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Life Cycle Costing

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Introduction

There are three types of LCC: conventional LCC, environmental LCC and social LCC. Conventional LCC methodology was founded in 1933 when the United States General Accounting Office, in a tractor purchase call for proposals, also requested the assessment of costs in terms of the product’s life cycle. Conventional LCC is the most common, and it’s based on a purely economic evaluation that considers the costs of the various phases in a given life cycle, generally sustained by a single party (producer or consumer). External costs or those indirectly sustained by the interested party generally aren’t considered. In addition, only part of the full life cycle is analyzed, and the end-of-life phase is never included.

LCC and LCA

Environmental LCC considers the costs relative to the life cycle of a product, sustained by the parties involved, including external costs that are expected to be internalized. This analysis is complementary to LCA analysis, sharing its functional unit and system boundaries and following its product system model, considering all phases of the life cycle. Environmental LCC and LCA are thus considered two complementary analysis methods, and environmental LCC also requires the completion of an LCA according to "Environmental Life Cycle Costing: A Code of Practice" by SETAC. The parties considered in LCC are those involved in the life cycle, especially producers, the supply chain, and the end consumer/user. It takes into account the costs of developing a product, the materials, energy, equipment, workforce, waste management, emissions monitoring, transport, maintenance and repairs, etc.

The methodology and guidelines of environmental LCC were developed by a SETAC (Society of Environmental Toxicology and Chemistry) working group between 2002 and 2006.

The inclusion of the outlook of the LCC offers a useful perspective, and is used mainly in the R&D phase or for public procurement. Moreover, the combination of LCA and LCC provides a more complete overview and a systematic, rational approach that helps find economically advantageous solutions. The combination of these two approaches makes it possible to assess the environmental efficiency of a product or service and to make visible the break-even point to the consumer, i.e., when an investment transitions into savings.

For years, we’ve applied the LCC methodology, for both European projects and our individual clients. Here are a few examples.

Horizon 2020 project SWEETWOODS

SWEETWOODS' game changing technology will convert almost all (over 90%) of the hardwood into usable high value biomaterials and bioproducts, establishing novel bio-based value chains with low ecological footprint. Within the project 2B is responsible for LCA, LCC and S-LCA.
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Horizon 2020 project Water2REturn

2B was a partner on the Water2REturn project for the recovery and recycling of nutrients and the transformation of waste water into products that add value to the circular economy in the agricultural industry. As part of the project, 2B was the work package leader for LCA, LCC, Social LCA, risk assessment and technical-economic assessment.
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Life Cycle Costing for innovation

LCA e LCC di un innovativo sistema di riciclaggio della plastica con uso di fondi di caffè.
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