If we accept the proposition that good environmental management can save money then we are ready to make the next step to “eco-efficiency”. Eco-efficiency is a management approach that promotes increa…
If we accept the proposition that good environmental management can save money then we are ready to make the next step to “eco-efficiency”. Eco-efficiency is a management approach that promotes increased production using fewer resources and less environmental impact. It encourages businesses to become more competitive, more innovative and more environmentally responsible. Whereas pollution prevention focuses on reducing environmentally harmful outputs, eco-efficiency considers resource inputs as well. It aims to streamline the full range of corporate metabolic processes — less stuff in, less waste out. It is a new era of increased environmental performance that corporate leaders are gradually entering.
More companies and investors are now taking on the challenge of explaining how they are using the concept of eco-efficiency to anticipate market demands, gain a marketing edge and deliver more value to shareholders. A recent report by the World Business Council for Sustainable Development (WBCSD) gives good examples of how corporations have increased shareholder value by improving environmental performance. In summary, if companies wish to attract investors, they should demonstrate that they are top environmental performers, and they should market their environmental edge.
A perfect example is Volvo’s Environmental Product Declaration relating to its new S80 sedan. The declaration is a consumer guide detailing the environmental impact of the new vehicle, from the design and production phase through its lifetime and ultimate recycling. Hans-Olov Olsson, president and ceo of Volvo Cars of North America, stated: “Volvo expects other companies throughout the business world will realize the importance of educating its consumers, and follow suit with their own product declarations”. Not only is Volvo one of the most safety-conscious auto makers, but it is now on the way to being one of the most environmentally conscious. This is very effective marketing.
The Volvo example demonstrates that business executives can view environmental management in one of two contexts: as a cost centre or as a revenue centre. The former is technical, reactive and compliance-oriented and is seen in terms of risk reduction, re-engineering or cost cutting. The latter is entrepreneurial, pro-active, and strategic. In other words, environmental know-how can be deployed aggressively and creatively to shave costs and create new business opportunities. Few executives today realize that environmental opportunities might actually become a major source of revenue growth.
Market-based case studies are showing that good environmental performance is reflected positively in stock market performance. In recent years there has also been a noted “ethical awareness” among shareholders, which has created an increased demand for the shares of environmentally friendly companies. It is estimated that socially and environmentally responsible investment portfolios have roughly US$1.2 trillion in assets.
A 1997 Paprican study on future market opportunities for the Canadian pulp and paper industry stated that: “There will be an overriding need to communicate the industry’s environmental commitment and performance much more effectively”.
The need for environmental education of the public, employees, shareholders and clients is pervasive. For example, how many of us really know that:
Fast-food giant McDonalds buys over $350 million annually in recycled products, has succeeded in eliminating 10 500 tons of packaging annually between 1991 and 1995, has increased the average recycled content of corporate packaging form 17 to 45%, and raised the consumption of recycled packaging to 220 000 tons per year;
Dow Chemical has a 10-year plan to save $1.8 billion due to environmental improvements.
This type of information should be very visible to everyone, to allow people to factor environmental protection into their purchasing or investment decisions. There is a need for-and a payoff from-more effective “environmental marketing” by the corporate world.
Environmental Marketing of Pulp and Paper was well summarized by Brian McClay (president, TerraChoice Market Services) at the Papercast conference (Berlin, June 1, 1999). McClay cites good examples of what other corporations have done to market their environmental edge and cites some of the most common tools used to show environmental performance improvements, such as:
1.An ISO 14001-registered environmental management system and/or forest management system accreditation;
2. Environmental labelling, such as the use of the EPDS( (Environmental Profile Data Sheet); and,
3.Life-cycle assessment (LCA) of products.
To this we should add effective environmental reporting at all levels: shareholders, clients, employees, the public and the local community. Environmental performance improvements should be measured using the above tools and reported. The objective should be to impress stakeholders so that more people support the company, buy its products or invest in it. It can also increase client base since more and more buyers are now considering environmental performance in their purchasing strategies.
Positive changes such as the move to eco-efficiency are occurring but they are in their infancy. There remains a pressing need to integrate environmental thinking in corporate and governmental decision-making. Corporate leaders need to be bold enough to take unconventional and innovative measures to ensure environmental protection. They should voluntarily lead the way to sustainable development and reap the financial benefits from being eco-efficient.
See www.192.197.196.1/business/default.htm for an excellent website on business and sustainable development. P&PC
RECOMMENDED READING
Paper Task force Recommendations for Purchasing and Using Environmentally Preferable Paper: Final report. New York: Environmental Defense Fund, 1995.
Feldman, S.J., Soyka, P.A. and Ameer, P. Does Improving a Firm’s Environmental Management System and Environmental Performance Result in a Higher Stock Price? Report by ICF Kaiser.
Porter, M.E. and van der Linde, C. Green and Competitive: Ending the Stalemate. Harvard Business Review, Sept.-Oct. 1995.
Ditz, D. and Ranganathan, J. Measuring Up: Toward a Common Framework for Tracking Corporate Environmental Performance. World Resources Institute, Washington, DC.
This approach studies resource inputs as well as outputsBy Phil Riebel
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