Overview of our methodology
The NEC metric makes it possible to assess and compare all economic activities, asset classes, products, services and companies across all economic sectors with regard to their impact on the environment.
This is the strength of our metric: it serves as a reliable compass that guides decisions by allowing any activity to be assessed and, if need be, compared to another, providing a cross-sectorial analysis of Transition Risks and Transition Opportunities.
The metric is based on a methodology that was built in four steps:
IDENTIFY THE MAIN ENVIRONMENTAL IMPACTS
We identify the environmental issues (climate, water pollution, land use change, etc.) that account for most of the impact of the function or service analysed (traveling, clothing, food, heating, lighting, etc.) along the life cycle steps. Each issue is assigned a weight or relative value, and 2 to 4 environmental issues are then singled out.
ASSESS THE ENVIRONMENTAL IMPACTS
For each value chain, we assign values of measurement to the most material environmental impacts – as quantitatively as possible (e.g. grams of CO2e/kWh for electricity production), allowing a relevant comparison of environmental performance per provided utility/service.
CALIBRATE THE SECTORIAL SCALES
We convert this impact ranking into a relative scale: by setting 1) the NEC +0% point (corresponding to the global average environmental footprint) and 2) the NEC +100% point (corresponding to the least impactful activities). This creates industry-specific scales, for each of the 15 sectorial frameworks of our methodology.
CALIBRATE THE COMMON CROSS-SECTORIAL SCALE
We re-calibrate the 15 sectorial NEC scales all together, with 3 levels available referring to high (-100%/+100%), moderate (-33%/+33%) or limited (-10%/+10%) impact intensity, so that they are all consistent and comparable on a single common NEC scale.
Why 4 steps ?
The first three steps are repeated for all the 15 sectorial frameworks, each of which covers a specific value chain, such as waste, or a group of value chains providing a given function, such as transportation or electricity. Each of these frameworks is thus applicable to an industry or a group of industries, such as mining, metals and basic materials. These three steps consist in building 15 specific NEC scales.
The last step is the second calibration step considering the NEC as a system of interconnected frameworks; it consists in bringing the 15 sectorial NEC scales all together, and to calibrate them on a common unique scale, making the NEC a cross-sectorial system.