1 Environment and Business, Part I Introduction Prof. Dr. Ir. Ab Stevels Chair of Applied EcoDesign Design for Sustainability Dept. Design Engineering, School of Industrial Design Delft University of Technology

2 Content 1.EcoDesign (environment) has become part of Sustainability 2.EcoDesign has become part of Corporate Strategy 3.Making of Environmental Strategies 4.Roadmaps and Performance Measurement

3 Ecodesign has become part of the (wider) Sustainability Dimension Economic Dimension Commitment to customers: employees, shareholders, suppliers, business, partners Business integrity: honesty, transparency, fairness Environmental Dimension Products: Reduction of energy, weight, packaging, substances, Increase recyclability Production: Reduction of energy, water, auxiliary materials Social Dimension Listening to stakeholders: politics, consumer groups, general public, labor unions, universities Employees: employment/careers diversity and inclusion (gender, regional origin of executives)

4 Commonalities to all these aspects Have principles, policies, procedures how to handle Have a program with tangible targets Measure progress, performance Reward, recognition, sanctions Performance in the Economic, Environmental, and Social dimension of Sustainability should be on similar levels

5 Examples: codes of conduct Global Business principles – Anonymous hotlines to report violations Code of Ethics for financial executives – Business control, audits Child labor issues in de supply chain – audit by thirds Business Excellence Model for a basis to reward people Transparency in hiring, salary system and promotion

6 Examples: human resources Company values in job description, appraisal Satisfaction surveys (anonymous) Personal growth (career center) Trade unions, Employment Heath and safety statistics

7 Examples: economic performance Employment, added value statistics Wage bills, contribution to local economy (suppliers) Share price Technology / innovation contributions Production (re)location

8 Examples: social responsibility Employee engagement in communities Contribution to quality of life (education and health) Sponsoring (cultural, nature, university research) Meaningful technology, empowerment Access to products/services for underpriviliged

9 Why Environment into Corporate Strategy? IT’S BUSINESS! IT IS BUSINESS not just technicalities. Upstream: suppliers, creativity Downstream: marketing and sales, image IT IS BUSINESS not just design Vision, strategy, programme IT IS BUSINESS Managing the green processes GREEN IS ABOUT MONEY!

10 Environmental thinking as a new creative management approach “Look with fresh eyes at old problems.” Prevention (“do not make it happen”) Functionality thinking, paradigm shift (“why are things as they are”) Life cycle approach (“stakeholder benefits”)

11 How to make money with green? (Supplier) Less use of utilities, auxiliaries Example: printed wiring boards (Lucent) Use of recycled material Example: TV cabinets (Philips) Contributions to Eco Design Example: IC, subassemblies Example: simplify structure of subassemblies/products

12 How to make money with green? (Ecodesign) Less materials Example: bill of material of green flagships (Philips) Application of smart materials Example: self disassembly of phones Application of recycled material Example: 10% recycled cardboard = 3% less cost Less Packaging, weight, volume’ Example: Philips packaging reduction strategy Less environmentally relevant substances Example: TV cabinets Lower disassembly time lower assembly cost Example: Philips Monitors

13 How to make money with green? (Customer) Lower cost of ownership Example: reduce energy consumption in use phase Easy, fun, convenience Unpack, packaging waste Feel good, examples: Philips is a caring company (image) This product is 100% recyclable No hazardous substances

14 How to make money with green? (Quality) Increase quality, reduce reject level Increase lifetime for instance by thermal balancing inside product Reduction of design complexity Match in the Hinkley diagram (balance capabilities of a production organization and the complexity of the product)

15 How to make money with green? (Paradigm shift) Functionality instead of embodiment focus *Life Cycle Optimisation (example smart IC) *Different Physical Principles (example: LCD instead of CRT LED Lighting) *Service capabilities without mechanics (example IT applications) *New business models (trade in, trade up)

16 Correlation 5 ways to make money and benefits waymoneyimmaterial/ emotion Ecodesign Resource reductionLower life cycle impact, compliance SuppliersSupply costsEnable ecodesign Green Marketing Sell moreCaring, fun, nice to and Saleshave QualityLess rejectEasy, simple Paradigm shiftHigher marginsLower life cycle / FunctionalityLower costs of impact ownership

17 Environment as part of vision, strategy and roadmaps, I Vision In what business are we Where do we want to be Environmental Vision, Policy Environmental External Analysis Opportunities, Threats Environmental Internal Analysis Strengths, Weaknesses Environmental Strategy Management of processes

18 Environment as part of vision, strategy and roadmaps, II Environmental strategy Management of processes Organizations, Roadmaps Responsibilities Processes Skills Technical Purchasing, Industrial Commercial Deployment, Implementation Monitoring, Review

19 Environmental Vision (example) Philips shall be the leading eco-efficient (sustainable) company in lighting and electronics industry Background good for the environment (more sustainable) company value (enhances brand image) customer benefit pro-active to the society (it can be done)

20 The Philips Environmental Policy Sustainable Development Prevention is better than cure The total effect on the environment counts Open contact with authorities

21 Environmental trends, I Awareness consumer Increasing Diverging interest OEM requirements Public sector purchasing requirements Green labeling to increase Energy consumption Labeling schemes Blue Angel TCO ’95 Market is becoming the driver instead of regulation Competition is using green in marketing

22 Environmental trends, II Legal/regulation requirements differences per country (priority) voluntary programs self declaration Restriction on use of chemicals/substances Energy declarations Take-back Limitation on landfill, incineration ‘Green’ taxation, levies on energy and material use

23 Environmental trends, III Environmental management systems (ISO 14000) Environmental reporting, auditing will come Environmental design manual/integration of green in design process Use of Life Cycle Analysis and Life Cycle Cost techniques Recycling companies offer their services Japanese companies catching up fast, threaten to take the lead

24 Environmental trends, IV More and more companies develop environmental strategies, roadmaps, programs, ….. Environment is seen as a managerial tool for cost reduction quality improvement employee motivation More and more environmental constancy bureaus offer their services, quality of service is increasing Well educated environmental specialists become available at the labor market

25 Environmental trends, V Technology has huge environmental consequences miniaturization digitalization software portability Function integration/ Lots of functionality for little money Electronic transport versus mechanical transport Global village (information) Costs of raw materials and energy go up (scarcity)

26 Roadmap characteristics Where do we stand? Where do we want to be 5 years from now Improvement roadmap: formulation and deployment implementation monitoring Two levels corporate roadmap BU roadmap (tailored to business situation) Three area’s defensive (compliance) cost driven pro active/gaining market share on basis of green Roadmap items image technical attributes

27 Content of Roadmap, I IssueOwner Target(4 years) Chapter 1StrategyPolicy, program, Roadmap key performance Indicators, Strengths and Weaknesses Chapter 2BusinessGreen products (better than competition) Eco-indicator, benchmark Chapter 3ProductsEnergy consumption, Materials application, Packaging, Substances, Recycling

28 Content of Roadmap, II IssueOwner Target(4 years) Chapter 4Manufact- Energy, Water, Auxiliary uring materials, Emission to air, water; waste Chapter 5Program’sPhilips EcoVision ISO Green marketing and communication Chapter 6DeploymentInternal communication Training

29 Environmental Key Performance Indicator EKPI =  A i * score per item A = weight or importance,  A i = 100% Score = 1 = OK= green per item or 0,5 = more or less fulfilled= yellow or 0 = not fulfilled= red

30 Companies activity matrix StrategyProduct Creation Green Marketing Fact FindingSWOTFacts, Benchmarking Potential benefits General itemsStrategyGreen Action plan Core Messages CodificationRoadmapGreen product specification Brochures, Internet ExecutionDeploymentEcoDesignLanguage ReviewScorecardValidationEthics

31 What hampers penetration of EcoDesign ? *Prejudice/doubt whether EcoDesign will add to the bottom line *Priority conflicts in the environmental domain (emissions/resources/toxicity) *Priority conflicts in the societal domain (scientific green versus government and customer green) *Priority conflicts between the business functions (development, production, purchasing, sales/marketing) Basic notions of EcoDesign are widely known, making a prioritized action agenda is often a problem

32 GREEN often leads to cost reduction Suppliers : Reduction of use of utilities, less waste, less auxiliary materials. Producers : Less materials, recycled materials, less packaging and transport, simpler product architecture Producers : sell more through green (green as such does not sell in most cases) All stakeholders : less energy Value chain issue : who is investing, who reaps the benefits ?

33 But : Green as such does not sell ! In the Netherlands/Western Europe : 80 – 85% of the public says that they will buy green products (even if these cost - a little bit - more) In practice only some 25 % shows this through their actual buying behavior ! Environment is nice, but what is in for me ? Green is a collective good, consumers are individuals ! Linking green with value >>> the Ecovalue concept

34 Conclusions 1.Environment is a business item (not just a technical item) 2.Vision, strategy, roadmap should be the framework for activities and programs 3.Look at what is happening in the outside world (trends, competition) 4.EcoDesign to be understood and organized/ integrated into product creation 5.Role of EcoDesign to be properly communicated