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Environmental management in product chains 8 The role of the product area and branch
This chapter analyses the role of the product area and the branch in the environmental management initiatives in the case studies. The aim is to understand the role of these characteristics in the environmental management of companies in a product chain.. The analysis is based on a so-called resource area analysis. Resource areas are groups of companies, which are contributing to and thereby dependent of the same markets, the same market conditions or linked together in product chains (Erhvervsfremmestyrelsen 2000). A resource area is a scientific construction, which is not tying companies, branches, knowledge institutions etc. within a resource area together. However, many networks will be established within a resource area – e.g. as a product chain. The analytical question is whether there are specific market conditions and other business conditions within a resource area, which influence the choice and the role of environmental management initiatives. Another question is how the role of a company in a product chain influences its role in environmental management in the product chain. By comparing the environmental management initiatives with the practice in the resource area they are part of it should be possible to identify not only the business specific prerequisites, but also the need for changes in the business conditions to support environmental management in product chains within that area. When companies are part of the same product area there is a possibility to organise joint environmental initiatives. A resource area could be the frame for a joint product oriented environmental initiative, which needs changes in laws or rules, new education and training opportunities, changes in the distribution system, development of product labelling etc. A resource area could also be the frame for dissemination of experiences with environmental management. An environmental initiative organised according to resource areas are the product panels, which the Danish Environmental Protection Agency has developed within a number of product areas or sectors during the 1990’ies and also after 2000. Different resource areas have different traditions for the development of new competencies. These traditions and existing structures may on the one hand limit the companies in the development of environmental initiatives and on the other hand, they may make it easier to organise joint initiatives. A focus on resource areas may also show the role of structural conditions and the existing innovation strategies and thereby that path dependency, which may be seen in initiatives within an area. This may at the same time show the need for structural changes in order to support development and diffusion of environmental management in product chains and thereby the need for path creation within that area. Analyses are done for the following resource areas: 1) Furniture and clothing, 2) Construction and housing, and 3) Information technologies and communication. A number of Danish resource areas are not represented in the case studies or are only represented by one or two case studies and analyses have not been made for those resource areas. 8.1 Furniture and clothingThis resource area is characterised by small, medium-sized and big companies. Especially the chemical suppliers are big multinational companies. The products are material products, and a number of chemicals are used in the manufacturing of the products and the final products contain chemicals and chemical residues. This has implied that the focus in environmental discourses in relation to the products has been on the use of chemicals in manufacturing and on the chemical residues in the products. The focus in the initial demands and governmental regulation was on limits to waste water discharges from the manufacturing. Later the possibility of obtaining eco-labelling on products was developed. The products are used by private as well as governmental users. Compared to other resource areas this area is characterised by a big export percentage, but at the same time also a high import percentage of the domestic consumption. The product chains are often long and are characterised by different degrees of stability in terms of customer-supplier relations. Global competition has put, for long time, a strong pressure on the costs in the sector and outsourcing of labour intensive processes to countries with lower wages has been a dominating strategy since the 1980’ies. Many companies have mainly the design, development and management activities located in Denmark while the manufacturing takes place in other companies in other countries (Erhvervsfremmestyrelsen 2000). In relation to environmental management, one aspect is whether the suppliers are asked to live up to certain environmental demands and if so, how these demands are managed in the interaction with the suppliers. The experiences show that the more demands textile companies have to their suppliers, the fewer suppliers they tend to co-operate with, because it is time and resource consuming to find suppliers, when it is not only the lowest possible price that is in focus, but also environmental demands (Stranddorf et al 2002). Seven cases can be referred to this resource area. Table 8.1 shows the role of the companies in their product chains and the environmental management initiatives.
Table 8.1: Characteristics of companies and initiatives within the resource area furniture and clothing The companies among these cases, which manufacture final products, have a focus on the possibility to achieve eco-labels on their products and expectations to a growing public green demand as part of an increasing focus on public green procurement. The customers of these companies are businesses and public institutions. The public customers are very important in two of the three companies. The initiatives are primarily eco-labelling and supplier assessment and dialogue. Eco-labelling is seen as an opportunity to be recognised at the market. Supplier assessment and dialogue is seen as an element in an outsourcing strategy to transfer demands for environmental protection and quality and to achieve certainty for suppliers’ delivery. The driving forces for the companies are a combination of customer demands and own interpretation of the societal discourses. The companies placed more upstream in product chains and with other manufacturing companies as customers have initiated life cycle assessment and documentation or improvements in order to meet demands from customers, who are qualifying for an eco-label license. The possibility to get public funding is mentioned as another driving force. Within the textile and clothing sector, relations with focus on environmental competence have been developed among consultants, schools and colleges, the trade organisation and the more pro-active companies. The Danish Environmental Protection Agency launched a product panel with stakeholders within industry, retail and civil society organisations among the members. The panel developed a strategy with a strong focus on a joint effort to develop supply and demand of eco-labelled products. Unfortunately, the public funding ended and the activities were stalled, because the sector was not committed enough to continue the funding of the activities itself. Recently a new public funded initiative has been launched, this time with funds from the Ministry of Economy and Business. Within the furniture and clothing resource area, it seems like the important driving forces have been expectations among the manufacturers of final products of an increased demand for eco-labelled products. The dialogue about environmental issues in the product chains has been influenced by existing types of agreements about delivery and about quality between the textile companies and their suppliers. Where companies already had stable relations to suppliers based on price and quality, environmental issues have been included as a new theme. For companies more upstream in the product chains, the possibilities for public funding seem to have been a important prerequisite. It looks like the expectations of increased demand for eco-labelled products were not met, neither among the consumers, nor among the professional public customers. It seems to be a characteristic for the area that initiatives are organised by single companies, as well as by joint initiatives involving manufacturing, sales, knowledge institutions and civil society organisations. 8.2 Construction/HousingThis resource area is characterised by many small and medium-sized companies and a few very big companies. Especially the raw material suppliers, the consultancy companies and the contractor companies are among the big companies. The products are physical products with a relative long lifetime and big numbers and amounts of materials and chemicals are used during the construction and are part of the finished building or other type of construction. Other activities focus on maintenance and refurbishment of existing buildings. The big resource consumption has implied a focus on waste management and recycling of construction materials, since the waste management costs are high due to the governmental regulation. The consultancy companies have had an important role in the environmental initiatives within the resource area as initiators, evaluators and mediators of experience and knowledge. The market has a public and a private part and is characterised by big investment companies, foundations etc. The resource area as such has had a relative low productivity improvement compared to the similar sector in other countries .Despite this, the Danish companies have had a positive economic development because of increased domestic construction activities (Erhvervsfremmestyrelsen 2000). However, foreign companies have bought a number of Danish construction companies. The resource area is much more project-based than other resource areas, and the product chain relations seem to be less stable and formalised than within other areas. However, more long term partnerships among the companies are seen, but less formalised than in more industrialised resource areas. Demands for changes come from the building owners’ demands and from the demand for increased productivity in the different companies. Environmental demands do not play an important role in public construction projects, due to lack of demands from the public building owners. New, more formalised partnerships, so-called partnering relationships, are considered in order to increase the productivity (BAT-Kartellet 2001) (Bonke & Kristensen 2000). Seven cases are from this resource area. Table 8.2 shows the role of the initiating companies in the product chains and the environmental initiatives.
Table 8.2: Characteristics of companies and initiatives within the resource area construction and housing One of the contractor companies has initiated supplier assessment and –dialogue in co-operation with the suppliers. The contractor company sees this initiative as one of its obligations within its environmental management system and at the same time as an opportunity to improve their own planning. For the companies more upstream in the product chains the initiatives have focused on improvement of products and resource savings through recycling of products and the use hereof in new products. The main driving forces have been governmental regulation with focus on higher taxes on waste management and possibilities for cost savings and public funding of initiatives. The initiative for recycling of plasterboard waste was organised as a branch initiative with co-operation among competing companies. The initiative implied major changes in the waste management schemes and development of standards for the handling of the waste materials. The companies saw it as an advantage to organise the new framework themselves. Market forces are not seen as important driving forces within this area. Only few companies highlight customer demands as the occasion or driver for environmental initiatives. Market forces are mainly focused on the productivity of the companies. It seems to be a characteristic for the area that initiatives are organised by single companies, as well as by business organisations. 8.3 Information technology and communicationThe companies within this resource area support other resource areas with information and communication services. The resource area includes the electronic industry. The resource area covers small, medium-sized and big companies. The products include very different types of products from immaterial products to materiel products, like electronic devices and printed goods. There has for many years been focus on the use of chemicals and substances in the manufacturing in the electronic and the printing industry, but also on the content of these chemicals in the final products. The markets include private and professional users, including public institutions. In the printing industry, the driving forces for environmental initiatives have been governmental regulation of chemicals and substances, expectations of increased public demand for eco-labelled products and increased competition from digital products. The business organisation and the educational institutions became a number of years ago initiators and mediators of environmental initiatives. The other parts of the resource area have grown, which have implied bigger resource consumption, including increased consumption of environmental hazardous chemical substances and products, and increased amounts of waste from electronic and electrical products. Two directives have been issued by the European Community, one with focus on waste management (WEEE – Waste from Electronic and Electrical Equipment) and one with focus on the reduction of the use of hazardous substances and restrictions to the import and sale of electronic products containing hazardous substances (RoHS – Reduction of Hazardous Substances). The actual implementation of the two directives may be difficult because of the frequent product changes, long product chains and big manufacturers of basic components, which may make it difficult to smaller companies to set demands and get them accepted. Five cases are from this resource area. Table 8.3 shows the role of the initiating companies in the product chains and the environmental initiatives.
Table 8.3: Characteristics of companies and initiatives within the resource area information technology and communication The case companies, which manufacture final products, are printing companies. Their initiatives are directed at their customers – especially the public customers. The initiatives include provision of information and eco-labelling licenses. The main driving forces seem to be the environmental management systems of the companies and the expectations of increased public demand. The suppliers within the resource area, which are not printing companies, have focused on information to customers, green procurement policy, recycling, and life cycle assessments as a way of providing information about the conditions for recycling of the final products. The main driving forces have been direct customer demands and expectations to the new EU directives during the period, when the directives were shaped. 8.4 Comparative analysis of the resource areasDespite the rather different types of products supplied within the three areas, a comparative analysis of the three resource areas shows similarities in the environmental dynamics among the areas:
Within all three resource areas chemical substances and products give environmental impacts throughout the product chains, although maybe to different extent within the different parts of the product chains, and within all the three resource areas the chemical impacts has been in focus of some of the environmental initiatives. Eco-labelling is seen as a strategy within all three areas, although with different degree of success. Especially the expectations to increased public demands are not met or only partly met, which is due to higher prices of the eco-labelled products. Within the textile and clothing area, the development of a national strategy for eco-labelling gave the opportunity to differentiate the products at the market through eco-labelling. Within furniture eco-labelling was also seen in one of the cases, but here with expectations to increased public green procurement as a driving force. These expectations, however, were not met because the eco-labelled products were more expensive. Within the construction and housing area, one supplier company also focused on eco-labelling of construction materials. Also within the printing industry, eco-labelling has played an important role as environmental initiative. Within this area, it has mainly been driven by expectations to increased public green procurement. These expectations were met to a higher degree although some public customers seem not to want the products labelled, they only want the environmental quality of the labelled product, because they do not want to pay the extra cost for the labelling, which the manufacturer allocate to the customer as an extra cost. Within a part of the printing industry the eco-labelled production concept become the only quality, because it is easier only to produce according to one concept, but not all customers choose to get the products labelled, due to the fee on eco-labelled products, which the printing companies choose to ask the customer to pay. It looks like these fees, the pricing strategies in companies and the restricted public economic frames all together restrict the diffusion of eco-labelled products. Also in relation to the integration of environmental concerns into construction projects, the lack of demand from public customers seems to be a barrier. The public tendering process and lack of environmental criteria may be one of the important structural barriers. Some professional building owners, like one of the big municipalities, are aware of this lack of demand and have – at least for some years – built internal competence to make it easier to get environmental demands included in construction projects. One of the multinational contractor companies with affiliates in Denmark seems to initiate some kind of environmental management with focus on chemical substances and products. It is not clear, however, how widespread this practice is used, whether it automatically becomes a part of a construction project, or it still is necessary for the customer to demand specific concerns to be taken. Within electronic and electrical products, focus is on chemical substances and products as environmental issue. The public regulation has been developed as international regulation, like EU Directives, probably because of the bigger amounts of products and the bigger problems during waste management. All three areas show participation and initiatives from business organisations and from knowledge institutions, in most cases organisations and institutions, which already are part of the resource area. Only in relation to LCA other, more generally focused, knowledge institutions got involved. Development of information to customers is seen within two of the resource areas within rather different product areas: electromechanical products, packaging, printing goods and building products. Although business organisations and branch related knowledge institutions have been involved within all three areas, it looks like the diffusion of the role of environmental demands in business-to-business sales and purchase is limited, like with respect to public green procurement.
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