Eco-Efficient Leadership for Improved Economic and Environmental Performance

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Eco-efficient Leadership for Improved Economic and Environmental Performance

The World Business Council for Sustainable Development (WBCSD) is a coalition of120 international companies united by a shared commitment to the environment and to theprinciples of economic growth and sustainable development. Its members are drawn from33 countries and more than 20 major industrial sectors. The WBCSD also benefits from athriving global network of 9 national and regional business councils and 4 partnerorganizations.

The WBCSD provides a powerful and unified business voice on sustainable developmentissues and plays an important role in developing closer cooperation between business,governments and others, and in encouraging high standards of environmental managementin business itself.

Its work program - comprising a number of working groups with company representatives -deals with policy development and environmental management issues. The WBCSD is alsoinvolved in a number of field projects in developing countries and countries in transition.

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Eco-Efficiency is the fundamental concept underlying the activities of the WBCSD. Thispaper outlines the main elements of this developing concept and provides examples of howit has improved the economic and environmental performance of companies.

The information contained in this paper is a composite of the ongoing discussions of theWBCSD Working Group on Eco-Efficiency and the proceedings of three expert meetingsheld in Europe (Antwerp 1, November 1993, and Antwerp 2, March 1995) and the UnitedStates (Washington DC, November 1995). The Working Group was sponsored by FrankPopoff, Chairman, The Dow Chemical Company, and Livio D. DeSimone, Chairman ofthe Board and Chief Executive Officer, 3M.

The list of the WBCSD Working Group on Eco-Efficiency and the list of participants whoattended the three workshops are contained in the back pages of this booklet.

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The pursuit of eco-efficiency does not requirecompanies to abandon all their current practicesand systems. It calls for them to adapt these inorder to achieve higher levels of economic andenvironmental performance through continuousimprovement. This means a significant changefrom ‘business as usual’.

Eco-efficiency is the primary way in which busi-ness can contribute to the concept of sustainabledevelopment - a concept recognized by more than80 per cent of the industrialized world’s multina-tionals, according to a UN survey. The notion es-sentially means forms of development or progressthat meet the needs of the present without com-promising the ability of future generations to meettheir own needs.

Eco-efficiency links the goals of business excel-lence and environmental excellence, by creatingthe bridge through which corporate behavior cansupport sustainable development.

Therefore, it offers high rewards. Governments arechanging market frameworks so that both resourcesand pollution become more expensive. Consum-ers are demanding higher environmental standardsfrom companies, and those which understand andadapt these trends will be rewarded.

Producing more from less

Although it is a new and still evolving concept,the vision of eco-efficiency is simply to ‘producemore from less’. Reducing waste and pollution,and using fewer energy and raw material resourcesis obviously good for the environment. It is alsoself-evidently good for business because it cutscompanies’ costs.

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Eco-efficiency is a management philosophy. Itencourages businesses to become more com-petitive, more innovative and more environ-mentally responsible.

Resource productivity is fundamental in the eco-efficiency approach. The potential for step-by-stepimprovements in resource productivity, to matchthe increases in labor productivity in recent years,is greater than often perceived.

Eco-efficiency embraces other concepts, such as‘pollution prevention’, ‘source reduction’, ‘wastereduction’, ‘waste minimization’ and ‘clean(or cleaner) production’. It captures the idea ofpollution reduction through process change, asopposed to earlier end-of-pipe approaches totackling the problem of pollution.

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It shares characteristics with the emerging conceptof ‘design for environment’ (DFE) by includingproduct design among the technological optionsfor reducing material and energy intensiveness inproduction, as well as facilitating reuse throughremanufacturing and recycling.

Eco-efficiency also features a life cycle perspec-tive, which follows products from the raw mate-rial through to final disposal stages.

It is a logical extension of the Total Quality Man-agement (TQM) process, which the best compa-nies practice to reduce (sometimes eliminate) pro-cess and product failures, and achieve higherquality at lower cost. Eco-efficiency is the meansfor companies to improve their environmental per-formance and save money by reducing resourceuse throughout the process. Increasingly, it willbecome an important yardstick against which man-agers and customers will measure a company’sperformance.

Value creation

A key feature of eco-efficiency is that it harnessesthe business concept of creating value and linksit with environmental concerns. The goal is tocreate value for society, and for the company, bydoing more with less over a life cycle.

To achieve long-term success, companies mustcreate value for their shareholders and customers.Over time, customers will increasingly demandmore than a product that simply performs a func-tion. They will demand that its production, use anddisposal is as beneficial to them, and as harmlessto the environment as possible. This will furthercause companies to think in terms of creating valuefor society as a whole.

By promoting change towards sustainable growth,eco-efficiency enables a company’s business togrow in a qualitative way (by adding value), whilereducing adverse environmental impact. It also sig-nals a significant shift in focus to concentrate onreal customer needs.

This emphasis on creating and adding value isclearly to society’s benefit. Further, it matches thechanging dynamics of the marketplace. Consum-ers want higher quality and increased value atlower cost. This trend is likely to develop and com-panies which report annually on their environmen-tal performance will be rewarded in the market-place.

Some companies are acting already

Many companies are already adopting eco-efficiency principles and practices. Someexamples may include:

➤ building environmental stewardship and ex-cellence into their corporate philosophy andfabric;

➤ setting targets for improved performance, andintroducing systems to track, measure andenforce those targets;

➤ taking responsibility for their products through-out their life cycles;

➤ being innovative in developing new processesand products;

➤ putting the priority on preventing pollution,rather than paying for clean-up.

Xerox Corporation for instance, has set the goalof waste-free products from waste-free factories,fixing clear targets for reducing solid wastes, airemissions, hazardous wastes, wastewater dis-charges, lower energy usage and the inclusion of25 percent post-consumer recycled materials inparts and packaging.

3M has been running its 3P (Pollution PreventionPays) program since 1975. Over that period, thecompany has progressively raised its environmen-tal performance goals (the target for 2000 is toreduce process air emissions by 90% and wasteby 50% from 1990 figures), met or exceeded themevery time through new, cleaner production pro-cesses, and has saved more than $750 million.


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These and other companies committed to eco-efficiency are demonstrating it is technicallyfeasible, and brings significant performance

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improvements, to cut costs, boost competitive-ness, and benefit the bottom line. In other words,eco-efficiency is good business.

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But business must remain successful to create morewealth. Continued economic development isneeded to improve quality of life throughout theworld. Zero growth is not an option.

Sustainable development is the way to balance fur-ther economic growth and social progress whileprotecting the environment from further damageby using the earth’s resources sensibly. Agenda 21placed on business a clear duty to respond to thischallenge.

The environment is not going to disappear as anissue for business. Companies are, and willremain under pressure from customers, investors,employees, legislators and, increasingly, frombanks and insurance companies to be eco-efficient.

Anticipating the challenge

If companies act only when forced to do so underpressure, they will miss important market oppor-tunities.

For example, companies that introduce newtechnology to improve environmental perfor-mance before mandated to do so by regulationswill avoid delays and higher costs later. Similar-ly, firms which give priority to resource produc-tivity, process change and product innovation willachieve significant performance gains at lowercost. Companies are already demonstrating thisthrough voluntary initiatives.

As the world becomes increasingly crowded andacceptable sinks for wastes and pollution moredifficult to find, and as valuable resources becomescarcer and ever more expensive, companieswhich manage their resources more efficientlywill gain a competitive advantage.

In addition, business will be challenged on theactual value it provides. Consumers will askwhether the function is really needed; and if it is,whether particular products and services are theright answer to that function, or whether thereare alternatives.

There will also be huge new business opportuni-ties from meeting the continuing need for added-value products and services.

The pursuit of eco-efficiency allows business tocope successfully with both the immediate andlonger-term challenges. Companies cannot affordnot to adopt it. The challenge is not in changingcourse, but in pursuing business as usual.

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Society expects business to contribute toeconomic development and social progress,and to reduce environmental impact throughimproved environmental performance.


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Top management should start the process of re-form with a business vision of eco-efficiency, toset the framework for creating a corporate cultureof eco-efficiency.

Employees at every level should understand thatfor their company to become eco-efficient:

➤ they should contribute to the process by promot-ing eco-efficiency to suppliers and customers;

➤ the company should take full responsibilityfor all of its products;

➤ the whole life cycle of a product should beconsidered in all decisions, at all levels;

➤ willingness to consider new ideas, from what-ever source, will add value, and reduce re-source input and environmental impact.

The following actions are also fundamental formoving towards eco-efficiency.

Reconnaissance

In identifying risks and opportunities that mayaffect their business, managers must understandthat the earth is finite, its capacity for recoveryfrom excessive resource use limited, and that pres-sures to modify business behavior will increase.These constraints will remain a fact of businesslife. Environmental issues must influence produc-tion and design. Eco-efficiency criteria should beapplied to all business decisions, particularlythose concerning product design changes and pro-duction. The life cycle implications of changesmust be taken into account. Key environmentalimpacts such as material flows and energy usemust be especially assessed.

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An eco-efficient company understands andseeks to minimize the environmental impactsof its products throughout their life cycle.The transition to eco-efficiency is a step-by-step process. It will not happen overnight.Like building a jigsaw, it is a matter of fittingthe right pieces into the right places.


Management tools

There are a number of management tools to helpidentify and select opportunities:

➤ formal risk and environmental assessments;

➤ life cycle approach (LC) to products;

➤ procedural standards such as EMAS and ISO14000;

➤ environmental accounts/audits;

➤ financial accounting methods that ref lect‘hidden’ costs and potential benefits;

➤ formal eco-efficiency assessments;

➤ environmental reporting and benchmarking toprovide feedback to management.

R&D for eco-efficiency

Companies should focus harder on reducing thematerial intensity of goods and services. R&Ddirected to process change and product improve-ment can lead to higher-value products and reducedenvironmental impacts.

Design for environment

Designers, mostly concerned with product perfor-mance and aesthetics, must take into account theeffect of design details on energy/materials require-ments for manufacturing, use and secondaryuse (repairability, remanufacturability andrecyclability).

Sony is making more environmentally-acceptableTV sets by using recyclable materials, reducingthe type and variety of plastics, making the setslighter, using halogen-free flame retardant mate-rials, and eliminating hazardous substancesduring production.

Production and eco-efficiency

Companies should pay closer attention to energyuse and emissions. Major improvements in energyefficiency can often be achieved at little or nocost, even with net savings, through the use oftargeted programs.

Purchasing and marketing foreco-efficiency

By focusing on increased value, companies caninfluence customer attitudes. Adopting specificprocurement/purchasing policies requiring suppli-ers to apply sustainable development practicesto their products and services, will avoid compa-nies buying-in waste and subsequent pollutionproblems.

B&Q, Europe’s biggest-do-it-yourself supplier,insists on knowing how the products it sells aremanufactured and where they come from, andgrades its suppliers on their production methodsand resource use.

After sales service

Most companies recognize their responsibility- and potential liability - does not end with asale. Some use after sales service as a means ofadding extra value.

The growing trend towards rental or leasing,rather than buying, will almost certainly accel-erate, and is clearly consistent with increasingeco-efficiency.

Closing the loop

For some types of products, an eco-efficientcompany will be able to design the product,make it, own it through its lifetime and take itback for remanufacturing, recycling or disposal.In effect, the company sells a service, not aproduct.

This end point is still far enough away thatmany companies do not realize it is coming, butit is.

In some countries, it is recognized that productliability law reform must occur in order to enablecompanies to adopt the policy and practice ofextended product responsibility.


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The existing framework conditions in whichbusiness operates do not encourage the wiseruse of resources, a shift from labor to resourceproductivity, or the search for new, innovativeand eco-efficient methods of production,products or services. Indeed, some as agriculturaland energy subsidies encourage the misuse ofresources, while others penalize eco-efficiencyinitiatives.

Getting the price right

Changing Course argued that “the pr ices ofgoods and services must increasingly recognizeand reflect the environmental costs of theirproduction, use, recycling and disposal”.

This means paying for the use of environmentalresources, both as a source of raw materialsand as a sink for wastes. At Rio, governmentscommitted themselves to action to internalizeenvironmental costs.

Those costs need to be internalized into business,so that business can move them into the market-place by applying them to processes and products.

Companies should identify existing environmen-tal costs and allocate them to processes andproducts, as well as anticipate and plan for futureenvironmental costs through a life cycle approach.

Economic instruments

Market-based instruments are more cost-effectivethan command-and-control regulation, give com-panies more flexibility over how they achieveresource productivity and prevent pollution, and

provide continuous incentive to producers to con-serve resources, prevent pollution and step uptechnological and organizational innovation.

They are also the most direct means of changingproducer and consumer behavior towards more ef-ficient resource use. Paying for environmental re-sources will make businesses and consumers usethem more carefully.

Companies will look for ways to cut the costs as-sociated with their use, and design new systems,processes and products to reduce environmentalimpacts and add value for consumers.

It is essential however that economic instrumentsare revenue neutral, and that their tax-raisingeffects are offset by compensating tax reductionselsewhere.

An increased use of economic instruments willlead to a review of the tax system, to consider areduction of taxes on labor combined with theintroduction of taxes on raw materials and fuel.

Governments should also adopt eco-efficientprocurement policies, and make their decisionson benefit-cost calculations that include environ-mental benefits and costs. Support for smalland medium-sized enterprises (SMEs) witheco-efficient new products and services couldbe helpful too.

The financial markets

The role and involvement of the financial marketswill become increasingly important to accelerat-ing eco-efficiency in business. Investors andlenders could encourage more firms to adopt moresustainable practices.

At the moment however, they remain largelyindifferent to companies’ efforts, mainly becausethere are few indicators to enable them to takeenvironmental performance and other con-siderations into account when determining acompany’s financial worth.

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Eco-efficiency starts in the workplace, and itis now up to business to begin to change.However, other players, notably governments,have a key role in accelerating this process.


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The WBCSD has a Working Group examiningthe whole issue of Environmental ShareholderValue (ESV), to demonstrate the close linkbetween the financial markets and eco-efficiency.

Public awareness

Society can play a key part in moving businessfaster towards eco-efficiency. Sustainableconsumption and sustainable production are sides

of the same coin. An informed public can makeinformed choices about eco-efficient productsand services, contributing to change throughpressure in the marketplace.

Business can help move the needle of publicawareness, directly through the educationprocess and by working with environmentalNGOs. Cooperation between business andNGOs is a more productive way forward thanconfrontation.

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Constantly adding value through increasingservice intensity, reducing material and energyintensity, extending product durability, enhanc-ing materials recyclability and maximizingrenewable resources is sound business sense, aswell as good for the environment.

The success of the post-Rio agenda is critical toindustry’s own future, as well as society’s. How-ever, long-term global sustainability will demandmajor reductions in resource consumption,pollution and society’s claim on the environment.

The Factor 10 Club, a group of leading interna-tional figures in environment and development,

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Eco-efficiency is the business norm for manycompanies, who are showing it works for them,and can work for every company in every busi-ness sector.

says that meeting the Agenda 21 goals willrequire a tenfold increase in the average resourceproductivity of the industrialized countries,through a process of industrial dematerializationbased on:

➤ a life cycle approach;

➤ changes in the way products are made,packaged, transported, sold, used, reused,recycled and disposed of;

➤ the development of entirely new products andservices.

This is achievable if business continually improvesits economic and environmental performance,to produce more from less, and add ever-increasing value. Companies who manage thiswill also gain new opportunities, rewards andmarket advantages.

The challenge is unavoidable, and so is this newcompetitive reality.

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Anova Holding A.G. Frank W. BosshardtAT&T Enrique Redondo

BCSD - Argentina Raymond FlorinBCSD - Columbia Maria Emilia Correa

BCSD - Czech Republic Petr HoracekBCSD - Gulf of Mexico Holly Hammonds

BCSD - Indonesia Prof. Otto SoemarwotoBCSD - Latin America Dr. Sylvia Pinal

The Boc Group Plc Richard BurnsBP Chemicals Christian Troussier

The British PetroleumCompany plc Charles C. Nicholson

Ciba Martin TannerCiba Pigments Dr. Peter Donath

Confederation of Indian Industry K.P. NyatiDow Chemical Company Kenneth Koza

Ric OlsonBen Woodhouse

Dow Europe S.A. Peter FlueckigerClaude R. FusslerKai HockertsMichael KollethHans Staeuber

DuPont Company, Inc. Ross StevensECOS / Fundes CH Ernst A. Brugger

Daniel MuntwylerAndres Romero

Ecotec H.E. WilliamsESKOM / Environmental

Industrial Forum of South Africa Jonathan HobbsERM, Inc. Paul Woodruff

Hoffman - La Roche AG Manuel GlauserDr. Peter Mueller

Interface Research Corporation Nancy A. GribbleJohn Laing Plc Philip Rees

S.C. Johnson & Sons Ken AlstonJane Hutterly

Monsanto Company Dr. Earl BeaverNestlé Ltd. Irina du Bois

Pascal GreverathNorsk Hydro S.A. Kjell Oren

Chairmen

Members

The Dow Chemical Company Frank Popoff3M Livio D. DeSimone

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Novo Nordisk Peter TangPowerGen Plc Dr. William S. Kyte

Procter & Gamble Dr. Deborah AndersonSandoz International Ltd Jean Jaques Salzmann

Shell Alain WoutersSony Europe GmbH Dr. Lutz-Günther Scheidt

Swiss Bank Corporation Franz A. KnechtTransAlta Corporation Gord Lambert

Jim Leslie3M Company Allen H. Aspengren

Robert P. BringerDavid A. Sonstegard

3M Italia SPA Marcello PucciniWestern Mining Corporation George White

Weyerhaeuser Norman JohnsonXerox Corporation Jack C. Azar

External participants involved in the two Antwerp meetingsand the Washington workshop

B&Q Alan KnightBank Gdanski SA Teresa Murat

Biofoam Corporation Ed AlfkeThe Body Shop International David Wheeler

Boston University Jim PostBrian Walsh

Capitol Office Kevin MillsCEM Dr. Jonathan Williams

Cofima SA Gilbert ShoeniCommission of European

Communities Robert HullCommission of European

Union DG XII, D-5 Andrew I. SorsCookson Group Lyn Holt

The Delphi Group Nicholas ParkerDevelopment Alternatives Ashok KhoslaDigital Equipment S.P.A. Michael Q. Adams

Domus Academy Prof. Ezio ManziniEnvironmental Conservation

Service, Environment Canada Robert W. SlaterGEM Jonathan Williams

GISPRI Tayzo HayasiKatsuo Seiki

Gorbachev Foundation Ludo van OyenGreen Management Program Martin Standley

The Greening of Industry Kurt FisherHallmark Cards, Inc. Ed Van Leeuwen

Home Depot Mark Eisen


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IBM Corporation Wayne BaltaIFC Martyn J. Riddle

IMD Annette EbbinghausINSEAD Prof. Robert U. Ayres

IRRC Jonathan S. NaimonLandis & Gyr Dr. Donald Weir

McKinsey & Co Dr. Ulrich GuntramMinistry of Environment, Norway Paul Hofseth

Ministry of Environment andNatural Resources Göran A. Persson

National Wildlife Federation Barbara HaasNexus Television Ltd. Nick Hart-Williams

Novotex Leif NorgaardOECD Jeremy Eppel

Rebecca HamnerPresident’s Council on Sustainable

Development Molly OlsonProgramme STD Prof. Dr. ir. Leo A. Jansen

Science Application InternationalCorporation Tom Jensen

State of Minnesota, Office of theAttorney General Leroy C. Paddock

Stockolm Environment Institute Prof. M.J. ChadwickThe Strategy Workshop Dr. David Fleming

Sustainable Development Councilon Environmental Quality Keith Laughlin

UNEP IE / PAC Jacqueline Aloisi de LarderelUS Department of Energy Denise Swink

World Bank David HanrahanWorld Resources Institute R. Darryl Banks

Dr. Rob CoppockDonna Wise

Writar Mark HavemanWuppertal Institute Prof. Dr. Friedrich Schmidt-Bleek

WWF UK Dr. Richard Tapper

Eco-Efficient Leadership for Improved Economic and Environmental Performance

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