Title: The Life Cycle Management Navigator Knowing Market Demands Training Session 4
1 The Life Cycle Management NavigatorKnowing
Market Demands Training Session 4
2Knowing Market DemandsMajor Trends
Outline
1
2
Supply chain pressure
3
4
Stakeholder pressure
3Knowing Market Demands
Trends
- Trend
- Competitive Pressure in Global Markets
- Global Product Chains
- Regional Competitiveness
- Global Opinion Leaders
1
4Competitive Pressure in Global MarketsGlobal
Product Chains
Trends
- Globalisation of product chains
- Increasing competitive pressure
- Global stakeholders on the watch
Global systems of PC
5Competitive Pressure in Global MarketsRegional
Competitiveness
Example
Case-study of textile industry in Wuppertal
around 1870
2001
- 4 of total industrial production
- Minor business branch (Employees lt 3.000)
- about 70 of revenues of industrial production
- One of the most important textile regions in
Europe
- Today Most production in Asia, textile industry
in Wuppertal only a minor business branch - Structural change is a major challenge for SMEs
Source Chambers of Commerce Wuppertal-Solingen-Re
mscheid
6Competitive Pressure in Global Markets Global
Opinion Leaders
Trends
From stakeholder challenges...
to business opportunities
Greening the Supply Chain
Reputation reward Higher quality Trustful
relationships
Manage your global supply chains!
Stakeholders
New business models
Take responsibility for your product applications!
Least Cost Supply Performance
ContractingProduct-Service SystemsOpen new
markets
7Competitive Pressure in Global Markets Global
Opinion Leaders - NGOs
Example
International Business Leaders Forum
Source IBLF, 2002, Business Human Rights A
Geography of Corporate Risk
8Competitive Pressure in Global Markets Global
Opinion Leaders - Financial Benchmarks
Example
Dow Jones Sustainability Index (DJSI)
Dow Jones Global Index2,500 largest companies
60 DJSI Industry Groups34 countries Component
SelectionTop 10 of companies in terms of
sustainability in each industry group 20
target market cap coverage in each industry
groupDJSI World317 Components60 DJSI industry
groups22 countries
9Competitive Pressure in Global Markets Global
Opinion Leaders - Financial Benchmarks
Example
Dow Jones Sustainability Index (DJSI)
Weightings for the DJSI
10Competitive Pressure in Global Markets Global
Opinion Leaders - Intl Initiatives
Example
The Life Cycle Initiative
- Objective To put Life Cycle Thinking in
effective practice - Initiated by UNEP Society for Environmental
Toxicology and Chemistry (SETAC)
11Competitive Pressure in Global Markets Global
Opinion Leaders - Intl Initiatives
Example
- Human Rights
- Principle 1 Businesses should support and
respect the protection of internationally
proclaimed human rights - Principle 2 make sure that they are not
complicit in human rights abuses. - Labour Standards
- Principle 3 Businesses should uphold the freedom
of association and the effective recognition of
the right to collective bargaining - Principle 4 the elimination of all forms of
forced and compulsory labour - Principle 5 the effective abolition of child
labour - Principle 6 the elimination of discrimination in
respect of employment and occupation. - Environment
- Principle 7 Businesses should support a
precautionary approach to environmental
challenges - Principle 8 undertake initiatives to promote
greater environmental responsibility - Principle 9 encourage the development and
diffusion of environmentally friendly
technologies - Anti-Corruption
- Principle 10 Businesses should work against all
forms of corruption, including extortion and
bribery.
12Competitive Pressure in Global Markets Global
Opinion Leaders - Intl Initiatives
Example
- The Marrakech Process
- Refers to the international effort to develop 10
Year Framework Programmes on Sustainable
Consumption and Production - Lead by UNEP and UN-DESA
- In cooperation with national governments,
private sector, and civil society
13Knowing Market Demands
Trends
Trend Increasing Costs for Waste,Energy
Materials
2
14Increasing Costs for Waste, Energy Materials
Trends
Rising costs for waste-treatment and disposal,
energy supply, raw-materials etc. increasingly
influence the bottom line.
Why?
Overall costs
time
15Increasing Costs for Waste, Energy Materials
Example
Material- and energy costs
Personnel costs
Factor 2-3 1
23 of total costs
51 of total costs Material flow causes 21 on top
Cost elements as of total costs
60
30
Federal Statistical Office, Cost Structure of
Manufacturing Industries, 1999
0
material energy
Depreciation rent
personell
others
Source Dr. Hartmut Fischer, 2003, ADL
16Increasing Costs for Waste, Energy Materials
Example
Material consumption is linked to costs
Saving 1 kg raw materials at the beginnig of the
life-cycle reduces the ecological rucksack by 1 t.
Source Wuppertal Institute
17Increasing Costs for Waste, Energy Materials
Example
- Waste Treatment
- Waste dumps and open landfills are a threat to
human health as well as to the environment. - Increasing awareness of proper landfill practices
among decision makers. - Introduction of standards/guidelines/regulations
in Africa, Asia, Latin America, Caribbean.
- Examples
- South Africa passed minimum requirements on
landfills existing dumps have to comply or
close. - China developed a comprehensive set of policies
on household waste, defining detailed criteria.
18Increasing Costs for Waste, Energy Materials
Example
- Cost implications of those measures
- Disposal fees for municipal waste currently
average US 10/ton throughout the regions,
ranging from US 1.3 to 18. - Increasing standards and enforcement will
inevitably increase the costs.
- Examples
- China is taking World Bank loans of US 269
million to invest in the solid waste sector.
These expenses will increase tipping fees. - Expenditure in waste management in Mexico
increased from 130 million US in 1990 to 275
million in 1994.
Source World Bank
19Increasing Costs for Waste, Energy Materials
Trends
- Eco-efficiency
- Strategy to reduce costs
- By World Business Council on Sustainable
Development
Doing more with less impact
Source WBCSD, 2006, Eco-efficiency Learning Modul
20Knowing Market Demands
Trends
Trend Supply Chain Pressure
3
21Supply Chain PressureUpstream and Downstream
Pressure
Trends
Impacts and Opportunities among consumer products
high
Environmental and social impacts
low
Natural Resources
Manufacturing sites
Product distribution
Natural Resources
Manufacturing sites
Product distribution
Transportation
Consumers
Transportation
Consumers
Value Chain
22Supply Chain PressureUpstream and Downstream
Pressure
Trends
Current Management Effort
Manufacturing sites
Product distribution
Consumers
23Supply Chain PressureUpstream and Downstream
Pressure
Trends
Mismatch between Impact of Products and
Management Efforts
Manufacturing sites
Product distribution
Consumers
24Supply Chain PressureUpstream and Downstream
Pressure
Trends
Manufacturing sites
Product distribution
Consumers
25Supply Chain PressureProduct Chain
Interdependencies
Trends
Interdependenciesin the Supply Chain
Producer operating in a market with high(er)
environmental requirements
Supplier
26Supply Chain Pressure Greening the Supply Chain
Trends
- A new quality of competition networks of
companies, led by a multinational, form virtual
cooperations or partnerships along the value
chain. - Large companies include environmental issues
when evaluating their suppliers, in order to - comply with regulations
- minimise their financial risk (liability)
- reduce costs.
Formal requirements like certified environmental
management systems (e.g. ISO 14001) are more and
more common.
27Supply Chain Pressure Procurement Policies of
Corporations
Example
- Royal Philips Electronics
- Considers suppliers commitment to adhere to the
Supplier Declaration on Sustainability (i.e.
Declaration) as an important factor in its
decision to enter or remain in a business
relationship.
28Supply Chain Pressure Procurement Policies of
Corporations
Example
The IKEA Way on Purchasing Home Furnishing
Products (IWAY)
Significance of supplier depends directly on the
scale of environmental and social impacts.
- High possibility for
- Cost reduction,
- Waste minimization,
- Reduction of downtime,
- Decreasing risks of interruption,
- Enhancing product and process safety, etc.
High level of impact
IKEA developed IWAY criteria on these issues
IWAY auditors screen its 1,600 suppliers in
compliance with the company code of conduct.
This allows IKEA to locate a geographical focus
for performance improvements.
Source CSCP, Retailers Calendar UNEP, 2007,
Life Cycle Management - A Business Guide to
Sustainability www.ikea-group.ikea.com
29Supply Chain Pressure Greening the Supply Chain
Example
- Companies greening their supply chain
- Goal to green the supply chain.
- Environmental performance criteria extend beyond
company-owned facilities. - Seek partnership with ecologically-responsible
suppliers. - Offer assistance to suppliers through own
Environmental Action Team. - Increasing importance of environmental audits due
to corporate liabilities.
30Knowing Market Demands
Trends
Trend Stakeholder Pressure
4
31Stakeholder Pressure
Trends
Employees
Public Authorities
FinancialInstitutions
NGOs
Media
Customer
Shareholder
Community
32Stakeholder Pressure Opportunity or Threat?
Trends
Opportunities
Threats
Stakeholder involving decision making
Greenwashing
Credibility
Distrust
Value creation
Value limitation
33Stakeholder Pressure Public Authorities
Trends
- Increasing regulation and authority pressure are
observed all over the world. - Traditional regulatory instruments (command
control) cover more and more sectors /
environmental issues.
BUT Often problem with enforcement
Consequence 1 Trend towards flexible and
efficient regulation, providing strong incentives
to reduce pollution (e.g. fees or pollution
charges).
Consequence 2 Legislation moves towards
emission prevention instead of end-of-pipe (e.g.
Mexican Env. Law encourages the development of
programmes to prevent, control, abate pollution).
34Stakeholder Pressure Public Authorities
Example
Laguna Lake Development Authority, Philippines
- Problem Laguna Lake high in organic pollutants
- Authority identified 5 industry sectors as prime
source. - Implementation of pollution charge for those
sectors - Fixed charge per discharge volume
- Charge per unit emission that meets standard
(low) - Charge per unit emission above standard (high).
- Result
- After 2 years reduction of biological oxygen
demand (BOD) by 88 - Increase of resources for monitoring and
enforcement due to fixed charge
Source World Bank
35Stakeholder Pressure Environmental Policy
Approaches
Trends
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Producers responsibility, recycling quotas
Sustainable Consumption Production Action
Plans (incl. raw material taxes)
Source Adapted from Wuppertal Institute
36Stakeholder Pressure Policy - Extended
Producers Responsibility
Trends
What is Extended Producers Responsibility (EPR)?
- Strategy to close the loop of material use.
- Extend the (financial) responsibility of
producers across the life cycle - in particular
to the stage of disposal. - Model example Take-back systems.
- Aim to encourage environmental improvements in
the entire product life cycle
37Stakeholder Pressure Policy - Extended
Producers Responsibility
Example
- EPR Systems in Europe
- EU EPR integrated in the Directive on
End-of-Life Vehicles and the proposal
Directive on Waste Electrical and
Electronic Equipment - Sweden Packaging, Newsprint, Tyres, Cars,
Batteries - Germany Take-back obligation for transport
sales packaging.
- EPR should be extended to further areas of
Community and Member State legislation whenever
the integration of environmental concerns into
the product design can be usefully achieved in
this way.
Source EU
38Stakeholder Pressure Policy - Extended
Producers Responsibility
Trends
Waste of electrical and electronic equipment
(WEEE)
Aim Prevention, reuse, recycling and recovery of electrical and electronic products, e.g. light bulbs, mobile phones, medical devices
Approach 1. Life-cycle thinking 2. Producer responsibility (design, production and disposal phase) 3. Consumer involvement (access to information and treatment facilities)
Concrete Measures 4 kg on average per inhabitant per year WEEE from private households, e.g. Ireland gathered 6.8 kg in 2005/2006
Business implications Producers must finance take-back systems since 2006 for products sold after August 2005 Awareness and commitment of consumers is key to success Strong agreements between state and economic operators, difficult to implement
Source EU
39Stakeholder Pressure Policy - Corporate Social
Responsibility (CSR)
Trends
- Green Paper
- Promoting a European Framework for CSR
- (July 2001)
- Broaden the dialogue on CSR
- by supporting companies to manage CSR more
efficiently
Corporate Social Responsibility Corporate Social Responsibility
Internal Dimension External Dimension
Human Resources Management Health and Safety Adaption to Change Environmental Management Local Communities Product Chain Partners Human Rights Global environmental concerns
40Stakeholder Pressure Policy - Corporate Social
Responsibility
Trends
European Multistakeholder Forum on CSR
2002
2004
2007
2006
Founding of the CSR forum
New Communication on Corporate Social
Responsibility Making Europe a pole of
excellence on CSR
CSR at the global level What role for the EU?
Common understanding of CSR among European
stakeholders for competitiveness
Promote innovation, transparency and convergence
of CSR
Demands on SMEs via MNCs
41Stakeholder Pressure Policy - Sustainable
Consumption and Production
Trends
Sustainable consumption and production ... gives
consumers the opportunity to consume products and
services that meet their needs in an efficient
and effective way, while minimizing the negative
environmental, social and economic impact. The
ultimate goal of sustainable consumption is to
improve quality of life for all consumers in our
and future generations, while minimizing
associated environmental impacts.
Source Sustainable Consumption in Asia, A
Guidance Manual, UNEP, 2005.
42Stakeholder Pressure Policy - SCP Action Plans
Example
...Build on, bring together, and improve
coherence of existing policies...
EU SCP Action Plan
Leveraging Innovation
Lead Market Initiative, Networking Of Innovation
Stakeholders
Timeline
Better Products
- Towards a Green Paper
- Background Document released
- Consultation process ongoing
- Communication
- In 2008
- Based on consultation
Dynamic Performance Requirements, Sustainability
Labels, Eco-Design Instruments, Standardisation
Leaner And Cleaner Production
Resource Efficiency Targets, Eco-Innovation and
Environmental Technologies, Review of EMAS, SMEs
Smarter Consumption
Retailer agreements, Market-Based Instruments,
VAT rates, EU Eco-Label, Advertisement, Green
Procurement
Global Markets
Exploiting first mover advantages and leveling
the playing field worldwide for sustainable
technologies and products
43Stakeholder Pressure Community
Trends
- The local community living next to the company is
of high importance, since
- the companys workforce is likely to be recruited
among residents - it is exposed to the operations social and
environmental impacts - it might push authorities to more strictly
monitor the operations and enforce existing
regulations - it could start a campaign against the company.
44Stakeholder Pressure Community
Example
- IKPP Indonesian pulp producer
- 1984Operation start with old technology.
- Early 90s Local community NGOs claimed
severe health damage from mills emissions. - Mid 90sExpansion of business ? need to access
bond markets. BUT concern about long-term
liability for pollution damage.Indonesias
national pollution control agency (BAPEDAL)
mediated agreement between IKPP and community.
Source World Bank
45Stakeholder Pressure Community
Example
- IKPP Indonesian pulp producer
- IKPP made investments in environmenal technology
Business is running profitably and outperformed
the Indonesian Stock Index.
Source World Bank
46Stakeholder Pressure Financial Market
Trends
Banks, Insurance companies and Investors are
increasingly interested in a companies
environmental performance.
- High pollution intensity signals
- inefficient production processes
- potential financial losses from regulatory
penalties - potential losses from liability settlements
- potential losses through accidents
- risk that financial markets revalue a firm in
reponse to bad news (accident, NGO campaign,
etc.).