Cornell University

Eco-Industrial Development: The case of the United States

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Issue: Businesses, local government and community groups are all seeking new answers for how to assure greater compatibility between environmental and economic opportunities. One possible contribution to meeting this challenge is a new phenomenon capturing the imagination of those concerned with responsible economic development in the United States. This phenomenon is known by various names, grouped here under the rubric of eco-industrial development. Eco-industrial development represents a systematic effort among a network of businesses and potentially other organizations to consciously work collaboratively to achieve continuous improvements in economic and environmental performance.
Relevance: The President's Council for Sustainable Development (PCSD), various U.S. Federal agencies such as the Department of Energy, Environmental Protection Agency, National Oceanographic and Atmospheric Administration, and Economic Development Agency are, among others, giving this fledgling movement a boost. Applications of industrial ecology are being examined as possible routes to increased competitiveness, environmental improvement and employment generation.

Industrial Ecology

Industrial ecology is an emerging framework for viewing the relationship between business and the environment. In 1989, the concept of an industrial ecosystem received wide attention with an article in Scientific American. In the publication, two General Motors' researchers suggested that the days of finding an ‘open space beyond the village gates’ for industrial by-products were quickly fading and new ways of thinking about wastes and pollution were needed (Frosch and Gallopoulos, 1989, p. 144). Since that time, the concept of industrial ecology has spawned an increasing amount of research, discussion, and actual implementation. At the most basic level, industrial ecology describes a system where one firm's wastes (outputs) become another's raw materials (inputs). Within this ‘closed loop’ fewer materials would be wasted.

Kalundborg, Denmark: The Model Industrial Ecosystem

A unique industrial ecosystem has been slowly evolving in Kalundborg, Denmark and has become a favourite example for industrial ecology enthusiasts. Located roughly 75 miles east of Copenhagen, Kalundborg is a small industrial area on the Danish coast. The industrial symbiosis began to evolve in the 1970s, as several of the core partners, trying to reduce costs and meet regulatory goals, sought innovative ways of managing waste materials and using freshwater more efficiently. The partners making up the Kalundborg system include, among others:

Asnaes Power Station. Commissioned in 1959, the coal-fired plant boasts a 1,500 MWe capacity. The same company also operates a fish farm.
Statoil Refinery. One of Denmark's largest refineries with a capacity of between 3-4 million tons/year.
Gyproc. Manufactures gypsum-based wallboard.
Novo Nordisk. Produces a significant amount of the world's insulin supply and certain industrial enzymes.
City of Kalundborg. Provides district heating services to the town's residents.
Local farmers. Many hundreds of farms producing a variety of crops are located within the area.
A number of symbiotic connections have developed between major and minor partners. The Statoil refinery distributes sulphur by-products to a sulphuric acid manufacturer and hot water to local greenhouses. Waste heat and steam from the Asnaes Power Station are used by Novo Nordisk, which in turn distributes organic sludge from its manufacturing process to local farmers for fertilizer. The Kalundborg model goes beyond material exchanges in a limited way to other types of collaborations in worker training and worker safety (Gertler, 1995). However, the primary focus has remained on the material and energy exchanges. Figure 1 sketches the symbiotic relationships between the core partners of Kalundborg and others that operate within the system.

Energy and waste exchanges were originally designed to find financially rewarding uses for waste materials or unused energy. Over time, however, business managers discovered that significant environmental benefits were also resulting from the innovative system of exchanges. (see below).

According to Jorgen Christensen several principles assisted the symbiosis in Kalundborg:

the industries fit together;
the geographical distance was not too large;
the ‘mental distance’ between participants was short (they all knew each other);
the incentive was a sustainable economy with commercially sound agreements;
cooperation was voluntary but conducted in close collaboration with regulatory authorities (Christensen, 1994).
American efforts view Kalundborg as a touchstone for what is possible. There are several projects in the U.S. such as the Mississippi Ecoplex, Chattanooga Smart Park, and Londonderry New Hampshire that have used the central energy flow or the sharing of steam and water resources as a core anchor for their activities. Yet Kalundborg appears to have been a result of small town connections with little systematic review or management of the system. It has a focus more on economic and environmental synergy, but beyond the town’s use of the slogan of ‘industrial symbiosis’ the connections have not been a major catalyst for industrial recruitment. It appears to have a larger number than usual of energy and material connections, but these seem to be an accretion of useful links rather than a result of a broader strategic focus or systematic review of possible beneficial inter-connections. Americans are also impatient with a two decade evolution as a satisfactory process to emulate. The American response has largely been to look to the Danish example as illustrative but seek more proactive ways to model and imagine eco-industrial possibilities.

By-product exchanges and recycling are not new ideas. Many different industries including metals, paper, wood, and plastic use large amounts of recycled materials. Further, niche industries such as used-oil recycling, fly ash for concrete production, and organic solid waste composting for soil enhancements have developed in many countries. Firms such as International Business Machines (IBM), Xerox, Minnesota Mining and Manufacturing (3M), and many others engage in ‘investment recovery’ to identify and re-deploy excess raw materials, obsolete products; excess or older machinery; and potentially valuable waste materials. IBM operates a ‘de-materialization’ centre that recycles or reuses materials from the company’s many distribution outlets. 3M’s ‘Pollution Prevention Pays’ (3P) programme has saved the company millions of dollars.

Can Eco-Industrial Development Be Facilitated?

Ernest Lowe asks this very question and offers a qualified yet encouraging response:
'There are as yet few data on the feasibility of deliberately creating a network of companies utilizing each other’s energy and materials by-products... Kalundborg, Styria, and petrochemical complexes like the Houston Ship Channel, developed spontaneously, not as the result of policies and strategies based on industrial ecology. However there are strong precedents for companies locating in parks or regions where they will be near suppliers or customers, and in fact this is one of the rationales for industrial parks' (Lowe, 1997, p. 58).

In its earliest stages in the United States, eco-industrial thinking revolved around recreating Kalundborg. Paul Hawken notes in The Ecology of Commerce: ‘Imagine what a team of designers could come up with if they were to start from scratch, locating and specifying industries and factories that had potentially synergistic and symbiotic relationships’ (1993, p. 63). In the U.S. a number of different approaches are being applied in an effort to create inter-firm collaborations for improving system-wide environmental and economic performance.

Some dominant features of the various projects are described below.

Specific parcels of land: The Green Institute in Minnesota is a 6 acre site with a new building scheduled to open by February 1999, but is already over 80% pre-leased. The project is forming a network of businesses in the Phillips neighbourhood with a clearly connected set of values and close proximity. Other projects focused on specific parcels of land include a preliminary concept for Denver, Colorado’s Stapleton Airport, a remanufacturing effort in East St. Louis, Missouri, and an ambitious project, ‘Mesa del Sol,’ outside of Albuquerque, New Mexico that seeks to change the development paradigm of 25% of the city's land area.

Virtual eco-parks: In Brownsville Texas, with the assistance of the Bechtel Corporation, a detailed computer modelling of regional material and energy flows is being used as way to connect businesses and to aid in the recruitment of others. Other virtual examples include Baltimore, Maryland, and a project in the Research Triangle region of North Carolina.

Environmental Technology: In Cape Charles VA, a Sustainable Technologies Industrial Park aims to recruit firms into flexible manufacturing buildings as part of an integrated effort for economic and community development. Targeted market areas include environmental technologies, as well as value-added agriculture and aquaculture applications. In Civano Arizona, an innovative residential/commercial/industrial mix arose out of a commitment to solar energy and new building materials. In Plattsburgh New York, an ISO 14000 focus is being used as a major part of their recruitment strategy.

Resource/Energy Focused Parks: In Vermont, a biomass power plant’s waste heat is being used to speed composting and the growth of organic vegetables with spin-offs to various food related and gardening activities. The Red Hills Mississippi effort is linking a new large clean coal power plant, a lignite mine and associated industries. In Chattanooga, a district energy system for several commercial and industrial customers is a central component of the SMART Park project. An emerging effort in Dallas Texas seeks to create a park around a landfill that would divert and extract resources. In Endicott, NY, IBM is encouraging other companies in the area to network as a way to complement its asset recovery plant and find new uses for recovered materials.

Cluster Analysis: Techniques for Eco-Industrial Development

Since Michael Porter’s, The Competitive Advantage of Nations (1990), economic development officials have turned an intrigued eye towards ‘industrial clusters.’ According to Porter, industrial clusters are sets of industries connected through customer/supplier relationships, technological areas, labour, or distribution. A few of the more prominent clusters in the U.S. include: high-tech corridors outside Boston and in Silicon Valley; apparel and furniture in North Carolina’s Piedmont; and aerospace manufacturing in Seattle and Southern California. Figure 2 below shows a schematic diagram of a cluster of industries in Southern California.

In the U.S., economic development organizations are using cluster analyses in order to target economic development policy for greater success in business retention, expansion, and attraction. Similarly, many eco-industrial development projects have used a variation of cluster analysis as a tool for gaining insight into a number of areas, such as:

assessing a region’s inputs and outputs or its industrial metabolism in order to uncover possible by-product or energy exchanges;
discovering other collaborative possibilities between existing organizations such as joint environmental permitting, or shared pollution prevention training;
targeted recruitment of firms that complement the local cluster of firms or can realize strategic advantages from existing infrastructure, institutional connections, market proximity, etc.
In a six county area of North Carolina, the Triangle J Council of Governments is analysing data on water, materials, and energy inputs as well as by-products of the region’s industrial base for an industrial ecosystem project. Cornell University’s Work and Environment Initiative (WEI) conducted baseline analyses for projects in Baltimore, MD, Trenton, NJ; and Plattsburgh, NY (WEI, 1995; WEI, 1996a, WEI, 1997b). These reports assessed several categories of information about each region including: the current industrial base; institutional support structures such as research institutes; potential market areas; business retention and expansion programs; and targeted recruitment possibilities for new economic development. Similarly, the Green Institute project in Minneapolis distributed a survey to businesses in an area covering 19 postal codes as a means of learning more about local inputs, outputs, and business interest in the concept of eco-industrial development (Lau, 1998).

Other methods of initial analysis have included large group interventions such as design charrettes. In 1995, the Cape Charles community participated in a master planning design charrette that resulted in a visual image for moving forward with the Sustainable Technologies Industrial Park. Similarly, the Green Institute also instituted a design charrette phase as a means of soliciting input from the local community and incorporating their ideas into project planning. Baltimore used a planning charrette as a means to take its strategic focus to the next step.

The symbiotic relationships in Kalundborg emerged over two decades, evolving from a number of bilateral relationships. The challenge for eco-industrial development projects seeking to approach the elegance of Kalundborg is how to encourage collaboration. As one author suggests:
'At Kalundborg, the companies organized themselves through market-based deals... this suggests that parks or regions seeking to recruit companies to form by-product exchange networks must not over-plan' (Lowe, 1997, p. 59).

While good planning efforts can help to better understand the collaborative possibilities of an eco-industrial project, it seems unlikely that this process will produce an array of participating organizations. Therefore a complimentary component is necessary as a coordinating mechanism for getting the proper people in the room for discussion.

Business Networking

Competition is the defining buzzword of the free market; however, it is also true that businesses frequently find it necessary to cooperate. Strategic partnerships, short-term alliances, and contractual relationships are different types of inter-firm collaborations designed for harnessing a competitive advantage. And increasingly with the globalization of the world economy, maintaining competitive advantage requires flexibility, responsiveness, and adaptability to rapidly changing conditions. Connections along the supplier-producer-customer chain are being tightened.

Private sector organizations are connected in many different types of ways. No company controls all of the resources necessary to achieve success. Manufacturers require inputs from suppliers and products need customers. Corporate/university connections for specific research and development activities are another area of cooperation.

A number of authors have explored various aspects of business networking, strategic alliances, and other forms of inter-organizational cooperation. Alter and Hage (1993) discuss the multiplication of inter-organizational alliances and describe their theoretical antecedents. Chisholm (1998) uses the New Baldwin Corridor Coalition as a case study on the formation and operation of inter-organizational networking. A conference held at the University of New Brunswick formed the basis for a book on ‘institutional interventions designed to foster business networks as a tool for regional development’ (Staber and Schaefer, 1996).

In the last twenty years, many researchers have discovered the Emilia-Romagna region of Northern Italy, where inter-firm collaboration through flexible manufacturing of various goods occurs, utilizing the specialized expertise of individual firms (OECD, 1996). Firms connected by production and social cooperation have achieved high levels of success:
'In Italy whole industrial districts consisting of thousands of small firms specializing in particular industrial sectors such as ceramic tiles, woollen cloth, and agricultural machinery, have been the backbone of much of Italy's post-War, export-led industrial success. These districts are superior in terms of innovation and market responsiveness through a combination of competition and cooperation, and group-based service centres offering assistance in technology and market intelligence' (Matthews, 1994, p. 178).

Geographically connected firms located in industrial parks or other areas of concentrated business activity are likely to have some type of formal or informal interactions. Whether that is through an industrial park management authority, local manufacturing associations, or a chamber of commerce is highly variable and depends on the availability of local networking infrastructure. Within these types of networks cooperative activities often occur on matters of local, regional, and national interest, such as education, labour, or regulations. One of the most visible and most successful networks in the United States is Joint Venture: Silicon Valley Network.

Incorporating the high-tech corridors of Santa Clara, San Mateo, Santa Cruz, and Alameda Counties which make up Silicon Valley, Joint Venture is a not-for-profit organization that features public-private partnerships between companies, community organizations, and local government. By July 1995, 11 initiatives in three primary areas had been identified as areas of cooperative activity - business climate, business development and entrepreneurship, and social infrastructure and quality of life (Joint Venture, 1995).

Joint Venture is an example of an inter-organizational collaboration that is conscious, aware, and works through institutional channels to accomplish its goals. It is our assumption that within an industrial ecosystem, similar awareness will be required. New levels of collaboration and cooperation could be necessary around different types of issue such as by-product exchanges, shared technical services, worker training, and joint regulatory initiatives.

Some networks around the world are highly developed and include management structures and formal programmes, while others are less tightly knit. Examples of cooperative networking may include research and development (R&D); product manufacturing and assembly; training; purchasing; and marketing. For the participating small and medium sized enterprises, networking provides a means of increasing economies of scale, competing with large integrated conglomerates, lowering costs of doing business, and creating continuously ‘learning’ organizations. As Richard Hatch stated in testimony before the U.S. Congress, ‘networks are quite simply cooperative efforts to escape from the limitations of size’ (1989, p. 9).

National and state governments around the world have established programmes to facilitate business networking. The Business Links Programme in Great Britain (Grayson, 1996), and Quebec's clustering and networking public policies (Ferland, Montreuil, and Poulin, 1996) are attempts to realize the benefits of inter-firm cooperation. In the US several states have established programmes to support network development (Lowe, 1997).

Using Networks to Facilitate Eco-Industrial Development

Eco-industrial projects in the US are attempting to shorten the time frame for innovative collaborations between organizations. Beyond initial baseline understandings, some type of systematic networking framework will be an important key for maintaining viability and collaborative activities within an eco-industrial development project.

Further, if the overall goal of an eco-industrial development project is to improve economic and environmental performance across the system, individual focus on by-product and energy exchanges seriously inhibits other potential collaborative opportunities. A more systematic approach may be necessary to consciously frame a wide range of possibilities, across a number of functional and thematic layers. Within key areas familiar to business, numerous possibilities for collaboration might emerge such as joint marketing and green labelling; ride sharing; shared processing equipment; flexible employee assignments; joint purchasing and shared services; and of course materials exchanges and energy cascading. Figure 3 outlines a potential model of collaborative opportunities.

Scepticism about eco-industrial development has centred on the technical and engineering difficulties, coordinating supply and demand needs of participating firms, and regulatory inhibitions (see below). Further, in the United States, there seems to be an expectation that material by-product, and energy exchanges would develop in much more rapid fashion. This impatience has led some to consider eco-industrial development a Quixotic endeavour with little chance of success; however, few projects have fully explored, much less implemented, eco-industrial networking as part of project activities. Moreover, even traditional economic development strategies evolve over years and sometimes decades.

Further, eco-industrial networking strategies can operate on playing fields that business knows best - market relationships. Thus it seems that creating the conditions for eco-industrial development to emerge through facilitated networking strategies is more likely to achieve success in the long run, especially in areas that already have an existing industrial base.

Connecting Policy with Eco-Industrial Development

In many ways, the success of eco-industrial activity is the degree that business sees value and invests their energies into exploring and acting on their mutually beneficial connections. But there is a role for government and policy to play in creating supportive conditions for this to occur. For eco-industrial development, regulatory barriers can preclude by-product exchanges. For example, in the United States, the Resource Conservation and Recovery Act (RCRA) has inhibited inter-firm exchanges of certain types of hazardous materials. While exchanges can occur on a case-by-case basis given the approval of the appropriate regulatory authorities, it is frequently easier to dispose of potential reusable materials in hazardous waste landfills. This is a large waste of money, time and valuable materials.

Paralleling this issue is the increasing focus of regulatory agencies on pollution prevention. The U.S. Pollution Prevention Act of 1990, as well as state-wide efforts across the country are more and more focusing on pollution prevention (P2) for environmental protection. The current focus of eco-industrial development on material exchanges, especially those involving toxic materials, could lock in long term use of those materials, and inhibit P2 or product substitution measures within firms (Lowe, 1997).

Several authors have discussed ‘umbrella permits’ for eco-industrial development projects as a means of encouraging their formation as well as lowering the overall impact of industrial activity on the surrounding ecosystem. Using multi-media and multi-organizational strategies for permitting might lead to overall, system wide improvements (Cote and Smolenaars, 1997). Similarly, flexibility and voluntary guidelines could encourage firms to seek out innovative ways of meeting system-wide pollution targets. In the United States, the U.S. Environmental Protection Agency initiated Project XL, to encourage innovative yet effective programmes for reducing environmental impacts. The Fairfield Ecological Industrial Park in Baltimore, Maryland applied for and was granted an XL designation.

In keeping with the general theme of this paper, we return to what we view as the key element for success of eco-industrial development. As Boons and Baas have stated:
'In the new concept of industrial ecology, the company boundaries passed through are Environment and Utilities and/or Product Development Alliances between firms... the concept of industrial ecology essentially calls for an integrated approach towards the environmental effects of industrial processes, rather than aiming at the reduction of the effects of separate industrial processes. An implication of this perspective is that the organizations responsible for the processes that are subject to this integrated approach should somehow coordinate their activities' (Boons and Baas, 1997, p. 79).

In the preceding sections we have explored how business networking or inter-organizational collaborations could be a viable strategy for initiating and maintaining eco-industrial development. Further, a number of countries have national and/or sub-national policies or institutional support mechanisms for encouraging business networking among firms. Many of these are focused on competitiveness, market responsiveness, and flexibility. Adjusting these and possibly creating other programmes for encouraging eco-industrial networking could be designed at the national and sub-national levels. Economic development strategy can seek more integrated strategies than industrial sprawl that creates redundant and wasteful use of resources. In an eco-industrial framework, the goal is reduced impact on the eco-system while expanding enterprise capability.

Funding for institutional support such as industrial extension organizations familiar with manufacturing environments or policy incentives can encourage eco-industrial collaborations. Planning for these activities that would attract or grow local business is a critical step. Government support for collaborative data gathering and decision-making would be very helpful. Our belief is that these should lead to commercially viable enterprises that can raise capital on the open market based on increased eco-efficiencies and improved market image as a consequence of their greater environmental responsibility.

The jury is still out on whether eco-industrial approaches will work and will be broadly applicable. Various models are being tested and over the next decade there will be a shakeout based on the lessons learned by its early pioneers. The future requires moving to a new platform of productivity and environmental solutions. The deliberate effort to move beyond enterprise specific solutions as the sole venue of business action to a more resource conscious and adaptive business ecosystem is a harbinger for the future. David Crockett, a councilman in Chattanooga Tennessee and a proponent of sustainable development has commented: ‘The choice is between Eco-Industrial Parks or Jurassic Parks’. Organizations of the future cannot afford the slow-witted and resource intensive strategies of the past when the future will demand far greater resource efficiency and market adaptability. Eco-industrial development is one path to that future.

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