Environmental implications of service industries

Abstract

The service sector in the U.S. economy accounts for twice the monetary output of manufacturing and is typically perceived as less damaging to the environment than manufacturing sectors. We use an Economic Input-Output Life-Cycle Assessment model (EIO-LCA) to assess both the direct and indirect (supply chain) effects of services on the economy and the environment. As expected, environmental emissions and wastes generated directly by service providers are small per dollar of output, and energy use per dollar output is lower for services than for most manufacturing industries. However, with such a large share of the Gross Domestic Product (GDP), the impacts of services have become a significant component of overall U.S. emissions, wastes, and energy consumption. For several environmental metrics (e.g., hazardous waste generation), service industries have significant indirect environmental effects on an economy-wide basis even when their direct emissions are negligible. When an average annual 'market basket' of goods and services is purchased by an average consumer in the U.S., the amount spent on manufactured goods is about 25% greater than that spent on services, but the environmental effects associated with manufacturing are about two to three times that of services. To investigate services in more detail, four representative service industries were analyzed: trucking and courier services, retail trade, colleges and universities, and hotels. Some results are expected, such as the high direct consumption of electricity, the low direct emission of toxic chemicals, and the low direct generation of hazardous wastes. We demonstrate that the supply chain environmental effects associated with these four services are more significant and merit further consideration. A better understanding of these impacts will encourage service providers to consider more carefully the environmental implications of their supply chain.