A Holistic Approach to Sustainability Reporting: Integrating Social and Governance Dimensions in Life Cycle Assessment

Due to the growing concern about sustainability issues, business advocacy groups increasingly emphasise the importance of Environmental, Social, and Governance (ESG) analysis and reporting within organisations. ESG performance broadens stakeholders' perspectives, offering insights into how an organisation evaluates its business practices and performance across ESG categories. While sustainability reporting is becoming mainstream, and organisations with high sustainability ratings demonstrate increased competitiveness and greater opportunities, concerns about the trustworthiness and accountability of sustainability reporting persist. Anecdotal evidence suggests that the lack of standardisation—mainly due to the diverse nature of businesses and organisations—and a rise in greenwashing practices have hindered the acceptance of sustainability reporting. Life Cycle Assessment (LCA) is widely recognised for its effectiveness in quantifying environmental impacts by identifying inputs and outputs in various processes. This work introduces the ESG-LCA framework, which evaluates environmental, social, and governance performance throughout the life cycle. The integration of LCA in addressing sustainability reporting based on the respective dimensions of ESG enhances sustainability reporting in terms of credibility, comparability, and practicality. A case study in the palm oil value chain is presented to illustrate the application of the ESG-LCA framework in the context of developing countries. This research contributes to advancing sustainable practices by integrating ESG considerations into the traditional LCA methodology. The proposed framework can facilitate decision-making by promoting higher resource-use efficiency, reducing environmental and social impacts, enhancing governance practices to strengthen stakeholder relationships, and managing risks. The results can serve as a guide for improving credit and investment decisions for financial institutions and investors.