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Towards Sustainable Business
Material Efficiency and
the work of the Wuppertal Institute
Presentation by:
Dr.-Ing. Holger Wallbaum
Wuppertal Institute
Wuppertal Institute
Business Research
Regions/
Industry Sectors
Product Chains
Companies
Information
Systems
Activities
Networks/
Information
Platforms
Holger Wallbaum
Wuppertal Institut, triple innova
Management
Concepts
Information
Transfer/
Finance
Loka Brunn, November 25th, 2005
2
Wuppertal Institute
Successful Business Projects
e-textile
1
Status quo
2
Strength/weakness
3
Measures
Holger Wallbaum
Wuppertal Institut, triple innova
The Efficient Entrepreneur
SAFE Sustainability Assessment For Enterprises
Loka Brunn, November 25th, 2005
3
triple innova
“Innovation Management Consulting
and Sustainability Research“
Companies
Assess
Create
Value Chains
Scope
Activities
Industry Sectors
Communities and
regional governments
Holger Wallbaum
Wuppertal Institut, triple innova
Communicate
Loka Brunn, November 25th, 2005
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triple innova
Communicate
Internal and External
Create
• Sustainability Trainings
Organisational and technical
Solutions
• Sustainability Mindset
Communicator
• Cleaner Production and
Eco-Efficient Navigator
• Stakeholder Engagement
and Dialogues
• Hot Spot Finder
• Eco-Design and Product
Service System Navigator
• Supply Chain
Communicator
• Stakeholder Opinion
Assessment
• Environmental Management
Navigator
• Company and Sectoral
Sustainability Reports
• Value Creator Radar
• Corporate Social Responsibility Navigator
• Network Building
Assess
Risks and Opportunities
• COMPASS
• Company and Sectoral
Benchmark
• Sustainability Indicator Sets
• Specific Indicators
(e.g. Material flows)
Holger Wallbaum
Wuppertal Institut, triple innova
• Sustainable Product Chain
Navigator
• RegioFit
Loka Brunn, November 25th, 2005
5
Wuppertal Institute/triple innova
Business 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 ecoefficiency indicators and to get an impression
of our companies' global ecological footprint."
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
6
SCP: Economic challenges
Spotlight on global systems of production and consumption
Global systems of P&C
Resource
Extraction
Holger Wallbaum
Producers
Wuppertal Institut, triple innova
Retailers
Consumers
End-of-life
managers
Loka Brunn, November 25th, 2005
7
SCP: Economic challenges
Spotlight on global systems of production and consumption
Supply chain of a mobile phone
80-100 1st tier
suppliers
200-500
components
5-20 2nd and 3rd
tier suppliers
2-20 component
ingridients
A supply chain of
400-2000 contacts
Potentially
400-10000 parts
Source: Panasonic Mobile Communications & Centre for Environmental Strategy
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
8
SCP: Economic challenges
Disparities along global value chains
First World
~ 20% of the ecological rucksack
~ 80% of economic value added
Resource
Extraction
Producers
Retailers
Consumers
End-of-life
managers
Third World
~ 80% of the ecological rucksack
~ 20% of economic value added
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
9
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
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
10
Current Trends and Stakeholder Expectations
Increasing total material requirement for economic growth
Eco-Efficiency - a European topic?
USA: High material requirements,
but significant progress
Japan: Economic success,
high Resource-Efficiency
EU15: Highly efficient,
but stagnation
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
11
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
No. of poor in China dropped
from 200 million in 1981 to 28
million in 2002
World-wide
standard of living
unmatched in
history
Worldbank (2004). China’s 8-7 National
Poverty Reduction Program
Holger Wallbaum
Wuppertal Institut, triple innova
increased per capita income
e.g. South Korea from
883$ in 1960 to 6578$ in 1990
Barro, Sala-i-Martín (1995). Economic Growth, p. 3.
Loka Brunn, November 25th, 2005
12
SCP: Social challenges
Increasing purchasing power in the third world
The share of worldwide consumer classes CC (>7000 USD yearly
nominal income) will raise from 1,7bn to 2bn in 2015
especially in transition countries large backlog demand:
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
Country
Source: Bentley 2003: Leading consumer classes in countries, 2002
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
13
SCP: A triple challenge
Management of change: Management of transitions & innovations
• What type of governance we
need for SPC?
Transition
Management
• What type of stakeholder
networks and partnerships
are required?
• What kind of new
business processes are
needed?
• What kind of capabilities
are needed?
Holger Wallbaum
Wuppertal Institut, triple innova
MACRO
META
MESO
Innovation Management
MICRO
Loka Brunn, November 25th, 2005
14
Challenges ahead
No. 1: Different regions, different issues
1. Different regions,
different issues
Integrating 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
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
15
No. 1: Different regions, different issues
Spotlight on global systems of production and consumption
Global systems of P&C
Resource
Extraction
Holger Wallbaum
Producers
Wuppertal Institut, triple innova
Retailers
Consumers
End-of-life
managers
Loka Brunn, November 25th, 2005
16
No. 1: Different regions, different issues
Growing stakeholder activism …
Growing stakeholder activism…
Government,
international org.
Public
Procurement
workplace
rights
NGOs,
unions
codes of
conduct
Eco-taxes,
Emission trading
Pension
funds
investing
Business
image
campaigns
reporting
fair trade
lending
ranking
Financial
institutions
verification,
audits
Households,
business clients
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
17
No. 1: Different regions, different issues
Growing 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
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
18
No. 4: Institutions and Capabilities make the difference
The European Union - a stakeholder formulating demands …
from output to
input focus
Emission
Trading
from macro
to micro Energy
Tax
EUP
Directive
product-chain focus
Sust. Res.
Use Strategy
EU
Chemicals
Directive
Integrated
Prod. Pol.
CSR Forum
others… internal &
external aspects
detailed risk data
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
19
Current Trends and Stakeholder Expectations
Sustainability Screening in the Financial Sector
Dow Jones Sustainability Index: Criteria
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
20
No. 1: Different regions, different issues
Growing number of Standards, Principles and Guidelines
Standards, Principles and Guidelines
Global
Sullivan
Principles
UN
Global
Compact
OECD
Guidelines for
Multinationals
GRI
WBCSD
Reporting
Guidelines
EU
CSR / IPP Paper
others
ISO 14000 & 9000, EMAS, SA 8000, National Standards
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
21
Challenges ahead
No. 2: The user tips the balance
1.
Different regions, different issues
2. The user tips the balance
Consumers 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
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
22
No. 2: The user tips the balance
Addressing both sides of the coin …
…WHAT ARE THE
OPPORTUNITIES FOR
CHANGE ON THE
DEMAND SIDE?
Supply
TO SUPPLY DIFFERENT
SERVICES WITH BETTER
SUSTAINABILITY
PERFORMANCE,…
Holger Wallbaum
Wuppertal Institut, triple innova
Demand
Loka Brunn, November 25th, 2005
23
No. 2: The user tips the balance
Share on total
material intensity (%)
Results of a case study on digital music
100
Physical retailing
50
100
Online shopping
50
0
50
0
Producer Retailer Consumer
Digital distribution
100
0
Producer Retailer Consumer
Producer Retailer Consumer
Increasing relevance of consumer behaviour
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
24
No. 2: The user tips the balance
Addressing both sides of the coin …
Reduction of environmental
impact per unit of products
and services
Rebound effect:
Efficiency gains are
outweighed by
growing demand
To reach sustainability
a combination of
efficiency and
sufficiency is needed
Holger Wallbaum
Wuppertal Institut, triple innova
Efficiency
Sustainability
Sufficiency
Loka Brunn, November 25th, 2005
25
Challenges ahead
No. 3: Systematic priority identification
1.
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?
Holger Wallbaum
4.
Institutions make the difference
5.
Mainstreaming – a matter of value
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
26
No. 3: Systematic priority identification
Understanding supply chain and use-phase issues
Environmental & Social Impact
Impacts and Opportunities among consumer products
high
low
Natural
Transportation
Resources
Manufacturing
sites
Product
distribution
Consumers
Value Chain
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
27
No. 3: Systematic priority identification
Understanding supply chain and use-phase issues
Current Management Effort
Focus of current
management effort
Management Response
high
only ad hoc
and sporadic
management
low
Natural
Transportation
Resources
Manufacturing
sites
Product
distribution
Consumers
Value Chain
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
28
No. 3: Systematic priority identification
Understanding supply chain and use-phase issues
Environmental and social impacts
Mismatch between the two
high
• SMEs‘ needs
• sectors‘ role
• regional
issues
Policy, performance
and reputation
opportunities
80% of overall
efforts focus on
20% of the total risk
• life styles
• norms and
values
• TBL
innovations
low
Natural
Transportation
Resources
Manufacturing
sites
Product
distribution
Consumers
Value Chain
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
29
No. 3: Systematic priority identification
Understanding the global backpack of a MNC
Going beyond the case study level…
abiotic materials
land used
• 5 million hectares;
• close to the area of
Switzerland
• 15 million tonnes (nonrenewable materials) e.g.
fossil fuels, fertilisers
• equivalent to the amount
needed to produce 833
thousand big cars
soil lost
• 100 million tonnes
due to erosion;
• equivalent to 3 million
loaded trucks
Holger Wallbaum
Wuppertal Institut, triple innova
biotic materials
• 38 million tonnes (renewable materials)
e.g. animal fodder, harvest residues
• equivalent to the amount needed to
produce 20 billion pairs of jeans
Loka Brunn, November 25th, 2005
30
No. 3: Systematic priority identification
Company-wide assessments
…the global environmental footprint of a company
direct material input
abiotic materials
biotic materials
A global
multinational food
company’s direct
material input every
year:
12 million tonnes
of agricultural and semiprocessed food
materials
Finland consumes
every year
close to
15 million tonnes
soil erosion
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
31
Challenges ahead
No. 4: Institutions and Capabilities make the difference
1.
Different regions, different issues
2.
Systematic priority identification
3.
The user tips the balance
4. Institutions and
Capabilities makes the
difference
There is often too much focus on impacts … not
on capabilities.
5.
Holger Wallbaum
Mainstreaming – a matter of value
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
32
No. 4: Institutions and Capabilities make the difference
New business models to drive sustainable production and consumption
Resources
Economic
Resources
Culture
TBL impacts & values
Environmental Implications
Values
Routines
- Resource use
- Waste generation
- Land-use…
Economic Implications
Natural
Resources
Human
Resources
Social
Resources
System of
Innovation
Products/
Services
Tacit
Knowledge
- Net Sales
- Market shares in different
geographies
- ROC …
Consumer
demands
Social Implications
- Health and safety
- Employment
- Training and Education
- Human rights
- Cultural value preservation
- Quality of life
enhancement…
Source: Wuppertal Institute
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
33
No. 4: Institutions and Capabilities make the difference
Formal and Informal Institutions
Formal Institutions
Informal Institutions
Written regulations
Judicial
rules
Political
framework
Customs & Traditions
Economic
rules
Codes of
conduct
Binding Partnerships
contracts
Norms of
Behaviour
Shared
values
Trust
Source: North, 1990
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
34
Federal material efficiency program
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
35
Challenges ahead
No. 5: Mainstreaming – a matter of value!
1.
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
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
36
No. 5: Mainstreaming – a matter of value!
From an impact to a value perspective
Impacts
Value drivers
• Reputation, Image
• Access to qualified
workers
• Employee motivation
• Product quality
• Transparency
• Trust/ loyalty of
customers, suppliers,
public, etc.
Environment as example:
• Material
• Energy
• Water
• Air
• Area
• Biodiversity
• etc.
Company success
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
37
No. 5: Mainstreaming – a matter of value!
The wide angel of success …
Environment
Employee-satisfaction
Knowledge/Know-how
Umfeld/Umwelt
Brand and image
Fixed assets
Trad.
company
value
Current Assets
Investors/
Lenders
Extended
company
value
Clients
Employees
Partners
Society
Source: adopted from PricewaterhouseCoopers
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
38
No.5: Live the change & create value
Getting the TBL to the workplace - customised training packages
Business
Units
Issues
Top
Manager
Middle
Manager
Sales &
Marketing
Engineers
Give
directions
Make the
right
decisions
Tell it to the Optimise
people
processes
Designers
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
√: relevant issue
Holger Wallbaum
Wuppertal Institut, triple innova
x: irrelevant issue
Loka Brunn, November 25th, 2005
39
Current Trends and Stakeholder Expectations
Eco-Efficiency – A path to sustainability
Eco-Efficiency and beyond
1. Moving Eco-Efficiency to the policy level
From micro to macro – Eco-Efficiency is entering
the policy making arena
2. Approaching Life-Cycle Thinking
Most environmental impacts are up- and down the
product chain – Affected by each business decision
3. Social issues and the triple bottom line
Eco-Efficiency as one part of a common
framework for triple bottom line management
Holger Wallbaum
Wuppertal Institut, triple innova
Loka Brunn, November 25th, 2005
40
Towards Sustainable Business
Opportunities
ahead!
Joint efforts
Global value chain
Innovation
Manager
Challenges
on the road
A matter of
lifestyles
Value creation
needed!
Holger Wallbaum
We use – you
produce?
The right
framework
Wuppertal Institut, triple innova
Set
priorities
Loka Brunn, November 25th, 2005
41
Towards Sustainable Business
Thank you very much for your attention!
Holger Wallbaum
[email protected]
tel ++49 (0) 202 - 4299510
fax ++49 (0) 202 - 4299505
www.wupperinst.org
www.triple-innova.de