journal of environmental sustainability, vol. 2

Rise and Fall of the Concept Sustainability Károly Kiss

Environmental Sustainability: A Definition for Environmental Professionals John Morelli

Contradictions Inherent in the Management of Natural and Industrial Disasters Sándor Kerekes

Corporate Environmental Sustainability Beyond Organizational Boundaries: Market Growth, Ecosystems Complexity and Supply Chain Structure as Co-Determinants of Environmental Impact Stefano Pogutz, Valerio Micale and Monika Winn

Assessing Corporate Sustainability Through Ratings: Challenges and Their Causes Sarah Elena Windolph

The Ecological Allowance of Enterprise: An Absolute Measure of Corporate Environmental Performance, its Implications for Strategy, and a Small Case André Reichel and Barbara Seeberg

Sustainable Rural Entrepreneurship: A Case in Hungary Szilvia Luda

Today’s Environmental Manager’s Toolbox: Evaluating the EHS Attributes of Products Kathryn H. Winnebeck

Environmental Sustainability and Supply Chain Management — A Framework of Cross-Functional Integration and Knowledge Transfer Dorli Harms

Volume 1, Edition 1

ISSN: 2159-2519

Evolving Role of EHS Manager in Industrial Sustainability Programs — Case Studies Incorporating a Pollution Prevention Approach to Problem Solving Anahita Williamson, David Fister and Rajiv Ramchandra

Rolling out Corporate Sustainability Accounting: A Set of Challenges Dimitar Zvezdov

The Paradox of Multi-Stakeholder Collaborations: Insights from Sustainable Silicon Valley’s Regional CO2 Emissions Reduction Program Peter Melhus and Bruce Paton

The Localism Movement: Shared and Emergent Values Nancy B. Kurkland, Sara Jane McCaffrey and Douglas H. Hill

The Role of the Environmental Manager in Advancing Environmental Sustainability and Social Responsibility in the Organization Lisa Greenwood, Joseph Rosenbeck and Jason Scott

The Importance of Human Resource Management in Strategic Sustainability: An Art and Science Perspective Harold Schroeder

Why Invest in Energy Efficiency? The Example of Lighting Dávid Andor Rácz

EnvironmentalSustainability

Journal of

Volume 1, Edition 1

ISSN: 2159-2519

1

Evolving Role of EHS Manager in Industrial Sustainability Programs —

Case Studies Incorporating a Pollution Prevention Approach to Problem Solving

Dr. Anahita Williamson (NYSP2I) at RIT

[email protected]

David Fister (NYSP2I) at RIT [email protected]

Rajiv Ramchandra (NYSP2I) at RIT [email protected]

ABSTRACT: The role of the Environment, Health and Safety (EHS) Manager has evolved over the last two decades. For many companies, the focus of the EHS Manager is shifting from solely a regulatory compliance and waste treatment or waste disposal role to incorporating a green engineering and pollution prevention approach when solving environmental problems. It is critical for the EHS Manager to have a strong understanding of Environmental Management Systems (EMS), regulatory requirements, and ISO standards pertaining to environment, health, and safety. However, having the ability to go beyond this realm and collaborate with manufacturing personnel to determine opportunities for cost savings as it pertains to environmental reductions is crucial. Reducing environmental impacts often has a direct relationship with reducing impacts on the health and safety of the organization’s personnel as well. This paper will focus on case studies surrounding projects where the New York State Pollution Prevention Institute (NYSP2I) has worked with companies where pollution prevention is becoming a focus of the EHS Manager’s role. The effectiveness of this approach versus waste treatment or management solutions will be quantified by showing both the environmental and cost savings.

I. INTRODUCTION

The role of the Environment, Health, and Safety (EHS) Manager in the manufacturing sector has changed over the last two decades and continues to evolve (Barron, 1994, Fiksel, et. al., 2004). According to the National Association for EHS Management (NAEM), the corporate EHS function has its origins in three distinct professions – Environmental Management, Workplace Safety, and Occupational Health – that began to merge at

the management level around 1990. Environmental Management emerged as a profession in the 1970s following the creation of the United States Environmental Protection Agency (USEPA) and other state-level regulatory systems. Workplace Safety and Occupational Health also grew in importance during this time, with the passage of legislation such as the Occupational Safety and Health Act of 1970. Over time, as companies began to develop a systematic way of complying with environmental,

2 Journal of Environmental Sustainability – Volume 2

health and safety regulations, corporations began tracking key measures and looking for ways to improve their performance. In the 1990s, improvements in data technology management made it easier for an organization to analyze its operations. Around that time, corporations began to merge oversight for environmental, health and safety programs through a new management role called EHS. The newly appointed leaders, who began their careers in one of the three sub-disciplines, started to create systems to drive EHS progress across all operations. Thus, the traditional functions of EHS managers (Figure 1) have included the three areas of:

1. Environmental Management2. Occupational Health3. Workplace Safety

Figure 1: Traditional Functions of EHS Managers

This paper focuses principally on the evolution of the EHS Manager’s role in the context of environmental management. However, it is evident that a preventative and conservation-based approach has direct impacts on Occupational Health and Workplace Safety in

manufacturing environments. For example, switching from a hazardous substance to a non-hazardous alternative in a manufacturing process mitigates the risk to people, and the environment. Thus, one of the primary factors driving the continuing evolution of the EHS Manager’s role is that companies are expanding their focus from conventional “end of pipe” activities focused on waste treatment for regulatory compliance to that of pollution prevention and sustainable production which involves reduction at the source in energy usage, waste generation, material substitution, along with greater recycling and reuse of resources. This strategic refocusing of an organizations operation could be defined as an Internal Influencer. In other words, the influence or impetus for the evolution came from within the organization due to changes in the corporate strategy and business outlook. Other factors include reporting requirements (such as reporting to USEPA’s Toxics Release Inventory) that result in large amounts of environmental release information becoming available in the public domain. This publicly available information has put a spotlight on the environmental impacts of companies and resulted in greater community awareness, increased risk to company reputation and an expectation of greater accountability from all stakeholders. This could be defined as an External Influencer where factors outside of the organization’s direct control influence its future direction. Internal and External Influencers are discussed in greater detail in subsequent sections. These factors have put demands on companies to better manage their environmental responsibilities (Chambers 2001). This shift has presented a great opportunity and challenge to EHS Managers, whose environmental efforts have traditionally been driven by corporate policies of meeting regulations and a desire to avoid significant legal and financial liabilities for their business (Dechant et al. 2005). Environmental

Evolving Role of EHS Manager in Industrial Sustainability Programs... 3

sustainability, or the need to protect the environment and conserve natural resources, is a value now embraced by the most competitive and successful multinational companies (Berry & Rondinelli 1998). The expansion of the EHS Manager’s roles and responsibilities into the sustainability arena has been observed firsthand by the New York State Pollution Prevention Institute (NYSP2I) in the process of providing assistance to companies around New York State. NYSP2I, a statewide research and technology transfer center (funded primarily by the New York State Department of Environmental Conservation [NYSDEC]), provides a statewide, comprehensive, and integrated program of research, technology development and diffusion, outreach, and training and education aimed at making New York State more sustainable for workers, the public, the environment, and the economy. In the three years of existence the NYSP2I has provided pollution prevention assistance to over 150 companies. In many joint projects between NYSP2I and manufacturing organizations, the EHS Manager has played a critical role in reaching a successful project outcome, whether it was providing data for an initial environmental sustainability assessment and identifying environmental improvement opportunities, performing a feasibility study to validate a proposed environmentally preferable technology or solution, or leading the implementation of an environmentally preferable technology into their manufacturing process. In all instances, proactive collaboration characterized by greater communication and open sharing of opportunities or barriers among the EHS Manager and manufacturing personnel at the organization was required. This collaborative relationship of the EHS Manager with manufacturing personnel on pollution prevention projects is still being adopted by many companies. Focusing on cost reduction and manufacturing process optimization opportunities have not been commonplace activities for EHS

Managers. However, as more organizations adopt sustainable practices (specifically in the realm of environmental sustainability), EHS Managers are expected to take on more, and in some cases, radically new responsibilities. This necessary evolution of the organization, along with the evolution of the role of the EHS Manager, comes with challenges for both. However, these changes have the potential to bring significant benefits that positively impact all three dimensions (people, planet, and profit) of sustainability.

II. FACTORS INFLUENCING THE EVOLUTION OF THE EHS MANAGER’S ROLE

An increasing number of companies have moved away from the view that environmental management focuses only on compliance with current laws and regulations to the understanding that environmental management is a legitimate business function driven by, among other things, legislation, markets, relationships in the supply chain, investors, and local communities and activist groups (Roome 1998). Additionally, the rapid increase in regulations since 1970 (Figure 2) suggests that working only towards compliance is like trying to hit a rapidly moving target. Becoming proactive with pollution prevention and sustainability initiatives is a means for companies to stay ahead of regulations rather than reacting to them. It is unlikely that industries can completely avoid regulatory compliance needs but making strategic process improvements could eliminate a whole category of requirements (as outlined in greater detail in Case Study # 2, where a hazardous waste stream was completely eliminated by switching to a non-hazardous alternative).


Thus, it is observed that broadly, there exist influencing factors that have their roots within an organization and outside of the organization. This paper expands on three well-established frameworks in business and management studies to discuss these Internal and External Influencers. The frameworks that have been used to identify External Influencers include:

1. PESTEL Analysis: A framework for identifying and evaluating macro-environmental factors (Political, Economic, Social, Technological, Environmental, Legal) that influence the business environment.

2. Porter’s Five Forces: This model shows the five competitive forces that shape every industry (threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services and rivalry among existing competitors), and helps identify industry

opportunities, weaknesses and strengths.The framework that has been used to identify Internal Influencers is:

1. McKinsey 7-S Framework: A framework which shows that organizational effectiveness and change stems from the interaction of Structure, Strategy, Systems, Style, Skills, Staff and Superordinate Goals (or Shared Values) (Waterman, Peters and Phillips, 1980).

External Influencers

External Influencers can be defined as drivers or parameters that influence an organization’s sustainability practices that originate outside of the organization. External influencers include, but are not limited to:

1. Changing consumer expectations2. Changing supply chain expectations

Figure 2: Cumulative Growth in Federal Environmental Laws and Amendments (USEPA)


3. Availability of sustainability programs and incentives through government/academic institutions

4. Voluntary sustainability certification programs

5. Forthcoming regulation6. New markets (local and international)7. Competition (local and international)8. Market stability/economic conditions9. Increasing material costs, both

manufacturing and disposal. Example: increase in water costs

Internal Influencers

Internal Influencers can be defined as drivers or parameters that influence an organization’s sustainability practices that originate from within the organization. Internal influencers include, but are not limited to:

1. Financial burden of “managing” the problem as opposed to addressing and eliminating it

2. Internal competition between facilities/plants at different locations

3. Corporate sustainability commitment4. Change in leadership5. Adoption/invention of new process/

technology6. Employee-driven initiatives7. Hazardous waste reporting costs; filing,

tracking, time8. Size of the company9. Availability (or lack) of resources

(personnel, financial, technical)10. Unfamiliarity with the economic value of

sustainability as a paradigm11. Voluntary sustainability certification

programs12. Reduced company liability exposure by

reducing hazardous materials

During the past three years, NYSP2I has worked with small, medium, and large companies on pollution prevention efforts in New York State. Some of the small-to-medium-size companies are very progressive in viewing sustainability as a business opportunity. These companies have collaborated with NYSP2I on projects focused on toxics reduction, water and energy conservation, and waste minimization (Winnebeck, 2011). As a company begins to look at sustainability in their products life cycle, they begin to see the system and not just the product. Product life cycles are a very powerful tool since all the components of manufacturing and disposal are mapped out. Cahan, et. al. provide an excellent discussion of the product life cycle and its effect on the EHS function and corporate direction. Other small-and-medium-size companies sometimes are challenged in making sustainability a priority, since they are limited on resources (personnel, technical, and financial) and primarily focused on meeting market demand for their products. Often these companies have a very small staff dedicated to EHS with limited scope as to the type of projects they are expected to complete. With the economic turbulence in recent years, many companies are focusing largely on staying in business. During times like this, sustainability and the implementation of sustainable environmental practices and technologies are not always viewed as strategic investments. However, in many cases the reluctance to make the necessary process changes to improve the efficiency and environmental performance of the production system is further hindering the company’s competitiveness in the field. Continuing to view waste as part of the process, as opposed to a cost improvement opportunity hinders many companies from delivering improved environmental and economic performance. NYSP2I has been approached by EHS Managers at companies looking for alternative waste treatment


haulers since their current treatment method comes with a significant cost (Poduska et al. 2011). However, when teaming with EHS Managers, it is NYSP2I’s mission to collaborate and develop a waste minimization strategy and develop solutions where companies will save significantly on costs by reducing their waste streams. NYSP2I must ensure EHS Managers understand the importance of the pollution prevention approach and provide them with the necessary tools and support to be able to apply the concept to other areas within their facilities. Larger companies have their own set of challenges, often times internally and between EHS Managers and manufacturing personnel. They typically have EHS Divisions with at least one group of specialists associated with each environmental media (water, air, hazardous waste, etc.). The specialists may be responsible for supporting specific manufacturing facilities throughout the company. For years their focus with manufacturing has been on ensuring regulatory compliance, and relationships have been built with this as the central focus. EHS Managers typically did not get involved with process optimization or consult the plant managers on pollution prevention solutions. In fact, at times they may have been seen as obstacles to manufacturing progress, approaching issues with a “can’t do” attitude instead of one of collaboration. However, as companies are progressing toward sustainability, the EHS Manager’s role is one that needs to assist, collaborate, and sometimes drive the pollution prevention opportunities. ISO standards, and ISO 14001 (ISO 14040) specifically, have been a stepping stone for this type of collaboration between EHS Managers and manufacturing. In certain facilities, the EHS Manager is leading the ISO initiative within the facility and, therefore, has a direct line to discussing waste minimization opportunities with the plant manager, engineers, and operators. Transitioning from a supporting role for regulatory compliance to an active role of process

optimization for waste reduction can present a greater challenge to both EHS and manufacturing personnel. In some cases the EHS Managers may need to build, or rebuild, the relationship with manufacturing personnel. In order to be effective, the relationship needs to be one of a collaborative nature, not adversarial. Training and education may be required on both sides to learn about the pollution prevention approach, its advantages, and the driving force and level of priority for the company. The EHS Manager will have to balance his or her regulatory approach with one of collaboration and opportunity. Otherwise, if the relationship does not change, progress will be extremely difficult. Once the relationship is built, the EHS Manager needs to become an integral part of the manufacturing team. In order for EHS Managers to successfully integrate themselves on a manufacturing team and make their projects a priority, they must clearly identify the business case and potential cost savings for the project they’re promoting. The following are case studies of companies that have worked with NYSP2I on taking a pollution prevention approach to address their environmental opportunities. NYSP2I also witnessed firsthand both external and internal influencers associated with each company, and these instances also are presented in the case studies below.

III. CASE STUDIES

Five case studies from NYSP2I projects are presented that highlight the evolving role of EHS Managers at manufacturing organizations in New York State. The manufacturing sectors represented in the case studies are the food manufacturing/processing, glass fabrication, and plating sectors. Each case study provides background information on the organization, the role of the EHS Manager (or lack of an EHS Manager), the environmental opportunity that was identified, how it was addressed, and the


outcome of the project. The case studies have been selected based on the involvement of an EHS Manager or a professional serving in that capacity in projects that NYSP2I has been involved with. Specifically, the case studies have been chosen since the individuals role went beyond the traditional functions of the EHS manager and incorporated the evolving attributes discussed in this paper. Multiple conversations and informational exchanges have been had with the relevant individuals at the five companies and NYSP2I has maintained relationships with these companies between two to four years. The relevant external and internal influencers (outlined in the previous section) are highlighted in each of the case studies.

III.I. CASE STUDY #1: PET FOOD MANUFACTURER, EASTERN US

III.I.I BACKGROUND

A pet food manufacturing company located in the Eastern United States has been taking proactive steps in relation to sustainability of its food manufacturing process. The company, which serves a variety of market segments in terms of product type and geography, has been actively seeking assistance to reduce the quantity of resources such as raw material, energy, and water utilized in its manufacturing process. The company is trying to simultaneously reduce the quantity of waste generated, for example, solid waste, wastewater discharge, and wasted resources such as energy, labor, raw material, and water due to process inefficiencies and rejected product. Listed below are the external and internal influencers that have motivated this paradigm shift toward sustainability.

External Influencers

1. Changing consumer expectations

2. Availability of programs and incentives through government/academic institutions

Internal Influencers

1. Internal competition between facilities/plants at different locations

2. Corporate sustainability commitment3. Availability (or lack) of resources

(personnel, financial, technical)

At the company, sustainability is being embraced as a model that enables and encourages processes to perform at their highest efficiency level, allowing a reduction in costs and environmental impact while increasing efficiency, productivity, and profitability. This efficiency has a direct impact on market perception in a rapidly evolving marketplace that expects some degree of measurable sustainable outcomes (the extent may vary) from manufactures, suppliers, and vendors, thus improving competitive positioning and potentially increasing market share. Plant-to-plant (internal) competition allows self-evaluation, internal benchmarking, and internal sharing of sustainability information. The role of the EHS Manager at the company is shared between two positions: the Environmental Coordinator and the Health and Safety Manager. The team involved in steering the organization toward its sustainability goals and metrics includes both of these positions. By splitting the roles between two individuals, the Environmental Coordinator has greater latitude and flexibility in engaging directly and deeply with manufacturing operators/operations. The Environmental Coordinator continues to be responsible for the tracking and regulatory reporting requirements in regard to wastes (hazardous and solid), wastewater discharge permits, and air permits. However, once freed from meeting the internal Health and Safety responsibilities (such as providing training, addressing internal concerns,


and incidents), the Environmental Coordinator has been able to take a proactive approach in improving the sustainability performance of the company. The Environmental Coordinator is involved in various plant-wide initiatives addressing energy and water conservation and reducing raw material waste, which is driven by a corporate program that was instituted in recent years. Specifically, the company has been working with NYSP2I over the last year in understanding the current state of their solid waste stream and analyzing quantified solid waste data from the production process. The data gathering process and analysis were greatly facilitated by the strong working relationship between the Environmental Coordinator and manufacturing personnel.

III.I.II. ENVIRONMENTAL OPPORTUNITY:

The total annual solid waste disposal cost incurred by the entire facility (which is comprised of two industrial units for two product groups) was

approximately $500,000 in 2009. In addition, one product group (which consists of three different products and has similar manufacturing processes) had high material costs, and the average cost of raw material lost per ton of waste generated was $1000. Thus, the total economic loss (including tipping fees + transportation costs + cost of lost raw material) as a result of solid waste generation from the facility was greater than $2 million annually. NYSP2I has worked with a team at the company, which was co-led by the Environmental Coordinator, in analyzing the solid waste data that was gathered from the production process. While data was being tracked, NYSP2I assisted in the data analysis and provided a quantitative summary indicating the production processes that contributed most significantly to waste generation. The primary solid waste generated from the product group with high raw material costs is organic food waste, and one process step (Step A) contributes to nearly 60% of the waste generated, as shown in Figure 3.While the process that is the largest contributor to

Figure 3: Solid Waste Generated during Manufacturing


waste generation has been clearly ascertained, the root cause or causes remain unclear. Therefore, a root cause analysis is being initiated to identify the underlying factors resulting in such high volumes of waste generation. The 6Ms (man, machine, material, measurement, management, and method) will be evaluated to determine these factors. Solutions will then be researched, evaluated, and implemented to reduce or eliminate the generation of waste. The combination of corporate sustainability goals and a solid connection between manufacturing and the Environmental Coordinator is setting the stage for significant reduction in waste due to process improvements. Also, the fact that the company created a dedicated position for environmental issues puts the company in a better position to act on sustainability opportunities.

III.II. CASE STUDY #2: GLASS FABRICATOR ROCHESTER, NY

III.II.I. BACKGROUND:

A glass fabricator located in Rochester, NY, manufactures glass blanks for other industries. The company is small and does not have a dedicated EHS position; instead, the Facilities Manager had this role. The company’s glass processing steps include the use of adhesive to hold the glass in place for cutting operations. After the cutting operation is finished, the residual adhesive must be removed from the finished glass blanks. In the past, adhesive removal was accomplished by soaking the parts in methylene chloride. As part of his many duties, the Facilities Manager was responsible for hazardous material disposal, as well as process safety and safety training. The use of methylene chloride in the facility required a separate ventilation system for the methylene chloride vapors in the processing area, special safety equipment, and hazardous material training.

As part of his facility goals, the Facilities Manager was working toward reducing or eliminating hazardous materials and hazardous waste.

External influencers:

1. Increasing material costs, in this case the cost to purchase and dispose of methylene chloride

Internal influencers:

1. Financial burden of “managing” the problem as opposed to addressing and eliminating it

2. Hazardous waste reporting costs; filing, tracking, time

3. Reduced company liability exposure by reducing hazardous materials

III.II.II. ENVIRONMENTAL OPPORTUNITY

There were two waste streams from the original adhesive removal process, adhesive sludge with small amounts of methylene chloride and the adhesive saturated methylene chloride. In 2009 the glass fabricator disposed of six 55-gallon drums of the sludge and spent methylene chloride. Both waste streams are considered hazardous due to the presence of the residual solvent. The Facilities Manager wanted to find a less hazardous or, preferably, a non-hazardous means of removing the adhesive from the glass blanks. The potential risk in replacing the methylene chloride was a slower process. Alternative materials could have been significantly more expensive. These disadvantages can be the process trade-offs when attempting to develop a more sustainable process. After much research, the Facilities Manager found a solvent that was not only non-hazardous but also worked better than the methylene chloride.


This solvent improved the process by increasing the part cleaning rate and completely eliminated the hazardous methylene chloride waste streams. The glass fabricator has been using this new solvent successfully for almost a year. This alternative eliminated a total of approximately 3600 lbs. of methylene chloride hazardous waste per year based on the 2009 disposal amount. This solution also led to other advantages, including the elimination of methylene chloride, Toxic Release Inventory (TRI) reporting, elimination of both safety training and safety equipment necessary for this chemical, and elimination of fume exhausting, resulting in cost savings in regard to heating the facility. Although certainly not always the case, there are times when looking for sustainable solutions results in both waste elimination and a process improvement, in this case a faster process. The financial and administrative burden of permitting, reporting, and regulations also can be lifted as sustainable solutions are implemented. The Facilities Manager had been gradually extending his responsibilities beyond that of meeting the standard environment, health, and safety requirements to being proactive and looking for pollution prevention opportunities. This stance enabled him to completely eliminate a hazardous material from the operation by examining the detailed process requirements. In a small company the EHS responsibilities can fall to an individual with many other responsibilities. In this case, the individual was self-driven to create sustainable solutions that coincidentally provided process improvements.

III.III. CASE STUDY #3: PLATING SHOP 1, ROCHESTER, NY

III.III.I. BACKGROUND

Plating Shop 1 is a metal finishing job shop in Rochester, NY, that specializes in advanced and

proprietary industrial coatings and plating. The metal finishing services offered include electroless nickel plating, anodizing, passivation of stainless steel, zinc plating, aluminum conversion coatings, and other specialty processes. This plating shop has been involved with sustainability improvements for many years. Six years ago it found a means of reducing both its acid use and acid waste, so the idea of becoming more efficient with its resources has a long history with the company. The role of the EHS Manager is divided between two people: the Plating Lab Manager and the General Manager. The Plating Lab Manager handles the environmental aspects of plating such as handling wastewater treatment sludge and monitoring the outgoing treated water. The health and safety responsibilities are handled by the General Manager. The Chairman of the company is highly interested in sustainability, so the drive to improve water use and chemical use is a top-down priority for the company. Having this kind of support from the CEO is extremely helpful when initiating pollution prevention projects.



2. Increasing material costs, both manufacturing and disposal, for example, water costs


1. Corporate sustainability commitment2. Size of the company—small and lean3. Availability (or lack) of resources

(personnel, financial, technical)


III.III.II. ENVIRONMENTAL OPPORTUNITIES:

The company Chairman was concerned about the amount of water used at his facility and was interested in finding a means of reducing the overall water footprint. This solution would have the impact of reducing the cost of water purchase, wastewater treatment, and water sewer charges. The company’s annual water use was approximately 7.6 million gallons at a cost of $40,000 in 2009. The major water use was in rinsing parts between process tanks for the various finishing lines. The NYSP2I provided some baseline rinsing measurements on three of the company’s high water use lines. Rinse flow rates are important in predicting annual water use estimates as well as finding rinse tanks with either unusually high or low flow rates (lack of flow control). It was determined that the shop could reduce its rinse water use by a technique known as reactive rinsing. This plating shop had six sets of rinse tanks that could benefit from this method of rinse water reuse. Figure 4 illustrates the typical tank sets that can be used for

reactive rinsing and that were used at this facility.After all the systems were running properly, the shop was able to save 1.4 million gallons per year or approximately 18% less water per year. This represents a water savings of approximately $7,700 per year for an investment of less than $1,000. Although the project was successful, there were implementation delays. One challenge with their corporate structure was that the Environmental Manager was at a lower level than the Health and Safety Manager, and it appeared that he did not feel empowered to implement the rinse water changes even though the Chairman felt water use reduction was important. Therefore, an opportunity for improvement would be ensuring that there is clear and uniform management support of process improvements that incorporate environmental initiatives. This management empowerment problem was discussed by Volkmar, et. al. as one of five EHS management challenges. They called it “Challenge No. 1: Top Management Participation” and “The Importance of Authority”.

Figure 4: Schematic showing the water flow in a Reactive Rinse


III.IV. CASE STUDY #4: PLATING SHOP 2 IN WESTERN NY

III.IV.I. BACKGROUND

Another Upstate New York plating job shop had investigated ways to reduce its environmental footprint but had somewhat limited engineering resources to investigate opportunities. The company has three plating lines, each with numerous rinse tanks. Rinse rates were controlled by the operators using water valves to control the flow rates on each rinse tank. As with most plating companies, the plating line wastewater is treated on site to remove metals and adjust the pH before discharging its water into the city sewer for final treatment by the publicly owned treatment works (POTW). It also had relatively large volumes of waste acid to treat on site each year from the acid etch tanks and their rework stripping tanks. Going beyond meeting the regulatory requirements was a new endeavor for their EHS Manager, and pollution prevention opportunities were being pushed to a low priority by day-to-day activities. A project was set up with the NYSP2I to determine the opportunities that were feasible for acid savings and water savings. Flow rates were measured for all the rinse tanks, and acid use was estimated based on the frequency of acid tank dumping and refilling. The company was already reusing the water from the cleanest rinse tanks by sending the water through an ion exchange system and then sending it back to the lines.



2. Increasing material costs, both manufacturing and disposal


1. Hazardous waste reporting cost; filing, tracking, time

2. Hazardous waste treatment costs (in-house wastewater treatment)

3. Availability (or lack) of resources (personnel, financial, technical)

4. Unfamiliarity with the economic value of sustainability as a paradigm

III.IV.II. ENVIRONMENTAL OPPORTUNITIES

There were three potential opportunities for improving the environmental footprint for this company: acid waste reduction, treated wastewater recovery, and conductivity-controlled rinse valves. The company was able to use an acid additive that prevented dissolved metal from building up in the acid tanks as metal is being etched. This additive extended the life of the acid tanks by at least double their normal life. The acid savings are expected to be at least $7,400 per year. This plating shop had relatively clean water coming from its wastewater treatment. The only drawback from reusing this water was its salt content, which was too high for direct reuse and too high for its ion exchange systems. The technically feasible solution for reusing at least 32% of this water was the use of reverse osmosis to remove approximately 99% of the dissolved salts. However, recovery of 32% of the treated wastewater using a Reverse Osmosis (RO) system is $16,700 per year on a 15,000-gallon-per-day RO unit. The RO unit was expected to cost over $60,000, so the annual payback of $16,700 in water savings did not meet the company’s economic requirements on this proposed solution. Finally, the rinse water flow rates were operator controlled. The shop installed one trial


water valve controlled by water conductivity to regulate the rinse water flow based on the contaminant level to one rinse tank. This system overrides operator control of the water and shuts off when the line is idle. This option is still being tested as an alternative to operator-controlled rinses. If successful, multiple control valves will be installed on the rinse tanks. The impact will be that rinse water can run at a high or low rate as determined by the operators. However, the water will flow only while contaminants are being diluted out of the rinse tanks to a preset contaminant level. After that level is reached, the water will automatically shut off. During idle periods on the plating lines, all the rinses will shut off automatically rather than previously relying on the operators to turn all the valves off. The overall results of the initial study for this company were positive and the EHS Manager has a better understanding of the plating process rather than just knowing and focusing on the wastewater treatment process. Overall process knowledge becomes necessary for the role of the EHS Manager when it goes beyond the waste and regulation aspects and expands to efficient material use or efficient material recovery. The reverse also is helpful, where the plating process engineers begin to understand what can cause the waste treatment process to work better (or worse). The plating department personnel were concerned that changing the rinsing process would be detrimental to the plating process by potentially causing plating defects. At that time environmental improvement goals were not mandated through corporate policy. Therefore, the EHS Manager was unable to initiate water use changes upstream of the waste treatment process. Obviously, process changes to improve sustainability can never be made at the cost of product quality. On the other hand, the cost of a process and its downstream costs should be continuously re-evaluated to look for improvement opportunities.

III.V. CASE STUDY #5: FOOD PROCESSOR IN NEW YORK CITY

III.V.I. BACKGROUND

This company is the processor of specialty fish products. It purchases its fish in the frozen state and must thaw them before going further in its process. In the food industry, thawing is commonly accomplished with water. For food safety, this water is constantly flowing to prevent potential bacterial growth. There are really no other regulatory problems at this stage of the food process. During a facility assessment by an outside consultant, the CFO was informed that, although no regulatory issues existed with the way the company was using the water, there were certainly concerns about the company’s usage of extremely large volumes of water just to thaw the fish.


1. Availability of programs and incentives through government/academic institutions Increasing material costs, both manufacturing and disposal, for example, water costs


1. Availability (or lack) of resources (personnel, financial, technical)

III.V.II. ENVIRONMENTAL OPPORTUNITIES

The company contacted the NYSP2I to obtain technical support in determining options for reducing its water consumption. The use-tempered water (warmed to a set moderate temperature


by mixing hot with cold) thawing was modeled to estimate the change in water use. The model suggested that the company could conservatively save almost 23,000,000 gallons of water per year. Its typical annual water use was close to 30,000,000 gallons per year, so its water use could be decreased by approximately 75%. In addition to the enormous water savings, the use of tempered water was found to have another positive effect on the thawing process. The wintertime incoming water temperatures could be as low as 35ºF, resulting in extremely slow thawing rates. The summer water temperatures were the reverse with very short thawing times. Therefore, the thawing rates varied dramatically over the course of the year resulting in the need for constant process adjustment. The use of tempered water year round meant a very stable and predictable thawing process. As an added cost benefit, the facility has access to excess heat that will be used for heating and storing hot water. This water will serve as the tempering water to bring the incoming cold water up to the required temperature without the use of any additional heating fuel. Therefore, their pollution prevention solution utilizes less water and no additional heating and provides a more predictable process. The company is very lean on staffing and does not have a dedicated position for either EHS or sustainability. However, the company CFO knew there was a significant cost associated with water use but did not know how to approach it. Both a lack of staff and a lack of technical resources due to company size were hindering this company from moving forward on the sustainability continuum. After observing the pollution prevention approach to reduce their water consumption, the CFO and staff now had a better understanding of their thawing process and how to control it. They also have a better understanding of how to approach similar problems in the future and the approach to use in reducing their environmental footprint. In

this case, the small size of the company resulted in a lack of internal staffing and technical resources to manage EHS issues. They were able to make use of external technical resources and external funding to improve their process sustainability.

IV. THE POLLUTION PREVENTION (P2) APPROACH AS APPLIED TO THE EVOLVING EHS ROLE

The pollution prevention mindset is a shift in approach for both the EHS Manager and the manufacturing facility. The EHS Manager needs to broaden his or her perspective of waste and look at waste as an opportunity to reduce costs and improve the process, instead of another stream to treat and dispose. The EHS Manager needs to immerse himself/herself in the manufacturing facility to fully understand the material inputs, outputs, environmental waste streams, and by-products of the manufacturing process. By quantifying the current state of the process (i.e. understanding the baseline), the prioritization of opportunities related to large waste streams or costs associated with the waste streams can be completed. NYSP2I has found the following steps to be effective when implementing pollution prevention solutions, particularly when the EHS Manager is taking the lead and working with manufacturing personnel.

1. Build strong working relations with manufacturing or operations, a collaborative vs. regulatory approach

2. Educate key personnel on benefits of pollution prevention and sustainability initiatives—through training programs or attending conferences

3. Focus on the direct impact to the bottom line to obtain buy-in from both management and manufacturing personnel


4. Develop the baseline; quantify the current state of the process (often entails material and energy input-output analysis)

5. Identify opportunities for environmental improvements and cost reduction

6. Prioritize opportunities7. Obtain buy-in from upper management on

the top opportunities8. Seek out experts (consultants, universities,

P2 organizations) to aid with prioritization, assessments, and implementations

9. Seek out funding opportunities (state, federal, other stakeholder organizations) to offset the cost of implementing sustainable practices/technologies

These steps were developed by the NYSP2I staff as they developed a history of successful and unsuccessful projects with the New York State companies. Successful implementation of pollution prevention recommendations typically had most of these steps in place. Unsuccessful or stalled implementation projects typically had multiple steps missing or incomplete. In order for EHS Managers to successfully integrate themselves on

a manufacturing team and make their projects a priority, they must clearly identify the business case and potential cost savings for the project they are promoting. The emerging role of the EHS Manager needs to incorporate a balance of compliance, regulations, and reporting with pollution prevention, process optimization, and systems thinking, as shown in Figure 5. The modern revelation is that waste can be viewed as both an environmental improvement opportunity and a cost-savings opportunity. This spectrum of companies and their respective roles for EHS managers is represented in the Sustainability Continuum created by the NYSP2I and shown in Figure 6. However, a large gap still exists between companies that have invested in sustainability and pollution prevention initiatives and companies that still view waste as an unavoidable part of their manufacturing process. The Sustainability Continuum provides a visual representation of an organization’s position in the context of its adoption of sustainable practices (specifically in the realm of environmental sustainability). The continuum also focuses on a few critical parameters that enable

Figure 5: Evolving Role of the EHS Manager


the transition from one phase to the next in regard to progressive sustainability. The operational, manufacturing, purchasing, and logistical practices of any organization dictate where it sits on the Sustainability Continuum. This point can range from having little to no intentional adoption of sustainable practices or strategy, to the implementation of short- and long-term corporate sustainability initiatives woven into annual performance goals. A variety of parameters influence an organization’s position and journey along the continuum and can move a company forward, backward, or keep it stationary. These movement influencers can be broadly divided into external (or macro) and internal (or micro) influencers. These lists were compiled from the combined experiences of the NYSP2I staff as they worked with companies on pollution prevention projects. The influencers were the reasons stated by the companies or observed by the NYSP2I staff as they worked through the projects with company EHS managers. The role of the EHS Manager is highly dependent on where the organization is on the Sustainability Continuum. In other words, the EHS role is influenced by a combination of external and

internal influencers. The size of the company on the continuum relative to number of employees (small <100, medium <500, or large >500) can also present its own set of challenges for EHS Managers and their emerging role in sustainability.

V. CONCLUSIONS

There are many variables that need to be taken into account when companies assign responsibilities to the role of the EHS Manager, including internal and external influencers, company size, and company position on the Sustainability Continuum. Understanding these variables and considering the challenges and opportunities faced by the EHS Manager will enable the organization to move toward a pollution prevention and sustainability approach in developing solutions to its environmental problems.The key findings in relation to the evolving role of the EHS Manager in light of sustainability are that:

There is no single influencer that can cause a positive sustainability shift in a business entity, as evidenced by the case studies. There are positive influencers that, working together, can cause major sustainability

Figure 6: Sustainability Continuum


improvements. For example, in a small company a combination of management recognition and commitment to sustainability, along with technical expertise, whether internal or external, will typically produce a positive sustainability shift. Even the cost of regulatory compliance, such as waste filing, tracking, and time, can produce enough non-value-added costs to justify changing a process to a more sustainable one. (Note that regulatory pressure can have the negative sustainability effect of moving a “dirty” process off shore rather than creating a positive on-shore change.)

The role of an EHS Manager and the shift to a pollution prevention and sustainability approach can be a self-directed change as demonstrated by case study 2 with the glass fabricator. However, the shift requires empowerment from inside influencers, such as corporate sustainability goals that cover all of manufacturing and, therefore, minimize conflicting corporate goals.

The EHS Manager can positively affect company sustainability if the role allows time for sustainability activities. Two of the case studies had split the responsibilities of health and safety activities from environmental activities to allow equal and greater focus on both of these important aspects of a well-run company.

In very large companies where there may be two or more individuals responsible for various environmental aspects of the business, a level reporting structure helps keep the goals uniform. For example, two environmental engineers in the company should report to the same manager to avoid

conflicting goals or duplicating efforts.The EHS Manager’s role must be more integrated with the manufacturing environment of the business to be able to successfully implement sustainability improvements. This role change requires the EHS Manager to become more knowledgeable about the needs of the manufacturing processes. Simultaneously, manufacturing needs to better understand the impact of waste on the cost of the business.

A key driving factor behind organizations focusing their efforts on sustainable measures are corporate initiatives and programs that encourage and incentivize employees and facilities to adopt sustainable practices. These motivators greatly enable the initiation of sustainability projects at the operational level and could be viewed as an advanced stage in the evolution of the organization and, consequently, the role of the EHS Manager.

Thus, the role of the EHS Manager in manufacturing organizations continues to evolve as enterprises and industry sectors move toward sustainability. The needs of different organizations and sectors, as they traverse the Sustainability Continuum, are different based on the internal and external influencers discussed. While there is no “one size fits all” solution that can be broadly implemented across manufacturing organizations to enable sustainable development, Institutes such as NYSP2I, government initiatives, and academic research are the resources that can provide guidance along the way in developing sustainable solutions. These resources can reinforce the pollution prevention and sustainability paradigm, thus paving the way to a sustainable future.


VI. REFERENCES

[1] Barron, T., “Changing EHS Role is Demanding New Skills, Environmental Management Today, vol 5, no. 11,(Nov. 1994, p. 3)

[2] Berry, M. A., and. Rondinelli, A., “Proactive Corporate Environment Management: A New Industrial Revolution.” The Academy of Management Executive 12(2) (1998): 38-50. ABI/INFORM Global, ProQuest. Web. 27 Jul. 2011.

[3] Cahan, J., Schweiger, M., “Product Life Cycle: The Key to Integrating EHS into Corporate Decision Making and Operations”, Total Quality Management, Winter 1993/94, p 141

[4] Chamber, R. “The Evolving Role of the Corporate Environmental Professional.” Pollution Engineering 1 May 2001: ABI/INFORM Global, ProQuest. Web. 27 Jul. 2011.

[5] Dechant, K., B. Altman, R. M. Dowining, T. Keeney, et al. “Environmental Leadership: From Compliance to Competitive Advantage: Executive Commentary.” The Academy of Management Executive 8(3) (1994): 7-27. ABI/INFORM Global, ProQuest. Web. 27 Jul. 2011.

[6] Fiksel, J., Lambert, D., Artman, L., Harris, J., Share, H., “The New Supply Chain Edge.” Supply Chain Management Review, vol. 8, No. 5 (Jul/Aug 2004), p 50

[7] ISO 14040 (2006): “Environmental Management – Life Cycle Assessment – Principles and Framework.” International Organisation for Standardisation (ISO), Geneva.

[8] National Association for EHS Management (NAEM). EHS Facts. [Online].

[9] Available at: http://www.naem.org/?page=EHS_Fact_Sheet [Accessed February 2012]

[10] Poduska, R. et. al. “Hazardous Waste Reduction From Mixed Acid Titanium

Etching.” Journal of Clean Technology and Environmental Policy Accepted Apr. 2011.

[11] Porter, Michael E. “The Five Competitive Forces That Shape Strategy.” Harvard Business Review 86.1 (2008): 78-93. Business Source Elite. Web. 7 Feb. 2012. (http://search.ebscohost.com/login.aspx?direct=true&db=bsh&AN=28000138&site=ehost-live)

[12] Roome, N. J. “Introduction: Sustainable Development and the Industrial Firm.” Sustainability Strategies for Industry: The Future of Corporate Practice Ed. Washington D.C.: IP, 1998. P4. Print.

[13] Shonnard, David R., Chapter 3, From End-of-Pipe to Pollution Prevention: Environmental Law and Regulations, Figure 3.1-1 Cumulative growth in the federal environmental laws and amendments.

[14] http://www.epa.gov/oppt/greenengineering/pubs/ch3intro.pdf accessed on January 16, 2012

[15] Volkmar, R., Ogilvie, K., Chizzonite, J., “Overcoming the Five Major Challenges to a Successful EHS Management System”, Environmental Quality Management, Vol. 13, no. 2 (Winter 2003), p. 3

[16] Robert H. Waterman Jr., Thomas J. Peters, Julien R. Phillips, Structure is not organization, Business Horizons, Volume 23, Issue 3, June 1980, Pages 14-26, ISSN 0007-6813, 10.1016/0007-6813(80)90027-0. (http://www.sciencedirect.com/science/article/pii/0007681380900270)

[17] Winnebeck, K. H. “An Abbreviated Alternatives Assessment Process for Product Designers: A Children’s Furniture Manufacturing Case Study.” Journal of Cleaner Production 19(5) 464-476, Mar. 2011.

19

Rolling out Corporate Sustainability Accounting: A Set of Challenges

Dimitar Zvezdov Leuphana University Lüneburg

[email protected]

ABSTRACT: The benefits of improving corporate environmental and social performance have been addressed by an increasing number of companies in the past two decades. However, not all companies have been interested in the topic since it first came up. Thus, companies’ attempts to quantify sustainability performance typically start with a qualitative understanding of the impacts of the environment and society on corporate economic performance and vice versa. At the forefront of corporate sustainability accounting practice, research has highlighted the attempt of various companies to expand and transform sustainability information collection practices into regular, day-to-day activities known as sustainability accounting. However, this step – referred to as roll out – is related to various obstacles that hinder its success. The following conceptual paper identifies the obstacles in the roll-out process and suggests an approach to deal with them. Based on various studies in the field, the developed approach presents typical challenges and highlights their significance for the success of the roll out of corporate sustainability accounting. The contribution of the paper lies in the identification of decision-situations which – albeit essential for the success of the roll out – appear to be neglected by many decision makers, often with undesired consequences. The novelty of the findings can support higher and middle management in their transition from small-scale, project-based collection, analysis and provision of decision-making information to a company-wide, self-sustaining management accounting system that integrates social and environmental impacts of and upon business. This transition can contribute to the long-term success of the enterprise and reduce its externalities on environment and society

KeywoRDS

Sustainability accounting, Information management, Decision making information, Challenge, Roll-out process

I. SuSTAInABIlITy ACCounTIng: A DRIveR foR SuSTAInABIlITy mAnAgemenT

Apart from being a topical issue in various fields of research (e.g., Schaltegger, Gibassier, and Zvezdov), corporate sustainability has been gaining importance in practice, too (e.g., Ernst & Young; BCG). Numerous recent studies reveal that companies seem to have realised the contribution of tackling sustainability issues toward their long-term success (e.g., Schaltegger and Wagner; Schaltegger, Bennett, and Burritt). Yet, corporate sustainability management poses various challenges to decision

20 Journal of environmental Sustainability – volume 2

makers, in developing an understanding of the linkages between sustainability management and financial performance (e.g., Schaltegger and Wagner). Furthermore, a successful corporate management would not only need to understand these linkages but also to be able to create new ones. This is where corporate sustainability accounting can provide decisive support. The discipline has been maturing and enjoying a growing attention from researchers and practitioners alike (Parker; Schaltegger, Gibassier, and Zvezdov). Alongside this development several focuses of research have been observed: The oldest theme appears to have been looking into the business case for sustainability (e.g., Schaltegger and Sturm; Klassen and McLaughlin; Dyllick and Hockerts). The foundation of this research stream lies in the paradigm that striving for corporate sustainability is worth beyond pure financial performance and in the overall interest of the company. A later sub-stream of sustainability accounting publications has focused on the increasing recognition of the business case for sustainability (e.g., Porter and van der Linde; Schaltegger and Wagner). These publications give mostly empirical answers to the question of whether corporate sustainability management has been able to contribute to tangibly improving the financial performance of the company. The role of sustainability accounting in these publications has been to provide accounting tools and methods to support an accounting toward sustainability. A third theme concentrated on observing the practice of corporate sustainability accounting. The publications in this area (e.g., Bennett and James; Heydkamp et al.) look into what companies do in the field of SMA, how they do it, and why they do it. This research, although limited in volume (Schaltegger, Gibassier, and Zvezdov) has brought significant insights into the responsibilities involved in SMA, the type and regularity of the information collected, etc. Last but not least, a major body of publications in the area deals with various challenges to sustainability

accounting – from “how to get the right information to the right people” to “how to measure sustainability performance reliably.” (Burritt; Rikhardsson et al.) For example, Burritt identifies a thorough list of obstacles that need to be investigated in detail. Thus, the discussion has developed beyond attempts to recognize the benefits of engaging with sustainability accounting with a trend toward establishing elaborate systems to provide support to decision makers as called for by Schaltegger and Burritt. Based on the development of sustainability accounting in leading sustainability companies (e.g., Burritt, Schaltegger, and Zvezdov), the paper draws the attention to the next challenge: the roll out of corporate sustainability accounting. The implications provide support in identifying the needs of the various people involved in sustainability accounting and its implementation in day-to-day business processes – referred to as “roll out” throughout this paper. A significant contribution toward understanding specific decision situations is made. From a more general viewpoint, the considerations made in this paper can be translated to other corporate functions engaged in sustainability management. The argumentation builds upon literature in change management theory (Cooke) and in practice-oriented accounting theory as understood by Malmi and Granlund. The analysis is strictly qualitative, using only secondary data sources. The analysis of challenges in Section 2 is based on a literature review conducted for this research. The core of the paper is a conceptual development that identifies, groups and elaborates on the challenges identifies in Section 3. A summary of the most important findings is provided in Section 4, together with implications for practitioners and researchers.

II. STATuS of CoRpoRATe SuSTAInABIlITy ACCounTIng pRACTICe AnD fuTuRe ChAllengeS

Rolling out Corporate Sustainability Accounting: A Set of Challenges 21

A few years ago, Schaltegger and Burritt provided an account of what sustainability accounting is. In their paper, the authors provide an insight into the status of corporate sustainability accounting and interpret its meaning. The interpretations range from “an empty voguish buzzword blurring debate” through “a broad umbrella term bringing together existing accounting methods dealing with environmental and social issues” and “a specific unitary measurement and information management tool” to “a pragmatic, goal driven, stakeholder engagement process, which attempts to develop a company specific and differentiated set of tools for measuring and managing environmental, social and economic issues as well as the links between them.”Precisely the latter – this pragmatic, goal driven approach – has been the subject of many decision-makers’s attention who have realised the importance of sustainability information provision and management. For this reason, a number of companies have been engaged in designing accounting systems that provide the right information to the right people in the right moment (Bennett, Schaltegger, and Zvezdov). However, there are hardly examples of companies that have been able to implement an overarching sustainability accounting system. For example Adidas have just published a statement on their efforts towards developing an accounting system that considers various externalities and serves as a base for short and long-term decision making. DHL is another example that highlights the challenge of an integrated information management system – so far only carbon accounting has been claimed to be integrated in business activities (Hufschlag), little is mentioned on other sustainability aspects. On the other hand, a large number of companies report on their sustainability performance: some 1400 reported on their sustainability performance in accordance with the GRI guidelines (GRI). This reveals a discrepancy between the signals of company in regard to the relevance of society and

environment to business and the actual attempts to manage these aspects. Whereas explanations of the above discrepancy such as mimicry and stakeholder pressure have been developed, the difficulty of moving from a project-based information generation and management to a company-wide sustainability accounting system has not been approached (e.g., Burritt). Yet, approaching the particular set of challenges to sustainability accounting – hereafter henceforth referred to as roll out – can provide several decisive advantages in managing corporate sustainability performance. One of the main considerations is that tackling these issues can help secure a smooth transition from project-based information collection and use to routine operations. “Project-based” refers here to the isolated nature of many sustainability activities. Projects for reducing energy consumption by educating staff are one example of such activities that can be embedded in business to improve their efficacy. Such an efficacy increase can be expected as energy consumption in this case is no longer tracked within certain boundaries (e.g., department, unit, or site) but is company-wide and not limited to a certain time frame. Furthermore, responsibilities that may contribute to improving energy efficiency are no longer excluded from the project team (e.g., Hobday).Paying attention to SMA roll-out challenges also is likely to reduce the cost of the transition explained above through managing quality and efficiency. Last but not least, bridging management challenges with content challenges can contribute to the flow of knowledge and thus have a positive effect on SMA practice.

III. SpeCIfICS of The SuSTAInABIlITy ACCounTIng Roll ouT

Publications on change management often identify organisational aspects of processes and activities


that need to be considered in certain situations and/or for achieving certain goals (e.g., Aladwani; Nah, Lau, and Kuang). Knowledge from this field can contribute to developing an understanding for processes and thus enable decision makers to modify such processes to achieve strategic and operational targets. On the one hand, the linkages between the various aspects need to be identified and explored. On the other hand, these linkages between the various aspects need to be put together and observed how one affects the other aspects. In the case of the roll out of sustainability accounting, it needs to be identified how approaching without losing sight of the targets. For example, a small sustainability team in a company may be motivated and capable of uncovering potentials for improving social, environmental and economic performance. However, expanding the information system without instructing the newly engaged people on the targets may result in very high costs with little additional benefits, thus rendering social and environmental opportunities unattractive for decision makers. On the other hand, diverse accounting studies have been working towards identifying the contingencies (e.g., Chapman; Gordon and Miller; Cadez and Guilding) of accounting practice. Researchers have been identifying and investigating the aspects of information that matter, so that decision making is supported. In the context of sustainability accounting, Schaltegger and Burritt produced one of the first publications that describes in detail the actors in sustainability accounting, their information needs, and the types of information generated and provided. Furthermore, Burritt, Hahn, and Schaltegger developed an “Environmental Management Accounting Framework” that identifies various situations in which different types of information are needed. This section focuses on the issues and challenges of the the roll-out phase of sustainability management accounting. It identifies and considers

organizational as well as content-specific challenges in the roll-out phase of corporate sustainability accounting. As presented above, these two types of considerations play a significant role in the roll out of corporate sustainability accounting to support an efficient and effective transition of the latter toward day-to-day business activities.

Organizational aspects

The generic roll-out process has been tackled from various perspectives (Balogun and Jenkins), including in accounting context (Burns and Scapens; Sulaiman and Mitchell). For the purpose of this paper, the analysis of the organisational aspects of the sustainability accounting roll out are listed and systematically tackled, based on a recent publication by Homma and Bauschke. The latter is considered a good source to build upon as it provides an overview of the basics of the roll-out process by summarizing relevant literature and presenting generic steps in the process. The considerations in this section thus rest on this concept. Furthermore, the largely underestimated importance of formal transition (toward integrating sustainability accounting in core business) management (Bennett, Schaltegger, and Zvezdov) is interwoven in the following analysis.The model for the roll-out process described by Homma and Bauschke rests on three decisive steps: (i) preparation of the roll out project, (ii) involving senior management, and (iii) subsequently involving employees. This preparation is particularly critical in terms of available resources, as the operational aspects of the roll out have been documented as very demanding (Burns and Scapens; Anderson and Young). This calls for a clear understanding of the needs of the roll-out process. The first consideration to be made is that as the involvement of various departments is needed, this involvement needs to be provided the necessary support, and the business needs to make


sure that available capacities for the required tasks are available within these departments. As recent research (e.g., Bennett, Schaltegger, and Zvezdov) reveals, in practice this is often not the case, thus hampering the advancement of the roll-out process. The involvement of senior management also has been identified to be crucial for the success of the roll-out process. Due to the often conflicting nature of sustainability management with short-term financial performance (e.g., Rappaport), the support of the senior management is often granted only partly (Epstein and Roy). In other words, by the nature of their functions, managers support processes and measures that can be legitimized in front of stakeholders – mainly shareholders, but also customers, wider public, etc. Thus a clear and tangible cost-benefit analysis needs to produce information (e.g., Bennett, Schaltegger, and Zvezdov; Schaltegger and Burritt) that draws the attention of senior management and stimulates its involvement. Therefore, one crucial task of roll-out management is the identification of a list of (expected) benefits of a transition to an encompassing sustainability accounting, ideally including short-term benefits as well as those expressible in monetary units. For example, a company-wide sustainability accounting can uncover further business cases for the company and additionally result in a reputation improvement. As observed by Bennett, Schaltegger, and Zvezdov, senior management is rarely engaged in the sustainability management of the company, although it does not seem to obstruct related activities. Yet, further involvement of senior management may have positive effects on sustainability accounting, e.g., by granting additional resources, motivating employees, and even reconsidering core business activities. Last but not least, senior management can contribute to improving sustainability accounting practice by putting less pressure on middle management to justify expenses on each and every sustainability-related activity with too high an accuracy. Thereby

sustainability accounting can focus on accounting rather than accountability and reporting. Similarly, marketing managers are not expected to provide a detailed and accurate account of the exact number of items sold due to a forthcoming image campaign, are they? The involvement of employees also has been identified as a critical factor in developing a company-wide sustainability accounting. For example Schaltegger and Burritt identify a lengthy list of providers and recipients of sustainability-related information. Also, Zvezdov, Schaltegger, and Bennett arrive at the conclusion that the employees involved in sustainability accounting play a significant role for the success of these activities for various reasons. First, their support is indispensable, as they are often the only providers of related information and, therefore, they need to be involved rather than having other functions generate the same information. For instance, specific, detailed information on raw material consumption may not be available in purchasing or bookkeeping but can have a major contribution toward saving resources. Second, employee involvement is essential as they are familiar with the content behind the information they provide, i.e. before information consolidation takes place. In other words, the original providers of information may be in the position to provide further related information, as the roll-out team may not be aware of the existence and/or relevance of this information. An example for such a situation is the provision of information on major water-consuming activities in production (Bennett, Schaltegger, and Zvezdov), with major savings potential being neglected as the workers operating the machines have not been involved in the water-saving project. Employee involvement is often a very important aspect as sustainability accounting requires cross-departmental cooperation. A main problem appears to be the lack of resources in supporting (i.e., other than the sustainability)


departments to provide the required information in the required form and, on the other hand, the unwillingness of other departments to be subordinate to the sustainability department, for example, by formally agreeing to produce certain information (Bennett, Schaltegger, and Zvezdov). In this case it is necessary that all of the involved people be informed about what the information they provide is used for. This information sharing should go beyond “ticking check boxes” by engaging employees in contributing with their specific expertise.

Content-specific aspects

The second group of aspects that require consideration for a successful sustainability accounting roll out are the so-called content-specific aspects. These, as opposed to organizational aspects, describe what the accounting practice needs to look like, such as what information is needed and which functions and departments need to be involved. Yet, the following paragraphs should not be understood as suggesting that certain actions be taken; instead they point out and describe decision-situations that are likely to be neglected or ignored during (the planning phase of) a roll out. There are several content-related aspects of the sustainability accounting roll-out process that need to be considered. On the one hand, (accounting) information flows need to be designed in view of potential providers, managers (administrators, gatekeepers), and users of sustainability information. This design requirement means that involving departments not only in the provision of information but also making the information available to them can be an incentive for their involvement and thus contribute to their supportiveness (Bennett, Schaltegger, and Zvezdov). As previously identified, the involvement of various departments generating information is particularly important; for the reasons outlined above, their involvement in making use of

such information is crucial, too. Based on an environmental management accounting framework developed by Burritt, Hahn, and Schaltegger, a few additional recommendations in regard to the necessary information can be provided. On the one hand, more attention needs to be paid to future-orientated sustainability information. For the roll-out process this means providing the possibility of relating the potential impacts for each department so that an overall integrity is achieved – a main objective of an overarching sustainability management accounting system. This also has strategic implications as changes made to corporate strategy require decision making based on long-term, future-oriented information. Also management control (Schaltegger 2011) depends widely on future-oriented information supplied by accounting.Another particularly important function of such a system is linking monetary and physical data, which appears to be the case in only a few companies (Burritt, Schaltegger, and Zvezdov). Whereas the authors report that monetary information is widely considered in current practice of sustainability leaders, they stress on the difference between collecting physical information strictly for deriving monetary information and the possibility to derive monetary information from physical one. For example, a re-calculation of sale prices due to changing cost structure requires that information on related carbon emissions is collected that is in turn converted to monetary units based on current or expected carbon market prices. At the same time, however, information strictly collected for monetary purposed may be unable to provide sufficient decision-making information. For example, in the above case, if the management realised that too high costs are attributed to poor carbon performance, they may not be in a position to improve this performance as no detailed information in the various value-creation steps is available. The frequency of sustainability data


and information generation is another important aspect to consider. On the one hand, regular data generation, collection, and use are likely to increase the efficiency of the process. On the other hand, however, limiting the scope of the system to such information renders it unable to take into consideration rare decision situations as identified in (Burritt, Hahn, and Schaltegger).

Iv. ConCluSIonS

With the increasing number of companies demonstrating sustainability engagement and the possible contribution of the sustainability manager (Zvezdov, Schaltegger, and Bennett), sustainability leaders appear to have reached a stage at which the roll out of sustainability accounting is the next step to take. Furthermore, companies that are less advanced in regard to their sustainability accounting practice are also likely to face the same challenges at a later point. Yet this process presents a serious challenge for businesses for the reasons outlined in Section 2 of this paper by means of a literature review. Against this background, an approach to tackling this challenge is developed and presented. The approach identifies and discusses crucial decision situations. Depending on how advanced a company’s sustainability accounting activities and system(s) are, these activities can present a different set of challenges for management. Some companies are expectedly more advanced in their sustainability accounting practices than others. As the above literature review reveals, different focuses of efforts toward sustainability accounting can be expected depending on what stage the company is at; a company that has just started (consciously) looking into sustainability accounting is more likely to be focused on identifying relevant performance indicators, figuring out (efficient) ways to produce the required information, and/or looking for the informational value of existing

sustainability information. More advanced in this regard companies, on the other hand, are more likely to be refining existing practice e.g., by increasing the departments and people involved in producing and using sustainability information, increasing the number of aspects and linkages they look for, etc. Thus, resting on the comprehensible presumption that different companies struggle with different challenges, the assumption could be made that eventually the challenges of the most advanced company are likely to be faced by the other companies as they advance, too. Therefore, the focus is placed on the type of challenges that seem to be at the forefront from today’s viewpoint and experiences. So what is the set of challenges today? The main message of the argument is that in practice the roll out of sustainability accounting is a complex, multi-facetted process, often overlooked or underestimated that requires professional project management as well as the full support of senior management and employees. The paper deducts a typology of sustainability-accounting-related roll-out challenges grouped in two categories: organisational challenges and content-related ones. The former category points out what non-accounting specific issues need to be considered for a successful roll out. Albeit trivial, issues such as employee involvement and support have been paid little attention in literature or – even worse – have been neglected in practice. Thus, the article not only identifies such important issues but also gives an account of why they need to be considered. The latter category – content-specific challenges – provides a list of accounting-specific challenges in the roll-out process. These are differentiated from the previous group since the list of challenges identified in Section 2 cannot be overcome without specific accounting considerations. That is, accounting techniques that have not been used in previous stages of accounting are essential for a successful roll out. For instance, linking physical to


monetary information or assigning a wide range of information providers is not essential for identifying sustainability performance improvement potentials but is absolutely necessary for a robust, future-proof information generation and provision system to support informed decisions. These conclusions provide a basis for managers to consider in their next steps or even earlier in their sustainability accounting practice, cf. Figure 1. The emphasis is on basis as both sustainability management and management accounting develop and research uncovers contingencies that have previously been ignored. Yet, the list does not provide advice as to the specific actions to be taken, e.g., how employees can be motivated or what information needs to be collected. These are company-specific decisions that are subject to other field of research and are thus not part of this paper. Also, additional research is required to identify further specific properties that need to be considered in the roll out. For this, the here developed typology can be either extended to include further relevant decision situations that need to be considered. Also case studies or surveys examining these challenges will contribute to testing the validity of the above arguments in practice.

v. RefeRenCeS

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[19] Heydkamp, P., P. James, F. B. de Walle, T. J. Wolters, M. Bartolomeo, M. Bennett, and J. J. Bouma. Eco-Management Accounting. Dordrecht: Kluwer Law International, 1999.

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[22] Hufschlag, K. “Weltweites Carbon Accounting bei Deutsche Post DHL.” uwf – UmweltWirtschaftsForum 18.1 (2010): 29–33. Available in German only.

[23] Klassen, R.D. and C.P. McLaughlin, “The Impact of Environmental Management on Firm Performance.” Management Science 42.8 (1996): 1199–1214.

[24] Malmi, T. and M. Granlund. “In search of management accounting theory.” European Accounting Review 18.3 (2009): 597–620.

[25] Nah, F., J. Lau, and J. Kuang. “Critical factors for successful implementation of enterprise systems.” Business Process Management Journal 7.3 (2001): 285–296.

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New Conception of the Environment-Competitiveness Relationship.” The Journal of Economic Perspectives 9.4 (1995): 97–118.

[28] Rappaport, A. “The Economics of Short-Term Performance Obsession.” Financial Analysts Journal 61.3 (2005): 65–79.

[29] Rikhardsson, P., M. Bennett, J. J. Bouma, and S. Schaltegger. Environmental Management Accounting. Innovation or Managerial Fad?, in: Rikhardsson, P., M. Bennett, J. J. Bouma, and S. Schaltegger (Eds.): Implementing Environmental Management Accounting. Status and Challenges, Dordrecht: Springer, 1-18, 2005.

[30] Schaltegger S., D. Gibassier, and D. Zvezdov. Environmental Management Accounting – A Bibliometric Literature Review. Luneburg: CSM, 2011.

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[33] Schaltegger, S., and M. Wagner, Ed. Managing the Business Case for Sustainability. The Integration of Social, Environmental and Economic Performance. Sheffield: Greenleaf, 2006.

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change: An empirical analysis.” Management Accounting Research 16.4 (2005): 422–437.

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29

The Paradox of Multi-Stakeholder Collaborations: Insights from Sustainable Silicon Valley’s Regional CO2 Emissions

Reduction Program Peter Melhus

San Francisco State [email protected]

Bruce Paton San Francisco State University

[email protected]

ABSTRACT: Significant progress toward sustainability will require effective collaboration among governments, businesses, non-governmental organizations, and citizens. But research on multi-stakeholder collaborative efforts as tools for achieving environmental results has identified an apparent paradox. Collaborative efforts can be extremely effective in enlisting participation of diverse participants, heightening awareness of critical problems, and catalyzing actions in the absence of clear public policy requirements; however, they may not be effective at achieving specific quantitative objectives. This paper illustrates this paradox, based on the experiences of the “Sustainable Silicon Valley” (SSV) project in the San Francisco (California) Bay Area. SSV is a multi-stakeholder collaboration among business, government, and environmental organizations. In 2003, SSV declared a goal of reducing Silicon Valley’s CO2 emissions by 20 percent compared with 1990 levels. Although Silicon Valley did achieve significant reductions in CO2 emissions compared with predicted increases, SSV did not come close to achieving the goal of 20 percent reductions for the Silicon Valley region as a whole. The experience of Sustainable Silicon Valley suggests that collaborative efforts can achieve significant progress in mobilizing leadership and support for environmental initiatives. But collaborative efforts alone may not be sufficient to achieve specific environmental goals such as a regional CO2 emissions reduction target.

KEYWORDS

Multi-Stakeholder Collaboration, Climate Change, CO2 Emissions Reduction, Voluntary Initiatives, Public-Private Partnerships

I. INTRODUCTION

Significant reductions in the climate change contributions from urban regions will require effective cooperation among governments, businesses, non-governmental organizations, and citizens. This cooperation must be developed


at a variety of scales from local communities to international markets and institutions. Building cooperation at the regional scale is particularly challenging because the stakeholders include multiple city and county governments, firms in multiple industries, non-governmental organizations (NGOs) with diverse interests, and citizens with conflicting perspectives. In addition, participants must address conflicting factors from outside the region, including state and federal regulation, national and international market forces, and rapidly developing influences from civil society. This paper illustrates the challenges and opportunities in designing and implementing a collaborative, voluntary regional CO2 emissions reduction initiative, based on the experiences of the “Sustainable Silicon Valley” (SSV) project in the San Francisco Bay Area (California, U.S.). SSV is a multi-stakeholder collaborative group of business, government, and environmental organizations convened in 2000 by the California Environmental Protection Agency, the Silicon Valley Manufacturing Group and the Silicon Valley Environmental Partnership. SSV subsequently became an independent not-for-profit organization. The first major initiative that SSV conducted was a voluntary program to reduce CO2 emissions in Silicon Valley by 20 percent by 2010 compared with a 1990 baseline. This voluntary, multi-stakeholder collaboration has achieved significant results, despite limited funding and a regulatory climate that placed little pressure on participants to become involved. By the end of 2008, SSV’s partners had voluntarily reduced their CO2 emissions by a total of 758,000 tons. In addition, by December 2010 SSV had enlisted participation of 29 of the 56 cities and towns in Santa Clara County and two of its adjacent counties. SSV has enlisted 10 of the largest employers in Silicon Valley, along with more than 60 small- and medium-sized businesses. However, despite significant success in

engaging Silicon Valley cities, businesses and civic organizations, the CO2 emissions reduction initiative did not come close to achieving its quantitative target. The estimated 758,000 tons of CO2 emissions reductions achieved by 2010 is a 2.4 percent reduction in Silicon Valley’s 1990 total CO2 emissions (32.2 million tons) and a 2.1 percent reduction in the region’s 2000 total CO2 emissions (36.4 million tons) (SVEP, 1999). These results reflect a paradox observed in other multistakeholder-collaboration efforts (Turcotte and Pasquero, 2001). Collaborative efforts can be extremely effective in enlisting diverse participants, heightening awareness of critical problems, and catalyzing actions in the absence of clear public policy requirements; however, they may not be effective at achieving specific quantitative objectives. This paper provides insights on this paradox based on the authors’ active participation in SSV for more than 10 years, on the review of documents from participating organizations, and on semi-structured interviews with representatives from cities and businesses participating in the project. We begin this paper with an overview of prior research on collaborative environmental efforts. Next we identify four empirical questions based on prior research. We then provide a brief history of Sustainable Silicon Valley and examine the experience of specific participants in the CO2 emissions reduction program. We conclude with implications for policymakers and business and environmental leaders.

II. THE PARADOX OF MULTI-STAKEHOLDER COLLABORATION

For more than two decades, collaborative approaches have played an increasingly important role in environmental management at the societal level. Multi-stakeholder collaborations such as

The Paradox of Multi-Stakeholder Collaborations: Insights from Sustainable Silicon Valley’s... 31

the Multistate Working Group (2008) and the California Green Chemistry Initiative (California DTSC, 2008) have made significant progress toward environmental goals where more traditional approaches such as legislation and litigation have failed to produce significant progress. Collaboration is a “process through which parties who see different aspects of the problem can constructively explore their differences and search for solutions that go beyond their own limited vision of what is possible” (Gray, 1989). Collaborative approaches permit “joint ownership of decisions and collective responsibility for outcomes” (Hartman, et al., 1999). Collaboration focuses on “using information, divergent insights and spontaneity to solve problems and develop new understandings” (Lozano, 2007). The large number and variety of collaborative approaches reflect the increasing complexity of environmental problems, the increased number of “self-perceived stakeholders” in environmental conflicts, the interdependence among private, public, and civil society strategies for addressing problems, and the limits of traditional policy instruments for dealing with complex environmental problems (Poncelet, 2001a). But multi-stakeholder collaborations create an apparent paradox (Turcotte and Pasquero, 2001). Collaborative efforts can be extremely effective in enlisting broad participation of diverse participants and catalyzing actions in the absence of clear public policy requirements; however, they may not be effective at achieving specific quantitative objectives. Turcotte and Pasquero (2001) describe a paradox they observed in one extended multi-stakeholder collaborative roundtable. While the collaboration appeared to create consensus, agreement “was limited mostly to general statements and weakly defined concepts.” However, Turcotte and Pasquero point out “consensus on ambiguous or weakly defined concepts should not be equated with failure.” While the collaborative effort may not achieve major

breakthroughs, the small wins generated may build significant momentum toward further progress (2001). In this section of the paper, we examine the many factors that contribute to this paradox. Poncelet (2001a) offers one explanation for this paradox based on observations of several efforts he studied. The desire to achieve consensus in a collaborative effort may create social pressures that cause participants to avoid confrontation. Some participants may avoid confrontation out of fear of damage to their reputations in the community, while others may suppress confrontation in order to keep other parties engaged. Conflict avoidance may be a double-edged sword. On one hand, a lack of conflict may preserve an existing balance of power more than it promotes successful resolution of an environmental issue. In addition, the positive public-relations benefits of participating in a collaborative effort may encourage some participants to avoid conflict in order to maintain the amity of the process. On the other hand, conflict avoidance may lead the group to avoid critical problems simply because they are contentious. Advantages of collaboration. According to Meadowcroft (1999), collaborative approaches offer several major advantages compared with conventional approaches to environmental management. First, they provide “a structured framework for encouraging pluralist inputs” (Meadowcroft). The range of inputs provides a wider knowledge base than the knowledge base that would be provided by a more closed process. The structure of the process creates additional opportunities for participants to listen to and learn from each other. Second, collaborative approaches provide “a mechanism for building consensus and more especially for transforming interests” (Meadowcroft). This provides a process for changing the ways in which problems are defined and an opportunity for participants to alter the conceptions of their interests in the issues.


Third, cooperative efforts provide considerable flexibility concerning the definition of the problem, the scale at which the problem is addressed, and the schedule and resources assigned to the problem. These efforts are particularly valuable where public policy lags behind participants’ perceptions of the problems to be addressed. Fourth, collaborative efforts have the potential to create “more stable and legitimate policy outcomes” (Meadowcroft). These effects are directly related to the credibility of the participants in the process. An outcome endorsed by a coalition of industry, government and civil-society organizations, for example, is likely to be more credible to the public and less likely to generate legal or social challenges to the implemented solution. Finally, collaborative processes can provide a setting in which participants can share expert scientific and technical knowledge, along with other forms of relevant knowledge. For example, understanding the scientific consequences of an environmental problem is frequently very distinct from understanding the social consequences of the same issue. A collaborative process allows holders of multiple kinds of knowledge to contribute to a shared understanding of the issues. The results can be a process of shared learning that produces new understandings of the issues to be addressed (Meadowcroft). Other researchers including Randolph and Bauer (1999) have argued that a collaborative management process is more likely to create favorable outcomes and help participants feel that their needs and opinions have been addressed effectively. “Collaboration reflects an attempt to take collective responsibility for actions and outcomes.” The collaborative process relies on sustained dialogue between potentially conflicting viewpoints, and promotes “a shared vision of the future” (Randolph and Bauer). Some forms of collaborative processes

can be viewed as “encounters between competing political or economic interests” (Poncelet, 2001a). In such circumstances, the collaborative process may produce superior outcomes because of the learning process that occurs when participants share information and perspectives with each other. Achievement of these superior outcomes depends in part on the creation of a process that controls conflict sufficiently to allow participants to hear each other’s perspectives and come to appreciate the values underlying those perspectives. These efforts create opportunities “for the production and social organization of (new) ways of thinking, talking, and acting with regard to environmental issues” (Poncelet, 2001a). Trust is both an important precondition and a byproduct of this process. Hood, et al. (1993) observe that trust and communication are challenging in multi-stakeholder collaborative efforts because of differences in organizational backgrounds of the participants. The level of trust that does emerge has significant effects both on group process and the long-term viability and effectiveness of the collaborative effort. The perspectives of participants may vary because of differences in “analytics” based on the professional training, personal experiences, and normative beliefs of participants (Weible and Moore, 2010). Overcoming differences in normative beliefs is frequently cited as an advantage of collaborative processes. Collaborative efforts may produce personal transformations of participants as a result of participation. Actors from different sectors may bring very different information, values, and preconceptions. The process of participation gives those participants opportunities to “experience change in their subjective understandings of and relationships to each other, themselves, and environmental action” (Poncelet, 2001b). These opportunities may arise in particular in situations where participants need to rely

on each other for missing information, interpretations, or potential solutions. These changes in perspective may lead to new perceptions of the tasks to be accomplished, the participants, and the appropriate modes for interacting across the sectors. Changes in perception may lead to more effective working relationships among organizations, new and innovative solutions, and a greater willingness to address future environmental concerns. Limitations of Multi-stakeholder Collaborations. Skeptics have raised concerns about the effectiveness of collaborative environmental approaches. These concerns may help explain the paradox described above. Hartman, et al. (1999), for example, raise the issue whether specific types of partnerships build in preferences for incremental change rather than more fundamental system change. Lubell (2004) observed that, “there is still hot debate about the ability of collaborative institutions to actually build consensus, encourage cooperative behavior, and improve environmental outcomes.” He continued, “collaborative institutions may actually do more harm than good by creating perceptions of progress in the absence of any real change.” He distinguished between substantive changes, and “symbolic policies” in which programs “fail to produce tangible changes in behavior and resource allocations, and instead consist of symbols connoting the suppression of some threat to the supporters of the policy.” In addition, Lubell (2004) pointed out that, “collaborative institutions thrive on sustained personnel commitment because the policy networks that form during the planning process often fall apart when critical people are replaced.” Meadowcroft (1999) identified four broad concerns related to collaboration -- power, democratic process, efficiency, and political culture -- that may contribute to the paradox. The concern about power recognizes that there may be significant differences among participants in their abilities to

influence perceptions and outcomes of the process. The concern about democratic process focuses on the legitimacy of the participants to represent the interests of the public. Participants may be chosen based on existing relationships with the process conveners, and they may not represent the full range of interested parties. The concern about efficiency focuses on changes in the roles of participants from their conventional modes of operation. For example, civil-society groups may be more experienced and skillful at acting as watchdogs and litigants than they are as formulators of policy. As a result, they may be co-opted from their watchdog role but not be fully effective in helping craft solutions. The political culture concern addresses the differences in political traditions across nationalities. Where a strong tradition of cooperation and negotiation exists, collaborative efforts may produce more effective results than in cultures such as in the U.S. with more adversarial traditions. In a similar vein, Fadeeva (2004) identified several key assumptions concerning collaborative approaches that may not be borne out in actual practice. First, collaborative efforts are often assumed to create more efficient outcomes than conventional approaches to environmental policymaking. Collaborative efforts may be inefficient in terms of the time and personnel required to develop and implement solutions. They often lead to changes in behavior that fall short of changes that would be socially optimal. Second, collaborative efforts have often been praised for generating more innovative outcomes. Fadeeva observed that while these advantages may in fact occur, empirical evidence that they do occur is rather limited. A related concern focuses on the potential for collaborative approaches to result only in “no regret” or “low-hanging fruit” outcomes. This concern is based on the fears that collaborative processes may produce least common denominator



outcomes because participants are reluctant to address more complex issues that may cause conflict (Fadeeva). In particular, participants may choose to avoid addressing elements of the problem prone to higher complexity or involving decision-makers not represented within the group. Collaborative efforts face a tradeoff between achieving ambitious targets and causing participants to abandon the process if they believe the targets are unrealistic or threatening. Turcotte and Pasquero (2001) observe that evidence of consensus and learning has been somewhat limited. Similarly, evidence of collaborative problem solving has been mixed. Turcotte and Pasquero point out that collaborative efforts often fall into an “in-between” category, in which their contribution to problem solving is “neither complete nor insignificant.” Empirical questions. This apparent paradox concerning collaborative processes raises several empirical questions that are relevant for Sustainable Silicon Valley. First, do collaborative processes increase social capital in ways that increase the collective capacity to act on complex environmental problems? Working together over a period of time can be expected to create social capital in the form of trust and mores of engagement (Coleman, 1988). Second, do collaborative processes produce demonstrably better outcomes for complex environmental decision processes than the alternatives? The prior research described above provides conflicting predictions. Third, can collaborative processes produce outcomes that go beyond “no regret” or “low hanging fruit” outcomes? Finally, can multi-stakeholder efforts muster sufficient resources and management capacity to drive significant change? This paper examines these aspects of the paradox of multi-stakeholder collaboration in the context of Sustainable Silicon Valley’s experience with

multi-stakeholder collaboration over the past decade.

II. A BRIEF HISTORY OF SUSTAINABLE SILICON VALLEY

Sustainable Silicon Valley began with a concept paper entitled, Partnership for a Sustainable Silicon Valley,1 written by a member of the Board of Directors of the Silicon Valley Environmental Partnership (SVEP) and adapted by two employees of Cal/EPA, California’s environmental regulatory agency. The SSV idea was to develop and implement a regional environmental management system (EMS).2 An EMS is a planned approach to managing an organization’s resource use and the environmental consequences of its activities (environmental aspects or pressures) while improving environmental performance.3

Over the first two years of SSV’s EMS effort, participants worked toward two broad objectives.4 First, they would develop a partnership of stakeholders representing business, environmental groups, government, private citizens and others in Silicon Valley to create an environmental and resource sustainability management system for the region. Second, these partners would collaborate on projects to significantly reduce specific environmental or resource pressures. The first major project selected by the group focused on energy and CO2 emissions reductions. CO2 Emissions Reduction. To address energy use, SSV created an Energy Subcommittee, later renamed the CO2 Subcommittee. This committee met in 2002 and 2003. By engaging regularly and consistently, this ideologically diverse group of individuals representing a similarly diverse group of organizations was able to agree on a target and timeline for addressing this first environmental pressure. The target and timeline were publicly announced in April 2003. The participants in SSV adopted the ambitious goal to reduce CO2 emissions

in Silicon Valley by 20 percent by 2010, using 1990 as a base year. Significantly, SSV partner organizations were permitted considerable flexibility in how to participate. This included flexibility to:

• Identify their base years of choice (1990 or later);

• Identify their own targets for CO2 emissions reductions;

• Report on stationary energy use and associated CO2 emissions only or also include mobile energy use and its related CO2 emissions; and

• Report for some or all of the organizations’ facilities.

SSV considered and rejected more uniform and stringent requirements. The group chose consciously to favor flexibility in order to encourage broader participation. The SSV goal of reducing CO2 emissions in Silicon Valley by 20 percent by 2010, using 1990 as a base year, was the goal for SSV, not its individual partners. CO2 emissions were selected as the metric to measure progress. In its 2008 report, SSV reported that its partner organizations achieved most of their energy and CO2 reductions through energy conservation, energy efficiency, and onsite use of renewable energy. Most SSV partners had made changes in their lighting systems, and some had begun “harvesting daylight” to reduce the need for artificial lighting. Also, many partners made efficiency improvements to their heating and cooling systems through additional monitoring, controls, or equipment changes. In addition to efficiency gains in lighting and heating/cooling systems, some municipal partners had installed higher efficiency street and traffic lights to reduce energy use and CO2 emissions and had gained efficiencies in their fleets by retiring old vehicles, and switching to hybrid cars and biodiesel trucks. One regional government

agency had purchased a fleet of bicycles for work-related travel. With its initial area of emphasis established and its metric, target and timeline for that area of emphasis adopted, SSV publicized its plans. In March 2004, at a press conference in San Jose City Hall, SSV announced the eleven initial pledging organizations, representing eight businesses -- Hewlett-Packard, Oracle, Lockheed Martin Missiles and Space Company, LifeScan, Alza Pharmaceuticals, Calpine, Akeena Solar, and Pacific Gas and Electric Company -- and three government agencies -- the City of San Jose, the Santa Clara Valley Water District, and NASA Ames Research Center. Organizational Issues. During the implementation of the CO2 emissions reduction initiative, SSV underwent significant organizational changes. From 2001 to 2004, Cal EPA provided a full-time staff member. With a change of administration, and a significant budget crisis, Cal EPA chose to discontinue funding for that position. To avoid closing down SSV, four participants -- including one representative from Cal EPA, one from SVLG, and two from SVEP -- chose to launch SSV as an independent, nonprofit (501[c][3]) organization in June 2004. The Cal EPA staff member who had been serving as project manager, took a leave of absence from the state agency and became the Executive Director of the newly created organization. Throughout its life as a nonprofit organization, SSV has been chronically underfunded. The initial executive director served for two years at a minimal and periodically deferred salary. SSV has hired three executive directors since 2006 and experienced a severe mismatch between the workload required and the resources available to staff the program. During the fiscal year that ended in June 2010, the annual budget for the organization had reached approximately $250,000 and staffing had reached two FTE (SSV, 2010b).



This chronic underfunding limited SSV’s ability to implement the CO2 emissions reduction program and the EMS. However, targeted staff efforts, significant amounts of volunteer staffing, and in-kind contributions permitted SSV to administer a steady stream of programs for participants. SSV coordinated and facilitated monthly meetings where partners gathered to share best practices and network for the purpose of resolving energy and CO2 emissions-related issues. These monthly meetings were supplemented with education forums held quarterly to share best practices, as well as with periodic special programs, for example, a visit to a new green building or to learn energy management methodologies from a participating firm. The organization continued through 2009 to track the progress of participating organizations toward the CO2 reduction goal, but has reduced the intensity of activities focused on energy conservation since then. The current organization focuses on three areas – energy, water and communities of practice. Results of the CO2 Emissions Reduction Program. SSV continued its efforts to recruit additional organizations to help meet its CO2 emissions reduction target. In its Sustainable Silicon Valley 2009 Annual Report, the fifth annual report on its CO2 initiative, SSV reported that it had 121 partners involved in its CO2 emissions reduction initiative at the end of 2008. According to the report, the 87 SSV partners that reported data had reduced their CO2 emissions by a total of 66,000 tons in 2008 and by 758,000 tons between 1990 and the end of 2008. According to the report, these 758,000 tons of emissions reduction is equivalent to removing almost 126,000 automobiles from the road or removing almost 350,000 homes from the local electricity grid for a year.5 These data indicate that despite substantial CO2 emissions reductions by SSV participants, the Silicon Valley region would not achieve SSV’s target emissions reduction of 20 percent by 2010 compared

with a 1990 baseline. While SSV participants had achieved reductions at a rate substantially greater than that of the Valley as a whole, it seems clear that progress toward an agreed-upon goal may not have been possible entirely through voluntary means. Legislation6 to create mandatory limits on CO2 emissions for California was enacted in 2006 (Assembly Bill 32). The legislation required that actions to reduce CO2 emissions begin to be phased in starting in 2011. Testimonials from elected officials at the state and national levels indicated that voluntary initiatives such as SSV’s CO2 program, helped set the stage for this legislation. In 2004, for example, US Senator Dianne Feinstein (D, CA) in a letter to the President and CEO of Silicon Valley Manufacturing Group, applauded the public-private nature of SSV and noted that its “goal of reducing emissions 20 percent below 1990 levels by 2010 creates an ambitious marker for others to follow.”7

In 2005, California Governor Arnold Schwarzenegger announced greenhouse gas reductions goals for the state and publicly acknowledged the leadership of SSV business partners to address this issue “even faster than the statewide goals.”8

Those SSV partners who, for the 2008 SSV report, provided energy use or CO2 emissions data for their facilities between 2000 and 2007, reported average emissions reductions of 27 percent in that timeframe,9 over three times the emissions reductions the United States would have had to achieve under the Kyoto Protocol. In the press release announcing the availability of its 2007 report, the chair of the board of SSV said, “Sustainable Silicon Valley partners are outperforming the Silicon Valley by a three to one margin … Our partners are saving money, saving energy and helping the environment.”In the press release announcing the availability of its 2008 report, the chair of the board of SSV said, “Not only does our 2008 report explain SSV’s proven, workable model for environmental quality

and economic vitality, but our partners’ results from the CO2 Emission Reduction Initiative demonstrate that the state’s AB32 goals are possible to achieve and can deliver a significant return on investment for businesses, local governments and organizations of all sizes.” These comments highlight the paradox of multi-stakeholder collaboration. SSV participants significantly out-performed non-participants in achieving energy efficiency gains, and collaboration clearly resulted in energy efficiency actions that could not have occurred without the knowledge sharing promoted by the program. The CO2 reductions that resulted clearly exceeded the levels of reductions that would have occurred in the absence of collaboration. Nonetheless, the program fell significantly short of its goals.

III. LEARNING FROM SSV PARTICIPANTS

Interviews with participants from individual cities and businesses provided insights into the causes and consequences of these apparently paradoxical results. We interviewed project participants from three of the 22 cities that were SSV partner organizations at the time of our field research –Palo Alto, San Jose and Sunnyvale – and two large businesses – LifeScan, a subsidiary of Johnson and Johnson, and Applied Materials. They provided significant insights on both drivers of and barriers to action on CO2 emissions. Both the public and private sector participants said that external and public pressure related to climate change was a driving force for their efforts. Public pressure was particularly relevant in the cities,10 as citizens’ involvement was critical for the cities to begin to take action on climate change. City representatives attributed increased public interest and pressure to many causes, including the popularity of the movie, An Inconvenient Truth,

as well as the recent increase in media attention to global climate change. Ongoing development and redevelopment in the cities and the interest of the public in seeing adoption of greener practices were also perceived to be contributing factors. The business participants reported that SSV reporting requirements dovetailed nicely with other data reporting efforts in which they were involved. These participants said that they were already developing data reports on their organizations’ basic energy use and CO2 emissions inventory so they did not have to do any special reporting for SSV. Additionally, they were creating internal reports that highlighted notable projects that reduced energy use and/or CO2 emissions, so including these project descriptions for SSV reporting was not a burden. All participants said the flexibility in the SSV reporting requirements was an important asset of the organization. Several participants also cited the reporting requirement itself as a benefit, suggesting that reporting on progress forced the organization to deal more seriously with the issue in order to show progress. The SSV reporting protocol provided partner organizations with flexibility in several dimensions. However, participants saw reporting flexibility as a double-edged sword. By having this flexibility, there was no firm, clear set of goals that had to be reached. However, even with this caveat, the interviewee who mentioned this agreed that on balance, reporting flexibility was a significant benefit. One participant observed that reporting flexibility became a collective liability for SSV as a whole. Reporting flexibility led to inconsistencies between partners that became apparent in the third year of reporting as the number of reporting partners increased, and SSV staff had to deal with organizations choosing different baselines and measuring different things. As participants discussed the barriers they faced, it became clear that dealing with climate



change was a difficult challenge for all of them. Cities reported, for example, that getting traction with city staff and city council was a difficult barrier; there was also the need to get money to pursue the activities related to climate change. Cities also reported a lack of continuing leadership at the highest levels (for example, the mayor or city manager) as other priorities took precedence, for example, public safety, infrastructure needs, etc. As a result, in addition to a lack of funding there was a lack of direction to city staff. City leaders did not say to department heads, “We want this to happen” so it did not happen. One interviewee suggested that it is critical to have a climate change champion (not necessarily an expert) at the top. The interviewee went on to say that in a city that champion must be the mayor, not a councilmember. One participant indicated that current city approaches were not adequate. She said that elected officials needed to be made aware that addressing climate change is not the job of one city councilmember. It is the job of all of them and all of the departments within the city. Such local lobbying of city and business leaders by SSV is important, as is bringing in private sector champions to meet with city officials and business leaders. For example, at a city-hosted meeting in San Jose, a representative from Adobe Systems Inc. said, “We saved over $1 million by using LEED11 for existing buildings.” This statement got the city council members wondering if the city too might save money by following LEED guidelines. One business participant criticized his colleagues in the private sector. “None of the companies has a comprehensive program to address energy efficiency and climate change. They are doing individual things as they hear about new technologies, but there is no systematic approach. This is not only about energy; it is about water, it is about cars on the road used by the sales force, it is about the company’s complete environmental footprint.”

Participants suggested that the urgency of dealing with climate change needs to be better communicated to other municipalities and companies to get them more involved and get them started on comprehensive programs to increase energy efficiency and reduce greenhouse gas emissions. Over time, SSV participants came to realize that collaboration across sectoral boundaries could be an important success factor. One business participant reported that his organization, along with the SSV Executive Director, met with officials in the city in which the participant’s business is located, to try to get the city to develop its own comprehensive energy efficiency program and to encourage businesses within its jurisdiction to do likewise. Although the city officials seemed interested during the meeting, a significant amount of time had passed at the time of the interview and the participant reported that he had yet to see any action by the city. Business participants’ criticisms were not limited to this single city. They suggested that cities throughout Silicon Valley needed to get involved with SSV and they needed to encourage their businesses to get involved as well. They suggested that the cities should help get the message out that there are ways of addressing climate change. “Cities have a lot of pull with businesses and they should use it,” said one interviewee. As these interviews indicate, there is strong evidence that SSV participants came to think of climate change as an issue to be addressed collaboratively and not just to be addressed within their own organizations or sectors. Participants came to realize that they shared problems such as organizational inertia, insufficient leadership, and inadequate resources with colleagues in other organizations and other sectors. Sustainable Silicon Valley appears to have contributed significantly to raising awareness of climate change issues, to have created significant sharing of best practices

among participating organizations, and to have built significant trust and cooperation among participants who did not initially see themselves as allies. However, the failure to achieve the CO2 emissions reduction goal illustrates the paradox of collaborative efforts – while collaboration can launch significant action toward achieving environmental objectives in ways that traditional public policies may not be effective, they may not be sufficient to achieve significant goals such as stopping and reversing climate change.

IV. CONCLUSIONS

SSV is a positive example of a regional, multi-stakeholder collaborative initiative addressing a problem despite the lack of state and federal government leadership and action on the issue. Such grassroots efforts can build significant progress toward solving complex problems if leaders from local government and the business and environmental communities come together and focus on their commonalties rather than their differences. The results of the program and the insights from participant interviews permit some preliminary answers to the empirical questions identified above concerning creation of social capital, ability to create better outcomes relative to alternatives, ability to create outcomes beyond “no regrets” levels, and the ability to generate sufficient resources and management capacity to succeed. Social Capital. First, we asked whether collaborative processes increase social capital in ways that increase the collective capacity to act on complex environmental problems? Anecdotal evidence strongly suggests that participants learned from each other, provided valuable tools and insights to each other, and developed strong mutual respect for each other. This development of social capital was evident in the early workings of the SSV

collaboration, as interested stakeholders came together to address the serious issue of global climate change. For example, the Silicon Valley Toxics Coalition, a local environmental group that has long been a thorn in the side of many high-tech and other companies in Silicon Valley, was a key representative of the environmental community in the early days of SSV. Notwithstanding the longstanding adversarial relationship of the Toxics Coalition with these firms, representatives from this organization and those from some major Silicon Valley firms were able to put aside their longstanding differences and work together to shape what would become SSV. Rather than focusing on the differences between the organizations, the representatives agreed to focus on the common goal as defined by SSV. The implications of this social capital go well beyond the SSV collaboration if the parties choose to continue to engage with one another. SSV has been a very open process throughout its existence. Cal EPA and the Silicon Valley Manufacturing Group (SVMG) convened the initial meetings and sent broad invitations to potential participants. While there was an informal core group that showed up for a majority of the early meetings, that core group evolved continually over time. Many individuals made significant contributions over short periods and then faded into the background. A small group, which formed the core of the 501(C)(3) organization, stayed engaged for most of the organization’s first decade. Other dedicated volunteers managed the quarterly forum events and other special events without actively engaging in other aspects of SSV’s work. This openness has been a mixed blessing, but on balance it has widened community support for addressing climate change, and it has led to a wide range of actions not actively coordinated by SSV. Unlike many of the collaborative processes discussed in the literature, for example, Turcotte and Pasquero (2001) or Poncelet (2001a), the participants



in the selection of the CO2 emissions reduction target did not form a close-knit community. However, this loosely coupled community created broad support for learning and action to address climate change in Silicon Valley. Annual conferences created a forum that attracted a broad cross-section of organizations in the region and provided a platform for deeper discussions of climate change issues and for exploration of other environmental issues such as water conservation. Over time several other organizations convened competing CO2 emission reduction programs, as factors inside and outside of Silicon Valley increased support for action to address climate change. When SSV started its CO2 program in 2004, participants reported little involvement in other voluntary climate programs. By 2009, many participants reported that they had to choose among several voluntary CO2 emissions reductions programs; these programs had varying reporting requirements, varying participation costs, and varying levels of public credibility. As national and international attention on climate change has increased, other organizations, including Joint Venture Silicon Valley (JVSV) and Silicon Valley Leadership Group (SVLG), have launched voluntary CO2 emissions reduction efforts of their own in the same or in overlapping geographic regions. This cooperation and competition has broadened the constituency for actions to address climate change but has slowed SSV’s momentum in attracting participants to its CO2 emissions reduction program. We believe this growing competition indicates that SSV contributed to the growth of social capital to be used to address climate change. However, SSV was less effective at appropriating that social capital to achieve its own objectives. Better outcomes. Next, we asked whether collaborative processes produce demonstrably better outcomes for complex environmental decision processes than the alternatives. The

evidence provided above indicates that SSV participants achieved significant CO2 reductions in the absence of any effective public policies at the federal or state level to require or encourage such reductions. Participants specifically identified SSV programs that contributed substantially to those efforts. These quantitative and qualitative results suggest that SSV’s efforts produced demonstrably better outcomes than would have occurred without the multi-stakeholder collaboration. Collaborative efforts face clear trade-offs between providing flexibility to encourage broad participation and stringent requirements required to achieve ambitious goals. SSV made a conscious choice to provide maximum flexibility in order to encourage broader participation. That flexibility clearly permitted participation by some organizations, both in business and in government, that would not have chosen to participate in a program with more stringent requirements. This allowed SSV to broaden the conversation within Silicon Valley and to avoid an adversarial relationship between these participants and environmental groups. Flexibility in target setting and choice of baseline enabled broader participation in SSV than would have occurred otherwise. This flexibility conflicted with some of the insights from the economic literature on voluntary environmental initiatives. Segerson (1999), for example, argues that voluntary initiatives can be economically efficient provided that the initiative specifies the target to be reached but allows participants the flexibility to decide how to reach the targets. SSV chose consciously to sacrifice efficiency in the short run in order to encourage the widest possible participation. The subsequent growth of the participant list (and corresponding growth in CO2 emissions reductions) suggests that, on balance the potential loss in efficiency was compensated for by the increase in participation. However, this flexibility gave SSV little chance to achieve its ambitious CO2 reduction goals.

While SSV participants showed significantly greater CO2 reductions than the Valley as a whole, little collective attention was given to the gap between the stated goal and the collective performance of Silicon Valley. Beyond no regret outcomes? Next, we asked whether collaborative processes could produce outcomes that go beyond “no regret” or “low hanging fruit” outcomes? The reporting protocol for SSV’s CO2 reduction program provided considerable flexibility in the choice of baselines, which facilities to include, and the targets to set. This flexibility created sufficient ambiguity to prevent us from concluding that participants achieved CO2 reductions beyond what would be expected in a “no regret” scenario. A related issue concerns the lingering question whether collaborative efforts can produce results that go beyond the efforts that organizations would have taken in the absence of the program.12 Interview data and anecdotal evidence suggest that the results reported in the SSV CO2 reduction program include both emissions reductions that would have occurred anyway and emissions reductions that can be directly attributed to best-practice sharing programs administered by SSV. Resources and management capacity. Finally, we asked whether multi-stakeholder collaborations could generate sufficient resources and management capacity to generate change, in the absence of strong public policy mandates. The SSV example does not permit us to give a definitive answer. SSV was limited by lack of financial resources and management capacity throughout its first decade. While the organization attracted extensive organizational participation, it did not attract sufficient funding to provide adequate staffing. This chronic understaffing contributed to the burnout that led the organization to have four executive directors in five years. The question we cannot answer is whether

more experienced non-profit managers could have produced a different outcome. The challenge of producing huge results with inadequate funding is common among non-profit organizations. But, finding managers with sufficient environmental expertise as well as expertise in non-profit management and fund-raising is an ongoing problem. The public good nature of the expected benefits may lead systematically to underinvestment by the collaborating parties. None of the parties will be able to claim full credit for the results, or to capture the benefits. The inability of any of the parties to capture the full benefits from the program may lead each participant to underinvest in the desired outcomes. The lack of public consensus about the issues to be addressed may decrease the willingness of participants to invest in the collaborative effort even further. We do believe that this problem may be endemic to multi-stakeholder collaborations launched without explicit public policy mandates. SSV addressed concerns over CO2 emissions long before a policy consensus began to emerge in California. This lack of consensus appeared to make participation and financial investment in a regional effort optional for key players. SSV would have not been able to succeed at all without the forward-looking contributions from leading Silicon Valley firms and city governments. Charitable foundations were particularly missing from the SSV process. One leading foundation inadvertently summarized the paradox, when it declined to participate in what it characterized as an admirable effort, because it did not want to pay for programs it believed that the government should be funding. But as we have described above, the lack of a policy mandate to address an important environmental problem contributed to the initial motivation for starting this multi-stakeholder collaborative effort.



V. LINGERING QUESTIONS

The experience of Sustainable Silicon Valley illustrates the paradox of multi-sector voluntary collaboration at the regional scale to address environmental problems and opportunities such as climate change. The SSV experience illustrates that, with patience and persistence, leaders from industry, government and non-government organizations can help mobilize necessary change, even in the absence of clear policy direction at the state or national level. However, collaborative efforts alone may not be sufficient to achieve specific environmental goals such as a regional CO2 emissions reduction target. Collaborative efforts may be most effective at building broad mandates, creating social capital and building momentum to achieve progress in advance of public policy mandates. The experience of Sustainable Silicon Valley suggests that collaborative efforts can achieve significant progress in mobilizing leadership and support for environmental initiatives, but achieving specific and ambitious goals may require other approaches with greater power to compel or incent action by all participants in a region. The experience of Sustainable Silicon Valley does not provide clear answers to the question whether the paradox of multi-stakeholder collaboration is an inherent feature of these efforts, or merely a reflection of limited resources, and a need for improved management effectiveness. We believe comparative studies of other multi-stakeholder collaborations may provide useful insights into this question. The SSV experience does illustrate the broad power of multi-stakeholder collaborations to bridge the gaps between participants with strongly diverging views and to generate momentum toward solutions to complex problems. We believe that such collaborations can become a powerful tool for addressing emerging issues if we can more fully

understand the paradox of collaboration and identify management practices to help overcome the effects of the paradox.

VI. REFERENCES

[1] Arora, S. and T. Cason. “Why Do Firms Volunteer To Exceed Environmental Regulations? Understanding Participation in EPA’s 33/50 Program.” Land Economics 72 (1996): 413-432.

[2] Brinckerhoff, Peter C. Mission-Based Management: Leading Your Not-For-Profit in the 21st Century. 2nd ed. Wiley, 2000.

[3] California Environmental Protection Agency. http://www.calepa.ca.gov/. Accessed June 13, 2008.

[4] California Department of Toxic Substances Control. “California Green Chemistry Initiative – Final Report” 2008. <http://www.dtsc.ca.gov/PollutionPrevention/GreenChemistryInitiative/upload/GREEN_Chem.pdf> Accessed June 30, 2011.

[5] Coleman, James S. “Social Capital in the Creation of Human Capital.” American Journal of Sociology vol. 94 Supplement, 1988.

[6] Fadeeva, Z. “Promise of Sustainability Collaboration–Potential Fulfilled?” Journal of Cleaner Production, 13 (2004): 165–174.

[7] Fisher, Roger and William Ury. Getting To Yes: Negotiating Agreement Without Giving In; Houghton Mifflin Co., 1981.

[8] Gray, B. Collaborating: Finding Common Ground for Multiparty Problems. Jossey-Bass, San Francisco, 1989.

[9] Hartman, C., P. Hofman, and E. Stafford. “Partnerships: A Path to Sustainability.” Business Strategy and the Environment 8(5) (Sep/Oct 1999): 255–266.

[10] Hood, J., J. Logsdon, and J. Thompson. 1993. “Collaboration for Social Problem-solving: A Process Model.” Business and Society 32(1) (Spring 1993): 1–17.

[11] Joint Venture Silicon Valley Network. 1999 Silicon Valley Index.

[12] Joint Venture Silicon Valley Network. 2008 Silicon Valley Index.

[13] Lozano, R. “Collaboration as a Pathway for Sustainability.” Sustainable Development 15 (2007): 370–381.

[14] Lubell, M. “Collaborative Environmental Institutions: All Talk and No Action?” Journal of Policy Analysis and Management 23(3) (summer 2004): 549.

[15] Meadowcroft, J. “Cooperative Management Regimes: Collaborative Problem-solving to Implement Sustainable Development.” International Negotiation 4 (1999): 225–254.

[16] MultiState Working Group. 2010. “The Multi-Stakeholder Working Group on Environmental Performance.” <http://www.mswg.org/> Accessed June 30, 2011.

[17] Poncelet, E. “A Kiss Here and a Kiss There: Conflict and Collaboration in Environmental Partnerships.” Environmental Management 27(1) (2001a): 13–25.

[18] Poncelet, E. “Personal Transformation in Multi-stakeholder Environmental Partnerships.” Policy Sciences 34 (2001b): 273–301.

[19] Randolph, J. and M. Bauer. “Improving Environmental Decision-making Through Collaborative Methods.” Policy Studies Review 16:3/4 (fall–winter 1999).

[20] Segerson, K. “Do Voluntary Approaches Lead to Efficient Environmental Protection?” European Research Network on Voluntary Approaches (CAVA). Working Paper No. 99/10/10 Oct 1999.

[21] Sierra Club. “Cool Cities.” 2008. Accessed Sept 3, 2008 <http://coolcities.us/ >

[22] Silicon Valley Leadership Group. 2008. Accessed June 11, 2008 <http://www.svlg.org>

[23] Silicon Valley Environmental Partnership. 2008. Accessed June 11, 2008. <http://www.svep.org>

[24] Silicon Valley Environmental Partnership. “1999 Silicon Valley Environmental Index.” <http://www.svep.org> Accessed May 15, 2011.

[25] Sustainable Silicon Valley. “Fundraising Proposal.” Unpublished manuscript, June 2004.

[26] Sustainable Silicon Valley. “Meeting Minutes – June 7, 2001.” Unpublished manuscript.

[27] Sustainable Silicon Valley. “Meeting Minutes – October 15, 2001.” Unpublished manuscript.

[28] Sustainable Silicon Valley. “Meeting Minutes – June 7, 2002.” Unpublished manuscript.

[29] Sustainable Silicon Valley. “Meeting Minutes – October 17, 2008.” Unpublished manuscript.

[30] Sustainable Silicon Valley. 2000. “Red, Yellow, Green Light Significance Criteria.” Unpublished manuscript.

[31] Sustainable Silicon Valley. “Summary of the Process.” Unpublished manuscript dated June 10, 2002.

[32] Sustainable Silicon Valley. “Sustainable Silicon Valley CO2 Report 2007.”

[33] Sustainable Silicon Valley. 2010a. Accessed Oct 22, 2010. <http://www.sustainablesiliconvalley.org/>

[34] Sustainable Silicon Valley. 2010b. IRS Form 990EZ – Short Form. Return of Organization Exempt from Income Tax.

[35] Sustainable Silicon Valley. “Sustainable Silicon Valley Project.” Attachment to Meeting Minutes – November 10, 2000. Unpublished manuscript.

[36] The Multi-Stakeholder Working Group on Environmental Performance. Accessed June 13, 2008. <http://www.mswg.org/>

[37] Turcotte, M. and J. Pasquero. “The Paradox of Multi-stakeholder Collaborative Roundtables.” The Journal of Applied Behavioral Science 37(4) (Dec 2001): 447–463.

[38] Weber, E. and A. Khademian. “Managing Collaborative Processes: Common Practices, Uncommon Circumstances.” Administration and Society 40(5) (Sept 2008): 431–464.

[39] Weible, C. and R. Moore. “Analytics and Beliefs: Competing Explanations



for Defining Problems and Choosing Allies and Opponents in Collaborative Environmental Management.” Public Administration Review (Sept/Oct 2010): 756–766.

[40] Wise, John C., Robert D. Stephens, and Keith Smith. “Partnership for a Sustainable Silicon Valley.” Unpublished manuscript dated Feb 22, 2000.

VII. ENDNOTES

1. Wise, John C., Robert D. Stephens and Keith Smith, Unpublished document dated February 22, 2000.

2. Source: SVEP.org .3. See, for example, http://www.epa.gov/EMS/ 4. Meeting minutes, Sustainable Silicon Valley,

November 10, 2000; Attachment entitled Sustainable Silicon Valley Project.

5. Source: Sustainable Silicon Valley 2009 Annual Report

6. California Assembly Bill 32, signed into law in 2006, requires that the state reduce its greenhouse gas emissions to 1990 levels by 2020, a roughly 25 percent reduction under business as usual estimates. AB32 address the same greenhouse gases as in the Kyoto Protocol. The California Air Resources Board is preparing plans to achieve the law’s objectives.

7. Senator Dianne Feinstein letter dated April 15, 2004 to Carl Guardino, President and CEO of SLVG.

8. Pérez Henríquez, Blas. Sustainable Silicon Valley: A Model Regional Partnership in Enhancing the Effectiveness of Sustainability Partnerships: Summary of a Workshop. 2009. Vollmer Derek, Science and Technology for Sustainability Program; National Research Council

9. Source: Sustainable Silicon Valley 2008

Annual Report10. The cities of Palo Alto, San Jose and

Sunnyvale are all located in Santa Clara County in the southern part of the San Francisco Bay Area of California. All three cities, like many others in the Bay Area, are making efforts to “green” themselves and to address global climate change. These cities have populations of 61,200, 974,000 and 132,000 respectively.

11. LEED (Leadership in Energy and Environmental Design) is a voluntary, consensus-based national rating system for developing high-performance, sustainable buildings. The system was developed by the non-profit U.S. Green Building Council.

12. This phenomenon was explored in research concerning the US EPA’s 33/50 program, which asked businesses to make voluntary reductions in their use of 17 toxic, volatile organic chemicals. Researchers concluded that a great deal of the reported reductions were actions that companies would have taken without the program. (Arora and Casson, 1996).

45

The Localism Movement: Shared and Emergent Values

AbSTrAcTLocalism, a movement to encourage consumers and businesses to purchase from locally owned, independent businesses rather than national corporations, has grown rapidly in the past decade. With several national, federated organizations and popular “buy local” campaigns, the localism movement has the potential to affect buying patterns, marketing, and distribution in American business. Yet localism remains understudied by researchers. This article, based on data from 38 interviews with localism leaders, identifies four of the movement’s priorities: independent ownership, local buying, local sourcing, and pragmatic partnering. In addition, we analyze the movement’s emerging values, including responsibility to workers and to the natural environment, and discuss the challenges these broader values present.

Nancy b. KurlandFranklin & Marshall [email protected]

Sara Jane MccaffreyFranklin & Marshall College

[email protected]

Douglas H. HillFranklin & Marshall College

[email protected]

KEyworDSLocalism Movement, Buy-Local Movement, Anti-Big Box

I. THE LocALISM MoVEMENT: MAIN STrEET TAKES oN THE MuLTINATIoNALS

In the wake of the “big-box revolution,” which shifted commerce from Main Street to suburban malls, business owners and activists have joined together to revitalize downtowns.1 Localism, which urges consumers and businesses to purchase from locally owned, independent businesses, has spawned at least 11 national organizations. (See Table 1.) In this study, we focus on three of the largest organizations, all of which sport a federated structure. Together, these three organizations boast a total of 229 local

networks in 44 states, the District of Columbia, and four Canadian provinces, and represent 47,000 members, most of which are businesses.2 Localism has grown rapidly in the past decade.3 It is a primarily urban movement, promoting economic justice, environmental responsibility, and social fairness.4 Environmental responsibility is more central to the mission of some localism organizations than others and a motivation for some, but not all, of the movement’s activists.5 In aiming to shift consumption from national chains and Internet retailers to local, independently-owned firms, the movement asks people to reconsider their relationships with their employers, their merchants, their neighbors, and their natural environment. What is localism? What is the organizational structure of the localism movement, and what consensus goals exist within it? How is localism related to the larger idea of community building, and


organization website Date Founded

About

3/50 Project http://www.the350project.net/home.html

2009 Loosely organized. Gathers supporters (i.e., independent businesses) into a national buy-local network. Not to be confused with Bill McKibben’s 350.org

American Booksellers Association

http://www.bookweb.org/index.html

1900 ABA is a trade organization, that “exists to protect and promote the interests of its members: independently owned bookstores, large and small, with storefront locations in towns and cities nationwide.” Website indicates 1748 members in all fifty states, two U.S. territories (Puerto Rico and U.S. Virgin Islands), and six Canadian provinces.

AmericanIndependentBusinessAssociation

http://www.amiba.net/ 2001 Founded in Boulder, Colorado, AMIBA is a national organization that presides over member networks – Independent Business Alliances or IBAs. It emphasizes a community’s economic independence. Each IBA consists of member organizations. AMIBA’s goal is to help communities successfully launch and operate “buy independent, buy-local” campaigns, as well as other efforts to support community enterprise. They market themselves as a “one-stop shop to help you get organized, legal, knowledgeable about issues, updated, and in touch with other IBAs to share ideas, find solutions, and build relationships.” AMIBA has 60 IBAs located in 33 states and one Canadian province.

Business Alliancefor Local Living

http://www.livingeconomies.org/ 2001 BALLE relies on a nested network organizational model similar to AMIBA’s. Below it are member networks, and within each member network are individual members. BALLE is headquartered in Bellingham, Washington (next to the Social Venture Network which incubated BALLE’s development). Its members consist of sustainable business networks (SBNs) around the country. Currently, BALLE has 75 SBNs in 26 states, the District of Columbia, and Canada, representing more than 20,000 individual organizations.).

Food RoutesNetwork

http://www.foodroutes.org/ 1999 In 1993, the Kellogg Foundation funded CISA (Community Involved in Sustaining Agriculture) in Amherst, Massachusetts. Its “Be a local hero, buy-locally grown” program was also known as the Local Hero program. In 1997, the Kellogg Foundation chose CISA to participate in its Kellogg Foundation-supported Food Routes Network Initiative (formerly Fires of Hope).

The Localism Movement: Shared and Emergent Values 47


About

3/50 Project http://www.the350project.net/home.html

2009 Loosely organized. Gathers supporters (i.e., independent businesses) into a national buy-local network. Not to be confused with Bill McKibben’s 350.org

American Booksellers Association

http://www.bookweb.org/index.html

1900 ABA is a trade organization, that “exists to protect and promote the interests of its members: independently owned bookstores, large and small, with storefront locations in towns and cities nationwide.” Website indicates 1748 members in all fifty states, two U.S. territories (Puerto Rico and U.S. Virgin Islands), and six Canadian provinces.

AmericanIndependentBusinessAssociation

http://www.amiba.net/ 2001 Founded in Boulder, Colorado, AMIBA is a national organization that presides over member networks – Independent Business Alliances or IBAs. It emphasizes a community’s economic independence. Each IBA consists of member organizations. AMIBA’s goal is to help communities successfully launch and operate “buy independent, buy-local” campaigns, as well as other efforts to support community enterprise. They market themselves as a “one-stop shop to help you get organized, legal, knowledgeable about issues, updated, and in touch with other IBAs to share ideas, find solutions, and build relationships.” AMIBA has 60 IBAs located in 33 states and one Canadian province.

Business Alliancefor Local Living

http://www.livingeconomies.org/ 2001 BALLE relies on a nested network organizational model similar to AMIBA’s. Below it are member networks, and within each member network are individual members. BALLE is headquartered in Bellingham, Washington (next to the Social Venture Network which incubated BALLE’s development). Its members consist of sustainable business networks (SBNs) around the country. Currently, BALLE has 75 SBNs in 26 states, the District of Columbia, and Canada, representing more than 20,000 individual organizations.).

Food RoutesNetwork

http://www.foodroutes.org/ 1999 In 1993, the Kellogg Foundation funded CISA (Community Involved in Sustaining Agriculture) in Amherst, Massachusetts. Its “Be a local hero, buy-locally grown” program was also known as the Local Hero program. In 1997, the Kellogg Foundation chose CISA to participate in its Kellogg Foundation-supported Food Routes Network Initiative (formerly Fires of Hope).


About

Institute forLocal SelfReliance

http://www.ilsr.org 1974 In 1974, the Institute for Local Self Reliance became “the first organization to systematically apply the concept of local self-reliance to urban areas.”

Local Harvest http://www.localharvest.org 1998 Local Harvest, an organic and local foods website, claims 20,000 members and provides a ”definitive and reliable ‘living’ public nationwide directory of small farms, farmers markets, and other local food sources” to connect farmers to customers.

New EconomicsInstitute

http://www.neweconomicsinstitute.org/

1980 The New Economics Institute, formerly the E.F. Schumacher Institute, acts as a network of networks. Among its members are BALLE, 350.org, Institute for Local Self Reliance, Slow Money, Small Mart (part of BALLE), Sustainable South Bronx (BALLE SBN), and 29 other likeminded organizations. (In 1975, E. F. Schumacher published Small is Beautiful. Considered a landmark set of essays on humanistic economics, Schumacher’s book questioned the assumptions that “growth is good” and “bigger is better.”)

Slow Food http://www.slowfood.com/ 1989(Italy)

Slow Food, a non-governmental organization, was founded in Italy “to counter the rise of fast food and fast life, the disappearance of local food traditions and people’s dwindling interest in the food they eat, where it comes from, how it tastes and how our food choices affect the rest of the world.”

Slow Food USA

http://www.slowfoodusa.org/ 2008(USA)

Slow Food’s US counterpart is Slow Food USA.

Slow Money http://www.slowmoney.org/ 2008 Slow Money’s “mission is to build local and national networks, and develop new financial products and services, dedicated to: investing in small food enterprises and local food systems; connecting investors to their local economies; and, building the nurture capital industry.”

how has that relationship affected the movement? To answer these questions, from November 2010 to June 2011 we interviewed 38 localism leaders from three national localism organizations, representing 20 states. We identified four broadly shared values, and another four that are common to a sizable minority of respondents. We conclude with challenges the movement faces.

II. wHAT IS THE LocALISM MoVEMENT?

The movement advocates that consumers and firms purchase from independent businesses in their local area. It seeks to re-energize the economies of local communities, especially in traditional downtown commercial districts; to retain and develop a sense


of place; and to encourage the local area to “be a reflection of people’s personalities rather than a cookie-cutter approach where everything looks the same” (Respondent B6).6 When successful, these organizations increase the economic and social power of people and firms who are rooted in their communities and are more responsive to local demands and social conditions. As people “buy locally,” purchases and profits shift toward local stakeholders and away from companies (like Walmart or McDonald’s) for which decision-making authority is usually far away. Localism advocates believe that stakeholders with strong ties to the community will be fairer employers (since their employees are their neighbors) and more faithful stewards of the environment (since they and their families live, play, and likely own a home close to where they work).7 To date there has been little scholarly research on localism in management.8 Yet buy-local is becoming so well accepted that “local-washing” is a recent concern. As Mitchell writes9:

HSBC, one of the biggest banks on the planet, has taken to calling itself “the world’s local bank.” Starbucks is unbranding at least three of its Seattle outlets, the first of which just reopened as “15th Avenue Coffee and Tea.” Winn Dixie, a 500-outlet supermarket chain, recently launched a new ad campaign under the tag line, “Local flavor since 1956.” The International Council of Shopping Centers, a global consortium of mall owners and developers, is pouring millions of dollars into television ads urging people to ‘Shop Local’—at their nearest mall. Even Walmart is getting in on the act, hanging bright green banners over its produce aisles that simply say ‘Local.’

What does “local” mean? In our study, movement leaders defined it in a number of ways, including in

terms of miles traveled (often between 100 and 250 miles); county and state political boundaries; and food and watersheds.10

III. LEADINg LocALISM orgANIzATIoNS

In this article, we focus on three organizations, all founded since 1999, dedicated to building local business networks in the United States and Canada: American Independent Business Alliance (AMIBA); Business for Local Living Economies (BALLE); and the Food Routes Network (FRN), which focuses on local food consumption. Each is made up of many local networks, which bring together businesses and others within a community. AMIBA’s local networks are “independent business alliances” (IBAs); BALLE’s are “sustainable business networks” (SBNs); and Food Routes has “Buy Fresh Buy Local” (BFBL) networks. Members of these networks tend to be small businesses (AMIBA and BALLE) or farmers and restaurants (Food Routes Network), but can also be individuals and non-profit organizations. AMIBA, established in 2001 by retailers opposing new big-box stores,11 focuses primarily on increasing the patronage of independent, locally owned businesses, and is sometimes viewed as anti-globalization. It has 74 local networks located in 35 states and one Canadian province, representing more than 23,000 independent businesses.12 That same year, BALLE launched its network, expanding the focus on local commerce to include the social and environmental impacts of business.13 BALLE has 77 local networks in 25 states, the District of Columbia, and four Canadian provinces, representing more than 20,000 individual organizations.14 And the Food Routes Network, founded in 1999 through the Kellogg Foundation, centers its efforts on rebuilding and preserving the family farm. It now boasts approximately 78 Buy Fresh Buy Local networks in


24 states, representing nearly 2000 organizations.15 Based on its website, AMIBA’s official message is to influence public policy and to encourage consumers to buy locally. BALLE leaders expand this frame to include a focus on social (e.g., fair wages) and environmental justice. And Food Routes Network’s BFBL chapters emphasize economic gains (to farmers) and health benefits (to consumers) of buying local, and increasingly talk about food justice.

IV. AbouT THE rESEArcH

From November 2010 to May 2011, we identified and interviewed leaders from both the regional and national organizations. First, we identified leaders of our local BALLE, AMIBA, and FRN affiliated networks. Second, we compiled a spreadsheet of the contact information found on BALLE, AMIBA, and Food Routes Network websites.16 This list resulted in 215 contacts (70 BALLE SBNs, 71 AMIBA IBAs, and 74 Food Routes BFBLs). We emailed requests to the 215 contacts for interviews. Fifteen addresses came back as invalid. Thirty-seven leaders replied that they would consider talking with us. From this number, we interviewed 25, for a 12% response rate to our original email blast. We also identified several other key informants in the movement whom we contacted directly. The result was 38 interviews with leaders from 20 states: 17 from BALLE, 14 from AMIBA, and 9 from Food Routes or related food organizations.17 The respondents fell into five categories:

1. National (work in the national headquarters, co-founded the national organization but affiliate with a regional network, or sit on the board of the national organization)

2. Regional (co-founders, executive directors, or board members of regional networks) of large (more than 300 members), medium

(100-299 members), or small (under 100 members) networks. The larger networks tended to be older (more than seven years), with the newest networks less than a year old at the time of the interview.

We interviewed and recorded each respondent by phone or in person. Interviews lasted between 30 and 75 minutes. Following each interview, we noted our takeaways to capture our first impressions of the data. After the initial interviews, we revisited the three organizations’ websites and discerned the following values:

1. Local ownership of businesses (and farms) 2. Customers’ local purchasing 3. Businesses sourcing local (including locally

grown food)4. Businesses providing living wages5. Citizens investing locally (e.g., with help

from organizations such as Slow Money18)6. Businesses reducing their impact on the

natural environment 7. (Networks seek to having) Government pass

public policy to support independents8. Networks educating communities about

buying locally9. Networks advocating for change in general

In all subsequent interviews, we asked interviewees to respond directly about the ease or difficulty to adhere to each of these values, and which ones their organization focused on. To become even more grounded in the data, we transcribed the majority of the interviews ourselves using HyperTRANSCRIBE. We carefully reviewed those transcripts we didn’t produce ourselves. We then analyzed the data inductively using grounded theory techniques.19 We coded each interview with NVivo 9, a qualitative research data analysis software package, using an emergent,


iterative process in which we first coded for the nine value statements. In an iterative process of discovery, we further organized these results into four shared and four emergent values.

V. SHArED VALuES: wHAT THE LocALISM MoVEMENT AgrEES oN

We start with what our respondents felt were the central principles of localism. The movement is member-based, and as noted above, its networks incorporate a diversity of opinions and objectives. However, we have identified four core beliefs that are common to almost all of the interviewees. They are pragmatically bounded; for example, nobody in the movement argues that airlines or oil companies should be locally owned. businesses should be locally owned and independent. AMIBA requires that member businesses be “at least 50% owned by area resident(s).”20 It defines this twice in its criteria for membership: ownership must be “private, cooperative, employee, or community” and “full decision-making authority lies with its local owner(s) or members.”21 BALLE lists “independent retail” as a building block of a local living economy. And the Food Routes Network argues for family farms. The Institute for Local Self Reliance, an advocacy group within the movement, calls local ownership the “hometown advantage,” arguing that U.S. Economic Census data show that “employees of independent retailers earned 35 percent more per year than employees of national chains.”22 customers should buy locally. BALLE, AMIBA, and Food Routes networks all seek to educate consumers to support the local economy by purchasing local products and services. Food Routes branded the phrase “Buy Fresh Buy Local” to identify its mission. A central argument is that buying from locally owned independent businesses

leaves more money in the local economy than shopping at locally owned franchises or nationally owned chain stores.23 Buy-local campaigns also tend to emphasize that local products and services provide better quality, keep dollars in the economy, and are critical to retaining a unique local ambience.24 Changing consumers’ behavior is central to the movement. For the majority of our respondents, “public education” in support of the movement’s goals defines the bulk of their efforts (Respondent A4), and they easily listed numerous communications strategies, including meet-and-greets, public speeches, press releases about member companies, and designating community councils. Local businesses should source goods and services locally. One goal of BALLE is to encourage businesses within a local network to source from each other. As one local chapter leader reports, “Our members, after becoming members, have done more local purchasing”(Respondent AB11). These business-to-business links can potentially have a magnified impact if firms work closely with local suppliers, helping them upgrade capabilities, identify new market opportunities, and increase competitiveness. AMIBA also identifies this as a focus area for its networks: “Cooperative purchasing, branding, marketing, resource sharing and other activities . . . help local businesses gain economies of scale and compete more effectively” (emphasis theirs).25 However, our interviews suggested limited success to date in building dense local supply networks via localism organizations. Even at small businesses, supply chains can be more difficult to change than consumer buying habits. Food and agricultural products are the easiest to source locally, except in large cities far from agricultural areas. In one case, a Food Roots affiliate concentrates on the wholesale level, to help farmers connect to restaurants. However, the challenge here is twofold: some foods are inherently unavailable locally (e.g., coffee and bananas); and


local sources may be unable to supply the quantities local organizations demand.26 Localism networks should look for all potential allies and partner with other organizations. Nearly every respondent listed one or more organizations with which they partner to achieve their goals. These included other localism networks, “sustainable city” initiatives, Main Street programs, farmers’ markets, local chambers of commerce, universities and colleges, credit unions, visual arts associations, historic preservation organizations, and the media. Regarding the latter, one leader explained that local media depends on advertising revenue from local business, so the buy-local movement has a natural ally with a megaphone (Respondent A6). Willingness to partner with existing organizations and potential allies of many stripes suggests the pragmatic nature and incremental strategy of localism organizations. Rather than define localism by what the movement is against (for example, anti-Walmart) and who its enemies are (perhaps, in some cases, the National Chamber of Commerce), leaders consciously and consistently focus on the positive messages and the potential for gradual improvements. As one activist said, “You only heard me say a couple . . . negative comments about big business, because we don’t spend our time doing that. We spend our time talking about the positives as much as possible” (Respondent B6). Partnering with other organizations manages to both amplify the localist message and to foster it, by undergirding and leveraging existing community networks.

VI. EMErgENT VALuES: wHEN LocALISM goES bEyoND purcHASE pATTErNS

As noted above, the localism movement is both nascent and diverse. Although most respondents did not include the following four goals within the

definition of their network, a significant minority felt that each should be definitional of the movement, and/or is important for their particular network. Localism networks should lobby governments to pass local-friendly policy. An oft-cited challenge to a thriving local economy is public policy that favors large national retailers at the expense of independent locally-owned firms. When local governments provide substantial tax incentives to firms such as Walmart, Costco, and Target to build new stores nearby, it’s harder for local independents, who don’t reap such incentives, to compete.27 We heard from a few networks that actively lobby local and state governments, while others do little or none. Federal lobbying is rare at present, because of the movement’s decentralized structure, its focus on local issues, and a lack of resources. Some localism leaders indicated that they are gradually building up from a base of working with local governments, to the state and eventually federal levels. Local, independent businesses should invest locally. In Small-Mart Revolution, Shuman asks “Do you bank locally? Where do you invest your pension money?” A few respondents reported that they were investing locally, starting the conversation with the help of Michael Shuman, BALLE’s Research and Economic Development Director, and Slow Money, an organization that seeks to move investment to “saving farmland, supporting small and mid-size organic farmers, rebuilding local and regional food processing and distribution.” Others saw the challenge of local investing as too large to consider until they had grown their network. Local, independent businesses should be fair to their employees. BALLE in particular has expanded beyond the core objectives; it urges local businesses to provide “meaningful living wage jobs.”28 However, for most respondents the principle of a living wage is unrealistic:

We have about 2,000 businesses right now.


And most of them are single proprietor businesses. And, so, a family business. And one or two people that work in the store. And it’s very hard for them, especially in this economic climate, to pay more or to provide any sort of healthcare or other benefits to their employees. They don’t even have healthcare themselves, a lot of them. (Respondent A1)

But concern for “social fairness” to employees was more commonly shared, and one leader suggested:

I think social fairness might be a better way to talk about it than living wages. That’s very narrow. And for the really small businesses, that’s considered nice but completely unrealistic...So even if people are not being paid a living wage, are they getting training and learning that allows them to go off and start their own business at some later point? The delicatessen in Ann Arbor, Zingerman’s29, [is] a model because they trained their people and then the people started spinning off businesses. [There’s] a bakery startup and...a sausage-making company that came out of it. (Respondent B14)

Without bringing along employees—the most vulnerable stakeholders, in many ways—the local movement risks being reactionary and protectionist. Indeed, the proponents of anti-chain legislation in the early part of the 20th century were often local elites (in some cases, KKK members) who wanted to freeze local power relationships, which were in their favor at the time.30 In our interviews, evidence that employees, as stakeholders, get much (or more) attention from the local economy movement was sparse, particularly at the network level. In short, while localist networks may believe that social fairness and providing living wages are important,

doing so may irreparably harm the independent business’s economic ability to compete. Local, independent businesses should be environmentally responsible. BALLE (in its mission statement) and some respondents connected to the other organizations argue the need to reduce business’s impact on the natural environment. They refer to this value as “working with nature” and they seek “to integrate our activities with natural systems in order to create real and lasting prosperity”:

Rather than choosing one sector within which to work, BALLE networks recognize that sustainable local communities and economies are based on the systemic relationship between these building blocks. We don’t prioritize or isolate the importance of energy efficiency from investing in local energy production, or ‘green’ buildings from the health of their occupants, or the viability of local farms from the prosperity of the grocers to whom they sell.31

AMIBA and Food Routes do not espouse this focus at a national level, though some of their local affiliates frame their arguments for localism in terms of environmental sustainability. However, research is mixed on the impact localism has on the natural environment. For example, when manufacturing is located near consumers, buying locally may decrease transportation impacts and increase awareness of environmental effects of production. However, these benefits may disappear with reduced access to economies of scale in production.32

VII. cHALLENgES AHEAD

Above, we provide a snapshot of four priorities and four emerging values underlying the localism movement in the US. However, as suggested above, several challenges remain. The first challenge


is to effectively define the term “local”. As one respondent commented:

The hardest thing is the definition of local. And no one has effectively addressed that in a way that is meaningful...Some people talk about the 50-mile or a hundred-mile diet. A lot of times it’s driven by funding. So if an organization has state funding, they define local as anything that’s grown within the state that they’re in. They might even have county or city funding, and so they’ll define it as anything grown in that county, or within 50 miles of the city that they’re serving. Some have a more regional approach to it...Sometimes it’s a hybrid of that. Some people say as long as it’s within a day’s drive. But you know I don’t consider the CAFO [Concentrated Animal Feeding Operations] that is 3 miles down the road that won’t allow you to come in and even look at the animals to be local. So all of those definitions fall a part (Respondent F3).

A second challenge the movement faces is reconciling localism and globalization. We asked respondents whether globalization was inherently incompatible with localism. Several purists vehemently affirmed that it was. Some hadn’t given the idea much thought. And still others used the term “glocal” to describe a synergy, or the idea that they are creating a “new economy.” A third challenge centers on reconciling the relationship between localism networks and local chambers of commerce. While some networks partner with their local chambers, others blatantly or quietly competed with them. And the more successful networks (as represented by their network leaders) appear to act as the de facto chamber of commerce or fill a niche that the chamber fails to. The difference is often philosophical. For example,

in one case, a local chamber of commerce, which is also an IBA, considers Wal-Mart to be local because their employees work within the town’s limits, stay there for lunch out, and shop there after work. Finally, respondents identified myriad other challenges in response to a question about their greatest obstacles. These challenges included: the expected lack of financial and human resources and the belief that “someone else will do the work”; consumer ignorance; the never ending battle for systemic change in approaches to land-use development; the need to shape food policy at the federal level; a lack of leadership; the concern (as we mentioned above) of big business co-opting the “local” message; and financing (see Shuman, 2007; Hess, 2009). On the latter, one respondent commented:

The greatest obstacle is financing. [I]t’s really what we do as individuals in terms of our investments; if we look at our largest investments after the home, it’s the 401-K. And the way that that is set up in this country is basically your retirement investments go into the very organizations that you’re mobilizing alternatives to. And so your right hand is supporting Starbucks or Dunkin’ Donuts or something like that. And your left hand is going out and supporting the local independent coffee shop. And there’s a really severe contradiction on the financial side (Respondent B14).

VIII. coNcLuSIoN

The localism movement seeks to “[restore] the capacity of communities to become more self-reliant” (Respondent B12). It broadly espouses a triple bottom line mentality, and foretells a restructuring of the American economy. However, the localism movement is understudied in the academic management literature. In this article,


we have presented an outline of four values generally espoused by the movement: independent ownership, local buying, local sourcing, and pragmatic partnering. Additional values, including responsibility to the physical environment, are emerging within the movement. Despite localism’s phenomenal growth in the past decade, and its increasing acceptance by consumers, the movement faces serious internal and external challenges. As with many social movements, localism organizations scramble for resources. Looming larger are potential contradictions in the logic and values of the movement. A growing cadre of academics (primarily, it seems, neo-classical economists) question the movement’s assertion that localism inherently encourages environmental responsibility and promotes economic justice. One recent entry in this growing literature, The Locavore’s Dilemma: In Praise of the 10,000 Mile Diet, describes the environmental benefit of eating locally as a myth, and is equally dismissive of the idea that local foods promote economic growth and social justice.33 Activists will need to do a better job assessing the impact of their programs in order to make more clear, convincing arguments that localism is indeed environmentally, economically, and socially sustainable. However, embracing and implementing environmental responsibility and fairness to workers may require tough choices, and risks alienating some of the constituents now inside localism’s big tent.

IX. ENDNoTES

1. S. Mitchell, Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses (Boston: Beacon Press, 2007).

2. Data collated from AMIBA, BALLE, and Food Routes Network websites (all accessed 8/27/11). The six states with no networks

are Alaska, Delaware, Mississippi, North Dakota, South Dakota, and Vermont. Only Food Routes is in Alabama, Iowa, Kansas, West Virginia, and Wyoming. Only BALLE is in D.C., Hawaii, South Carolina, and British Columbia, Nova Scotia, and Quebec. And only AMIBA is in Kentucky, Nevada, New Hampshire, Rhode Island, Texas, and Utah.

3. Kurland, N.B., McCaffrey, S.J. and Zell, D. (2012). The Localism Movement: Environmental Leadership in Grassroots Activism. Forthcoming in D. R. Gallagher (Ed.) Environmental Leadership, Sage Publications; Hess, D. J. (2009) Localist Movements in a Global Economy: Sustainability, Justice, and Urban Development in the United States. Cambridge, MA: The MIT Press.

4. Hess, 2009, ibid. 5. The national leaders of BALLE, for

example, are more eager to actively promote environmental responsibility than are those of AMIBA.

6. Respondents in this study were assured anonymity. We have coded them by organization (A = AMIBA, B = BALLE, F = Food Routes; and AB = for those members of both AMIBA and BALLE) and given them numbers.

7. For a comprehensive overview of the movement, see D. J. Hess, Localist Movements in a Global Economy (Boston: MIT Press, 2009).

8. One does, however, find this research (mostly food-related) published in rural studies, sociology, and business history, and in some popular management writings. In rural studies see, e.g., A. Starr, A., “Local Food: A Social Movement?” Cultural Studies - Critical Methodologies 10: 6

http://search.proquest.com.libproxy.csun.edu/docview.lateralsearchlink_1:lateralsearch/sng/pubtitle/Cultural+Studies+-+Critical+Methodologies/$N?t:ac=818801229/abstract&t:cp=maintain/resultcitationblocks

http://search.proquest.com.libproxy.csun.edu/docview.lateralsearchlink_1:lateralsearch/sng/pubtitle/Cultural+Studies+-+Critical+Methodologies/$N?t:ac=818801229/abstract&t:cp=maintain/resultcitationblocks

http://search.proquest.com.libproxy.csun.edu/docview.issuebrowselink:searchpublicationissue/23497/Cultural+Studies+-+Critical+Methodologies/02010Y12Y01$23Dec+2010$3b++Vol.+10+$286$29/10/6?t:ac=818801229/abstract&t:cp=maintain/resultcitationblocks


(2010): 479-490; R. Feagan, R., “Mapping Out the “Local” in Local Food Systems.” Progress in Human Geography 31:1 (2007): 23-42; M. DuPuis and D. Goodman, “Should we Go Home To Eat? Toward a Reflexive Politics of Localism,” Journal of Rural Studies 21 (2005): 359-371. In sociology see e.g., Hess, 2009, ibid.; S. Gasteyer, Hultine, S. A., Cooperband, L. R., Curry, M. P., “Produce Sections, Town Squares, and Farm Stands: Comparing Local Food Systems in Community Context” Southern Rural Sociology 23:1 (2008): 47-71. In business history, see T. A. Freyer, T. A., “The Federal Courts, Localism, and the National Economy, 1865-1900.” Business History Review (pre-1986) 53:3 (1979): 343-363. Also see writings by popular management theorists Peter Senge and Michael Russo: P. Senge, Smith, B., Kurschwitz, N., Laur J., et al., “The Necessary Revolution” (Crown Business, 2009). M. Russo, M., “Companies on a Mission: Entrepreneurial Strategies for Growing Sustainably, Responsibly, and Profitably.” (Stanford Business Book, 2010).

9. Mitchell, S. 2009. “The Corporate Co-opt of Local.” The New Rules Project. (A Program of the Institute for Local Self-Reliance.) http://www.newrules.org/retail/article/corporate-coopt-local (accessed 6/1/11).

10. For more on the topic of how localism leaders define “local,” see Kurland, N.B. & McCaffrey, S.J., 2012, “Leadership, Framing, and the Localism Movement.” Unpublished manuscript.

11. The first IBA, in Boulder, Colorado, appeared in 1998; the national organization, AMIBA, was established three years later. See http://www.amiba.net/about/ (accessed 6/1/11).

12. Number and locations of networks found at http://www.amiba.net/find-iba (accessed 8/27/11). The “23,000” number comes form Jennifer Rockne, Director, AMIBA, personal communication, 8/22/11.

13. BALLE emerged as a group vision in part from the work of Judy Wicks and the Sustainable Business Network of Greater Philadelphia and of Laury Hammel and the New England Business for Social Responsibility – see http://www.livingeconomies.org/aboutus/history (accessed 6/1/11).

14. BALLE’s website states that it is “comprised of over 80 community networks in 30 U.S. states and Canadian provinces representing over 22,000 independent business members across the U.S. and Canada” (see: http://www.livingeconomies.org/aboutus - accessed 12/29/10). Our numbers are based on an actual listing of the networks they list on the website (see http://www.livingeconomies.org/netview - accessed 8/27/11).

15. http://www.foodroutes.org/bfbl-chapters.jsp#chapter-list (accessed 8/27/11); The “2000” number comes from Jessica Seeley, Director, Food Routes Network, personal communication, 8/30/11.

16. A research assistant compiled this spreadsheet for us. She visited each website (BALLE, AMIBA, and Food Routes) and found the list of organizations involved. If a link to the organization’s website was provided she went to the website this way. If it was not, she searched for the chapter’s official website. Many times this was successful, but several organizations either didn’t have a website or it was unavailable. More details on her data collection process available by request from the first author.

http://www.newrules.org/retail/article/corporate-coopt-local

http://www.newrules.org/retail/article/corporate-coopt-local

http://www.amiba.net/about/

http://www.amiba.net/find-iba

http://www.livingeconomies.org/aboutus/history

http://www.livingeconomies.org/aboutus/history

http://www.livingeconomies.org/aboutus

http://www.livingeconomies.org/aboutus

http://www.livingeconomies.org/netview

http://www.livingeconomies.org/netview

http://www.foodroutes.org/bfbl-chapters.jsp#chapter-list

http://www.foodroutes.org/bfbl-chapters.jsp#chapter-list


17. Two networks affiliate with both BALLE and AMIBA. Two interviews are with leaders at Food Routes itself, rather than a local affiliate. Three other leaders are associated with non-Food Routes food non-profits (in PA and CA). We spoke with leaders from the following states: Food Routes BFBLs and related: CA, IA, PA, WV; BALLE SBNs: AK, CO, CT, IA, IN, MA, MN, NY, OR, PA, VA, WA; AMIBA IBAs: CA, CO, IL, KY, LA, MA, MI, MN, NH, OR, PA, TX.

18. http://www.slowmoney.org/vision (accessed 8/27/11). Slow Money takes its name from the Slow Food organization. See Tasch, W., “Inquiries Into The Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered” (White River Junction, VT: Chelsea Green Publishing Company, 2010).

19. For more on grounded research techniques, see Glaser, B., and Strauss, A. (1967). The Discovery of Grounded Theory. Chicago: Aldine.

20. http://www.amiba.net/about_ibas.html - accessed 1/2/11. The New Rules Project through the ILSR defines “independent retailers” as those having fewer than 10 outlets - http://www.newrules.org/retail/news/what-new-census-data-show-about-state-independent-retail - accessed 1/2/11. Note that AMIBA allows local chapters to define their own “area” as the local members think is appropriate. Some AMIBAs adopt a county-based definition of “local.” Others accept members from within their county or within a certain distance (e.g., 50 miles) from the county border.

21. See http://www.amiba.net/about_ibas.html - accessed 1/2/11.

22. Mitchell, S., “What New Census Data Show About the State of Independent Retail” New

Rules Project. (December 16, 2010), http://www.newrules.org/retail/news/what-new-census-data-show-about-state-independent-retail (accessed 1/2/11). Similarly, the American Booksellers Association, a trade association, states that it is dedicated to promoting the interests of “independently owned bookstores, large and small, with storefront locations in towns and cities nationwide.” See http://www.bookweb.org/about - accessed 1/2/11.

23. Mitchell, 2007, ibid.; Mitchell, S. 2010a. Stacey Mitchell Interview on WDET Radio’s Craig Fahle Show. December 1. http://www.newrules.org/retail/audio/stacy-mitchell-interview-wdet-radios-craig-fahle-show (accessed 1/2/11); also see studies by Civics Economics. For these studies of the impact of buy local campaigns on the local economy, visit http://www.civiceconomics.com/html/library.html (accessed 5/31/11).

24. Hess, 2009, Localist Movements in a Global Economy.

25. See http://www.amiba.net/about_ibas.html - accessed 1/2/11.

26. See Berea College Local Food Initiative, Report for the Administrative Committee (July 13, 2005). http://www.berea.edu/localfoodinitiative/documents/ACreportFINAL.pdf. This report provides an excellent analysis of the challenges of incorporating a local foods initiative in an institution of higher education.

27. Mitchell, 2007, ibid.28. http://www.livingeconomies.org/aboutus/

mission-and-principles (accessed 8/21/11)29. http://www.zingermanscommunity.com/

(accessed 5/28/11); also in the green jobs literature, see: Daley-Harris, S., Pathways Out of Poverty: Innovations in Microfinance for the Poorest Families (Kumarian Press,

http://www.slowmoney.org/vision

http://www.amiba.net/about_ibas.html

http://www.newrules.org/retail/news/what-new-census-data-show-about-state-independent-retail








http://www.bookweb.org/about

http://www.bookweb.org/about

http://www.newrules.org/retail/audio/stacy-mitchell-interview-wdet-radios-craig-fahle-show



http://www.civiceconomics.com/html/library.html

http://www.civiceconomics.com/html/library.html


http://www.berea.edu/localfoodinitiative/documents/ACreportFINAL.pdf



http://www.livingeconomies.org/aboutus/mission-and-principles

http://www.livingeconomies.org/aboutus/mission-and-principles

http://www.zingermanscommunity.com/


2011); Fetzer, A. and S. Aaron, Climb the Green Career Ladder: Make Your Company and Career More Sustainable (Wiley, 2010).

30. Schragger, R. 2005. “The Anti-Chain Store Movement, Localist Ideology, and the Remnants of the Progressive Constitution, 1920-1940.” University of Virginia Law School Public Law and Legal Theory Working Paper Series. http://law.bepress.com/uvalwps/uva publiclaw/art21

31. http://www.livingeconomies.org/building-blocks (accessed 8/26/11).

32. Hess, D. 2008. “Localism and the Environment.” Social Compass. 2:2, 625-638. See also DesRochers, P and H Shimizu (2012) The Locavore’s Dilemma: In Praise of the 10,000-Mile Diet. Perseus Books: New York; Weber, C. L., & Matthews, H. S. (2008). “Food-miles and the Relative Climate Impacts of Food Choices in the United States”. Environmental Science & Technology, Mariola, Matthew J. (2008) “The Local Industrial Complex? Questioning the Link Between Local Foods and Energy Use” Agric Hum Values (2008) 25:193–196 DOI 10.1007/s10460-008-9115-3.

33. DesRochers, and Shimizu, op. cit. (2012);Weber and Matthews, op cit (2008); Mariola, op. cit. (2008); and Hinrichs, Clare C. and Patricia Allen (2008) “Selective Patronage and Social Justice: Local Food Consumer Campaigns in Historical Context” Journal Of Agricultural And Environmental Ethics. Volume 21, Number 4, 329-352.

http://www.livingeconomies.org/building-blocks

http://www.livingeconomies.org/building-blocks

http://www.springerlink.com/content/?Author=C.+Clare+Hinrichs

http://www.springerlink.com/content/?Author=Patricia+Allen

http://www.springerlink.com/content/1187-7863/

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The Role of the Environmental Manager in Advancing Environmental Sustainability... 59

The Role of the Environmental Manager in Advancing Environmental Sustainability and

Social Responsibility in the Organization

AbSTRAcTA changing business climate has led many organizations to embrace environmental sustainability and social responsibility; however, organizational roles and responsibilities in sustainability initiatives have not been clearly defined. This paper specifically examines the role of environmental managers in advancing environmental sustainability and social responsibility. It is part of a broader study to identify the extent to which various departments or functional units within an organization are prepared to play a role in these initiatives based on a survey of various professionals in relation to activities and action items derived from the ISO 26000 standard on social responsibility. As expected, the findings indicate that environmental managers are positioned to play a critical role in advancing environmental sustainability and social responsibility in their organizations. However, there appears to be disparity between the role that environmental managers indicated they are prepared to play and the perceptions of their role held by others in the organization. While environmental managers indicated that they would support or play a major role in 18 of the 35 action items on which they were surveyed, professionals from other functional units indicated that environmental managers would be involved in only a few key areas focused on traditional environmental issues associated with pollution prevention and waste management. This suggests that environmental managers are prepared to play a much broader role in the organization’s sustainability and social responsibility efforts but may not be fully utilized in this capacity.

KEy WORdSEnvironmental Manager, Environmental Sustainability, Social Responsibility

In response to increasing environmental legislation in the 1970s and 1980s, the initial focus of environmental management as a profession was on regulatory compliance and enforcement. In

the 1990s, this role began to shift from reactive to proactive with the environmental manager leading the way (Morelli 1999; NAEM 2010). Today, in what many hope will be known as the age of sustainability, environmental professionals are beginning to take on a more integrated role “leading corporate efforts toward sustainability” (NAEM 2010). This research attempts to identify the roles

Lisa GreenwoodRochester Institute of Technology

[email protected]

Joseph Rosenbeck Rochester Institute of Technology

[email protected]

Jason ScottRochester Institute of Technology

[email protected]

mailto:llgcem%40rit.edu?subject=

mailto:jmrcem%40rit.edu?subject=

mailto:jds3553%40rit.edu?subject=


and levels of leadership that environmental managers feel prepared and positioned to assume in various elements of their organization’s environmental sustainability and social responsibility initiatives and to answer the following questions:

1. What should be the role of environmental managers in their organization’s environmental sustainability and social responsibility efforts?

2. Which other departments or functional areas within an organization are best positioned to collaborate with environmental managers on these efforts?

The results suggest that while the embedded role of environmental managers in the organization positions them to collaborate with several other departments or functional areas on sustainability and social responsibility efforts, their abilities may not be fully realized. Beyond technical and regulatory compliance-related efforts to manage environmental impacts and prevent pollution, environmental managers may be underutilized. The concept of sustainability is broad. The Brundtland Commission, chartered by the World Commission on Environment and Development (1987), defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” While this definition is widely recognized and accepted, it does not provide clear direction on its application or the roles and responsibilities that the various functional units should play in an organization. In this work, sustainability is considered to be a combination of “social responsibility” as set forth in ISO 26000:2010 Guidance for Social Responsibility (ISO 2010) and “environmental sustainability” defined by Morelli (2011a) as follows:

... a condition of balance, resilience, and interconnectedness that allows human society to satisfy its needs while neither exceeding the capacity of its supporting ecosystems to continue to regenerate the services necessary to meet those needs nor by our actions diminishing biological diversity.

II. ObJEcTIVE And METhOdOLOGy

This study examines the roles and responsibilities of environmental managers in advancing environmental sustainability and social responsibility within the organization and is part of a broader research effort to define the related responsibilities of a variety of professionals across the organization. The objective of the broader study is presented below: Objective (Excerpted from Morelli, J., “Introduction,” “Mapping Roles and Responsibilities for Environmental Sustainability and Social Responsibility,” graduate research project assignment, unpublished 2011.)

Since the concept of sustainability is so broad as to transcend any one profession, and not knowing who should be doing what becomes an obstacle to progress in this direction, the objective of this work is to help identify to what extent various professions may be prepared and well-positioned to contribute toward a more sustainable future. ...This project attempts to define the related roles and responsibilities of professionals in various functional units within the organization. Faculty and students at RIT have been conducting ongoing research for the last two years aimed at mapping responsibility for moving an organization towards a more environmentally sustainable and socially responsible future.


In an effort to more clearly define these roles, an electronic survey was administered to professionals in the following departments or functional areas:

• environmental, • occupational health and safety, • legal, • process/product design, • purchasing, • manufacturing, • facilities management, • operations, • marketing, and • human resources.

The survey consisted of 35 questions derived from action items identified in the ISO 26000 Social Responsibility Standard (ISO 2009) in relation to organizational governance, human rights, labor practices, environment, health and safety, fair operating practices, consumer issues, and community involvement and development. Based on the premise that their organization had decided to move toward becoming more sustainable and socially responsible and was asking professionals in each department and functional area to contribute to this effort, respondents were asked to select the role or level of responsibility that they considered most appropriate for their department or functional unit:

• major (leadership role), • supporting (engaged role), or• minor (limited or no role).

Respondents also were asked to identify any other departments or functional units aside from their own that they perceived as playing a significant role in accomplishing each action item. This “perceived role” data from the broader study is compared in this study with responses from environmental managers

themselves. In addition, where other departments or functional units indicated a major role for an action item in which environmental managers also indicated a role, the applicable departments are listed as potential collaborators on that issue. The survey was issued to 1,994 environmental managers identified by a direct marketing mail list provider and yielded 101 responses for a response rate of 5.07%. The precision of the environmental data ranged from +/- 9.7 to 10.6% with an average precision of +/- 10.3% using a 95% confidence level.

Data Analysis and Assumptions

The data was initially screened to identify action items for which at least 50% of participating environmental managers indicated a particular responsibility level. While this initial screening based on criteria from the broader study methodology was helpful in identifying clear cases for leadership roles in several action items, several important data points were not captured or identified as noteworthy using this approach. For many items, responses were largely divided between major and supporting roles. When the responses indicating a major role were combined with those indicating a supporting role, it was evident that environmental managers felt positioned to take at least a supporting role in several additional areas. In order to capture this information, a new “involved role” category was identified where the combined responses indicated for major role and supporting role exceeded 50%.

III. SuRVEy FIndInGS

Major Role

The majority of environmental managers indicated they were positioned to play a major role in five action items related to pollution prevention,


sustainable resource use, climate change mitigation, and raising environmental and social responsibility awareness among those with which the organization has relationships. Specific action items, response levels, and potential collaborators are shown in Table 1. Collaborators consist of the other departments or functional units that also indicated they could play a major role for those action items based on the responses in the broader study.

Consistent with environmental managers’ self-indicated roles and responsibilities, other professionals perceived that environmental

managers would play a major role in two of the action items identified in Table 1: implementation of measures to minimize waste and prevent pollution and identification and minimization of adverse impacts on ecosystems and biodiversity. However, these professionals did not indicate a major role for environmental managers for the other three action items related to toxic and hazardous material use, programs and practices for sustainable resource use, and raising environmental and social responsibility awareness.

Responses to the broader survey identified health and safety, operations, and facility management

SUSTAINABILITY ACTION ITEMS:MAJOR ROLES FOR

ENVIRONMENTAL MANAGERS

Implement measures to minimize waste, prevent pollution and properly manage that which is unavoidable Collaborators: Health & Safety

Collaborators: Health & Safety, Operations

Collaborators: Facilities Management

Pollu

tion

Prev

entio

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stai

nabl

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esou

rce

Use

Clim

ate

Cha

nge

Miti

gatio

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Ada

ptat

ion

Prom

otin

gSo

cial

Res

pons

ibili

tyin

t the

Sph

ere

of In

fluen

ce

Ensure the organization measures, records, reportsand publicly discloses the amounts and typesof toxic and hazardous materials used and released,and make known the associated risks to humanhealth and the environment.

Implement programs and practices for sustainablematerial, energy and environmental resources toreduce the environmental burden resulting from theorganizations’ activities, products and services.

Identify potential adverse impacts on ecosystemsand biodiversity; and implement planning, design and operating practices to eliminate or minimize them.

% Indicating Major Role

Ensure the organization participates in raising theenvironmental and social responsibility awareness ofthose with which it has relationships.

% Indicating Supporting Role

0 10 20 30 40 50 60 70 80 90 100

Collaborators: Health & Safety, Facilities, Operations

Collaborators: Health & Safety, Facilities Management

83.1 9.1

79.2 15.6

61.8 31.6

55.6 25.9

50.6 41.6

Table 1: Major Roles for Environmental Managers


functions as potential collaborators on these items as indicated in Table 1. This shared responsibility coincides with the overlapping roles professionals play in these departments and may be an indication of the importance of close collaboration in promoting and furthering environmental sustainability and social responsibility.

Involved Role

Based on the initial screening, the survey data did not definitively indicate that the majority of environmental managers would take a supporting role for any of the action items. However, there were 13 items for which the majority of responses were divided, indicating that environmental managers were prepared to be significantly involved by taking a major or supporting role. Table 2 (see page 64) displays the action items for which environmental managers felt positioned to take on an involved role, including potential collaborators where applicable.

IV. hEALTh, SAFETy, And ThE EnVIROnMEnT

With more than 75% of respondents indicating at least a supporting role, environmental managers appeared to identify significantly with actions related to:

• occupational health and safety management; • consumer health and safety; and • climate change mitigation and adaptation.

In addition, health and safety, human resources, and operations professionals identified a major role in occupational health and safety management items indicating a clear opportunity for further collaboration with these departments or functions. Health and safety personnel indicated a major role

in providing consumers with safer products as well but not in providing consumers with accurate information about environmental and social factors related to products. In relation to climate change mitigation and adaptation, purchasing and operations professionals identified a major role in considering environmental and social responsibility criteria in selection of suppliers and contractors. However, no other professionals in the broader study self-identified a major role in the climate change category in relation to incorporation of environmental protection in development projects or consideration of market mechanisms to internalize the cost of the organization’s environmental impacts.

V. ORGAnIzATIOnAL GOVERnAncE And FAIR MARKETInG

Also, environmental managers overwhelmingly indicated an involved role in ensuring that the organization:

• is governed in a manner that balances the needs of the organization and its stakeholders, including future generations (74.1%); and

• does not engage in any deceptive, misleading, fraudulent, or unfair practices (76.3%).

Operations and human resource professionals self-identified as major collaborators for both of these items.

VI. SuSTAInAbLE cOnSuMpTIOn, cOMMunITy, And huMAn dEVELOpMEnT

Finally, environmental managers indicated to a slightly lesser extent that they would be willing to

Table 2: “Involved” Roles for Environmental Managers

SUSTAINABILITY ACTION ITEMS:MAJOR ROLES FOR

ENVIRONMENTAL MANAGERS

Collaborators: Purchasing

Collaborators: Operations, Health & Safety

Collaborators: Operations, Human Resources (HR)

Collaborators: Purchasing, Operations

Collaborators: Health & Safety, HR, Operations

Collaborators: Health & Safety, HR, Operations

Collaborators: Human Resources

Collaborators: Operations, Human Resources

Wea

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reat

ion

Com

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ityIn

volv

emen

tSu

stai

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e C

onsu

mpt

ion

Fair

Mar

ketin

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hang

e M

itiga

tion

and

Ada

ptat

ion

Hea

lth &

Saf

ety

at W

ork

Prot

ectin

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mer

s’H

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and

Safe

ty

Hum

anD

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ent

and

Trai

ning

inth

e Wor

kpla

ce

Org

aniz

atio

nal

Gov

erna

nce -

Gen

eral

Expe

ctat

ions

% Indicating Major Role% Indicating Supporting Role

0 10 20 30 40 50 60 70 80 90 100

6.8 45.2

20.5 37

37 39.7

21.9 46.6

37.3 48

40.8 35.5

45.6 30.4

36.7 45.6

42 39.5

42.5 38.8

46.8 36.4

21.1 43.4

29.4 44.7

Give preference to local suppliers of products and services and contribute to local supplier development where possible and practicle.

Systematically consult/participate in representative community groups for the purpose of contributing to the public good and the community’s development.

Provide consumers with accurate information about the environ-mental and social factors related to its products and services.

Ensure the organization offer consumers socially and environmentally beneficial products.

Ensure the organization provides products and services that, under normal and reasonably forseeable conditions of use, are safe for users and other persons, their property, and the environment.

Ensure the organization does not engage in any deceptive, misleading, fraudulent or unfair practices, including omission of critical information.

Incorporate the protection of natural habitat, wetlands, forest, wildlife corridors, protected areas and agricultural lands into land development projects.

Consider environmentally and socially responsible perfor-mance when evaluating and selecting suppliers and contractors.

Consider market mechanisms, such as carbon emissions trading, to internalize the cost of environmental burdens resulting from the organizations’activities, products and services.

Analyze, control and communicate the health and safety risks involved in the organizations’ activities and ensure that all workers follow safe practices and procedures.

Apply principles of health and safety management and provide health and safety protection for all workers.

Provide all workers at all stages of the work experience with access to skills development, training, and opportunities for career advancement.

Ensure the organization is governed in a manner that balances the needs of the organization and its stakeholders, including immediate needs and those of future generations.

The Role of the Environmental Manager in Advancing Environmental Sustainability...65

take at least a supporting role in:

• ensuring that the organization offers environmentally and socially beneficial products (68.5%);

• providing employee professional/skills development (64.5%);

• contributing to local supplier development (62%); and

• participating in community groups to contribute to the public good (57.5%).

Human resources self-identified as a collaborator in employee development, and purchasing self-identified as a collaborator on local supplier development; however, no other departments indicated a major role in community group involvement or in provision of beneficial products. The perceptions of other professions regarding the roles of environmental managers indicated in the broader study only aligned with environmental managers’ self-indicated roles for two action items:

• considering market mechanisms to internalize environmental costs; and

• incorporating the protection of the environment into land development projects.

This correlation outlines these two action items as areas where environmental managers are viewed as having a leadership role and should accept more responsibility. However, the data indicates that environmental managers are not perceived by others in the organization as serving a significant role in other areas for which they have indicated a willingness to be involved.

Minor Role

Environmental managers indicated they had a

minor or negligible role for 17 out of the 35 action items addressed in the survey, and this finding was further substantiated by the perceptions of other departments or functional areas from the broader study. Action items under community involvement and development, consumer data protection, human rights - due diligence, labor practices and employment conditions, and fair operating policies were indicated largely as outside of the scope of the environmental manager’s role. However, the data indicates that not all environmental managers may consider these as minor roles and may be areas for further investigation. Appendix I includes a detailed listing of these items and survey responses.

VII. LITERATuRE REVIEW

The literature indicates that the environmental management profession is evolving with an increasingly strategic focus on environmental sustainability and social responsibility. While regulatory compliance management and environmental technical knowledge continue to be important aspects, the increasing emphasis on sustainability has expanded the role of the environmental manager toward more proactive and integrated management approaches within the organization (ENEP 2012; Neuvelt 2010). Butler (2009) argues that environmental managers serve a multifunctional role and continually strive for more sustainable practices that can be accomplished through more efficient processes and more eco-friendly raw materials. The Institute of Environmental Management and Assessment (IEMA) further asserts that effective environmental professionals must serve a “cross functional, diverse, multi-level, change agent role” (2011). Today’s environmental managers serve as internal facilitators, guiding and enabling sustainability efforts across multiple functional areas within the firm while simultaneously serving as the


environmental stewards of the corporate world, managing the relationship between the firm and the environment (Neuvelt 2010; Morelli & Butler 2008). Internal and external communication is an important overarching aspect of the environmental manager’s role as a means to raise awareness among key stakeholders (Maclean 2005). In providing stakeholders with accurate information about environmental and social factors related to products and services, Florida and Davison (2001) suggest that environmental management systems can be used as a tool for communication of important information to all key stakeholders and can leverage the important information that must be communicated. Organizations are considering environmental impacts from a broader perspective, engaging numerous functional areas within the firm in environmental issues, including plant managers, product designers, and research and development departments. Environmental managers can create internal relationships to integrate environmental practices throughout the business and are critical in developing the firm’s policies and programs to achieve scientific objectives related to environmental impacts and sustainability as well as evaluating whether these efforts can succeed in advancing sustainability within the context of the organization and its business framework (ENEP 2012; Rosenbeck 2008; NAEM 2010; Neuvelt 2010). Generally environmental managers have clearly defined responsibilities related to environmental aspects and impacts, including the reduction of negative environmental impacts of the organization’s processes, maintaining regulatory compliance, and avoiding unnecessary environmental liabilities (Butler 2008; Ott 1998). Their technical knowledge, problem-solving abilities, and management skills can advance environmental stewardship in the organization (Neuvelt 2010). They often interact with personnel at all levels of the organization from workers on

the production floor to upper management. These contacts place them in an excellent position to determine issues, possible opportunities, and solutions throughout the organization (Ott 1998). Often environmental managers must break down barriers within companies since they work with nearly all aspects of the organization. This ability promotes not only stronger organizational governance but also allows for better early detection of issues since communication is more open (Friedman 1992). In addition, environmental managers have a role in raising environmental awareness of all members of the organization (Greenwood & Bliss 2010; Morelli & Butler 2008). Their interaction with others across the organization positions them for vertical and horizontal communication to ensure that every member of the organization can know current internal events and can have a voice to upper management (Greenwood & Bliss 2010). Internal stakeholders may not be fully aware of the organization’s environmental and social responsibility efforts and metrics, and raising awareness can further enable collaboration and provide the firm with a greater chance of success in pursuing its goals (Neuvelt 2010; Maclean 2005). In addition, Daily and Huang (2001) suggest that environmental managers must provide adequate training to all employees in terms of reducing environmental impacts and promoting social responsibility, since both of these requires active and knowledgeable participation from all employees at an organization. The external role of the environmental manager deals with environmental sustainability in managing the relationship between the firm and the environment but is also linked to social responsibility. The global public holds companies to an increasing expectation to become more socially responsible and improve the welfare of society, and socio-economic, social, and environmental factors have become part of measuring a company’s performance


(Morelli 2011b). Since the environment directly relates to and affects society, social responsibility partly falls on the shoulders of environmental managers. Environmental managers have taken on responsibilities related to sustainable resource use, restoring the environment, and mitigating climate change, in addition to their traditional roles in protecting the environment and preventing pollution (Morelli 2011b). Environmental managers play a role also in external environmental communication and awareness, including reporting on the firm’s progress toward environmental initiatives, responding to stakeholder inquiries about environmental performance and sustainability, and engaging the supply chain (NAEM 2010). External communication with interested parties, including suppliers, industry groups, academia, and public interest groups, is critical with respect to raising awareness, collaboration, and transparency (Greenwood & Bliss 2010). Championing stakeholder engagement ensures important information is communicated effectively and directly from the source. Furthermore, environmental objectives may be more successful when environmental managers “embed sustainable thinking across the organization value chain,” which makes sustainability a variable considered by all major stakeholders in the organization (IEMA 2011). Human rights activities are of specific concern also, since often environmental issues can lead to human rights violations (Amazon Defense Coalition 2009). Kay (1997) asserts that it is imperative that environmental managers take a more active role in these activities and that they consider the implications of every process that may challenge human rights.

Major Role Correlations

With respect to the survey findings, there appears to be a strong correlation with findings in academic

and professional literature. Environmental managers who responded to the surveys indicated that they are prepared to play a major role in:

• keeping track of hazardous materials and informing the public of possible harm to humans and the environment;

• minimizing waste and preventing pollution; • identifying and minimizing environmental

impacts from the organization’s activities;• raising environmental and social

responsibility awareness; and• establishing programs for sustainable

resource use.

By ensuring the organization records and reports hazardous waste, Larson and Larson (1998) suggest that environmental managers should utilize a management systems approach to properly measure the waste. IEMA suggests that since environmental managers track the waste, they should then inform all stakeholders of its inherent dangers. Nearly 79.2% of environmental managers consider this a major role, and collaboration should occur with Health and Safety as they can help characterize the dangers of the hazardous material for the people coming into contact with the waste. For waste minimization and pollution prevention, environmental managers can improve resource utilization rates and improve the efficiency of production to reduce the waste that is created (Larson & Larson 1998). Of the environmental managers surveyed, 83.1% indicated this as a major role, and collaboration should occur between Health and Safety, Facility Management, and Operations. Health and Safety can assist with reducing hazardous waste that may pose a threat to human health; Facility Management can ensure proper waste disposal at the facility itself; and Operations can ensure that production processes are as efficient as possible and that recycling occurs.


For identifying potentially adverse impacts on ecosystems and determining ways to mitigate them, Larson and Larson again suggest that environmental managers should use a management systems approach to determine areas of concern and possible mitigation strategies. Of the environmental managers surveyed, 55.6% indicated this as a major role and, again, a small percentage of Health and Safety and Facility Management professionals indicated this as a role as well. In terms of raising environmental and social responsibility awareness, MacLean (2005) suggests environmental managers must understand the true importance of raising awareness of all key stakeholders, including other functional units within the firm, members of the supply chain, consumers, and local community members. Nearly 50.6% of environmental professionals considered this one of their major roles, and a small percentage of Health and Safety and Operations professionals indicated they had a role in raising awareness as well. This figure may indicate that these professionals could assume a larger role in this area. In implementing sustainable energy and resource use, Butler (2009) suggests that environmental managers play a multifunctional role and must use sustainable practices including more efficient processes and eco-friendly materials. 61.8% of environmental managers indicated that they play a major role in this area, and Facility Managers are the main collaborators because they can ensure that sustainability initiatives are implemented to lower energy use and that more sustainable materials are used. Professionals in other functional areas perceived a major role for environmental managers in considering market mechanisms to internalize the organization’s environmental costs and incorporating environmental protection into land development projects. For internalizing the cost of environmental matters, Panayotou (1994) suggests environmental managers serve the vital role of calculating true

environmental costs and should internalize this cost as part of the price charged to customers, essentially serving as the “full-cost accounting.” 81.5% of environmental managers indicate this as an area where they may play some role. Protecting the environment from land development projects is a critical task of environmental managers during mergers, acquisitions, and new development. Environmental due diligence requires that proper environmental assessments are completed prior to any transactions or new construction. Due diligence allow environmental managers to outline all the possible environmental ramifications from the firm’s proposed actions and determine necessary changes to remediate or eliminate the possible impacts (Wallace 2010). The majority of environmental managers did not indicate this as a major role in the surveys; however, 76.0% indicated an involved role.

VIII. cOncLuSIOnS

The environmental manager’s roles and responsibilities have been evolving from a traditional focus on regulatory compliance, as well as pollution prevention and control, to a larger role in the organization’s pursuit of environmental sustainability and social responsibility. In this study, the literature supports the survey results indicating that environmental managers can play a major or involved role in a wide range of environmental sustainability and social responsibility initiatives. Environmental managers identified a major or involved role in 18 of the 35 action items. However, environmental managers were only perceived by professionals in other functional units as playing a major or involved role in 4 of the 35 action items. This perceived role is inconsistent with the environmental manager’s role expressed in the literature and self-indicated by environmental managers in the survey. This study suggests that environmental managers


are underestimated and may be underutilized within their organization. Environmental managers should have a prominent role in an organization’s pursuit of environmental sustainability and social responsibility; however, professionals in all functional units should have a formal role in these efforts. Partnering with these professionals may serve as an opportunity for raising environmental and social responsibility awareness. For environmental managers to fully perform their responsibilities, they must break down barriers within the organization to join forces with the numerous functional units with which they interact (Friedman 1992). The survey results suggest that environmental managers could collaborate with:

• health and safety, operations, and facility management functional areas to complete many pollution prevention, sustainable resource use, and climate change-related action items;

• health and safety, operations, and human resources functional areas on matters related to health and safety at work and employee skills development;

• purchasing professionals on supplier selection and development activities;

• operations and health and safety professionals on consumer health and safety issues; and

• operations and human resources professionals on organizational governance issues related to ethics and stakeholder expectations.

The data did not show any ties to the legal, marketing, or product and process design functional areas. In addition, there were no conclusive indications that any other functional areas would take a supporting role in action items related to

community involvement, sustainable consumption, incorporating environmental protection into land development projects, or considering market mechanisms to internalize environmental costs. However, opportunities for collaboration may exist and should be investigated further. Each organization should explore and clearly define the related roles of environmental managers and other professionals in relation to its sustainability and social responsibility objectives. In addition, further research on the relationships between various functional units should be conducted to further understanding of the potential roles of environmental managers and other professionals in advancing environmental sustainability and social responsibility.

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[26] - - -. “Professional Network Ready to Help Achieve Biodiversity Targets.” European Network of Environmental Professionals (ENEP) 2012 <http://www.efaep.org/news/article/80/>.

[27] Stannegard, L. “Flexible Couplings: Combining Business Goals and Environmental Concern.” Business Strategy and the Environment 9 (2000): 163-174 <http://www.environmentalmanager.org/wp-content/uploads/2007/12/flexible-couplings.pdf >.

[28] Wallace, M. “M&A Transactions: Are you Making These Costly Due Diligence Mistakes?” EHS Jour 2010 <http://ehsjournal.org/http:/ehsjournal.org/mark-wallace/ma-transactions-due-diligence-mistakes/2010/>.

[29] Winnebeck, K. H.” Today’s Environmental Mgr’s Toolbox: Evaluating the EHS Attributes of Products.” Jour of Environmental Sustainability 1 (2011) <http://www.environmentalmanager.org/wpcontent/uploads/2011/09/Article8Winnebeck1.pdf>





AppEndIX

core Areas Subcategories Action Items Environmental ManagerSelf-Indicated

Labor practices

Employment and Employment Relationships

Ensure work done for or on behalf of the organization is performed by legally employed

persons.(60.8%)

Conditions of Work and Social

Protection

Ensure that the conditions of work comply with national laws and regulations and are consistent

with relevant international labor standards.

(53.4%)


Ensure the protection of employee personal data and privacy. (53.2%)

human Rights

Due Diligence

Ensure that the organization’s policies and practices are free from bias or discrimination

based on race, color, gender, age, nationality or national origin, ethnic or social origin, caste, marital status, sexual orientation, disability,

health status, political affiliation or other bias.

(50.6%)

Due Diligence

Create and effectively implement the human rights policy throughout the organization,

including mechanisms to identify and address human rights abuses.

(60.2%)

Fair Operating practices

Fair Competition

Ensure the organization conducts its activities in a manner consistent with competition laws

and regulations and does not take advantage of social conditions, such as poverty, to achieve

unfair competitive advantages.

(60.3%)

Responsible Political

Involvement

Ensure transparency regarding the organization’s policies and activities related to lobbying and political involvement, and raise

the awareness of employees and representatives regarding political involvement.

(70.3%)

Anti-Corruption Develop and apply anti-corruption policies and practices. (68.4%)


Table 3: Action items for which environmental managers indicated a minor or negligible role.

core Areas Subcategories Action Items Environmental ManagerSelf-Indicated

Labor practices


Ensure work done for or on behalf of the organization is performed by legally employed

persons.(60.8%)

Conditions of Work and Social

Protection

Ensure that the conditions of work comply with national laws and regulations and are consistent

with relevant international labor standards.

(53.4%)


Ensure the protection of employee personal data and privacy. (53.2%)

human Rights

Due Diligence

Ensure that the organization’s policies and practices are free from bias or discrimination

based on race, color, gender, age, nationality or national origin, ethnic or social origin, caste, marital status, sexual orientation, disability,

health status, political affiliation or other bias.

(50.6%)

Due Diligence

Create and effectively implement the human rights policy throughout the organization,

including mechanisms to identify and address human rights abuses.

(60.2%)

Fair Operating practices

Fair Competition

Ensure the organization conducts its activities in a manner consistent with competition laws

and regulations and does not take advantage of social conditions, such as poverty, to achieve

unfair competitive advantages.

(60.3%)

Responsible Political

Involvement

Ensure transparency regarding the organization’s policies and activities related to lobbying and political involvement, and raise

the awareness of employees and representatives regarding political involvement.

(70.3%)

Anti-Corruption Develop and apply anti-corruption policies and practices. (68.4%)

consumer Issues

Consumer Data Protection

Limit the collection of personal data to information that is essential for the provision of

products and services.(63.5%)

Consumer Data Protection and

Privacy

Ensure the organization does not disclose, make available or otherwise use personal data for purposes other than those specified, except with the informed and voluntary consent of the

consumer or when required by the law.

(58.9%)

Privacy and Protecting

Consumers’ Health and Safety

Instruct consumers in the proper use of products and convey appropriate safety

information.(51.4%)

community Involvement

& development

Social InvestmentConsider promotion of community

development in planning social investment projects.

(77.8%)

HealthPromote good health by supporting community access to essential health care services, clean

water and appropriate sanitation.(58.3%)

Wealth and Income Creation

Consider the economic and social impact of entering or leaving a community, including impacts on basic resources needed for the

sustainable development of the community.

(70.3%)

Technology Development and

Access

Analyze the impacts of the organizations’ investment decisions on local employment. (83.8%)

Education and Culture

Promote cultural activities; respect and value local cultures and cultural traditions. (71.2%)

Promote and support education in the community, and engage in actions to improve

the quality of and access to education.(55.6%)

The Importance of Human Resource Management in Strategic Sustainability... 75

The Importance of Human Resource Management in Strategic Sustainability:

An Art and Science Perspective

AbSTRAcTStrategic sustainability is associated with significant business benefits as well as positive environmental impacts, yet many organizations fail to recognize the potential of this approach, and neglect the factors necessary for its successful implementation. This article recommends an art and science based approach to strategic sustainability and discusses the important role of Human Resource professionals in contributing to the success of this approach. A number of key areas of responsibility for the HR department in relation to strategic sustainability are discussed and the importance of a more proactive approach on the part of HR professionals is noted.

Harold SchroederSchroeder & Schroeder [email protected]

Key WoRdS

Art and Science, HR, Strategic Sustainability, Transformation

I. InTRoducTIon

According to a growing body of research evidence, many employers are struggling to incorporate sustainability in a strategic way into their business. For those that do so successfully, it is reported that the business benefits are often substantial, including an enhanced brand image resulting in increased sales, improved recruitment and retention, and greater efficiencies. When sustainability is adopted as a more peripheral or add-on way to core business, on the other hand, it often results in increased costs and can be seen as financial burden, and as a result can be readily abandoned due to economic pressures

in other areas of the business (Kruschwitz and Haanaes 87). In this article, I explain and recommend the use of an “art and science” approach to sustainability to help ensure that sustainability initiatives deliver both environmental and business benefits, and I highlight the important role of Human Resource (HR) specialists in this process. Although many functional areas of an organization are often involved in developing and implementing sustainability initiatives, HR specialists are uniquely placed to make a major contribution in this area due to the important people-related dimension of this type of initiative, as well as the range of art and science skills typically associated with the HR function itself. I outline some specific areas in which HR professionals can contribute to the achievement of sustainable business, and conclude by reflecting on progress and limitations in this area to date, and

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76 Journal of environmental Sustainability – Volume 2

the ways in which this professional group should position itself for a more central role as sustainability advocates and experts.

II. THe SuSTAInAbIlITy cHAllenge

International sustainability surveys (Aberdeen Group; Haanaes, Balagopal and Arthur) have found evidence of a significant gap between those organizations that have fully embraced sustainability and those who are adopting it more gradually and in a more peripheral way. While most organizations now recognize the business benefits of sustainability, the more “cautious adopters” (Kruschwitz and Haanaes 4) are struggling to measure these and are not yet gaining a competitive advantage from their sustainability initiatives in the way that the first group are. Among the organizations that have successfully adopted sustainability in a strategic way into their core business, the reported benefits include greater efficiencies, the ability to innovate, increased profits and business growth (The Aberdeen Group 22; Haanaes, Balagopal and Arthur 78). What often goes unrecognized is that, like other business projects, sustainability initiatives require a good mix of art and science to be successfully implemented and achieve their desired outcomes. In order to generate business as well as environmental benefits from a sustainability initiative, a transformative approach is required in which sustainability principles are incorporated into all areas of the organization, and workplace norms and behavior are modified to reflect these. Unfortunately, organizational transformations in general typically have high failure rates (Economist Intelligence Unit 5; IBM 14), and it is becoming increasingly evident from research that this can largely be attributed to a neglect of the people-related aspects of change. In the area of sustainability, projects and goals are often established without due

consideration to the likely impact on employees and what will be required of them to ensure the success of the initiative. Further, sustainability initiatives are often launched without the levels of investment or the application of project management expertise and tools that would generally be allocated to other types of business project, which almost sets them up for failure from the outset. Moreover, research indicates that sustainability is still being given a relatively low priority on the executive agenda compared with other business issues (Kruschwitz and Haanaes 87), which suggests that there are low levels of awareness of its potential business benefits among organizational leaders, leading to a “vicious circle” scenario in which inadequate attention or resources are allocated to sustainability initiatives. In one international survey of more than 4,700 executives and managers from a wide range of sectors, for example, only 28% reported that sustainability is a “core strategic consideration” in their organisation (Kruschwitz and Haanaes 89).

III. ART And ScIence In STRATegIc SuSTAInAbIlITy

As the above section highlights, becoming an environmentally sustainable organization represents good business sense if approached correctly, but many employers are adopting sustainability only as a peripheral or add-on project which is core to the business. When approached in this way, the sustainability program does not generally receive the level of investment or application of expertise and organizational tools necessary to ensure that it delivers the intended benefits – and project failure or termination is often the inevitable result, especially in the face of economic or workload pressures in other areas of the business. I recommend the adoption of an “art and science” approach to sustainability as the solution


to this problem and the best way of ensuring that sustainability is implemented in a way that will add measurable value to the business as well as delivering environmental benefits.

The Role of Art

In particular, there is a need to introduce a greater “art” dimension to projects in order to reduce the risks related to neglect of the people-related aspects of change. These are especially important in the context of sustainability because employees need to understand and be convinced of the need to implement the changes necessary for sustainable business, especially if these involve extra work and the benefits are intangible or only realized in the longer term. In general, the frequent lack of attention to art in organizational change can largely be attributed to the “science”-focused nature of the formal project management discipline, which originated in industries such as construction and IT in which people-related factors are of lower importance than in other sectors and organizational contexts. In the case of sustainability, however, the successful implementation of projects relies very much on the engagement and involvement of employees throughout the organization, and securing this requires a range of skills and attributes not traditionally given high importance in project management compared with the “science” skills involved, for example, in developing a project budget, work breakdown schedule and risk management plan. The importance in sustainability of the “soft” skills of managers and leaders was highlighted in a 2010 survey carried out by the International Society of Sustainability Professionals, with the most important being identified as including the ability to influence, inspire and motivate others, excellent communication skills and team-building abilities

(Johnson 30). The importance of communications in sustainability cannot be under-estimated – a good communications strategy is needed to generate organizational learning about sustainability and about the objectives and intended benefits of the initiative to all stakeholders, and to monitor and report on progress in order to highlight the benefits and encourage all to work together to achieving its goals. It is not only necessary to convince staff about the need for sustainable working practices and address their concerns; senior executives also often need to be persuaded to give their support to the program and commit the necessary financial and non-financial resources to ensure its success. This requires sustainability champions who understand and are skilled in communicating the business benefits to senior executives and negotiating adequate investment to underpin its implementation. Other types of art skills especially important in strategic sustainability, identified from a review of the sustainability literature by Smith and Sharicz, include having a questioning, innovative and creative approach to business; the ability to build internal and external relationships and partnerships with stakeholders; strategic awareness and the ability to balance local and global perspectives, and emotional intelligence (77).

The Role of Science

All this is not to suggest that only art skills are important in the implementation of strategic sustainability, a range of “science” skills are equally important and it is achieving the right combination of art and science that is fundamental to the success of any sustainability initiative. The “science” related aspects of project management in general consist of the application of formal methods, tools and techniques in order to achieve project objectives, for example in the areas of planning, budgeting, risk management, quality control and performance measurement.


In the context of strategic sustainability, there will be a need to apply science skills from the outset in systematically reviewing current operations and practice in order to identify areas where the business can become more sustainable and what this will involve, and to develop specific sustainability goals and performance criteria. There is also a need for the application of established project management tools and techniques to scope projects and develop detailed specifications, formulate detailed implementation plans at organizational and departmental level, and determine resource requirements and the breakdown of responsibilities and required inputs. Sustainability project managers need to be able to estimate resource requirements, develop a budget and use techniques such as stakeholder analysis and risk analysis to maximize the likelihood of successful outcomes and minimize both inefficiencies and possibility of project failure. Additionally, they need to develop and implement performance measurement systems that can monitor and demonstrate program performance and return on investments, and convey the results in ways that will be meaningful and inspiring to stakeholders at all levels of the organization.

Combining Art and Science for Transformation

Achieving the right balance of art and science is the key to successful sustainability, as in the case of other organizational transformation projects, a point which is supported by the research evidence. International employer surveys (Haanaes, Balagopal and Arthur; Kruschwitz and Haanaes) have revealed that the organizations generating a competitive advantage from their sustainability initiatives were most likely to be exhibiting both an analytical approach to sustainability, including the development of a formal business case as well as the use of scenario planning and strategic analysis, as well as a shift in organizational culture with an increased emphasis

on intangible and qualitative business goals such as enhanced innovation and creativity. Indeed, strategic sustainability requires a “transformative” approach involving not just extensive changes to business processes and strategy but a significant change in mindset and corporate culture, particularly involving a shift in focus from traditional financial or quantitative indicators of business success to social and environmental indicators as well as the more intangible, qualitative factors such as improved awareness of and attitudes towards the company brand. This involves the application of both “art” and “science” perspectives, or what might also be referred to as “right brain” and “left brain” thinking, respectively.

IV. THe cenTRAl Role of HR PRofeSSIonAlS In SuSTAInAbIlITy

Among all functional and professional groups within an organization, HR specialists in particular can be singled out as being best placed to take on a central role in the art and science approach to sustainability. A number of key areas in which HR input is needed or in which HR specialists can potentially add value to the sustainability initiative can be identified as follows.

Raising Awareness and Promoting Dialogue

Awareness and understanding of environmental sustainability and related issues among all employees is essential for securing their engagement in and commitment to the sustainability initiative, and in developing the types of approaches and values necessary for sustainable business. The HR department with its responsibility for training will ideally be centrally involved in the development and delivery of training programs and awareness-raising materials to meet these needs, especially


since the learning requirement spans all functional areas. Events and media used to raise awareness of environmental and sustainability issues may include seminars and workshops specially tailored to the requirements of the organisation, as well as newsletters or other literature, or electronic learning resources available via the organizational intranet. One of the main objectives of interactive training events should be to promote understanding of how environmental sustainability can be achieved within specific areas of the organization, and the roles and responsibilities of individual employees in relation to this. As Colbert & Kurucz (28) and Rimanoczy & Pearson (15) highlight, HR has an important role to play in designing these to facilitate the dialogue needed to achieve this understanding, which is in turn likely to promote the sense of a community working towards shared goals, itself associated with enhanced employee engagement and other organizational benefits.

Provision of Art and Science Skills and Expertise

Overall, the HR department is responsible for ensuring that the organization possesses the right levels and combination of art and science skills necessary for successful implementation of strategic sustainability, which can be achieved either through training and development of existing employees, or recruitment. The department should take the lead in conducting an organization-wide review of skills and expertise in order to identify current strengths as well as gaps that need to be addressed, and also to ensure that the right individuals are allocated to key roles in the development and implementation of the sustainability initiative. In doing so, the department will need to work closely with organizational leaders as well as department heads to secure the necessary levels of investment in training and recruitment, and the co-operation necessary to change or modify the jobs of

individuals selected for key roles in the sustainability initiative. HR professionals will themselves need to demonstrate strengths in science as well as art skills in order to achieve these objectives including the ability to accurately estimate the budget requirements for training and recruitment and to help build a robust business case for sustainability, as well as the communications and negotiation skills necessary to convince senior executives and managers of the need for these.

HR Policies and Procedures

In order to successfully deliver the art and science skills needed for strategic sustainability, there may also be a need for the HR department to redesign its own policies and processes, especially relating to performance management, rewards and recognition, and recruitment and selection processes. There are two main objectives: first to ensure that the policies and processes are designed to provide the organization with the required mix of art and science skills for strategic sustainability, and second to ensure that sustainability-related factors are incorporated in organizational competencies and in individual, team and departmental plans and goals. It might be argued that, traditionally, staff selection and performance appraisal procedures have been focused primarily on the assessment of “science” skills, such as formal knowledge and experience of the techniques used in a particular area of work, while the softer “art” or people-related skills have been explored less systematically. As discussed earlier, art skills are highly important in the achievement of strategic sustainability; but it is also becoming increasingly evident that both art and science are required in most jobs and should be reflected as such as job descriptions and core competencies. Widespread organizational benefits can then be expected to ensue from a redesign of selection and assessment systems to ensure that both


art and science skills are being properly evaluated. Doing so may involve, for example, an increased reliance on more qualitative or holistic methods in recruitment and performance evaluation, such as in-depth interviews or the use of 360 degree appraisals to complement more structured knowledge tests. Incorporating specific sustainability-related goals into job descriptions and core competencies will also help to ensure that employees are motivated to work towards sustainability goals and that these receive similar levels of attention as any other criteria against which individuals and teams are formally assessed. They should be linked to the organisation’s rewards and recognition systems, including for example performance-related pay systems, promotion eligibility criteria, or “employee of the month” schemes (Daily and Huang 1548). These types of reward systems might also be used to reinforce a direct emphasis on sustainability, for example by introducing some form of “sustainability award” for outstanding achievements in this area. More generally, as Colbert & Kurucz observe, HR strategy and processes are instrumental in supporting the implementation of new business directions, such as sustainability, not only by ensuring that the right skill and expertise are available, but by promoting the development of “organizational capital” such as good teamwork, employee empowerment and a positive culture (28). These are likely to evolve as the art and science skill balance of the organization improves, but can also be stimulated by the use of specific types of training such as brainstorming sessions, teambuilding events and consensus-building workshops

Socially Responsible Employment

It can be argued that sustainability begins “at home” and that being a socially responsible employer goes hand in hand with being an environmentally sustainable organization, since a company is likely

to be judged on its corporate social responsibility performance overall. HR specialists can ensure that the organization and its suppliers comply with or exceed employment standards and provide favourable terms and conditions of employment to their staff and contractors (Glade; Rimanoczy and Pearson 14). They can act as source of information, guidance and support both to the parent organization and its supply chain participants on how to be social responsible employers, and arrange training in this area if necessary. In general, high quality HR policies and practices integrated with business and sustainability goals are likely to promote positive employee-related outcomes such as improved morale, increased engagement, higher productivity and improved retention (Meisinger 8; Schramm 88; Wilkinson, Hill, and Gollan 1497) and improve the company’s brand image which in turn is likely to increase sales and increase the organization’s attractiveness to potential recruits. On this point, HR professionals should also ensure that the organization’s sustainability policy and achievements to date are included in marketing and recruitment strategies and materials (Colbert and Kurucz 28).

Sustainability Champions and Change Management Specialists

The types of art and science skills already held by many HR specialists and needed in their day to day work make them ideally suited to take on key roles – either on a full- or part-time basis - in the development and implementation of sustainability initiatives. There is evidence from previous research that companies with dedicated sustainability leaders tend to exhibit stronger sustainability performance and gain greater business benefits from their initiatives (Aberdeen Group 3). Such leaders may a central


role in driving progress towards sustainability goals through collaboration and communication with internal and external stakeholders and in ensuring that sustainability stays firmly on the core business agenda. HR professionals are usually skilled communicators and effective negotiators, with high levels of people acumen but also an astute understanding of business needs and how best to develop a company’s human resources to meet these. The nature of HR work also requires expertise in planning, budgeting, risk management and a range of other science-related skills. Few other professional groups exhibit such a strong combination of the art and science skills that are also essential for driving progress towards sustainability objectives.

Performance Measurement

Finally, it will be crucial to monitor and measure progress towards the organizational sustainability goals, in order to highlight and capitalise in business terms on their achievements, reveal areas where improvements are needed, and demonstrate the return on investment of various measures and activities such as training courses or recruitment for sustainability-related posts. Overall, this will require an art- and science- approach to capture the tangible and non-tangible dimensions of performance in sustainability, including for example energy efficiencies and a reduction in waste, as well as the changing attitudes and behavior of employees. HR professionals will need to play a central role in relation to the performance measurement of employee-related aspects of sustainability, by developing appropriate metrics and designing and implementing data collection methods and tools. These might include, for example, the analysis of recruitment data as well as the design and implementation of staff surveys and interviews to measure or explore changing attitudes towards

environmental issues and their impact on workplace behavior.

V. concluSIon

To date, HR professionals have not been centrally involved in sustainability initiatives to the extent that their skills and expertise can contribute real value in the ways outlined above (Harmon, Fairfield, and Wirtenberg 17). A likely reason for this is that many organisations are not yet approaching sustainability in a strategic way, or acknowledging the need for the sort of art- and science-based approach which HR professionals are ideally placed to support. The available evidence suggests that there is little consensus about which functional area of an organization should lead its sustainability initiative, and this is likely to be one of the weaknesses that may undermine an organization’s approach to sustainability and perhaps even result in its demise. However, researchers in this area have argued that this HR professionals as a group also need to become more proactive in understanding business trends, opportunities and risks in the area of sustainability, as well as the perspectives and concerns of relevant internal and external stakeholders and how to ensure that these are effectively engaged in the strategy Harmon, Fairfield, and Wirtenberg 17). This understanding can then be converted into HR policies and processes designed to support strategic sustainability and generate business benefits which will help convert even the most skeptical stakeholders to the cause. In other words, HR specialists need to become advocates of as well as experts in sustainability, and business partners to senior executives in its overall implementation.


VI. RefeRenceS

[1] Aberdeen Group. The Sustainable Supply Chain. Author, 2010. Retrieved from http://www.aberdeen.com/Aberdeen-Library/6676/RA-supply-chain-sustainability.aspx

[2] Colbert, Barry A. and Elizabeth C. Kurucz. “Three Conceptions of Triple Bottom Line Business Sustainability and the Role for HRM.” People and Strategy 30, 1 (2007): 21-29.

[3] Daily, Bonnie F. and Su-chun Huang. “Achieving Sustainability through Attention to Human Resource Factors in Environmental Management.” International Journal of Operations & Production Management 21, 12 (2001): 1539-1552.

[4] Economist Intelligence Unit. The Burning Platform: How Companies are Managing Change in a Recession. Author, 2009. Retrieved from http://www.celerantconsulting.com/Downloads/ResearchReviews/Celerant%20-%20EIU_Burning%20platform.pdf

[5] Glade, Brian. “Human resources: CSR and Business Sustainability – HR’s Leadership Role.” New Zealand Management [online]. Retrieved from http://www.management.co.nz/Editorial.asp?eID=32475&Wcat=69

[6] Haanaes, K., Balagopal, B. and D. Arthur. “First Look: The Second Annual Sustainability & Innovation Survey.” MITSloan Management Review, 52, 2 (2011).

[7] Harmon, Joel, Fairfield, Kent D and Jeana Wirtenberg. “Missing an Opportunity: HR Leadership and Sustainability.” People and Strategy, suppl. Special Issue: Transitioning to the Green Economy 33, 1 (2010): 16-21.

[8] IBM Corporation. The Enterprise of the Future: IBM Global CEO Study 2008. Author, 2008. Retrieved from www.ibm.com/enterpriseofthefuture.

[9] Johnson, D. “Sustainability: Spin or Substance? “ ISHN.com 45, 5, 1 (May

2011): 28-30.[10] Kruschwitz, N. and K. Haanaes. “First

Look: Highlights from the Third Annual Sustainability Global Executive Survey.” MIT Sloan Management Review 53, 1 (2011, Fall).

[11] Meisinger, Susan. “HR’s Role in Social Responsibility and Sustainability.” HRMagazine 52, 12 (2007): 8.

[12] Rimanoczy, Isabel and Tony Pearson. “Role of HR in the New World of Sustainability.” Industrial and Commercial Training 42, 1 (2010): 11-17.

[13] Schramm, Jennifer. “Promoting Sustainability.” HRMagazine 56, 3 (2011): 88.

[14] Smith, Peter, A.C. and Carol Sharicz. “The shift needed for sustainability.” The Learning Organization 18, 1 (2011): 73-86.

[15] Wilkinson, Adrian, Hill, Malcolm and Paul Gollan. “The sustainability debate.” International Journal of Operations & Production Management 21,12 (2001): 1492-1502.

http://www.aberdeen.com/Aberdeen-Library/6676/RA-supply-chain-sustainability.aspx



http://www.celerantconsulting.com/Downloads/ResearchReviews/Celerant%20-%20EIU_Burning%20platform.pdf




http://www.management.co.nz/Editorial.asp?eID=32475&Wcat=69

http://www.management.co.nz/Editorial.asp?eID=32475&Wcat=69

http://www.ibm.com/enterpriseofthefuture

http://www.ibm.com/enterpriseofthefuture

83

Why Invest in Energy Efficiency?The Example of Lighting

AbsTrAcTEnergy efficiency can be an interesting field for alternative investments. The main question is: Are these investments worthwhile? This article presents a new approach to evaluate the risks and achievable returns of energy efficiency investments via the example of lighting devices: To the author’s knowledge, cost equivalents have not been used to compare alternative solutions in the field of energy efficiency investments. The selection of optimal technology always depends on the intensity of use and on the expected rate of return. The primacy of compact fluorescent tubes is indisputable from a financial perspective. With the LED and Compact fluorescent lamps compared to incandescent light bulbs, depending on the daily use, an annual average 24-74% cost saving can be achieved. In case of spot lighting, LED light sources have been better than those observed in the case of illumination of a particular area, and in almost each tested case they held second place with only a minor lag in comparison with the compact fluorescent tubes.

Dávid Andor RáczCorvinus University of Budapest

[email protected]

KEywordsEnergy Efficiency, Green Investment, Cost Equivalent, NPV, LED

i. inTroducTion

Alternative investments are receiving more interest, as the financial and economic crisis has destroyed long-living investment fundamentals, and market participants are on the search for less risky though profitable investment opportunities outside equity markets. One interesting field is the opportunity in energy efficiency investments. While environmentalists, environmental economists and supporters of sustainable development have long disputed that these investments are inevitable,

their spread have not yet reached the critical mass. There is a long debate in the economic literature about whether these investments really do have significant positive returns and net present value, and if so, why are not they more widespread. Supposed obstacles against these investments include a lack of required information, and lack of ability to correctly assess them. In the analysis via the example of lighting devices a new approach (the use of cost equivalents) is proposed as a means to evaluate the risks and achievable returns of energy efficiency investments. The main question is: Are these investments worthwhile? One should not only focus on the achievable returns, but also on the arising risks, which are not always fully covered by the producer’s warranty.

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84 Journal of Environmental sustainability – Volume 2

The article is structured as follows:

1. Summary of Literature2. Analysis of energy efficiency investments

via the example of lighting devices3. Presentation of individual light sources4. Comparison of individual light sources5. Comparison of individual light sources in

case of spot lighting6. Summary

ii. summAry of LiTErATurE

In the summary of literature articles are presented which focus on the returns/net present value of energy efficiency investments and the anticipated obstacles that hinder their realization. Brounen et al (2012) states that about one-fifth of global energy consumption is caused by residential dwellings via heating, cooling and lighting. Energy efficiency in this sector is receiving more interest from scientists and policy makers addressing fossil fuel depletion and sustainable energy supply worldwide. In their article, the authors have examined Dutch households’ awareness and behaviour in connection with their residential energy expenditures. Results are surprising, as of the 1721 respondents just 56 percent in case of gas, and 47 percent in case of electricity were aware of their monthly energy bills. The authors called the ability to evaluate energy efficiency investments correctly - where one has to make a trade-off between long-term savings from energy efficiency and the upfront investment required to reach this development - “energy literacy”. They found that this factor is low among Dutch households, since only 60 percent of the sample was able to evaluate investment decisions in energy efficiency correctly. This was tested via a question, where respondents had to choose between two heating systems with both having a 15 years lifespan: one which has a cheap purchase price with

higher energy consumption and thus higher operating costs, and the other which is more expensive to purchase, but has lower energy consumption and lower operating costs. The data indicates that 40% of the consumers are unable to make rational decisions even if they are well informed. Alcott and Greenstone (2011) make a summary of the existing literature in the field of energy efficiency, and line up several articles proving that there are various occasions where energy efficiency investments have significantly positive net present values (McKinsey & Co. (2009), Brown et al. (2001)), ergo the gains of these investments are greater than the required costs, even when including the time value of money in the calculations. In contrast, Alcott and Greenstone (2011) also summon articles which are using experimental observations suggesting that there are unobserved costs and risks which reduce the possible gains through energy efficiency investments and thus in several cases remarkably lower the ex ante calculated returns, and in some occasions even make the net present value negative ex post (Anderson and Newell (2004), Blasnik (2010), Schweitzer (2005)). Some of the named obstacles facing the otherwise profitable energy efficiency investments were the following, according to Anderson and Newell’s analysis based on the energy audits for small- and medium sized enterprises provided by the U.S. Department of Energy: “lack of staff for analysis/implementation,”, “risk of inconvenience to personnel”, “suspected risk of problem with equipment”. Metcalf and Hassett (1999) estimated the distribution of returns from attic insulation in the U.S. population using nationally representative panel data. The estimated median and mean returns on investment were approximately 10 percent, and one-quarter of households had returns greater than 13.5 percent. Alcott and Greenstone made the conclusion that the unobserved costs, and the credibility of various analyses make it difficult to assess the net returns of

Why Invest in Energy Efficiency? The Example of Lighting... 85

the energy efficiency investments, they believe there are investment inefficiencies, but their magnitude is relatively small from policy makers’ viewpoint. They also highlight the heterogeneity of investment inefficiencies across the population, which requires targeted policies. Sandberg and Söderstrom (2003) investigated the required decision supports for energy efficiency investments through in-depth interviews with company representatives. Access to correct information, better follow-up activities, and transparent, understandable calculations are considered to be important. Hausman (1979) estimated a discrete choice model using 65 observations of consumer choices between air conditioner models, which vary in upfront cost and energy efficiency rating. The author found that the real implied discount rate is around 20 percent and it varies inversely with income. Brounen and Kok (2011) represent that the asymmetric information of the consumers can be reduced by providing the essential data on energy efficiency and consumption for example via energy labels of dwellings.

iii. AnALysis of EnErgy EfficiEncy inVEsTmEnTs ViA ThE ExAmpLE of LighTing dEVicEs

While asymmetric information, and the distortions derived from it can be handled via regulation and energy labels, the information assessment problem is another topic. In my analysis via the example of lighting devices I suggest a basic approach to evaluating the risks and achievable returns of energy efficiency investments. In residential dwellings, offices, factories, and common buildings the most widely realizable green investment from the smallest investment amount is the change of the lighting devices to a more efficient technology.

One of the most spread light source is the E27 screwed socket, 60 Watt incandescent light bulb. To construct the financial analysis as a first step all costs appearing during the use of the incandescent light bulb have been taken into account. The next step is the same calculations for its more energy efficient alternatives. The subjects of the analysis beside the incandescent light bulbs, were its equivalents, which provided comparably same amount of light: the halogen light bulb, the compact fluorescent light and the LED light source. In the analysis, prices form the Hungarian domestic market have been used and converted to USD with an exchange rate of $220 USD/HUF. To calculate the costs of the operation a gross 47 HUF ($0.2136 USD) per kWh residential electricity price has been used for the entire lifecycle of the equipment. We face a 30-year lifespan for the LED light sources in the case of an average daily usage of 1-hour. For quite a long time the price of the electricity has been uncertain. The trends until today make price elevation more probable then price fall. The assumption of constant electrical prices seems to be the best estimation due to the huge uncertainty. Although it has to be mentioned, that in the case of price elevation the cost benefits of the energy saving light sources will rise compared to the less energy efficient ones. Expenses have been calculated on a monthly basis taking into consideration all the arising hours of monthly operations, the electricity prices, as well as the upfront costs. In case of procurement expenses, the assumption has been made that the prices of the equipment will not change in the future and that the replacement of the light sources are made at the end of that month in which the operation hours do not exceed the theoretical lifespan. The alternative light sources have different upfront and operation costs, and highly different lifetimes. To accurately compare the alternative light sources’ total cost over their lifecycle, one should compute the yearly cost-equivalents. The simplest


method to compute this value is to calculate the present value of all accruing costs for the lifespan of the light source (1) and then to divide it with the appropriate annuity-factor (2). With this operation we distribute the present value of total costs to the particular years so that every year has the same amount. Ergo the yearly cost-equivalents (3) will give the annual yearly expenses on an average in present value for the analyzed devices. This way the expenses of the alternative technologies can be compared to each other properly, and cost savings can be determined relative to the incandescent light bulb which has been considered the starting point. It is important to note, that in reality the costs are not divided evenly among the years. The bigger the procurement costs are, the bigger savings of electricity expenses are needed via energy efficiency during the lifespan of the light equipment, to achieve the initial extra investment’s pay-off while taking money’s time value into account.

In the first table a fragment of present value cost calculations can be seen beside a daily average 1 hour of operation and 5% alternative rate in the case of an incandescent light bulb and a halogen light bulb. In the Sum of operation hours column, the month in which the light source reaches the end of its lifespan with monthly 30 hour usage can be observed. This shows the month when the equipment needs to be replaced. In this example the incandescent light bulb’s replacement is necessary in the 33rd month. On the other hand the halogen light bulb will only end its theoretical operation in the 66th month, which though is not shown in the table due to lack of space. In the 6th and 7th column the present value of the monthly costs can be seen. In the next two

columns, are the present value of total costs required for the determination of the discounted payback time. In the case of the halogen light bulb the extra procurement investment’s discounted payback time is 18 month. The present value of total costs will be divided with the appropriate annuity-factor to calculate the cost-equivalent (see table 1).

iV. prEsEnTATion of indiViduAL LighT sourcEs

The 60-Watt incandescent light bulb will be the benchmark and it will be compared with alternative technology light sources which provide as identical amount of light as possible.

Incandescent light bulb

The E27-socket, 60-Watt incandescent light bulb, in accordance with its name, uses 60 Watts of electric power per hour. Light is produced when the electric current passes through and a Wolfram fibre glows, a process by which the great majority of the electricity used is converted into heat, and only 5 - 10% into light. The 60-Watt incandescent light bulb features 630-710 lumen light output1, thus the utilization of light is 10-12 lumen/Watt.

Figure 1: E27-socket, 60-Watt incandescent light bulb2

1 http://www.argep.hu/trend/60WI/60W-izzo.html2 http://commons.wikimedia.org/wiki/File:Gluehlampe_01_KMJ.jpg

http://www.argep.hu/trend/60WI/60W-izzo.html

http://commons.wikimedia.org/wiki/File:Gluehlampe_01_KMJ.jpg


Sum of operation hours

Monthly operation hours

Month Incandescent 60W costs

Halogen 42W costs

Edison 60W present value of monthly costs

Halogen 42W present value of monthly costs

Incandescent 60W present value of total cost

Halogen 42W value of total cost

0 0.32 2.27 0.32 2.27 0.32 2.2730 30 1 0.38 0.27 0.38 0.27 0.70 2.5460 30 2 0.38 0.27 0.38 0.27 1.08 2.8190 30 3 0.38 0.27 0.38 0.27 1.46 3.07120 30 4 0.38 0.27 0.38 0.26 1.84 3.34150 30 5 0.38 0.27 0.38 0.26 2.22 3.60180 30 6 0.38 0.27 0.38 0.26 2.59 3.87210 30 7 0.38 0.27 0.37 0.26 2.97 4.13240 30 8 0.38 0.27 0.37 0.26 3.34 4.39270 30 9 0.38 0.27 0.37 0.26 3.71 4.65300 30 10 0.38 0.27 0.37 0.26 4.08 4.91330 30 11 0.38 0.27 0.37 0.26 4.45 5.16360 30 12 0.38 0.27 0.37 0.26 4.81 5.42390 30 13 0.38 0.27 0.36 0.26 5.18 5.67420 30 14 0.38 0.27 0.36 0.25 5.54 5.93450 30 15 0.38 0.27 0.36 0.25 5.90 6.18480 30 16 0.38 0.27 0.36 0.25 6.26 6.43510 30 17 0.38 0.27 0.36 0.25 6.62 6.69540 30 18 0.38 0.27 0.36 0.25 6.98 6.94570 30 19 0.38 0.27 0.36 0.25 7.34 7.18600 30 20 0.38 0.27 0.35 0.25 7.69 7.43630 30 21 0.38 0.27 0.35 0.25 8.04 7.68660 30 22 0.38 0.27 0.35 0.25 8.39 7.93690 30 23 0.38 0.27 0.35 0.25 8.74 8.17720 30 24 0.38 0.27 0.35 0.24 9.09 8.42750 30 25 0.38 0.27 0.35 0.24 9.44 8.66780 30 26 0.38 0.27 0.35 0.24 9.79 8.90810 30 27 0.38 0.27 0.34 0.24 10.13 9.14840 30 28 0.38 0.27 0.34 0.24 10.47 9.36870 30 29 0.38 0.27 0.34 0.24 10.82 9.62900 30 30 0.38 0.27 0.34 0.24 11.16 9.86930 30 31 0.38 0.27 0.34 0.24 11.50 10.10960 30 32 0.38 0.27 0.34 0.24 11.83 10.33990 30 33 0.70 0.27 0.61 0.24 12.45 10.57

Table 1: Comparing incandescent light bulb to Halogen light bulb for 1 hour operation on a daily average ($ USD)


A 60-Watt incandescent light bulb can be purchased for gross price $0.32 USD, and its life-span is 1,000 hours of operation. Calculating with gross power price of $0.2136 USD/kW and the 60-Watt consumption means a cost of $0.0128 USD per hour. Beside a daily 1-hour use and 7% of alternative rate of return, taking into consideration the procurement cost as well, the annual equivalent cost can be determined, which can be considered as the average annual cost of operation, or, in case of financing via lease, the annual lease fee. In this case the operation of the bulb costs an average of $4.89 USD per year.

Halogen bulb

The halogen bulb can be considered as an improvement of the incandescent bulb. In this type of bulb there is a small quantity of halogen in the surrounding medium of the filament, and as a result it induces a halogen circuit between the Wolfram fibre and the halogen allowing the filament to operate more effectively at higher temperatures. In comparison with the incandescent bulb a 30% energy saving can be achieved. The 42-Watt, E27-socket halogen bulb lumen features 550-630 lumen light output3, thus the utilization of light is 13-15 lumen/Watt.

3 http://www.landlite.hu/content.php?kategoria=fenyforras&csoport=halogenizzo&alcsoport=ECOHAL

http://bolthely.hu/tungsram/id/01105____Normal_halogen_izzo_HaloGLS_230V__42W_E27__60W_

Figure 2: E27-socket 42-Watt halogen bulb4

A 42-Watt halogen bulb can be purchased for gross price $2.27 USD, and its life-span is 2,000 hours of operation. The 42-Watt consumption means a cost of $0.00896 USD per hour for the user. Beside a daily 1-hour use and 7% of alternative rate of return, taking into consideration the upfront cost as well, the average annual cost of operation is $3.84 USD per year.

Compact fluorescent

A compact fluorescent tube filled with low-pressure gas can be screwed into an E27 lamp socket, in which, as a result of the electric current, gas begins to glow. Usually it is filled with mercury vapour that emits UV light and which by generating the light dust on the fluorescent wall produces visible light. In comparison with the incandescent light bulb an 80-percent energy saving can be achieved. The 11-Watt, E27-socket compact fluorescent tube features

4 http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/halogen-lampak/halozati-feszueltsegue-halogenek-reflektor-nelkuel/ecoclassic-a-shape/37652/cat/

http://www.landlite.hu/content.php?kategoria=fenyforras&csoport=halogenizzo&alcsoport=ECOHAL

http://www.landlite.hu/content.php?kategoria=fenyforras&csoport=halogenizzo&alcsoport=ECOHAL



http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/halogen-lampak/halozati-feszueltsegue-halogenek-reflektor-nelkuel/ecoclassic-a-shape/37652/cat/




600-700 lumen light output5, thus the utilization of light is 55-63 lumen/Watt.

Figure 3: E27-socket 11-Watt compact fluorescent tube6

An 11-Watt good quality compact fluorescent tube, whose life-span is therefore 10,000 hours of operation and has high light output, can be purchased for gross price $9.09 USD. The 11-Watt consumption means a cost of $0.00235 USD per hours for the user. Beside a daily 1-hour use and 7% of alternative rate of return, taking into consideration the procurement cost as well, the average annual cost of operation is $1.62 USD per year.

LED light source

The light emitting diode is made of semiconductor

5 http://www.argep.hu/trend/KOMP/Kompakt-fenycsoe-E27-11w.html

6 http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/energiatakarekos-lampak/specialis-energiatakarekos-fenyforrasok/tornado-performance/37161/cat/#filterState=FG_LP_WATTAGE|range%3D5%2C13%3BFG_LP_CAPBASE|E27%3Dtrue%3BFG_LP_COLOR_TEMP|range%3D2700%2C6500

material whose electrons, as a result of the electric current, emit light. Due to its technical features one single LED diode can only emit light in a maximum of 120º angle7, contrary to the otherwise observed 360º-radiation angles of any other light sources. Because of this characteristic LED light sources can primarily be used competitively as point or spot lights. In spite of the above feature LED lighting manufacturers have made significant developments by building more light emitting diodes and placing miniature optical mirrors into a “bulb” in order to gain equal alternative lighting technique in consideration of both the light output and the radiation angle. A 12-Watt, E27 socket LED light source has a radiation angle of 300º, which features an 806 lumen light output8 and the utilization of light is 67 lumen/Watt.

Figure 4: E27-socket 12-Watt LED light source9

For a 12-Watt LED-lamp manufacturers provide 25,000 hours of operation and a maximum 3-year warranty10. LED light sources feature a very long

7 http://www.anrodiszlec.hu/article_info.php/articles_id/708 http://www.argep.hu/trend/PHIL/Philips-e27-led-12w.html9 http://www.ecat.lighting.philips.hu/l/professzionalis-

fenyforrasok/led-vilagitasi-rendszerek/led-fenyforrasok/master-led-lampak/929000182402_eu

10 http://www.lighting.philips.com/main/connect/tools_literature/warranty-policy.wpd

http://www.argep.hu/trend/KOMP/Kompakt-fenycsoe-E27-11w.html

http://www.argep.hu/trend/KOMP/Kompakt-fenycsoe-E27-11w.html

http://www.anrodiszlec.hu/article_info.php/articles_id/70

http://www.argep.hu/trend/PHIL/Philips-e27-led-12w.html

http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/led-vilagitasi-rendszerek/led-fenyforrasok/master-led-lampak/929000182402_eu



http://www.lighting.philips.com/main/connect/tools_literature/warranty-policy.wpd

http://www.lighting.philips.com/main/connect/tools_literature/warranty-policy.wpd


time to remain operative since their components rarely fail to the extent that they could not continue to light up. Instead, as time goes by, the intensity of their brilliance reduces, so in case of LED light sources life-span does not mark hours of operation during which the product is expected to remain operative, but it marks hours of operation where the brilliance falls to 70 % of the initial value11. In case of this lamp manufacturers provide 25,000 hours of operation as the time of the 70% reduction in light output. Then light output is 806*0,7= 564 lumen, which is 10% less than the 60-Watt incandescent bulb’s light output, yet further continuous operation can be assumed, however a slow deterioration in performance occurs. Calculating conservatively the assumption will be used that a LED lamp can operate over 18,000 hours of operation without error and then the value of light output is 806*(1-18000/25000*0.3)=632 lumen, which is still comparable with the alternative light sources. The analysed LED-lamp can be purchased for gross price $64.77 USD. The 12-Watt consumption means a cost of $0.00256 USD per hour for the user. Beside a daily 1-hour use and 7% of alternative rate of return, taking into consideration the initial cost as well, the average annual cost of operation is $5.65 USD per year.

V. compArison of indiViduAL LighT sourcEs

To the question “Which is the cheapest source of light?” an unambiguous and correct answer can be given only in case it is clarified, that, calculating on a daily basis, how many hours the light sources expectedly will be used as well as the extent of the alternative rate of return shall also be taken into consideration. The applied present value and rate of return calculation, for simplicity, has been

11 h t t p : / / w w w. 4 s h a r e d . c o m / o f f i c e / W I n j 8 G 9 n /Understanding_power_LED_lifeti.html

calculated with horizontal yield curve. I considered as base case the 7% of alternative rate of return; however, I carried out calculations for 5%, 6%, 8% and 9%, so that the magnitude of the effect of the expected rate of return could be illustrated. In Table 2 cases depending on daily use of hours have been analysed separately and in a relevant sub-case the lowest operating cost of a given light source has been marked in green, in blue is the next best choice shown, in white is the third and in orange is the fourth case, thus the most expensive choice of a given case. For a daily 1-hour use the best choice is a compact fluorescent tube and the second best one is halogen bulb. The high upfront cost can explain why LED light source “returns” its price only beside an expected 5% of rate of return, and only then is able to outpace the incandescent light bulb and to come up to the podium as the third one. In case of higher interest rates it will be only the fourth one. It can be said that the higher the expected rate of return is the less worth is investing in expensive light sources. For a daily 2-hour use the best choice is still a compact fluorescent tube. Then, supposing that the alternative rate of return is not higher than 7%, LED lamp comes up to the second place outpacing halogen bulb. However, if the expected rate of return is higher than 7%, halogen bulb comes up to the second place while LED light will be only the third one. Incandescent light bulb, beside a daily 2-hour use, is no longer able to compensate higher operating costs with its lower initial cost, therefore on the examined rate of return levels it has become the last. From a daily 3-hour use to a daily 6-hour use, taking cost effectiveness sequence into consideration, a compact fluorescent tube is the best choice, which is followed by LED light source; then the third best choice is a halogen bulb while incandescent bulb is worse than the latter (see table 2).

http://www.4shared.com/office/WInj8G9n/Understanding_power_LED_lifeti.html

http://www.4shared.com/office/WInj8G9n/Understanding_power_LED_lifeti.html


Yearly cost equivalent ($ USD)Hours of operation Alternative

rate (r)Incandescent light bulb

Halogen light bulb

Compact fluorescent

LED light source

Dai

ly 1

hou

r

5% 4.85 3.78 1.48 4.496% 4.87 3.81 1.55 5.067% 4.89 3.84 1.62 5.658% 4.91 3.87 1.70 6.259% 4.94 3.90 1.78 6.87

Dai

ly 2

hou

rs

5% 9.68 7.50 2.66 6.486% 9.73 7.55 2.72 6.967% 9.77 7.60 2.79 7.468% 9.81 7.64 2.86 7.989% 9.86 7.69 2.94 8.52

Dai

ly 3

hou

rs

5% 14.52 11.23 4.16 8.656% 14.58 11.29 4.23 9.107% 14.65 11.35 4.31 9.568% 14.72 11.41 4.39 10.049% 14.78 11.47 4.47 10.53

Dai

ly 4

hou

rs

5% 19.36 14.95 5.05 10.876% 19.44 15.03 5.12 11.307% 19.53 15.11 5.19 11.758% 19.62 15.19 5.27 12.219% 19.70 15.26 5.34 12.68

Dai

ly 5

hou

rs

5% 24.19 18.67 6.26 13.116% 24.30 18.77 6.33 13.547% 24.41 18.86 6.41 13.988% 24.52 18.96 6.49 14.439% 24.62 19.05 6.57 14.89

Dai

ly 6

hou

rs

5% 29.38 24.90 7.46 15.366% 29.51 25.02 7.54 15.797% 29.64 25.13 7.62 16.238% 29.77 25.24 7.71 16.689% 29.90 25.35 7.79 17.14

Table 2: Average yearly cost equivalents of the light sources depending on the average daily operating hours and alternative rate


It can be concluded that together with the increase in the daily hours of operation the relative advantage of the longer lasting light sources also increases in comparison with the short life-span ones. For example, beside a 7% alternative rate of return a daily 3-hour operation of the incandescent bulb is at an annual average of $14.65 USD and then the LED light source is at an annual average of $9.56 USD, consequently incandescent light bulb is nearly 35% more expensive to operate. In case of a 6-hour daily operation the annual cost equivalent of the incandescent bulb is $29.64 USD, while LED’s is $16.23 USD, thus the difference increases up to 45%. Similarly, with the increase in the daily hours of operation the difference between a LED light source and a compact fluorescent tube will reduce; and it shall also not be forgotten that a LED light source, after its operating time applied in the analysis, theoretically remains usable between 18,000 and 25,000 hours of operation and can be used instead of lower intensity bulbs. In financial terms it can be said that money invested in technology with higher upfront cost will return only when it is used/illuminated relatively much. This, of course, does not mean to replace lighting with a more efficient one, then to use it as much as possible in order to regain our investment. One shall not forget that in fact no positive returns are obtained by investing in energy efficiency in the present, but we save ourselves from bigger negative rate of returns, thus from expenses in the future. But this claim is available only when in the new position our behaviour is not changed i.e. lighting is used the same way as it was used before the investment (rebound effect). In Table 2 an answer is given to the question that which light source at what cost can be best operated, from the aspect of the daily hours of operation and alternative rate of return, thus which one should be chosen when taking cost effectiveness into consideration.

However, before investment decision is taken, the individual is not only interested in the average cost of operation but he also might be interested in the size of the initial investment, in the discounted payback period, in the energy-saving and expected life-span of the light source. Based on the above written information comparison was carried out with the help of Table 3. LED lighting requires the highest investment being seven times more expensive than compact fluorescent tube costs, which fact can only partly be compensated by its longer life-span. Regarding the discounted payback period, independent of the expected rate of return and no matter how many hours of operation have been done, halogen bulb is always in the first place since the 30% energy-saving is achieved with a relatively low initial investment. Compact fluorescent tube is in the second place and LED light is the third due to the reasons mentioned above. In Table 3 from the values of the cost equivalents beside the 7% rate of return and certain hours of operation, when incandescent light bulb is replaced with other technologies the average annual cost-saving can be calculated, which can be considered as the rate of return of technology changing. In case of a daily 1-hour of operation a 66.8% saving is obtained if incandescent bulb is converted to a compact fluorescent tube. In case of changing for a halogen-bulb the cost advantage is 21.5%, while the application of LED lighting is not recommended in this case justifying with the cost side because its operation cost is higher by an annual 15.4% than that of the incandescent bulb’s. In case of a daily 2-hour of operation the cost advantage of the compact fluorescent tube is 71.4%, the LED’s 23.6% and the halogen bulb’s is 22.3%. The sequence, in accordance with Table 1, does not change if the hours of operation remain between 3 and 6 hours per day, only the cost advantage ratio of energy-efficient and long-life light sources increases.


Hours of operation

Halogen light bulb

Compact fluoresent

Led light source

Dai

ly 1

hou

r

Investment need in USD 2.27 9.09 64.77Discounted payback time in years (r=7%) 1.50 2.58 NALifespan 5.56 27.78 33.33Cost saving compared to incandescent light bulb in USD/year (r=7%) 1.05 3.27 -0.75Cost saving compared to incandescent light bulb percent (r=7%) 21.5% 66.8% -15.4%Energy saving compared to incandescent light bulb 30.0% 81.7% 80.0%

Dai

ly 2

hou

rs

Investment need in USD 2.27 9.09 64.77Discounted payback time in years (r=7%) 0.75 1.25 12.67Lifespan 2.78 13.89 16.67Cost saving compared to incandescent light bulb in USD/year (r=7%) 2.18 6.98 2.31Cost saving compared to incandescent light bulb percent (r=7%) 22.3% 71.4% 23.6%Energy saving compared to incandescent light bulb 30.0% 81.7% 80.0%

Dai

ly 3

hou

rs


Dai

ly 4

hou

rs


Dai

ly 5

hou

rs


Dai

ly 6

hou

rs


Table 3: Comparing the indicators of the different light sources relative to the incandescent light bulb


Although the risk of transition to another light source is elusive, since in case of new technologies we do not have enough experiences concerning failures, yet the discounted payback period is a good guidance. The halogen bulb with its 2,000-hour of operation exceeds the incandescent bulb’s with 1,000-hour of operation, and its discounted payback period, beside a daily 1-hour use, is not more than 1.5 years, so the chance of circumvention of our extra investment due to a failure is negligible. In case of a compact fluorescent tube and LED lighting for the better quality products manufacturers provide a 3-year warranty After reviewing the Table we can see that in case of a daily 1-hour of operation, which is considered as the least “safe” the discounted payback period of the compact fluorescent tube is 2.6 years, so the potential financial risk arising from failure is borne by either the manufacturer or the merchant instead of us. In case of LED lighting the 3-year warranty, in most cases, does not seem to be satisfactory in terms of secure return. In case of a 6-hour use the discounted payback period is 3.25 years, so if we do not want to bear any adverse financial implications of failures, investment

into LED lighting should only be done when it is intended to be used over 6 hours per day. The manufacturer’s warranty conditions shall also be taken into consideration when calculation is made. In case of the analysed LED lamp the manufacturer provides the 3-year warranty only if the annual hours of operation do not exceed an annual 4,000 hours, which means a daily 11-hour average use. It is important to mention that the mercury in the compact fluorescent tubes cannot be specified as an environmental friendly solution, and at the end of its life compact fluorescent tubes become hazardous waste whose management is a serious challenge. Accordingly, in case the importance of environmental considerations is as much essential as financial interests for the investor, it might be worth rethinking that depending on the hours of operation whether LED lighting, on the second place because of its cost, or halogen bulb should be chosen.

Vi. compArison of indiViduAL LighT sourcEs in cAsE of spoT LighTing

Figure 5: Spot lighting in case of a variety of technologies (from left to right: incandescent, halogen, compact fluorescent tube, LED lighting)


If we do not need a space be illuminated at an angle of 360º but just intend to highlight a particular area then the so-called spot lamps are recommended. In the previous chapter analysed E27-socket light sources have suitable versions for spot lighting and their light scatter is at an angle of 30-35º. LED lamps, due to their structure, are more effective for this scope of task. A LED light source, in this case, a 7-Watt-power spot light has been chosen12, which, because of the loss in brilliance and similarly to the first example, will be used for 18,000 hours of operation when its level of brilliance will have been reduced to the incandescent bulb’s brilliance level (see figure 513). In comparison with the base case there is a conspicuous change in the rise of LED lighting. Considering the tested daily hours of operation its performance is better than that of the incandescent bulb’s, and compared to a halogen bulb it drops behind only in case of a daily 1-hour use and if the alternative rate of return is at least 8% or higher, but in all other cases its implementation is better. In addition the relative advantage of the compact fluorescent tube contra LED lighting is reduced; however, the compact fluorescent tube technology wins in terms of cost. (see table 4) The cost advantage of energy-efficient technologies is more spectacular in this case than in the previous ones. The biggest change can be observed in the return period. LED light source’s

12 http://www.creoven.de/a-2142/?ReferrerID=1313 http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/

izzolampak/fenyvetoek-nr-r-par-e-a-p-pc-forma/reflector-diam-63-mm/37419/cat/

http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/halogen-lampak/halozati-feszueltsegue-halogenek-reflektorral/ecoclassic-reflector/925636044201_eu/

http://www.ecat.lighting.philips.hu/l/reflector/66176/cat/http://www.ecat.lighting.philips.hu/l/professzionalis-fenyforrasok/

led-vilagitasi-rendszerek/led-fenyforrasok/master-ledspot-par/929000174502_eu/

return is available in case of every tested hour of operation. Considering the 3-year period of warranty, in case of a daily 4-hour of operation LED lighting can be applied without any financial risk because this time its return period is 2.75 years. The changeover on the podium’s first two stages in the order of energy-saving shall be emphasised in favour of LED lighting. (see table 5)

Vii. summAry

In the analysis financial indicators, techniques, and considerations were presented to help the reasonable comparison of the initial extra investments, with cost savings arising later through energy efficiency via the example of lighting technique. Each case of application of alternative technologies can be rationally evaluated, and one can conclude whether an energy efficiency investment is worthwhile or not depending on the conditions of the case. The selection of optimal technology always depends on the intensity of use and on the expected rate of return (assuming that procurement and operating cost remain unalterable). To invest into technologies with higher procurement cost is feasible only when the benefits of future cost saving can be used, thus they can be used in appropriate intensity. Regarding new technologies, presently no adequate experience is available; therefore the investor can avoid financial risk arising from failure when time limitations of the manufacturer’s warranty period are taken into account, and a particular technology is chosen only in case its discounted return period is within the warranty period. In the case of 360 degree illumination of a particular area the primacy of compact fluorescent tubes is indisputable from financial perspective. In case of a daily use up to 2 hours and beside an alternative rate not exceeding 7% the second best alternative are LED light sources, and the best choice are Compact fluorescent tubes. With the

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Yearly cost equivalent ($ USD)Hours of operation Alternative

rate (r)Incandescent light bulb

Halogen light bulb

Compact fluorescent

LED light source

Dai

ly 1

hou

r

5% 5.46 4.45 1.42 3.246% 5.49 4.50 1.48 3.677% 5.52 4.55 1.55 4.118% 5.56 4.60 1.62 4.579% 5.59 4.65 1.69 5.04

Dai

ly 2

hou

rs

5% 10.86 8.76 2.56 4.486% 10.92 8.83 2.63 4.957% 10.98 8.90 2.69 5.328% 11.04 8.97 2.75 5.719% 11.09 9.03 2.82 6.12

Dai

ly 3

hou

rs

5% 16.27 13.07 4.02 6.066% 16.35 13.16 4.10 6.407% 16.44 13.25 4.17 6.758% 16.52 13.33 4.24 7.119% 16.60 13.42 4.31 7.48

Dai

ly 4

hou

rs

5% 21.68 17.38 4.89 7.586% 21.78 17.49 4.96 7.917% 21.89 17.60 5.02 8.248% 22.00 17.70 5.09 8.599% 22.10 17.81 5.16 8.94

Dai

ly 5

hou

rs

5% 27.09 21.69 6.06 9.116% 27.22 21.82 6.14 9.437% 27.35 21.94 6.21 9.778% 27.48 22.07 6.28 10.119% 27.61 22.20 6.35 10.45

Dai

ly 6

hou

rs

5% 34.57 32.02 7.23 10.656% 34.73 32.17 7.31 10.987% 34.88 32.31 7.39 11.318% 35.04 32.46 7.46 11.649% 35.19 32.60 7.54 11.98

Table 4: Average yearly cost equivalents of the spot light sources depending on the average daily operating hours and alternative rate


Hours of operation

Halogen light bulb

Compact fluoresent

Led light source

Dai

ly 1

hou

r


Dai

ly 2

hou

rs


Dai

ly 3

hou

rs


Dai

ly 4

hou

rs


Dai

ly 5

hou

rs


Dai

ly 6

hou

rs


Table 5: Comparing the indicators of the different spot light sources relative to the incandescent light bulb


LED and Compact fluorescent lamps compared to incandescent bulbs, depending on the daily use, an annual average 24-74% cost saving can be achieved. In case of spot lighting LED light sources have been better than those observed in the case of illumination of a particular area, and in almost each tested case they were included on the second place and there is only a minor lag in comparison with the compact fluorescent tubes. The available cost saving in case of compact fluorescent tubes and LED lamps, depending on the daily hours of operation is 26-79% compared to the incandescent light bulb.

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[8] McKinsey & Co. “Unlocking Energy

Efficiency in the U.S. Economy” (2009) http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/US_energy_efficiency_full_report.pdf.

[9] Schweitzer, M. “Estimating the National Effects of the U.S. Department of Energy’s Weatherization Assistance Program with State-Level Data: A Metaevaluation Using Studies from 1993 to 2005.” Prepared for U.S. Department of Energy. Working Paper ORNL/CON-493, (2004)

[10] Sandberg, P. and Söderstrom, M. “Industrial energy efficiency: the need for investment decision support from a manager perspective” Energy Policy, 31 (15), (2003), 1623-1634.

[11] Decanio, S. „The efficiency paradox: bureaucratic and organizational barriers to profitable energy-saving investments” Energy Policy, 26 (5), (1998), 441-454.

[12] Csutora M. and de Palma, R. „Using EMA to Benchmark Environmental Costs”, In: Schaltegger, S., Bennett, B., Burritt, R. L., Jasch C. (edit.) Environmental Management Accounting for Cleaner Production. Dordrecht: Springer, (2009), 143-164.

[13] Emergence Technological Consultants, LLC: Conversion to Energy Efficient LED Lighting – Understanding LED Lifetime Analysis, White Paper

[14] Wald, M. L. „The energy challenge – Efficiency, not just alternatives, is promoted as an energy” The New York Times, (2007)

[15] Simpson D.G. „Photometry” Department of Physical Sciences and Engineering, Prince George’s Community College, (2010)

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