European Commission, Environment DG

Business, Eco-Efficiency and Sustainable Development: The Role of Management Tools

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Courtesy of European Commission, Environment DG

 Executive Summary

Sustainable development is not incompatible – and can be mutually supportive – with competitiveness. Business has many ‘win-win’ opportunities to create environmental and/or social improvement whilst increasing profits and market share. This can create new sources of employment.

Business has reconciled the need for sustainable development with the demands of competitiveness through the concept of eco-efficiency. This is ‘business-friendly’ and has led to the identification of many cost-effective pollution prevention schemes and other environmental improvements.

Nonetheless, more needs to be done. Economic growth is still increasing energy and resource consumption and action is required to decouple them. One question is whether current taxation structures and subsidy schemes encourage unsustainable resource consumption. The social and cultural dimensions of sustainable development have also received less business attention – and have less developed management tools - than the environmental dimension.

Addressing these challenges requires greater innovation by business. Governments can encourage such innovation by setting long-term sustainability targets (analogous to the Euro convergence criteria). This requires appropriate policy instruments, which set a direction but allow business more flexibility in getting there than traditional ‘command-and-control’ approaches. These instruments include incentive-based regulation and voluntary agreements with business. Participating in, or encouraging, partnership approaches by business – such as supply chain initiatives or multi-stakeholder collaborations such as the Global Reporting Initiative or the Forest Stewardship Council – is another means of stimulating innovative approaches.

The Commission could also take action with regard to the internal market. Environmental considerations could be made part of the essential requirements in the ‘new approach’ internal market directives. Some experts also believe that the existing rules on open public procurement are being interpreted in ways which make it difficult to set environmental criteria for purchasing.

In addition, Governments can do more to improve co-ordination and co-operation between different departments with regard to sustainable development and introduce environmental management systems into their own activities. They also need to ‘speak the language of business’ to ensure that any messages are understood by their recipients.

In most companies, sustainable development is not sufficiently integrated into business management. There needs to be more visionary leadership and environmentally aware workforces. Pressure from customers – through supply chains – and financial institutions are other important forces for change. One significant development is the Dow Jones Sustainability Index, which contains the companies deemed to be the most sustainable in each industry sector, and which has outperformed the Dow Jones Index itself. It seems to show that good environmental and social performance can benefit shareholders.

Financial and other stakeholders require more reliable and standardised information about business environmental performance than is currently available. This requires an institutional framework of expert, professional and regulatory bodies analogous to that supporting financial performance measurement. This could also help environmental and social management tools to be used more appropriately and effectively – which is a more urgent need than developing new ones.

Finally, the Internet is growing in importance as a means of disseminating information about sustainable development. It is also making many economic activities more eco-efficient – for example, by substituting transport of information for transport of people and goods. On the other hand, the information and access it provides could stimulate much higher levels of consumption. More research is needed to identify the precise costs and benefits of the Internet for sustainable development, and what the net effect is likely to be.

The main policy options generated by the conference were:

Creating Long-term Targets

Develop a small number of generic sustainable development ‘convergence criteria’, together with sector-specific indicators, and identify the policy measures which will be needed to achieve them.

Integrating Sustainable Development into Existing Community Activities

Incorporate environmental considerations into the essential requirements of the internal market “new approach” directives.

Examine the interpretation of public procurement rules.

Assess the sustainable development implications of all major policy proposals and instruments.

Further develop the EMAS scheme and apply it within Community organisations.

Informing and Facilitating Policy Development in Member States

Further examine and discuss the relationship between sustainable development and competitiveness in Industry Council meetings.

Create mechanisms to encourage identification of best practice, and exchange of experiences, between national governments.

Develop benchmarks to evaluate national government progress towards sustainable development.

Sponsor research on emerging topics such as the relationship between the ‘new economy’ and sustainable development.

Examine whether current taxation structures and subsidies are encouraging unsustainable resource consumption.

Facilitating and Contributing to Institutional Frameworks

Identify opportunities to develop new, and contribute to existing, multi-stakeholder partnerships (such as those trying to standardise environmental reporting and performance measurement).

Create new European networks and a Web site to support the development of management tools.

Convene a workshop on social management tools.

Facilitate the development of regional sustainable development innovation networks.

Support the development of trans-national supply chain initiatives.

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