Material Efficiency and the work of the Wuppertal Institute

Towards Sustainable Business

Material Efficiency and the work of the Wuppertal Institute

Presentation by:

Dr.-Ing. Holger Wallbaum

2Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005

Activities

Wuppertal Institute

Wuppertal Institute

Business Research

Product Chains

Companies

Regions/Industry Sectors

Networks/Information Platforms

InformationTransfer/Finance

InformationSystems Management

Concepts


SAFE -Sustainability Assessment For Enterprises

The Efficient Entrepreneure-textile

Holger Rohn

Organisation undUnternehmensstrategie

WirtschaftlicheSituation

Innovationund Technik

Organisation desUmweltschutzes

BetrieblicherUmweltschutz

…kologischeProduktgestaltung

Beteiligung

Arbeits- undGesundheitsschutz

Beschftigung undArbeitsorganisation

65

4

3

2

1

Qualifizierung

Motivation undKooperation

Information

Strken- undSchwchenprofil

Strke

Schwche

Prioritt

Status quo1

2

Measures3

Strength/weakness

Wuppertal Institute

Successful Business Projects


triple innova

Scope

Assess

Create

Communicate

Activities

Companies

Value Chains

Communities and regional governments

Industry Sectors

“Innovation Management Consulting and Sustainability Research“


triple innova

Organisational and technical Solutions

• Cleaner Production and Eco-Efficient Navigator

• Eco-Design and Product Service System Navigator

• Environmental Management Navigator

• Corporate Social Respon-sibility Navigator

• Sustainable Product Chain Navigator

• RegioFit

Risks and Opportunities

• COMPASS

• Hot Spot Finder

• Stakeholder Opinion Assessment

• Value Creator Radar

• Company and Sectoral Benchmark

• Sustainability Indicator Sets

• Specific Indicators (e.g. Material flows)

Internal and External

• Sustainability Trainings

• Sustainability Mindset Communicator

• Stakeholder Engagement and Dialogues

• Supply Chain Communicator

• Company and Sectoral Sustainability Reports

• Network Building

Assess

Create

Communicate


Wuppertal Institute/triple innovaBusiness projects

Albrecht Schmidt

"COMPASS enabled our operating companies, which are multinational consumer goods producers, to better locate environmental performance improvement options along our product chains from an eco-efficiency and stakeholders' viewpoint. We used COMPASS to develop eco-efficiency indicators and to get an impression of our companies' global ecological footprint."


Global systems of P&C

SCP: Economic challenges Spotlight on global systems of production and consumption

End-of-lifemanagers

ConsumersRetailersProducersResource Extraction


SCP: Economic challenges Spotlight on global systems of production and consumption

Source: Panasonic Mobile Communications & Centre for Environmental Strategy

200-500 components

2-20 component ingridients Potentially

400-10000 parts

80-100 1st tier suppliers

5-20 2nd and 3rd tier suppliers

A supply chain of 400-2000 contacts

Supply chain of a mobile phone


First World~ 20% of the ecological rucksack

~ 80% of economic value added

Third World~ 80% of the ecological rucksack

~ 20% of economic value added

End-of-lifemanagers


SCP: Economic challenges Disparities along global value chains


SCP: Ecological challenges Increasing evidence for burden shifting

Global systems of production and consumption lead to growing natural resource extraction from the third world…

European Union

EU 15


Current Trends and Stakeholder Expectations Increasing total material requirement for economic growth

Eco-Efficiency - a European topic?

USA: High material requirements, but significant progress

EU15: Highly efficient, but stagnation

Japan: Economic success, high Resource-Efficiency


e.g. South Korea from 883$ in 1960 to 6578$ in 1990

Barro, Sala-i-Martín (1995). Economic Growth, p. 3.

World-wide standard of living

unmatched in history

No. of poor in China dropped from 200 million in 1981 to

28 million in 2002Worldbank (2004). China’s 8-7 National

Poverty Reduction Program

SCP: Economic challenges Economic Development - The basis of development

Economic Development• Qualitative improvement of the economic subsystem of society that is concerned with the production, consumption and distribution of goods and services to meet human needs

www.cadi.ph/glossary_of_terms.htm)

reducing poverty quality of life increased per capita income


SCP: Social challenges Increasing purchasing power in the third world

Country Members of CC 2002 (in millions)

Share of total population in the

given country (in %)

USA 242,5 84

China 239,8 19

India 121,9 12

Japan 120,7 95

Germany 76,3 92

Russian Federation 61,3 43

Brasil 57,8 33

Source: Bentley 2003: Leading consumer classes in countries, 2002

The share of worldwide consumer classes CC (>7000 USD yearly nominal income) will raise from 1,7bn to 2bn in 2015especially in transition countries large backlog demand:


SCP: A triple challengeManagement of change: Management of transitions & innovations

MACROMETA

MESO

MICRO

com

mu

nicatio

nco

mm

un

ication

Transition Management

Innovation Management

• What type of governance we need for SPC?

• What kind of new business processes are needed?• What kind of capabilities are needed?

• What type of stakeholder networks and partnerships are required?


Challenges aheadNo. 1: Different regions, different issues

11. Different regions, different issuesIntegrating varying mind sets and specific regional issues into analysis is still a major challenge.

2. The user tips the balance

3. Systematic priority identification

4. Institutions make the difference

5. Mainstreaming – a matter of value


Global systems of P&C

No. 1: Different regions, different issuesSpotlight on global systems of production and consumption

End-of-lifemanagers



Business

Growing stakeholder activism…

Government,international org.

Households,business clients

Public Procurement

Financialinstitutions

investing

lending

ranking codes of conduct

workplacerights

verification,audits

imagecampaigns

NGOs, unions

fair tradereporting

Eco-taxes,Emission trading Pension

funds

No. 1: Different regions, different issuesGrowing stakeholder activism …


Map of Human Rights Risks

• Depicts human rights violations and operating companies around the world

• Sector specific maps, incl. ICT

Issues, e.g. in Asia:• Torture• 'Disappearances'• Extra-judicial killing• Harassment of human rights

defenders• Arbitrary arrest and detention

Source: www.humanrightsrisk.com

No. 1: Different regions, different issuesGrowing stakeholder activism …


No. 4: Institutions and Capabilities make the difference The European Union - a stakeholder formulating demands …

CSR Forum

Sust. Res. Use StrategyEmission

TradingIntegratedProd. Pol.

Energy Tax EU

EUP Directive Chemicals

Directive

others…

from output to input focus

product-chain focus

detailed risk data

from macro to micro

internal & external aspects


Dow Jones Sustainability Index: Criteria

Current Trends and Stakeholder Expectations Sustainability Screening in the Financial Sector


No. 1: Different regions, different issuesGrowing number of Standards, Principles and Guidelines

others

OECD Guidelines for MultinationalsGlobal

Sullivan Principles

EUCSR / IPP Paper

UNGlobal

Compact

GRIWBCSD

Reporting Guidelines

ISO 14000 & 9000, EMAS, SA 8000, National Standards

Standards, Principles and Guidelines


2Challenges aheadNo. 2: The user tips the balance

1. Different regions, different issues

2. The user tips the balanceConsumers play an increasingly decisive role with respect to life-cycle wide impacts and opportunities.





No. 2: The user tips the balance Addressing both sides of the coin …

…WHAT ARE THE OPPORTUNITIES FOR CHANGE ON THE DEMAND SIDE?

Supply

DemandTO SUPPLY DIFFERENT SERVICES WITH BETTER SUSTAINABILITY PERFORMANCE,…


No. 2: The user tips the balance Results of a case study on digital music

Sh

are

on

to

tal

mat

eria

l in

ten

sity

(%

)

Physical retailing

0

50

Producer Retailer

100

Consumer

Online shopping

0

50

Producer Retailer Consumer

100

0

50

Producer Retailer Consumer

100Digital distribution

Increasing relevance of consumer behaviour


Sustainability

Sufficiency

Rebound effect: Efficiency gains are

outweighed by growing demand

Reduction of environmental impact per unit of products

and servicesEfficiency

To reach sustainability a combination of

efficiency and sufficiency is needed

No. 2: The user tips the balance Addressing both sides of the coin …


Challenges aheadNo. 3: Systematic priority identification



3. Systematic priority identification Are our efforts directed towards the most significant sources of risks and opportunities?




Impacts and Opportunities among consumer products

No. 3: Systematic priority identification Understanding supply chain and use-phase issues

high

lowEnv

ironm

enta

l & S

ocia

l Im

pact

Value Chain

Natural Resources

TransportationManufacturing

sitesProduct

distributionConsumers


Current Management Effort


Value Chain

Natural Resources


sitesProduct


high

low

Man

agem

ent R

espo

nse

Focus of current management effort

only ad hoc and sporadic management


Mismatch between the two


high

low

Env

ironm

enta

l and

soc

ial i

mpa

cts

Policy, performance and reputation opportunities

80% of overall efforts focus on

20% of the total risk

• life styles• norms and

values• TBL

innovations

• SMEs‘ needs• sectors‘ role• regional

issues

Value Chain

Natural Resources


sitesProduct



Going beyond the case study level…

No. 3: Systematic priority identification Understanding the global backpack of a MNC

• 100 million tonnes

due to erosion;• equivalent to 3 million

loaded trucks

soil lost

• 15 million tonnes (non-

renewable materials) e.g.

fossil fuels, fertilisers• equivalent to the amount

needed to produce 833

thousand big cars

abiotic materials

• 5 million hectares;• close to the area of

Switzerland

land used

• 38 million tonnes (renewable materials)

e.g. animal fodder, harvest residues• equivalent to the amount needed to

produce 20 billion pairs of jeans

biotic materials


No. 3: Systematic priority identification Company-wide assessments

…the global environmental footprint of a company

A global multinational food company’s direct material input every year:

12 million tonnes of agricultural and semi-processed food materials

Finland consumes every year

close to 15 million tonnes

soil erosion

biotic materials

abiotic materials

direct material input


Challenges aheadNo. 4: Institutions and Capabilities make the difference




4. Institutions and Capabilities makes the differenceThere is often too much focus on impacts … not on capabilities.



Consumerdemands

No. 4: Institutions and Capabilities make the difference New business models to drive sustainable production and consumption

- Health and safety- Employment- Training and Education- Human rights- Cultural value preservation- Quality of life enhancement…

- Resource use- Waste generation- Land-use…

- Net Sales- Market shares in different geographies

- ROC …

TBL impacts & valuesResources

Economic Resources

Natural Resources

Human Resources

Social Resources

System ofInnovation

Culture

Routines

Tacit Knowledge

Products/Services

Values

Source: Wuppertal Institute

Social Implications

Environmental Implications

Economic Implications


No. 4: Institutions and Capabilities make the difference Formal and Informal Institutions

Formal InstitutionsWritten regulations

Informal InstitutionsCustoms & Traditions

Source: North, 1990

Judicial rules

Political framework

Economic rules

Binding contracts

Codes of conduct

Partnerships

Norms of Behaviour

Shared values

Trust


Federal material efficiency program


Challenges aheadNo. 5: Mainstreaming – a matter of value!

51. Systematic identification of priorities

2. SMEs – the real giants



5. Mainstreaming – a matter of value!To mobilise a critical mass of producers it is crucial to shift the focus from impacts to values


No. 5: Mainstreaming – a matter of value! From an impact to a value perspective

Company success

Value drivers

• Reputation, Image

• Access to qualified workers

• Employee motivation

• Product quality

• Transparency

• Trust/ loyalty of customers, suppliers, public, etc.

Impacts

Environment as example:

• Material

• Energy

• Water

• Air

• Area

• Biodiversity

• etc.


No. 5: Mainstreaming – a matter of value! The wide angel of success …

Umfeld/Umwelt

Employee-satisfaction

Knowledge/Know-how

Brand and image

Fixed assets

Investors/ Lenders

Clients

Employees

Partners

Society

Current Assets

Environment

Trad. company

value

Extended company

value

Value

Driver

Stakeholder

Source: adopted from PricewaterhouseCoopers


Issues

Top Manager

Middle Manager

Sales & Marketing

Engineers Designers

Give directions

Make the right decisions

Tell it to the people

Optimise processes

Consider Life-Cycle aspects

Resp. Corp. Governance √ √ x x x

Code of Conduct (intern) √ √ x x x

Int. Agendas & Stakeholder (ext.) √ x √ x x

Supply Chain Aspects √ √ x √ √

Defined Priorities √ √ √ √ √

Measuring methodology x x x √ √

Communication √ √ √ x x

No.5: Live the change & create value Getting the TBL to the workplace - customised training packages

Business

Units

√: relevant issue x: irrelevant issue


Current Trends and Stakeholder Expectations Eco-Efficiency – A path to sustainability

Eco-Efficiency and beyond

2. Approaching Life-Cycle Thinking

1. Moving Eco-Efficiency to the policy level

3. Social issues and the triple bottom line

From micro to macro – Eco-Efficiency is entering the policy making arena

Most environmental impacts are up- and down the product chain – Affected by each business decision

Eco-Efficiency as one part of a common framework for triple bottom line management



The right framework

Value creation needed!

Setpriorities

We use – you produce?

Challenges on the road

A matter of lifestyles

Global value chain

Innovation Manager

Opportunities ahead!

Joint efforts


Thank you very much for your attention!

Holger Wallbaum

[email protected] ++49 (0) 202 - 4299510fax ++49 (0) 202 - 4299505

www.wupperinst.orgwww.triple-innova.de

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Material Efficiency and the work of the Wuppertal Institute

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