Environmental Product Chain Management
1. Summary and conclusions
The studies of environmental cooperation in product chains have taken their starting point in enterprises having already an environmental management system. By involving suppliers, cooperators and in some cases customers in the efforts to improve the environmental profile of a product, the environmental focus of enterprises is extended to cover a larger part of the life-cycle of the product.
The product chain cooperations studied focused primarily on environmental impacts from the product itself, and there are only few examples of inclusion of global environmental impacts from the product life-cycle. The product chain cooperations studied thus mainly deal with constituents in the product, for example by focusing on documentation on the product or substitution of constituents.
1.1 Motivation
For many enterprises, one of the essential factors for starting a cooperation with suppliers on the development of a product with an eco-friendlier profile is a wish being an environmental frontrunner. Here, one of the essential elements is green public purchasing. Furthermore, customers on the German market are said on several occasions to have a catalysing effect, due to the many questions asked as well as direct requirements.
The most critical customers are used in some (few) enterprises as an inspiration for further product development, as they are expected to give a good indication of future developments on the market.
Some of the examples studied have been granted support from the Danish Environmental Protection Agency’s competence scheme or other public funds. External financing in these cases has been decisive for product development, since the support has given enterprises more scope for testing new methods or conducting more comprehensive analyses without expecting direct cost-effectiveness.
A few enterprises of the 25 examples select partners for cooperation on environmental issues in the product chain based on a review of global environmental performance in the product chain life-cycle. However, in most cases it is seen that decisive parameters for selection of cooperators are existing cooperation relations, personal acquaintances and – naturally – the significance of the different cooperative relations in terms of finances and/or strategy.
1.2 Driving forces and barriers
In environmental management work, backing from enterprises’ management is important, and the examples illustrate that this is also the case for environmental cooperation. Whether environmental cooperation with suppliers arises out of visions and strategies in the enterprise, or whether it is initiated at a more decentralised level in the enterprise due to, for example, existing cooperative relations on product development, cooperation typically is only translated into concrete environmental results, if management shows clear support. If not, staff spends resources on other essential activities.
Running-in of new procedures in production may face resistance with staff members, and some departments may find it difficult to accept inclusion of environmental arguments in their work. In this case it is particularly important with management backing, to ensure allocation of the necessary resources for environment work. If the enterprise has a "pioneer", he or she may assume the crucial function of "selling the message" on perspectives of environmental cooperation to colleagues and management, just as this dedicated person may hold on to focus, contacts and personal relations with respect to suppliers and customers.
Dialogue and development of environmental cooperation with suppliers and customers is seen by many as a comprehensive task requiring additional resources. This is especially the case if there is not already a cooperation among enterprises, for example on product development, as in this case contacts among the relevant persons in enterprises must be established as a first step. The success of cooperation depends largely on personal contacts, and several enterprises point out that if contact persons are replaced dialogue among enterprises is set back. Good personal contacts with a common understanding of what is important to clarify in connection with the environmental cooperation eases dialogue and work on procurement of documentation. Confidence among parties is a clear precondition for exchange of product information among enterprises.
Several enterprises have trained their sales personnel in including environmental parameters in their sales work. Price and delivery used to be key arguments, but now it has become necessary to acquire new knowledge on products’ environmental properties to ensure that advantages also in this respect play an active role in customers’ choice.
Lack of systematics and follow-up in environmental cooperation may cause the project to be a one-off event instead of a development process. Often, cooperation between enterprises and suppliers is based on the solution of a specific task. Once the task has been completed, there is in many cases no system to follow-up this cooperation, which is consequently discontinued.
To make the best of the environmental cooperation external consultants have often been called on, for example for identifying essential areas of effort, systematising efforts or applying the documentation provided. Several enterprises mention that the external assistance as had a catalysing effect for capacity building internally in the enterprises.
It must be easy to find information or to ask questions from customers to the right persons. Therefore, focus is put on internal organisation and knowledge of staff responsibilities. External contact often takes place through sales or purchasing departments, so these departments must have solid knowledge on enterprises’ environment work to enable then to refer directly to the relevant staff members, when more detailed knowledge is needed.
The chemical industry has some particular features. Traditionally, much attention is paid to safety in product handling, and the risk of accidents in connection with processing and use, storage or transportation of substances, for example, may become a negative press event. One of the examples discussed illustrates clearly the wish for secure handling of chemical products, as the supplier sets requirements to customers for introduction of safety measures and contributes to the implementation of environmental management systems with customers.
In several environmental cooperations enterprises participating are the frontrunners of their sector. These enterprises in particular experience that the thorough environmental perspective is not necessarily reflected in a clear demand for environmental advantages of products. The environmentally optimised products are often slightly more expensive than traditional products, and for this reason enterprises’ expectations as to larger market shares are not always met. This is particularly clear in sectors where competition typically lies in other parameters – for example the clothing industry. It may be difficult to sell products on their environmental properties, so environmental advantages are often pointed out in connection with other parameters such as quality or optimised delivery. Other enterprises choose to intensify sales work and service in connection with the use of products.
It is seen that customers demand product properties that have been phased out or that enterprises wish to limit for environmental reasons. Customers’ knowledge on impacts from a product may imply that it may be difficult to replace constituents or change properties, giving the product a better environmental profile.
1.2.1 Documentation and environmental product declarations
Environmental cooperation among enterprises often implies a need for exchanging more detailed information on products and components. Several enterprises experience that it may be difficult to communicate products’ environmental advantages to customers. For example, it is pointed out that there is no unambiguous template for preparing environmental product declarations, so it may be difficult to compare directly products’ environmental properties.
Enterprises often meet difficulties when asking documentation from suppliers on constituents or properties of constituents. The problem seems to be largest when documentation is requested from (not least large) foreign suppliers from countries where there is not necessarily the same attention to environmental issues and where the individual (small) customer has little strategic importance. It is in particular small enterprises that find documentation and writing procedures time-consuming and burdensome.
Particularly in the chemical industry it may be difficult to provide documentation for constituents, since exactly the recipes may be a significant competitive factor. In some product chains committing cooperations have been entered, where confidentiality among enterprises can be guaranteed, whereas other chains choose to manage documentation more indirectly through requirements for products’ properties instead of for constituents.
It is seen that suppliers reject a customer imposing too heavy requirements in connection with supply. This is seen, for example, if documentation is requested on matters that are not already described, since many resources are needed to provide documentation. The high environmental requirements thereby may reduce the number of interested suppliers.
Concrete questions from customers to products’ environmental profile range broadly. Sometimes, diffuse and general questions are asked that are not focused on specific environmental issues – making them very hard to answer. In connection with this inconcrete environmental demand some enterprises have spent resources on providing documentation that was not requested at all. It is also seen in several cases that products’ environmental properties, despite requests, are not used as a criterion for customers’ choice of products, since irrespective of environmental profile, for example, the cheapest product is chosen anyhow.
In the examples in the next section, documentation and environmental product declarations are discussed in, among others, the following examples: 1, 2, 3, 5, 10, 11, 14, 18 and 23.
1.2.2 Eco-labels
Among the examples for environmental cooperation in product chains some enterprises have opted in on eco-labels and some have opted out of them. The advantage of using eco-labels is that the customer can easily chose in connection with "green purchasing". The eco-label has been pointed out as an asset in connection with public purchasing since in many public offices for a number of years there has been a wish of documenting a green purchasing profile. Eco-labels are a tool for communicating in a simple way complicated information on environmental issues where there is no need for detailed information.
Many enterprises having considered eco-labelling of their products find the Nordic market particularly attractive for these products, as the remaining international market does not show the same attention to products’ environmental properties. (Not surprisingly), this goes particularly for the Nordic eco-label – the Swan – since enterprises asked only find limited knowledge of the Swan eco-label outside the Nordic countries.
By contract, some enterprises with international marketing expect that environmental advantages developed for the Nordic market may be used as a catalyst for products sold outside the Nordic market.
In connection with labelling with the Swan, producers are charged with a turnover fee of 0.4%, and some enterprises mention this fee as a barrier for the label. Several enterprises manufacture products complying with the criteria of the Swan, but chose not to apply for a licence for the label. Within a product series there may be more products complying with the Swan criteria and where the enterprise chooses to only label one produce in the product group in question. Thus, the enterprise may deliver to customers demanding explicitly eco-labelled products, whereas other customers can choose to "purchase green" without paying the fee on the Swan licence.
Information relating to product chains with respect to the European eco-label the Flower cannot be derived from the 25 examples.
In the examples in the next section, eco-labelling is discussed in, among others, the following examples: 1, 2, 11, 12, 13, 19, 20, 21, 22 and 23
1.2.3 Cooperation with foreign suppliers
It is seen from the 25 examples that cooperation with foreign cooperators on environmental issues may be difficult. Often, it is easier to start a dialogue with Danish suppliers understanding more directly Danish environmental legislation and interests on the part of enterprises in finding documentation. As mentioned, it may be particularly difficult to find documentation from (not least large) foreign suppliers from countries where there is not necessarily the same attention to environmental issues and where the individual (small) customer has little strategic importance.
Often, contacts with foreign suppliers passes through contact persons that may be located far from the production, and as environmental cooperation often implies discussions of technological developments, it may be difficult to establish communication of this kind. Finally, linguistic barriers may have an impact on the benefits of an international environmental cooperation.
It should also be mentioned, however, that it was pointed out from some enterprises that nationality of cooperators is of no importance whereas corporate culture is more important with respect to opportunities for environmental cooperation in product chains.
In examples nos. 1, 22 and 24 aspects on cooperation with foreign suppliers are discussed.
1.3 Results of environmental cooperation
Environmental cooperation in product chains aims to improve the environmental profile for a specific product (or global environmental impact of an enterprise). It appears from the summaries of product chain cooperation examples that they have led to a number of concrete environmental achievements. However it has not been possible precisely for all product chains described to state the concrete environmental benefit from the cooperation. This is for example the case for phasing-out of specific problematic substances and materials or optimised use of products.
In addition to concrete environmental benefits a number of tools have been developed that may be used in a continuous optimisation of the environmental cooperation in a product chain. This is the case, for example, for systems for assessment of suppliers or systems for marketing of environmental advantages of products. In many cases there has also been an improvement of enterprises’ internal organisation, for, for example, there has been focus on internal communication. Thus, the basis has been created for a closer cooperation both among enterprises and internally among departments in the enterprise.
The examples described indicate that good environmental results in particular arise out of real cooperations where, for example, a central enterprise with a good environmental grasp contributes to suppliers’ (and in some cases customers’) development in the environmental field. Further, it is seen that clear communication to suppliers on environmental policies and objectives of an enterprise may pay off by innovative steps taken by the supplier (see examples 5 and 15).
1.4 Perspectives for further development
The cooperation on environmental improvements in product chains altogether has given enterprises a capacity building in the management of environmental issues and in cooperation with other enterprises. The extended focus for environment work – with product life-cycle considerations – and experience with cooperation opens up for extension of environmental cooperation interplays and increased environmental benefits in future.
On the basis of the examples presented some areas can be identified where environmental cooperation in product chains seem to present special scope for development. This goes both for when it may be relevant to extent the environmental cooperation in the product chain and for how to exploit the environmental cooperation in other areas.
It is clear that many enterprises having work with their own environmental issues for a number of years will be able to obtain environmental benefits from extending the future preventive environmental efforts to also cover suppliers and customers.
Environmental cooperation in product chains seems not least relevant in sensitive markets such as the chemical industry, where accidents may cause large environmental impacts and thus attract attention. This brings the entire product chain into focus, linking responsibility for products and services of the enterprise to the reputation of the enterprise.
On markets with few suppliers purchasers have a large need for establishing formalised cooperation with suppliers to ensure that suppliers are involved in the development of products.
Enterprises’ environment work often arises out of interest in their own or their products’ environmental impact, and it is therefore not directed directly at suppliers’ global environmental impacts. Typically, it is difficult to delimit, for example, suppliers’ energy or water consumption from the manufacture of individual components, and often enterprises find it more evident to follow constituents of the product or the components instead of environmental impacts from the manufacturing process. A more comprehensive LCA perspective in this context seems to be realisable only in a distant future.
Only a minority of enterprises so far have based the environmental cooperation on a real life-cycle approach, where environmental hot-spots in a product chain have been identified based on comprehensive screenings. The need for general tools facilitating the completion of such analyses has been pointed out, forming the basis for development of products with improved environmental properties in the entire life-cycle of the product. This is not least the case where an essential part of environmental impacts in a product life-cycle lie beyond the individual "key enterprise".
Products’ environmental profile already today is a competitive parameter in markets, where customers’ need for documenting an environmental profile in connection with purchasing (for example requirements for public green purchasing) have an impact on choice of products. Green purchasing has not penetrated as markedly as many front-runner enterprises would have wished, but several enterprises expect that development of products with an environmental profile in future may be used as a catalyst on the international market. This is also supported of the ideas in, for example, the EU Commission’s Green Paper on integrated product policy.
Technically, there are good opportunities for improving the global environmental profile of a product. The speed of environmentally optimised products’ penetration may be enhanced through focus on:
 | development of easily accessible tools for environmental cooperation in product chains (for example standards for preparation of environmental product declarations) |
| support for establishment of enterprise network (for example in product chains) with special focus on the environment |
| development in market demand for environmentally optimised products |
| development of ability and willingness of individual (groups of) players to contribute to reducing environmental impacts in a life-cycle perspective |
| larger insight into organisational preconditions for smooth environmental cooperation in product chains |
1.5 Areas for further efforts and clarification
The summary of the 25 product chain reports points to a number of elements that may form the starting point for further discussions. Below four areas of discussion are identified that would be relevant to further elucidate to provide the basis for supporting developments in environmental cooperation in product chains.
1.5.1 Market perspectives
To make way for the largest possible benefit from environmental efforts it is important for enterprises to pay attention to market developments. However, it may be difficult for the individual enterprise to follow developments in the "green market" closely, and many enterprises would benefit from an insight into market dynamics with respect to environmentally optimised products. At the same time, this would provide better opportunities for conscious marketing of environmental advantages of products.
Questions for clarification of the area:
| To which extent are environmental issues seen as a competitive parameter? |
| How to market environmental advantages (offensive influence on demand)? |
| Are environmental differences among competitive products visible/transparent? |
| What can enterprises do to visualise environmental advantages? |
| What is the implication of customer type (consumers, enterprises or public purchasers)? |
| How to include dynamics with respect to market changes? |
| How are these dynamics reflected in the internal organisation of enterprises? |
| What are the bottlenecks with regard to sale of environmentally optimised products? |
| What is the wish-list for other players (shareholders, investors, staff, customers, suppliers etc.)? |
Many enterprises can have more benefit from their environmental efforts by gathering stand-alone or sporadic processes on supplier cooperation to a global effort where formulation of a strategy prioritising areas of effort may strengthen environment work. Such a strategy naturally must be prepared in a close interplay with the overall strategy of the enterprise as well as its objectives for other areas.
Questions for clarification of the area:
| Which objectives are laid down for environmental cooperation with suppliers/customers? |
| Which elements must be considered to ensure optimum benefit from the cooperation? |
| How to ensure continuity and development of the cooperation? |
| How to link preferences from different stakeholders (customers, shareholders, authorities etc.)? |
| What is the interplay with other objectives of the enterprise? |
| How to operationalise the strategy? |
1.5.3 Organisation of environmental cooperation
To have the optimum benefit from the cooperation in the product chain it is important to have a focused prioritisation of both cooperators and areas of effort. In addition, there are a number of questions on the actual organisation of the cooperation that should be clarified. For many enterprises exchange of experience in networks (region, sector or "value chain") may be profitable, allowing for example for dissemination of different tools for supplier assessments etc.
Questions for clarification of the area:
| What are the objectives for the cooperation? |
| How to ensure continuous development of the cooperation? |
| How to identify cooperators? |
| Requirements or dialogue – advantages and disadvantages? |
| Planning of communication – sales department, development department, laboratories? |
| Determination of distribution of responsibilities among the enterprises? |
| How to achieve clear and unambiguous communication on environmental issues? |
1.5.4 Information
Information is a key concept in environmental product chain cooperations. This goes for both internal communication among the different departments in the enterprise and for communication with external parties.
Questions for further clarification:
| From Green Accounts to more detailed knowledge – which information is necessary? |
| How to prioritise and focus information in the enterprise? |
| What communication tools are applicable? |
| Bottlenecks in relation to more detailed product knowledge? |
| How to enhance dialogue with suppliers (for example long-term contracts)? |
| Common language, how to provide the right information, how to generalise experience from different cooperations, for example Danish/foreign, certified/non-certified, large/small, sector characteristics? |
| How best to inform consumers on environmental advantages? |
| How to ensure access to new knowledge? |
| Does the enterprise have sufficient capacity for applying new knowledge? |