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Environmental management in product chains

3 Theoretical perspectives for analyses of environmental management in product chains

• 3.1 Introduction: the concept of environmental management in product chains
• 3.2 A social shaping perspective on the analysis of environmental management in product chains
• 3.3 Network relations in and around product chains
• 3.4 The role of environmental issues in innovation
• 3.5 A typology of environmental management strategies in product chains
  • 3.5.1 Transnational environmental management
  • 3.5.2 Competencies in environmental management in product chains
• 3.6 Assessment of changes in environmental impacts
  • 3.6.1 Time perspective
  • 3.6.2 Degree of prevention
  • 3.6.3 Holistic orientation
  • 3.6.4 Effect on environmental impacts
• 3.7 The role of governmental regulation
  • 3.7.1 Governance paradigms
  • 3.7.2 Policy formation and implementation
  • 3.7.3 Regulatory regimes
  • 3.7.4 Policy patterns
• 3.8 Path dependency and path creation

3.1 Introduction: the concept of environmental management in product chains

Different notions are used for environmental management in product chains. “Life cycle management” is sometimes used as the name of this form of environmental management (see e.g. Garcia-Sanchez et al 2004). Kogg (2002) uses the term “environmental supply chain management” about efforts initiated by companies to improve and/or control environmental performance upstream and/or downstream in their supply chains. When the term “supply chain management” is used the focus of some authors is primarily on demands directed upstream the supply chain (which means towards the suppliers).

De Bakker and Nijhof (2002) use the term “responsible chain management” as a term for a continuous alignment of different internal and external expectations to a company. This term signals that today not only environmental demands are in focus in product chains, but sometimes also issues like social conditions, occupational health and safety, child labour etc. Some companies have started using the term “sustainability management” and reporting guidelines have been developed. An example is the Global Reporting Initiative (www.globalreporting.org).

In this report, “environmental management in product chains” is used as the general term. Environmental management in a product chain is defined as attempts to

• Address environmental problems in a product chain
• Convert the understandings of problems and the management hereof into changed practices in the individual companies in the product chain and/or the product chain as a whole.

Kogg (2002) stresses that much of the research in the field of environmental supply chain management has been based on case studies and that prescriptive recommendations often have been based on a limited number of cases, typically best practices, while little has been done in relation to theory building. This report is based on 25 case studies in Danish industry, which is a reasonable number for drawing some conclusions with respect to theory building and with respect to recommendations for governmental regulation. The report discusses:

• The interaction between environmental management and existing product chain relations and other external conditions like governmental regulation
• The development of environmentally related competencies and environmental achievements in the product chains
• The opportunities and barriers for a long-term and more widespread implementation of environmental management in product chains as part of business strategies and how this can be supported by governmental regulation.

The following paragraphs present theoretical perspectives for the analyses of the above-mentioned aspects of environmental management in product chains.

3.2 A social shaping perspective on the analysis of environmental management in product chains

Traditionally analyses of changes of corporate practice are based either on a resource-based perspective focusing on the development of routines and resources inside the company or on a contingent perspective focusing on the corporate uptake of external demands and discourses. This report combines the two perspectives into a social shaping perspective, where the focus is on the co-shaping of companies and societal discourses during the emergence and stabilisation of new issues inside companies, as well as on the changes in routines and resources within the involved companies this might imply (Forman & Jørgensen 2001a & b).

The focus on the shaping of environmental management practice in product chains implies that the environmental activities in a product chain are seen as shaped by, on the one hand, existing traditions within the companies and among the companies in a product chain, and, on the other hand, by the pressure on the companies to introduce environmental efforts. This pressure may come through environmental requirements from external and internal actors, including governmental regulation. Existing traditions in a product chain and in the companies include the strategic orientation in the companies, the division of labour and communication in and among companies, and the methods of control companies use to achieve the fulfilment of the requirements to their suppliers, such as quality, delivery etc. The analyses of the social shaping of the environmental management practice focus on the change processes, the background (the triggers for the changes), the interaction with present business strategy and product chain and the outcome of the change processes. Changes in practice are understood as environmental changes, which means changes in potential environmental impacts, and organisational changes, which means changes in knowledge resources, values, routines and/or organisational structures (Forman & Jørgensen 2001a & b) (Hansen et al, 2002). Organisational changes can be seen as basis for the embedding of a new practice as the future practice. This perspective is very much in line with for example Kogg (2002), where focus in similar case studies is on triggers for greening, the greening objectives, the supply chain structure, the approach to environmental supply chain management and the consequences for the companies.

Also Bowen et al (2001) stress the importance of focusing on the corporate environmental activities as well as the strategic purchasing and supply, when analysing the shaping of what they call “green supply”. Hall (2000) discusses environmental supply chain dynamics and highlights the importance of the buyer-supplier relations, including the degree of collaborative buyer-supplier relations and the degree of one actor’s ability to control the decisions of the other actors, so-called channel power. For the analyses of product chain relations Goldbach (2002) describes two extremes of relations in product chains as one characterised by co-operation, incentives, trust and win-win solutions and another characterised by confrontation, control, power and win-lose solutions. Kogg (2002) identifies two aspects of environmental supply chain management approaches from two case studies. One aspect concerns whether environmental measures take place through direct interaction with each of the suppliers upstream or by approaching the nearest supplier, whom then is supposed, if necessary, to approach own suppliers, which could be called a kind of “mediated environmental management” with the product chain as arena. The other aspect concerns whether the initiatives are taken by a company alone in order to position itself on the market or collaboration is established with competitors in order to increase the pressure on the suppliers.

Since several companies within the same branch or product area are analysed it is possible to compare companies and look for similarities and differences in the issues they focus at, and the strategies they develop. This includes whether some companies can be seen as front-runners shaping new strategies, and others can be seen more as followers, who react to new strategies and thereby contribute to making these strategies a new path within a certain branch or product area.

Although the focus in the analysis is on environmental management in product chains, the analysis of the cases draws on a broader network analysis to supplement the product chain perspective. The broader societal “selection environment”, suggested in the literature to increasingly play a role in product and industry greening, is not captured with a product chain analysis alone. Networks around a single part of the product chain, or networks addressing the whole product chain, can also contribute to the development of the selection environment.

3.3 Network relations in and around product chains

Inspired by Holm et al (1997) and Søndergaard et al (2004) a distinction is made between four types of networks, which companies, consciously or unconsciously, are part of:

• The business network – here called the product chain – the flow of material, capital and information from cradle to grave between suppliers and customers and users (see figure 3.1)
• The developmental network – sometimes also called the knowledge network – which focus on the development of new processes and products and which can include parts of the product chain and universities and other types of knowledge institutions
• The regulatory network, which includes public authorities from the local to the international level, but also civil society organisations which directly or indirectly address how companies should or ought to act
• The local network, which consists of the local supply of natural resources, infrastructure, staff, local governmental regulation etc.

This combination of innovation, product chain- and network approaches contributes to the analysis of the greening process as co-shaped by processes in and among the companies in the product chain and other types of networks.  Figure 3.2 shows the combined focus on the different types of networks.

Figure 3.1: The structure and the flows in a general product chain (Jensen and Remmen (eds.) 2005)

Figure 3.2: The focus of the case analyses combining a focus on the product chain, the developmental network, the regulatory network and the local networks. The arrows show the complex pattern of flows among the different networks of natural resources, information, capital etc.

Boons (1999) distinguishes in his typology for business networks between bilateral and multilateral networks and between networks with different level of integration (low level of integration meaning more autonomy to the members of the network). Table 3.1 gives an overview of different types of networks according to these aspects (Boons 1999).

In the analyses of the product chain relations and their interaction with environmental management practice Schary & Skjøtt-Larsen (2002) is used as background for characterising customer-supplier relations in product chains. According to Schary and Skjøtt-Larsen product chain relations can be found on a continuum between market conditions and hierarchies. Market conditions imply that materials, services etc. are bought from time to time looking for the best

Table 3.1: Typology of bilateral and multilateral corporate relations with different levels of integration (Boons, 1999) price, and hierarchies imply that a company take over or integrate a certain competence into own organisation. In between these extremes are a number of so-called hybrid forms with some kind of competence hold by the supplier and some kind of specificity of the materials, services etc. the supplier offers. Schary and Skjøtt-Larsen refer to Andrew Cox’ typology for product chain relations as shown in Table 3.2.

Table 3.2: Typology of product chain relations (Schary & Skjøtt-Larsen 2002, pp. 183-193)

According to Schary and Skjøtt-Larsen, it should be expected that the closer a certain competence is to the core competence of a company, the more likely it is that this competence becomes more integrated into the dominating company in the product chain. A company has often, however, a portfolio of product chain relations at different levels of integration. A number of factors influence the break away from past practice of simple procurement at market conditions: increased outsourcing, global sourcing, Just-In-Time purchasing, information technology development and increased focus on environmental supply chain management (Schary & Skjøtt-Larsen 2002).

3.4 The role of environmental issues in innovation

A focus on innovation dynamics is important in the analyses of environmental management in product chains of two reasons. On the one hand, several of the environmental initiatives in product chains, which were identified, involve development of new products or changes of existing products. On the other hand, existing innovation dynamics would also play a role in the shaping – according to the earlier mentioned co-shaping perspective to the development of environmental management in product chains.

A number of studies have analysed the role of customers, users, indirect stakeholders and general societal demands in innovation. The reasons for these concerns to play an increasing role include increasing concern over technological changes and their societal impacts. Such concerns are reflected in company policies as well as in governmental regulation. Increasing customer and consumer awareness of health, environmental and societal consequences is another sign of the societal role of these types of concern. (See e.g. (Forman & Jørgensen 2004), (Stranddorf et al2002), (Madsen & Ulhøi 2001), (Foster & Green 2000), (Stewart et al 2000), (Stewart & Conway1998), (Hansen1996) and (Lundvall1985).

These studies include innovation studies with an industrial economic perspective and studies with a more organisational perspective. The industrial economic perspective focuses on the structural conditions and driving forces for activities like environmental management in product chains. This literature focuses on productivity driven innovations, but also new products, new quality aspects and products implying less societal impacts. Seen from an environmental point of view, productivity driven innovations often also have an environmental dimension due to the use of fewer resources. This kind of innovations does not take place automatically, but maybe only if there is a strong economic incentive. This kind of innovations includes more efficient equipment and more efficient management (so-called “good house-keeping”). Other types of environmental innovations are based on substitution of chemicals, which implies less environmental impact during use or waste handling, longer lifetime etc.

The selection environment, as a term for the mechanisms behind the decision to focus on certain values, includes stakeholder groups and structures and regulation. Regulation is here understood both as specific governmental policies and as the result of negotiations balancing between different interests. Compared to the role attached to governmental regulation in economics of innovation as inhibiting innovation, the role of regulation with regard to “green innovation” is regarded as more positive. Regulation may reduce uncertainty about consumer acceptance, may draw attention to cost ineffective production methods and may add quality to the product (see e.g. (Hansen 2001)).

In a number of innovation studies regulation is found to be a strong motivator for environmental innovation, and according to (Foster & Green 2000), English companies seem only to develop so-called greener technologies if they are under regulation or if customers further down the product chain demand them. The only exception to this in their survey is, if companies have Scandinavian customers, which demand greener products.

In Stewart et al (2000) the role of broader societal “demands” and concerns for technology development and environmental innovation have been analysed. Broader social concerns are mentioned to be of increasing importance for innovation. Because of their less direct influence, terms such as “the selection environment” and “indirect stakeholder influence” have been used about them. These broader concerns are harder to demonstrate since the concerns are often more complex and involve several technical trait, links are indirect between e.g. NGOs and the company, and the consideration of the concerns are often not traceable in the company.

Hall (2000) refers to small companies as less responsive to general or indirect environmental concerns, whereas large and high profile companies are more inclined to address their environmental image in public. One reason why it may be more difficult to trace the responses in small firms, is the lack of an environmental person, a formulated environment policy etc. Hall also refers to small firms as enjoying less criticism, because they are small. He uses the notion “channel power” about the ability of a company to raise demands to its suppliers or customers.

Stranddorf et al (2002) conclude in a study of Danish textile companies and their environmental demands to suppliers that whether a company chooses to address an environmental issue depends on a number of factors including the present product chain relations and possible ways of integrating the topic into the business strategy. There may be different triggers for environmental initiatives in the same company.  The triggering factors include:

• Governmental regulation of chemicals and materials
• Governmental regulation as public-private sector-based dialogue forum (developing plan for eco-labelled collection of garment)
• Governmental funding, including funding for eco-labelling and for joint development projects with suppliers in developing countries
• Public debate, especially in relation to child labour
• Customer demands
• Expectations to market opportunities

Foster and Green (2000) analyse in nine companies how environmental issues influence the research and development of companies. Focus includes the role of consumer demand, university research and governmental regulation. The hypothesis that demands play an important role is amongst other based on earlier studies on the co-construction of markets and anticipated markets for technology development. The awareness of this is seen as important for managing technical as well as economic uncertainties. Foster and Green (2000) argue that environmental innovation could get a bigger role if suppliers encouraged their customers more to have a dialogue about environmental potentials.

Madsen and Ulhøj (2001) see environmental innovation as the result of a very complex process involving not only suppliers and customers, but also a broad group of societal stakeholders or actors. Such studies demand a view on many different types of relations of the companies and the dynamics of such relations.

In greening of product development, it is important to be aware of those changes that may be necessary in a future practice with a greener product, for example because the product maybe demand more of the user. Akrich (1992) uses the concept of “script” as a way of describing future roles in a practice. These roles are “played” by the objects themselves, their supporting infrastructure and the humans (e.g. users, governmental authorities). In a design approach the concept of script can be seen as a way of characterising those intentions or manuscript, which a designer builds (inscribes) into a technology through its material shape, its functions, the user guidelines etc. These intentions include the future roles, which the technology, the user, the surrounding infrastructures etc. are supposed to have. Whether the script afterwards is accepted and a stable practice is developed depends on the script and on the type of technology and the context and probably how much present and/or future users have been involved in the design og re-design of a greener product. The theory talks about “negotiations” between the inscribed possibilities and limitations the script gives the user. These negotiations take place in interaction with the economic, knowledge, technical etc. resources, which the user has access to when shaping the practice with the product (for example whether it is possible to use more time on a cleaning task, if the greener chemicals demands this. The technology is considered as “hard” if the users cannot change the technology, even if they feel restricted in the shaping of their practice. On the other hand, the technology is considered as “soft” if the users can shape their own practice. The so-called “prescription” refers to the room for action, which the script allows (Jørgensen et al 2006).

3.5 A typology of environmental management strategies in product chains

In the above-mentioned study of environmental management in product chains in the Danish textile sector three different types of environmental management in relation to suppliers are identified (Stranddorf et al 2002) and (Forman & Jørgensen 2004). The aspects, which showed the need for differentiating between different practices, were:

• The degree of pro-activity in the corporate environmental strategy
• The tradition for short or long term relationships and for control and/or co-operation with the suppliers
• The concepts used by the companies to plan and monitor demands to the suppliers
• The organisational impact of environmental initiatives on the product chain in terms of development of the competencies of the company itself and/or the supplier(s).

The three environmental supply chain management practices are:

• The wake strategy, where the company does not place requirements on suppliers, but follows in the ”wake” of organisations, which already place these requirements.
• The asymmetrical partnership, where a company wants long-term relationships with a supplier. The customer is dominating the relationship, builds up a lot of competence itself and controls that the supplier met the requirements.
• The symmetrical partnership, where a company wants long-term relationships with a supplier and enters a mutual partnership with the supplier(s) and built the strategies in dialogue.

A company might have different supply chain strategies and different environmental management practices in relation to different suppliers, depending on the competence of the supplier. If a supplier is easy to substitute, which for example sewing companies in the textile industry in some cases seem to, the environmental supply chain management practice are more of an asymmetrical partnership. If the company is more dependent on the competence of a supplier, it seems like there is a tendency to build symmetrical partnerships.

The aspects of stabilisation of these three product chain practices can be viewed from both a customer and a supplier perspective (Forman & Jørgensen 2004). The wake strategy can make it easy for a company to switch to new suppliers, when for example the market for eco-labelled products has become mature. However, companies might face problems at that stage to find suppliers due to potential suppliers’ agreements about not selling to more customers, because existing customers want to secure their own market position.

The most essential reason why suppliers decide to enter agreements to provide environmentally improved products or improve processes is that they can see competitive advantages in participating in these partnerships and a direct link to customer demands. An international retail chain is for example a potentially large customer for suppliers. Therefore, it is attractive to suppliers and they are more willing to co-operate with the company. It is, however, not only the size of the company, which makes it attractive as customer. A strategic alliance with suppliers of chemicals may be developed, because the customer buying the chemicals is well known for its in-depth testing of new chemicals.

Companies, which have outsourced their production activities, seems to need to pay attention to how they ensure their market position, as the essential competence building takes place by the supplier.

With respect to asymmetrical and symmetrical partnerships, it looks like that the more aspects, which have to be incorporated into the customer-supplier relations the more resource saving it might be to develop more long-term and closer customer-supplier relations. It takes time and human resources of the focal company if it too often has to develop new customer-supplier relations, including aspects of quality, environment and occupational health and safety. Forman and Jørgensen (2004) report the same dilemmas for customers and suppliers connected with these types of relations as Hall (2000) in his literature review. The customer is sure to have qualified suppliers, but might also find it difficult to shift suppliers due to the dependency of the supplier being developed, for example if external conditions like currency rates change and make it more profitable on a short term basis to find other suppliers. The supplier is getting more stable planning conditions, but might also be pushed by the customer to take the burden of a number of new activities like obtaining eco-labelling.

Asymmetrical partnerships are not necessarily capable of disseminating advanced environmental competence along a supply chain and develop a multiplier effect, as a company that makes requirements at a supplier build up its own environmental competencies and do not expect the supplier is able to develop the similar competencies. Seen in a long-term perspective this might make the supplier very dependent of the customer and imply that the customer stays with the responsibility of updating knowledge about environmentally more sound opportunities. (Schary & Skjøtt-Larsen 2002) refer that multinational companies in some cases urge preferred suppliers also to have other customers in order to ensure more dynamic suppliers.

3.5.1 Transnational environmental management

Some product chains are transnational, which in most cases implies that there is a different level of environmental protection in countries along the product chain. Hansen(1999) argues that transnational environmental management typically will have at least the following elements:

• General principles for the environmental activities of the entire corporation
• More specific policies and programs applicable throughout the corporation
• A cross-border environmental management system  with procedures for monitoring and controlling the practice of the foreign affiliates
• Training, education and information exchange programmes and activities
• A formal organisation where responsibilities and functions are delineated and allocated between different entities and persons – for example between headquarter, affiliates and suppliers.

Hansen (1999) argues that corporate environmental management practice in transnational product chains falls within the range from adaptation to the local regulation and practice in developing countries to global integration where a company is practising the same level of concern and responsibility as in the home country (Hansen 1999). Hansen (1999) refers to two types of product chains: management of controlled affiliates and management of non-controlled foreign entities (organised through franchising, licensing, subcontracting or strategic alliances). With reference to Bartlett’s and Ghoshal’s ideal types of cross border organisation in transnational corporations, Hansen (1999) describes four ideal types of cross-border environmental management: decentralised environmental management, international compliance, centralised environmental management and globally integrated environmental management. The most elaborated and environmental ambitious cross border environmental functions are seen in the centralised and globally integrated types. Table 3.3 gives an overview of the four types of practice.

Table 3.3: A typology of corporate environmental management in transnational product chains (based on (Hansen 1999).

According to Hansen (1999) the type of forces, which shape the environmental management in transnational product chains between local adaptation and global integration, seems to be:

• Regulatory forces: the type of environmental regulation shaping the cross border practice: international regulation, home country regulation and host country regulation
• Market forces: the quality and environmental orientation of the markets and the value chains
• Industry specific forces: the collaboration in the specific industry
• Company specific forces: the nature of the production technology, the environmental history from the home country, the international orientation of the company.

3.5.2 Competencies in environmental management in product chains

In addition, the networking inside a company might change as part of environmental management in a product chain. Lenox and Ehrenfeld (1997) suggest that when companies develop their ability to handle new problem areas there is interplay between the company’s need and ability to explore and research the new problem area in relation to the company’s business areas and the need to convert this knowledge into a new practice. They point out that the challenge is to develop the knowledge resources and secure integrating structures. Both aspects are important in relation to the corporate environmental competence. The integration of knowledge into practice is based upon co-ordination and communication between the various actor groups within the company and the external network of the company. Lenox and Ehrenfeld argue the following elements are necessary in order to develop the ability of a company to handle environment as an issue:

• Knowledge resources: information and expertise residing in individuals, groups and technical artefacts

• Communication channels, both formal and informal, which are the channels through which information flows and is exchanged in a given social system

• Interpretive structures, which can help create mutual understanding and values among the involved stakeholders, because it is not enough to merely understand and agree on the information exchanged between groups. The groups must also have similar values and find the information meaningful in the context of their own work. This aspect influences what meanings are attached to the information during change processes, and thereby the results achieved.

Where Lenox and Ehrenfeld focus on the single company the focus in this report is on the product chain. The interesting aspect becomes where in the product chain what knowledge resources and changed structures and routines are developed.

From the earlier mentioned case studies about Danish textile companies and their interaction with suppliers a number of competencies necessary for the environmental management in product chains were identified (Stranddorf et al 2001) (Forman & Jørgensen 2004). These competencies are developed within the companies in the product chains as a part of the planning, the implementation and the monitoring of the initiatives in the environmental supply chain management. Depending on the environmental supply chain management practice, the various competencies are developed and anchored at 1) the company that sets the requirements, 2) the supplier and/or 3) a third party (e.g. an advisor or a certifying organisation).

Interpretation competence

Interpretation competence is partly the competence to understand external requirements from e.g. environmental agencies and customers, and partly the competence to translate those requirements into practice within the organisation itself – such as converting the requirements into actual practices for purchasers, production workers, designers, suppliers etc. In most cases, dialogue was established with suppliers in several parts of the supply chain and not only with the nearest supplier.

Technical environmental competence

Technical environmental competence refers to the insight into technical and chemical processes, etc., which is a prerequisite for the adjustment or reorganisation of a production process, a design scheme etc. in order to meet environmental requirements.

Documentation competence

Documentation competence is knowledge about how to build and operate documentation systems and document handling routines etc.

Control competence

Control competence refers to knowledge about monitoring systems, management systems, auditing etc., and the responsibility for or empowerment to maintain control. This competence can reside with the company, the supplier, or a third party – e.g. a certification agency.

Network competence

Network competence is the ability to create changes in a product chain through networking among customers and suppliers, including the ability to motivate the companies in the chain to enter a dialogue, as well as the ability to transfer technology and knowledge in or among product chains.

De Bakker and Nijhof (2002) have developed a capability assessment framework for responsible chain management, where they distinguish between internal and external capabilities and talk about four types of capabilities in a so-called capability cycle: interpretation, integration, monitoring and communication. The circular process, inspired by the Plan-Do-Act-Cycle, is too sequential, since the processes of interpretation, integration, monitoring and communication often occur more interwoven, but the four types of capabilities and the focus on internal and external capabilities seem relevant. Four competencies identified by De Bakker and Nijhof (2002) (interpretation, integration, monitoring and communication) corresponds to those presented above, although Stranddorf et al (2002) identified a more detailed range of integration competencies: part of the interpretation competence, technical environmental competence and network competence.

3.6 Assessment of changes in environmental impacts

In analyses of the embedding of environmental initiatives in product chains, it is important to include whether and how environmental impacts are reduced in the product chains in focus. The analyses are based on a life-cycle screening combined with a concept for characterising changes in environmental impacts developed in (Forman & Jørgensen 2001b). This concept includes the following aspects, which are introduced briefly in the following paragraphs:

• Time perspective
• Degree of prevention
• Holistic orientation
• Effect on environmental impacts

3.6.1 Time perspective

The time perspective reflects that a problem solving process is a progressive process. It takes place in relation to surroundings that are not stable, but are constantly changing – whereby conditions for the solution of the problem may change. These conditions could include the development of new technological possibilities, new customer demands, new knowledge, new employees, etc.

At the company level, the time perspective relates to which possibilities the company focuses on in relation to concrete problems, both in the long and short terms. Short-term solutions are connected to local possibilities in departments, etc. Long-term solutions are connected to the company’s strategic decision-making processes.

3.6.2 Degree of prevention

Prevention aims to solve the problem as close to its source as possible. The degree of preventive solutions can be described as one of three degrees of prevention:

• High degree of prevention: Solutions which remove or limit influences on the environment at the source, e.g. changing the way activities is organised and the way technology is used in order to achieve a cleaner technology, e.g. substitution of hazardous chemicals.

• Medium degree of prevention: Solutions that limit influences on the environment through cleaning processes, such as chimney filters or wastewater treatment.

• Low degree of prevention: Solutions that limit influences on the environment through encapsulation, e.g. depositing waste at controlled dumping grounds.

3.6.3 Holistic orientation

Holistic orientation problem solving processes are concerned with:

• All environmental impacts found in a product chain.
• The connection of environmental problems with other concerns, such as quality, work environment, operations and development in production or a product chain.

A holistic orientation can be seen as the opposite of a single-factored approach to a problem. With a holistic approach, several problems can be solved during the same process while ensuring that new problems are not introduced.

3.6.4 Effect on environmental impacts

The assessment of the effect focuses on whether the problem solving processes seems to reduce environmental impacts quantitatively and/or qualitatively.

In relation to the concrete environmental problems, the effect expresses the scope in which the implemented solutions work to remove or limit the environmental impacts. High effect is not the same as high degree of prevention. For example, a cleaning provision (medium degree of prevention) can significantly limit some type of impact on the environment, but might create new problems at the same time.

3.7 The role of governmental regulation

Governmental regulation has two roles in the analyses in the report. On the one hand, governmental regulation is seen as one of the possible driving forces behind the development of environmental management in product chains and, on one the other hand, proposals for future governmental regulation, which may support further development of environmental management in product chains, are developed.

3.7.1 Governance paradigms

In the literature, focussing on policy analysis and the study of policy impacts there has been a tendency in the recent years to emphasise the role and importance of government in a multitude of functions as a mediator, a provider of negotiation space, and as regulator in the field of environmental protection.  New perspectives on government actions are described influenced by the changing views on regulation from viewing government primarily as a central authority to an actor in network-based governance. This shift does not imply that the roles of government are diminishing but rather that the roles change. Studies of environmental policies and protection measures show that successful environmental improvements in industry are found in the cases where government has played a consistent part by setting goals and timelines for improvements, by funding or in other ways supporting innovative changes, by setting taxes providing significant changes in cost structures, or by intervening with traditional legal requirements. In those cases where declared government policies were not followed by other supportive measures or a threat of future intervention in case of non-compliance with the policy objectives, not much happened (Jørgensen et al 2007) (De Bruijn & Norbert Boehm 2005). This indicates on one side the importance of government intervention and interaction, but demonstrates also the role of consistent series and generation of policies as opposed to an idea that a single policy should do the work.

In policy science a distinction is often made between three general governance paradigms (see Table 3.4) (Schot et al 2001):

• The traditional top-down model with a central role for (national) government and hierarchical relations,
• A bottom-up or market model with a large degree of autonomy for local actors,
• A policy network model of shared rule making and agreements between interdependent actors with diverging values and beliefs.

The three governance paradigms not only differ in their basic philosophy, but also in their instruments. Formal rules and regulations are common in the command-and-control paradigm, subsidies and taxes in the market model, and network management, learning processes, experiments, and interactive policy making in the policy network paradigm (Schot et al 2001).

3.7.2 Policy formation and implementation

The implementation and the impacts of policy interventions are difficult to study and difficult to plan. Not least because specific policy interventions most often do not stand alone, but are influenced by the policy discourse and the views and intentions expressed herein. Furthermore, other policy instruments with maybe different objectives influence the interventions. Overlapping policies coming from different fields of policy with very different objectives or even counter measures from involved actors might be as powerful as the policy action in focus. In a company, this includes the perspectives assigned by management to certain anticipated market and technology developments, which frame the strategic priorities and the types of innovations as response to the governmental regulation (Jørgensen et al 2007).

Table 3.4: Three basic governance paradigms (based on Schot et al, 2001)

Analyses of impacts of policies open for a range of questions covering the intended and actual policy program that is initiated (see figure 3.3 based on Winther’s model for policy formation and implementation (Winther 1990)). Such analyses include studies of

• the scope or the objective of the policy,
• the choice of measures and instruments,
• the implementation of these instruments in the daily regulatory practices of responses and enforcement from the street-level bureaucrats (front-line policy implementers),
• counter measures from the target group (so-called ”counter programs”),
• the output and the outcome of the policy implementation.

Figure 3.3: Aspects in policy formation and implementation (based on Winther 1990)

3.7.3 Regulatory regimes

Well-established policy paradigms, as the command and control based legal regulation of environmental permits based on emissions standards forms what can be phrased as “regulatory regimes”. Such regimes develop from regulatory practice, but they also tend to shape future regulatory practice, as a regime forms a mix of institutions and practices easy to reproduce in new areas of policy. This limits the specific possibilities of designing new policy measures in accordance with the objectives of new policy issues. This may imply institutional replication, which may limit the ability to regulate new policy issues (Jørgensen et al 2007).

The role of the institutional framework and the translations resulting from moving from the policy discourses and objectives to the choice of regulatory framework and again to the street level implementation can be analysed in an analytical framework focusing on the constitution of the regulatory regimes (Jørgensen 2005). The focus in analyses of regulatory regimes is the interdependency of actors, their knowledge, and their interactions in relation to specific forms of environmental regulation. The combination of specified environmental objects and the established practice and knowledge of the institutions, which are responsible for the implementation and use specified instruments, define the backbone of a regulatory regime. Regulatory bodies and the regulated companies are important actors, but also customers, suppliers, consultants, and knowledge institutions producing the criteria for regulating the specific environmental objects in question may be important actors (Jørgensen et al 2007).

Governmental regulation will often also refer to a set of elements used to enforce the regulation. These can vary from legal procedures for when and how the regulating body can dictate requirements to definitions of responsibility or negotiated agreements about the implementation of action plans. A traditional way of handling legal procedures in environmental protection is to identify a company not complying with a given environmental permit, and after having forwarded certain warnings, prosecute the company in court. The necessary type of information defines the specific character of the enforcement problem of a regulatory regime. As an example: If the regulation is dependent on continuous controls of pollution, it is necessary to have this information to maintain regulation and control. If the control procedure is left to companies by means of self-control, enforcement has to shift from control of specific pollutants to the control of process data and organisational procedures. When the environmental problems in question and the necessary type of knowledge are defined a distinct type of professionals will be needed to maintain the regime. A focus on ecological capacity shapes a regulatory regime primarily based on ecological knowledge, while a focus on cleaner technologies shapes a regime where also production and innovation knowledge become important competences (Jørgensen et al 2007).

3.7.4 Policy patterns

Where different policy measures or instruments are used in combination or influence the same field in society they can be characterised as a “policy pattern” as described by Jänicke (2000). Policy patterns are the sum of rules, manners of proceeding (practices and routines), and contexts of action within an area that is subject to government control or intervention. A policy pattern can be described with three dimensions (as shown in table 3.5):

• The structure of the instruments (or programmes) in relation to specific environmental goals.
• The policy style of government institutions on environmental issues.
• The political-institutional context of the actors and actions

Table 3.5: Policy patterns of environmental policy (Jänicke 2000)

This perspective on governmental regulation policy shifts the focus from the single instrument (and its regime) to the impact of parallel and sequential policies. This implies that the context of policy implementation also must be emphasised. This leads to a focus on the coherence of the different policy and the instruments: do the dynamics and synergies of policies contribute to sustained policy interventions with more or less identical regulatory regimes in a multitude of actions. The opposite implementation context would be conflicting policy measures and regulatory regimes and visions, which may lead to either shifts in the direction of the actions of the regulated or lack of impacts due to the lack of clarity and delayed responses.

3.8 Path dependency and path creation

When the conditions for a long-term and more widespread implementation of the environmental management practices in product chains are studied, the term “stabilisation” is used - with reference to the social shaping approach. The focus is on mechanisms that have implied that companies decide to continue with a certain practice, whereby the dynamics within for example. a product area change towards conditions, where environmental concerns play an important role in the competition. One of the mechanisms are what Preuss (2001) calls “the multiplier effect”, when suppliers utilise experience from environmental measures, initiated by one customer, in relation to other customers.

The analyses of this kind of stabilisation are inspired by the concept of path creation at branch or product area level as developed by Karnøe and Garud in their analysis of path creation and path dependency in the development of the Danish wind turbine industry (Karnøe & Garud 1997). Karnøe and Garud see the shaping of new paths as an ongoing interaction between four systems: A production system, a consumption system, a knowledge system and a regulatory system. None of these systems are solely shaping the others, but changes in one system is from time to time changing the conditions for some of the other systems, which then change the conditions for some other systems and so on. One should for example not expect that the consumption system shape the production system. It might as well be the other way round or rather a co-shaping of the two systems, which maybe then make changes in regulation, research, education and training etc. necessary.

The path creation might imply use of existing technology, institutions etc. as well as shaping of new technology and new institutions. Seen over time as well reinforcing as restraining dynamics may occur. Within a social shaping perspective, it is not enough to identify the mechanisms it is also necessary to try to understand and explain why and how changes take place or why certain initiatives do not have an impact. Among the explanations might be the meaning actors give to certain changes. For example, whether a company sees an eco-labelling scheme as a tool for making previous product changes visible, as a chance to produce some high-price products to a certain market segment etc.

As part of path creation, boundary objects might be shaped as part of what can be called boundary practice (see for example (Wenger 2000)). The boundary objects are getting the role as translating environmental concern into corporate practice. This might take place as a co-shaping of the environmental concern and the corporate practice. Different companies within the same branch or product area may have different strategies. Some companies might be front-runners and contribute to the shaping of boundary objects, while others might react to the boundary objects as a condition for doing business. However, these more reactive companies might still contribute to the shaping of the boundary objects by the practice they develop and the meaning they thereby give the boundary objects. This means that the drivers behind for example eco-labelling in two companies might be different.

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Version 1.0 June 2008, © Danish Environmental Protection Agency