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Chapter 13: Social and environmental management in:

Joachim H. Becker, Sven Pastoors, Ulrich Scholz, Rob van Dun

Towards Sustainable Innovation, page 247 - 262

A five step approach to sustainable change

1. Edition 2017, ISBN print: 978-3-8288-3903-8, ISBN online: 978-3-8288-6655-3, https://doi.org/10.5771/9783828866553-247

Tectum, Baden-Baden
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243 chapter 13: socIal and envIronMental ManageMent Ulrich Scholz Summary In this chapter three different management systems to check a company´s sustainability are introduced: the quality management (QM), social responsibility management (CSR) and environmental management (EMAS). Environmental Management is accomplished principally in response to requirements stipulated in environmental laws and regulations. Its objective is ensuring the protection of human health and well-being and the protection of life forms and their habits. Quality management (QM) and Environmental Management have the tasks of formulating aims and achieving these through structural and procedural organisational rules. Ecological problems and a shortage of resources have led to the waste-disposal problem that has found its way into the environmental considerations of companies. In this context, economic targets should be brought in line with social and ecological targets. In doing so, companies save costs by e.g. sparing the use of water in production. Careful handling of lim- 244 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation ited resources can also contribute to the image and sustainability improvement of the company. Life cycle assessment (LCA) is a tool for Environmental Management, which companies may use to assess the possible impacts of a product, procedure or activity on the environment during the course of its life (life cycle). In doing so, companies measure quantitatively the use of particular resources (“inputs”), such as energy, raw materials and water and the emissions (“outputs”), which end up in the air, water and soil, are assessed. Thus, these are those resources to be associated with the tested system (extraction of raw materials, product manufacturing, use, disposal). The results of the life cycle assessment form the basis to create a company’s Eco balance. Therefore, the LCA includes the widest possible collection of environmental impacts of products, processes and services with regard to the entire life cycle of one of the products manufactured by the company. So, in conclusion the concept of LCA is to evaluate the environmental effects associated with any given activity, from the initial gathering of raw materials from the earth until the point at which all residuals are returned to the earth. 13.1 Quality management: product and process aspects If a company wants to act sustainable it needs a common set of policies, processes and procedures to ensure that it can fulfil all the tasks required to achieve its objectives. This common framework is also termed a management system. According to the International Organisation for Standardization (ISO) a management system “describes the set of procedures an organization needs to follow in order to meet its objectives. [...] the larger the organization, the more likely that procedures need to be recorded to ensure everyone is clear on who does what. This process of systemizing how things are done is known as a management system“ (ISO, 2016). 245 Chapter 13: Social and environmental management The ISO offers a wide ranch of different management systems, depending on the field of activity (Production, Finances, QM, HR etc.) a company wants to improve in. According to the ISO an effective management system provides companies: • “more efficient use of resources, • improved risk management, and • increased customer satisfaction as services and products consistently deliver what they promise“ (ISO, 2016). In this chapter three different management systems to review a company´s sustainability are introduced: the quality management (QM), social responsibility management (CSR) and environmental management (EMAS). Before discussing the certification possibilities of environmental management, the quality management of a company is briefly presented along with its certification possibilities. Quality management (QM) has the task of formulating aims and organising these through structural and procedural organisational rules (Oeldorf/Olfert, 2004), p. 67). Since a uniform, internationally recognised and harmonised assessment of quality capability of companies was lacking, with the aid of the International Organization for Standardization (ISO), the series of standards ISO 9000 to 9004 were established in 1994. Introducing the standard series EN ISO 9000, standards were created for documenting the basic measures of quality management. Today, the ISO standard includes the sub-areas: • ISO 9000: Quality management systems: Fundamentals and vocabulary • ISO 9001: Quality management systems: Requirements In this system products are offered with the aim of fulfilling the customer’s requirements and increasing customer satisfac- 246 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation tion. ISO 9001:2000, Quality management systems, defines the requirements placed on a quality management system. This standard is the basis to certify QM systems. It describes the requirements that a QM system needs to fulfil. • ISO 9004: Guideline for orienting the company in the direction of Total Quality Management (TQM). TQM describes the general process of introducing a company’s quality and sustainability as the company’s system target. Since this standard is not the basis for certification, it receives less attention than ISO 9001. However, the European Framework for Quality Management (EfQM)-Model defines the concrete implementation of this standard. Here, quality refers not to the product, but rather to the relationship between the company and the customer. 13.2 social responsibility The social and corporate responsibility of a company is defined as the core of corporate social responsibility (CSR) (Schneider/Steiner, 2004). The topic at hand revolves around the company’s obligations to society. The field of corporate social responsibility focuses on corporate norms, values and actions and their results. It examines the norms and values used for orientation by the people working in business (Küpper/Picot, 1999). Thus, the ISO standard 26000 defines and describes social aspects and social responsibility. It serves as a guideline for companies and organisations to demonstrate Corporate Social Responsibility. “The international standard ISO 26000 […] is a guideline, which when used voluntarily, supports organisations to realise social responsibility. It was developed by the International Organization for Standardization (ISO) involving all the interested parties, including the industry, trade unions, consumers, authorities, non-governmental organisations (NGOs), and in cooperation with 450 experts from 247 Chapter 13: Social and environmental management almost 100 countries in about six years.” (BMAS, 2013) It is important to mention that emerging and developing countries were involved in preparing this guideline as well as the consumer organisations for the design of the standard in the starting phase. Important impulses were given from these countries. The standard ISO 26000, which has been in force since the end of 2010 deals with the social responsibility of organisations, an area that would normally be defined as soft factors by the company. Activities of companies and organisations, like poor factory working conditions in developing countries, child labour, over-exploitation of raw materials, sometimes have dramatic consequences for the image of the company. All the aspects of ISO 26000 are equally important. There is no predetermined order of implementation for the individual topic areas. Thus, the company realises fields of action for all the areas by the end of the implementation. However, as it is not possible to measure responsibility, the standard is of a guiding nature. ISO 26000 sets no requirements for how organisations and companies have to behave, but the standard is aimed at a common understanding of the term social responsibility. For this reason, companies and organisations cannot be certified according to ISO 26000. In contrast to corporate social responsibility, the ISO standard incorporates not only companies, but also all forms of independent organisation. Thus, institutions such as high schools, administrative departments and hospitals should align themselves to this standard. The guideline begins with a series of definitions and trends to be observed. It defines the seven basic principles and seven core topics of social responsibility. The seven basic principles determine the basis and prerequisites for a credible discussion on social responsibility, whereas the core topics represent the seven main areas of social responsibility. 248 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation Basic principles of social responsibility: 1. Accountability: The actions of organisations have implications for the environment and society. Hence, it should be accountable. 2. Transparency: How an organisation acts, decides, etc. should be exposed in a proper extent and at the same time traceable. 3. Ethical conduct: Concern for humans, other forms of life and the environment. 4. Regard for the interests of the stakeholders 5. Regard for the rule of law 6. Regard for international standards of conduct (e.g. those of the International Labour Organization – ILO) 7. Regard for human rights Besides these principles, ISO 26000 names seven core areas of social responsibility of companies/organisations. These core areas are important for all organisations, but can result in different fields of action for different companies/organisations. Thus, for example, in the core area “environment”, efficient resource usage can be more important for one company/organisation than for another. Therefore, the respective companies/organisations have to decide for themselves what they perceive to be important. 249 Chapter 13: Social and environmental management Fig. 13.1: ISO 26000 – Th e core topics of social responsibility of companies Source: Vitt et. al., 2011, p. 34. Many appraisals of ISO 26000 consider it positive that an internationally shared understanding of social responsibility is achieved. Th ere is hope for this internationally shared understanding to gain acceptance based on the cooperation of diff erent interest groups. 13.3 ecological Management Ecological problems and a shortage of resources have led to the waste-disposal problem that has found its way into the environmental considerations of companies. In this context, economic targets should be brought in line with social and ecological targets. In doing 250 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation so, companies save costs by e.g. reducing the use of water in production. Careful handling of limited resources can also contribute to the image and sustainability improvement of the company. A company that operates high-quality disposal and prevention management improves its competitive advantage, becoming interesting for investors and analysts. Generally, objects in the disposal area include everyday rubbish, exhaust gases, wastewater and empty containers. These objects are combined under the term waste. The ecological targets, which are to be pursued in this area, are prevention before recycling, and recycling before disposal. Schulte summarises waste disposal strategies, which are particularly relevant for environmental management, as follows (Schulte, 2005, p. 419): • Prevention: The generation of waste is generally avoided • Reduction: Use of resource-conserving alternatives • Utilisation: Retention of the form of the material • Recovery: Break-up of the form of the material • Elimination: Final waste disposal from an economic point of view These waste disposal strategies allow companies plenty of scope for action. Companies may us them, for instance, in the area of resourcing pre-products. Important consequences are recycling strategies, which contribute to the acquisition of raw and auxiliary substances, but also pre-products from recycled end-products, which in return contribute to sourcing optimisation. Important approaches for raw material recycling include: • New use: Here, in the area of new use, materials are re-processed, so that they can be introduced to a new, original use. • Continued use: The material can be applied for continuous use with or without further preparation. 251 Chapter 13: Social and environmental management • Multiple use: Multiple use allows the multiple use of residual materials. • Re-use: Multiple use materials can be added in the framework of re-use. Furthermore, companies may generate an individual disposal concept through observing the following steps: 1. Analysis of the present situation with consideration of the company objective, 2. Development of an alternative disposal concept, 3. Introduction of a supply concept, 4. Controlling and steering of the introduced supply concept. The recyclability of the sourced and processed products is very important for companies, as high recycling costs can retrospectively lead to an increase of the purchasing prices. In the B2B sector, the sourcing company expects a clear recycling concept from suppliers in order to give its own customers disposal guarantee. Companies that place emphasis on the management of their ecological responsibility and want to increase the respective activities, can introduce an environmental management system. In doing so, a distinction must be drawn between the “Eco-Management and Audit Schemes” (EMAS), also known as the EU-Eco-Audit, and the international counterpart ISO 14001. The EMAS Standard was developed by the European Commission. It allows companies to obtain certification for their environmental management system as a whole or for individual operating facilities separately. They contain a series of specifications on the environmental effects of the core operation. Companies with activities at several locations and in several countries set themselves multiple targets regarding when particular percentages of the location or the turnover should be certified according to one of the two standards. However, both systems are recognised. 252 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation Literature criticises the focus of EMAS to still be placed on the optimisation of the management system, which in practice often results in production optimisation and waste avoidance alone. Thus, the core business and product design are often not affected. Due to the fact that the system is developed too statically and not sufficiently future-oriented towards development possibilities, the strategic success potentials remain unrecognised. In contrast, EMAS organisations are committed to continuously improve their environmental performance beyond the legal requirements. For this reason, with ISO 14001, the strategic components are strengthened from the beginning. Thus, a technical control board (like e.g. TÜV) rejects a recertification if it is not obvious how environmental and social aspects are anchored in the strategies of the business areas. Surveys of the stakeholder are intended in the framework of the creation of the EMAS process. An example for the creation of processes is the definition of core topics and indicators for success measurement. In doing so, the business areas can align the activities to expand and further develop a sustainable strategy. Experts recommend implementation of, for example, “life cycle assessment” for dynamic companies focussing on holistic and even stronger strategy-oriented procedures. 13.4 life cycle assessment The life cycle assessment (LCA) is a tool to assess the possible impacts of a product, procedure or activity on the environment during the course of its life (life cycle). In doing so, companies measure quantitatively the use of particular resources (“inputs”), such as energy, raw materials, water, and the emissions (“outputs”), which end up in the air, water and soil. Thus, these are those resources to be associated with the tested system (extraction of raw materials, product manufacture, utilisation, disposal). 253 Chapter 13: Social and environmental management Fig. 13.2: General procedure for the development of a life cycle assessment Source: fit-umwelttechnik, 2014. The results of the life cycle assessment form the basis for the creation of a company’s Eco balance. Therefore, the LCA includes the widest possible collection of environmental impacts of products, processes and services with regard to the entire life cycle of one of the products manufactured by the company. Furthermore, it demonstrates the potential for improvement, the environmental properties of products, procedure and services. At the same time, it is important to create transparency and objectification using a modular approach and an overall analysis. Its aim is to provide decision-making assistance for industry, politics and non-profit organisations to optimise the production process of a product from an environmental perspective. In a life cycle assessment (LCA), the environmental impact of a product is calculated. Furthermore, the companies may consider the amount of raw materials required for the manufacture a product. Also, the production of semi-finished products, the production itself, including packaging and transport of raw materials, the use of the product and its disposal after use is taken into consideration. 254 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation Figure 13.3: Life cycle assessment of a car Source: Daimler, 2015. The two types of systems that are of particular interest for companies are the life-span of a product (e.g. a car) and the activity triggered by the product (e.g. driving). The examinations of the life-span are performed in order to answer the questions about the duration/extent of the pollution load, which the product releases during use. For this reason, this question is decisive for the structure of the LCA study. A similar question could be: which direct impacts does a new product have on the environmental load in comparison to the impact of a present product? The life cycle assessment is performed in 4 steps (Herrmann, Ch., 2010, S. 153): 1. Definition of target and scope Starting with the target and the scope, first the decision-making criteria and the functional units for further investigations are determined. Furthermore, the system restrictions are defined. 255 Chapter 13: Social and environmental management The products are analysed from the view of a cross-system functional unit. The analysis takes place in a consistent, transparent and reproducible manner. The aim of the first step is to select raw materials and the product innovations in such a way that products and packaging may be developed that have a lower impact on the environment. 2. Status analysis The second step analyses the consumption of energy resources and resources in the sourcing process, production and productuse. A treatment diagram is created to classify the process of the product life cycle. Finally, the investigation parts and the energy input and output are determined. By means of this, a company collects all the relevant data to assess the product and, if necessary, presumptions about the missing data are made. Thus, the correct material and the energy proportions for each phase of the product life can be presented. 3. Impact assessment In the third step, the emissions, wastes and used resources are analysed, taking environmental topics into consideration. That means, the effects of materials and the matter of the contaminant appraisal of a product are described in impact categories. Thus, during this step, criteria are determined that are influenced by the impact categories. In consequence, the indicators of the respective impact categories and the corresponding weightings given to the categories are determined. 4. Improvement/appraisal and interpretation of the results At step four, the company identifies the parameters that are most important during the monitoring and control of sourcing, production and logistics. Furthermore, it defines improvement areas, and assesses the effect-categories using the original target 256 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation definition, so that it can realise the improvement process. A main question in this step is which resources are necessary for the improvement and, in return, which risks are involved with the use of these resources. Finally, the results of the analysis are evaluated and the progress is publically reported. However, LCA is not a risk assessment, considering that the LCA does not take exposition into consideration. This is, however, a parameter of utmost importance for a risk assessment. For example, with LCA emissions are determined quantitatively. The actual impacts of these emissions are, however, dependent on where and when they were released into the environment. As already determined, the entire life cycle of a product is analysed in the framework of the life cycle assessment. Not only the production, but the entire product life cycle is taken into consideration. The main steps of the LCA are described in the standards (ISO 14040- 14043). All the difficulties of stock taking and restrictions of the impact of the calculation process must be documented for every step of the LCA. Even during a very meticulous implementation of the life cycle assessment, not all aspects can be taken into consideration. This is considered to be a problem of the tool. However, despite numerous limitations, the LCA leads towards the right direction to the identification and reduction of environmental loads and helps companies to produce sustainably and save on costs. Finally, the properties are summarised once more in Figure 13.4: 257 Chapter 13: Social and environmental management Fig. 13.4: The four steps of LCA Source: Stages of an LCA. Data from ISO 14040, 2006. Training questions: 1. Name the principle and core areas of “social responsibility”. 2. Please explain the five waste disposal strategies shortly. 3. Please explain the four approaches for raw material recycling. 4. What is the basic idea behind LCA? 5. Explain the tasks and implementation of the life cycle assessment. 6. Name the four life-cycle stages and explain them. 7. Explain the LCA approach with the car industry as practical example: 8. How does it affect internal processes? 9. How does it affect communication with the consumers? 10. How does it affect supply chain management? 258 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation Recommended literature Frösch, G./Meinholz, H. (2011): Handbuch betriebliches Umweltmanagement, Wiesbaden. Oeldorf, Olfert (2008): Materialwirtschaft, 12. Ed., Leipzig. Schulte, Christoph (2005): Logistik, München. Vitt, Judith et.al. (2011): Gesellschaftliche Verantwortung nach DIN ISO 2600 – Eine Einfürung mit Hinweisen fuer Anwender, Berlin/ Wien/Zürich. Internet resources Daimler (2016): Elements of the environmental management system R&D with focus on desing for environment, online: www. Daimler. com, last access on 13.10.2016 Fit Umwelttechnik (2014): Life Cycle Assessment, online: www.fitumwelttechnik.com, last access on 23.2.2014 ISO (2016): Management Standards, online: http://www.iso.org/iso/ home/standards/management-standards.htm, last access on 23.2.2014

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Zusammenfassung

With sustainability having gained a lot of momentum over the last years and companies implementing strategies to create corporate sustainability, there are lots of opportunities for innovation. Thus, the two concepts of sustainability and innovation should not be considered separately – they are closely interlinked with one another. The main goal of sustainable innovation is to develop new products and technologies that have a positive impact on the company’s triple-bottom-line. To meet this aim, they have to be ecologically and economically beneficial as well as socially balanced.

In order to help companies to improve their sustainable innovation process practically, this book is structured into five possible phases of a sustainable innovation process:

Awareness of a sustainability problem

Identification & Definition of the problem

Ideation & Evaluation of the solutions

Testing & Enrichment of the solutions

Implementation of the solutions & Green Marketing