Strategies to Improve Environmental Performance
Edilberto Miguel Avalos Ortecho
For many years, companies around the world have been looking for different ways to be more competitive or to achieve competitiveness. Companies used to practice differentiation or implement low-cost strategies in order to be more competitive and profitable, but these measures are no longer enough. Instead, competitiveness now depends on the management of process production in order to minimize pollution, such as atmospheric emissions, effluents, and solid wastes. An additional challenge for companies is to deliver their customers’ products that have better environmental performance and better value proposal to the market. Organizations must also factor external environmental impacts into their internal operations budget with the objective of being more competitive. On the other hand, companies that control operational pollution by preventive measures will gain social license (Zhang et al. 2015), and those that contribute to corporate social responsibility will qualify as sustainable. For these reasons, it is urgent that a strategy that makes companies more competitive and profitable by improving their environmental performance is found.
There are three ways to control environmental impacts: preventive measures (cleaner production), end of pipe technologies and a mix of both technologies. Eud- of-pipe technologies can help an organization comply with environmental regulations and pollution taxes, but it cannot provide an internal rate of return. On the other hand, companies that have altered their process performance to appeal to green markets and customers can achieve superior profits and better environmental performance by using resources efficiently in order to reduce pollution in a preventive way. As a result, it is possible to reduce operational costs and optimize profits. Therefore, ecologic consciousness appears to be a promising business strategy that can increase a company’s bottom line. The question then follows is if there is a relationship
Operations and Process Department, Architecture and Engineering Faculty, Umversidad de Luna, Av.
Javier Prado Este № 4600, Monterrico, Lima, Peru.
Industrial ecology as a strategy refers to taking action to prevent pollution, excluding collective actions. Porter (1995), Hart and Aliuja (1996), Russo and Fouts (1997), Montabon et al. (2007) and Lopez-Gamero et al. (2009) agreed that there is a strong relationship between pollution prevention and environmental performance.
The primary objective of this chapter is to determine if there is a strong relationship between industrial ecology as a strategy (pollution prevention) and the environmental performance of companies. Another objective is to determine how to use environmental tools to reduce environmental impacts from process sources, i.e., in a preventive maimer (by controlling raw materials and processes with clean technologies) and then use end-of-pipe technologies to address residual impacts, such as atmospheric emissions, effluents and solid wastes.
First, this chapter defines why companies must consider industrial ecology as a viable business strategy. Then, this chapter shows why environmentally conscious principles must be complementary with the snrdy of tools, such as the environmental management system ISO 14001:2015, life cycle assessment system, e.g., ISO 14040, and monitoring environmental performance using indicators like ISO 14031 and the Satrkey diagram with the objective of focussing on critical environmental problems. Additionally, this chapter discusses if there is a strong relationship between cleaner production and business performance of organizations using structural equation modeling with Arnos software 22.0 and ChemCad 7.2. These models simulate processes in order to optimize environment process performance.
Finally, this chapter evaluates the hypothesis that the adoption of industrial ecology (pollution prevention) as a business strategy improves the environmental performance of companies.
According to Porter (1996), "The myriad activities that go into creating, producing, selling, and delivering a product or service are the basis units of competitive advantage. Operational effectiveness means performing these activities better that is, faster or with fewer inputs and defects than rivals do. Companies can rear enormous advantages from operational effectiveness. The problem with operational effectiveness is that best practices are easily emulated.’' In this case, the competitive advantage exists only over a short term; for instance, a company implements environmental management system ISO 14001:2015 and is able to improve their environmental performance because they can manage a significant environmental indicator in a preventive way, and as a result, the company can reduce atmospheric emissions, effluents or solid wastes.
On the other side, by practicing continuous improvement, a company can reduce operational costs (direct costs, indirect costs and external costs) and consequently deliver greater value to customers or can create comparable value at a lower cost or do both. The trouble then arises on how a company could achieve a sustainable competitive advantage while preserving what is distinctive about that company, hi other words, performing similar activities in one industry in different ways, using a different set of activities to deliver a unique mix of values. One of these different ways would be to control the quality of raw materials, for instance not using toxic materials because they do not create value for the product and they pollute the environment and increase production costs. Traditionally, organizations practiced generic strategies, such as cost leadership, differentiation and focus, but currently, these measures are not enough because they do not reduce pollution or wastes from source processes nor do they design products with a better environmental performance by delivering a sustainable product to the customer. In this way, it becomes clear that companies could adopt industrial ecology as a strategy to obtain superior sustainable performance among its competitors and achieve an optimized bottom line.
Industrial Ecology as a Strategy
“Industrial ecology (i.e.) is an emerging field, which covers the study of physical, chemical, and biological interactions and interrelationship both within and between industrial and ecological systems. Implementing an i.e. framework incorporates the strategy of cleaner production and pollution prevention in the industrial activities” (Basu and Van Zyl 2006). The aim of i.e. is to interpret and adapt to an understanding of the natural system and apply it to design of the manmade system in order to achieve a pattern of industrialization that is not only more efficient but that is intrinsically adjusted to the toler ances and characteristics of the natural system. The emphasis is on forms of technology that work with natural systems and not against them. Applied i.e. is an integrated management and technical program including:
- • The creation of an industrial ecosystem.
- • Balancing industrial input and output to natural ecosystem capacity.
- • Dematerialization of industrial output.
- • Improving the metabolic pathways of the industrial process and materials used.
- • Policy alignment with a long-term perspective of industrial ecosystem evolution" (Tibbs 1992).
IE can be applied to any manufacturing or transformation sector like mining, textile, ceramic, cement and energy in order to seek out most opportunities for environmental improvement. IE as a strategy could be another way to improve process productivity (the creation of a unit and valuable position), and it reduces not only pollution but also operational costs. As a result, this will increase the value of the product for the customers and the organization (Avalos 2018). “Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well-not just a few-and integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability” (Porter 1996). Accordingly, if companies adopt IE as a strategy, they should apply it not only to their operations but also to all other areas, such as marketing, finance, human resources, chain management, maintenance, quality and environmental systems and strategic planning by implementing a culture of pollution prevention. There must be operational, tactical and strategic actions that establish short-, intermediate- and
Figure 1. Comparison of strategies, with the border of the profitability shown (Avalos 2018).
long-term plans. As shown in Figure 1, IE as a strategy provides strong tools to companies, enabling them to increase environmental improvement by focussing on the source(s) of pollution, i.e., process production and quality of raw materials.
Industrial Ecosystem Model
In order to reduce or limit the environmental impact caused by human activities, it is necessaiy to increase the efficiency with which resources are consumed in the technosphere (Graedel and Alleuby 2003).
“The model shows in Figure 2 how material as well energy is flowing between components in the teclmosphere, thus the energy supplier or energy generator has been added to the original industrial ecology model” (Despeisse et al. 2013). The proposal is to find a closed circuit in order to limit waste production.
Figure 2. Industrial ecosystem model focussed on the manufacturer (Despeisse et al. 2013).
Manufacturing Ecosystems Model: From Linear to Quasi-Cycle Resource Flow Through a Process or System
Figure 3 shows process production as a manufacturing ecosystem where the mam idea is to plan a closed production system in order to minimize waste. In this scenario, it is necessary to practice an operational strategy that helps the company manage pollution in a preventive maimer (Avalos 2018).
“The data analysis should focus on the resource flows linking the systems’ components and on how technologies are consuming and transforming the flows to create process maps of the manufacturing systems. As in an ecosystem, the importance is the overall productivity of resources and how they circulate in the system rather than the efficiency of individual processes or technologies” (Despeisse et al. 2013).
Figure 3. Manufacturing ecosystems model: from linear to quasi-cyclic resource flow through a process
Manufacturing Ecosystems Model with Three Components and Material, Energy, Waste (MEW) Flows
As it shows on Figure 4 about manufacturing ecosystems model, in order to be more eco-efficient (energy, waste and material management), it is necessary to manage the resources aligned with lean environmental thinking, clean technology and an ecology strategy. The environmental aspect is managed with an environmental management system like ISO 14001:2015, which led companies to prevent pollution and standardizing production methods (Avalos 2018).
“By capturing the MEW (material, energy, waste) process flows systemically, potential interactions between processes can be identified to recover material and energy losses, ‘capture’ them and use them in another process. Using a systems view is a key element to move towards solutions, which bring opportunities to improve the system as a whole and avoid local, suboptimal solutions. This knowledge of the potential flow interactions, design methodologies can be developed to enable more environmentally sustainable manufacturing system creation” (Heilala et al. 2008).
“By taking a systems view, we acknowledge that everything affects everything else and therefore we need a tool which helps anticipating those effects while allowing the identification of long-term consequences and root causes. Using a process modelling approach to map MEW flows and analyse them can highlight
Figure 4. Manufacturing ecosystems model with three components and material, energy, waste
opportunities to use outputs from some activities to use outputs from some activities as inputs to others to reduce net consumption. Such principles for recovery and reuse of waste and energy, and therefore reduction of cost and environmental impact could be applied across a whole facility” (Heilala et al. 2008).
Manufacturing Ecosystem Example
This manufacturing ecosystem example suggests designing a manufacturing ecosystem in order to minimize not only the transformation process and operator movement but also the circulation time with the objective of reducing production cost and wastes (Avalos 2018).
Figure 5 represents a factory building and offices, the operation systems (composed of various processes) and the facilities supporting those processes and the building system. The type of improvement can be in organizational/operational management or technical/physical change, and the corresponding elements that should be targeted are resource flow and/or technology components. The generic examples below cover various MEW flows or technological solutions to identify improvements using simple rules based on recurring themes for industrial sustainability (adapted from Lovins et al. 2008).
Industrial Ecology: The Heart of Strategic Planning
Companies should consider IE as a strategy in their strategic planning in order to drive sustainable development. Economic and social corporate objectives in line with IE can also be achieved, separate from the improved euviromnental performance, by taking preventive actions not only with hard abilities but also with soft abilities.
Figure 5. Manufacturing ecosystem example; snapshot at a specific time during operations.
Companies must make investments such as clean technologies, clean energy and raw materials with fewer contaminants. On the other hand, the soft abilities of an environmental cultural organization include pollution prevention, ISO 1400:2015, environmental lean thinking, environmental training, continuous environmental improvement and life cycle assessment (Avalos 2018).
The Staircase of Concepts
The staircase in Figure 6 considers all concepts in environmental management systems like ISO 14001:2015, so when a company tries to implement the system, it must be a strategic process and not an operative process. The final objective is to find a sustainable advantage over company rivals by reducing pollution in a preventive
Figure 6. The stancase of concepts for environmental management systems (Hamner 1996).
maimer. Waste disposal, pollution control and recycling must exist within the eud- of-pipe technologies (collective actions). Thus, these technologies would apply after preventive actions. Pollution prevention, cleaner production and IE must be applied as preventive responses not only for the influx of raw materials but also within production processes in order to reduce pollution from the source. IE as a corporate strategy is the driver for sustainable development. These preventive actions generate value for the company and deliver greater value for the customers (Avalos 2018).
The Environmental Management Programme
The relationship shown in Figure 7 provides a mechanism to apply local/operational activities at the global level using a bottom-up structure. This structure positions IE as a delivery tool for sustainable development goals. The sustainable development can be operationalized through an IE framework, which would be used for developing relevant cleaner production and P2 strategies at the corporate or organizational level for effective decision-making. Waste minimization and recycling are mainly planning activities at the operational level, which could be integrated into both long- and short-term planning. Pollution control and waste disposal are part of production activities at the operational level satisfying the strategies and policies of cleaner production and P2 using the IE framework at a top-level. P2 (Pollution Prevention Dir ective) means the use of materials, processes or practices that reduce or eliminate the creation of pollutants or wastes at the source. It includes practices that reduce the use of hazardous materials, energy, water or other resources and practices that protect natural resources through conservation or more efficient use (Heilala et al. 2008).
Figure 7. A hierarchical structure showing the relationships of environmental management programme
concepts at various levels.