An industrial outlook on green productivity

This project essentially required me to conduct research on the topic ‘Green Productivity’. The research methodology that has been used in this project is purely doctrinal in nature. It includes use of Secondary Sources such as books, print-media, articles and statistics sourced from the World Wide Web have been used. The sources available on the internet have been used after thorough refinement. Citations are as per the Bluebook issued by Harvard University. The books and articles referred to, in the making of the project have been mentioned in the bibliography.

The project’s approach is to describe the development of thinking around “Green Productivity” and look at it from the industrial perspective.

INTRODUCTION

“While our economic system is trying to achieve growth, our earth system is finite and non-growing. We have reached a point where our economy must adapt to a pattern of development compatible with the geophysiological capacities of the Earth. Human society has already “overshot” its capacitites and now faces the choice between correction and crash.” [1] 

True to the lines stated, it is sad but true that this day, the Earth seems to be at a point of no return. We are caught in a paradox- most of the environmental problems confronting us have been caused by technological progress since the Industrial Revolution [2] . Now we need technological innovation to reverse this trend-reverse engineer and innovate. And this is where my subject matter for this project comes into play, Green Productivity.

With the start of the new millennium, the world has seen rapid change and change in the approach of the manufacturing industry with regards to sustainable development. Formerly, lone voices were urging a concern for the environment with a thought for sustainable development while improving business performance are now coalescing into a “movement”- new thinking and new ways of approaching old problems have made it perfectly possible to address these issues together, most effective when planned as part of a total review of the life-cycle of products and their manufacturing and delivery processes- and this movement being called Green Productivity. The global economy is coming under growing pressure to pay for the restoration of damaged environments. But this economic engine is being asked to help solve other pressing problems at the same time. The challenge is to solve all of these problems in a sustainable manner, so as to generate continuing development. And hence comes the concept of Green Productivity, emerging from the theory of sustainable development, only that it encompasses the manufacturing industry as a whole and not just the implications of growth-and-development on the environment, implications at the organisational level where firms that are trying to take seriously their corporate social responsibility should be able to find new ways of improving business performance while conforming with increasingly tough environmental legislation and codes of practice and implications at the policy level where governments are trying to impose tougher environmental impact regulation but wish to do this without unduly harming business activity and performance. 

Why Green Productivity as a concept has gained ground in the recent years and is being implemented world over is because of the fact that there is now an international consensus among the scientific community and most nations that global warming is a reality and increases the urgency to improve green productivity. But the subject area of the project shall, though touch on the Governmental level of policy making and the stance taken up by the nations, it will primarily focus on the Industrial perspective because that is where the scope of Environmental Economics comes in.

As a student of Economics in the First Semester, this project topic was chosen by me inspite of being unaware of Environmental Economics, because of the fact that I being freshly out of school, this seemed to be a topic that I could connect to for having studied the Environmental Sciences in the recent past and also having been the member of an Environmental club- Jagriti, that urged recycling and using of bio-degradable products. This project topic seemed to connect to what I’ve been doing, just that its scope broadened to cover the larger picture of the Manufacturing Industry and thus, Economics.

GREEN PRODUCTIVITY AT A GLANCE

2.1 DEFINITION

The concept of Green Productivity was first introduced by the Asian Productivity Organization (APO) following the 1992 Rio Earth Summit and was defined as:

“…a strategy for simultaneously enhancing productivity and environmental performance for overall socio-economic development that leads to sustained improvement in the quality of human life. It is the combined application of appropriate productivity and environmental management tools, techniques and technologies that reduce the environmental impact of an organization’s activities, products and services while enhancing profitability and competitive advantage.”

The concept of green productivity, as can be interpreted from the definition, is drawn from the integration of two important developmental strategies via productivity improvement and environmental protection. Productivity provides the framework for continued improvement while environmental protection provides the foundation for sustainable development [3] .

2.2 RELATION WITH SUSTAINABLE DEVELOPMENT

Sustainable Development has been defined as

“…a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for future generations.” [4] , and also as

“development which meets the needs of the present without compromising the ability of future generations to meet their own needs.” [5] 

While Green Productivity is a dynamic strategy to harmonize economic growth and environmental protection for sustainable development, simultaneously. Though Green Productivity is a concept which is closely related to Sustainable Development, its functioning is different from the latter concept. Thus, while on one hand the very concept of green productivity emanates from sustainable development, on the very other hand, sustainable development is an objective of green productivity combining in it the dynamics of market economics.

Essentially, the definition of Green Productivity can summarised in the industrial and sustainable development context as

“Green Productivity means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future.”

2.3 MANILA DECLARATION

In 1994, the Asian Productivity Organization launched its Special Program for Environment, under a special grant from the Japanese Government, to help member economies integrate environmental concerns into their productivity enhancement work. A special focus on small and medium sized enterprises (SMEs) was taken in recognition of the important role they play in economic development, environmental degradation and the lack of resources and expertise that generally limits their advancement- and hence a focus on manufacturing industries.

Convinced that Green Productivity, being a concept of integrating socio-economic aspirations and a means to harmonize environmental protection and economic development, is the key to sustainable development for enhancing people’s quality of life, the APO, in collaboration with the Development Academy of the Philippines, organized the APO World Conference on Green Productivity in Manila, the Philippines from, 4 to 6 December 1996.The APO tabled its strategy to meet this challenge head on – through Green Productivity. At the conference, the APO demonstrated empirical evidence that it had found a way to move sustainable development from the possible to the practical.

The participants deliberated on the concept and current status of Green Productivity practices, discussed related issues and problems and adopted strategies for promoting the Green Productivity Movement in the Asia-Pacific region and worldwide.

Though many resolutions were undertaken, but because our project scope is primarily focused on the Economic front, only the resolutions dealing with the project essentials of Green Productivity are being listed hereunder:

Industrial development should be pursued more vigorously by promoting technology development and availing of technological advancement, with emphasis on building indigenous capacity for development and adoption of green products and green production processes to conserve natural resources;

Service industries should ensure that the provision of service to society is bereft of damage to environment and is in consonance with environmental conservation concepts;

Due heed should be given to the need for ISO 14000 standards to be effectively applied to all levels of economic activities especially in the industry sector, as such standards will have a significant bearing on the promotion of Green Productivity practices;

Comprehensive market-based instruments should be instituted to enhance regulatory approaches in order to accelerate the shift to Green Productivity;

Key industries having substantial contribution to national income and employment generation should provide the lead in demonstrating efficient implementation of Green Productivity concepts and practices.

GREEN PRODUCTIVITY: THE NEED

Previous approaches to environmental protection have tended to ignore economic performance. Green Productivity recognizes the fundamental need for businesses to incorporate not just environmental concerns, but economic performance in the improvement process.

Previously regulators were tasked with the “dubious honour of having to closely monitor those with the deepest pockets” and suspect of the greatest ‘wrongdoing’ – sparked by the events such as Chernobyl, Bhopal and the Exxon Valdez. This surveillance has led to substantial reductions in single point source pollution in most countries. [6] However it has left the seemingly trivial individual contribution of day-to-day inefficiencies in other larger and smaller enterprises and public organizations unattended.

The recognition that environment and development are two sides of the same coin came in response to the need to link economic development strategies with environmental preservation. Between 1993 and 1994 a number of the APO member economies were involved in research focused on applications and opportunities for cleaner production as the cornerstone for guiding Asian countries towards a more environmentally friendly industrialization. It was realized that the practice of Green Productivity results in using material resources and energy more efficiently and sustainably – doing better with less.

According to the World Economic Forum’s Year 2000 Report, the ability of a nation to improve its competitiveness is measured by its environmental performance in addition to more traditional economic criteria. Central to improved competitiveness is productivity. This makes the concept of Green Productivity a simple but elegant solution – to make environmental protection a core business attractor instead of an isolated cost contributor.

Between 1994 and 2000, over 1,000 people involved in specific projects-the electroplating, textile, food processing and papermaking sectors have shown the success of Green Productivity. Though Green Productivity has been primarily been associated with the Small and the Medium Scale Industries, with the start of the new century, a growing enthusiasm for the power of Green Productivity as a strategic driver for innovation has been sensed all over the manufacturing sector, world over.

Moreover, Green Productivity is being aided by the shift to a demand side market. As consumers have more money they are asking for products with environmental sensitivity be it shade tree coffee, recycled paper stock, to cars with lower emissions and greener energy sources. As markets demand greener products and services, Green Productivity helps to push the supply side by providing a logical process and practical tools and techniques by which this transformation can be accomplished.

GREEN PRODUCTIVITY: OBJECTIVES

4.1 BRIEF OUTLINE

Green Productivity, as has been explained in the first chapter, is a strategy for simultaneously enhancing productivity and environmental performance. Its aim is well-rounded socio-economic development that leads to sustained improvement in the quality of human life. While the tools, techniques and methods have expanded over the last eight years, the goal has remained the same – to balance environmental and economic needs. The concept of green productivity assures profitability and resource productivity. Businesses and communities get multiple returns in the form of bottom-line savings, value added products and services, and environmental protection.

OBJECTIVES

The objectives of Green Productivity, as laid down by the Asian Productivity Organization in the First World APO Conference on Green Productivity, are as under mentioned:

Increase profitability of manufacturer

Improve health and safety of workers and consumers, and the society at large

Make quality products

Promote environmental protection

Ensure regulatory compliance

Enhance company’s environmental consciousness

Raise morale of the industry as a whole to ensure rise in productivity without compromising the environmental resources

Achieve the goals of Sustainable Development

Green productivity uses a set of management tools, techniques and technologies to encourage innovation and a continuous cycle of productivity gains. [7] 

The Second World Conference on Green Productivity in Manila held in 2002 gathered the Green Productivity experts from around the world to review the progress made during the past years and identify the priority areas for future. Based on the extensive discussions, the following areas of focus were added to the objectives:

Greening the Supply Chain- leveraging purchasing power in the private sector.

Water Resource Management- innovating approaches to using Earth’s most precious resource.

Energy Efficiency- Enhancing the use of resources to reduce costs and emissions.

Solid Waste Management- Reduction at source, treatment, and recycling.

Integrated Community Development- Sensitising the community at utilization of alternate energy resources and towards the environmental friendly approach.

GREEN PRODUCTIVITY: METHODOLOGY

5.1 DEFINITIONAL STRATEGY

In its formal definition, Green Productivity uses three terms and phrases:

– strategy

– productivity and environmental performance

– socio-economic development

Building on its strategic foundation, Green Productivity focuses on enhancing profitability through combined improvements in productivity and environmental performance. This approach engenders an important mind shift from environment as a cost or externality to an asset and opportunity for increasing efficiency and profitability. When excessive use of resources and materials or generation of pollution is seen as a manifestation of lower productivity as well as poor environmental performance, these are seen as manufacturing defects that need to be consistently corrected. The next level of Green Productivity offers the logical method drawn from quality management and provides practical tools and techniques. The knowledge and approaches under the umbrella of Green Productivity can help companies attack their productivity challenges with increased confidence, leading to a better bottom line and competitive advantage. The strategy of Green Productivity allows enterprise, large or small, to understand what it is they do or have that impacts environment, reduces their efficiency, adds cost, and suppresses their productivity.

Another important factor along with this mind shift is a transition from end-of-pipe thinking to design for environment, seeking innovation. Design changes necessitate research and development, and this evolves the response of a company from concentrating on the cost of clean-up to the excitement of innovating new products and services. Making products and services greener as a condition of innovation is significant. It excites business, motivates investors, intrigues employees and attracts consumers. 

METHODOLOGICAL STEPS

Green Productivity follows through on the strategic framework by seeking technical and managerial interventions, based on the concept of continual improvement. In six simple steps an enterprise can examine and evaluate both its production processes and products to reduce their environmental impacts and highlight ways to improve productivity and product quality. Implementation of these options leads on to another cycle of review and so promotes continuous improvement. 

The following are the six steps of methodology implementation [8] as underlaid by the Asian Productivity Organization:

Getting Started is an easy task. Identifying the people who are going to be involved and forming a Green Productivity team marks the beginning. These people, led by a team leader, walk through and survey the site or facility and record first impressions. This allows the team to gather baseline data and identify areas where there may be a problem.

Planning allows an organization to leverage the information gained in the first step to analyse the potential for improvement, along with analytical tools such as material balance, benchmarking, Eco-mapping and fishbone diagrams. Objectives and targets can be established and performance indicators identified to help guide the improvement process, allowing the company to manage and measure progress.

Generation and Evaluation of Green Productivity Options involves the development of options to meet the objectives and targets formulated in planning. It involves a review of prevention of pollution and application of existing or new control procedures to support the development of the options to enhance productivity. Options are screened against performance indicators. Those most likely to net the economic and technical results desired are given first priority.

Implementation of Green Productivity Options involves two actions- preparation and execution. Preparatory work includes awareness building, training and the development of competencies. If new equipment or systems are required, these are installed along with the operator instruction and hands on training to ensure success. Execution involves putting into use the resources and equipments in hand through the methodological training received.

Monitoring and Review of the new Green Productivity options is vital to check to see that they are producing or exceeding the anticipated results. This includes monitoring the whole system to ensure that it is on track and performing as designed. Findings are reported for review by management.

Sustaining Green Productivity requires action to correct where necessary or to build on existing success. Having a feedback loop is essential to keep progress on track and to respond to the changing circumstances imposed by internal and external drivers including customer expectations, the environment and other innovations that may accelerate the greening of productivity.

APPLICATION OF METHODOLOGY

Following the directives of the Second World Conference on Green Productivity in Manila, the following focus areas were taken up by the APO as part of the updates objectives of the Green Productivity drive and the following implementations were drawn up through the 6-point methodology structure.

5.3.1 Greening the Supply Chain

Under the green supply chain mechanism, the large assembly corporations will buy their components from Small-and-Medium-sized Enterprise suppliers within the supply chain with the purpose of enhanced competitiveness. In doing so, the big corporations should share their expertise and know-how with their suppliers and help them to produce more environmentally friendly components. Such partnerships will be beneficial to the partners as well as for the region in the long term.

5.3.2 Water Resource Management

The APO has placed a clear emphasis and focused on water-related issues in its all past programs, especially at the microeconomic level (industry, agriculture, service sector, communities, households, etc.) in particular. The past activities on waste minimization and prevention issues at industry level have to a large extent brought about changes at the industry level.

5.3.3 Energy Efficiency

Implementation of energy efficiency projects can directly benefit any organization by enhanced resource efficiency and productivity, thus leading to direct monetary benefits. This also results in the environmental benefits namely reduction in greenhouse gases (GHGs) emissions.

Further, the Clean Development Mechanism [9] under the Kyoto Protocol presents an enormous opportunity for the Non-Profit Organisations to develop and offer a range of new services to industries, service sectors and communities in the APO member countries. [10]  

“For the overall objectives of resource conservation, environmental preservation, competitive advantage and sustainable development, Energy Efficiency (EE) must become an integral part of the approach of Green Productivity (GP) thus offering synergistic benefits that will lead to both environmental and economic benefits.” [11]  

5.3.4 Solid Waste Management

It has been widely observed that the rate of urbanization is very high due to the migration of rural populations to big cities, which places severe stress on the infrastructure and urban resources. While providing adequate infrastructure and urban services is a major challenge for the concerned authorities, at the same time there is ample potential for the conservation of water and energy. This involves not only high-technology solutions, but also calls for innovative urban management approaches. Furthermore, owing to diminishing government funds, there is an explicit emphasis on the privatization of urban infrastructure facilities, with the onus for payment resting on the ultimate users. The merits of GP will be seen in its application in Solid Waste Management as it promotes the use of appropriate techniques, technologies, and management systems. 

5.3.5 Integrated Community Development

GP essentially addresses the triple bottom-line issues of economic profitability, environmental protection, and social fairness. GP application in communities is an excellent model in which the productivity principles are effectively applied to harmonize the triple bottom-line results for the ultimate goals of poverty alleviation and sustainable development. The APO believes that the GP has a great potential in poverty alleviation and Integrated Community Development (ICD). The focus is on water supply, better sanitation, use of waste as the resource for community, natural farming etc. 

Another important aspect of these projects is the possible linkage with the Clean Development Mechanism (CDM). Many of the GP-ICD projects have resulted in the positive impact on the environment – especially with regard to reduction in usage of coal and the subsequent reduction in the CO2 emissions which could lead to financial support for the communities / local agencies to continue their GP-ICD initiatives. 

TUTTLE AND TEBO ENVIRONMENTAL PERFORMANCE MODEL

The urgency of the environmental challenges requires business organizations to strive for breakthrough improvement rather than incremental improvement [12] . Thomas Tuttle and John Heap, in 2007, presented a “breakthrough life cycle model for strategic environmental performance” that is particularly relevant for manufacturing industries. This self-explanatory model is primarily based on the 6-step method developed under the concept of Green Productivity and hence can be seen in consonance with it.

The above diagram gives a clearer picture of what the Green Productivity model functions like in the manufacturing industries. It incorporates the methodology of the original model proposed while implementing it in the industrial mechanism of production.

GREEN PRODUCTIVITY AND SME: SUCCESSFUL IMPLEMENTATIONS IN ASIA

The implementation and success of Green Productivity is not a theoretical concept. Its validity and application can only be assessed under the light of practical implementations already made. In this effort to exemplify Green Productivity, brief examples of Small-and-Medium-sized Enterprises in Asia, whose success with Green Productivity were encountered during the course of research, follow.

ILLUSTRATION 1: Shui Hua Leather Industrial Co. Ltd., Taiwan [13] 

Manufactured Product: Leather products.

Why did the company decide to implement Green Productivity?

The leather tanning industry in Taiwan faces significant pollution challenges;

in particular wastewater contains strong alkalis, bio-wastes and high

concentrations of heavy metals such as chromium. If not well managed

these chemicals can result in high risk to the environment and human

health. Green Productivity helped the company address these issues in a timely and efficient manner bringing improved productivity, a higher level of compliance and economic returns. Process improvements alone netted the company a savings of US$ 2.3 million.

ILLUSTRATION 2: Chiang Mai Food Industry Co. Ltd., Thailand

Manufactured Product: Food Products

What did Green Productivity offer to the company?

By adopting the GP methodology, the company was able to save substantially by minimizing citric acid and other resource usage and also on water treatment costs- the industry’s main problem. The company realized a savings of US$ 6,943 in one season of production. The project’s significance to the food industry in Thailand and other developing countries is potentially massive, since it shows that cost effective solutions exist to the industry’s main problem-waste water generation.

ILLUSTRATION 3: Shen’s Art Printing Co. Ltd., Kowloon Peninsula

Manufactured Product: Cultural, Commercial and Art Printing.

Why did Green Productivity appeal to the company?

Prior to Shen’s adopting GP, it had already reduced pollution and improved energy efficiency by installing water recycling, temperature control, dust filtration and air change systems. The company saw GP as an excellent way to develop new technical and management solutions to its business challenges. The pull of innovation that GP fosters helped the company capitalize on reductions in raw material and resource consumption to lower production costs, upgrade productivity and improve the work environment. By using the six-step method, Shen’s was able to improve its environmental performance, which led to an annual estimated US$ 261,615 savings.

ILLUSTRATION 4: Nasser Tannery Co. & Tanchem Industries, India

Manufactured Products: Leather Products

These two tanneries are representative of the challenges faced by the tannery industry in India. Their participation allowed for an assessment of how issues of scale affect environmental and economic performance in the sector.

Was the implementation of Green Productivity of value?

This project introduced a systematic approach to continuous improvement in environmental performance and productivity. Among the changes observed was a shift in the approach and attitude of the employees-they were very much concerned about wasted resources and took all steps and measures to reduce losses.

CONCLUSION

Green Productivity offers a successful strategy for innovating sustainability. It provides a practical method for creating value-added products and services that result in triple bottom line results. Communities benefit from economic development while improving environmental protection. The rewards it enables are quantifiable and demonstrate a method to obtain an enhanced quality of life. Green Productivity has already proven to be as effective in the boardroom as it is on the shop floor. [14] The universality of its application should not be underestimated.

The business of managing the planet for prosperity demands a balanced approach between good governance, profitable enterprise and people who have a quality of life. The people are responsible for the creation of green-product demand-side market. More often than not people will pay for quality when the choice is offered. As more businesses understand that there is profit in improved environmental performance, that there is competitive advantage in offering green products and services, a demand side market will pull sustainability forward. And this is where the concept of Green Productivity comes in. It is a subtle interplay between the working forces of the market- consumer and manufacturer, and the environment.

But for the businesses to implement Green Productivity at all levels of manufacturing requires the willful support of the Government. It needs to set a good example by its own actions – with supportive policies, sensible laws and appropriate financial incentives. After all Green Productivity isn’t in the business interest of an individual or a firm, neither is it in the interest of the receiving customer nor it is in the interest of the people of a nation. Green Productivity being a tool of sustainable development is a concept that spans the interest of the planet Earth at large and essentially, of the future generations to come.

From the economic point of view, Green Productivity delivers for the enterprise addressing the triple bottom-line issues of economic profitability, environmental protection, and social fairness. The strategy of Green Productivity allows enterprise, large or small, to understand what it is they do or have that impacts environment, reduces their efficiency, adds cost, and suppresses their productivity. As the illustrations given in the previous chapter describes, Green Productivity has enabled enterprises, which have dared to think beyond compliance, to obtain competitive advantage.

Cooperative competition in theory and in practice can reduce costs and spread economic development opportunities. Governments and Markets of the world must cooperate beyond their traditional borders to bring competitive advantage to local communities.

We need to shift from “mandate, regulate and litigate” to “smart growth” and unleash the collective creative ingenuity of mankind [15] . Innovating sustainability is key and Green Productivity seems to be the only key to a future in productivity, and hence development.