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Using impact accounting to validate product improvements for a Japanese consumer products company: Deloitte Tohmatsu 

Deloitte Tohmatsu supports its client in using impact accounting to validate its product improvements.

As a member of Deloitte, Deloitte Tohmatsu Consulting (DTC) provides clients with consulting services in Japan. Support for clients cover the full spectrum, from agenda and strategy development through execution, with thought-leading advisory services to attain sustainable growth. DTC prides itself in helping move society forward by solving social issues and creating new industries.

Objective

Deloitte Tohmatsu’s client, a prominent consumer products company, was interested in using impact accounting to determine whether its products that use recyclable materials contributed to a reduction in greenhouse gas (GHG) emissions. This information was critical for the company to understand the effectiveness of its sustainability initiatives.  

Many of the products provided by the client are consumer goods essential for daily hygiene, and they are relevant to environmental topics in terms of resource use and waste generation. The objective was to compare the GHG emissions of some of the company’s leading products.  

By leveraging the common language of currency, this exercise promised to lay the groundwork for quantitatively assessing the value, and measurable impacts, of products that utilize materials categorized as recyclable and less environmentally harmful raw materials or environmentally friendly for short. The results would support education campaigns and enhance operational processes to better manage relevant KPIs at various levels of the organization and potentially with external partners.  

Our clients have acknowledged the value of impact accounting as it facilitates strategic decision-making by providing a comprehensive understanding of economic performance that includes external impacts. It is rapidly being recognized as a powerful tool in driving sustainability efforts.

Deloitte Tohmatsu Consulting LLC

Application

The consumer products company used impact accounting to analyze the GHG emissions of two product categories:  

  1. Products made with recycled materials, and 
  2. Products made with more environmentally friendly materials, which use less GHG emissions than the recycled products 

The results were compared to the company’s existing product line. More specifically, the analysis included Scopes 1 and 2, as well as categories 1 and 12 of Scope 3. Deloitte Tohmatsu had previously supported GHG visualization efforts which reduced the time and effort of related calculations to about one month. Only negative impacts related to GHG emissions were included. 

Findings and Outcomes

  • Although the existing products produced lower GHG emissions during the manufacturing phase, both the recycled and environmentally friendly products measured a reduction in negative impacts of about 20% to 30% compared to the existing products. Furthermore, the results showed that the products using environmentally friendly materials were more effective in reducing GHG emissions. See Figure A below.  
  • For products using environmentally friendly materials, the overall reduction in negative impacts was about 30% compared to existing products, and the reduction in negative impacts was measured to be about 70%, especially in Scope 3 emissions. In the future, further reductions are expected due to technological innovation. For products using recycled materials, the overall reduction in negative impact was about 20% compared to existing products. In particular, the reduction in negative impact was about 60% in Scope 3 emissions. 
  • This allowed the management team to validate the appropriateness of the direction taken in previous initiatives. 
  • This initiative enabled Deloitte Tohmatsu’s client to visualize the reduction of negative impacts within the significantly short span of one month for each of the analyzed product lines. 
  • Assuming that the existing products are either recycled or replaced with environmentally friendly materials, based on their annual sales volume*, we can estimate a substantial reduction in negative environmental impact for each targeted product:  
Figure A: Calculation results: Comparison of impacts of GHG emissions
  • Upon setting various premises and carrying out these calculations, we discovered a significant reduction effect, particularly within Category 12 of Scope 3:
Figure B: Scope and overview of GHG emissions calculations

Future work

  • Depending on the product category, there are opportunities to expand the data coverage for/from additional stakeholder group such as consumers and employees to help identify additional impacts.
  • Given that only negative impacts were included, the company is contemplating the incorporation of positive effects of recycled products as a distinct element.
  • Building upon this work will help validate certain strategies over others, as well as the effectiveness of its products, not only in terms of GHG emission reduction but also considering the positive and negative impacts of adjacent correlated topics.
  • This was the consumer product company’s first step to convey its values quantitatively. This has sparked additional conversations about measuring other contributions to society as a core component of its impact goals. The organization has high conviction in the decision-making power of socially accepted concepts, including Impact accounting, to steadily advance while ensuring the credibility of relevant methodologies and calculations for all stakeholders.