The Area Graph shows most water use from a bakery occurs from utilities in production layer 2, such as cooling water in power stations.

This benchmark spider shows how a bakery’s intensities measure up against the industry sector benchmark (labelled 1).

Minutes of employment along the supply chain to produce $1 of wheat.

A new assessment tool paves the way for a far reaching environmental, social and economic analysis of an organisation’s supply chain. Richard Collins reports.

Sit down to dinner at Fraser Island’s Kingfisher Bay Resort and an odd thing strikes you about the menu: each meal has an eco-footprint rating. The eco-resort on Queensland’s fragile sand island has done much to address its on-site impacts, driven by an estimated 57 person years of environmental research. But it has not stopped at its boundary, going on to also address its indirect, upstream issues.

Kingfisher is one of a handful of organisations to have used a framework developed by the University of Sydney and CSIRO that promises the world’s most far-reaching triple bottom line (TBL) assessment. Called Integrated Sustainability Analysis (ISA), it is designed to track back through an entity’s entire supply chain all the way to the base raw materials, developing a full analysis of its environmental, social and economic impact and identifying where in the chain the biggest impacts lie.

The complexity of the model is mind-boggling. ISA builds in 344 direct suppliers for each organisation, then another 344 for each of those suppliers and so on up the chain, the numbers growing exponentially. The mathematical grunt behind the framework comes from Dr Manfred Lenzen from the university’s School of Physics. He says it is unlike any other methodology.

For example, it will aggregate energy from every layer of a bakery’s supply chain: the town gas that fires its ovens; the energy consumed milling the flour; the diesel fuelling the wheat transport; the energy used to manufacture the truck; and so on, going back to the very roots of the supply chain tree. Every supply chain has millions of such structural paths, few of which are captured in traditional footprint analysis.

ISA underpinned the CSIRO’s seminal Balancing Act triple bottom line assessment of the Australian economy that was released in May, comparing each of its 135 sectors according to the environmental, financial and social resources per standard dollar of final consumption. The Sydney University/CSIRO team lead by Barney Foran from CSIRO Sustainable Ecosystems has an ambitious goal: to provide the in-depth information needed to revolutionise the economy for a sustainable future. Balancing Act has an obvious seat at high level national policy discussions around such issues as carbon risk and water resource allocation, but Foran wants to take it further, to develop a tool that allows individual companies and consumers to understand the full implications of their decisions.

“We are facing several emerging crises running in parallel and we need to make massive changes in the structure and nature of our economy,” he told WME. “In the next 10-15 years we would expect the roll out of this to the consumer. We would expect, for example, water-smart shopping guides that show people what to buy to be water conscious.”

Entering your vital statistics
Things are set to roll on the organisational tool much more quickly than that. Next month the Sydney University team is launching the ISA framework as an automated software tool that puts all the complex calculation in the hands of everyone from businesses to councils to state governments. The simplified interface allows users to plug their own vital statistics into the engine and have it spit out diagrams and tables across a range of self-selected indicators that can form the backbone of a comprehensive sustainability report.

It is based on a model of the physical, social and financial flows of the entire economy developed through the input-output (I-O) tables compiled by the Australian Bureau of Statistics. The software then breaks down and assigns impacts according to the characteristics and expenditure patterns of the subject organisation. They enter information from their financial accounts and let the engine do the rest, tracking along the millions of supply paths and aggregating impacts, adjusting for distance from the subject.

“As you go further down the production line the impacts get more diffuse,” said Foran. “Most of the action is in the first 10 chains, where you get about 90 per cent of the impact, which is better than other models [that only capture] the 20-30 per cent of [total] impact that is on-site.”

A TBL report commissioned by Wollongong Council found up to 70 per cent of the impact of some indicators was located in the first three production layers of the supply chain. Dr Lenzen and colleagues computed an ecological footprint of 6,742 hectares from the council’s own operations, some 4.6 hectares per employee, and generated scorecards for each TBL indicator with its aggregate impact value and the three main contributors to that impact.

Others to have used it include Sydney Water, Victoria’s Department of Sustainability and Environment and, of course, Kingfisher resort.

Current and potential risks revealed
There are critics, of course. It’s all very well for government agencies and eco-resorts to use the tool but why would a business go beyond the first level of suppliers, where audit approaches such as the Global Reporting Initiative draw the line, when this will inevitably increase its footprint?

Supporters say there’s a strong business case. Perhaps the most compelling argument is that it reveals current and potential risks over the full supply chain which allows a much more rigorous risk assessment, commonly cited as one of the real strengths of sustainability reporting. It also provides reliable, quantitative information for strategic planning, including real sector or business unit benchmarks and identification of opportunities that may not otherwise be apparent.

“Where the upstream story does help them make decisions is where they may face big expenses to reduce on-site impacts, by providing a much wider range of options to address it indirectly. It may be better for them to achieve an upstream benefit through purchasing decisions than through work on-site,” Foran said.

ISA also factors in benefits that are hard to quantify, such as up- and downstream employment. Wollongong, for example, stimulates 75.9 cents of economic activity per dollar of expenditure, most of it predictable but, surprisingly, with spending on “frames, mesh and other structural metal products” as the fifth biggest stimulus.

Not everyone is convinced the ISA model can produce sufficiently accurate outputs as it is not based on hard, site-specific data. It has high-profile backing though, from no less than John Elkington, the originator of the eco-footprint concept, who gave his seal of approval after it came through a test with EPA Victoria by calculating the state footprint.

Foran said it was not designed to replace audits but could sit on top of them to sharpen the upstream focus. A hybrid model could include a local audit of direct impacts with the remaining impacts calculated using the ISA to produce results that are much more consistent.

Sustainability assessment is commonly seen as more art than science, and by some as not even that. One of the main barriers is the lack of certainty on defining the limits of a company’s impact, which makes it impossible to rigorously compare different companies and performance over time.

“Every organisation in the economy has a complex supply chain sitting behind it. The [supply] tree . . . goes in an upstream direction and the number of layers is infinite,” said Dr Lenzen. “We believe Balancing Act solves the boundary problem.”
Oh, and while at Kingfisher Bay avoid the beef, the eco-footprint is appalling.

More at www.isa.org.usyd.edu.au