Earth System Impact analysis – estimating global effects from local impacts

Key takeaways

The Earth System Impact (ESI) score is a systemic, science-based and context-sensitive tool that helps users assess the global environmental impact of their local activities, including carbon emissions, water, and land use. It evaluates pressures on three planetary boundaries simultaneously and uniquely captures their interactions. This nuanced approach helps companies and investors assess systemic impacts and identify key contributing factors. ESI supports strategic planning, enhances transparency, and facilitates benchmarking, benefiting companies, investors, and lending institutions.

The Earth System Impact (ESI) score in a nutshell

The Earth System Impact (ESI) score offers a way to assess the global environmental impact of local business activities. It extends beyond carbon emissions to also include the effects of water and land use. By acknowledging the varying effects of water and land use across different regions and types of vegetation, the ESI tool ensures a nuanced and detailed impact assessment. A key novelty of the tool is its ability to evaluate pressures on three planetary boundaries simultaneously and capture the amplified effects resulting from the interactions between them (see Chapter 1). ESI therefore provides a means to assess the systemic impact of any economic activity, helping companies and investors
to consider both cumulative and cross-scale effects of their operations.

How to use the ESI Tool to calculate environmental impact

Using the ESI tool requires four types of input data, covering three environmental pressures and the geo-coordinates of each asset or facility:

  1. Location
  2. Carbon dioxide equivalent (CO2e) emissions (at the asset level)
  3. Land use (at the asset level)
  4. Water consumption (at the asset level)

Four novel contributions of the Earth System Impact score are:

  1. It accounts for pressures on three critical planetary boundaries: climate, water and land use, and uses as inputs four environmental disclosures; asset location, carbon emissions, water use and land use.
  2. It also considers how corporate activities impact the interactions between these
    planetary boundaries.
  3. It distinguishes impacts on land and water based on region and vegetation type– for example, a land clearing in the Amazon has different impacts than a clearing of similar areas in a Mediterranean forest.
  4. It accounts for total resource availability. For example, it recognizes that water extraction has a greater impact in arid regions, such as the North American plains, compared to tropical rainforests

Together, these data are used to estimate the global Earth System Impact of economic activities at specific sites. The ESI score is calculated for each individual pressure—Carbon ESI, Water ESI, and Land ESI—and can be combined to provide a total ESI score for any asset. Furthermore, asset-level impacts can be aggregated to assess the overall company-level impact (see Table 1).

Potential uses of the ESI Score

Outputs of an ESI analysis can be plotted to easily identify assets with large impacts, and determine which of the three ESI components contributes most to this impact. Figure 6, shows the assets of the five largest precious and non-precious metal mining companies in the world, ranked according to their ESI intensity (ESI per revenue, top panel) and according to their carbon intensity (bottom panel, emissions per revenue). When comparing the two plots, it becomes clear that some assets have a high ESI, despite having a fairly low carbon footprint. These are assets that would have been overlooked with assessment tools only focused on carbon. This illustrates the added value of the ESI tool in identifying these high-impact assets.

Interpreting the ESI outputs

The ESI score captures a complex set of Earth System processes. In essence, the ESI score expresses an activity’s environmental impact in relation to regional boundaries (also referred to as guardrails), while also accounting for the current state of the Earth system and key interactions between climate, vegetation cover, and water.

The unit of measure represents the impact on all three planetary boundaries, considered together because the ESI captures interactions between different Earth system components (e.g., the impact that land use has on climate change and water runoff), and the amplifications of environmental impact that results from this.

The ESI is normalized to account for contributions towards planetary boundaries. An ESI value of 1M therefore means that an activity moves the value of one of the three planetary boundaries from its boundary level to twice beyond it.

Since any single company or asset contributes a relatively small fraction of the total regional or global impact relative to these boundaries, ESI numerical values are usually much smaller than 1M. However, this does not imply that their impact is negligible.

Finally, the ESI score can be broken down into its three components – carbon emissions, land use, and water use – to show each pressure’s contribution to the total score of an asset or company. These contributions depend on both the volume of the pressures and the specific location of the asset (e.g., assets in water-scarce locations tend to have a higher contribution from water use to their total ESI). This detailed breakdown helps companies prioritize their mitigation decisions effectively

Who can use ESI and for what?

Companies wanting to reduce negative environmental impact across their operations could employ the ESI score to identify which localities have the biggest integrated Earth system impact. Additionally, the ESI score helps identify the specific environmental pressure most concerning in each region.

Institutional investors could use ESI in a similar way as companies by assessing portfolio companies’ own operations to inform and sharpen their engagement with the board. This can help in developing targeted impact mitigation plans tailored to specific regions.

Lending institutions could use the ESI score to assess the potential environmental impact of portfolio companies and to identify clients with specific needs to transition to less impactful operations in certain regions. ESI could also be used to assess the potential impacts of new projects or to assess the pre- and post-issuance impact of bonds.

Venture capital investors and their portfolio companies can use the ESI score as a pre-screening tool to identify regions with the least environmental impact for developing production sites. It can also be employed to assess and compare the ESI scores across different planned or potential production sites. Additionally, ESI can be used to evaluate sourcing locations or sourcing scenarios, allowing start-ups to evaluate their future potential impact as they scale and make informed decisions to mitigate and minimize these impacts.

Illustration of ESI results for a large mining company.


Comparing ESI and carbon intensity measures.

Benefits of the ESI Score

Strategic planning and improvement: The ESI score provides stakeholders with information about how a company’s local environmental impacts translate into global effects. By using the ESI score, businesses can identify key areas for environmental performance improvement, facilitating the development of strategic plans to enhance sustainability.

Transparency and accountability: The ESI score is open-source, scientifically based, and thoroughly documented. This transparency promotes accountability in environmental reporting, fosters trust, and supports informed decision-making.

Benchmarking and communication: The ESI score can be used to develop industry standards, allowing companies to benchmark their performance. This highlights areas of excellence, identifies opportunities for improvement, and supports continuous improvement. Additionally, it facilitates effective communication of sustainability achievements to stakeholders.

Limitations

In its current format, the ESI tool does not, in itself, include full supply chain considerations. For this, one would have to model (as is often done) the generic impact of products or services and use this as input. However, sourcing location for inputs is critical. This is not technically a limitation, per se, but rather a necessary input requirement to unleash of the tool’s capability of assessing Earth system impact based on where on the planet the land or water impact occurs.

Background references

Crona, B., Parlato, G., Lade, S., Fetzer, I., & Maus, V. (2023). Going beyond carbon: An” Earth system impact” score to better capture corporate and investment impacts on the earth system. Journal of Cleaner Production, 429, 139523. doi.org/10.1016/j.jclepro.2023.139523

Lade, S. J., Fetzer, I., Cornell, S. E., & Crona, B. (2021). A prototype Earth system impact metric that accounts for cross-scale interactions. Environmental Research Letters, 16(11), 115005. doi.org/10.1088/1748-9326/ac2db1

To access and explore the tool go to: https://gedb.shinyapps.io/ESI_showcase/