The spirit of eco-efficiency? To combine economic value creation or enhancement while continuously mitigating environmental resource usage and impacts.
Eco-efficiency is a key driver for overall business performance because it helps companies understand that they can produce better goods and services while using fewer resources, and lowering ecological impact: Thereby improving both, their environmental performance and their bottom line.
The World Business Council on Sustainable Development (WBCSD) coined the term in 1992. The idea of eco-efficiency as a major driver of corporate excellence, according to them, was perhaps introduced by Swiss industrialist Stephan Schmidheiny in the same year, through his book Changing Course.
This article aims to introduce the eco-efficiency concept, some of its key manifestations, and perhaps most importantly, how companies can become more eco-efficient.
Identifying the positive link between environmental improvements and economic benefits, is eco-efficiency’s first base and taps the potential for enhancing savings from environmental improvements.
Key Considerations for Eco-Efficiency
At the heart of eco-efficiency is creating -or delivering- more, with less. And at the heart of CSR or the triple bottom line is creating, instead of perhaps simply re-locating, honest value addition.
The Geneva-based WBCSD, a coalition of about 125 leading, international companies that share commitment to the environment. economic growth and sustainable development has identified a handful of key action-areas of a basic eco-efficiency mandate. Perhaps most relevant to companies functioning in economies such as Pakistan’s is the combined gist behind the components: that businesses must harness their creativity to deploy new technologies, initiate improvements along the entire value-chain and bring new, value-added products to the market.
Eco-Efficiency Along the Value Chain: LCVA
The eco-efficiency concept has now expanded to include the exploration of business opportunities to be gained from sustainable development strategies, an idea which gained popularity with Harvard Professor, Prahalad’s Bottom of the Pyramid (popularly called BoP) theory. The BoP movement is now in full-swing with everyone clamouring to serve the billions of ‘consumers’ at the bottom of the income pyramid. This, in a country often perceived to be sliding towards the BoP, is old news.
Eco-efficiency though, can work throughout the supply chain, end-users included – hence an increased focus on minimalistic packaging that is driven by the understanding that post-consumer processing is a part of the cost of production. In developed markets, companies are already developing products and services that allow customers to cut their consumption of resources and reduce their individual and collective environmental impact. All while satisfying their needs often more effectively, and at a better price.
Budding entrepreneurs from developing countries can offer all of the above – but the catch sometimes is that quality becomes a victim. Without consumer demand for rigorous standards, why supply them? This is where downstream consumer empowerment in the form of information is vital for leading companies who have firm faith in the value chain that went into producing their products. They must help consumers understand and demand ethically produced, quality goods.
It is a tough line to walk – but only if a company’s business strategy lacks ingenuity. (Please note: the existence of a robust, long-term business strategy is assumed). However, companies that have invested their time and energy into honest creativity towards value-addition are already reaping the benefits.
For instance, offering services in a manner that meets the environmental, economic and social (triple bottom line) expectations of all stakeholders will create a solid foundation for increasing shareholder value over the long term. Not rocket science.
Canada-based Suncor Energy for instance, uses the Life Cycle Value Assessment tool to facilitate “integrated decision making that takes into account long-term triple bottom- line benefits and impacts, not just short-term paybacks”. Managers or business unit heads can often become too focused on cost-cutting measures, which can actually hinder both the realization of the triple bottom line and the long-term financial bottom line.
Proactive application of triple bottom line or life cycle based thinking, claims Suncor, makes it a more sustainable energy company that continuously improves the performance of its operations and products. Like many companies who’ve treaded these warm waters, Suncor believes that this thinking specifically enables more rewarding decision making given its triple bottom line parameters such as societal concerns and priorities as they impact project design and implementation, including safety and community perspectives. It also facilitates the development of an eco-efficient “design of processes and operations based on opportunities to reduce costs and environmental impacts and improve net value”.
The benefits? A reduced risk of unintentionally shifting the burden or environmental impacts created by company decisions in direct operations to upstream or downstream activities – for starters. Want more? A “reduced business risk from hidden socio-economic or environmental liabilities, and/or regulatory or stakeholder expectations” – now for a traditional energy company that is not only serious baggage potentially unloaded but a massively enhanced ‘license to operate’.
Private Sector: Living the Wake up Call
The good news, at least from the perspective of the eco-efficiency journey, is that the corporate sector has woken up to realize that eco-efficiency is the only way forward.
One of the most promising manifestations of the eco-efficiency movements is that of industrial ecology (IE). Sweden’s Royal Institute of Technology, for instance defines it simply as an interdisciplinary study of technology, society and ecology.
Although many may have different names for it, several companies are in fact rigorously implementing measures towards their own eco-efficient future.
For instance, over a 15-year period, Engro Chemical has actually reduced its energy intake by 32% per ton of urea produced – while production has actually increased. Within this period, the plant’s production capacity increased more than two-fold in 8 years: to 850,000 tons per year in 1999, from 268,000 tons per year in 1990.
Additionally, the company also consistently improves its feed: fuel ratio, producing more urea, with less natural gas input. This means that by streamlining its plant and power operations, the company has been consistently able to shift its main operational input: natural gas, towards actual urea production as opposed to consumption in the shape of power generation.
Evolution of Layering Concepts: Industrial Ecology
“Industrial Ecology sees industrial systems (for example a factory, an ecoregion, or national or global economy) as being part of the biosphere,” says Dr. Getachew Assefa of the Institute’s Department of Industrial Ecology. “It considers such systems as a particular case of an ecosystem, but based on infrastructural capital rather than on natural capital,” Dr. Assefa adds.
It is essentially the shifting of industrial processes from open loop linear systems to closed loop systems, meaning that no outputs are considered waste, they become the inputs of another industry – hence an ecology emerges. Instead of resources and capital investments moving through systems to become waste, IE shifts to systems where wastes become inputs for new processes.
Dr. Assefa asserts that natural systems have no waste – hence proposes modeling human-made systems after natural ones, thus rendering them sustainable. He calls this a form of biomimicry, using the biological organism as a basis for designing industrial systems, thereby closing the material cycles.
But, these zero-waste targets require intensive, proactive and oft-wrinkled cooperation between industries. The basic tools he recommends include tools such as the life cycle assessment tool described above. For industrial ecology, a life cycle energy analysis to assess the environmental impact is more meaningful still.
He also outlines four key considerations to Sustainable Design, which he defines as “the art of designing physical objects to comply with the principles of economic, social, and ecological sustainability”:
- Energy efficiency: this mainly entails lower overall energy usage in manufacturing processes
- Low-impact materials: non-toxic, recycled sustainably-produced materials usage
- Quality and durability: better quality and long-lasting products, lengthening positive product life cycles
- Design for reuse and recycling: design for performance in a commercial ‘afterlife’
The fourth is a venture that developing countries seem especially well-positioned to explore. Our indigenous, informal recycling systems catalyzed by BoP-based entrepreneurs are a living example of this in fact. For instance, the organic waste of a food company becomes input for a cattle feed company; the waste steam of its plant air conditioning units is channeled to power its industrial cooking appliances and so on.
Ways to Become Eco-Efficient?
The hope is that this article has helped unravel how eco-efficient measures are among the highest impact ways to live the triple bottom line. In the language of six sigma, the ‘low-hanging fruit’ are here; this is where creativity and commitment combined with oft-miniscule financial input synergize to offer almost immediate financial gain can be realized.
The WBCSD and Dr. Assefa reinforce the following starting points below for companies to chart eco-efficiency into their business strategies – as many are already forced to do given dizzying fuel costs. So while we still have room, let’s try to be proactive by:
- reducing the material intensity of goods and services – using less to make a product or deliver a service;
- reducing the energy intensity of goods and services; enhancing the recycling possibilities and options of all materials used;
- choosing a TBL-criteria based method for production, service, disposal or recovery;
- increasing mineral recovery, using fewer inputs such as energy and water and recycling more while reducing emissions;
- using new technology, fewer inputs per unit of product such as energy and water;
- recycling more and reducing toxic emissions;
- maximizing the use of renewable and recycled resources, particularly strategic geographical resources – for instance, in Pakistan, wind and solar energy are abundantly available and wasted.
The bottom-line of eco-efficiency? Fully and honestly integrate it into your business strategy (and national strategies to neutralize your own competitiveness in the short term) – before it integrates its own way in as natural resource prices sky-rocket. And continue to advocate and support policy measures which reward eco-efficiency, as Pakistan’s National Conservation Strategy so wisely recommended, way back in 1992.