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
3Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
4Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
triple innova
Scope
Assess
Create
Communicate
Activities
Companies
Value Chains
Communities and regional governments
Industry Sectors
“Innovation Management Consulting and Sustainability Research“
5Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
6Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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."
7Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Global systems of P&C
SCP: Economic challenges Spotlight on global systems of production and consumption
End-of-lifemanagers
ConsumersRetailersProducersResource Extraction
8Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
9Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
ConsumersRetailersProducersResource Extraction
SCP: Economic challenges Disparities along global value chains
10Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
11Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
12Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
13Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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:
14Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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?
15Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
16Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Global systems of P&C
No. 1: Different regions, different issuesSpotlight on global systems of production and consumption
End-of-lifemanagers
ConsumersRetailersProducersResource Extraction
17Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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 …
18Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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 …
19Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
20Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Dow Jones Sustainability Index: Criteria
Current Trends and Stakeholder Expectations Sustainability Screening in the Financial Sector
21Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
22Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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.
3. Systematic priority identification
4. Institutions make the difference
5. Mainstreaming – a matter of value
23Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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,…
24Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
25Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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 …
26Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Challenges aheadNo. 3: Systematic priority identification
31. Different regions, different issues
2. The user tips the balance
3. Systematic priority identification Are our efforts directed towards the most significant sources of risks and opportunities?
4. Institutions make the difference
5. Mainstreaming – a matter of value
27Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
28Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Current Management Effort
No. 3: Systematic priority identification Understanding supply chain and use-phase issues
Value Chain
Natural Resources
TransportationManufacturing
sitesProduct
distributionConsumers
high
low
Man
agem
ent R
espo
nse
Focus of current management effort
only ad hoc and sporadic management
29Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Mismatch between the two
No. 3: Systematic priority identification Understanding supply chain and use-phase issues
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
TransportationManufacturing
sitesProduct
distributionConsumers
30Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
31Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
32Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Challenges aheadNo. 4: Institutions and Capabilities make the difference
41. Different regions, different issues
2. Systematic priority identification
3. The user tips the balance
4. Institutions and Capabilities makes the differenceThere is often too much focus on impacts … not on capabilities.
5. Mainstreaming – a matter of value
33Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
34Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
35Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Federal material efficiency program
36Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Challenges aheadNo. 5: Mainstreaming – a matter of value!
51. Systematic identification of priorities
2. SMEs – the real giants
3. The user tips the balance
4. Different regions, different issues
5. Mainstreaming – a matter of value!To mobilise a critical mass of producers it is crucial to shift the focus from impacts to values
37Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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.
38Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
39Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
40Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
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
41Holger Wallbaum Wuppertal Institut, triple innova Loka Brunn, November 25th, 2005
Towards Sustainable Business
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
Towards Sustainable Business
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