4.3 Firm Competitiveness
Competition between companies is driving the uptake of Life Cycle Approaches in a variety of sectors. In the manufacturing sector, Life Cycle Approaches—such as Design for Environment (DfE) or ecodesign—can be used to demonstrate environmental performance and product quality improvements. Competition is less of a driver in raw materials industries, where market access and regulatory compliance have played a stronger role. Energy efficiency is strongly linked to competitiveness in several sectors as gains in this area can provide an ongoing competitive advantage.
Cost avoidance and innovation are drivers for companies in competitive industries as they contribute to competitive advantages and differentiation in the marketplace. Cost avoidance refers to using Life Cycle Approaches to identify cost savings through activities such as energy efficiency, waste management, and greening the supply chain. It is closely linked to a focus on the triple bottom line, which takes environmental and social performance into account alongside financial performance.
Companies also use Life Cycle Approaches to innovate and identify features and improvements that can differentiate products in the marketplace. Companies are shifting their sustainability focus to the supply chain both to save money and to meet new and rising accountability demands from their shareholders, stakeholders and investors to do so.
There is a growing demand from companies for quantitative, science-based information to validate intuitive assumptions in product design and use, and to ensure that investments in environmental improvements are made at the right place. Companies can use Life Cycle Approaches to determine where they should invest their money to achieve the largest environmental gain at the least economic cost. Without this approach, they might invest in areas that are less effective – for example, by changing their light bulbs instead of optimizing the packaging or reducing wastes where there are more environmental and efficiency gains to be made.
ENHANCING SUPPLY CHAIN EFFICIENCIES
The supply chain§§§§ represents a significant and obvious opportunity to make environmental improvements as up to 90% of a consumer good’s environmental impact is incurred in this process.126 By better understanding their supply chain through the adoption of Life Cycle Approaches, retailers and manufacturers gain an awareness of the economic and environmental risks along it (see Table 3 for a summary). This allows the identification of hot spots, processes inefficiencies, and improvements in upstream and downstream processes.
TABLE 3. LIFE CYCLE APPROACH-RELATED RISKS AND OPPORTUNITIES IN THE SUPPLY CHAIN
By applying Life Cycle Approaches to their supply chain, businesses are realizing economic benefits. Distribution costs are being reduced by identifying areas for fuel savings, such as decreasing the amount of packaging and thus the weight or volume of the product to transport or the introduction of hybrid vehicles, resulting in overall cost savings.127, 128 Increased supply chain reliability and flexibility in sourcing, as well as improved time to get products to the market through distribution efficiency,129, 130 are resulting in increased business competitiveness. Distribution efficiency is “having the right product distributed to the right place, at the right time, and at the right cost.” 131
Environmental gains are being realized through increased supplier awareness of hot spots that could be addressed through process improvements, and through enhanced consumer awareness of steps to take to limit environmental impacts during use and disposal. This information helps downstream companies work with suppliers to reduce or eliminate environmentally harmful substances from their products. For example, in Europe, the Restriction of Hazardous Substances Directive (RoHS) restricts the use of lead, mercury, cadmium, hexavalent chromium, and polybrominated flame retardants in electronic and electrical equipment.132 In response to this directive, manufacturers of electrical and electronic equipment are identifying and limiting regulated substances that are used in the components that make up their products. Similarly, suppliers to Walmart Canada are reacting to Walmart’s goal of a 20 million metric tonnne annual reduction in GHG emissions from its supply chain by 2015 (see text box below for more details). RONA is also targeting reductions along its supply chain with respect to packaging and it aims to decrease packaging by 5% by the end of 2015.133
ENHANCING INTERNAL OPERATION EFFICIENCIES
Similar to the public sector, the private sector is using Life Cycle Approaches to identify areas for economic and environmental improvements in internal operations. Internal operations refer to the infrastructure, goods, services, and related processes that help businesses function, including manufacturing or processing practices that are internal to the company. The identification of hot spots, inefficiencies, more favourable alternatives, or process improvements in operations “owned” by the company can be achieved through the adoption of Life Cycle Approaches. The resulting efficiencies are opportunities for economic savings, as well as for conservation of resources and pollution prevention. These include improved product quality as ongoing measurement provides an imbedded continuous improvement mechanism134 and improved process reliability.
Companies are in turn becoming better environmental stewards by reducing negative impacts through the use of Life Cycle Approaches in internal operations. Environmental benefits, such as reduced air emissions, solid waste generation, and wastewater discharges and reduced noise or other quality-of-life emissions are being achieved through the use of this approach.135
The following case study shows how BASF is using a Life Cycle Approach, eco-efficiency, to incur these benefits in their products and processes. Eco-efficiency analyses the environmental and economic impacts of a product or process over its life cycle to support choices that are cost effective and have minimal environmental impacts with respect to resource conservation, emissions and waste generation.136
4.4 CONCLUSION
The NRT’s research and convening revealed three key reasons for Canadian businesses and governments to adopt Life Cycle Approaches.
First, Canada’s international competitiveness faces risks from market access and trade issues that result from the requirement of Life Cycle Approaches along the supply chain by foreign governments and business sectors. This risk is real and Canada must act now to maintain its competitiveness.
Second, the public sector has an opportunity to advance environmental stewardship objectives and show leadership by integrating of Life Cycle Approaches in strategic areas of the government’s internal operations, as well as in policy and program decision making. Some policies and programs are currently in place that support or incorporate this approach, but significant room for improvement exists particularly if it is to support private sector needs in this respect. Savings in its own internal operations can also result.
Third, Life Cycle Approaches present an opportunity for the private sector to realize process efficiencies in internal operations and supply-chain management, improve product and service offerings to customers, and increase its competitiveness in national and foreign markets.
[§§§§] Supply chains refer to the cycle of products and services, beginning with design and then moving through sourcing, production, distribution, and sales and ending with consumption.
[126] The Delphi Group and Kalypso Designs 2011
[127] Industry Canada 2009a
[128] Consumer Electronics Association 2010
[129] Industry Canada 2009b
[130] Industry Canada 2009a
[131] Industry Canada 2009b
[132] The European Parliament and the Council of the European Union 2003
[133] RONA 2011
[134] Schenck 2009
[135] Industry Canada, Canadian Manufacturers and Exporters, and Design Exchange 2009
[136] European Commission Joint Research Centre 2010b
[137] Walmart 2011
[138] Walmart Canada 2011
[139] ICF Marbek 2011
[140] ICF Marbek 2011
[141] ICF Marbek 2011
[142] BASF ND
[143] BASF 2005
[144] BASF 2005
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