The Greening of Industrial Ecosystems. 1994.

Pp. 201-207. Washington, DC:

National Academy Press.

Implications of Industrial Ecology for Firms

PATRICIA S. DILLON

Environmental management in the 1970s focused on pollution control, that is, end-of-pipe treatment. The 1980s saw a shift toward waste reduction or pollution prevention. From a business and environmental perspective, treating wastes from manufacturing processes was no longer seen as the most effective or efficient solution. In the 1990s it is becoming clear that even pollution prevention as it is traditionally viewed is shortsighted. It is no longer enough just to prevent pollution from manufacturing processes. We are beginning to see instead a shift in industry and government toward a broader concept of pollution prevention— beyond the manufacturing process—to encompass environmental concerns and pollution prevention throughout the life cycle of a product, from acquisition of raw material to ultimate disposal (Figure 1).

In leading firms, the concept of product life cycle management is being formalized in Design for Environment (DIRE) and product stewardship programs, aimed at the design of more environmentally compatible products and the extension of producer responsibility beyond the manufacturing plant to influence product use, recycling, and disposal by customers. For example, as discussed by Klimisch in this volume, automobile manufacturers are redesigning vehicles to facilitate the reuse, recycling, and reclamation of materials and components, particularly nonmetallic components. As part of this effort, they are working with suppliers, car dismantlers, and shredder operators to create the necessary infrastructure to recover, recycle, and market vehicle components and materials after the automobile's useful life.

By focusing on the entire life cycle of a product rather than discrete sources of pollution, companies are clearly moving in the right direction. In addition,



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The Greening of Industrial Ecosystems The Greening of Industrial Ecosystems. 1994. Pp. 201-207. Washington, DC: National Academy Press. Implications of Industrial Ecology for Firms PATRICIA S. DILLON Environmental management in the 1970s focused on pollution control, that is, end-of-pipe treatment. The 1980s saw a shift toward waste reduction or pollution prevention. From a business and environmental perspective, treating wastes from manufacturing processes was no longer seen as the most effective or efficient solution. In the 1990s it is becoming clear that even pollution prevention as it is traditionally viewed is shortsighted. It is no longer enough just to prevent pollution from manufacturing processes. We are beginning to see instead a shift in industry and government toward a broader concept of pollution prevention— beyond the manufacturing process—to encompass environmental concerns and pollution prevention throughout the life cycle of a product, from acquisition of raw material to ultimate disposal (Figure 1). In leading firms, the concept of product life cycle management is being formalized in Design for Environment (DIRE) and product stewardship programs, aimed at the design of more environmentally compatible products and the extension of producer responsibility beyond the manufacturing plant to influence product use, recycling, and disposal by customers. For example, as discussed by Klimisch in this volume, automobile manufacturers are redesigning vehicles to facilitate the reuse, recycling, and reclamation of materials and components, particularly nonmetallic components. As part of this effort, they are working with suppliers, car dismantlers, and shredder operators to create the necessary infrastructure to recover, recycle, and market vehicle components and materials after the automobile's useful life. By focusing on the entire life cycle of a product rather than discrete sources of pollution, companies are clearly moving in the right direction. In addition,

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The Greening of Industrial Ecosystems FIGURE 1 Product life cycle. attitudes in progressive firms are evolving to the point where environmental issues are no longer viewed as problems to be defended against or prevented. Instead, the environment presents opportunities to transform management practices to make environmentally superior products and services and gain competitive advantage (Booz, Allen and Hamilton, 1991). Although firms are making progress on the environmental front, current efforts will not significantly improve the environmental characteristics of the current industrial ecology. If the ultimate goal is a closed industrial ecosystem that consumes limited resources and produces limited wastes (Frosch and Gallopoulos, 1989), then industry and society cannot simply minimize product impact on the environment. Attention must also focus on optimizing material flows and integrating the life cycles of diverse products, so that waste streams from one activity become the raw material for another. Such changes will require radical transformation in industrial practices and relationships. In most cases, technology probably will not be the limiting factor, a lesson learned in recent years as companies have adopted pollution prevention practices. Rather, cultural and organizational changes within industry (as well as changing the behavior of consumers and government agencies) will most likely present greater obstacles.

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The Greening of Industrial Ecosystems As a point of departure, this paper first examines the implementation of DFE and product stewardship programs in firms because they share a systems-oriented approach consistent with industrial ecology thinking. They focus on reducing environmental risks over the life cycle of products rather than merely reducing pollution at the manufacturing site. Evaluating existing efforts within firms should provide some insights into how to proceed in the future. This paper then examines where current industrial efforts fall short of meeting environmental goals and what additional steps might be needed to move closer toward a closed industrial ecosystem. The remarks in this paper are based on a two-year study at Tufts University Center for Environment that examined the scope, design, and implementation of corporate product responsibility programs, such as Design for Environment and product stewardship. MAKING THE CONCEPT OPERATIONAL Companies face numerous challenges as they try to implement an ''environmental program" that affects virtually all aspects of their business. To capture environmental considerations throughout the product life cycle, the program must reach out and link many corporate functions, which may not have been traditionally involved in environmental issues. For example, the program must influence the product development process at a point where the selection of alternative materials is feasible and not cost prohibitive; extend to purchasing in order to shape the activities of suppliers; incorporate input from environmental, legal, and regulatory experts; solicit the input of marketing to monitor customer requirements and expectations; and tap into technical assistance departments to provide environmental services to customers. Although company product responsibility programs are still in the developmental stages and are primarily the initiative of large, progressive firms, some common and apparently successful features of their programs emerge. Commitment of senior management. Clear and prominent leadership from senior management is necessary to achieve cultural, organizational, and procedural changes such as those outlined below. For example, the Environmentally Conscious Products initiative at International Business Machines (IBM) Corporation was the direct result of a senior vice president's efforts to address European customers' concerns about product disposal and the shortage of landfill space. A worldwide task force comprising more than 50 representatives from diverse functional areas within IBM was formed to address the issue. The emphasis of the task force shifted quickly from its initial focus on disposal to the entire product life cycle, as the task force realized that any disposal improvements would come only from product design changes. One important outcome of this task force was IBM's guidelines for environmentally conscious products.

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The Greening of Industrial Ecosystems Development of companywide strategies and guidelines. Corporate guidance is needed to ensure that product responsibility is carried out appropriately and consistently within a company. With input from various functional groups, environmental and technical staff often provide overall direction and oversight of the program, including delineation of environmental goals and priorities (such as design for recyclability or reduction in toxic emissions) and an overall strategy for accomplishing these goals. Companies are developing guidelines for program implementation (for example, procedures for integrating environmental considerations into product design processes) and corporate policies and standards for priority concerns. 3M Corporation's Product Responsibility Program encourages business units to think holistically—from cradle-to-grave—about their products and to develop plans to address environmental issues that arise during product manufacture, use, and disposal. To help business units identify problem areas and opportunities to improve the environmental performance of products, corporate staff developed two tools, a self-evaluation survey and a life cycle model for product responsibility. The life cycle model outlines activities and issues for business units to consider, such as minimizing the use of toxics in products or processes, incorporating reusable and recyclable materials in products, and identifying opportunities for product and package recycling by customers. In order to avoid potential misuse of environmental claims, 3M also issued a corporate policy covering environmental marketing and established a formal process for the review and approval of environmental claims, symbols, and slogans. Creation of multidisciplinary networks. Since product responsibility infiltrates so many aspects of a business, it is important to develop networks or teams of individuals with different training and perspectives on the business to solicit the input of appropriate functions in decision-making processes and to provide a conduit for information exchange. Multidisciplinary networks can be used in the formulation of strategy and goals for the overall product responsibility program; in responding to environmental challenges facing individual product lines; and in dissemination of relevant regulatory, technical, and internal management developments. Depending on the issue at hand, involvement of personnel from research and development, purchasing, technical service, legal and regulatory, marketing and sales, and health and safety groups may be appropriate. Harmonization of product responsibility program and goals with other company practices and goals. To ensure that environmental issues are considered along with traditional criteria such as cost, quality, and performance, companies are integrating environmental product responsibility objectives into existing and familiar decision-making processes and tools such as review phases for new products and expert systems. For example, the original premise of DFE among companies such as AT&T and automobile manufacturers was to incorporate environmental principles into their "Design for X" (DFX) process, where "X" represents any product characteristic such as reliability or manufacturability that the

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The Greening of Industrial Ecosystems company wants to maximize in its product design. At Xerox Corporation total quality management (TQM) practices provide the foundation for its product improvements for the environment. The involvement of the manufacturing and development organizations, as well as functions such as marketing, is critical to the integration of the concept into the fabric of the business. For example, involvement of product managers and design engineers is necessary to make the concept and practice part of the product development process; sales, marketing, and technical service staffs must also embrace the concept of environmental product responsibility if the company hopes to deliver its expertise and services to customers. In addition, the application of environmental product responsibility principles and guidelines by product groups recognizes the relative autonomy of product lines and provides the flexibility for product groups to apply their expertise to the product's technical and performance specifications, as well as its uses and markets, to identify environmental issues and solutions and to fine-tune the environmental product responsibility program to their needs. Establishment of a systematic and iterative process. Carrying out a comprehensive analysis of the product life cycle and identifying possible measures to reduce environmental risks involves consideration of environmental, regulatory, legal, technical, and market issues. The broad scope of this task necessitates a deliberative, systematic evaluation process to ensure that the viewpoints and data provided by members of the multidisciplinary group are incorporated into business decisions. In addition, since environmental regulations, societal values, and customer requirements are forever changing, products must change over time. Therefore, the program must provide for periodic evaluation of products and opportunities for continuous environmental improvements. FUTURE CHALLENGES As firms adjust their management practices and decision-making processes to meet the challenges of managing product life cycles rather than pollution sources, they begin to create an atmosphere in which movement toward a closed industrial ecosystem is possible. However, current efforts of U.S. firms tend to be ad hoc, even when the goals of the product responsibility program are far reaching. Companies' efforts tend to address single issues (for example, reduction of toxic emissions from manufacturing operations, increasing recycled content in products) or particular stages in a product's life cycle (for example, disposal). Integration and cooperation among firms, which is necessary because the activities of individual firms do not span the entire product life cycle, is also limited at the present time. In addition, little attention is being paid to some critical issues such as reducing raw materials consumption and extending the useful life of products. A critical question, therefore, is how to move beyond current efforts toward a

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The Greening of Industrial Ecosystems more comprehensive product life cycle management and, ultimately, a closed industrial ecosystem? Company initiatives are largely influenced by external signals that have economic implications for the firm (for example, current and pending regulation and issues on the agenda of the public.) While customer requirements and demand also play a role, customers themselves are frequently driven by these same external signals. Several examples help to illustrate this point. As an extension of the company's product stewardship philosophy, Dow Chemical in 1990 formed a new business group, Advanced Cleaning Systems (ACS). Unlike previous product stewardship efforts at Dow, ACS was designed principally as a business strategy: its goal, to maintain and increase sales and profitability in the company's chlorinated solvents business, which is threatened by increased regulation of ozone-depleting chemicals and federal and state programs to control toxic air pollutants. To accomplish its goal, ACS is developing alternative chemicals and processes as well as a range of customer services, including improved containers and process controls, aimed at reducing the environmental impact of Dow products from their arrival at the customer's facility through processing and waste handling. In the automotive and electronic industries, design for disassembly and recycling initiatives are largely influenced by international concerns such as rising disposal costs and legislation in Europe, specifically German postconsumer "takeback" legislation, and the possibility of U.S. adoption of such measures. Such legislation generally requires manufacturers to take their products back after consumers are through with them, and recycle or dispose of them properly. While the United States does not yet have national packaging regulations, individual states and nongovernmental organizations such as the Coalition of Northeastern Governors (CONEG) are responding to solid waste disposal issues by developing model legislation dealing with heavy metals in packaging and packaging waste reduction. These efforts have prompted actions by companies to redesign their packages and reduce packaging volume. Improving the environmental characteristics of entire industrial ecosystems will not be achieved by putting out fires or reacting to the public policy issues of the moment. The public policy agenda does not always reflect the most important environmental priorities and risks, long-term issues, or cross-media environmental concerns. Rather, it often reflects short-term priorities, perceived risks, and politically "hot" topics, and addresses single environmental media issues or contaminants (U.S. Environmental Protection Agency [EPA], 1990, 1992). In addition, since company efforts focus on activities in which they derive economic benefits, realization of industrial ecology goals will necessitate getting less profitable ventures on the corporate agenda: for example, recycling of materials and wastes that have little value, providing services to small, dispersed customers; and

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The Greening of Industrial Ecosystems identifying and addressing issues for which there are minimal or nonexistent regulatory, public, or customer pressures. Incentives for firms can be created by national environmental policies and legislation (such as the German take-back legislation, Japan's Law for Promotion of Utilization of Recyclable Resources, and the Dutch National Environmental Policy Plan) or voluntary programs (such as EPA's Industrial Toxics and Green Lights programs) that encourage comprehensive, long-term solutions to environmental problems through the development of more environmentally sensitive products and the creation of industrial infrastructures and partnerships. For example, the German take-back legislation requiting the recycling of all packaging is forcing the development of a private recycling infrastructure ("Green Dot" program) and the redesign of packaging (Calmcross, 1992). Existing regulations must also be examined to eliminate unnecessary or inappropriate barriers, such as hazardous waste regulations that might discourage the take-back of chemical products by suppliers or antitrust regulations that limit industrial cooperation. Setting future environmental priorities and goals in both the private and the public sector also will be facilitated by the further development of analytical methods, such as life cycle analysis, that better capture the true and total life cycle impacts of products and processes on the environment. In the near term, the challenge for industry and government is to set priorities and make decisions that will hold up in the face of advancements in analytic methods such as life cycle analysis and will not become costly mistakes to the company and the environment in the future. REFERENCES Booz, Allen and Hamilton. 1991. Corporate Environmental Management: An Executive Survey. Bethesda, Md. Cairncross, Frances. 1992. HOW Europe's companies reposition to recycle. Harvard Business Review 70(2):34-45. Frosch, Robert A., and Nicholas E. Gallopoulos. 1989. Strategies for manufacturing. Scientific American 261 (3): 144-152. U.S. Environmental Protection Agency, Science Advisory Board. 1990. Reducing Risk: Setting Priorities and Strategies for Environmental Protection. SAB-EC-90-021, Washington, D.C. U.S. Environmental Protection Agency. 1992. Safeguarding the Future: Credible Science, Credible Decisions. EPA 600/9-91/050, Washington, D.C.