The Wheels of Integrated Product Policy Grind Slow

Integrated product policy had an innovative feel when it appeared on the EU's environmental agenda in the late 1990s. But after much in-fighting and business lobbying, the White Paper on IPP issued by the European Commission in June proved disappointingly thin, and unlikely to make any significant impact on the market until the end of the decade at best.

'Fundamental changes in the way societies produce and consume are indispensable for achieving global sustainable development,' world leaders agreed at last year's Johannesburg summit on sustainable development.
There were two main factors behind that declaration. One was the global imbalance which sees the wealthiest 15% of the world's population accounting for 55% of its total consumption, while the poorest 40% get just 11% of the cake. The second was the pressure on the world's resources and environment from current consumption patterns.

At Johannesburg, world leaders agreed to respond to these concerns by promoting ten-year programmes 'to accelerate the shift towards sustainable consumption and production.'

Below the global scale, this imperative is readily acknowledged in strategic policy documents. One example was the EU's sixth Environment Action Programme, which two years ago set out an ambition to decouple environmental degradation from economic growth, 'in part through significant improvements in eco-efficiency.'

The problems begin at a lower level, when it is time to translate political declarations into practical action. It is here that political and institutional inertia set in, compounding the inherent difficulties of shifting corporate and consumer behaviour onto a more environmentally sustainable path. The European Commission's attempts to get a meaningful integrated product policy off the ground are in danger of becoming a case study of such inertia in practice.

The road to IPP
An EU environmental policy for products emerged in the early 1990s, with the launch of the eco-labelling scheme and energy labels and standards for household appliances. The 1994 packaging Directive introduced producer responsibility to the EU stage, making it the forerunner of Directives on end-of-life vehicles and waste electrical and electronic equipment.

These were very much piecemeal initiatives. The first signal of a more coherent policy came in 1996, when Environment Ministers, commenting on the Commission's proposals for the fifth EU Environment Action Programme, asked it to prepare a strategic framework to influence the environmental performance of products.

The Commission responded by sponsoring a study by Sussex University and Ernst & Young. Completed in 1998, this appears to have coined the term IPP, and suggested several possible components of such a policy at EU level. Presciently, it also highlighted the obstacles which stood in the way - ranging from the huge number and diversity of products and companies which policy would need to act on, to general business resistance to measures which intervened in product innovation or extended producer responsibility.

A stakeholder conference on IPP followed in 1998, and the issue was debated by Environment Ministers a year later. A Green Paper on IPP emerged from the Commission in early 2001. Following internal debate which Environment Commissioner Margot Wallström described as 'a very bumpy road', a Communication - a White Paper - on IPP was finally published in June.1Launching the Communication, Ms Wallström said: 'IPP represents a new and very promising approach to environmental protection. IPP will look at all the stages of a product's life cycle from cradle to grave and seek to reduce the overall environmental damage it causes at the different stages. The gains that can be made by making just small changes are huge.'

She also contended that IPP has much to offer progressive companies. 'In a competitive business world, environmental performance can be a factor giving companies or their products a competitive edge. IPP can help such companies by giving them more visibility.'

Behind the rhetoric, however, Ms Wallström knows that her Environment Directorate has been forced to surrender a good deal. Important ideas in the Green Paper or developed subsequently have fallen by the wayside, and the timetable for effective action has been stretched several years into the future.

Setting a framework
The Communication sets out five key principles for IPP. It will be based on life-cycle thinking. It will work with the market. Stakeholder involvement will be encouraged. IPP will aim for continuous improvement in products 'rather than setting a precise threshold to be attained'. And it will employ a variety of policy instruments, though 'within IPP the tendency is clearly to work with voluntary approaches.'

A two-pronged approach will be pursued by the Commission. It will establish 'framework conditions for the continuous environmental improvement of all products throughout...their life-cycle.' And it will be 'developing a focus on products with the greatest potential for environmental improvement.'

A series of initiatives will help create the 'framework conditions' for greening all products:

Taxes: The Green Paper proposed the introduction of differentiated taxation to favour environmentally superior products - including reduced VAT rates on those bearing the EU eco-label. However, the Commission says that 'in the light of the stakeholder comments received, in particular from Member States,' that idea will not be pursued 'for the time being'.

The Environment Directorate looked to be in difficulties soon after the Green Paper was issued, when an official from the Taxation Directorate told a conference that adjusting the EU's VAT regime to accommodate it would be 'very complicated' and could only be for the 'medium term'.

At another conference in early 2002, an Environment Directorate official said that economic instruments would be the 'most effective' means of encouraging manufacturers to produce more environment-friendly goods, and that 'many things are not possible without them'. Losing the battle over VAT has left a major hole in the Environment Directorate's strategy - and any tax measures will now be left for Member States to pursue on their own.

Voluntary agreements and standardisation: The Communication is desperately vague about the Commission's intentions with these means of greening products, merely saying that both need to be 'considered'.

The Commission outlined plans for making greater use of environmental agreements with business last year, but received something of a setback in May when the European Parliament demanded greater democratic safeguards and constraints on such initiatives.

The use of international standards to set environmental criteria for products has been equally controversial. Environmental organisations have complained of an inability to participate effectively in the standard-setting process and its domination by business interests. The Commission merely says that it will use the standardisation process to pursue its objectives for IPP 'wherever possible'.

Legislation: The Green Paper itself was vague about when legislation might be used under IPP, suggesting only that it might be employed to extend producer responsibility without identifying any possible candidates. The Communication is equally hazy.

However, one legislative initiative, a framework Directive on eco-design of energy-using products, is already in the pipeline. This will provide for product-specific follow-up Directives 'where justified', as well as 'allow room for self-regulation by the industry where this would reduce environmental impacts faster and/or with greater cost-effectiveness than legislation.'

However, the Environment Directorate has been forced into a substantial retreat from legislative ideas which took shape after the Green Paper. These were set out at a conference in April 2002 by one of its officials, Otto Linher.

Acknowledging that by then it looked as if economic instruments would not be available to promote IPP, Mr Linher said that without them 'action on the design of products is probably the most efficient way to reduce the environmental impacts of products.'

Promoting eco-design might, he suggested, take the form of general legislation requiring companies to use state of the art methods of eco-design and follow life-cycle principles. They might also be required to keep evidence that environmental considerations had been taken into account in product design, along the lines of the 'essential requirements' legislation on packaging, with the weight of this duty being varied by size of business and the environmental impacts of its products.

This kind of approach, Mr Linher suggested, might begin with electrical and electronic equipment, but be extended later to other products or incorporated in a framework Directive on eco-design.

These ideas featured in drafts of the Communication well into this year. One circulated in February, for instance, said that 'some form of general obligation on producers may be required. This could take the form of a framework Directive with general obligations for all companies to integrate environmental considerations systematically into the product design and production processes,' possibly supported by 'interpretative documents' or Directives for particular sectors. A discussion document on these issues was intended during 2003.

At a late stage, however, the Environment Directorate was forced to back off. The discussion document has been postponed until 2005. It will now only 'consider' ways of promoting 'the IPP approach' in companies, 'including if appropriate general obligations for specific products.' The references to a framework Directive were deleted.

Life-cycle information: Good quality data on the life-cycle impacts of products are essential for design and product information purposes - though smaller firms in particular complain that such data is often beyond their reach on both cost and complexity grounds.

The Commission is planning several initiatives on this front. Among them will be a directory of LCA databases and a practical handbook on best practice in LCA, due in 2005.

Environmental management systems: The Commission foresees a role for the EU's eco-management and audit scheme (EMAS) under IPP. EMAS could be used, it suggests, 'to provide a framework for all types of tools, from the greening of the organisation's procurement to validating green information,' such as environmental claims for a product.

Products were included within the scope of EMAS when the Regulation governing it was revised in 2001. However, the Commission acknowledges that the scheme's primary focus is still on manufacturing activities, and it will fill the gap by producing guidelines on how product issues should be dealt with by the end of 2004.

In addition, it will 'monitor and evaluate the implementation of the product dimension in EMAS so that it can feed into the next revision of the Regulation, which is due by 2006.'

By then, it should be evident whether the recent signs of waning business enthusiasm for EMAS were the start of a trend - giving the Commission something more to ponder.

Public procurement: Purchases by the public sector account for some 16% of the EU's gross domestic product and have the potential to shape the market for greener products.

The Commission is not intending to make any changes in EU public procurement legislation. It maintains that there are already 'ample possibilities' for taking environmental considerations into account in the tendering process, and the issue is to ensure that these are used fully.

The paper passes the baton to Member States, inviting them to draw up action plans for greening their public procurement, starting in 2006.

For its part, the Commission intends to survey the current extent of green procurement practice across the EU later this year, and sponsor a study on the potential environmental and market impacts of greener purchasing.

To support public authorities, the Commission also intends to prepare a handbook on green procurement, and establish a website on the topic by the end of 2004. This will contain a database bringing together existing environmental criteria for products in eco-labelling and environmental product declaration schemes.

Corporate purchasing: The paper takes a hands-off approach to purchasing by the private sector. It merely notes that 'the tools being developed for greening public procurement...should also facilitate greener corporate purchasing.'

Labelling: Potentially, the main innovation on the labelling front will be action at EU level to promote 'environmental product declarations' (EPDs).

EPDs are not labels as such, but summaries of quantified life-cycle data for a product. They are particularly valuable in passing environmental information to designers along supply chains, and could play an important role in public procurement - as long as enough suppliers of the same product are providing comparable information to facilitate purchasing choices.

Several EPD schemes are already in operation in Europe, especially in the vehicles, construction products and paper sectors. A review for the Commission by consultants ERM found that they vary on important parameters such as the degree of compliance with ISO standards on life-cycle analysis, quality assurance and stakeholder participation.2

ERM recommended that the Commission should become involved in the development of EPDs, while refraining from establishing a fully harmonised EU-wide scheme. It might do this, the report suggested, by getting stakeholders together to agree minimum standards for EPDs, and then incorporate these in a framework Directive which left room for regional and sectoral schemes to continue development.

The Commission's response is half-hearted. The Communication promises that it will decide by the end of 2005 'whether any action needs to be taken at Community level to stimulate the development of this potentially important instrument.'

There is little else on the labelling front, apart from a promise to complete a guidance document on green claims, the possibility of having product claims externally verified under EMAS, and a review of the effectiveness of private labelling schemes.

Pilot projects
In its Green Paper, the Commission said it would set up one or two pilot 'product panels' during 2001. These were originally developed in Denmark to provide a forum for stakeholder debate on ways of improving the environmental performance of particular product groups.

However, the pilot projects failed to materialise - and the idea of product panels has been dropped.

Instead, the Commission is now asking businesses to volunteer products to be used in pilot projects which will demonstrate the benefits of applying life-cycle thinking.

Exactly how the projects will work is not made clear. The paper says that, on the basis of a 'common understanding' among stakeholders, the aim will be to document a product's life-cycle impacts, analyse the environmental, social and economic effects of all options to reduce them, identify the most feasible options, and agree implementation plans.

Recent drafts of the Communication which introduced the idea of pilot projects aroused sensitivities in industry. They suggested that pilots might cover food products, vehicles, furniture and construction products - but there is no mention of these in the finished paper. The only illustrative example concerns tyres.

The Commission has asked for volunteers by the end of October. In July, Grant Lawrence of the Environment Directorate told a House of Lords inquiry that three sectors have so far expressed an interest in participating - electronics, tyres and furniture.

The pilots seem unlikely to be completed in a rush. According to a financial statement appended to the Communication, it is assumed that only one project will be carried out at a time. The paper does not say how many the Commission has in mind, but it appears that there will be no more than four.

Whether the pilot projects will themselves inform future policy initiatives, or are intended purely as a means of demonstrating the merits of a life-cycle approach, is not made clear. Indeed, the Commission says that the choice of projects will not depend on whether volunteered products have a high environmental impact or the greatest potential for improvement - rather detaching this initiative from the second main element of the paper's focus on specific products.

According to the Commission, this will involve identifying and stimulating action on products with the greatest potential for environmental improvement. However, it says, as yet there is no consensus on how such products might be identified - so the first step will be to develop the necessary methodology.

Once this is complete and meets with 'a broad level of consensus' among stakeholders, products with the greatest impacts will be identified.

The third step will be to carry out further analysis on products 'towards the top of the list', identifying options for improvement and assessing their socio-economic consequences. All this is expected to take 3-4 years.

Finally, the Commission will then 'seek to address some of the products with the greatest potential for environmental improvement at least socio-economic cost individually' - though by what means or instruments is again not explained.

Preliminary products list
Curiously, the paper does not mention a major study sponsored by the Environment Directorate which sought to develop a methodology for quantifying the environmental effects of products.3The project was carried out by French consultancies BioIntelligence Service and O2 France, which claimed it to be a pioneering work in IPP by integrating life-cycle environmental impact data and economic valuations of environmental externalities associated with 34 categories of products and services representing most of the EU economy.

Building occupancy - both domestic and commercial - and freight and passenger transport emerged as the products and services contributing most to environmental externalities. Textiles and household appliances were also high on the list. Some products contributed significantly to particular impacts - such as food production, where vegetables accounted for much of the total eutrophication load and livestock did the same for emissions of photochemical oxidants.

The consultants also carried out a series of case studies which assessed the scope for improving the environmental performance of products. They found often huge differences between available technologies in reducing particular impacts such as global warming or ozone depletion - although, as the report acknowledges, an option which performs well on one impact will not necessarily do so on another.

These are important pointers, but no more. The methodology used in the study is contentious along many steps of the way - underlining the difficulties which will face the Commission when it seeks consensus on a method of identifying the most damaging products.

Greens hit out
The Commission's retreat from many of the more radical ideas for IPP aired over the past three years will generally have been welcomed by industry - although it must be said that a high standard of environmental literacy has not always been evident in business contributions to the debate.

One example was a complaint by the Confederation of Food and Drink Industries about a specific reference to food products in an earlier draft. 'We do not understand how food products can be environmentally damaging when the final product is eaten,' a spokeswoman commented.

Environmental organisations were bitterly disappointed by the Communication. The European Environmental Bureau said that it 'fails entirely' to set in train significant reductions in the life-cycle environmental burdens of products - and hit out at the Commission for including no environmental objectives in the paper.

The EEB had been particularly keen on a framework Directive to impose general eco-design obligations on businesses. 'Without this framework, the IPP process will have no political drive and no ability to create major changes in the near future,' a spokeswoman commented. 'Does it have to take ten years from the start of IPP studies in 1997 to 2007 to realise what is necessary?'

Setback for national policies
On the surface at least, the IPP Communication may seem like another victim of a growing anti-interventionist tendency in high EU policy-making circles.

There is something to that view. At the same time, the genuine difficulties of mustering an effective products policy should not be understated. Over the next few years, the Commission will be putting in place a number of building-blocks which should give IPP stronger foundations a few years hence - and certainly this is not a policy area which business can now afford to ignore.

That said, the weakness of the Communication may well undermine efforts to build products policies at national level. The UK, which is not among the front-runners, had been looking to the Commission to give a lead - by developing EPDs to encourage the flow of environmental information along supply chains, to take just one example.

An early indication of the impact on Government thinking should come soon, in the shape of a draft UK strategy on sustainable production and consumption. But the Communication has clearly disappointed. Commenting on the paper at a House of Lords inquiry in July, Richard Bird of the Environment Department said: 'We have been influential in shaping the strategic direction of the document. That is not to say that we are entirely happy with it, because it does seem a little light on specific proposals.'

Indeed it is - and for a strategy billed by the Commission as marking a 'major input' to the ten-year programmes on sustainable production and consumption agreed in Johannesburg that is a serious setback.

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