General methodology

Measuring Environmental Impact Across the Value Chain

The NEC metric calculates the extent to which issuers (an activity or company that supplies or distributes products or services) are aligned with the global transition toward a sustainable, resilient economy.

How it Applies to Different Sectors

The NEC can be applied to all industries, activities and geographies as it uses a framework that takes into account the whole value chain.
Here are two examples of the criteria and scope of the NEC and how it classifies two very different sectors for evaluation.

FOOD & BEVERAGE

The value chains are agriculture, livestock farming, fishery, food and beverage industries, water and wastewater utilities. The physical unit for food products is the mass, expressed in kilos or liters. Its underlying content is made up of proteins, lipids, carbohydrates and water.

CONSTRUCTION

The value chains include the whole construction industry, all types of construction, infrastructure, renovation, rehabilitation, building management, real estate, architecture, and urban design. The common underlying physical unit is the surface area in m2.

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A step-by step Construction

The NEC applies a specific framework to each value chain or a group of value chains providing a given service.
The version 1.0 of the NEC methodology was constructed in 4 steps. It contains 15 function-specific frameworks that have been designed using a value chain approach and organized into three categories – based on their environmental impact intensity: high intensity, moderate or limited, along with general guidelines for applying and combining the frameworks.

1

IDENTIFY THE ENVIRONMENTAL IMPACTS

First, we identify the environmental issues that need to be tracked: climate change, water footprint, resources and waste, air quality, or biodiversity. They are selected and assigned a weight or relative value. Two to four environmental issues are singled out for each phase of the product’s or service’s life cycle.

2

CHOOSE THE PERFORMANCE INDICATORS

For each value chain, we quantify the most relevant environmental impacts. This involves assigning the values of measurement, (such as grams of CO2 equivalent per kilowatt, for the electricity framework), which allows us to determine the performance indicators.

3

CALIBRATE THE FRAMEWORK’S SCALE

The third step consists of setting the scale which defines the average (0%) and maximum performance levels for an industry. This step tests dozens of real cases, including extreme examples, and it creates an industry-specific scale.

4

CALIBRATE THE FRAMEWORK’S NEC

The last step calibrates the framework itself into the common NEC scale. The value of maximum NEC level, named the eco-solution point, is assigned to one of three possible NEC levels: +10%, +33% or +100%, depending on the environmental impact intensity (high, moderate or limited).

The NEC has already been successfully applied
to more than 2,000 issuers

WHY THE NEC?

Designed to inform and empower investment decision makers, it uses physical data from across the whole value chain to provide a snapshot of an activity’s net environmental contribution and it can be applied at a company, portfolio, index or product/source level.

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THE NEC INITIATIVE

In 2019, the NEC metrics founding partners decided to create an open-source collective platform to jointly construct, update,
disseminate and apply this metric:
the NEC Initiative.
We are currently welcoming new members.

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FOOD & BEVERAGE METHODOLOGY

The NEC evaluates the impact of food and beverage industry activities based on environmental issues including climate change, water and biodiversity. This is a significant sector of impact and gives a good example of how the framework is applied. 

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