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Integration of Environmental Considerations at Different Levels of Decision Making

2. A methodology for integrating sustainability in sectoral policies

2.1 Introduction

This methodology provides a structured, systematic approach for considering how the integration of environmental considerations into decision making by key stakeholders at different levels could be improved, and the policy tools which might be suitable for facilitating this. It should be noted that there are no existing widely agreed and clearly defined processes or methodologies for evaluating, measuring or improving progress towards integration, and the methodology developed here should be seen in that context.

The methodology is based on identifying the following aspects of decision making:

	Who are the key actors in each sector?
	What are the key decisions that they are or could be making that have an impact on the environment?
	What are the parameters which determine the outcome of their decisions?
	What is the policy framework in which they are making such decisions and how does this influence the parameters?
	What are the gaps in the current use of tools to address the parameters?
	What additional tools could be used to promote the integration of environment into decisions by addressing current disincentives and promoting more sustainable options?
	What are the conditions for effective implementation of such tools, both specific to each tool and to the wider policy framework?

By following this approach it is possible to understand the driving forces behind consumption and production decisions by market based actors and how the development of sectoral policy and related tools can provide incentives for and facilitate more sustainable choices.

There are two stages in the methodology, summarised below and described in the following sections:

1. Identify areas where integration could be improved, involving:

	Identify current opportunities and weaknesses
	Identify the stakeholders in the target area
	Conduct a decision flow analysis for key stakeholders

2. Identify the policy tools that would be suitable for improving integration, involving:

	Consider the parameters and framework conditions
	Short-list potentially useful tools for improving integration
	Discuss the use of tools with key stakeholders

2.2 Stage One: Identifying Improvement Areas

The purpose of the first stage is to identify the areas that might benefit from improved integration of environmental considerations into decision making processes, and understand the context of these areas and the key stakeholders involved.

2.2.1 Identify Opportunities to Improve Integration

The first step is to identify those areas where integration would assist in addressing environmental degradation. This could be approached by identifying known areas of weakness or by capitalising on areas of opportunity.

Areas of weakness, in terms of environmental performance, are likely to be well known and understood by sectoral agencies. However, the challenge is to address the fundamental issues for sustainability - often driving forces such as overall demand management and resource efficiency - rather than pressures and ambient conditions (states). By understanding the general context or framework conditions for integration, it will be possible to identify the areas where integration would assist in improving environmental protection and overall sustainability. Working in conjunction with the EPA could facilitate the process. Box 2.1 presents a list of potential criteria for assessing the current status of integration at the sectoral level and identifying areas of weakness. Wider stakeholder involvement, particularly involving stakeholders who have not so far been very pro-active, is a useful part of this identification process.

The alternative approach is to improve integration where opportunities are presented by relevant activities within the sector. This might include major policy reforms, at the local/regional or national level, or the development of industry/sectoral environmental initiatives, such as voluntary commitments to improve environmental performance.

In either case it should be recognised that integration per se is not leading the process - there must be another process or activity that is taking place and integration is a way of improving the sustainability of that process/activity and its outcomes.

Output: Identified and defined target areas within different sectors e.g. more sustainable consumption patterns, shift from conventional production techniques to more eco-efficient products

Box 2.1 Criteria for Assessing Integration at the Sector Level

2.2.2 Identify Stakeholders

Once the target area has been identified, the next step is to undertake a stakeholder identification and analysis to:

	identify all stakeholders, especially those that are particularly active but also those that are currently not involved;
	determine the level at which they operate, whether micro, meso or macro as outlined in Box 2.2 (for further explanation see Section 3);
	consider the policy drivers and pressures that they respond to and generate, bearing in mind the generic framework conditions for the use of policy tools for integration (see Box 2.3); and
	map the relationships between them, both within and between the three levels.

Box 2.2 Levels of Decision Making

Micro-level: innovative actors (households and companies) bringing about economic change. Policy can support them by promoting and stimulating environmental innovation drivers at the company level or through fiscal incentives and awareness raising at the household level. Meso-level: institutions in the business environment and efficient network structures linking companies, consumers, governmental organisations and intermediary institutions facilitating a change in economic structures. Policy has the task to re-structure business oriented institutions and stimulate re-orientation. Macro-level: Policy makers setting the regulatory and fiscal framework and environmental guidelines which must provide adequate incentives for integration.

Source: Kundte and Liedtke (1999) Companies’ and Sectors’ Path to Sustainability. Wuppertal Paper

The stakeholder analysis investigates the range of decisions that key stakeholders are taking, and those that they could take, that influence the sustainability of production or consumption within that sector. It should consider the specific context of the sector including, where required, looking at sub-sectors (eg dairy farming within the agriculture sector) or at a user groups (eg company car fleet operators within the transport sector) or those actors who have not been fully involved to date (eg SMEs). Section 3 presents an example of a generic stakeholder analysis and illustrates the approach further with an example from the agriculture sector.

Outputs: Identified and defined the key stakeholders for key integration opportunities/gaps Understanding of their interrelationships Understanding of the framework in which they operate and their own sphere of influence Identified the range of decisions that stakeholders are making

2.2.3 Conduct Decision Flow Analyses

For the key stakeholders, conduct a decision flow analysis to identify:

	how the decisions they are making influence the sustainability of their activities/outcomes;
	the parameters which determine the outcome of those decisions; and
	the policy tools and mechanisms that are currently being used to influence those parameters.

The analysis should take account of the specific context in which the stakeholder is acting (eg businesses as users of transport services, and businesses as providers of transport services, businesses as manufacturers of vehicles). It should also consider the framework conditions and how they relate to the parameters for decision making.

Section 5 describes how to conduct a decision flow analysis and presents examples from each sector as a one page flow chart. This form of presentation provides a useful overview of the different aspects of the decision flow analysis and may highlight any gaps in the current use of integration tools.

Outputs: Decision flow analyses for key stakeholders in the context of relevant decisions Understanding of the experiences with the policy tools that are currently being used Description of the framework conditions that affect the stakeholders in decision making

2.3 Stage Two: Identifying Suitable Mechanisms

The purpose of the second stage is to carry out a gap analysis and develop a strategy for specific environmental issues and stakeholder groups based on identifying which parameters of their decisions are not currently being addressed, the type of integration tools which might be effective and the framework conditions within which they could be implemented successfully. The main task here is to understand how these tools would be most effective in the context of the target area and decision making by the key stakeholders.

2.3.1 Consider Parameters and Framework Conditions

The parameters and framework conditions are the main factors determining the suitability of policy tools to improve integration in the target area.

The wider framework conditions place constraints on the effectiveness of policy tools. An analysis of the wider framework conditions as they apply to the target area will provide an understanding of which tools are suitable to the framework context or how the framework itself could be addressed (if possible taking into account limits on jurisdiction, responsibility and influence). This analysis should build on the general consideration of framework conditions in Identifying Stakeholders and Conducting Decision Flow Analyses in Stage 1, and should also consider how the framework conditions relate to the parameters for decision making so that the choice of policy tools can be narrowed. A suggested set of generic frameworks conditions are described in Section 4.

Outputs: Understanding how the wider framework conditions apply to the target area, and the constraints on the use of policy tools Understanding the parameters affecting the sustainability of decision making and how these relate to the framework conditions

2.3.2 Short-list Potentially Useful Tools

A short-list of potentially useful tools can be constructed by considering how the framework conditions and parameters apply in the target area with the key stakeholders, building on the consideration of parameters and framework conditions. Further explanation and examples of how parameters and framework conditions relate to a range of generic policy tools are presented in Section 6. This is a manual exercise that will also raise issues common to all policy making, about environmental benefits and social impacts and equity, economic implications, and institutional issues etc.

A list of framework conditions and a non-exhaustive checklist of questions is summarised in Box 2.3.

Box 2.3 Framework Conditions Checklist

Sustainability Awareness. An awareness of wider sustainability issues, government policies and targets (where these are relevant) and the specific environmental issues which are being addressed by the tool (and the options for making environmentally less damaging production or consumption choices) is necessary for the success of most tools. Do producers know what they can do to improve processes, products, disposal? Do consumers understand the impact of their consumption choices and know what they can do to shift to less damaging products and services, use products in more environmentally friendly ways or reduce the quantity of goods and services they consume? Is there a sound scientific basis for government or other institutions favouring particular technical solutions to production or consumption decisions? Availability. For any tool except R&D to be effective less environmentally damaging products, processes, services need to be accessible and known. Are technologies - capital equipment or processes - (eg for planting, weeding, harvesting organic crops) for producing environmentally less damaging products and services available? Is supply of goods or services reliable? Are goods and services perceived as meeting desired quality requirements? Are they safe and convenient to use compared to conventional processes or products? Are goods or services accessible through normal outlets or is the consumer forced to use new and less convenient purchasing routes? Affordability. Prices of less environmentally damaging goods and services need to compare favourably with conventional products and services unless there is a clearly defined niche market where buyers are prepared to pay a premium. If production costs are higher are these passed on to businesses or consumers? Are businesses or consumers willing to pay a premium, if so how much? Are higher prices likely to have impacts on competitiveness or regressive impacts on quality of life for specific groups (poorer households, pensioners, the disabled, rural households etc) Competitive Context. Global conventions and the EU regulatory and policy framework should be reviewed and the competitiveness implications of the tool considered. Do WTO or EU rules prevent restrictive purchasing policies, the use of subsidies or collaborative activities by producer or retailer organisations? Is cost and price determined by factors (such as EU price support) which are outside the control of national macro decision makers? Are tools likely to adversely effect the competitiveness of national businesses without conferring any PR or prime mover advantages? Existing Market Structure. The structure of the market from producers through wholesalers, retailers to consumers will have an effect on decision making parameters and may affect the effectiveness of integration tools. What is the structure of the industry and services sector (size of businesses, technology base, age, costs, market shares)? Is this likely to encourage action? Are there a small number of major players who need to take a leading role or who can prevent integration? Is the sector very traditional in its outlook? Do they have experience in working with government or competitors on environmental (or any other) issues? Institutional Capacity. The majority of tools require sufficient institutional capacity to support the implementation, monitoring and enforcement of the tool and to put supporting policies in place. Are credible independent organisations able to provide verification of company environmental reports, ecolabels and green claims etc? Can independent organisations provide consumer advice on the use of products? Are all possible interested stakeholders being actively involved in addressing the problem (eg Water and Sewage Utilities providing advice to consumers on the disposal of chemical products)? Willingness to take action. Finally even where all of the above framework conditions are right there are a number of intangible factors, which might be summarised as a cultural predisposition towards more sustainable production and consumption decisions, which need to be right. At the overall level this requires that government, civil society and the market share a perception of the risks of not moving towards sustainability. It also requires that all groups are willing to accept that there may be higher costs of more sustainable consumption and production decisions and a willingness to share the burdens. The key issues are different along the supply chain. Producers: If producers have the necessary knowledge and access to affordable and appropriate technology, goods and services are they prepared to translate this into action? Does past experience encourage them to do so? Do businesses/producers believe that government regulations and market based instruments will be actively enforced? Will government policies, targets and negotiated agreements be followed through? Does sustainable production fit with producers ‘world view’ and sense of ‘the right thing to do’? Do they see non monetary advantages to action (eg corporate social responsibility)? Consumers. If consumers are aware of the need to change and have access to affordable goods and services does this translate into changed consumption and purchasing decisions? Is the timeframe of the purchasing decision important (eg differences in time and effort for purchasing of household appliances or cars compared to weekly consumables shopping)? Does the environmentally preferable product or service imply inconvenience (eg additional labour or travel time)? Does it have negative lifestyle, style or wealth connotations?

Output: Short-list of the policy tools that are most suitable in the context of the parameters affecting decision making and the wider framework conditions in the target area

2.3.3 Working with Stakeholders

The effectiveness of integration will depend on the successful use of policy tools. Both will be improved if the use of policy tools is discussed with key stakeholders before they are introduced. If stakeholders have been involved in the initial assessment of key integration challenges and opportunities then it will be useful to involve them again in identifying potentially effective tools and the conditions for their success.

Output: Shared understanding of how the policy tools would work, what they are trying to achieve, whether this is feasible and the best way in which to apply policy tools.

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