This is perhaps the easiest way to understand the deep problem caused by modern measures of sustainability having been based on old economic science. The root of the problem seems to be the theory of Input/Output tables, intended to show how businesses in the economy are interconnected. Those models do accurately trace the exchange of materials between business sectors, associated with environmental impacts, *but* … that’s the wrong question. What they don’t show is the connection between those environmental impacts and “who pays for them”. Environmental impacts are instead largely accounted for by ”where they occur” instead! So the accounting scheme doesn’t identify who is responsible for the choices physically causing them. Most confusing!!
The most curious result of,
- using the wrong accounting model, and
- asking the wrong question,
is that the largest of all environmental impacts of business is omitted. That is the impact of paying the people who operate, direct and support the operation of a business, who are paid with the financial resources needed for their own consumption. That largest of business environmental impacts is also a “consumption for production”, every bit as critical for businesses to work as the consumption of technology, which business and economists account for with high precision. It seems to be the “organization” of the business that people provide that economics treats as “immaterial”…
Because “paying for things” is the “direct economic and legal cause” of what physically causes them, and “sustainability science” now doesn’t consider that, our present sustainability effort contains a deep flaw for guiding us to actual sustainability. Below is a recent email that seems to clarify the correction and how to use it than my more complete technical descriptions “What’s Scope 4” and applications “A World SDG“.
To UNEP FI GHG Investor Risk working group…
…. I don’t doubt that I/O LCA models have been greatly improved lately, of course. Having the advanced online Carnegie Mellon tool you suggested for reference is very useful. What my team started with in 2010 for our 2011 Systems Energy Assessment model I’ll call “SEA-LCA v.1”, was a 1984 effort by Costanza to replace process LCA with his own form of I/O LCA design. The Carnegie Mellon I/O LCA tool is still based on the classical 1970’s work of Wassily Leontief, and so contains the discrepancy my team, as well as Costanza by another means, trying to correct.
The main difference is that SEA-LCA counts in a business’s own impacts the consumption that people are paid with for the human services that business uses to operate, and I/O LCA doesn’t. I/O LCA counts them, but as impacts of other businesses and sectors, not of the businesses paying for the services… What we found letting us measure it statistically was that consumption for human services was mostly in consumer products not producer products.
So SEA-LCA v.1 treats human consumption impacts as “misplaced information” and corrects business impacts by just counting the impacts of the human services which that business uses in its own environmental impacts (not another’s). To make that manageable we estimated human services impacts only for scale, and generally implying large adjustments in individual business energy use and financial GHG risk exposures. That was done using impact intensity factors for business costs for known or implied human services. For the SEA Wind Farm study, I roughly estimated that 90% of the energy used to deliver the consumption for human services needs would come from sectors other than those for the wind farm’s producer products.
I think you’re helping me get to what’s relevant here. I hope so anyway.
All the very best, Jessie
More detail fyi….
So, I know of nothing wrong with the I/O accounting (for measuring material exchanges between economic sectors). The problem is the definitional exclusion of environmental impacts of human services, throughout the business value chains. Below are a “value tree” diagram and a comparison table to help, and bring out more issues for further research. In the diagram the human services are symbolized by green dots, the money from business revenues going to people, versus other businesses along the tree.
| Green dots are for the people paid to operate businesses, throughout the business “value tree”
. (in I/O accounting having no role in businesses except as consumers)