Applying Life Cycle Thinking into Business: The case of Banco de Mexico

The Banco de México, Mexico’s central bank, occupies a crucial space in the daily lives of Mexico’s 130 million inhabitants. Through the regulation of monetary policy, this operationally autonomous entity strives to maintain the purchasing power of the national currency and, just as crucially, provides the Mexican peso “in the quantity, denomination and geographical distribution demanded by the public”.

It is in the production and distribution of its millions of banknotes that the Banco de México is especially active in environmental terms, having only recently taken big steps to introduce Life Cycle Thinking to the world of banking in Latin America and conducting an assessment of all organizational activities of Complejo Legaria. This development was undertaken as part of the road-testing of the Guidance on Organisational LCA.

In 2014, Banco de México took the decision to perform the first life cycle analysis of banknotes conducted by any organization in Latin America, with a firm focus on the environmental impact of “polymer substrate” banknotes compared with that of “high durability cotton substrate”.

The study which followed reported on no less than 1.2 thousand tonnes of polymer- or cotton-based banknotes which were produced in 2013. Specifically, this meant a rigorous examination of a range of processes: namely the design, production and distribution of banknotes, and even the shredding of banknotes withdrawn from distribution.

This meant an assessment of all organizational activities of Complejo Legaria (the Banco de México-owned reporting organization where these processes are performed). According to the Bank, the rationale for the Organizational Life Cycle Assessment (O-LCA) was simple: “it reinforces the Banco de México’s commitment to environmental protection, and solidifies its position as the only national central bank that has applied this methodology.”

But there was more to the story than a progressive campaign to boost the bank’s environmental credentials.
Also at stake was the opportunity to conduct a comprehensive assessment where Banco de Mexico could finally access detailed information on its environmental impacts, thereby making future social or economic impact assessments more straightforward with a similar methodology.

Crunching the numbers, getting results

And so Banco de México undertook a holistic O-LCA, which in the first instance considered the complete life cycle of all the denominations of Mexican banknotes, in addition to the materials, energy and emissions required for Complejo Legaria’s activities.

A cradle-to-grave assessment of both direct and indirect activities was conducted, leading to no fewer than 11 impact categories. These range from agricultural land occupation, climate change and depletion of fossil fuels, to human toxicity, soil acidification and depletion of water resources. These were as wide-ranging as they were revelatory for the organization.

The results were clear for Banco de México. Most of the bank’s environmental impacts were derived from activities related to the production and transportation of raw materials. In addition, the assessment showed that “the distribution and final disposal stages produce significant atmospheric emissions primarily due to air and land distribution of the banknotes throughout the Mexican territory.”

Where the production and transportation of raw materials was concerned, this meant that water resources, earth eco-toxicity and agricultural land occupation were particularly affected. This signalled the need for immediate discussions on bold new strategies.

According the bank, this is precisely what happened.
“The O-LCA methodology enabled the organization to create environmental management strategies that could make a significant difference on the high-impact processes,” recalls Banco de México.

Finding bankable solutions

Specific proposals also included the deployment of renewable energy to power some of Complejo Legaria’s operations and, for the nationwide distribution of banknotes, the switch from diesel-powered vehicles to gas-powered vehicles – two important steps towards reducing emissions.

The adoption of Life Cycle Thinking by Banco de México appears to have led to broader questions about how organizations can bring about better environmental performance.

The bank’s management have already recommended that further O-LCAs be performed for the organization’s administrative units and regional cashiers (which form part of the bank’s Currency Issuance arm – the same directorate as Complejo Legaria).

This roll-out of applied life cycle science would surely take Banco de México’s use of Life Cycle Thinking to the next level, and consolidate the organization’s green credentials in a – thus far – rather cautious banking sector as far as LCA is concerned.

However, with the renewed support of Banco de México top management, there is almost certainly more good news to come from this particular Latin American life cycle pioneer.