ENVIRONMENTAL COMMUNICATION AND COMPETITIVENESS

IIIEE Communications 2000:1 ENVIRONMENTAL COMMUNICATION AND COMPETITIVENESS A case study of the car industry Agathe Bolli International Institute fo...
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IIIEE Communications 2000:1

ENVIRONMENTAL COMMUNICATION AND COMPETITIVENESS A case study of the car industry Agathe Bolli

International Institute for Industrial Environmental Economics (IIIEE) (IIEEEE) Internationella miljöinstitutet

IIIEE Communications 2000:1

ENVIRONMENTAL COMMUNICATION AND COMPETITIVENESS A Case Study of the Car Industry

Agathe Bolli

Thesis for the fulfilment of the Master of Science in Environmental Management and Policy Lund, Sweden, September 1999

International Institute for Industrial Environmental Economics at Lund University Internationella miljöinstitutet vid Lunds Universitet

© You may use the contents of the IIIEE publication for informational purposes only. You may not copy, lend, hire, transmit or redistribute these materials for commercial purposes or for compensation of any kind without written permission from IIIEE. When using IIIEE material you must include the following copyright notice: 'Copyright © IIIEE, Lund University. All rights reserved' in any copy that you make in a clearly visible position. You may not modify the materials without the permission of IIIEE. . Published in 1999 by IIIEE, Lund University, P.O. Box 196, S-221 00 LUND, Sweden, Tel: +46 - 46 222 02 00, Fax: +46 - 46 222 02 10, e-mail: [email protected]. www.lu.se/IIIEE/ ISSN 1401-0798

Internationella miljöinstitutet vid Lunds Universitet

International Institute for Industrial Environmental Economics at Lund University

Environmental Communication and Competitiveness A Case Study of the Car Industry

Agathe Bolli

Supervisors: Tareq Emtairah and Ulrika Wennberg

M. Sc. Thesis Lund, September 1999

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Acknowledgements

I would like to thank several people who provided me with information and supported me during these three and a half summer months of the thesis: I want to express my thanks to the representatives of the car companies who were open to providing me with interesting information. These were Björn Brovik from Saab AB, Raimund Medrisch from BMW, and Mary Ann Ruiz from Volvo Cars. Further, I would like to thank Wolfgang Lohbeck from Greenpeace for giving me his opinion about the car industry. I am very thankful to Robert Niggli from UBS Brinson for taking so much time to introduce me to the “facts and figures” of the car industry and for reading my thesis draft. Gianreto Gamboni from UBS Brinson deserves a special thanks for giving me good advice in my “times of doubts”. I appreciated this very much! Ulrika Wennberg and Tareq Emtairah deserve special mention for their assistance as thesis advisors. Supervising so many thesis works is not an easy task. Especially I appreciated Tareq’s choice of Bornholm as a place for giving me a feedback on my thesis draft. Further, I have to say that I very much enjoyed our “platform group” Petter, Natalia, Gemma and Mats, and I want to thank them for the encouragement and the interesting discussions. I will not forget the “Hello platform! Is it not sinking yet?”. This thesis would not have been possible without the support of my family and my friends at the IIIEE. A particular thanks goes to my sister Leta who provided me with accommodation, food, Internet and a good mood during the month of July that I spent Switzerland. I also want to thank my parents for being so concerned about what my thesis title was going to be. Last but not least, a special thanks goes to Raquel for the support throughout the summer and for being tolerant with the mess in our apartment and the fact that there was never food in the fridge.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Executive Summary Environmental problems are increasing, and so is the awareness that there may be a link between economic and environmental performance. This has caused industries to take environmental issues into consideration when making business decisions. Environmental communication plays a crucial role in this context, and environmental reports are becoming an important tool for communicating environmental performance and strategies to a multitude of stakeholders. However, identifying the information needs of stakeholders seems to be problematic, and the benefits of environmental communication, especially reporting, are not always evident. Complex, final assembly producers, such as car manufacturers, face a unique situation. Since most of the components for the end products are manufactured by suppliers, environmental impacts resulting from production can often only be indirectly influenced. Most of the environmental impacts resulting from an automobile’s life cycle is caused by the actual use and disposal of the car. This poses problems in defining a car manufacturer’s actual environmental responsibility, and in turn creates difficulty in establishing priorities for environmental communication. Using the car industry as an example, this study aims to examine how, if at all, environmental reporting and communication can be used strategically by complex final goods producers to achieve competitive advantages. The topic was explored by asking the following research questions: 1. What role does environmental communication and reporting play in obtaining competitive advantages? 2. What and how should car companies communicate, concerning the environment, in order to reach competitive advantages? 3. Is this reflected in current environmental communication and reporting of car companies? 4. Do current reporting frameworks, like the Global Reporting Initiative (GRI), support such “competition oriented” environmental communication? The study was conducted through a desktop research of literature pertaining to competition theories and the environment, environmental problems resulting from the life cycle of a car, environmental demands placed upon the European car industry by stakeholders, and environmental communication by the car industry. The analysis of environmental communication by the car industry was limited to environmental reports, environmental information provided on corporate web-sites of car manufacturers, and product information. Three interviews with environmental managers of car companies were conducted to verify findings and provide some additional input.

Findings 1. Possible influence of environmental communication on competitiveness There is no clear link between environmental communication and competitiveness. Environmental communication is not of the same importance for every company and for every industry branch. In order to assess the possible effects of environmental communication on competitiveness, a company’s interactions with stakeholders from its main market, the public, and the political arena has to be analysed. The environmental information needs of the various stakeholders have to be analysed, as well as the influence possibilities for environmental strategies. Overall, the following statement can be made about the effect of environmental communication on competitiveness:

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Environmental communication can increase competitiveness by meeting the information needs, pertaining to environmental issues, of various stakeholders, as well as supporting environmental strategies. As a responsible member of society, a company should openly communicate environmental problems that arise from its production activities, as well as from its products. Failing to provide information regarding environmental problems can have a negative impact on company image, whereas proactive and critical communication can have a positive impact, and indirectly lead to increased competitiveness. Open communication regarding environmental issues is also a prerequisite for obtaining credibility with any proactive environmental strategy. A verified environmental report constitutes an appropriate tool, however not the only one, for responding to such information needs required mainly by the public and politicians. Environmental communication can be used proactively to support environmental strategies. Environmental issues generate environmental demands from different stakeholders, which can lead to changes in the competitive situation of a branch. Facing the same environmental requirements, companies may choose different strategies to confront them. For the purpose of this analysis, a distinction has been made between environmental market securing strategies, environmental cost strategies, environmental differentiation strategies, and environmental market development strategies. Environmental communication can be used to support all of these strategies. The stakeholders addressed and the contents of environmental communication are accordingly different. The environmental report might be of more importance for supporting strategies aimed primarily at the public and politics, such as market securing and market development strategies. 2. Implications for environmental communication by the car industry The study of environmental aspects of the automobile’s life cycle has shown that the main environmental impacts occur during raw materials extraction and processing, and during the use and disposal phase. Impacts in the use phase are caused by emissions created by the combustion of fuel, such as carbon dioxide (CO2) or nitrogen oxides, but also by the infrastructure that is built around the car. Communication regarding environmental issues should therefore mainly target these problem areas. What is also important is the communication of the goals and measures needed to mitigate the environmental problems. Environmental requirements resulting from environmental issues have been analysed in this study. Four major environmental competition fields have been identified, based on these requirements and underlying environmental issues: the reduction of exhaust emissions, fuel and CO2 efficiency, product stewardship and end-of-life management, and new mobility concepts. Car companies choose several strategies to confront the challenges arising from these fields of competition, and conclusions about implications for communication have been made on the basis of these strategies. Environmental communication for cost strategies, e.g., concerning end-of-life management, should be directed mainly towards employees, suppliers, car dealers, and dismantling companies. Establishing an internal “environmental spirit” and co-operating and communicating goals and requirements along the supply chain is important for competitiveness. The environmental report may have a subordinated role in such stakeholder-specific communications. The environmental competition fields also pose opportunities for product differentiation, such as fuel efficiency or reduced exhaust emissions. In order to be credible and to actually achieve a benefit for the environment, such environmental strategies should be applied to the whole vehicle fleet. In the environmental report, product performance data has to be provided in a way that allows comparability. It should at least contain information pertaining to fleet fuel use, fleet CO2 emissions, exhaust emissions compared to legal limits, contents of hazardous substances, and recycling. IV

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

However, the environmental report is not the primary tool for reaching customers. Environmental product declarations or labels can provide more customer-oriented, transparent, and comprehensible information, allowing customers to compare different car models within different classes of automobiles. It should be noted that not all brands have the same potential to be marketed with environmental attributes, as “environmental friendliness” has to be combined with other ”classical automobile values”. Desirable, from the point of view of sustainable mobility, are environmental strategies aiming at providing “service mobility” rather than the “product car”. Communication for such strategies should be aimed primarily at public and political stakeholders, as attitudes and the political framework have to be influenced in order to make such strategies profitable. Environmental reporting is a good tool for reaching opinion leaders among the public and within the political arena. In the context of supporting environmental product strategies, such as future propulsion technologies, the environmental report should contain information about long-term goals and visions, that is, how car companies see their products in the future. An environmental report should contain statements about how a company perceives the political framework it is operating in, and what its position is towards actual and future regulatory measures concerning internalisation of external road transportation costs. 3. Communication by car manufacturers The study of environmental reports, corporate web-sites, and product information of car manufacturers has revealed that car companies are in fact communicating environmental problems. Topics addressed are, above all, environmental impacts resulting from the production process, as well as from use. Environmental measures are described, however, the goals are not always clearly defined. In addition, there is no critical discussion of performance with respect to achieving goals. Communication pertaining to problems arising from the supporting infrastructure, such as roads, parking lots, and fuel supply, are hardly touched upon. A trend towards more product-oriented information can be seen. However, the provided information does not allow comparability of product performance of the entire car fleet. Comparison of environmental performance concerning processes on the basis of the reported data is not possible due to different systems boundaries and the lack of explanation of measuring methods. In the analysis of environmental communication supporting environmental strategies, it was difficult to distinguish between environmental strategies and actual communication regarding environmental strategies. Environmental communication concerning cost strategies is very stakeholder-specific and could not sufficiently be assessed on the basis of the studied material. Regarding environmental strategies aiming at product differentiation, the study revealed that car companies are following a segmentation strategy. Car companies are promoting cars with excellent fuel efficiency and low emissions, however, they are only offered in market niches. The environmental communication is reflecting this strategy. Volkswagen, for example, is aggressively promoting its car ”Lupo” which consumes only three litres of fuel per hundred kilometres. On the other hand, the environment is not at all an issue for promoting the ”New Beetle” which is not very fuel efficient. Environmental product communication concerning all the products in a vehicle fleet is not applied by any car company except for Volvo, who is also the only company using an environmental product declaration. The car industry is communicating developments concerning future propulsion systems and extremely fuel efficient and low polluting cars towards environmentally sensitised stakeholders. However, “environmental communication” with political stakeholders by car companies, and especially by the industry associations, reflect market securing strategies. Out of a defensive position, the car industry tries to slow down processes aiming at internalising external costs of road transportation. Indications for such strategies could be found in press releases by industry V

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

associations, annual reports of car companies, and corporate communications about policies on corporate web-sites. 4. Use of reporting frameworks, such as the GRI, for ”competition oriented” communication The Global Reporting Initiative is a reporting framework which is intended to be applied in any industry sector and contains requirements concerning structure and contents of environmental reports. Such a strict reporting framework can prevent companies from setting priorities regarding the contents of environmental communication and thus constrain the possibilities for communication aimed at supporting environmental competition strategies. Environmental reporting should reflect the information needs of stakeholders and also give companies the opportunity to proactively promote their environmental strategies. The core information in environmental reports of car companies, or other product-oriented industries, should pertain to strategies and performance of products. This is not sufficiently considered in the GRI framework. Furthermore, such a framework prescribing detailed contents of an environmental report does not consider the time dimension. Environmental problems caused by an industry and the corresponding requirements might change over time. Stakeholders from different reference fields that are addressed may change as well. As the environmental report is not equally suited for reaching all stakeholders, it should therefore be possible to adjust the contents of the environmental report and set new priorities. Final remarks The thesis presents a framework for how companies could take competitive issues into consideration for setting priorities for environmental communication. This can be done through a systematic analysis of environmental problems caused by the industry; environmental requirements; actual, latent, or potential competition fields; and the implications that this causes for environmental communication aimed at market, public, and political stakeholders. The car industry has been used as an example for how this framework could be applied for complex goods industries. This work aimed at analysing potential benefits of environmental communication and did not try to prove any clear links between environmental communication and competitiveness. The need for environmental communication cannot be defined only over competitiveness criteria. Generally, two “levels” of environmental communication by car companies have been observed, and some companies might be reaching competitive advantages through both ways of communication. On the one hand, they can achieve competitive advantages through environmental communication pertaining to product strategies and by promoting car models that are particularly low polluting. The positive impact on competitiveness is in this case not achieved directly through increased sales of the environmentally differentiated products, but indirectly through an improved image. The environmental report can add to such an image and strengthen a brand. On the other hand, the whole car industry tries to achieve competitive advantages against more environmentally friendly modes of transport by opposing more stringent environmental laws and fiscal measures. ”Environmental communication” aimed a political stakeholders in the name of such strategies is not consistent with environmental communication regarding environmental product strategies. In the long run, this might have an impact on the credibility of communication regarding environmental product strategies. If final complex goods industries want to use environmental communication effectively, they have to be able to communicate substantial environmental improvements, which reflect the whole product portfolio and not simply prototypes or niche products.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Table of contents 1. 1.1 1.2 1.3

1.4 1.5

INTRODUCTION

5

PROBLEM STATEMENT OBJECTIVES OF THE STUDY SCOPE AND LIMITATIONS 1.3.1 CONTENTS BOUNDARIES 1.3.2 GEOGRAPHICAL AND TIME BOUNDARIES METHODOLOGY AND APPROACH STRUCTURE OF THE REPORT

5 6 6 6 8 8 10

PART I - THEORETICAL BASICS 2. 2.1

2.2

2.3

3. 3.1

3.2

3.3 3.4

4. 4.1 4.2

ENVIRONMENT AND COMPETITIVENESS FROM ENVIRONMENTAL PROBLEMS TO ENVIRONMENTAL COMPETITION FIELDS 2.1.1 THE LOGIC OF THE ENVIRONMENTAL TRANSFORMATION 2.1.2 ENVIRONMENTAL REQUIREMENTS AND STEERING SYSTEMS 2.1.3 THE STAKEHOLDERS BEHIND THE STEERING SYSTEMS 2.1.4 ACTUAL, LATENT AND POTENTIAL ENVIRONMENTAL COMPETITION FIELDS ENVIRONMENTAL COMPETITION STRATEGIES 2.2.1 ENVIRONMENTAL MARKET SECURING STRATEGIES 2.2.2 ENVIRONMENTAL COST STRATEGIES 2.2.3 ENVIRONMENTAL DIFFERENTIATION STRATEGIES 2.2.4 ENVIRONMENTAL MARKET DEVELOPMENT STRATEGIES 2.2.5 COMMENTS TO ENVIRONMENTAL STRATEGIES COMPETITIVENESS OF COMPANIES AND ENVIRONMENT 2.3.1 THE MARKET-BASED VIEW 2.3.2 THE RESOURCE-BASED VIEW 2.3.3 SHAREHOLDER VALUE MODELS 2.3.4 COMMENTS TO THE THEORIES ENVIRONMENTAL COMMUNICATION

11 11 12 12 13 14 15 16 16 17 18 18 19 19 21 22 23 24

WHAT IS ENVIRONMENTAL COMMUNICATION? 3.1.1 ENVIRONMENTAL REPORTING 3.1.2 ENVIRONMENTAL PRODUCT INFORMATION AND ECO-MARKETING DRIVERS FOR ENVIRONMENTAL COMMUNICATION AND TARGET GROUPS 3.2.1 ORGANISATION-INTERNAL TARGET GROUPS 3.2.2 MARKET-BASED TARGET GROUPS 3.2.3 NON-MARKET-BASED TARGET GROUPS (PUBLIC OR POLITICAL TARGET GROUPS) PROBLEMS WITH ENVIRONMENTAL COMMUNICATION 3.3.1 SPECIAL POSITION OF COMPLEX FINAL GOODS PRODUCERS DEVELOPMENTS IN ENVIRONMENTAL COMMUNICATION 3.4.1 EUROPEAN AND INTERNATIONAL DEVELOPMENTS IN ENVIRONMENTAL REPORTING ENVIRONMENTAL COMMUNICATION AND COMPETITIVENESS LINKING ENVIRONMENT, COMMUNICATION AND COMPETITIVENESS MODEL FOR ANALYSIS

1

24 24 27 28 28 28 30 32 33 33 34 35 35 39

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

PART II - CASE STUDY IN THE AUTOMOBILE INDUSTRY 5. 5.1

5.2

5.3

5.4

5.5

6. 6.1

6.2

ENVIRONMENT AND THE CAR INDUSTRY

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CHARACTERISTICS OF THE CAR INDUSTRY IN THE EUROPEAN MARKET 5.1.1 PRODUCTION IN EUROPE AND LEADING COMPANIES 5.1.2 MARKET SITUATION 5.1.3 GLOBAL CHALLENGES AND STRATEGIES ENVIRONMENTAL ISSUES ALONG THE LIFE CYCLE OF THE CAR 5.2.1 ENVIRONMENTAL ISSUES ALONG THE LIFE CYCLE OF THE CAR 5.2.1.1 Raw materials extraction and processing 5.2.1.2 Pre-assembly manufacturing and vehicle assembly 5.2.1.3 Use phase 5.2.1.4 End of life 5.2.2 SUMMARY MATRIX OF ENVIRONMENTAL ASPECTS ENVIRONMENTAL REQUIREMENTS ON THE CAR INDUSTRY ARISING FROM THE

43 43 44 45 46 46 46 47 48 49 50

ENVIRONMENTAL PROBLEMS 5.3.1 LEGISLATORS

51 52 52 53 54 54 54 55 55 55 56 56 57 57 57 57 58 60 60 61 63 64 65 65 65

5.3.1.1 Fuel use and CO2 emissions - European level 5.3.1.2 End-of-life - Directive on End-of-life vehicles 5.3.1.3 Influence of regulation and authorities 5.3.2 ”GREEN” POLITICAL PARTIES 5.3.2.1 Influence of Green Parties 5.3.3 ENVIRONMENTAL NGOS 5.3.3.1 Influence of Environmental NGOs 5.3.4 CONSUMERS AND MOTORISTS ASSOCIATIONS AND CONSUMERS 5.3.4.1 Influence of consumers and motorists associations 5.3.5 SUPPLIERS 5.3.5.1 Influence of suppliers 5.3.6 INDUSTRY ASSOCIATIONS, COMPETITORS 5.3.6.1 Influence of Industry Associations 5.3.7 STAKEHOLDERS AND THE STEERING SYSTEMS 5.3.8 SUMMARY MATRIX OF ENVIRONMENTAL REQUIREMENTS ALONG THE LIFE CYCLE ENVIRONMENTAL COMPETITION FIELDS AND STRATEGIES 5.4.1 REDUCING EXHAUST GAS EMISSIONS 5.4.2 FUEL AND CO2 EFFICIENCY 5.4.3 PRODUCT STEWARDSHIP AND END-OF-LIFE MANAGEMENT 5.4.4 NEW MOBILITY CONCEPTS IMPLICATIONS FOR ENVIRONMENTAL COMMUNICATION 5.5.1 ENVIRONMENTAL COMMUNICATION CONCERNING ENVIRONMENTAL PROBLEMS 5.5.2 ENVIRONMENTAL COMMUNICATION SUPPORTING ENVIRONMENTAL STRATEGIES

ENVIRONMENTAL COMMUNICATION AND REPORTING IN THE CAR INDUSTRY 68 THE POSITION OF ENVIRONMENT WITHIN THE CORPORATE INTERNET COMMUNICATION 6.1.1 CORPORATE WEB-SITES 6.1.2 ANNUAL REPORTS AND OTHER STATEMENTS ENVIRONMENTAL REPORTS IN THE AUTOMOBILE INDUSTRY 6.2.1 LIMITATIONS IN COMPARABILITY 6.2.2 ENVIRONMENTAL POLICY AND GUIDELINES 6.2.2.1 CEO statement 6.2.2.2 Environmental Policy and guidelines 6.2.3 ENVIRONMENTAL MANAGEMENT SYSTEM 6.2.4 DATA ABOUT COMPANY RELATED MATTER AND ENERGY STREAMS

2

68 69 70 71 73 73 73 74 74 74

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

6.2.5 ENVIRONMENTAL ASPECTS OF PRODUCTS AND SERVICES 6.2.6 ENVIRONMENTAL PROGRAMME AND ENVIRONMENTAL GOALS 6.2.7 ECONOMIC QUESTIONS OF ENVIRONMENTAL PROTECTION 6.2.8 COMMUNICATION WITH TARGET STAKEHOLDERS 6.2.9 CREDIBILITY ENVIRONMENTAL PRODUCT INFORMATION AND ECO-MARKETING 6.3.1 CUSTOMER-ORIENTED ENVIRONMENTAL INFORMATION IN THE INTERNET 6.3.2 ENVIRONMENTAL LABELS, PRODUCT DECLARATIONS AND OTHER ENVIRONMENTAL

6.3

75 76 77 78 78 78 78 79 79 81 81 82

INFORMATION IN CUSTOMER ORIENTED COMMUNICATION

6.3.2.1 The Volvo Environmental Product Declaration 6.3.2.2 Environmental information at the point of sale 6.3.2.3 Environment and product information in car magazines 6.4 7.

SUMMARISING REMARKS APPLICABILITY OF THE GRI GUIDELINES FOR “COMPETITION-ORIENTED” ENVIRONMENTAL REPORTING

7.1 7.2

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COMPARISON OF THE ENVIRONMENTAL REPORTS WITH THE GRI GUIDELINES 84 IMPLICATIONS FOR “COMPETITION ORIENTED” REPORTING IN COMPLEX GOODS INDUSTRIES 85

PART III - SYNTHESIS 8. 8.1 8.2

9. 10. 10.1 10.2 10.3 10.4

DISCUSSION OF THE RESEARCH QUESTIONS

87

THERE IS NO “GENERAL RECIPE” FOR ENVIRONMENTAL COMMUNICATION SHORTCOMINGS AND OPPORTUNITIES FOR DEVELOPMENT IN THE ENVIRONMENTAL COMMUNICATION OF THE CAR INDUSTRY 8.2.1 ENVIRONMENTAL COMMUNICATION ABOUT ENVIRONMENTAL PROBLEMS 8.2.2 ENVIRONMENTAL COMMUNICATION SUPPORTING ENVIRONMENTAL STRATEGIES 8.2.3 IMPLICATIONS FOR ENVIRONMENTAL REPORTING AND REPORTING FRAMEWORKS SUCH AS THE GRI 8.2.4 HOW CAN THE CUSTOMER BE REACHED? FINAL REMARKS

87 88 88 89 92 94 96

REFERENCES

99

PRINTED SOURCES WEB-BASED SOURCES AND E-MAIL SOURCES FURTHER CONSULTED SOURCES INTERVIEWED PERSONS

100 101 103 104

Appendices APPENDIX 1 – GRI GUIDELINES

A-2

APPENDIX 2 – ENVIRONMENTAL REPORTING TYPES

A-3

APPENDIX 3 – ENVIRONMENTAL PROBLEMS IN THE CAR INDUSTRY

A-5

APPENDIX 4 – EUROPEAN LEGISLATION CONCERNING CAR USE PHASE

A - 11

APPENDIX 5 – ANALYSED CORPORATE WEB-SITES AND ENVIRONMENTAL REPORTS

A - 15

APPENDIX 6 – ANALYSIS OF ENVIRONMENTAL REPORTS

A - 17

APPENDIX 7 – REMARKS TO ENVIRONMENTAL PERFORMANCE INDICATORS

A - 23

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Table of Figures FIGURE 1-1: APPROACH

8

FIGURE 2-1: THE LOGIC OF THE ENVIRONMENTAL TRANSFORMATION

12

FIGURE 2-2: ENVIRONMENTAL COMPETITION STRATEGIES

15

FIGURE 4-1: ENVIRONMENTAL COMMUNICATION AS PART OF BUSINESS COMMUNICATION

36

FIGURE 4-2: EFFECTS OF ENVIRONMENTAL REPORTING

38

FIGURE 4-3: MODEL FOR AN “INTEGRATED COMPETITION THEORY”

40

FIGURE 5-1: EUROPEAN MARKET SHARES.

44

FIGURE 5-2: SUMMARY MATRIX OF ENVIRONMENTAL ASPECTS ALONG THE LIFE CYCLE

51

FIGURE 5-3: ENVIRONMENTAL REQUIREMENTS OF STAKEHOLDERS

58

FIGURE 5-4: SUMMARY MATRIX OF ENVIRONMENTAL REQUIREMENTS ALONG THE CAR LIFE 59

CYCLE

FIGURE 6-1: ENVIRONMENTAL COMMUNICATION IN THE CORPORATE WEB-PAGES

69

FIGURE 6-2: ANALYSED ISSUES IN THE ENVIRONMENTAL REPORTS

72

FIGURE 6-3: GOALS CONCERNING FUEL USE AND CO2 EMISSIONS

77

FIGURE 6-4: VOLVO ENVIRONMENTAL PRODUCT DECLARATION FOR THE VOLVO S80 2.9

80

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

1. Introduction 1.1 Problem statement With increasing public awareness of environmental issues and the links between economic, environmental and social performance, the requirements from different stakeholders concerning environmental communication and reporting are increasing. Only since the beginning of the nineties have companies started to report about their environmental performance in a more systematic way through environmental reports. However, as there were neither legal nor voluntary schemes about what to report and how to report, the quality of environmental information was (and still is) strongly varying and hardly comparable. An underlying problem of the insecurities regarding reporting could be the problem that companies often do not know how to collect, manage and declare the information they want or should report. Problems with defining the contents of environmental communication can also stem from the fact that companies often are not aware of who is actually using the environmental information. Problems of the complex final goods producers like the automobile industry with environmental communication and reporting Through the complexity of their products and the position of these industries in the value chain, complex final goods producers face special problems when it comes to environmental communication and reporting. Many final goods producers are only assemblers and have suppliers from different parts of the world. Therefore they often only have indirect influence over the environmental impact arising from the production of their products. The environmental impact of the products themselves (in the use and disposal phase) is often higher than the impact of the production. This situation makes it very difficult for these industries to set the systems boundaries of their “environmental responsibility” and therefore to decide what the important environmental issues are that they are accountable for and should communicate. These insecurities include questions like: To what extent should the environmental impact of the suppliers be taken into consideration? How shall these industries get the data for the reports, for example, about production impacts and even about composition of components? How important is communication about the properties of the products? Are they accountable for the end-of-life of their products? Which are the strategically important issues to report about? There have been several efforts from industry to put up frameworks for environmental reporting, but they are all very general and do not take into account the characteristics of the different sectors. There still is a lack of specific guidelines about what and how to report on a sector level. The importance of environmental reporting and communication is nowadays accepted in the industry, but actually it is not clear in what way reporting, or in a broader way communication about environmental performance and strategy, could be of benefit for the companies. How should the value of environmental reporting and communication be viewed in final complex goods industries? Can environmental communication contribute to increased competitiveness, and what would such communication look like? This is the problem field examined in this thesis.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

1.2 Objectives of the study Using the car industry as an example, this study aims to examine how, if at all, environmental reporting and communication can be used strategically by complex final goods producers to achieve competitive advantages. In order to explore this topic, the study is built on the following broad research questions: 1. What role does environmental communication and reporting play in obtaining competitive advantages? 2. What and how should car companies communicate, concerning the environment, in order to reach competitive advantages? 3. Is this reflected in the current environmental communication and reporting of the car companies? 4. Do current reporting frameworks like the Global Reporting Initiative (GRI) support such “competition-oriented” environmental communication?

1.3 Scope and limitations 1.3.1 Contents boundaries General The thesis aims at providing a framework for how a company could analyse the need for environmental communication from the competitiveness point of view. It shall show how issues for environmental communication, which can potentially add to competitiveness, could be taken into consideration. The thesis focuses on the issues relevant for complex goods industries, using the example of the automobile industry. It should be noted that the thesis does not actually try to find “proofs” of the link between environmental communication and competitiveness by analysing past environmental communications and their effects. Connection with the Sustainability Communication Platform The thesis was carried out in the framework of a project tied to the “Sustainability Communication Platform” (SCP). The concept of the Sustainability Communication Platform, developed by the IIIEE (Project manager Ulrika Wennberg) in co-operation with audit firms and the European Environment Agency (EEA), is intended to provide corporations with a costeffective way to disclose comparable and credible information on their environmental or, in general, sustainability performance. The core of the Sustainability Communication Platform is intended to be a platform on the Internet, which shall allow stakeholder-specific access to sustainability information and communication on different “complexity” levels. This shall enable benchmarking and decision-making based on a more balanced view of corporate performance1. A basic framework of the required information and data that should be in this platform has already been developed. It is closely linked to the requirements set in the Global Reporting Initiative (GRI) 2. However, the framework is so far very general and does not yet consider the specific reporting needs of different industry sectors. During the pilot phase of the project, together with four other students, a benchmark study and gap analysis was performed to compare the information requirements for the platform with the 1

Wennberg, U. (1999). Sustainability Communication Platform. - Project Description. Project description from 29.05.99 sent out to companies.

2

GRI is the Global Reporting Initiative. See description in Chapter 3.4.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

actual environmental communication and reporting of a number of selected companies. The aim was to evaluate current practices for measuring and communicating environmental information and strategies in four different focus areas (process-oriented industries, product-oriented industries, services, public services). My area for the project was final goods producers (or “product-oriented industries”), mainly automobiles. For this purpose, interviews with responsible persons for environmental management and communication were performed. These interviews were also used to discuss specific questions related to the thesis3. The focus on corporate environmental reporting and product-related information There are many different ways how companies can interact and communicate with their stakeholders. The ESI approach (Environmental Stakeholder Initiatives4) distinguishes between informative, consultative and participatory initiatives. This study concentrates on the informative and informative/consultative stakeholder relations, which means rather the “one-sidecommunication” with “disclosure-nature”, which however might encompass some possibility of stakeholders giving feedback. Environmental reporting and environmental product information and declarations have been studied, whereby the focus was on environmental reporting. However, also the effects of environmental marketing are touched in this study. The boundaries between environmental marketing and “objective” environmental communication are not always quite clear. The study concentrates on communications on the corporate level. Even though environmental stakeholder initiatives on a local level (e.g., in order to secure the “licence to operate” in a certain production site) can be of great competitive importance, they are not considered in this study. The reason for focusing on informative communications on corporate levels is due to ease of availability and the fact that corporate environmental reports constituted the most important document studied for the Sustainability Communication Platform. Focus on automobile industry Final complex goods industries are characterised through their position at the end of the value chain, and through a high complexity of their goods. Core competition factors are price, and especially quality, function and brand5—a fact that can allow them to take a very proactive approach concerning the environment. Environmental improvements can be built into all these factors and can be used to gain competitive advantages. However, the market situation and environmental problems are very different within such industries. I decided to focus on automobile manufacturers—mainly manufacturers of private cars—as cars are good representatives of complex final goods which are durable and have a high impact during use. •

Cars are made out of 10,000 up to more than 20,000 components6 and therefore are good representatives of highly complex goods.



Automobile assemblers are at the end of the product value chain. The extent of backward integration may be varying between the manufacturers, but generally the bulk of the

3 The thesis methodology was intended to be based to a great extent on these interviews. However, it turned out to be difficult to get a commitment from car manufacturers for participation in the pilot phase of the SCP. As a result, only one interview with a car company in the framework of the SCP was conducted. Therefore, the methodology had to be adapted towards less reliance on the interviews as basis for the case study and more use of secondary information. 4 Grafé-Buckens, A. and Hinton, A.-F. (1998). “Engaging the stakeholders: Corporate views and current trends” 5

Smith, D., et al. (1998). Adoption by Industry of Life Cycle approaches, p 47

6

Toyota Motor Corporation (1999). Environmental Report 1998, and Volkswagen (1997): The Volkswagen Environmental Report 1997

7

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

components production and therefore the main share of the environmental impact due to production is outsourced. This makes it difficult for the manufacturers to set their priorities in environmental management and therefore also in communication. •

The environmental impact of the automobile in the use and disposal phase is enormous, especially if the whole infrastructure for automobiles is also taken into consideration. The pressure on automobile firms to improve the environmental performance of cars is increasing. It can be expected that environmental product improvements and therefore also environmental communication will be of increasing importance for this industry.

Some conclusions drawn from the situation in the automobile sector may also be applied to other final goods industries. However, the links between environmental communication and competitiveness are very complex and depend on numerous interdependent factors. Generalisations are very problematic, even within the same sector. The effects of environmental communication cannot be analysed without considering the internal and external context of a specific company. 1.3.2 Geographical and time boundaries The automobile industry is a global industry. Nevertheless, the competitive situation and the environmental awareness are not the same all over the world. The study concentrates on the markets in Europe and mainly companies based in Europe. This thesis work was conducted over three months in the summer of 1999.

1.4 Methodology and approach The study was conducted during the months of June, July and August and beginning of September 1999, and followed the structure of the approach presented in Figure 1-1. However, the process was to a certain extent iterative and several parts were conducted simultaneously. Figure 1-1: Approach

What are the general links between environmental communication and competitiveness? •Environment and different competition models •Drivers for environmental communication and reporting •Role of environmental communication in the context of competition theories

THEORETICAL BASICS

ANALYSIS What are the issues that could be communicated and reported in the car industry out of competitive reasons?

Appliccability of the GRI Guidelines for “competition-oriented” reporting

What and how is communicated and reported in the car industry? •Environment within corporate communications •Issues communicated in environmental reports : what, how, why? •Product related environmental communication

Comparison of “what could be communicated” with “what is communicated ” SYNTHESIS Conclusions to how -if at all- environmental communication and reporting can be used strategically by car companies to achieve competitive advantages

8

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Information for the study was acquired mainly from the literature. Complementary to the desktop study, a number of interviews were conducted. These were used to verify findings and provide some additional input for several points throughout the study. For analysing the links between competitiveness, environment and environmental communication, information was acquired through a study of literature dealing with competitiveness as well as business strategies and the environment. Information about environmental communication and reporting was gathered from environmental magazines and books available at the IIIEE library, environmental reporting web-sites, a telephone interview with a specialist in environmental reporting and competitiveness7, and discussions within the “Sustainability Communication Platform” (SCP) group. Information about the automobile sector, the environmental problems associated with it, the environmental requirements on this industry and the corresponding environmental strategies was mainly gathered from publications by the automobile sector itself and the sector organisations (environmental reports, web-sites), a publication from an environmental asset management firm, as well as from publications by governments or NGOs, mainly from Internet resources. Three interviews were conducted with members of the car industry. These interviews should above all help to find out about the actual reasons for environmental communication and reporting, the criteria for selecting the target stakeholders of environmental communication, and the tools for identifying the information needs of the stakeholders. One interview with Saab Automobiles was conducted in the framework of the Sustainability Communication Platform (SCP)8. The interviews for the SCP were conducted with the responsible persons for environmental communication, and were of an average length of two hours9. The interviews were semi-structured and were mainly concerned with the questionnaire filled in for the SCP. About half an hour was devoted solely to additional questions for this study concerning the environmental strategies of the firms, the benefits of environmental communication and the different approaches that companies were choosing. One semi-structured telephone interview of about 90 minutes solely concerned the research questions, with the head of environmental department of BMW10. An informal interview of about 45 minutes with a member of Volvo was devoted mainly to product information11. Further information about the car industry and their environmental approaches was gathered through unstructured personal interviews with two environmental analysts12. For information about the credibility of the environmental efforts and communication in the car industry, a telephone interview with a member of Greenpeace Germany13 was conducted. Information about the current state of communication of automobile industries was mainly based on the published environmental reports as well as any other corporate environmental information available on the Internet.

7

Telephone interview of 22.07.99 with Thomas Loew, IÖW Berlin

8

Interview of 30.06.99 with Björn Brovik, Environmental Coordinator at Saab Automobile AB, Trollhättan

9

Further interviews conducted in this time were with an electronics company (Ericsson), an energy company (Sydkraft) and a chemicals company (Novartis).

10

Telephone interview of 03.09.99 with Dr. Raimund Medrisch, Head of the Environmental Department at BMW, Munich

11

Telephone interview of 31.08.99 with Mary Ann Ruiz, Volvo, Brussels

12

Interview of 08.07.99 with Robert Niggli and and Gianreto Gamboni, UBS Brinson, Environmental Performance Analysis, Zurich

13

Telephone interview of 26.08.99 with Wolfgang Lohbeck, responsible for climate, Greenpeace Germany

9

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

1.5 Structure of the report After the introduction with the first Chapter, Part I is dedicated to the theoretical basics needed for the analysis of the environmental communication and competitiveness in the car industry. Part II is the analysis of environmental communication and competitiveness in the car industry, based on the findings from the theoretical Part I. A comparison of the findings of the research questions and final conclusions are presented in Part III. Part I - THEORETICAL BASICS •

Part I starts in Chapter 2 with a review of literature concerning the general links between business and the environment. The focus is on the environmental strategies used for increased competitiveness and business survival and the importance of environmental communication in this context. Some basic competition models are analysed for their applicability in explaining the effects of environmental communication.



Chapter 3 is a review of the “state of the art” of environmental reporting and communication of industry. After a definition of environmental communication, the reasons for environmental communication, the problems and recent developments in environmental communication and reporting are described

Based on the literature review, findings about the possible links between environmental communication and competitiveness are presented in Chapter 4 (refer to research question 1). These were used as a basis for the analysis in Part II. Part II - ANALYSIS OF THE CAR INDUSTRY •

Chapter 5 aims at answering the questions: “What should and could the car industry communicate?” and refers to research question 2. This chapter contains an analysis of the characteristics of the studied industry, of the environmental problems surrounding this industry, the environmental requirements, the environmental competition fields arising from them, and the environmental strategies chosen by the industry as a response. These are then put into the context of environmental communication.



Chapter 6 looks at the question, “What is the car industry communicating about?” and refers to the research question 3. This part contains an analysis of the contents of environmental reports as well as environmental information in other corporate communication means like the annual report or the corporate web-site or product related information.



Chapter 7 aims at finding out whether reporting guidelines such as the GRI Guidelines actually support “competition-oriented” reporting in complex final goods industries. These comments are based on the theoretical basics and the analysis in Chapter 5 and Chapter 6.

Part III - SYNTHESIS AND CONCLUSIONS •

Chapter 8 is a comparison and discussion of the findings of the research questions. In particular, whether the current environmental communication reflects the environmental problems arising from this sector and the environmental issues that are currently or potentially of competitive importance, is discussed. There are some conclusions about what this implies for environmental reporting and customer communication.

Chapter 9 goes back to the original thesis question, that is, if environmental communication and especially reporting actually can contribute to competitiveness of car firms, and if yes, in what way. The work ends with some concluding comments and final remarks.

10

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

PART I - THEORETICAL BASICS Environmental communication should be an integral part of an environmental strategy and cannot be looked at as a separate tool. In order to explain the effects of environmental communication on competitiveness, it is necessary to “take a step back”. This is done in Chapter 2, which looks at the general importance of environmental strategies for competitiveness. Further, different competition models are analysed for their “usefulness” for explaining the role of environmental communication for competitiveness. Chapter 3 is a review of the different types of environmental communication and reporting, the stakeholders addressed, the problems of environmental communication, and the current state-of the-art techniques. In conclusion from these two chapters, the possible linkages between environmental communication and competitiveness are presented in Chapter 4. These findings can then be used as a basis for exploring the potential use of environmental communication and reporting for reaching competitive advantages in the car industry.

2. Environment and competitiveness Why should a company take the environment into consideration? Companies are operating in society, and they use the environmental resources for production and services. First, they have responsibility to safeguard the environment as a part of “society”, for ethical reasons. How should companies view the challenge of respecting the environment? How should companies integrate environment into their business strategies? Many arguments with different approaches have emerged in the last years to explain that “it pays to be green”. Such arguments say that there does not have to be a trade-off between environmental protection and economic performance, but in contrast, there is a link between improved environmental performance of a company and better economic performance. Chapters 2.1 and 2.2 look at how environment can become of importance for an industry and what strategies that companies are using in order to face this challenge. Chapter 2.3 is more on a broader, corporate level and looks at how such environmental strategies can actually have an effect on higher economical performance and competitiveness. It examines explanations of how the environment can be integrated into different competition theories, as well as the possible link to environmental communication.

2.1 From environmental problems to environmental competition fields Environmental problems can change the competitive situation of a sector considerably. Existent competitive advantages can be diminished and new ones created. Changes can happen suddenly, for example, with certain “shocking” discoveries, but often the process is rather slow. In the book “Ökologie und Wettbewerbsfähigkeit [Ecology and Competitiveness]” 14, Dyllick, Belz and Schneidewind propose a theory for how environmental problems can be of competitive relevance, and what options for environmental strategies are chosen by companies to respond to these challenges. As I found this a very comprehensible basis for explaining such a complex field, it is summarised in the following subchapters. 14

Dyllick, T., Belz, F., and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit [Ecology and Competitiveness]

11

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

2.1.1 The logic of the environmental transformation Dyllick et al. claim that there is a process called “the logic of the environmental (or ecological) transformation”15. Following this logic, environmental impacts on the material-energy level such as energy use, air pollution or soil pollution are taken up on the socio-economic level by public, political and market stakeholders and transformed into environmental requirements. Examples for such environmental requirements could be those by consumers for the declaration of genetically modified products, incentive charges on pollutant emissions, incorporation of environmental criteria in banking, or increased demand for ecologically grown food. These requirements lead to changed conditions, which eventually may lead to new environmental competition fields. It can be distinguished between actual, latent and potential environmental competition fields (see also Chapter 2.1.4). Figure 2-1: The logic of the environmental transformation

Environmental impacts are transformed through

Environmental requirements Market

Politics

Publics

leading to

Environmental competition fields actual

latent

potential

Source: Dyllick, T., Belz, F., and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 7

The companies should therefore take environmental requirements into consideration when formulating their strategy, because they could become of competitive relevance sooner or later. Of course, it could be said that environmental requirements also have an intrinsic value which should be taken into consideration simply because of ethical reasons and have to be traded off against other economic interests. 2.1.2 Environmental requirements and steering systems Who is putting these environmental requirements on a company and how can they have an impact on competitiveness? Dyllick et al. distinguish in this mechanism three different external “steering systems” which have a different way of functioning16: public, politics and market.

15 Dyllick, T., Belz, F., and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 5. The term is translated from German “Logik der ökologischen Transformation” 16

ibid, p 25

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli



The steering system “public” is based on social sanctions and the conscience of a company. It is therefore quite evident that this system works implicitly. A company has to obtain the social licence to operate and gain the acceptance and legitimacy of relevant stakeholders, such as their neighbourhood, environmental NGOs or the media, whose influence is based on the mobilisation of public pressure.



The steering system “politics”. Politics sets up binding rules for behaviour. Companies have to comply with environmental laws and requirements set by the authorities. However, companies also have a responsibility for participation in the development of the political framework, that is, the active participation on the transformation of the social to an eco-social market economy.



The steering system “market”: The steering mechanism of the market is the price. Market influences are expressed in the environmental context above all through changed demand behaviour, but also in the form of costs such as for requested decontamination, waste disposal or environmental risks. The company, therefore, has to adapt cost-efficiently to the environmental requirements, but can also build up environmental success potentials.

These steering systems are interrelated and a clear distinction is sometimes not possible. In most cases, environmental transformation processes are initiated by the steering system public. Emerging environmental problems are discussed by exponents in the public and are then taken up by politics when they become “fashionable” enough, until they in the end reach the market. Examples could be waste taxes or emission charges. However, in some cases public requirements are translated directly into market forces, for example, in the case of consumer boycotts of certain products after accidents or other “bad” discoveries. The environmental impacts arising in different stages of a product life cycle can be compared with the actual environmental requirements of the steering systems put upon the respective stages. Discrepancies between impacts and requirements are an indication that there might be substantial changes in the future concerning the environmental requirements from public, politics and market. 2.1.3 The stakeholders behind the steering systems The different stakeholders of a company can be assigned to these three steering systems. In general it could be said that customers, suppliers and competitors use the steering system market, the legislators and authorities the steering system politics, and environmental NGOs use their influence over the steering system public. However, this division is too simple, as the same stakeholder group can use its influence over several steering systems. Greenpeace, for example, tries, on one hand, to influence the public opinion on certain environmental problems, but it also tries to influence the market directly by helping ecological products penetrate the market, such as the CFC-free refrigerator Greenfreeze. Other examples are the environmentally motivated taxes and charges, which are levied by the legislator, that is, “politics”, but cause direct market impulses for the companies. The actual influence of the different stakeholders through these steering systems depends on the intensity of the environmental requirements and the sanction potential of the respective stakeholder group. There may be groups who have a central role for environmental issues but have no influence potential. On the other hand there are groups from which companies are highly dependent (e.g. suppliers) but may not make any environmental requirements. However, environmental requirements and influence potentials can change over time. Consumers can for example increase their influence potential if they form national or even international networks of

13

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

consumer organisations in order to increase their leverage, for example, through influencing the legislative process or providing information to consumers in a more professional way. 2.1.4 Actual, latent and potential environmental competition fields Environmental competition fields can be interpreted as the environmental problems of a sector, the solution of which can lead to competitive advantages or, on the other hand, non-compliance can lead to considerable competitive disadvantages. The key for the company to benefit from the changed sector constellation is to take appropriate strategies to solve the environmental problems. It can be distinguished between actual, latent and potential environmental competition fields. Actual environmental competition fields are environmental impacts that have already been taken up by market stakeholders and are developing competitive effects. Latent and potential environmental competition fields are environmental impacts that are being discussed in public and politics, however have not yet had a direct impact on competitiveness. In latent environmental competition fields, environmental product variations are only existent in some niches and are only promoted by some single pioneer companies. Environmental properties as differentiation criteria are only important to small customer groups. The corresponding environmental problems do cause costs to the companies, however they are strategically not important. Latent environmental competition fields exist if:17 • • •

environmental quality is an important purchasing criteria for a minority of the customers, environmental product alternatives have a small market share and are only offered by a few pioneer companies, or environmental marketing and communication plays a subordinated role.

Potential environmental competition fields are even less developed. Principally every important ecological problem of a sector represents a potential environmental competition field. Concrete approaches might already be existent on concept level. Potential environmental competition fields offer considerable opportunities. The potential for getting first-mover benefits are bigger— however the risks are also bigger, for example, for investing too early into “wrong” technology or that the environmental transformation process takes too long and environmental investments are not offset by the potential benefits in the future. There is great uncertainty in the time dimension, and the question of right timing is in this respect a very crucial issue. Dimensions of competition The goal of the company strategy in a relevant environmental competition field is to achieve a competitive advantage. The ultimate aim is to satisfy the customers’ needs in a superior way compared to the competitors. Following Porter’s definition18 there are two dimensions of competition: costs and differentiation. A company can either offer products at a cheaper price than comparable products or at a higher quality (or “different” quality). Two types of cost advantages can be distinguished in the context of environment: • •

Absolute cost reductions: These are absolute reductions of production costs under the level of the costs of competitors who are mainly externalising the effects of their production. Relative cost reductions: This means keeping environmental costs on a significantly lower level than competitors who have to comply with approximately the same environmental legal

17

Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 124

18

Porter, M. E. (1980). Competitive Strategy: Techniques for analyzing industries and competitors

14

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

requirements. With the right strategies, systematic competitive advantages can be gained, especially if environmentally caused costs constitute a considerable part of the total costs. Differentiation through environment is possible through:19 • •

providing an environmental additional benefit to an existing product, or creation of new products and services responding to emerging environmentally induced needs.

2.2 Environmental competition strategies The points mentioned in the previous chapter describe the dimensions and the basic determinants of competition. This still leaves the companies the choice of what strategies to use in order to encounter these actual, latent or potential environmental competition fields. There are different theories about how to define and classify environmental strategies. The World Resources Institute (WRI) defines environmental strategies as “business strategies in which environmental improvement is either an explicit objective or a necessary outcome”20. Reed emphasises in his publication “Green Shareholder Value, Hype or Hit?” that there are different environmental strategies which have different effects on financial fundamentals, and that environmental performance is the product of several different types of management choices. Companies can try to avoid environmental requirements or view environmental challenges solely as a cost factor and cope with these costs as efficiently as possible. This could be interpreted as defensive strategies. Companies can also have a more proactive approach to the environment and see new opportunities through differentiation strategies or cost strategies. Dyllick et al. stress that environmental strategies are not only directed towards the market, but in some cases primarily towards the public21. Following this typology, four types of environmental competition strategies are distinguished, as shown in Figure 2-2. Figure 2-2: Environmental competition strategies Strategy directed towards

public

market

defensive

Environmental market securing strategy (”clean”)

Environmental cost strategies (”efficient”)

proactive

Environmental market development strategies (”progressive”)

Environmental differentiation strategies (”innovative”)

Type of strategy

Source: Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 76

Reed22 has a similar typology with a four-level model of environmental strategies. He distinguishes between (1) franchise protection strategies—“focus compliance”, (2) strategies involving process changes—“focus efficiency”, (3) strategies involving product changes—“focus innovation and value chain” and (4) new market development—“focus innovation”.

19

Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 61

20

Reed, D.J. (1998): Green Shareholder Value, Hype or Hit?, p 2

21

Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 75- 174

22

Reed, D.J. (1998): Green Shareholder Value, Hype or Hit?, p 2

15

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Reinhardt23 emphasises that environmental problems do not automatically create opportunities to make money. Managers should look at environmental problems as business issues and ask themselves the question, “Under what circumstances do particular kinds of environmental investments deliver benefits to shareholders?”. He distinguishes five approaches that companies can take to integrate environment into their business thinking: (1) saving costs, (2) managing environmental risk, (3) managing your competitors, (4) environmental product differentiation and (5) redefining markets. As can be seen, all the above mentioned typologies distinguish in some way between cost strategies and differentiation strategies. In the following, the typology of Dyllick et al. is used, however elements from the other definitions are incorporated as well. This typology highlights the target groups towards which environmental strategies are directed, which makes it, in my view, a good basis for drawing conclusions about environmental communication. 2.2.1 Environmental market securing strategies An environmental market securing strategy comes out of a defensive orientation. A company reacts to influences from the public which could threaten the existing markets and businesses. Before public and political requirements become of competitive relevance, the company tries to deal with the requirements and influence (which means to normally slow down or even stop) the environmental transformation process through appropriate measures such as communication, commitments or direct influencing of the legislation process. This strategy is not only directed towards the market, but above all towards the public and politics. Such strategies can be quite subtle, for example, through making environmental measures in less critical areas and thus trying to distract the public’s and politics’ attention from the “real” environmental problems of the sector. Another strategy is trying to fight against the public’s propensity to lump together all environmental issues and achieve a more differentiated discussion of a problem area such as chlorine or genetically modified organisms (GMO). Marked securing strategies are not necessarily taken only by single companies. Often a whole sector or even several interconnected sectors are the targets of specific environmental requirements and not just one company. An accident in one chemical firm can discredit the whole industry. This leads companies to collective actions, for example, the Responsible Care programme of the chemical industry. Reinhardt’s strategy type “managing your competitors” could, to a certain extent, also be placed into this category. He claims that in certain cases it is better to force rivals to match one’s own behaviour, especially if response to environmental pressure definitely involves higher costs. Changing the rules of the game, for example, with private standards, can still enable a company to reach competitive advantages if competitors have to raise their costs even more. 2.2.2 Environmental cost strategies Environmental cost strategies can also be described as defensive. The company does not oppose the environmental transformation process, but tries to live with it and solve the environmental requirements as efficiently, that is, as cheaply as possible24. Generally, the larger the environmental costs from the total costs of the product, the more incentive a company has for cost strategies. Often good environmental management opens the eyes to the companies to the full costs of products and not just the evident process end-of-pipe costs. This can lead to the discovery of new cost saving potentials and a more integrated approach for environmental 23

Reinhardt, F. (1999): “Bringing the environment down to earth”

24

Reed’s “strategies involving process changes” can also be fit into this category.

16

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

protection. The assessment of the whole environmental life-cycle costs can become to a strategic success factor. Purely defensive cost strategies react only to already internalised costs, for example, recycling strategies and design for recycling as a response to product take-back legislation. Reinhardt’s “saving costs” strategy can be attributed to this type. More proactive strategies aim at costs that are so far not or only partly internalised (e.g. energy management). Reinhardt’s “managing environmental risk” can also be interpreted as such a strategy, taking a long-term view of environmental costs. Taking external costs into account proactively offers great potential “first-mover” benefits and differentiation opportunities. On the other hand, it also bears the risk of having actual cost disadvantages which cannot be compensated by the first-mover benefit, if the “environmental transformation process” lasts too long (”environmental time-trap”). Two crucial factors are important for the success of a proactive and broader environmental cost strategy: the expected time of the environmental cost internalisation and the probability that such an internalisation will happen25. 2.2.3 Environmental differentiation strategies Environmental differentiation strategies are the result of the proactive orientation of a company and are primarily directed towards the market. The goal is to find innovation potentials through the environment26. Environmental properties can be an important differentiation criterion, especially in saturated markets. However, an environmental added benefit, which is not recognised or not considered to be relevant by the customer, does not contribute to a differentiation in competition. A characteristic of ecological products is that they often provide a social benefit, but not necessarily an individual benefit. Ecological products that only provide a social benefit and are more expensive than conventional ones, have problems surviving in the market. However, if they are combined with an individual benefit (e.g., organic products which taste better and are more healthy), they can get competitive advantages. Depending on internal and external factors, environmental friendliness can be integrated into product quality, which can be declared as an important dimension apart from price and quality or marketed as dominant product property. In the latter case it is a prerequisite that the environment is integrated into all business areas of the company, otherwise the company runs the risk of losing credibility. It has to be considered that the introduction of ecological products also has consequences for the rest of the product portfolio. A broader view of environmental differentiation is offering environmental services instead of products, such as leasing of photocopiers instead of selling (e.g., Xerox), car-pooling, or energycontracting27. Also, for differentiation strategies, timing plays a crucial role. First movers have to fight against market resistance like consumer scepticism and are prone to failure if the product quality is not fully developed yet. On the other hand they can have the power to build up market entry and mobility barriers. There are advantages and disadvantages of pioneer roles, and in some cases companies with a follower’s strategy can leapfrog the pioneers and become more successful. Another risk of pioneering is wrong positioning. If environmental friendliness is marketed as the dominant product property, then there is the danger of narrowing the segment and being put into a niche.

25

Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 119

26

This is also described in Reinhardt’s “differentiating products” strategy or Reed’s “strategies involving product changes”.

27

Reinhardt mentions this under the strategy “redefining markets”

17

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Reinhardt28 emphasises that there are three conditions required for success with environmental product differentiation: First, the company must identify customers who are willing to pay more for an environmentally friendly product. Second, it must be able to communicate the product’s environmental benefits credibly. And third, the product must be protected from imitators for long enough to profit on the investment. 2.2.4 Environmental market development strategies ”Typical” eco-products are often limited to market niches. In order to encounter this, the approach of environmental market development strategies is therefore to play an active role in changing the public perceptions and the socio-political and regulatory framework. The goal is to participate in shaping the prerequisites that lead to the build-up or increase of environmental competition fields. However, contributing to raise awareness of the public about an environmental problem caused by a sector is a difficult task for companies. According to polls29, such communications by the industry have a very low credibility. There is little trust in that companies are actually interested in the problem. Environmental NGOs, academia and the authorities have more credibility. A possible approach for companies is therefore to co-operate with environmental NGOs or other organisations, also with the “critical” ones (such as Greenpeace). Companies can try to directly influence the perception of the public and sensitise them to environmental problems. However, companies can also try to influence politics. In most cases the environmental transformation processes develop over politically initiated and steered changes in the framework. Strategies of influencing policy making by companies and especially by branch associations are very common. However, in most cases their influence is used rather to slow down such processes. As branch organisations always have to represent the common interests of their members, this is often not enough to actually change the status quo. Therefore, for market development strategies, it is also important for companies to be independently active. It has to be noted that even if the environmental transformation process in public and politics can be successfully influenced, there is no grant for relevant market impulses. Possible high transaction costs, or information and credibility problems can be market barriers which have to be considered. 2.2.5 Comments to environmental strategies There are many other publications which try to classify a company’s stage in the “corporate greening process”. The publication of Reed defines the company’s corporate environmental strategy based on a corporate view. Both Reed and Dyllick et al. suppose that in many cases there can be observed something like an “evolution” of the different strategy types on a corporate level; companies move from market securing and cost strategies to differentiation strategies and eventually to market development strategies. However, the line between the described strategies is not always that clear, and several strategies could be applied at the same time. According to my view, it is not always that clear whether the above mentioned environmental strategies should necessarily apply to a whole corporate strategy or whether the same company could have different strategies for different competition fields. There are different environmental problems a company has to face, and different competition fields arising at different times. A company cannot necessarily respond to all of these fields in a proactive way. It might put much effort into one environmental field and miss the importance of 28

Reinhardt, F. (1999): “Bringing the environment down to earth”

29

Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 160

18

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

another emerging field. Of course, in general it can be said that if a company wants to have any proactive environmental strategy, it can only be credible if it is sustained by a corporate strategy and values that embrace the environment. Cost advantages through systematic environmental management can probably be achieved in most cases, and it seems to make sense to consequently apply such strategies to a whole corporation. Environmental differentiation might bear more risks and might be more appropriate for one product of a company, whereas the circumstances can be different for another product. When analysing environmental communication in the light of such strategies, it might therefore be difficult to distinguish between environmental communication concerning a specific environmental competition field and a strategy for a certain product or brand, and communication concerning the whole corporation and its environmental efforts in general. The effects of environmental communication might therefore be difficult to interpret.

2.3 Competitiveness of companies and environment What are actual prerequisites that allow the company to achieve competitive advantages with the selected strategies? Competitiveness could be defined as the actual and future ability of a company—as a whole or within its strategic business units—to adapt to and win through to the different market sides30. Indicators for competitiveness could be, for example, market share, margins, profits or long term strategies. However competitiveness is not just a snapshot of the present, but is future oriented and cannot be expressed with a single figure. There are many models describing the competitiveness of companies. To simplify, it could be said that there are basically two schools of thought about how a company can succeed in getting competitive advantages. One is the market-based view (Chapter 2.3.1), where the state of competition is explained with the competitive forces in the market. Another approach for explaining competitive advantages is the resource-based view (Chapter 2.3.2), which emphasises the importance of the companies’ own core competencies. Somewhat related to this are theories about environmental performance and shareholder value, which will be examined in Chapter 2.3.3. 2.3.1 The market-based view Michael E. Porter is probably the best known proponent of this view. His book “Competitive Strategy” was published 1980 and has reached very high popularity. According to Porter’s model31, the state of competition in an industry depends on five basic competitive forces. The collective strength of these forces determines the ultimate profit potential in the industry. Hereby he emphasises that the underlying structure of a branch is very important. Not all branches offer the same profit opportunities, and the importance of each of these forces is not the same in every branch. The five competitive forces—the structural determinants—are the following: 1. New entrants. The threat of new entrants is dependent on the barriers to entry, coupled with the reaction from existing competitors that the entrant can expect. Barriers to entry can be economies of scale, product differentiation, switching costs, brand identification, access to necessary inputs and distribution channels, and experience or government policy. 2. Intensity of rivalry among existing competitors. Factors determining rivalry can change over time. Factors influencing intense rivalry can be, for example, numerous equally balanced 30

Fichter, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit,p 325. Definition based on Porter and Hinterhuber

31

Porter, M. E. (1998). Competitive Strategy: Techniques for analyzing industries and competitors, p 4 (book was originally published in 1980)

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

competitors, slow industry growth, lack of differentiation, phases of over capacity, lack of switching costs, high strategic stakes or high exit barriers. 3. Substitutes. Often industries stick together to counter pressure from substitute products. They can decide whether to try to head off a substitute strategically or to plan a strategy with the substitute as a key force. Important factors are the relative price performance of the substitute products, switching costs or the inclination of customers to substitutes. 4. Buyers. The bargaining power of buyers is crucial, and the company’s choice of buyer groups to sell should be viewed as a crucial strategic decision. Price sensitivity is a very important determinant. Buyer groups can be especially powerful, for example, if they are concentrated and are purchasing large volumes relative to the seller sales, if the purchased product represents significant costs to the buyer, if they are facing low switching costs, have full information or pose a credible threat of backward integration. 5. Suppliers. Suppliers can have a considerable bargaining power, especially if the supply is dominated by a few companies, there are no appropriate substitute products and the switching costs are high, the supplier’s product is an important input to the buyer’s business, or if the supplier group poses a credible threat of forward integration. These five forces determine the branch profitability, because they influence prices, costs and the need for innovation. Porter distinguishes three generic competitive strategies in order to reach competitive advantages in one of the two dimensions of competitiveness: Cost leadership (low cost position), differentiation (i.e., create something that is perceived as being unique), or focus (focus on particular buyer group, segment of product line or geographic market). A company or a strategic business unit has to commit itself clearly to one strategy type, otherwise it will be “stuck in the middle”. This model is very much focused on the market players and the external view of basic structures existent in the market32. However, Porter emphasises that no structural analysis is complete without a diagnosis of how present and future government policy, at all levels, will affect structural conditions. Porter did not mention the importance of environmental problems for a company’s strategy in his book, but the effects of environmental problems on competitiveness fits well into this theory. Through environmental problems and the emerging requirements, the constellation of these five competitive forces within an industry can be changed, for example, through new differentiation criteria of customers or higher prices for input goods. It has to be noted that the impacts of environmental regulation are probably not considered enough in this model. Also, the competitive relevance of other non-market factors such as the public, environmental NGOs or media is not captured33. For example, in the case of an accident affecting the environment, such non-market factors can be very powerful in changing a company’s image and in consequence its competitiveness. Implications for environmental communication Environmental communication in the context of this theory could be viewed as a tool for influencing the strength of these competitive forces. Environmental communication can add to product differentiation and brand identification (if environment is meant to be a differentiation criterion). Concerning new entrants or substitutes, environmental communication can help to 32

It has to be remarked that in his book “Competitive advantage: Creating and Sustaining Superior Performance (1985)”, Porter introduced the value chain analysis as a tool for determining competitive advantages along the product value chain and the associated activities and skills in research and development, purchase, production or marketing.

33

Fichter, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit,p 121

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

increase switching costs by providing comprehensive environmental information about product and production processes proactively to the buyer or to the supplier. In Fichter’s view34, Porter presupposes that companies are trying to get complete information and can base their strategies on this. However, this may lead to a paradox, in that there is an excess of information so their capacities to process information collapse. The actual opportunities and limitations of information processing and the role which communication plays in competitive processes should be more critically analysed. 2.3.2 The resource-based view Proponents of the resource-based view35 criticise models such as Porter’s, who describe a firm’s success as basically determined by its external environment. They stress the importance of the core competencies of the company. Competitive advantages are rooted inside a firm, in assets that are valuable and inimitable. In order to achieve competitive advantages, the company should therefore stick to developing and improving its core competencies, that is, the company-specific skills that are difficult for competitors to imitate. These internal competencies then have to be applied to an appropriate external environment. It could be said that the resource-based view addresses the fit between what a firm has the ability to do and what it has the opportunity to do36. In their application of the resource-based view on corporate environmental performance and profitability, Russo and Fouts37 considered resources and capabilities in the following combinations: 1. Physical assets and technologies, and skills required to use them. Physical resources can be a source of competitive advantage if they “outperform” equivalent assets within competitors. 2. Human resources and organisational capabilities, which include culture, commitment and capabilities for integration and communication. If the environment is viewed as a part of the business strategy, it has to be incorporated into the company’s organisation and culture. Environmental commitment can become a part of an organisation’s identity and affect the working moral and “spirit for innovation” in a positive way. 3. The intangible resources of reputation and political acumen. A reputation for leadership in environmental affairs can lead to increased sales among environmentally sensitised customers. An environmental reputation must be built up on top of an overall reputation for quality and can be a valuable inimitable resource. An organisation’s political acumen is defined by Russo and Fouts as “the ability to influence public policies in ways that confer a competitive advantage”38. Political skills are a valuable resource that can be used to neutralise, promote or otherwise manage external constituencies. Russo and Fouts claim in their publication that the level of an industry’s growth will moderate the relationship between the environmental performance and profitability of firms in that industry. Firms are less likely to reap benefits from increased environmental performance when industry growth is low. This is, according to them, partly due to the fact that low-growth industries are more likely to be populated by mature firms selling standardised products, and under such conditions, organisational structures can be expected to be hierarchical, inflexible and bureaucratic. Also, it is more difficult for them to change their reputation. Political strategies tend to focus on rent-seeking, that is, the securing of competitive advantage via political means. 34

ibid, p 122

35

Proponents of the resource-based view are for example Prahalad, Hamel or Hinterhuber

36

Russo, M.V. and Fouts P.A. (1997). “A resource-based perspective on corporate environmental performance and profitability”

37

ibid, p 541

38

ibid, p 542

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Implications for environmental communication When it comes to the first “set” of resources concerning “physical assets and technology”, I do not see a direct link to environmental communication. Concerning human resources and organisational capabilities, environmental communication—especially internal environmental communication—plays an important role. Purposeful internal environmental communication about the company’s environmental policy and goals and about the employees’ opportunities in participating in the improvement process can add to competitiveness by increasing employees’ motivation and innovation potential. Concerning the intangible resources of reputation and political acumen, environmental communication is crucial. An environmental reputation cannot be built up without appropriate communication to the strategically important audiences. 2.3.3 Shareholder value models Related to these competition models are a number of “shareholder value models” which describe the driving forces behind the shareholder value. This theory is a response to models that calculate the value of a company based mainly on the past and not on the future. Shareholder value can be viewed as the discounted net current value of a company’s future free cash flow39. Rappaport40 is a popular defendant of the shareholder value model. According to his theory, the seven value drivers behind shareholder value are: value growth duration, sales growth, operating profit margin, income tax rate, working capital investment, fixed capital investment and cost of capital. These are influenced by decisions on operational management, investment and financing41. There have been attempts in the last few years to show the link between increased shareholder value and superior environmental performance. Schaltegger and Figge concluded in their publication “Environmental shareholder value”42 that environmental management measures are enterprise value-enhancing if they have the following characteristics: capital-extensive, lowmaterial-consuming, sales-boosting, margin-widening, safeguarding the flow of finance and long-term value-enhancing. However, they also remarked that the shareholder value concept in this form does not support any explicit analysis of the social aspects of corporate environmental protection and of corporate learning processes. The publication “Environmental Performance and Shareholder Value” by the World Business Council for Sustainable Development (WBCSD)43 contains a “Shareholder Value Pyramid”. In this model, the shareholder value is built on three value-contributors—sales growth, cost management and capital deployed. These value-contributors are supported by four value drivers, which can be positively influenced by environmental performance: 1. Strategy and vision: In order to capture opportunities arising from the environment, a company’s strategy and vision should embrace a response to a changing environment. 2. Operational fitness: Operational fitness is influenced by environmental costs arising from resource use as well as from emissions into the environment. Minimising these costs can improve the value of the firm.

39

Schaltegger, S., and Figge, F (1998): Environmental Shareholder Value, p 6

40

He wrote the book “Creating Shareholder Value” in 1986

41

Schaltegger, S., and Figge, F (1998): Environmental Shareholder Value, p 9

42

Schaltegger, S., and Figge, F (1998): Environmental Shareholder Value, p 9

43

WBCSD (1996): Environmental Performance and Shareholder Value

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

3. Stakeholder satisfaction: Interests of environmental stakeholders have to be taken into consideration. The public’s perception of the company’s environmental position can have a high influence. 4. Products and services: The company’s products and services have to respond to the customers’ expectations. Product stewardship can be used to enhance the company’s environmental performance and its sales. The company’s view of environmental drivers can indicate the possibility of new markets based on its core competencies or developments The publication presents examples of firms who have improved their financial performance through implementation of environmental strategies, such as British Gas with its strategy to provide the transport sector with natural gas, Du Pont Agricultural Products with new products that require less herbicides or Sony. Sony lost its market share for TVs after bad environmental ratings in European consumer magazines in 1994. After deciding to choose a more proactive approach, it gained its market share again. Implications for environmental communication Concerning “strategy and vision”, it could be said that environmental communication is important for supporting the company’s environmental strategy and vision and the communication of it to the target groups. The link between “operational fitness” and environmental communication might not be that evident. But indirectly, environmental reporting, in particular, can have a positive influence on environmental controlling and data gathering, as it fosters these processes. This can lead to more complete and better comparable data, which can in turn help to improve processes and reduce operational costs. “Stakeholder satisfaction” is very closely linked to environmental communication, as their satisfaction depends very much on whether their information needs are covered. Stakeholders do have an increasing interest in environmental information for different reasons, for example as customers, as shareholders or as suppliers (see Chapter 3.2 for more detailed description of environmental information needs). Concerning “products and services”, environmental communication plays a crucial role. Depending on the kind of products and services, a different mix of “environmental communication tools” is necessary. For products that should be differentiated with environmental attributes, eco-labels and environmental product declarations, for example, can be very important. 2.3.4 Comments to the theories The influence of environmental issues on economical performance and competitiveness can be explained with all three models. Positive examples of relations between superior environmental performance and increased competitiveness or good economical performance can be applied to any of these models. The environmental strategies described in Chapter 2.2 can be linked to these theories. However, it has to be recognised that it is impossible to find “proof” for this link. “Being green” can be interpreted in many ways. The relationship between the environment and the economy is influenced by many factors, and the same environmental strategy can be successful in one business unit and fail in another one. The effect of environmental communication cannot be explained sufficiently with any of these theories. There is not a direct link between environmental communication and competitiveness. There is no doubt that environmental communication can make its contribution to increased competitiveness, but the effects of environmental communication have to be analysed in light of the respective competition strategies and corporate communication.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

3. Environmental communication This chapter analyses the importance, problems, and different methods of environmental communication. Starting in Chapter 3.1 with a definition of environmental communication and reporting, Chapter 3.2 describes the drivers for environmental communication and the different stakeholders addressed. In Chapter 3.3, the various problems with environmental communication and reporting are highlighted. Partly as an answer to these problems, a number of environmental reporting guidelines have been developed recently, of which some examples are described in Chapter 3.4.

3.1 What is environmental communication? Based on a business strategy that incorporates the environment, environmental communication is ideally an integral part of the corporate communication strategy. Due to the fact that environmental communication is a relatively new field and that there is no clear distinction between environmental communication and “non-environmental” communication, there is not one agreed definition on what environmental communication and reporting is. According to Fichter and Loew.44, “environmental communication is the transmission and exchange of environmentally related information. These are (more or less) noticed, processed, given a meaning and kept, that is, learnt by the parties involved. Environmental communication therefore represents a mutual learning process. It encompasses environmental reporting as well as environmentally related employee communication, product information, public relations, ecomarketing and eco-sponsoring”. Environmental communication is therefore all kinds of oral or written communication tools that concern environmental issues. Following the Environmental Stakeholder Initiatives (ESI) approach, environmental communication can be of a rather informative nature, such as environmental reports or regulatory data provided to the authorities, but also a consultative or even participatory nature45. Examples of the latter two could be discussion rounds with NGOs or the local community, political lobbying or active involvement of employees for achieving environmental improvements. This study concentrates on informative and informative/consultative environmental communication, that is, mainly “one way processes”, possibly with an option of giving feedback. Very important environmental information tools at the corporate level are corporate environmental reports, environmental information in annual reports and on the corporate website, environmental product information, labelling and eco-marketing. Whereas environmental reports or product information have a “disclosure character”, eco-marketing emphasise the achievements and the positive environmental properties of products. These different informative tools are explained in more detail in the following chapters. 3.1.1 Environmental reporting Environmental reporting is a relatively new phenomenon. It was implemented as recently as the beginning of the nineties, when larger companies started to report about their impacts on the environment and their efforts to mitigate them in a more systematic way. The quality of the environmental reports still varies, ranging from rather thin leaflets to comprehensive 44 Fichter, K., and Loew, T. (1997). Wettbewerbsvorteile durch Umweltberichterstattung (Competitive advantages through environmental reporting), p 12 45 Grafé-Buckens, A. and Hinton A.-F. (1998): “Engaging the stakeholders: Corporate views and current trends”. In the ESI approach, the distinction informative, participatory and consultative is applied to ESI, which can be defined as “all activities undertaken by a company to increase the communication with or involvement of stakeholder in environmental issues relating to the company and its business practices”

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M.Sc. Thesis, IIIEE

Agathe Bolli

sustainability reports encompassing economic, environmental and social issues. With increasing pressure from the regulatory side, and also market forces, to disclose environmental information, the quality of the environmental reports has been increasing steadily, also thanks to voluntary initiatives from the business side to provide frameworks for better reporting. Similar to environmental communication, there is no accepted definition for environmental reporting. It can be said that environmental reporting includes all measures that contribute to the appropriate and truthful information of a company’s internal and external target groups about environmentally relevant questions of a company or a site. It refers to the environmental aspects and the impacts that are caused through the company and its products as well as to the environmental strategies, the goals set and measures taken to alleviate those impacts46. This can happen orally or in writing, both personally or through telecommunications. Environmental reporting can be categorised into three categories47: Involuntary reporting (disclosures against the company’s will, for example, after an accident), mandatory reporting (e.g., the reporting for the US Toxics Release Inventory) and voluntary reporting (e.g., a CER or confidential disclosures to customers). Environmental reporting can therefore encompass corporate environmental reports (CERs), environmental communication incorporated in annual reports or environmental reports on a business unit level and site level. In a broader sense, it can also encompass other kinds of information like reports to the authorities, information to the neighbourhood or speeches about environmental activities of the companies. My interpretation from these definitions is that environmental product declarations, eco-labels and eco-marketing are not considered a part of environmental reporting. Importance of the Corporate Environmental Report The corporate environmental report (CER) is the most commonly used tool by environmentally active companies for voluntarily providing a multi-stakeholder group with information on environmental policies, practices and performance. According to Lober48, a CER is defined as “a publicly available, free-standing document, not part of the annual report, which is devoted solely to environmental and health and safety issues, at the corporate level”. Different interest groups have different requirements concerning the environmental information from a company (see also Chapter 3.2 with the stakeholder groups). It is therefore quite difficult to produce a report that suits all these requirements at the same time, and to find a balance between “comprehensive enough” and still “easily comprehensible”. A study by Lober et al.49 in 1997 of over 100 CERs issued by large US companies showed that “corporate policy, environmental management structure and letters of communication from environmental executives made up 20% of reports on average. Almost 40% of the reports were allocated to management tools, with waste reduction, pollution prevention, recycling and packaging accounting for one half of this space. Approaches such as product stewardship, lifecycle analysis and risk reduction occupied only 2% or less of each report. Specific environmental issues were given 34% of the space.”

46 Compiled from FEE (1999): FEE discussion paper towards a generally accepted framework for environmental reporting, p 11 and Fichter, K. (1998): Umweltkommunikation und Wettbewerbsfähigkeit, p 13 47

Skillius, Å. and Wennberg, U. (1998). Continuity, Credibility and Comparability - Key challenges for corporate environmental performance measurement and communication, p 25

48

Lober D.J. et al (1997). “The 100 plus corporate environmental report study: A survey of an evolving environmental management tool”

49

ibid

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

In the Lober study, report issuers identified employees and shareholders as their primary audiences. Employees were also named as the most important target group in a study by Fichter et al.50 of German CERs, but also customers and the public were on the top list. However, this study also showed that many (30% of the sample) companies did not prioritise any target group at all. As not all the environmental reports are aimed at the same stakeholder groups, the perceptions about the benefit of a CER are very different as well. The benefits derived from environmental reporting could roughly be divided in two categories:51: financial and strategic. If a company can demonstrate good environmental performance and an acceptable level of environmental liability to its stakeholders, it may benefit financially in that its share price may increase. Potential strategic benefits include improving the company image and building better relations with relevant stakeholder groups. Environmental reporting in corporate annual reports A company who recognises the environment as an important issue to be tackled should also include to some extent environmental information in the annual report, if it wants to be credible with in its environmental efforts. Basic environmental policies or product strategies as well as financial environmental information can increasingly be found in annual reports. It is an ongoing discussion whether it makes more sense to incorporate the environmental report into the corporate annual report or if the environment “deserves” a stand-alone report such as the CER. Apparently many companies regard the annual report as not being the appropriate medium to allow a comprehensive description of all environmental efforts. Another reason for the development of stand-alone corporate environmental reports could also be that in many cases the environmental management is still not fully integrated into the company structure (i.e., responsibilities in the lines), but a somewhat “separate” department. Persons responsible for the editing of the CER might not have much contact with the responsible persons of the corporate communication, and the link between financial and environmental performance and strategy is not perceived to be too strong. Environmental reporting in corporate Internet sites Most large companies have their own Internet web page. The quality of such pages varies considerably. Some are more customer-oriented and mainly inform the reader about products and product strategies, others provide corporate information, including annual financial reports, the company history and statements by CEOs. If a company integrates the environment into its corporate strategy, then this should also be evident from the corporate communication on the Internet. The Internet is an ideal tool to solve some of the problems encountered with printed CERs. Through the possibility of building the information into a hierarchical structure and connecting pieces of information through hyperlinks, the Internet can allow a more stakeholder-specific access to information. There is also the potential for using real-time reporting of material (e.g., emission data)52. Further it enables more dialogue through the possibility of online-communications and e-mail. Most companies publishing a printed CER also make this report available on their web page in PDF-form. Few of them go further and provide other environmental information or present the 50

Fichter, K. , and Loew (1997). Wettbewerbsvorteile durch Umweltberichterstattung

51

Skillius, Å. and Wennberg, U. (1998). Continuity, Credibility and Comparability - Key challenges for corporate environmental performance measurement and communication, p 30

52

Corporate environmental reports: Relevant and required? (1997), by New Zealand Ministry of the Environment

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

environmental report in a more user-friendly form through the possibilities provided by the web. The potential of the Internet for effective environmental communication is not realised by most companies. 3.1.2 Environmental product information and eco-marketing End-users normally do not read environmental reports. Environmentally sensitised customers want comprehensible, “easy” help to make a good ecological choice. Information is often required concerning product properties directly affecting the consumers’ health, such as the content of toxic substances, or properties affecting the consumers’ finances, such as electricity use or in the case of a car, fuel consumption. However, with rising environmental awareness, consumers increasingly want information about the whole life cycle of a product and want to be sure that it has a low impact on the environment, from raw materials extraction over production process to disposal. There is a gap between the intentions of consumers to buy more environmentally friendly products and the actual demand. Barriers to green purchases—apart from price—could be that there is insufficient information or that this information is too complex and without established terminology. This makes it difficult for the consumer to judge about the actual environmental performance of a product and to compare between products. Further, it can be noticed that consumers do not have much confidence in claims made solely by the companies themselves. Third party verified environmental product declarations and eco-labels emerged as a response to all these different complex and “untrustworthy” claims from companies. In order to avoid a proliferation of misleading claims and unclear labels, the ISO (International Organization for Standardization) aims to create standards for such labels and declarations. A Type I Environmental label, according to the ISO standard 14024, is a label from independent third parties that award them to the best environmental performers in various product categories. Examples are the “Blue Angel” in Germany or the US “Green Seal”. Criteria for the labels are based on a life cycle approach53. Environmental labels of the ISO Type II are self-declared labels from manufacturers to indicate the environmental aspects of a product or service. These do not necessarily have to be based on a whole life cycle perspective, but can also concern a certain environmental property, such as recyclability. ISO Type III are labels licensed by independent organisations, serving as a “report card” and providing information on the possible environmental impact a product. There are no pass or fail criteria; the goal is simply to supply objective information. It is left up to the consumer to interpret the information. Environmental product declarations could be attributed to this type. In Sweden, for example, there exists a system for Certified Environmental Product Declarations that are based on Life Cycle Analysis (LCA). However, these declarations are mainly directed towards purchasers in business and public sectors and not individual consumers54. There is no clear line between what is called eco-marketing and environmental product information. Eco-labelling or environmental product information can constitute a part of ecomarketing. With eco-marketing, a company tries to highlight the environmental aspects of a product and the benefit that the consumer receives from this. Eco-marketing tries to stress the positive environmental aspects of a product and does not necessarily aim at giving a comprehensive picture about all the environmental aspects of a product or of a company. For being credible in the long run, eco-marketing should be objective and not just “greenwashing”55.

53

It turned out to be difficult to pose requirements upon the actual process phase, if such labels should be applied internationally. It is discussed whether environmental criteria concerning the process would actually discriminate certain countries and cause trade barriers.

54 55

Jönsson, K., and Jacobsson, N. (1999). Environmental Product Communication. Lecture in Cleaner Products Course “Greenwashing” could be defined as making misleading claims about the environmental benefits of a product, or good works of a corporation.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

3.2 Drivers for environmental communication and target groups Generally speaking, it could be said that the task of environmental communication is to assure public acceptance56. Environmental communication can be taking place simply because a company feels the “moral obligation” of a responsible corporate citizen to do so, but definitely also because there are numerous stakeholders requesting environmental information, and not satisfying these needs might have a negative impact on the company. However, environmental communication is also used proactively and aggressively by some companies, in a more strategic way in order to reach competitive advantages. Therefore, depending on the environmental exposure of a branch or a company and the individual strategy, a company will choose a different mix of environmental communication tools or no environmental communication at all. Just like general corporate communication, environmental communication is directed towards several different reference fields with a different function. The contents and the way of the communication can differ depending on the purpose and the target audience. In general it can be distinguished between internal organisation communication, market communication and public relations57. The target groups within these reference fields have different information needs and there are different degrees and means of mutual influence. Referring to the steering systems described in Chapter 2.1.2, the communication to external groups could also be divided into communication towards market, public and politics. The target groups are described in more detail in the following chapters58, with a focus on the relevance for competitiveness and the importance of informative corporate environmental communication tools such as environmental reports or product declarations. 3.2.1 Organisation-internal target groups Employees and workers unions Employees play a direct role in the environmental work done by a company and are also the most directly concerned. Ecological improvements and innovations can only be reached if employees are taking an active part in contributing to environmental efforts. Internal environmental communication can strengthen the company culture, the employees’ motivation and innovation potential, which can have a positive effect on competitiveness. Effective internal environmental communication has to occur frequently and in a participatory way, such as direct communication and education, Intranet, e-mail, exhibitions, posters or newsletters. Environmental reports are only one of many means with which employees are informed, and probably not the most important. However, employees are viewed by many companies as a core reader group, and feedback to the reports from them is regarded as very valuable. 3.2.2 Market-based target groups Shareholders and lenders Shareholders and lenders provide the company with money, and they have a stake in the economic performance of the company. Environmental performance is increasingly seen to have 56 Schumacher, I. (1996). Anspruchsgruppen und ihre Anforderungen an Umweltberichte [Target groups and their requirements upon environmental reports], p 15 57

Fichter, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit, p 45

58

Much of the information for these chapters is compiled from Schumacher, I. (1996). Anspruchsgruppen und ihre Anforderungen an Umweltberichte, p 6-12; and FEE (1999): FEE discussion paper towards a generally accepted framework for environmental reporting, p 12-14. However, both publications concern only environmental reporting and not environmental communication in general.

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Agathe Bolli

a direct or indirect influence over financial performance and financial risk assessment. Information about risks in the form of liabilities, fines or profit-reducing environmental investments has to be provided. This is also of increasing importance for insurance companies. On the other hand, investors, lenders or insurance companies may also be interested in information about future profit potentials through environmental strategies. Also shareholders can be members of the “environmentally concerned public”. Often they represent a high percentage of the readership of CERs. Their interest goes beyond the purely financial effects of environmental management, as they simply may want to be a member of a company who is a “good corporate citizen” and takes into account social and environmental responsibilities. For example, the feedback that Novartis received on its 1998 CER from the shareholders showed that they were very interested in the discussion of benefits and risks of the products or the emission data and what the company wrote concerning performance towards goals59. According to FEE60, conventional investors in risk capital still obtain most of the information they need from audited financial statements, and they tend to make only general use of environmental reports. However, there is an increasing share of financial stakeholders (e.g., environmental funds, or increasingly, institutional investors such as churches or pension funds) who base their decision not solely on financial criteria, but also on social and environmental criteria. Environmental reports are regarded as an important source of information. Concerning invested volume, this group is still an insignificant minority. Nevertheless, their potential for influencing companies’ perceptions about the environment and their efforts should not be underestimated. Customers and retailers ”Where environmental liabilities and regulatory compliance issues are relevant, customers will have an interest in information concerning the going concern status of a supplier. More commonly, however, customers are recognising the links with their suppliers in terms of the environmental life-cycle. Suppliers, through their use of certain substances and materials, may directly affect their customers’ environmental performance. Some companies are already demanding that “first-line” suppliers are accredited to a recognised Environmental Management System (e.g. EMAS of ISO 14001).”61 Retailers can have a considerable influence on purchasing decisions. Ecological criteria for purchasing are increasingly used, and information is requested from companies. These information needs can be satisfied, for example, with environmental reports, personal communications or additional confidential material concerning the product properties. If a company wants to have competitive advantages with environmental features, information and education of retailers can be of high importance, especially if ecological products are to be sold with a price premium. Furthermore, the added benefit through environmental differentiation has to be perceived by the consumer, and a retailer can play an important role in communicating this. Consumers and consumer organisations Consumer behaviour is influenced by criteria such as price, product functionality, quality, brand or availability. With increasing environmental awareness and knowledge of the public, environmental criteria are becoming more important. Comprehensive environmental information 59

Telephone Interview of 27.07.1999 with Martin Tanner, Communication Sustainable Development, Novartis, Basel

60

FEE (1999). FEE discussion paper towards a generally accepted framework for environmental reporting, p 12

61

ibid, p 13

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M.Sc. Thesis, IIIEE

Agathe Bolli

in order to support their purchasing decisions is requested, such as information about electricity use or toxic materials content, but also information about the general environmental performance of the company. If a company wants to reach competitive advantages with environmental differentiation, an appropriate environmental communication strategy is crucial. Eco-marketing is used, which highlights the environmental features of products. More “objective” product declarations, listing important environmental criteria, are used as well. It should be noted that consumers are critical of such claims made solely by the companies. In order to reduce the complexity and increase credibility, third-party certified eco-labels are increasingly used. Environmental reports are hardly the right information tool to reach consumers directly. However, consumer organisations make more and more use of them by comparing and “translating” the information, and can considerably influence the purchasing behaviour with the publication of product performance scorings or “Green purchase lists”. Suppliers Suppliers need to understand the environmental aspects of their major customers. If a company wants to make environmental improvements, it has to involve the suppliers into the process. Requirements concerning environmental properties of supplied components have to be put up. Environmental policies have to be communicated so that suppliers can direct their own research into the desired direction. Suppliers may then see new competition fields and eventually come up with complete innovations. Environmental reports may be one of the communication tools for suppliers. Other means could be communication through an Extranet or personal communication between the responsible persons. 3.2.3 Non-market-based target groups (public or political target groups) General Public and local community Members of the public are affected by companies in many ways—as members of the local community, as customers, as employees or as shareholders, just to name a few. The information needs are accordingly different, and communication normally occurs through the respective interest groups. It is difficult to identify the information that should be provided to “the public” as a whole (see also target group “media”). The local community is concerned about environmental impacts arising from a site and the potential risks. Communication with neighbours and the local community occurs, for example, through discussion evenings, newsletters, telephone information “hotlines”, factory open days or environmental reports on a site level. Corporate environmental reports are seldom the right tool to satisfy the information needs of the local community, but environmental reports on a site level can provide valuable information. Media Media can be seen as the “infrastructure” of the public62 and have an important role in shaping public opinion. Media have the function of processing the immense flow of information, news, opinions and subjects by reducing complexity and channelling the information flows. Being under time and cost pressure, many mass media do not conduct their own research and rely on information offers from external “content providers” and “opinion shapers”. Apparently, about two thirds of all news is copied or adapted from press releases of interest groups and other public 62

Fichter, K. (1998). Umweltkommunication und Wettbewerbsfähigkeit, p 217

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

actors63. It is evident that financially powerful actors, such as companies, can have a considerable influence on media reporting and the public opinion. Some of the potential influence can also be explained with the dependence of certain media on advertisement incomes. The method of environmental communication to the media (e.g. press releases, press conferences, speeches) depends on the message to be put through. Environmental reports might not be the main tool to reach the media; however, they can be of importance for media focused on the environment, who process this information and spread the core messages to a wider audience. They can play, in this respect, a disseminator role. Authorities and policy makers In the framework of the enforcement of environmental laws or voluntary agreements, companies have duties to provide authorities with environmental information such as emission data or waste figures. The channels for communication are normally set on the local or regional level. The function of environmental reports should not be to reproduce such statutory returns, but rather to provide “value added” information (e.g., assurance of good environmental management) that the regulator is unlikely to obtain from other sources64. Companies can also co-operate with regulators and influence policy making in a proactive or more defensive way—on local, national or international level. Co-operation in projects, working groups or political lobbying are examples for such environmental communication. Environmental NGOs Environmental NGOs represent the interest of environmentally concerned citizens and can influence public opinion. One of the tasks of environmental NGOs is to ensure the “public’s right to know” and provide it with “objective information” about the issues perceived as important. Some NGOs (such as Greenpeace) can also have the power to influence policy making and the market conditions. Co-operation with environmental NGOs can therefore be essential for a company. Environmental communication with NGOs ranges from discussion rounds, working groups, joint projects, press conferences to environmental reports, product declarations and eco-labels. Academia Active co-operation with universities or research institutes in the form of joint projects, participation in lectures or providing study materials is nothing new for companies. Fiat, for example, is supporting a whole study for automobile construction at a university. This also applies to the environmental field. Influencing academia can therefore have considerable effects through shaping ways of thinking and influencing the material that is published. Environmental reports and other purely informative information constitute only one part of this environmental communication. Companies rarely see academia as a target group for environmental reports. However, interestingly enough, they do constitute a high share of the reader group. They use environmental reports, for example, for benchmarking studies or publicising examples of “best practise”. In this sense they can play a “disseminator” role, as material published by academia is regarded as being much more credible by the public than material published by industries themselves65.

63

Fichter, K. (1998). Umweltkommunication und Wettbewerbsfähigkeit, p 220

64

Azzone, G., et al (1997): “A stakeholders’ View of Environmental Reporting”

65

Jönsson, K., and Jacobsson, N. (1999). Environmental Product Communication. Lecture in Cleaner Products Course

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Competitors A company might want to signal to competitors that it is the clear environmental leader in the branch to prevent them imitating. It might also want to co-operate with competitors to follow a defensive or proactive strategy on a branch level. Competitors are interested in comparing environmental strategies and efforts with their own approaches. They may want to benchmark their environmental performance against the performance of other companies in the branch. Environmental reports have so far only a limited importance for benchmarking due to the lack of comparability of the reported data. Often, benchmarking exercises are performed through direct contact and information exchange by two companies.

3.3 Problems with environmental communication Three specific characteristics can be attributed to environmental communication66: • • •

The subject of the environment is (relatively) new There are conflicting views about environmental issues Environmental issues are difficult to measure, evaluate and communicate

Problems that arise from these characteristics are, for example, that the recipients of environmental information often do not know how to interpret the information nor do they know whether they can trust the information at all. Environmental communication is therefore a very delicate issue and prone to credibility problems. Communicated issues have to be based on reliable facts. Pure greenwashing may even have a negative impact on a company, if it is discovered that the company makes wrong claims or only publishes part of the facts which gives the wrong picture of the company’s actual environmental impacts. Difficult identification of information needs It is a difficult task to satisfy all the different information needs of all the stakeholders (see also Chapter 3.1.1) This presupposes that the information needs are known by the companies, which is, in reality, not necessarily the case. Identifying and prioritising information requires resources, which might not always be granted in a company. Credibility problems The CER can play a crucial role in communicating objective and credible information to a broad range of stakeholders. However, full credibility is only guaranteed if the top management endorses the CER and if it is verified by a third party (which should itself be competent, independent and credible). This is still not the case for many CERs. Limited comparability CERs are often declared to be the most important tool to compare environmental impacts and environmental activities from different companies. This comparability is still only given to a very limited extent. Comparison of environmental information between companies from different branches is problematic. Different branches cause different environmental impacts along the life cycle of their products, and the same activities do not cause the same environmental impact all over the world. Due to this complex relationship between environment and industrial activities, there is no agreed way on how to prioritise these impacts and the respective environmental efforts. Even between companies of the same branch operating in the same geographical area, comparability of the information is not granted. There are hardly any standards on branch level. 66

Ficher, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit, p 46

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Companies have different ways of measuring their environmental aspects and setting the systems boundaries for their responsibilities. Complexity of information and “lack of competence” from recipients Concerning CERs, it can also be noted that there is actually a “lack of competence” from the stakeholder side on how to interpret the contents of such a report. I could, for example, read in several sources that most financial analysts have not yet discovered the information potential that a CER can provide them. Similar problems can be seen with information for consumers concerning the environmental profile of products. Which aspects of the life cycle should be included in product declarations or eco-labels? What is the benchmark? How can these data be presented in a consumer-friendly and credible way? Considerable progress has been made in the last ten years concerning such questions (see also Chapter 3.1.2). Nevertheless, environmental product information is still a very rare tool used only by a few environmentally active companies. 3.3.1 Special position of complex final goods producers Producers of complex final goods face special problems when setting priorities for environmental management and communication. Which impact is within their responsibilities and what should they communicate about? What should they focus on? How can they identify the information needs of the stakeholders? Assuming responsibility for the whole life cycle of a product, their focus should be on the largest impact that they can directly or easily influence, and where they see the best opportunities to actually save costs and reach new competitive advantages through differentiation. Integrating environmental issues into the design phase is important. For example, in the car industry, the extent to which the car components are produced in-house by car manufacturers differs considerably. Some producers have 70% of the production outsourced, others only 40%. The different extent of outsourcing, and the fact that information about the product’s properties is not always complete, poses problems for the communication of environmental performance data concerning processes as well as product components. If external stakeholders want to benchmark the environmental performance of companies, comparability is seldom given due to the different systems boundaries and the different extent of information. Better guidelines on how to set the boundaries for information would be needed. Another conclusion would be that it might make more sense to communicate about environmental management systems and the way the suppliers’ environmental performance is influenced, rather than presenting too much environmental data about the production. In most cases, information about the products themselves and the use and disposal phase are more important than the information about the production, as the impact is often higher during the use and disposal phase. As consumers can often influence the environmental performance of such products, they are an important target group for environmental information. This involves the question of which environmental communication tools are best to reach customers, and how environmental information has to be presented in order to be effective.

3.4 Developments in environmental communication Regulatory pressure for accountability for the environment is increasing and companies are discovering that it can pay to include environmental issues into the business strategy. As a consequence, environmental communication is becoming of increasing importance. Environmental communication and reporting are emerging fields, which have matured considerably during the past ten years, but there is still room for improvement in the objectivity, 33

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

completeness, credibility and comparability. Along with the increased implementation of environmental management practices since the end of the eighties, the companies’ environmental controlling systems have improved and companies make increasing use of environmental performance indicators in order to measure progress towards goals and benchmark with best practices. Also environmental accounting and total cost assessment are practices increasingly used in order to assess the benefits of environmental measures. Companies are more aware of the effects of their activities on the environment and the “true” costs of pollution than they were twenty or even ten years ago. These developments had a positive impact on the quality of environmental communication. However, as mentioned in the previous chapter, there are still many problems to solve. Efforts in order to increase comparability and credibility of environmental information by companies are made in several fields by the industry itself, but also by regulators and other interest groups. 3.4.1 European and international developments in environmental reporting It is an ongoing discussion whether the publication of an environmental report should happen on a voluntary basis or if companies should be forced, through legislation, to report. Companies which are EMAS registered (European Eco-Management and Audit Scheme) are required to publish an environmental report (environmental declaration) with respect to the sites registered under the scheme. There are also some national governments like the Netherlands, which have already introduced legislation requiring companies operating within certain sectors to publish an annual environmental report67. There are many voluntary initiatives by industry which aim to increase the usefulness of environmental reports. In order to encourage companies to publish credible and comparable environmental reports and improve the practice of environmental reporting, several initiatives comparing the quality and ranking environmental reports have evolved, such as the UNEP/Sustainability ranking68 or the Ranking of German environmental reports by future69. Other initiatives directly try to make companies commit to keeping certain reporting guidelines. Apart from the European Chemical Industry Council’s (CEFIC) Guidelines on Environmental Reporting or the guidelines of the banking sector, there have not been too many efforts for reporting frameworks on a branch level. However, there are quite a number of recent initiatives on a more general level. Some initiatives like the Global Reporting Initiative GRI (see below) aim at setting up globally applicable guidelines for what elements an environmental report should contain, that is, which topics should be covered. Groups like the WBCSD working group on ecoefficiency metrics and reporting70 focus more on the development of comparable indicators in order to facilitate definition, selection, measurement and communication of eco-efficiency information by business. Other initiatives, for example, the FEE (Féderation des Experts Comptables Européens - European Federation of Accountants) discussion paper towards a generally accepted framework for environmental reporting71, do not provide directions for the actual contents of environmental reports, but rather talk about the common qualitative characteristics such as relevance, reliability, comprehensibility, neutrality, completeness, prudence, comparability, timeliness and verifiability as a prerequisite for environmental reports. 67

Drieënhuizen, F. et al, “Environmental accounting and auditing - a status report”

68

see for example: SustainAbility/UNEP (1997). The 1997 Benchmark Survey

69

see for example: future e.V./IÖW (1998). Umweltberichte und Umwelterklärungen. Ranking 1998 [Environmental reports and environmental declarations. Ranking 1998] 70

WBCSD (1999). Eco-efficiency indicators & reporting, p 3

71

FEE (1999): FEE discussion paper towards a generally accepted framework for environmental reporting

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Environmental Communication and Competitiveness - Case Study in the Car Industry

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Agathe Bolli

Which of these approaches will be the most applicable has not been determined. As an often mentioned initiative, the GRI is described in more detail. Global Reporting Initiative (GRI) 72 The GRI was established in late 1997 with the mission of designing globally applicable guidelines for preparing enterprise-level sustainability reports. The GRI is convened by CERES (Coalition for Environmentally Responsible Economies) and incorporates the participation of corporations, NGOs, consultants, accountancy organisations, business associations, universities, and other stakeholders around the world. The intent of the guidelines is to provide a sustainability reporting framework which emphasises the links between the environmental, social and economic aspects of enterprise performance. The Guidelines have been presented as an Exposure Draft for comment in March 1999, and pilot tests are now performed in order to test the practicability of this framework. The goal is to release the Guidelines in early 2000. The Sustainability Reporting Guidelines contain nine core parts (see Appendix 1 for more detailed description): •

Part 1: CEO statement



Part 5: Stakeholder Relationships



Part 2: Key indicators



Part 6: Management Performance



Part 3: Profile of Reporting Entity



Part 7: Operational Performance



Part 4: Policies, Organisation, and Management Systems



Part 8: Product Performance



Part 9: Sustainability Overview

In order to allow better comparability, companies using the GRI are meant to use the reporting sections in the order described above. However, they are flexible in the presentation of the items within the different parts. These guidelines are quite demanding and go quite far in their reporting requirements. However, they do not contain any branch-specific items and are intended to be applicable to any size and any type of enterprise that chooses to prepare a sustainability report. Comments about the applicability of the GRI for “competitiveness” reporting can be found in Chapter 7.

4. Environmental communication and competitiveness This chapter synthesises the theoretical basics from Chapters 2 and 3 for linking environmental communication and reporting with competitiveness. Chapter 4.1 describes some general findings, and Chapter 4.2 is an attempt to build a model which can be used subsequently for the analysis of environmental communication in the car industry.

4.1 Linking environment, communication and competitiveness General links between environmental communication and competitiveness Obviously, the link between environmental communication and competitiveness is as ambiguous as the link between environment and competitiveness itself. The effects of environmental communication have to be analysed in the context of the respective environmental strategies and the corporate communication of a company (see Figure 4-1 for my view of environmental communication).

72

CERES (1999). Sustainability Reporting Guidelines. Exposure Draft for Public Comment and Pilot Testing

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Environmental Communication and Competitiveness - Case Study in the Car Industry

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Agathe Bolli

Figure 4-1: Environmental communication as part of business communication

Corporate communication strategy: towards different stakeholders - as a part of the business strategy

Environmental problems

Environmental communication strategy: towards different stakeholders Product related information

Eco-labelling

Speeches Sponsoring

Env. related employee information

Env. reporting

“Face-to-face” stakeholder dialogue

Environmental business strategy Long-term strategy and goals, environmental product strategies, transparency, awareness over environmental impacts, possibility of preventative approaches and proactive approaches Design for the Environment

EMS

Life Cycle Analysis

Environmental Management Tools Green Marketing

Environm. Controlling

Performance indicators

Env. Accounting

Risks and opportunities

Environmental competition fields

“Branch competititive forces” competition fields

Direct and indirect consequences for competitiveness? E.g. Improved stakeholder satisfaction, increased competitiveness thought ready supply of data requested from stakeholders like purchasers, changes in demand through or eco-labelling, increased image in the public, etc

The following conclusions, which can be drawn from the previous two chapters, show the complex relationship between environmental communication and competitiveness73 Environmental communication is not of the same competitive importance for every company and every branch. Different branches are concerned by different environmental problems that are in different stages along the “environmental transformation process”. The environmental requirements placed on companies by public, political or market stakeholder groups and their corresponding information needs varies accordingly. Depending on what “stage” environmental problems are at, the communication may be directed more towards public, politics or towards the market. The same stakeholder group might not have the same influence and information needs along this transformation process. Environmental communication depends on the strategies that companies use in order to face the environmental competition fields. Environmental communication can serve the stakeholders’ information needs, but also may influence stakeholders proactively and change their perception in order to carry through a company’s environmental strategy. Facing the same environmental requirements, companies may choose different strategies to encounter them. Defensive environmental strategies obviously require different communication from proactive strategies. Strategies based on differentiation require communication to different 73 The publication Wettbewerbsvorteile durch Umweltberichterstattung by Fichter, K., and Loew, T. (1997) contains a number of working hypothesis about the relationship between environmental reporting and competitiveness, which are in some points similar to the findings of Chapter 4.1

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

stakeholders than do strategies based on costs. Product differentiation strategies may be focused directly towards the market, whereas market development strategies are very much focused towards the public and politics in order to influence the prerequisites that allow the achievement of competitive advantages. The environmental information needs of all the stakeholders are not always known A target-oriented environmental communication takes for granted that all the different environmental information needs of the stakeholders and the best means for communication with them are known to a company. However, this is not always the case. Still very few companies make a comprehensive assessment of their environmental stakeholders and their information and communication needs. This can be seen with environmental reports. Many companies do not identify their target readers and just declare the reports as being “for all the interested stakeholders”. Case of environmental reporting The above mentioned findings about communication and competitiveness also roughly apply to environmental reporting. The environmental report is only one of many environmental communication tools. The benefits of an environmental report perceived by companies depend very much on the reason why a company makes an environmental report. As can be seen from the stakeholder-description in Chapter 3.2, the environmental report might not have the same importance for every stakeholder group. In order to analyse the effects of environmental reporting in an empirical study, Fichter and Loew 74 divided environmental reporters into six different “reporting types” (see detailed description in Appendix 2), depending on the reasons for reporting, the contents of the reports and the target groups the reports are aimed at. Some types are more management-oriented, some are market-oriented, others are public oriented. The possible implications for competitiveness have to be analysed in a different way. The following are further additional remarks to environmental reporting and competitiveness: Environmental reporting mainly effects perceptions and attitudes As the empirical study by Fichter and Loew75 showed, the direct effect of environmental reporting is mainly on perceptions and attitudes. At further levels, there are effects on dialogue, co-operation and actual direct material and financial changes, but in a more limited way, as influences by other factors are increasing and the direct link cannot be shown clearly. This can be visualised in the following way:

74

Fichter, K., and Loew. T. (1997): Wettbewerbsvorteile durch Umweltberichterstattung

75

Fichter, K., and Loew. T. (1997): Wettbewerbsvorteile durch Umweltberichterstattung

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Figure 4-2: Effects of environmental reporting Change of the management and the Environmental controlling

Environmental reporting

Perception Conciousness Attitudes

Actual Dialogue, Cooperation material communicating and and about certain measures financial issues changes

Influences by other factors

Source: Fichter, K., and Loew. T. (1997): Wettbewerbsvorteile durch Umweltberichterstattung, p 63

This was interpreted from the answers received in the empirical study. Asked for the benefits of environmental reporting, the answers from companies differed, to a certain extent, between the reporting types. However, in general, the most common answers for all the types were: “Our environmental efforts are more visible to the public now”, “Our image increased through environmental reporting”, “The dialogue with opinion leaders was enhanced” and “Our credibility for the target groups has increased”. Environmental reporting therefore seems to have, in general, a strong influence on image and the socio-political reference field. CERs contain a lot of retrospective information and comparably little information about future strategies It can be noted that many CERs contain mostly retrospective information, describing the environmental measures done and showing environmental balance sheets with material and emission flows. Clear information about goals and strategies can be found, but with less frequency. If it is meant to be legitimate to use environmental reporting for influencing public perceptions in favour of their environmental competition strategies, then more future-oriented information should be available in such reports. This could especially be of importance for companies with market development strategies. However, it seems to be the case that the environmental report is not regarded as an important tool for market development strategies. Apart from the six reporting types mentioned in Appendix 2, the study performed by Fichter and Loew also tried to identify a reporting type “Market development”, targeting mainly the public. Following a proactive, public-related competition strategy, the goal of this reporting type should be above all to increase public awareness of environmental issues and ensure acceptance for environmental friendly products and technologies. However, this type of reporting could not be clearly identified in the empirical study! The importance of an environmental report for competitive strategies can change over time Different stakeholders can best be reached with different communication means. Trying to satisfy too many different information needs of stakeholders with the same tool such as an environmental report is difficult. This also implies that the importance of an environmental report for competitiveness of a company may change over time, as target groups of environmental communication change along the “environmental transformation processes”, and not for all of their information needs the environmental report is equally suited. 38

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

A general reporting framework for all branches might constrain the use of an environmental report for competitive purposes Environmental reporting should reflect the information needs of stakeholders and also give companies the opportunity to proactively describe its strategies. From the point of view of competitiveness, it is problematic to construct a reporting framework that equally suits companies in all the branches, with their different environmental problems and the different individual environmental strategies that are chosen.

4.2 Model for analysis Is there a competition model that can be applied to explain the effects of environmental communication in a company of a certain industry? As mentioned in Chapter 4.1, there is no direct clear link between environmental communication and competitiveness. In each of the competition models or shareholder value models described in the Chapters 2.3.1 to 2.3.3 there are elements with a close link to environmental communication. But none of the models is sufficient for a systematic analysis of the multicausal relationship between environmental communication and competitiveness76. The Porter model uses the forces playing in the interactions between the company and its external market stakeholders for describing competitiveness. Resource-based models concentrate more on the company-internal core competencies as a source for competitive advantages. I agree with Fichter’s view that Porter’s model is the best to describe the effects of environmental communication, as it refers to the relationships with stakeholders. Each of these relationships can be analysed, and the importance of environmental communication in this mutual relationship can be assessed. However, as could be seen from the previous chapters, this model should be expanded with stakeholders from the public and politics. A company is operating within the three external interaction systems market, politics and public, and each of them has different mechanisms of regulation and steering. The public and politics play an important target of environmental communication. The role of the media as “opinion shapers” and disseminators of information, and the role of academia and governmental agencies can be crucial for “constructing reality” in favour of companies. Several aspects from the resource-based model described in Chapter 2.3.2 can be integrated here. Intangible resources of a company, such as the image of environmental leadership, can be of crucial importance for the credibility of environmental communication. Also, the importance of political acumen should not be underestimated. Political lobbying and influencing of legislation is a very important skill. Political acumen is especially important for public-oriented strategies, for example, market securing strategies and market development strategies. Environmental communication is not only towards external stakeholders, but also internal stakeholders. With reference to the resource-based model, it can be said that internal environmental communication is very important for achieving an “environmental company culture” and for shaping the company’s human resources and organisational capabilities in this “spirit”. Purposeful internal environmental communication (probably rather of participatory nature) can increase competitiveness by increasing employees’ motivation and innovation potential.

76

In the book Environmental communication and Competitiveness by Fichter, K., different competition models are analysed regarding their applicability for explaining the effects of environmental communication on competitiveness. Fichters analysis constituted an important input for my study. He came to the conclusion that none of the competition models is sufficient for explaining the effects of environmental communication on competitiveness, but regarded the Porter model as the most appropriate as a basis for a better model.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Trying to combine the market-view and the resource-based view, Fichter defines competitiveness in the following way77: “Competitiveness results from the interaction of market competition structures, company-internal core-competencies and the ability of a company to secure scopes for action and legitimation for concrete strategies in the socio-political sphere”. Figure 4-3 shows Fichter’s proposal for an “integrated competition theory” which is based on the model of Porter, but takes into consideration the importance of the public and politics. Basically, the “model” simply shows the different stakeholders within their reference fields market, politics and public. Figure 4-3: Model for an “integrated competition theory” Socio-political environment

POLITICS

MARKET

Political actors

New entrants Substitutes

Capital providers State actors

Suppliers

Customers

Company development

Societal stakeholders

Societal stakeholders Competitors

Cooperations

Mass media

PUBLIC

Source: Fichter, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit, p 474

Fichter described in detail the influence of the public and the media, however, he did not make a comprehensible overview of how and which kind of environmental communication influences these different mutual relationships between the company and its stakeholders (e.g., between financial analysts or suppliers and the company) or within the company. The previous publication “Competitive advantages through environmental reporting”78 came to the conclusion, based on a simplified version of this model, that environmental reports have their highest influence on public perception of the companies’ environmental efforts, on image and on improved dialogue with opinion leaders. It did not described exactly how the reports are contributing to the benefits, and what kind of information causes these changes. Obviously, it seems to be a very difficult task to describe these effects, as there is no “one way” of describing the importance of environmental communication within these mutual influences 77

Fichter, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit, p 326

78

Fichter, K., and Loew, T. (1997). Wettbewerbsvorteile durch Umweltberichterstattung

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

between the company and the stakeholders. The strength and the influence potential of these different stakeholders are not the same in every branch. Environmental communication is a part of the whole business communication and difficult to analyse separately. Furthermore, the effects of environmental communication are often linked to the effects of the actual improvements in environmental performance. This constellation is different in every branch and even for every company. It can be concluded that environmental communication can in fact add to increased competitiveness—but only under certain circumstances. For simplifying the analysis, the need for environmental communication for competitive reasons, is divided into two categories: 1. Environmental communication about environmental problems that the industry is causing, together with the corresponding goals and measures to reduce them. Not satisfying environmental information needs arising from these problems and the corresponding environmental requirements can have negative effects, either directly on competitiveness through decreased customer demand, or indirectly through negative impacts on the image. 2. Environmental communication that supports environmental strategies. If a company wants to gain competitive advantages with a certain environmental strategy, it can support this strategy with adequate environmental communication towards the targeted stakeholders of the environmental strategy. I will use the above shown model as a basis for the analysis of the possible effects of environmental communication on the competitiveness of car companies. I will describe the relationships between the different stakeholders, the mutual influence possibilities and the type of environmental communication that could be of relevance for a certain environmental competition field and the respective environmental strategy.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

PART II - CASE STUDY IN THE AUTOMOBILE INDUSTRY Based on the findings of the theory section about environmental communication and competitiveness, I analysed the case of the automobile branch in two parts. Chapter 5 starts with a description of the general competitive determinants of the automobile branch. In order to determine the importance of the environment for competitiveness of the car industry, I follow the method by Dyllick et al., described in the Chapters 2.1 and 2.2. Starting with the environmental problems, the environmental requirements placed upon the branch are analysed. The environmental competition fields arising from them are identified and the respective general environmental strategies described. From this, conclusions are drawn about which are the important issues to communicate from a competitive point of view. Chapter 6 looks at the actual (informative) environmental communication within the automobile industry, with a focus on European countries. The studied communication encompasses environmental reports, some annual reports, car magazines, environmental information on the Internet, and product related information. On the basis of the findings from Chapter 5 and Chapter 6, Chapter 7 looks at whether reporting frameworks such as the Global Reporting Initiative (GRI) can actually support such “competition-oriented” environmental communication.

5. Environment and the car industry The core competencies of an automobile assembler could be defined as follows: the management of increasingly rapid design and development of new vehicles in co-ordination with suppliers to meet specific market and regulatory demands, and the management of the assembly process and the supply chain to reduce component and assembly costs79. Cost, quality, time-to-market, environmental regulations and perceptions are important determinants of competitiveness. Apart from process innovations, product innovation is gaining importance. Environmental and safety concerns are, in this respect, a main driver for product innovation. Many of the most significant product-related innovations within the automobile industry are today stimulated by environmental regulation and pressure80. The car of today represents a sophisticated, mature technology. It is highly complex and made out of between 10,000 and 20,000 components. However, despite many incremental improvements during a century of evolution, its design remains fundamentally the same. The basic principle of a car being powered by an internal combustion engine has not changed since its invention. With the fuel cell, this basic concept could for the first time be completely changed. A car powered by a fuel cell runs with electricity generated on board from a reaction of hydrogen with oxygen. The perception of the car and its advantages has changed considerably during the 100 years since invention. While in the first twenty years it was advertised as having an advantages over horses, the car then no longer began to represent simply a functional object, but became the symbol for 79

European Commission (1998). Adoption by Industry of Life Cycle Approaches. Its Implications for Industry Competitiveness.

80

ibid

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

lifestyle, freedom, individuality and status. The car no longer was simply a means of transportation with certain technical properties. Communication and marketing has always been very important for the car industry. The whole “feelings” associated with cars are a product of psychological advertising of the car industry81. Brand identification is very important, and every brand is associated with certain attributes, which are not necessarily just of technical nature. If environment should add to differentiation of the product car, then the additional benefit has to be visible to the customer. Advertising with environmental virtues might not at all add to more customer demand for certain brands, rather the contrary. “Environmentally friendly” is not necessarily compatible with the other values communicated. This has to be considered when talking about environmental communication and differentiation strategies. If analysing environmental strategies and communication, the general factors that rule competition in a certain branch should also be considered. Chapter 5.1 provides an overview over the characteristics of the car industry in the European market and the determinants of competition. Following the “logic of environmental transformation” (see Figure 2-1), Chapter 5.2 starts with describing the environmental problems arising along the car life cycle. From these problems arise the environmental requirements upon the car industry, which are summarised in Chapter 5.3 These two chapters shall allow the identification, in Chapter 5.4, of the environmental competition fields in the car industry, and what environmental strategies are used to cope with them. The implications for environmental communication are described in Chapter 5.5, based on the assumption that environmental communication that supports competitiveness depends to a certain extent on the environmental strategies used. A special focus is thereby put on the role of environmental reports and product related information.

5.1 Characteristics of the car industry in the European market 5.1.1 Production in Europe and leading companies The automobile industry and associated industries are a key component of the European economy. In 1998, about 14.5 million passenger cars and nearly 1.7 million commercial vehicles were produced in the European Union82. Concerning country share, the US is world leader in automobile production (with the “Big Three” General Motors, Ford and Chrysler—now DaimlerChrysler), followed by Japan (with the three major manufacturers Toyota, Nissan and Honda), Germany and France83. Further the UK and Italy have considerable automobile production. The EU is a net exporter for passenger cars. Amongst the luxury car makers (Mercedes Benz, BMW and Volvo), North America has gradually become a more important market, whereas at the lower end (Renault, PSA) exports outside the EU are primarily for the Latin American and Eastern European markets84. At present, Asia is not a significant market for European producers yet. Six motor vehicle manufacturing groups—Volkswagen, General Motors, PSA Peugeot-Citroën, Ford, Renault and Fiat—together account for three-quarters of the EU passenger car market. This is a position maintained since the mid 1980s85. The Volkswagen Group is the biggest producer with about 18% market share in 1998. More than half of the Volkswagen sales can be attributed to the Volkswagen brand, about a quarter to Audi. The market share of Japanese cars is 81

Graedel, T. E., and Allenby, B.R. (1998). Industrial Ecology and the Automobile, p 27

82

European Automobile Manufacturers Association, ACEA (1999). Automobile Trade. Web-based source

83

Association of International Automobile Manufacturers, AIAM (1999). World vehicle production. Web-based source

84

European Commission (1998). Adoption by Industry of Life Cycle Approaches. Its Implications for Industry Competitiveness

85

ibid

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

comparably small (about 12%, with Toyota and Nissan as the biggest share), as the market is distorted by a quota system for imports based on volumes. As these import restrictions are going to be removed by the year 2000, the Japanese share in the European car market might then increase (Toyota, Honda, Nissan). National markets remain quite distinct within Europe. Domestic brands partly have a very high market share, for example, in France and Italy (which are likely to be the most exposed to the impact of liberalisation concerning quota) 86. Figure 5-1: European market shares.

Volkswagen PSA Peugeot-Citroën Japanese General Motors Ford Renault FIAT BMW DaimlerChrysler Nissan Toyota Volvo Honda

1995*

1997**

1998*

1999 (July)*

18.3% 12.7% 11.4% 13.3% 12.4% 10.7% 12% 6.4% 3.8%

17.9% 11.4%

18.1% 11.4% 11.7% 11.5% 10.2% 10.7% 10.9% 5.7% 5.0%

19% 11.7% 11.6% 11.3% 11.4% 10.8% 10.6% 5.1% 5.3%

11.4% 10.3% 10.7% 11% 5.7% 4.4% 3% 3% 1.7% 1.5%

Sources: “ Warburg Dillon Read (1999): Global vehicle demand **Warburg Dillon Read (1999): Global Autos. Presentation to Investors. Q1 1999. Both refer as source to S&P DRI, ACEA and own research estimates.

5.1.2 Market situation87 The European car market is a highly competitive, quite mature market with little fundamental growth88. A wide variety of auto makers supplies complex and differentiated markets. There are different brands from compact to small, medium, large or luxury cars, and the growth perspectives may not be the same for all of them. Each of them is serving different customer segments and requires different marketing. The year 1998 was in general a good year, but in 1999, the unit volumes are expected to drop by 4.5%89. The car company market worldwide has been in a process of consolidation in the last years, and further mergers and acquisitions are expected. The last large merger was in May 1998 with the merger of the German company Daimler-Benz and the US company Chrysler to DaimlerChrysler. In February 1999, the Swedish Volvo’s automotive division was sold to Ford Motor Company. The trend is towards fewer larger corporations with multibrand strategies. Europe is very likely to play a central part in further consolidation, as Europe still has six major car manufacturers, whereas Japan and the US have three each (analysts sometimes refer to this as “rule of three”). Automobile prices have traditionally varied considerably by region (e.g., Volkswagen models sold in Italy are 30 percent cheaper than those sold in Austria and Germany, and car prices in the UK are generally much higher). This discrepancy is likely to disappear after the introduction of 86

Warburg Dillon Read (1999). Global Autos. Presentation to Investors. Q1 1999

87

The information to this chapter is compiled mainly from the following sources: Warburg Dillon Read (1999). Global Autos Presentation to Investors. Q1 1999, and Price Waterhouse (1999). Automotive. Industry Analysis 88

However, there is some growth potential from Eastern Europe

89

Internal personal document of UBS Brinson, Environmental Performance Analysis, Zurich, based on Schroeders Analyst Meeting at the Geneva Motor Show, March 9-10, 1999

44

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

the Euro and falling trade barriers, and prices are expected to gravitate toward the lower end of the scale. Competition with other forms of transport does not appear to have any impact on the EU car market as a whole, although this may have an impact in specific cases such as large cities with interventionist transport policies90. 5.1.3 Global Challenges and Strategies On a global scale, automobile production is expected to have a robust growth of some five million units in the next five years91. As a result of the global expansion strategies, the car industry has to cope worldwide with the problem of considerable excess capacity. This is a structural problem and has several causes, including the spread of build-where-you-sell strategies and regional and national protectionism. The capacity utilisation rate is less than 80% in Europe92. Competition in the car industry is getting more intense, and pricing pressure is likely to continue. The need to focus on costs is increasing, and capacity cuts in mature markets like Western Europe will be necessary. The tight competition is leading to consolidation in order to improve efficiencies, push for low costs through high volumes, reduce costs of research and development and extend global marketing and distribution capabilities. In the Volvo case, it could be said that selling 400,000 cars a year was not enough to cover the costs of marketing and new product development required them to compete in the semi-luxury category. In the case of the DaimlerBenz-Chrysler merger, the fundamental goals of the merger were lower per unit costs, increased scale and expanded global reach, as well as synergism in technology transfer. Within corporations, a trend can be noticed within common engineering to simplify the manufacturing process and eliminate competition between different models manufactured by the same company93. Different models of the same brand are increasingly produced on the same or similar platforms. Parts are standardised so that they can be used interchangeably across different models but still enable the manufacturer to differentiate their products in different market segments. This increases the supply chain efficiency. Larger orders for a smaller range of parts can be made, which leverages the buying strength with suppliers. Japanese producers as well as GM and Volkswagen employ this strategy, whereas other producers like BMW are very critical of it. Poor execution of platform strategies can also offset benefits when the design does not meet the customer needs. Changes in the supply chain management can be observed. For reaching further productivity improvements, companies increasingly focus their product and process design on reducing the number of parts and the time required for vehicle assembly. Further, firms are increasingly outsourcing the production of parts and assembly of components. However, the percentage of outsourced production still varies considerably among the manufacturers. At the same time, a trend towards reducing the number of suppliers can be observed. Assemblers and suppliers work together more closely by aligning goals and sharing the risks and rewards of developing and producing vehicles. Information networks are built up, such as “extranets” for manufacturers and suppliers operated by Internet providers, and the “Big Three’s” Automotive Network Exchange (ANX). 90

European Commission (1998). Adoption by Industry of Life Cycle Approaches. Its Implications for Industry Competitiveness, p 130

91

Price Waterhouse (1999). Automotive. Industry Analysis

92

Warburg Dillon Read (1999). Global Autos Presentation to Investors. Q1 1999

93

Price Waterhouse (1999). Automotive. Industry Analysis

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Concerning marketing and distribution, a dramatic consolidation of dealerships can be observed. In Europe there is a trend to create fewer and stronger dealerships with larger territories. There will be a shift in power from manufacturers to dealers and consumers in the next future. Regulations to stimulate competition in favour of the consumer has been adopted in Europe. Dealers may now sell more than one make of automobiles from the same sales premises, which increases their power. Further, new regulations allow dealers as well as consumers to engage in parallel imports and export without manufacturer interference, which will lead to a convergence of prices within Europe to the benefit of the consumer. Under these changed conditions, new retail strategies are adopted by the manufacturers, as manufacturers are now able to sell directly to final customers. Direct-to-public sales through the Internet or making order sales through stockless showrooms are strategies increasingly applied by manufacturers, which can lead to substantial cost savings through inventory reduction and lower distribution costs. This poses a serious threat to dealerships.

5.2 Environmental issues along the life cycle of the car The focus of this case study are automobile firms, that is, automobile assemblers. The production of most of the components is outsourced. When looking at the environmental impacts arising from the product “car”, however, the whole life cycle has to be considered. The car is well known as a polluter in everyday’s life. Cars cause air pollution, carbon dioxide (CO2) emissions, they create noise, traffic jams, accidents and lead to destruction of ecosystems through the construction of infrastructure like roads and parking lots. Much of the environmental impact of a car arises in the use phase and is therefore closely linked to the quality of the product and the driver’s own behaviour. 5.2.1 Environmental issues along the life cycle of the car Chapters 5.2.1.1 to 5.2.1.4 describe the life cycle impacts of a car94. An overview of environmental aspects during the life cycle and strategies used to reduce them is shown in Appendix 3. 5.2.1.1 Raw materials extraction and processing Up to 70% of the weight of a car can be attributed to metals—mainly iron and steel, but increasingly also aluminium, magnesium and other metals. Further, a car contains about 15-20 % rubber and plastics, 6% petrol, oil and grease, some percent of light metals (large variations), 3% glass, and 1% to 2% paint95. In 1996, the automotive industry in the US consumed 35 percent of all iron produced in the US and nearly 63 percent of all natural/synthetic rubber96. Mining, drilling of petroleum, steel making, polymerisation and other extraction and processing steps as well as transportation cause considerable environmental impacts. Improvements opportunities for car manufacturers Car manufacturers have only an indirect influence over impacts arising during the extraction and the processing of the raw materials. However, the impact from materials use can be reduced by using less and lighter material, choosing materials with lower impact on the environment, using 94

Information for this chapter is mainly from: Environmental Defense Fund (1998). Green car: a guide to cleaner vehicle production, use, and disposal. Web-based source, and Kuhndt, M. (1997): Towards a green automobile

95

Volkswagen (1997): The Volkswagen Environmental Report 1997, p 15, and BMW (1997): BMW Umweltbericht 1997/98 (BMW Environmental Report 1997/98), p 39 96

Environmental Defense Fund (1998). Green car: a guide to cleaner vehicle production, use, and disposal. Raw Materials Extraction and Processing. Web-based source

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Agathe Bolli

recyclable and renewable resources and reducing the complexity of construction. Life cycle assessment (LCA) can be used as a decision tool for choosing the materials that impose the least impact during their whole life cycle. 5.2.1.2 Pre-assembly manufacturing and vehicle assembly About 40 to 70%97 of the components are not produced by the car manufacturers themselves, but by partner firms. In the aggregate, it can be said that the environmental impacts of pre-assembly manufacturing exceed the impacts of assembly operations98. At the vehicle assembly facilities, that is, the actual facilities of the “car manufacturers”, the vehicle body is formed through joining various metal pieces. Further structural supports like door, roof or side panels are joined by spot welding (for joining metals) or with adhesives (for bonding dissimilar parts). The use of adhesives does not only cause the release of chemicals, but it may also have negative implications for end-of-life management. Anticorrosion operations are used to pre-treat the body parts for the priming, where four distinct coatings are applied. The finishing step, the final stage in the painting process, applies both a colour coat and a clear protective coat to the vehicle body. The majority of volatile organic compounds (VOC) emitted in the vehicle assembly process arise in these two coatings. The painting, that is, the priming and finishing can be seen as the most problematic step, environmentally, in the vehicle assembly process. VOC emissions arise in the various painting steps due to the solvent-based paints. Also waste water containing paint and metals such as zinc is generated. Assembly plants and facilities such as engine machine shops also produce considerable amounts of recyclable metal scrap. Further, it has to be considered that many car firms have large power plants of their own which cause emissions. Improvement opportunities for car manufacturers Car manufacturers can influence the impacts of pre-assembly through product design and purchasing practices. Concerning their own operations, environmental reports of car manufacturers show that efforts in saving energy and water, and reducing waste and emissions into air, recycling, and in eliminating hazardous materials in the process as well as in the products themselves have been quite successfully implemented and reduced the impact of production considerably in the last ten years. Apart from end-of-pipe technologies, efforts have been made to reduce VOC emissions from paints through improvement of the transfer efficiency, and the application of low-solvent waterborne formulations as well as powder coatings. Less than one percent solvent is present in powder coatings, and the application and curing processes are almost pollution free. Powder coating has successfully been implemented in various manufacturing plants, but not however in all. BMW, who call themselves “pioneers in powder coating techniques” had as early as 1997, invested over DM 300 million into the new technique99. Another method for reducing paint emissions is the use of plastic parts, thus eliminating the need for painting. However, trade-offs with recyclability have to be considered in this case.

97

Volkswagen (1997). The Volkswagen Environmental Report 1997, p 46; Kuhndt, M. (1997). Towards a Green Automobile, p 46; and BMW (1997). BMW Umweltbericht 1997/98 98

Environmental Defense Fund (1998). Green car: a guide to cleaner vehicle production, use, and disposal Pre-Assembly Manufacturing. Web-based source

99

BMW (1997). BMW Umweltbericht 1997/98, p 22

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M.Sc. Thesis, IIIEE

Agathe Bolli

5.2.1.3 Use phase Looking at the life cycle impact of a car, the use phase constitutes the most polluting phase for nearly all the environmental aspects. A life cycle study by VW of the primary energy requirements of a of a VW Golf showed that 80% of the energy is consumed during the service life, 10% for petrol production, 6% to produce the materials required and 4% for the actual production at VW100. In Germany in 1994, passenger cars contributed to 24% of the NOx emissions101. The production of NOx depends highly on combustion temperature and combustion efficiency. Carbon monoxide (CO) and hydrocarbons (HC) are mainly the product of incomplete combustion, and accounted in 1994 for 49% of the CO and 26% of the HC emissions in Germany. Further, cars cause sulphur dioxide (SO2) and particulate emissions (above all from diesel powered cars). Apart from the “classical” air pollutants, cars of course cause carbon dioxide (CO2) emissions, which are directly related to the amount and the type of fuel consumed. Mass produced cars use 5–25 litres of fuel per km. The average fuel consumption of the European car fleet is about 8 litres, which corresponds to CO2 emissions of about 186 g/km. Passenger cars account for 12% of the human caused CO2 emissions in the EU102. Improvement opportunities A very important step for reducing emissions of NOx, CO and VOC was the introduction of the three-way catalytic converter in the end of the eighties, which was mainly due to pressure from legislation. However, due to the increase in the whole vehicle fleet, the total emissions from transportation, especially NOx, have not been reduced, but are steadily increasing. Considerable reductions of SO2 and HC can also be achieved through better fuel quality. CO2 emissions are directly linked to fuel consumption and the carbon contents of the respective fuel, and the only strategy to reduce CO2 is to switch to alternative fuels with lower carbon content and reduce fuel consumption. The introduction of the catalytic converters in the end of the eighties caused a temporary increase of fuel use, which could however be reduced through technical improvements already in the beginning of the nineties. There are several strategies how to reduce the fuel use and the CO2 emissions of a car: Improved aerodynamics, lightweighting, efficient use of heat According to BMW103, one third of the fuel use is due to air resistance. More aerodynamic cars can reduce the fuel use considerably. Also the reduction of rolling resistance can bring improvements. Fuel use increases with the increasing weight of the car. However, according to VW104, a weight reduction of 100 kg “only” cuts average fuel consumption by some 0.2 litres per 100 km (MVEG cycle with diesel engine). In order to reduce fuel use considerably with lightweighting, completely new construction concepts have to be applied. Lighter metals such as aluminium and magnesium are increasingly used, or completely new constructions with plastics. Other strategies to reduce fuel use mentioned in environmental reports are for example latent heat accumulators, where some of the motor heat can be recovered.

100 Volkswagen (1997). The Volkswagen Environmental Report 1997, p 15. The assumed mileage is 150,000 km over 10 years with 8.1 litres fuel consumption per 100 km. 101 Volkswagen (1997): The Volkswagen Environmental Report 1997, p 21. The figure in the report is based on a source from the German Umweltbundesamt (Ministry of Environment) 102

EU business (1999): Background feature: CO2 and cars - fuel economy labelling. Web-based source.

103

BMW (1997), Environmental Report 1997/98, p 10

104

Volkswagen (1997): The Volkswagen Environmental Report 1997, p 37

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Improvement of combustion efficiency and use of fuel with low carbon content Diesel has a higher density and a higher carbon content per litre than gasoline, but it can be burnt more efficiently. The fuel use is considerably lower, and this results in most cases in lower CO2 emissions per kilometre than with gasoline. However, on the other hand, it causes more NOx and particulate matter emissions. Other fuels used in mass produced vehicles are alcohols and liquefied or compressed natural gas. Brazil, for example, has a high share of cars that run with ethanol made out of sugar cane. The advantage of biofuels such as ethanol is that they are made out of renewable resources, which results in lower net CO2 emissions. However, the production of biofuels is expensive and requires much land use. It can therefore only be viewed as a solution for certain regions. Natural gas has a much lower carbon content than gasoline and diesel. Up until now, the problem of the gas storage limited its use to larger vehicles such as commercial vehicles or public transport vehicles. Electrical cars and new propulsion systems Electrical cars have been developed for many years. They do not produce any pollution on site, however, the electricity used for loading the battery also causes pollution—more or less, depending on the way the electricity is generated. Electric cars are viewed by car companies as a good solution for heavily polluted urban areas. Completely new motor concepts that are currently developed are hybrid motors and fuel cells. A hybrid is basically a combination of an internal combustion engine with an electrical motor and a battery. In a fuel cell, electricity is directly produced through proton exchange process where oxygen reacts with hydrogen. The product of this reaction is only water, which would make it a much cleaner option compared with the combustion engine. Apart from this, a fuel cell has a considerably higher efficiency than a conventional gasoline engine. However, the question of how the hydrogen should be produced, still remains. Hydrogen is produced for example from alcohol such as methanol, or from natural gas. This process requires energy use. The fuel cell therefore only truly represents a cleaner technology if the hydrogen is produced with renewable energies, such as solar energy. Intelligent driving and intelligent transport systems The real consumption of fuel compared to standard measurements depends highly on the behaviour of the drivers. Drivers’ education can contribute to a considerable reduction of pollutants and CO2. Driving courses or electronic features such as on-board-diagnostics can help making the drivers more aware of their influence. In order to reduce pollution from traffic jams and help drivers find the shortest way to their destination, information systems based on GPS (Global Positioning Systems) are increasingly installed in cars. 5.2.1.4 End of life End-of-life cars constitute a major waste stream and cause eight to nine million tonnes of waste per year in the European Union. As many as seven per cent of the vehicles abandoned in some EU Member States are not disposed of at all, but merely dumped105. The metal parts, which make up to 70% of the car, can be dismantled and recycled quite easily. Approximately 25 percent of the vehicles by weight, or nearly 75 percent by volume, remains as waste106. This so-called “auto shredder residue” (ASR), consisting of various plastics, rubber, greases, oils, textiles or wood, is a massive resource-consumption and waste-management problem. Car producers made commitments to try to reduce the waste percentage. Efforts are done above all to increase the recyclability of the plastic parts. In an old car, it is difficult to find 105

Friends of the Earth (1998). Atmosphere and Transport Campaign. Cleaner, More Efficient Vehicles. Car Recycling. Web-based source

106

Environmental Defense Fund (1998). Green car: a guide to cleaner vehicle production, use, and disposal. End-of-Life Vehicle Management. Web-based source

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M.Sc. Thesis, IIIEE

Agathe Bolli

out the contents of the parts. Several different plastics may be stuck together with adhesives, which reduce the recyclability, or the plastics are not suitable for recycling at all. Plastics recycling is still under development, and still many problems are encountered like high recycling costs and lower quality of recycled material. Further problematic parts, if not removed and treated adequately, are motor oils and lubricants, car batteries and CFC from the air conditioning system. Improvement opportunities for car manufacturers Reusability and recyclability of cars or car parts can be considerably influenced in the design phase. Efforts have been made to reduce the amount and number of hazardous components, to design cars which are easy to disassemble (e.g., through larger parts or avoiding of adhesives) and recycle (e.g., through labelling of components and use of fewer materials). Further, the corresponding end-of-life infrastructure has to be provided with collection networks, rebuilder plants and recycling facilities. 5.2.2 Summary matrix of environmental aspects In order to get an overview of the environmental problems of a branch and reduce complexity, a “matrix of environmental aspects” was constructed, following the method described in Dyllick et al.107. The aim is to compare this matrix with the matrix of environmental requirements posed on the branch by the market, the public and politics (see Chapter 0). Using a qualitative analysis, this matrix shows, in a simple way, the relative importance of environmental aspects along a product life cycle108. It therefore shows the environmental aspect at each step in relative terms and not absolute terms. The fact that I regarded, for example, “waste production” in the assembly process to have low impact does not mean that there are no problematic wastes in the assembly process. Cars have a considerable impact on the environment at any stage of their life cycle.

107

Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit, p 12

108

It has to be noted that this matrix is not based on a comprehensive set of quantitative data or LCA, but reflects a rather “subjective” evaluation based on the sources consulted for Chapter 5.2. A scientific constructed matrix would require months of research , involving discussions with experts and data gathering.

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Agathe Bolli

Figure 5-2: Summary matrix of environmental aspects along the life cycle Branch levels Environmental Dimensions Use of resources

Raw materials extraction, production

Use phase

Raw materials

Driving

Preassembly

Assembly

End of life Infrastructure

Disposal

Energy use and CO2 emissions Land use and impact on soil and water Solid waste Air pollutants Noise pollution Direct harm on humans (e.g., accidents) High environmental impacts

Moderate environmental impacts

Low environmental impacts

The matrix shows that the main impacts of a car arise in raw materials extraction and processing and in the use phase. Environmental impacts created by the whole infrastructure that are needed to support road transport are considerable and very visible in the landscape. How much responsibility for the infrastructure impacts should actually be imposed on the car manufacturers, and how many opportunities car manufacturers actually have for influencing these impacts can be questioned.

5.3 Environmental requirements on the car industry arising from the environmental problems The car is a consumer good with a considerable environmental impact. The environmental impacts of the car have not been discovered recently, so there are many environmental requirements affecting the car manufacturers directly or indirectly, from the public, politics and the market. As urban pollution started to increase, the role of the automobile as a polluter was for the first time seriously discussed. Tailpipe emission standards were initiated in California in 1959 to control CO and HC emissions from gasoline engines109. Today, the automobile branch is heavily regulated with respect to manufacturing processes and products, and pressure from environmental legislation can be seen as one of the main reasons for technological advances of the products in the last 20 years. However, pressure does not come solely from legislation. A comprehensive description of all demands arising from all the stakeholders and the steering systems they use for their influence would exceed the scope of this study. The following is a description of some main stakeholders, their interests and their requirements. 5.3.1 Legislators Most environmental improvements in the automobile industry have so far been legislation driven. For example, BMW in their Environmental Report 1997/98, wrote that the “Basis for our initiatives are laws and regulations. If it is technically feasible and economically affordable, we 109

DieselNet (1997). How emissions are regulated. Web-based source.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

exceed the laws.”110 Legal requirements are imposed on the production process, on materials use and other properties of the car, as well as on scrapping cars. Furthermore, the car industry is affected through regulation and taxes concerning road use or parking, fuel price, speed limits or traffic bans in cities. In particular, the production process itself—from raw materials processing to assembly—is governed by many environmental laws. In most European countries, compliance with environmental (and other) laws and the existence of environmental control programmes are prerequisites for obtaining production permits. US firms have to declare the release of toxic emissions in the framework of the Toxic Release Inventory (TRI), which can be accessed by the public. These requirements have effects through costs, for example, of end-of-pipe treatments of air and water emissions, increasing waste disposal costs, emission taxes or controlling costs. Also more recent laws on use of substances in products had an input, such as bans of CFC, PVC or asbestos. Companies have to react to these bans and search for adequate substitutes. Now the focus of the new regulation is directed more towards the effects of the use phase and end-of-life. The introduction of market instruments in order to influence the production of ecoefficient cars and the behaviour of drivers, such as fuel and CO2 taxes, is discussed in several European countries and in the EU, but so far little is happening. None of these taxes is high enough to be really market effective. Exhaust gas emission limits, car taxation, regulation concerning fuel quality, fuel excise duties and CO2 taxes on fuel are the legal requirements most directly linked to the car use phase and are described in more detail in Appendix 4. Concerning transportation in general, national and regional government agencies have many policies in order to support public transport (subsidies, education), promote a shift from road to rail transport and to raise public environmental awareness. The EU strategy to reduce CO2 emissions from cars and the new EU Directive concerning endof-life cars are two policy areas that have been discussed intensively between legislators and car manufacturers in the last two years (see more detailed description in Appendix 4). 5.3.1.1 Fuel use and CO2 emissions - European level The three “pillars” of action fields of the EU strategy to reduce CO2 emissions are environmental agreements with automobile manufacturers111, a fuel economy information scheme and fiscal incentives: Agreements with automobile manufacturers: The ACEA members (Association des Constructeurs Européens d'Automobiles/European Automobile Manufacturers Association112) committed themselves in October 1998 to reduce CO2 emissions for the average of new passenger cars sold in the European Union down to 140 g/km113 by the year 2008. As the current (1995) market average is 186 g/km, this means that CO2 emissions have to be reduced by 25 percent, compared to 1995. The Commitment does not impose a target on the individual manufacturers, but only an overall average target for all ACEA members. A fuel economy information scheme: An EU fuel economy information scheme is planned to come into force in December 1999. The aim is to influence consumers’ choice towards more fuel efficient models. This scheme will include a fuel economy label that has to be displayed at the point of sale (including an estimation of fuel costs), a fuel economy guide and a list that gives an 110

BMW (1997). BMW Umweltbericht 1997/98, p 59

111

European Commission DG XI (1999). An Environmental Agreement with the European Automobile Industry. Web-based source

112

Members are BMW, Fiat, Ford of Europe, GM Europe, Daimler-Benz, Porsche, PSA Peugeot Citroën, Renault, Rolls-Royce, VW, Volvo

113

measured according to the Community’s current measurement procedure (Directive 93/116/EC)

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

overview of CO2 efficiency and fuel use of all cars available at a dealership. Further, official fuel consumption data have to be included in promotional literature114. As most European countries have a tax differential favouring diesel over gasoline, the new consumer information scheme may therefore promote diesel penetration into the market by highlighting the fuel savings and CO2 reductions that can be achieved by purchasing a diesel car. The commission admits that there might be goal conflicts with air quality goal strategies, as diesel engines cause more particulate emissions and NOx than gasoline. Fiscal incentives: The above-described agreement regarding CO2 reductions does not exclude the possibility of member states introducing additional fiscal measures to cut down fuel use. However, it has to be mentioned that the ACEA itself mentions in the CO2 commitment, “As long as its commitments are being honoured, ACEA is assuming that this Commitment provides complete and sufficient substitute for all new regulatory measures to limit fuel consumption or CO2 emissions”115. 5.3.1.2 End-of-life - Directive on End-of-life vehicles In July 1997, the Commission presented a proposal for an EU car take back legislation. The aim of the proposal is to prevent the creation of waste from vehicles116 and render it less dangerous by promoting the re-use, recycling and recovery of vehicles and their components. The proposal encompassed requirements for reducing use of hazardous substances, provisions on the collection and treatment of end-of-life vehicles and targets for reuse and recovery117. This proposal was opposed fiercely by car manufacturers, especially the German manufacturers, and a final agreement was delayed several times. Apparently, Ferdinand Piëch, head of Volkswagen’s board, personally lobbied Chancellor Gerhard Schröder, who is a former director of Volkswagen. He pressured the German environment minister Jürgen Trittin to block the common position on the directive118. The main point of disagreement was that the directive would be applied retroactively and car manufacturers would be obliged to take back and cover the scrapping costs for all end-of-life cars of any age from the year 2003. The German car manufacturers’ position is that with this requirement they would face enormous scrapping costs which could have a negative impact on their competitiveness. In fact, no less than 40% of the 160 million cars currently registered in the EU are German makes119. Apparently, VW will have to make reserves in the range of far more than ten billion DM120. According to Wolfgang Lohbeck, Greenpeace121, the reason behind the opposition was that car manufacturers wanted to gain time, because they would like to take over the car scrapping business themselves. The EEB (European Environmental Bureau) remarked that Schröder “has together with his British and Spanish colleagues chosen to support the car-lobby and publicly undermine the authority of their respective environmental ministers” 122. 114

EU business (1999). Background feature: CO2 and cars - fuel economy labelling. Web-based source

115

European Commission DG XI (1999). ACEA Commitment. Web-based source

116

Applies to vehicles of the category M1 (vehicles used for the carriage of passengers and comprising no more than eight seats in addition to the driver seat) and N1 (vehicles used for the carriage of goods and having a maximum mass not exceeding 3.5 tonnes), as well as two and three wheel motor vehicles. 117

Proposal for a Council Directive on End of Life Vehicles. COM (97)358

118

Environmental Data Services (1999). “Danish minister defends end-of-life vehicle law”. E-mail source

119

Verband der Automobilindustrie, VDA (1999): The VDA advocates a modified scrap car directive. Web-based source

120

“Altauto-Politik auf Kosten der Kunden? [Car End-of-life policy on costs of the customer?]” (1999) , Auto Bild

121

Telephone interview of 26.08.99 with Wolfgang Lohbeck, responsible for climate, Greenpeace Germany. This is his personal view, however, he said that the German government had the same opinion 122

Environmental Data Services (1999). “EU ministers “ban" GMOs, delay scrap car law”. E-mail source

53

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

On 22 July 1999, finally, Member States representatives agreed on an arrangement which provides cost-free take-back for new vehicles placed on the market after 1st January 2001, and for all vehicles, whenever they were designed or built, after 1st January 2006. However, the ACEA still remarks that this compromise “will impose on the car industry high financial obligations that are bound to affect the economic situation of the sector and its competitive position. At the end, the consumer will pay for the car he buys for himself, and also for cars sold in the past to others123.” 5.3.1.3 Influence of regulation and authorities Overall, it can be said that environmental legislation has quite a high impact on the car industry. Meeting tailpipe emission limits are crucial for staying in the market. However, regulations and taxes not directly concerning cars, such as fuel prices, road prices or speed limits also have effects and could become of increasingly important. Compliance with laws has to be communicated to the authorities, which happens normally in standard ways given by authorities. The importance of environmental communication concerning legislation lies more in the fact that powerful industries such as the car industry can influence the whole process of policy making substantially. The car industry, together with affiliated industries such as the transportation industry or the road construction industry constitute important “cornerstones” in most economies in Europe, and politicians do not like to “burn their fingers” by introducing “anti-industry” regulations. 5.3.2 ”Green” political parties Transportation is on the agenda of every political party in Europe, especially transportation of goods, and traffic in cities. Green parties call for internalisation of external costs caused by road transportation (e.g., the German Green Party want the fuel price to be at the height of DM 5), for better public transport and higher attractiveness of environmentally friendly means of transport, such as bicycles or trains. It should be noted that there is a “tension field “ with other forces represented in political parties that have rather “anti-environmental” requirements. In Switzerland, for example, there is a political party which was called “The car party”, now renamed “The freedom party” with representatives in the parliament who are opposing environmental pressures and can influence all three steering systems (opposing environmental laws and taxes, promoting automobile infrastructure—stressing the citizens’ right for individual mobility and freedom). However, overall, more “moderate” parties have probably an even higher influence on slowing down internalisation processes. 5.3.2.1 Influence of Green Parties The car industry is very important for the European economy, and there are many industries tied to the car industry, such as the construction industry or transportation companies. Representatives of these industries use their influence over the political parties. These are often in a majority compared to green parties. However, green parties have indeed had an important role in influencing the public’s perceptions and the requirement of more environmental regulation and taxation.

123 European Automobile Manufacturers Association, ACEA (1999). “Agreement in COREPER on end-of-life vehicles does not solve the retroactivity issue" stresses ACEA. Web-based source

54

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

5.3.3 Environmental NGOs The first priority of environmental NGOs is to try to sensitise people for the environmental problems associated with the use of the car. They call for new mobility concepts and want people to think over their perception of mobility and make them, for example, switch to more environmentally friendly modes of transport. However, as they themselves recognise, changing the perception and the habits of people is a long process. They also pressure the legislative bodies to set more strict frameworks and to introduce environmental taxes and try to make people switch to cars with low environmental impact. For example, the American Council for an Energy-Efficient Economy (ACEEE) is issuing every year a “ Green Guide to Cars and Trucks”. NGOs such as Greenpeace or Friends of the Earth are also directly pressuring the automobile industry. They urge them to produce more fuel efficient cars. Applying pressure is done in different ways: •

Greenpeace unveiled in 1996 a gasoline car that uses only about 3.5 litres/100 km, made out of a Renault Twingo with a fuel consumption of 6.7 litres/100 km. With this car called SmILE (Small, Intelligent, Light, Efficient), Greenpeace wanted to show to the public and the automobile producers that such cars are feasible and bring a good performance. The core idea of the car concept is the use of a small, high output, low capacity supercharged engine.



Greenpeace and other environmental NGOs ask car drivers to write a direct letter to the automobile companies to urge them to produce fuel efficient cars. NGOs make media effective protests in front of automobile firms against fuel inefficient cars (e.g., Greenpeace against the new VW Passat in 1996 124).



Greenpeace also criticised the environmental communication of car manufacturers. In publications such as “Rhetoric Versus Reality”, they criticised for example Chrysler’s commitments to improve fuel efficiency, while none of the Chrysler-models sold in Europe in 1997 had a fuel consumption of lower than 10 litres/100 km. 5.3.3.1 Influence of Environmental NGOs Environmental NGOs have been trying to influence the public’s perception of cars for years, and the public environmental awareness concerning cars has probably risen in the last twenty years. However, this has not prevented people from buying new private cars. Giving up a car does not provide any individual environmental benefits, and in many cases requires sacrifices in personal mobility and “freedom”. Discrediting the industry with “scandals” such as in the case of chemical companies has never really been the case. However, some actions might lead consumers to consider environmental criteria in car purchasing. The influence of NGOs, such as Greenpeace, on the legislative process is rather small125. The example of the SmILE has shown that NGOs can, in fact, have a direct influence on car manufacturers, as the manufacturers in Germany did react to this provocation and promised to produce a “three litre car”. 5.3.4 Consumers and motorists associations and consumers “Green” consumer associations, like environmental NGOs, try to influence the consumers behaviour. They want to help the consumers make an environmentally sound choice of car, for example, through issuing “Green car lists”. Car buyers guides like the English “What Car?” publish a “Green car guide” and even perform emission tests. Also, European Traffic Clubs 124 Greenpeace (1996). Deutsche Autoindustrie: Spritsäufer statt Klimaschutz [German car industry: “Fuel drinkers” instead of climate protection]. Web-based source 125

Telephone interview of 26.08.99 with Wolfgang Lohbeck, responsible for climate, Greenpeace Germany

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

publish environmental ratings of car firms and car environmental lists. Such lists could have a direct influence on the market, as they are used as a decision basis for car purchases. Some motorists clubs are, in my view, definitely trying to slow down any “environmental transformation processes”, such as the Association of British drivers126. But most motorist clubs realise that they cannot avoid the issue of climate change. The FIA’s declared objectives are “to maintain the freedom of mobility provided by modern cars and to enjoy the highest standards of air quality.127” Accordingly, they emphasise that they are engaged in the International Carbon Sequestration Federation. They welcome subsidies for environmentally friendly cars or encourage the withdrawal of old gross polluters from the vehicle fleet. However, they are opposing most fiscal measures which aim at internalising environmental burdens from transportation and restricting the individual mobility, such as higher fuel prices, speed limits, traffic restrictions in the cities or new road taxes. They are stressing the need for “greener cars” and the importance of technological advances and electronics, such as on board diagnostics. Environmental criteria still do not constitute one of the main purchasing criteria for consumers. However, the perceptions of consumers are changing. If environmental friendliness is compatible with the other requirements that consumers have for a car, then eco-efficiency could become a good selling point. For example, according to a poll in Germany, Switzerland and the Netherlands in 1996, more than 50% of the consumers would buy a fuel efficient car128. If lower performance was accepted by consumers (reduce engine power, reductions in weight), then it could be said that improvements of 50-60 per cent or more could be achieved with limited technological development implications129. 5.3.4.1 Influence of consumers and motorists associations Consumers’ associations, especially also somewhat “anti-environment” associations who issue car magazines and car ratings could have quite a high influence on consumers’ purchasing behaviour. Car ratings are used as a decision tool for car buyers, and environmental criteria are increasingly incorporated in such ratings. On the other hand, the influence of the “car-lobby” (to which I also count motorist clubs) for actually slowing down the “environmental transformation process” should not be underestimated. 5.3.5 Suppliers For suppliers of the car manufacturers, especially substitute products like steel, aluminium and plastics, environmental compatibility has already become an important determinant of competition. The steel and aluminium industry, therefore, is increasingly performing LCAs on cars in order to prove that their material is better to use for automobiles130. An important issue is the growing focus on reusability and recyclability, driven by the regulatory requirements. In this context, environmental communication is very important for suppliers, because car manufacturers increasingly demand information about the properties of the products.

126

See http://www.abd.org.uk/: Association of British drivers - Voice of the driver. They are proclaiming on the home page for example: “Debunking the nonsense you hear about the environmental impact of the car” or “Reclaiming the road for people who pay for them” 127

Fédération Internationale de l’Automobile, FIA (1998). Clean Cars and Clean Fuels for the Twenty-First Century. Position paper on the Draft Directives on Vehicle Emissions and Fuel Quality. Web-based source. The FIA is “the voice of the motorist” and is a federation of national motor clubs from 116 countries

128

Greenpeace (1997): Rhetoric Versus Reality. Web-based source

129

OECD (1997): Transport and the Environment. Background and Synthesis Report: Policy Measures and their Effects. Web-based source

130

Cutter Information Corp.(1999). “Steel, Aluminum Industries Debate Lifecycle Impacts”. E-mail source

56

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

5.3.5.1 Influence of suppliers So far, in general it can be said that the main pressure to make environmental improvement comes from the car manufacturers to the suppliers rather than from the suppliers themselves131, but with increasing competition among suppliers based on environmental arguments, the influence of suppliers can be potentially quite high. New entrants could come up with “revolutionary” innovations and new materials. 5.3.6 Industry Associations, Competitors The European car manufacturers are represented in several industry associations, such as the ACEA (European Automobile Manufacturers Association), the VDA (Association of German Car Manufacturers) or the AIAM (Association of International Automobile Manufacturers). There are many joint ventures and co-operative actions between car manufacturers. One example is the EUCAR (European Council for Automotive Research and Development132), which is supported by the EU government. EUCAR's objectives are technology leadership, increased competitiveness of the European automotive industry and environmental improvements. Areas of efforts are for example future propulsion systems. 5.3.6.1 Influence of Industry Associations Much of the political lobbying on European level happens over such industry associations. Such associations might not directly make environmental pressure on car manufacturers. Generally, these associations aim rather at slowing down legislation processes concerning the environment. The VDA, for example, is opposing higher fuel taxes or speed limits. Nevertheless, in the framework of voluntary agreements such as the CO2 commitment by the ACEA (see Chapter 5.3.1.1), such associations might pressure certain manufacturers. The commitment does not contain specific CO2 reduction goals for single manufacturers, and there has to be found a way for reaching this goal. 5.3.7 Stakeholders and the steering systems As explained in Chapter 2.1.2, stakeholders have different steering systems to put up their requirements. The stakeholders described in the chapters above can influence the market directly, for example, through changing customer demands, they can promote their requirements in public, or they might influence the legislation process over the steering system politics. The following Figure 5-3 is an attempt to give an overview of which steering systems are used by the main stakeholders to put up their environmental requirements. This table is illustrative and does not claim to provide a comprehensive insight into all possible environmental requirements. In particular, the influence and threats arising from new entrants providing alternative options to the conventional car may not be highlighted enough here. Note also that this table only contains the environmental requirements and not the forces against such requirements that could come from some stakeholders.

131

Telephone interview of 03.09.99 with Dr. Raimund Medrisch, Head of the Environmental Department at BMW, Munich

132

Member companies of the EUCAR cooperative R&D partnership include BMW, Daimler-Benz AG, Fiat SpA, Ford Europe, Adam Opel AG, PSA Peugeot-Citroen, Renault SA, Rover, Volkswagen AG, and Volvo AB. CNIE (1996). The Partnership for a New Generation of Vehicles (PNGV). Web-based source

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Figure 5-3: Environmental requirements of stakeholders - In parentheses (): Addressed phase Steering systems

Market

Public

Politics

Tax exemptions for “greener cars” (use) Higher taxes for “dirtier” and larger cars (use) Subsidising of public transport and railway (use) Ban of leaded fuel (petrol production, use) Future: Fuel economy information scheme (use) Future: Higher fuel taxes, CO2 taxes (use)

Promotion of alternative mobility concepts, public transport (use)

Environmental laws/ taxes concerning production, for example, emission limits, waste taxes (pre-assembly, assembly, end-of-life) Fuel quality requirements (use) Tailpipe emission limits (use) Actual and future: Car scrapping directive (end-oflife)

Sensitisation of public of transportation problems (use)

Participation in development of environmental laws and taxes (use, end-of-life)

Promotion of new mobility concepts and green cars (use) Publications and protest actions against industry (use, process)

Support of taxes and other laws (use, end-of-life, production). Normally no direct influence in legislation process

Stakeholder

Legislators/ authorities

Green political parties Environmental NGOs

Promotion of green cars (use)

Consumer NGOs and consumers

Publishing of environmental car ratings (use) Environmental criteria for car purchasing (use) Proposals for improvements (assembly, product)

Suppliers Industry organisation Car manufacturers themselves

Voluntary ACEA agreement about CO2 reductions (use)

Financiers, Insurance

Requirements on upstream operations concerning substances and recyclability (pre-assembly, raw materials) Economic offers from public transport (use) Alternative car concepts, for example, Hypercars (use) Car sharing firms (? not really substitute Risk assessments (raw material extr., processes)

Employees/ labour unions

Own initiatives of employees (assembly, product)

New entrants, substitutes

Participation in development of H&S laws (process)

Media

Traffic problems discussed in media, but automobile producers seldom directly attacked (use)

Academia

Studies of best practice (assembly, use)

High direct influence on car industry

Moderate direct influence on car industry

58

Small direct influence on car industry

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

5.3.8 Summary matrix of environmental requirements along the life cycle The power of a steering system is the result of the potential influence of the respective stakeholders in these steering systems and the actual intensity of the requirements. Adding the influence potentials of the different stakeholder groups in the three steering systems, a matrix of environmental requirements133 from the three steering systems along the stages of the product chain can be constructed. Figure 5-4: Summary matrix of environmental requirements along the car life cycle Branch level Steering systems

Raw materials extraction and petrol production

Preassembly

Assembly

Driving

Infrastructure

Disposal

Market

potentially high

Politics

potentially high

Public High influence on respective branch stage

Moderate influence on respective branch stage

Small influence on respective branch stage

Comparing this matrix with the matrix of environmental burden (see Figure 5-2), it can be noticed that even though there is a high burden on the use phase, the requirements are not correspondingly high. Legislation heavily governs the production process as well as properties of the product. However, the steering system “market” is so far relatively ineffective concerning the use phase. Fuel-efficient and low-polluting cars are rarely promoted, as gasoline costs are still low and there are not enough tax incentives for choosing environmentally friendly cars. Car disposal costs might not yet be completely internalised to really become effective on the market. The system “market” will probably play a more important role in the future with the possible introduction of higher fuel taxes in several countries. Environmental awareness of car buyers is rising, however, the reality is that cars are chosen on the basis of other criteria than environmental friendliness. So far, “environmentally friendly cars” are only demanded by a minority. The new EU legislation about the fuel efficiency declaration might have an impact on purchasing behaviour. Legislation can have quite a high impact on the car companies’ competitiveness, which shows in the fierce debates about the new directive about end-of-life cars. This directive apparently brings the German car industry into trouble and currently constitutes only a cost factor. More difficult to analyse are the environmental requirements arising from the public and politics because of the environmental burden caused through the whole infrastructure needed to support the private motorised mobility. External costs of road transportation arising from accidents, road construction or traffic jams have not, for the most part, been internalised, and this process has been subject of political discussions for years. However, efforts for increasing public transport

133 The terminology “Matrix of environmental requirements” is based on the analysis method presented in Dyllick, T., Belz, F. and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit. Like with the matrix of environmental aspects, there is no scientific basis for constructing this matrix. The reason for providing these summary matrixes of environmental aspects and environmental requirements is rather to show the principle.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

and reducing pollution in cities can be observed. How much of this pressure is actually influencing the car industry is not clear.

5.4 Environmental competition fields and strategies When looking at financial sector analyses on the car industry, threats arising from environmental requirements cannot be found. The big issues in reports about competitiveness of car companies are costs and the related cost strategies such as consolidation of car manufacturers, common platforms, increased use of the Internet for sales, dealer consolidation and supplier reduction combined with common engineering. Excess capacity is a big challenge to encounter, and increased process efficiency is an important goal. It could therefore be concluded that environmental issues are not the most “pressing” issues for staying competitive in this business. Nevertheless, from the environmental requirements mentioned in Chapter 5.3 there are several issues that are or could be of competitive relevance. The different requirements from the stakeholders over the different steering systems presented Figure 5-3 can be applied to the “model” for analysis presented in Chapter 4.2. All these stakeholders can influence a company’s competitiveness in some way. The largest influence probably comes from state actors, that is, legislation. Requirements arising from legislation are in fact a driver for improvements and innovations in the car industry. They somehow “belong to the framework” car companies are operating in. Also fiscal measures have increasing influence and start to become effective directly on the market. Requirements concerning the performance of the products have to be taken into consideration in order to stay in the market. Environmental pressure from the consumer side does not seem to show considerable market effects yet. Often environmental competition fields “diffuse” into the branches from the end of the product life cycle. However, for automobiles, this is not actually the case. Pressures have been made first on the processes and on the exhaust gases. The waste problem has been tackled only for the last few years. As can be identified from the environmental problems (Chapter 5.2) and environmental requirements, the larger environmental challenges for the automobile industry in the next decades will be to considerably reduce air pollution and CO2 emissions from cars, to cope with the end-of-life of cars and, in a broader sense, to redefine the role of the automobile for personal mobility134. 5.4.1 Reducing exhaust gas emissions The constant reduction of exhaust gas emissions could be seen as an actual environmental competition field. The stringent Californian emission standards for low emission vehicles (LEV) or ultra low emission vehicles (ULEV) are a driver for technological improvements. Also in Europe, emission standards are getting tighter. Meeting present and future exhaust emission standards is essential for the car industry and is a prerequisite for staying in the market. Having low emission cars could become more important for the customers’ preferences, if car sales taxes and annual taxes will be increasingly based on pollutant emissions. Tax exemptions for “greener cars” are already applied, for example, in Germany, and this can send some direct market signals to the customers.

134

see also European Commission (1998). Adoption by Industry of Life Cycle Approaches - Its Implications for Industry Competitiveness, p 131

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Environmental strategies Exhaust gas emissions from cars have been considerably lowered since the introduction of catalytic converters. However, looking at the total emissions, most of these reductions have been offset by the increase of road traffic in general. As mentioned in Chapter 5.2.1.3, there are a number of strategies for reducing pollutant emissions, and some of them coincide with strategies to reduce fuel use: abatement technologies such as catalytic converters, particulate traps or exhaust gas recirculation, improvements in conventional combustion engines, use of lower-pollutant fuels, light-weighting or and new propulsion systems. Car companies today already aim to produce “zero emission vehicles” (ZEV) according to the Californian emission limits definition. Newest models of electrical cars or hybrid vehicles are increasingly presented on motor shows or other events. However, such products are meant as niche products, for example, electrical products for heavily polluted urban areas. The competition issue is: How can these emission reductions be achieved at lower costs than the competitors? Many of the measures are based on end-of-pipe technologies, such as the catalytic converter. However, strategies in combination with the CO2 issue, which aim at revolutionising the whole propulsion systems, could offer considerably higher opportunities. 5.4.2 Fuel and CO2 efficiency Even though there have been many improvements to increase the efficiency of car engines, due to increased power of the cars and energy-intensive equipment, the average fuel consumption and therefore CO2 emissions are still about the same like thirty years ago135. According to a Delphi study performed in 1997 by OSAT136, “the global warming issue is expected to have a somewhat important influence on automotive design in the next decade”. Commitments on CO2 reductions in the framework of the Kyoto Protocol have been made by the signing countries, and the automotive industry is one of the target industries of international and national CO2 reduction strategies. European car manufacturers have committed themselves to CO2 reductions of the car fleet (see Chapter 5.3.1.1), and meeting this goal is essential for competitiveness of the whole branch. In Europe, there are no legal requirements concerning fuel use in cars. In the US, the Corporate Average Fuel Economy (CAFE) standards require that car makers have to meet a sales-weighted average fuel economy level for the fleets of new cars and light trucks they sell each year. Compared with the average fleet fuel consumption of European cars of 7.8 km/100 km, the CAFE requirements concerning private cars are, with 27.5 miles/gallon (8.5 litres/100 km), not very high. It is difficult to judge whether a competition field can be categorised as potential or latent. In any case, I would not call CO2 efficiency an actual competition field already. Fuel consumption does constitute a purchase criterion for certain consumers, however, due to the low fuel prices, other criteria still have priority for most customers.

135 Greenpeace (1997). Verkehr: Aufräumen mit dem Mythos “Drei-Liter-Auto” [Traffic: Get the things right with the myth “Three-litre-car”]. Web-based source. In this publication, Greenpeace names a consumption of 9 litres per 100 km. This might refer to a world average. The European fleet average is around 7.8 litres per 100 km. According to Greenpeace, the automobile industry could have constructed a 3 litre car already ten or even twenty years ago, however, due to a coalition between the car and oil sector had not interest in doing so. 136

Office for the Study of Automotive Transportation, OSAT (1998): Delphi IX - Forecast and Analysis. Web-based source

61

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Environmental strategies Car companies assume that road transportation and private cars will, also in the next millennium, constitute an important part of mobility. Considering the growth potential in developing countries, a considerable increase in private cars is expected for the near future. The only way for car companies to legitimate the increased use of cars is through considerable improvements in CO2 efficiency. So far, the car companies are responding to the CO2 issue with a segmentation strategy. Volkswagen (VW) for example is promoting its “3 litre Lupo” (i.e. a car called “Lupo” that consumes only three litres fuel per 100 kilometres driving), but on the other hand it also has completely different cars with high fuel consumption. Extremely fuel-efficient models are still meant to be niche products and consequent considerable fuel use reduction of the whole car fleet is not applied by any larger car company. As mentioned in Chapter 5.2.1.3, there are several strategies to reduce CO2 emissions—from lightweighting, improvement of combustion efficiency and use of fuel with low carbon content to electrical cars and new propulsion systems. According to the OSAT Delphi study137, despite the trend toward lightweight materials for engine applications, steel will probably continue to be the predominant material for all types of frame construction in the next decade. In the last few years, car manufacturers have emphasised their efforts to construct lighter cars in order to reduce fuel consumption. Audi, for example, has focused on aluminium frames, and VW is increasingly using magnesium for certain parts. Nevertheless, the statistics show that the weight of cars has been constantly increasing. According to a study of the Dutch Ministry for Environment, the average weight of cars has increased since the beginning of the nineties from 850 kg to 1,045 kg. Interesting in this context is the remark by Mr. Lohbeck that the actual frame of the car only constitutes about one quarter of the vehicle weight. Reductions of the frame weight are offset by all the “additional” features that cars are equipped with, such as air conditioning or GPS. Substantial weight reductions could according to him be achieved through smaller motors as proposed by Greenpeace with their SmILE138. However, this does not seem to be the trend. Concerning alternative fuels to gasoline, in the European market a very clear trend towards a larger share of diesel models can be observed. Volkswagen and BMW count on diesel direct injection technology. This is an interesting development, considering the fact that ten years ago diesel was viewed as the “bad, dirty fuel”. It is probable that extreme reductions cannot be achieved anymore with conventional technologies—unless the requirements on performance are changed, for example, by reducing power or the maximum speed. Hybrid systems seem to be an improvement, which could soon be mass produced at similar costs like conventional cars. Hybrids can run with diesel, gasoline, natural gas, methanol or hydrogen. Toyota launched their hybrid sedan car “Prius” in Japan in December 1997, which is expected to be launched in the US soon. The Prius consumes only 3.6 litres of fuel per 100 km. It is questionable whether such reductions will be enough. Fuel cells may be a promising and substantial improvement, provided that the hydrogen is produced with renewable energy. They produce hardly any pollutants and are up to four times more efficient than conventional combustion engines. Car manufacturers promise much development in this area with the first mass-produced vehicles within five years. However, it is still unknown when mass production of fuel cell powered cars will be possible at affordable 137

Office for the Study of Automotive Transportation, OSAT (1998): Delphi IX - Forecast and Analysis. Web-based source

138

Telephone interview of 26.08.99 with Wolfgang Lohbeck, responsible for climate, Greenpeace Germany. He said that a motor of a big Mercedes is 250 kg - with a motor with smaller cubic capacity at least 120 kg could be saved. Further, a S-Class Mercedes car has about 85 other small motors for all kinds of things which add to the weight. As a comparison - the turbocharger engine of the smart weighs only 59 kg.

62

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

costs. Toyota has its own research concerning fuel cells, whereas companies such as Ford and DaimlerChrysler have a joint venture with Ballard Power Systems139. In mid-March 1999, the new prototype for the fuel cell powered car, “NECAR 4" by DaimlerChrysler, was presented to the public in Washington. Due to the large research and development costs necessary for alternative propulsion systems, especially the fuel cell, co-operation between firms and joint ventures will be of increasing importance. Small firms and research institutes such as the Rocky Mountains Institute with its Hypercar show innovative proposals for different approaches to car design, based on ultralight construction with advance polymers and composite materials, low-drag design, hybrid-electric design and efficient accessories. According to the Hypercarcenter, Hypercars would completely transform the way vehicles are designed, manufactured and sold140. Hypercars could shift production to a more horizontal, agile model more familiar to the computer industry. The makers of key enabling technologies would play major roles in this model. Whether such concepts, which would completely revolutionise the design process and the supply chain will be applied, is still open. 5.4.3 Product stewardship and end-of-life management Apparently the new EU Directive on the end-of-life take back obligation for car manufacturers (see Chapter 5.3.1.2) is a serious threat to competitiveness of the car industry, especially for the German car industry. From the year 2006, car manufacturers will have to cover the costs for scrapping end-of-life cars of any age. The fact that the German car manufacturers were opposing this retroactive regulation so intensively could lead to the conclusion that extended producer responsibility is still a relatively new concept for car manufacturers and that such implications were not taken into consideration when constructing cars ten years ago. It will be of competitive importance how car manufacturers will in future cope with this responsibility and be able to keep the costs down for car scrapping, whilst reaching the recycling quota. Environmental strategies Design for disassembly, reuse and recycling are important tools which will have to be more emphasised in the future, and co-operation along the supply chain is crucial. Environmental pressure from the car manufacturers is applied to the supply chain, but also the suppliers are increasingly proactive from their side. For the suppliers of components, the environment has become an important competitive issue. It is vital for them to declare the ecological properties of their products, otherwise they are out of business. Raw materials manufacturers start competing with environmental arguments, and they use LCA approaches for sustaining their claims, for example, in the case of steel versus aluminium for vehicle bodies141. The issue of recyclability has a considerable impact on the suppliers. For example, in order to increase competitiveness, plastics manufacturers have to prove the recyclability properties of their products. In this context, the role of environmental labelling for suppliers has already been discussed and debated about for several years. Supporting good environmental information systems and data management in these relationships can be of high importance to car manufacturers for reacting fast to legal requirements, and can probably bring systematic competitive advantages.

139

Ballard Power Systems (Vancouver, Canada) is a worldwide leader in the development of PEM (Proton Exchange Membranes)-fuel cells. In 1998, Daimler-Benz owned 20% of the shares and Ford 15% of the shares of Ballard Power Systems. Source: Sustainable Asset Management, SAM (1998). Sustainability in der Automobilindustrie [Sustainability in the automobile industry]

140

Hypercarcenter (1998): What’s a Hypercar? Web-based source

141

Cutter Information Corp.(1999). “Steel, Aluminum Industries Debate Lifecycle Impacts”. E-mail information

63

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

In order to cut costs and improve production efficiency, many manufacturers have introduced product and process design aimed at reducing the number of parts. For example, GM’s newest vehicle designs incorporate 20 to 30 percent fewer parts and require about 25 percent less assembly time than did their predecessors142. Environmental requirements concerning end-of-life treatment can partly fit into such strategies, for example, if “design for assembly” can be combined with “design for disassembly”143. In general, between vehicle assemblers and the suppliers, a trend can be observed towards more co-operation, risk-sharing, and rewards of developing and producing vehicles. Product chain management is a concept that is of increasing importance. Concerning the end of the product chain, the take-back infrastructure has to be improved and appropriate recycling techniques and facilities granted. Special focus will thereby be on the improvement of plastics recycling methods. 5.4.4 New mobility concepts The car industry is stressing the potential of technological advances for reducing pollutants and CO2 from cars. But it has to be noted that environmental product improvements could also be compensated through changes in behaviour, for example, if a car uses only two litres, then people might drive more or use it as third or fourth car. If society should move towards sustainability, then the role of the private car would have to be redefined completely. New forms of mobility require changes not only in the design of the car. They require a change of the whole system built around the cars—from infrastructure such as highways and supply infrastructure to the actual social structure which leads to an increased need of mobility, such as dispersed communities and businesses or shopping malls outside city centres. Whether such fundamental changes will be promoted by the car industry is questionable. The car industry is quite “locked” into its system of interdependencies with related businesses. Nevertheless, most companies are, in some way, engaged in “new mobility concepts”, addressing, on a local or regional level, transportation management and engaging in co-operation with other means of transport, public transport, enabling smoother traffic flows or car-sharing. Always mentioned within such strategies are drivers’ assistance tools such as the Global Positioning System (GPS), where the driver can find out the exact position, the best way to the destination, or information about traffic jams from a satellite. This should help to reduce urban pollution by avoiding traffic jams and allowing smoother traffic flows. I doubt if this will, in the end, really help to reduce the traffic flows, as such systems might actually encourage more driving. Such “Intelligent transportation management” measures could be interpreted as projects mainly aimed at securing the regional “licence to operate”, rather than a sign of complete change of strategy. Co-operation with the local government and academia is important in the context of these strategies. As a step towards higher eco-efficiency, car companies could consider to move their activities from selling the product “car” to actually selling the service “mobility” instead. Environmental services lead to changes in behaviour in a positive sense. People who take part, for example, in car sharing co-operations drive less than before and make increased use of public transport. Environmental services are therefore, in the long term, the better option to really reduce environmental impacts. 142

Price Waterhouse (1999). Automotive. Industry Analysis

143

As an example, at BMW, “clipsing” headlights instead of screwing proved to be better for assembly and disassembly. On the other hand, the use of adhesives can make assembly processes more efficient, but has a negative impact on disassembly and recyclability. Telephone interview of 03.09.99 with Dr. Raimund Medrisch, Head of the Environmental Department at BMW, Munich

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M.Sc. Thesis, IIIEE

Agathe Bolli

Car companies have so far not shown credible willingness to move towards “mobility companies”. MCC (DaimlerChrysler)144 have shown “starting points” for thinking more in this direction. In their “smartmove” concept, the “smart” car is marketed in combination with train tickets and car pooling possibilities. The smart is a two-seater city car with thermoplastics bodypanels, is relatively fuel efficient (4.8 litres gasoline/100 km), and with its length of 2.5 m is well suited for coping in the city traffic flow and using small parking spaces. It is not clear whether the smart would actually replace other vehicles or in the end just increase the car fleet (as people would buy such a car as second car and not first car). So far, the smart is viewed as a niche product, and there are no signs that similar concepts should be adapted for the other brands at DaimlerChrysler.

5.5 Implications for environmental communication Which are the important environmental issues that the car industry has to communicate and report about in order to support its competitiveness, and what position has the environmental report and product oriented information taken? The following can be concluded from the environmental problems, requirements by stakeholders and the emerging environmental cost and differentiation strategies taken by the car companies. 5.5.1 Environmental communication concerning environmental problems Considering the fact that the car is one of the most polluting consumer goods, environmental communication should be of high importance for the car industry. Car companies have to communicate openly about the environmental problems they are causing. They have to present the goals set in order to mitigate these problems and the corresponding efforts. This is their responsibility as corporate citizens. The corporate environmental report therefore constitutes an important tool for communicating to a variety of stakeholders. Not informing the public about these issues can have an impact on their image and therefore indirectly affect their competitiveness. Open communication about environmental problems is also necessary in order to be credible in any environmental strategy. The question is, which environmental problems are car manufacturers accountable for? The weight of the communication should be on the major impacts during the life cycle of the car, which is raw materials consumption and impacts during use and disposal. This obviously encompasses information about the product performance concerning exhaust gas emissions and fuel use, as well as information about the end-of-life treatment. Should they also report about environmental impact due to the whole infrastructure built around cars? From a sustainabledevelopment point of view the answer is yes. At least some qualitative statements should be expected. This could be of special importance considering Emerging Markets where the whole infrastructure for motorised transportation is still being built up. 5.5.2 Environmental communication supporting environmental strategies Following the findings from Chapter 4.1, environmental communication depends on the strategies that companies use in order to face ecological competition fields. Environmental cost strategies Environmental cost strategies can be used to respond to some of the described competition fields, especially reductions of emissions and end-of-life treatment of cars. For applying cost strategies concerning environmental improvements in the process as well as reducing costs for the end-of-life treatment, building up an internal “environmental spirit” and communicating 144

Micro Compact Car smart GmbH., which belongs to DaimlerChrysler now

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

with the employees and the suppliers is of great importance. Co-operation with suppliers for making the supply chain and the production process more efficient is gaining importance in general. In this context, the ability of integrating environmental communication and sophisticated environmental information systems into these relationships could provide proactive companies with systematic competitive advantages. The corporate environmental report may in this respect have a subordinated role, as more direct and effective communication means are used, such as network-conferences, lists of requirements or personal communications (see also Chapters 3.2.1 and 3.2.2 for communication with target groups). Environmental differentiation strategies The future capability of car companies to cope with the considerable reduction of air pollutants and CO2 emissions will be of high importance for the competitiveness of the whole automobile industry. Companies with proactive environmental product strategies could gain competitive advantage with environmental differentiation, and environmental communication can play an important role in this context. Companies are in fact making efforts in this area, such as with electrical cars, small cars like the smart, the first mass-produced hybrid car “Prius” by Toyota or Volkswagen’s “3 litre-car”. Nevertheless, so far these products are all viewed to be niche products. If car companies want to be credible in their efforts towards more fuel efficient and less polluting cars, then this should be applied to the whole car fleet and communicated accordingly to the public, politicians and, of course, to the customer. As recognised in Chapter 4.1, many environmental reports contain mostly retrospective information. However, the environmental report can represent a good tool for communicating real commitment to fuel efficiency and emissions reductions, and strategies for the future. Environmental reports have an influence mainly on perceptions, and it is important to reach opinion leaders from different stakeholder groups to make them aware of proactive strategies. Also financial analysts will hopefully increasingly keep an eye on how car companies intend to compete in a world moving towards more sustainable mobility. Product performance data have to be provided in a way that allows comparability. Especially concerning end-of-life strategies, information about how suppliers and dealers are incorporated into the environmental management system has to be provided. As car companies operate within the reference fields market, public and politics, they should also express their opinion concerning the political framework in which they are operating. Statements to the current and future regulatory and fiscal measures that are affecting their business and their strategies, such as measures for internalising costs of motorised transportation, would be very interesting. The environmental report might not be the right tool for differentiating products, as it is not targeted at individual consumers. The attribute “environmental friendliness” has to be combined with other marketed attributes. Brand identification is very important in the car industry, and obviously, not every brand wants to be associated with environmental features. Consumer purchasing decisions also vary by vehicle segment. According to the OSAT Delphi study145, entry level vehicle buyers are expected to look for a low purchase price and good fuel economy in the coming decade. Intermediate buyers will look for interior space and comfort or convenience, while luxury buyers will look for exterior styling as well as comfort and convenience. In general among cars, the panellists think interior and exterior styling and pricing offer the greatest opportunities for product differentiation. In this context, environmental properties have to be combined with such issues and marketed as an added benefit. This can be very difficult in the case of reduced emissions, as they do not provide an individual benefit to the customer. Information about the environmental product performance has to be communicated in 145

Office for the Study of Automotive Transportation, OSAT (1998): Delphi IX - Forecast and Analysis. Web-based source

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

a way that is transparent and can be used by the customer to compare different car models. Fuel efficiency and CO2 emissions have to be declared. The new regulatory fuel economy information scheme (see Chapter 5.3.1.1) can support this communication. A more comprehensive way of communicating environmental performance of the product is with environmental product declarations. Environmental market development strategies Referring to Chapter 5.4.4, it is desirable from a sustainability point of view that car companies would reconsider their products and core competencies completely and move towards selling the “service mobility”. Co-operation with governments and authorities on a local, regional and national level is necessary. However, a car is not just a means of transport; a car is something that is owned. For eighty years car companies have tried, through marketing within their branding strategies, to associate the car with a status symbol, fun, freedom, speed, power, performance, and not just with necessity. If benefit-oriented service concepts should be more successful, companies also have to deal with the psychological dimension of consumption. Environmental communication must be directed primarily towards the public and politics and aim above all at changing the perceptions and the political framework that would enable such strategies to be successful. The environmental report could in this context represent a very important tool. Communication in the form of political lobbying, for example for increasing internalisation of external transportation effects would also be important.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

6. Environmental communication and reporting in the car industry Due to the large environmental problems that cars cause along their life cycle and the environmental requirements arising from different stakeholders, all car manufacturers are environmentally communicating in some way. In general it can be said that the French and the Japanese companies are more information-passive than the German and US companies. Apart from Peugeot-Citroën and Renault, all large car manufacturers issue an environmental report. Most automobile companies issue other special reports, for example, environmental declarations of sites, reports which talk about special topics like new propulsion systems, alternative fuels, painting, hydrogen cars, traffic management or recycling146. This part analyses the current state of environmental communication of automobile companies. Chapter 6.1 looks at indications for what priority the environment has within the corporate communication, and which environmental issues are discussed in the corporate communications147. Chapter 6.2 analyses what kind of information is provided in environmental reports, with a special focus on the competition fields identified in Chapter 5.4. Considering that the environment could become a differentiation criterion for cars, Chapter 6.3 looks at product related information in the Internet and written product information provided to the customers.

6.1 The position of environment within the corporate Internet communication If environmental protection is taken seriously by car companies and viewed as an opportunity for reaching competitive advantages, that is, if the environment really constitutes a part of the business strategy, then this should also be clear from corporate communication. The importance of the Internet as a communication tool is increasing rapidly, and almost every globally operating company has a corporate web-site on the Internet. Most companies also post pdf-files of written information such as annual reports or other special reports on the net. The corporate web-sites of the following companies have been studied: Volvo, Saab, BMW, Volkswagen (VW), DaimlerChrysler (DC), Audi, Opel, Toyota, General Motors (GM), Fiat, PSA Peugeot-Citroën, Renault and Ford (see Appendix 5 for Internet-addresses of the sites). Figure 61 gives an overview over the main analysed points.

146

Apart from reports and Internet-communication, of course, car companies have other ways of communicating environmental issues. Environmental communication such as internal communication, communication to suppliers, speeches, conferences, workshops, local engagement, press releases, involvement in universities or political lobbying are not analysed here.

147

Due to time limitations, the analysis of the corporate communication is based on the information obtained on the corporate web-sites. The Internet might not give a complete insight into the whole set of corporate communications, but it is regarded as sufficient for this purpose

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Figure 6-1: Environmental communication in the corporate web-pages Company

Information found Environment mentioned on first page Environmental report available as PDF file of the printed version Environmental report available as a summary or modified Internet-version Additional environmental information available apart from CER Information provided about future propulsion technologies Environmental properties mentioned/ explained in product presentations Possibility of ordering CER and more environmental information online Applies

Applies only partly

Does not apply

6.1.1 Corporate web-sites Most companies who produce an environmental report have clearly visible links to their environmental report or other environmental communication on their web-pages. Volvo, DaimlerChrysler and Toyota are providing environmental information very aggressively, and environment is a keyword on the fist page. Volvo declares, “Cars generate pollution, noise and waste”148. The company’s three core values, safety, quality and care for the environment are clearly communicated, and it is emphasised that every model has to be safer, lighter and more fuel efficient than the one it replaces. Further, much information about the Volvo Environmental Product Declaration of the model S 80 is provided. This statement can be found in the corporate web-site: “Volvo's aim is to become known as one of the world's leading automotive manufacturers in the environmental field by the year 2000”149. DaimlerChrysler communicates developments in new propulsion systems, for example, with the presentation of the newest fuel cell powered prototype car NECAR 4150. It also provides electronic versions of various environmental publications of former Daimler Benz. The case of Toyota is especially interesting, as it apparently used to be rather information passive in earlier years151. It has now posted environmental information quite aggressively on the net. On the first 148

http://www.car.volvo.se/index.asp; under “Company Information”

149

http://www.volvocars.com/home/; under “Headquarters”/ “Heritage” /”Core Values”

150

http://www.daimlerchrysler.com; under “News”: “DaimlerChrysler, along with the California Air Resources Board (CARB), the California Energy Commission, Ballard Power Systems, Ford Motor Company, ARCO, Shell and Texaco have created the “California Fuel Cell Partnership" to advance automotive fuel cell technology. The California Fuel Cell Partnership plans to place about 50 fuel cell passenger cars and electric buses on the road between 2000 and 2003. DaimlerChrysler's goal is to demonstrate 15 passenger vehicles in California by 2003 as part of the project. The exact vehicle models have yet to be determined”

151

Interview of 08.07.99 with Robert Niggli, UBS Brinson, Environmental Performance Analysis, Zurich

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

page, there is a link to the environmental report as well as to environmental information about the challenges to the car industry, such as recycling, internal combustion, fuel cell, hybrid, electric vehicle and Toyota’s approach152. Under “eco-mission”, there is an advertisement for the Prius hybrid car taking part in a caravan in the US (”Prius carries message of cleaner transport to United States, Canada”). On a link on the first page, Toyota claims. “Output of solid waste from Toyota plants in Japan will stop completely by the end of 2003153”. This is quite a daring statement! BMW’s environmental information is very much focused on hydrogen-technology and does not provide further additional environmental information. It has a link about “Cleaner Energies”, promoting hydrogen as the fuel of the future, and even a “Cleaner Energy Game”. Volkswagen has posted an easily visible link to the environmental report on one of their main pages. However, apart from the environmental report, there is practically no environmental-related information on the very customer-oriented web-site. Some sites like the Opel or Saab sites are very customer-oriented. The Opel page does not have a real “environmental chapter”, but environmental goals such as reduction of fleet fuel use are mentioned, for example, in the “Opel story”. Under “Fleet management” there are some brief comments about environmental initiatives, promoting the ECOTEC engine as environmentally friendly154. Saab does not provide any environmental information on the Internet. At PSA Peugeot Citroen, the first environment related information to come across is a press release about a carbon sink project in the Amazonian forest155. With further searching, more environmental information can be found under “Strategies” with links to articles about environmental strategies and efforts concerning recycling and reduction of hazardous materials, but also about future propulsion technologies. At Renault, there is very little environment-related information except for a small paragraph about reducing fuel use in “Avenues of Research and Development” and some press releases in “Press information”. In the annual report, “Economic Environment”, there are comments about developments in the regulatory framework concerning the environment, and the response of Renault to them. 6.1.2 Annual reports and other statements When it comes to other corporate communications posted on the web-sites, like the annual report or CEO statements, the picture is very diverse. Toyota highlights the new hybrid car Prius, fuel use reductions and other environmental improvements in the annual report. The annual report from Audi for example contains a heading “Environment”, but it talks only about environmental protection in production and recycling and not about products. The 1998 BMW annual report does not contain anything about challenges and efforts in the environmental field. The 1998 DaimlerChrysler annual report contains a section about “Government Regulations and Environmental Matters”, where environmental regulations such as emission standards or the US CAFE standards are described and their possible impact on costs. Ford communicates very openly about its position concerning governmental policies. Under the heading “Corporate Worldwide Public Policy”, Ford opposes more stringent CAFE levels or 152

The shockwave-application is very fancy with many picture, however does not contain too much substantial information

153

Following another link from that page, it is then clarified what “zero waste” means: It actually means zero landfill waste. It is explained that in Toyota terminology, achieving “zero waste" means a reduction of 95% or more as compared with the fiscal 1995 level, as there are still materials that present technological difficulties in terms of recycling. The fact that Toyota is stressing the waste issue so much could be explained with the fact that the waste and landfills problematic is quite discussed in Japan.

154

It has to be remarked that some companies such as Opel or Audi do have several environmental publications and an environmental report, but they cannot be found on the web-sites. 155 Title: “Dominique Voynet, on her visit to La Joux (Jura), salutes the cooperative efforts by Peugeot and the French National Forestry Board (ONF) concerning the carbon sink project in the Amazonian forest.” Peugeot (1999). Press release of 9th July 1999. Web-based source.

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Agathe Bolli

tighter air quality standards because it could have a negative impact on the competitiveness of US automakers156: “Higher CAFE standards would conflict with what our customers want - affordable vehicles that provide performance, safety, towing/hauling capacity, and comfort. If manufacturers are forced to add ever more sophisticated and expensive technology that customers don’t want, it reduces the affordability of cars and trucks and comes at the expense of other purchase priorities. The results in reduced vehicle turnover, keeping older, less fuel-efficient cars and trucks on the road longer “ The following statement from Professor Joachim Milberg, Chairman of the Board of Management of BMW AG, can be found in a speech at the Annual General Meeting of BMW AG in Munich, 18 May 1999: “The fiscal policy pursued by the German government will lead to substantial burdens for companies and will therefore, at least indirectly, have a negative effect on the automobile market. An initial analysis shows that BMW, as a result of this so-called tax reform, will be paying approximately DM 400 million in additional taxes in this year of business alone. A further point is that the ecology tax will certainly not have a positive effect on our Company as such and the purchasing behaviour of our customers.”157 Such statements do not give the impression of a very proactive position towards regulatory requirements arising from environmental problems. It seems that environmental product regulation is seen solely as cost factor.

6.2 Environmental reports in the automobile industry The environmental reports of the European based car companies Volvo, Saab, VW, BMW and Fiat as well as one American (GM) and one Japanese company (Toyota) were analysed158 Saab, Peugeot and Renault have not published an environmental report yet. PSA will do so in fall 1999, and Saab next year. As Saab was the only company interviewed personally, its environmental publication which is not a real environmental report, is also included in the evaluation. The detailed results of the evaluation with a qualitative analysis can be viewed in Appendix 6. The evaluation criteria are partly adapted from the IÖW guidelines for rating of environmental reports159, however special attention is given to topics related to the competition fields. According to findings from Chapter 5, the environmental reports were analysed for information regarding “environmental competition strategies”, as well as regarding comprehensive information about environmental aspects, goals and measures. The focus was on finding out how much information is provided about product strategies and co-operation along the product chain. Further, which environmental performance data is provided and how comparable this data could be, is analysed. It has to be emphasised that this is not meant to be a rating of the environmental reports nor a rating of the actual environmental efforts of the companies. The following main criteria were analysed:

156

Ford (1999). Ford’s perspective on Corporate Average Fuel Efficiency - CAFE is a flawed policy. Web-based source

157

http://www.bmw.com/bmwe/enterprise/gb99/index.shtml; under “Enterprise” /”Statement”

158

see Appendix 5 for list of studied reports. The new environmental report of DaimlerChrysler, issued in August 1999, was intended to be included, had however not been sent after several requests.

159 Clausen, J., Fichter, K., and Loew, T. (1998). Die Bewertungsskala für das Ranking der Umweltberichte [The Scheme for the Ranking of the Environmental Reports]

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Figure 6-2: Analysed issues in the environmental reports 1

General information about the company Special attention given to: number and location of production sites and type of products, output of cars

2 2.1

Environmental policy and guidelines • Contents of CEO statement Special attention: trends and challenges in political framework, priorities, critical analysis of achievements and failures

2.2

• Contents of environmental policy/guidelines and principles Special attention: life cycle approach, policy concerning products, procurement, end of life

3

Environmental management system Special attention: environmental information systems in place, employee information and participation, involvement of suppliers, involvement of dealers

4 4.1

Data about company related matter and energy streams • Prioritisation of environmental aspects and actions in production Special attention: criteria for prioritisation, process strategies (efforts in paint shop)

4.2

• Contents of environmental balance sheet Special attention: Material, water and energy use, VOC emissions, recycled waste

4.3 4.4

• •

5 5.1

Environmental aspects of products and services • Discussion of relevant questions of the product life cycle and prioritisation of efforts in product development concluding from a life cycle perspective Special attention: Is there any comprehensive description of the car life cycle? Are the broader impacts of the car mentioned?

5.2

• Product strategies Special attention: Comments about future trends and challenges, changes in political framework, use of LCA, hybrids, new propulsion systems, new mobility systems

5.3

• Product performance data Special attention: Comprehensive data to fuel consumption, CO2-emissions, recyclability, comparison with legal limits, use of relative performance indicators

6 6.1

Environmental programme and environmental goals • Overview over performance towards goals Special attention: Is there a comprehensive overview that gives a good picture? Is there any critical analysis of goals that were not reached?

6.2

• Description of the goals and measures Special attention: Goals and measures concerning product development (alternative propulsion systems, Design for Environment), procurement and end-of-life (recycling)

7 7.1

Economic questions of environmental protection • Costs and savings Special attention: Information about effects of cost strategies

7.2



8 8.1 8.2 8.3

Communication with target stakeholders • Presentation of the actual and future activities with stakeholders • Naming of contact persons, invitation for feedback • Additional information and links

9

Credibility Special attention: Verification of the report, critical comments

Compliance with environmental standards in production Indication of the method of data collection and systems boundaries

Assessment of the market situation and market potential of environmental strategies Special attention: Statements about fiscal measures concerning internalisation

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

6.2.1 Limitations in comparability The environmental reports analysed were issued in different years160. The reports of GM, BMW and VW were issued in 1997/1998 and contain data from 1996 or 1997, whereas the reports of Volvo, Toyota and Fiat were published in late 1998 or 1999. This difference is above all visible concerning information about future propulsion systems, as there have been many developments in the last years. The Toyota, BMW and VW reports are each about 100 pages long, whereas the Fiat and GM report have around 50 pages. Volvo’s report is 22 pages, and the Saab information is 25 pages. Interestingly enough, the actual relevant information content in the short Volvo report is not much lower than, for example, in the Volkswagen report. The environmental reports are quite different in their structure. Toyota, Fiat and VW and BMW have a similar structure, having chapters on the life cycle stages of the car: Research, development and design (including future propulsion systems or dedicating a special chapter to this), procurement and production, marketing and recycling, and new mobility systems. The description of the EMS is either at the beginning or at the end. The Volvo Environmental Report 1998 is very lean and contains information about all the divisions of Volvo. There is therefore only a certain part dedicated specially to passenger cars161. The information is very productoriented and focuses on product strategies. The GM report is structured to follow the CERES report protocol. It emphasises corporate citizenship, health and safety issues, responsibility for disclosures, and compliance. The focus is on process-based information and description of management systems, backed up by much TRI data. 6.2.2 Environmental policy and guidelines 6.2.2.1 CEO statement An introductory statement of the CEO can have several functions. The fact that there is a CEO statement can give an indication that there is a top management commitment. Such a statement should provide a critical analysis of environmental achievements and challenges. It gives the reader “space” for interpretations about how seriously environment is really taken, how critical the company is towards itself and which environmental strategies the company is intending to apply in the future. The BMW and Fiat (and Saab) reports do not have a CEO or other adequate statements at all. This has an impact on the credibility of these reports. Toyota has a foreword signed by the President (Hiroshi Okuda) and a Senior Managing Director in charge of environmental issues (Shinichi Kato). It is emphasised that Toyota believes that economic growth and concern for the environment are mutually compatible. In order for a corporation to advance in step with society, the importance of alliances with other industries and groups involved in environmental preservation is emphasised. The GM introductory statement is also signed by two persons, the Chairman and CEO, J. Smith and the Vice President and Chief Environmental Officer, Dennis Minano. They stress the membership at CERES (Coalition for Environmentally Responsible Economies) and the responsibility for the customers, employees and the communities. In my view, the fact that one statement is signed by two persons (i.e., an environmental officer and president or CEO) does not necessarily add to the credibility. Such a statement should give the personal view and commitment of a member of the top management. 160 It would have been interesting to include the new environmental reports of DC, VW and BMW which are all published in August/September 1999. 161 It has to be noted that Volvo Cars offer a lot of other environmental information apart from the environmental report. Concerning detailed emission data from production, the report refers to the Internet. The corporate environmental report may therefore not be regarded as the most important communication tool.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

The VW report contains both a statement from the Chairman of the Board of Management (Ferdinand Piëch) as well as from the Chairman of the General and Group Works Council. Piëch states responsibility for social and environmental implications of VW’s actions. He emphasises, above all, achievements and the goal of launching a car that consumes only 3 litres fuel per 100 kilometres. In the foreword, Leif Johansson, President and CEO of AB Volvo, puts the efforts of Volvo into the context of growing environmental demands from customers, politics and the public, and emphasises that new business opportunities and long-term competitive gains through aggressive action programmes can be achieved. He emphasises the importance of co-operation with involved industries. None of the CEO statements contains a critical review of measures or any comments to goals that were not reached. Also, none of the statements (except for Volvo) takes a concrete position on future strategies and the way they view the position of a car company in the next future. 6.2.2.2 Environmental Policy and guidelines All reports contain chapters about the environmental policy and guidelines. The policies themselves vary considerably in their specificity. Toyota, for example, mentions their Earth Charter and Environmental Action Plan with the different areas of action concerning the impacts products and processes. Also the BMW guidelines are quite specific, addressing production, emergencies, environmentally compatible vehicles, recycling, alternative propulsion systems and mobility. GM, on the other hand, presents the GM Environmental Principles which are so general that they could apply to any company. The same is the case for Saab. 6.2.3 Environmental management system All reports describe their environmental management system. The space dedicated to this varies considerably. It could be said that companies who have already published several environmental reports tend to devote less space to the description of their environmental management system (EMS). Toyota, who is a “first-time-reporter” on the corporate level, has much information about the EMS and the responsibilities. GM dedicates many pages to different responsibilities and programmes, but it is somewhat difficult to get an overview about the environmental organisation. Whereas the VW report contains hardly any information about environmental information systems in place, a good description is provided in the reports of BMW, GM and Fiat. All reports mention the involvement of suppliers. VW dedicates two pages to suppliers relations, mentioning the Volkswagen Environmental Awards for partner companies and stressing co-operation, innovation from suppliers and the fact that suppliers have to declare the chemical composition of supplied products. In connection with suppliers, BMW mentions its environmental information system “ZEUS”162. The way dealers are involved is emphasised at Volvo and VW. Volvo wants to achieve an ISO 14001 certification for all its dealerships. Employees are very much emphasised in the GM report, but also in the Volvo and VW report. 6.2.4 Data about company related matter and energy streams All reports mention environmental efforts in the process. The GM report, as well the Saab “report”, contain much process-related information compared to product-related information. Concerning environmentally related data like matter and energy streams, in general it can be noticed that the input side is not adequately covered. Only BMW and VW mention input streams 162 The German abbreviation ZEUS stands for “central assessment of environmentally relevant substances” and is used in connection with “red lists” of prohibited substances.

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M.Sc. Thesis, IIIEE

Agathe Bolli

of metals, plastics, or solvents. All companies report on energy or fuel use, and most (except Toyota) on water use. VW has most data concerning output, however this is not summed up to corporate level but only for the single sites. All companies report on waste, and most on CO2 and VOC emissions. As for air emissions, Fiat only reports about solvent emissions in paint shops and halogenated solvents for industrial washing. Furthermore, the data provided by Toyota is very poor163. VOC emissions from the paint shops would be interesting to compare, as they constitute one of the major environmental aspects in the process. Toyota reports VOC emissions of 65 g/m2, Fiat reports 83 t/year of solvent emissions per year, and VW has 4,411 t/year of organic substance emissions. Saab plants emit 4.5 kg VOC/car produced, BMW has 3,008 t/year solvents. Volvo reports 1,800 t/year of solvent emissions or 9 kg/MSEK of net sales. The Volvo figure relates to all operations and not just car production. GM has a long list of all TRI chemicals emitted, which makes it impossible for an “normal” reader to identify which ones are the VOC. Methods used for data collections and measurements and the systems boundaries are poorly stated. A comparison of the different process data between the companies on the basis of the environmental reports is not possible due to this lack of information, and the different ways of measuring and indicating emissions, as can be seen easily from the example of VOC. GM and Toyota especially emphasise process-related regulations and compliance. Compliance with environmental standards in production is mentioned in most reports in some way. 6.2.5 Environmental aspects of products and services Considering the fact that the product itself during use and disposal actually causes the most impact along the life cycle, the focus of reporting should be more on products than on processes. It seems that the car companies are recognising this. In comparison with “older” environmental reports, the studied reports contain more product-oriented information. The tool of Life Cycle Assessment is mentioned in most reports, often in connection with design and the end-of-life problem. However, a comprehensible description of the life cycle impacts of the car and the priorities for efforts drawn from this is missing in most reports (except for Toyota, Volvo and VW). Product strategies concerning reduced emissions and fuel use are mentioned in all reports, from measures to improve conventional combustion engines over electrical cars to new propulsion systems. Toyota states clearly its goals and priorities concerning product development and design164. Developments in fuel cell technology and hybrids are emphasised. There is even a sixpage “Special Story” dedicated to how the hybrid car “Prius” was developed. The issue of end-of-life management is touched upon in all the reports, however to a different extent. The integration of recycling issues into design, dismantling handbooks and scrapping infrastructure are emphasised. The GM report provides very little information on this subject. Toyota as well as BMW provide a very comprehensive overview of activities in this field, from Design for Environment, over recycling technologies to support of recycling activities by dealers. No report talks “seriously” about the impacts of their products caused through the whole infrastructure needed for them. This seems to be out of the scope of car companies. There are 163 Air and water emissions data is reported in g/m3 and mg/l respectively, and compared to the control value. As there is no information of the yearly volumes emitted from these sources, it does not say anything about the total mass of pollutants. 164

Toyota mentions six subject areas and describes efforts in each area: 1. Improving fuel efficiency, 2. Reducing exhaust emissions, 3. Reducing external automobile noise, 4. Using less refrigerant in air conditioner, 5. Reducing substances of environmental concern, 6. Improving recoverability.

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Agathe Bolli

chapters about new mobility concepts, however, they address rather the problem of congestion and noise and high pollution in urban areas. BMW provides much information about efforts for enabling a smoother traffic flow in Munich and about co-operation with other means of transport in the framework of MUNICH COMFORT165. Similar efforts on local and regional level are described in all the reports except for the Saab and GM report. In general, comprehensive data to product performance is very poor (compared to the amount of process data). Most reports contain examples of especially fuel efficient and low pollution models. A comprehensive overview of the performance of all models and a comparison with legally set emission levels cannot be found in any report. Volvo, Saab and Fiat do not even provide a figure of the fleet fuel consumption. Toyota provides in this respect the best data base166, but also Volkswagen and Volvo provide comprehensive data on a number of models. Specific models of different companies can be compared with the information provided, but a comparison of the product performance of the whole vehicle fleet concerning fuel use, CO2 emissions, pollutant emissions, recyclability or contents of hazardous substances is not possible. 6.2.6 Environmental programme and environmental goals Clear goals that reflect the strategies for the future and a critical analysis of the achievements are very important for the credibility of environmental efforts. All reports talk about environmental efforts concerning product development, procurement, production and end-of-life. When it comes to clear statements and an overview of goals and a critical analysis of the performance towards the goals, most reports are rather poor. Toyota presents a comprehensive description of all the goals in the respective areas and the measures undertaken. Volvo lists the corporate-wide goals and achievements, however there is not much information on the measures. Volkswagen has a good list of general, corporate-wide goals167, but no critical analysis of the achievements. BMW and Saab do not give a good picture of the actual goals, but describe many measures. In the GM only a few mainly process and waste based goals are mentioned. Fiat mentions some goals concerning fleet fuel use, alternative propulsion systems and recycling quota.

165

COMFORT stands for “Cooperative Management for Urban and Regional Transport”

166

It provides information concerning different models about weight, CFC-contents, CO2-emissions and fuel use, noise, compliance with law of exhaust emissions, substances of environmental concern and recyclability (bumper recycled materials)

167

The goals are divided into the areas “Environmental Management”, “Researching and Developing”, “Procuring and Producing”, and “Marketing and Recycling”

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Agathe Bolli

Taking the example of fuel use and CO2 emissions as an important competition field, the following information concerning goals could be found: Figure 6-3: Goals concerning fuel use and CO2 emissions communicated in environmental reports Volvo (1998)

Selling cars in the year 2008 with a 25% lower fuel consumption than 1995 (based on the ACEA commitment).

Saab (1999)

No goals mentioned.

VW (1997)

Reduce CO2 emissions until 2005 by 25% compared to 1990 levels and offer a 3-litre168 car by the turn of the millennium .

BMW (1997)

No goals mentioned.

Fiat (1999)

Reduce fuel consumption until 2010 by 25% compared to 1995, that is, from 7.4 litres/100 km in 1995 to 5.9 litres/100 km in 2005, to 5.5 litres/100 km in 2010 (based on an agreement with the Italian Ministry of the Environment).

GM (1997)

No goals mentioned.

Toyota (1998)

By the year 2000 achieve 18.2 km/l [5.6 litres/100 km] for Category 1 (875 kg), 13.0 km/l [7.7 litres/100 km] for Category 2 (1000 to 1500 kg) and 9.1 km/l [11 litres/100 km] for Category 3 (1750 kg and above).

Interesting in the case of GM is that it is emphasised that CO2 emissions per mile have been reduced by 56% since 1974. A fuel economy figure provided some pages later in the report shows that in 1974 the fuel use was indeed much higher, but since 1993 practically no improvements in fuel economy have been achieved, and are still around 8.4 litres/100 km (28 mpg). This fact is not commented on, nor are the reduction goals stated. Overall, it is difficult to get an overview of goals and measures, and the respective performance. It is interesting to note that Volvo is the only company who actually states goals concerning external communication itself. The goal is to establish and implement a global communication strategy by the year 1999. 6.2.7 Economic questions of environmental protection All reports contain some figures about costs or savings concerning certain specific areas. GM also has figures on “1996 industrial pollution control capital expenditure”, and BMW has a graph with the development of energy and water costs over the years. Toyota dedicates two pages to the discussion of the problems of measuring environmental costs and savings and the differentiation between environmental and non-environmental expenditures. A figure for environmental costs in 1997 is mentioned, however with the indication that the accounting system is not yet adapted for grasping “environmental items” and will be improved. In no report are there comments about the economic influences of regulation and fiscal measures related to the car (e.g. about possible influences of higher fuel taxes), and about what position car companies take towards the efforts of the government to internalise external costs of transportation. Under the heading “Powerful forces drive aggressive environmental programmes”, Volvo emphasises that legislation, the demand for environmentally compatible products, the competitive situation and public opinion are the most important external driving forces for environmental activities. The important laws and regulations, concerning products are described as well as comments about what this means to Volvo.

168 It is also stated: “The technical findings that emerge from the development of this vehicle will be built into the development process of all classes of Volkswagen vehicles”!

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Agathe Bolli

6.2.8 Communication with target stakeholders None of the environmental reports studied has special sections addressed to a specific stakeholder group, nor are target stakeholders mentioned in the introductions or CEO statements—except for “the public”. GM emphasises its membership to CERES where “Informing the public” constitutes one of the principles. BMW mentions that “Openness is necessary in order to give an insight into actions and the reasons behind decisions” and that transparency is important. The possibilities for giving feedback to the report and getting information about contact persons vary considerably. Volvo has a whole list of contact persons with addresses; Toyota mentions many names but no contact addresses, and VW does not have any contact names and addresses. Some reports like those from Volvo, BMW or VW provide links for further specific information, for example, about site environmental reports or special reports about certain environmental topics. 6.2.9 Credibility Apart from the CEO statement and its contents, a verification by a third party is an indicator for credibility of an environmental report. Only the VW report (KPMG) and the Toyota report (Deloitte&Tohumatsu Consulting) are verified by a third party. Another indicator could be the degree of criticism towards their own performance and whether the information provided is comprehensive or rather on a “positive examples” basis. All analysed reports emphasise positive examples and achievements. Models of extremely fuel-efficient cars presented; however, the performance of all the models is seldom presented. Measures are described, but not always corresponding goals. A critical analysis of non-achievement of certain goals or difficulties with achieving goals could not be found in any report.

6.3 Environmental product information and Eco-marketing Environmental information about products can be found in the environmental report, as described in Chapter 6.2. Environmental reports are normally not the information tool with which customers are reached. If the attribute “environmental” should add to the differentiation of the product, then this should be clear in the product marketing and product information provided to the customers. Often it cannot really be distinguished between eco-marketing and “objective” environmental product information. Environmental product information or environmental labels can constitute a part of the environmental marketing. Looking at the “environmental competition fields”, it can be concluded that a car could be differentiated with environmental attributes such as low fuel use and CO2 emissions, low pollutant emissions, good recyclability or use of renewable and recyclable materials or “natural” materials for the interior design. This chapter analyses customer-oriented product information in the corporate and national Internet web pages, product brochures available at car dealers and information provided in car magazines for such information. 6.3.1 Customer-oriented environmental information in the Internet Environmental properties are rarely used as a marketing argument in the Internet. Low fuel consumption is sometimes mentioned in product descriptions, but seldom emphasised as a selling argument. Volvo is the only company who mentions environmental properties along with safety issues and comfort in the product description for every model. However, the information is not always 78

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

model specific. Emphasised are environmental design principles, effectiveness and durability of the catalytic converter, Volvo’s restrictions on chemicals, water-borne paints, recycling issues and goals concerning fuel use reduction169. Fiat mentions the environment under the descriptions, however most of the comments are not very product-specific. Toyota promotes some of its cars as environmentally friendly, such as the Prius hybrid. VW promotes the 3L TDI Lupo as the first mass-produced car consuming only 3 litres of fuel per 100 km170. On the other hand, the environment is not an issue at all for the marketing of the new Beetle (which uses 5.2 litres diesel or 8.7 litres per 100 km in the gasoline version) or other mass-produced cars. BMW lists the fuel consumption in the product data sheet, but does not emphasise it in any way. Comfort, safety, engineering and quality are the core issues that DC mentions under the Daimler Benz model descriptions. Environmental compatibility at DC is only mentioned under the description of the small car series. Audi does not have any corporate environmental information, however, under Audi’s product descriptions there are comments about the strategies under the headings design, environment and safety. Low energy consumption is the main issue, stressing the importance of lightweight construction (aluminium), always under Audi’s motto “Advancement through technology”. Some web-sites are not very customer-oriented, such as the GM and the PSA corporate page, and do not have any product presentations at all. 6.3.2 Environmental labels, product declarations and other environmental information in customer oriented communication 6.3.2.1 The Volvo Environmental Product Declaration Eco-labelling is not common for cars. Volvo made a first step in this direction in 1998, when it published its first Environmental Product Declaration for the Volvo S80 2.9171. This Environmental Product Declaration has been certified by the Swedish Environmental Management Council. It is also certified by Lloyd’s Register Quality Assurance as being based on life cycle assessments, and the assessment was executed as a sampling exercise based upon requirements of the ISO 14040 and 14031. The process and content of the declaration is close to what would be expected under ISO 14024, however, it has to be emphasised that the Environmental Product Declaration is not officially ISO-certified. The Environmental Product Declaration describes the environmental performance of the S80, based on criteria considering the whole life cycle of the car. The declaration divided into four areas, which are expressed with three indicators each. • • • •

Environmental Management – Volvo’s method of steering environmental work towards continual improvement. Manufacturing – the environmental impact of making the car. Operation – the environmental impact of driving the vehicle. Recycling – the environmental impact of scrapping the car.

For each indicator Volvo has chosen a scale from 0 (worst) to 100 (best) on which to show a best and a worst value in order to depict the relative performance of the car (see Figure 6.4).

169 For example in the description of the Volvo V70, under “Environment” is among other a heading “Tomorrow’s fuels today”., where Volvo’s fuel use reduction goals of 25% are mentioned and the fact that there exists a V70 Bi-fuel version. However, the actual fuel use of the V70 is not mentioned. 170

This car has been promoted aggressively by VW over various communication channels, such as press releases, conferences, exhibitions. Above all in Germany, the 3 litre Lupo has been discussed intensively in the media 171

Volvo Car Corporation (1998): Environmental Product Declaration. Volvo S80 2.9

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Agathe Bolli

Figure 6-4: Volvo Environmental Product Declaration for the Volvo S80 2.9

Source: Volvo Car Corporation (1998): Environmental Product Declaration. Volvo S80 2.9

In the declaration, Volvo provides a description of the indicator categories and a short rationale for each indicator. A definition is provided of the worst and best cases followed by examples of their efforts towards moving to the best performance level. It has been criticised that the declaration actually does not have a true life cycle perspective and should therefore not claim this172. Using these four areas, all life cycle stages are to some extent covered, but none of the indicators is measured across the whole life cycle. Energy use and solvent emissions, for example, are only declared for the manufacturing stage. However, it has to be questioned if it is really necessary to provide a product declaration based on a complete life cycle assessment. I regard the selection of indicators as appropriate in the sense that they are all relatively easily and directly measurable and can be provided with a certain exactness. The way of presenting the indicators is very reader-friendly. The choice of the indicators, above all concerning recycling, could be discussed regarding their relevance173. What should be especially criticised, in my view, is the scale used for the presentation of the indicators, that is, the criteria used for the best and worst case174. Some of the worst cases are based on legislation, but for other cases it is not very clear. There are no benchmarks with industry “best cases”. It is therefore difficult to judge the relative environmental performance compared to similar models from other producers.

172 Society of Environmental Toxicology and Chemistry, SETAC (1998). “Volvo Makes an Environmental Product Declaration”. Web-based source 173

For example, instead of “use of recycled plastics”, there could just as well be an indicator “use of recyclable plastics”.

174

Some best and worst cases are either very unrealistic or it is not clear how they came up with these figures.It could for example be discussed whether it makes sense to use as worst case for “materials utilisation” that all material entering the process ends up as waste or as best case for “energy use per manufactured car” that no energy whatsoever is used.

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Concerning CO2 emissions, the best case is zero emissions during use. The worst case is 300 g CO2/km, which corresponds to the emission of carbon dioxide from the 1997 Volvo variant with the highest fuel consumption. This scale is not very sensitive. Comparisons with industry-wide “worst and best cases” in the respective car class or recommendations by government or consumer associations might give a better picture. Apparently, other manufacturers are also discussing developing environmental product declarations. According to Björn Brovik from Saab, there are discussions among several car producers to agree on a declaration. An industry-wide format for such a declaration could allow customers to compare models from different producers. At BMW, environmental product declarations have obviously not been taken into consideration yet175. The crucial question is always who is actually the target group for such declarations or labels and what kind of information this group requires. According to Mary Ann Ruiz from Volvo, the S80 product declaration is not really aimed at individual consumers but rather fleet customers such as big companies or the government176. For individual customers, they have product description leaflets, which highlight only some points. 6.3.2.2 Environmental information at the point of sale Cars are not marketed with their environmental attributes. However, environmental information can in fact be found at car dealers. As a visit to some car dealers in Sweden showed, information about fuel use and CO2 emissions is provided. Fuel use and CO2 emissions are also declared in product leaflets such as the new VW Beetle and an Audi A4, however, it is not emphasised. 6.3.2.3 Environment and product information in car magazines The “images” associated with cars in most car magazines are quite far away from environmental concerns; it’s all about speed, power, design, safety, and comfort. Issues such as fuel use and air pollutant emissions are mentioned, but are not, however, a main criteria when it comes to, for example, the rating of cars. Obviously, environmental aspects are not emphasised in the information that is forwarded from the car companies to the editors of these magazines. A few magazines have the heading “Environment” with different articles, for example, the introduction of the car scrapping directive and the negative impacts of it for the car companies and the customers. Out of about 30 car magazines sold in Switzerland, I found one called “Ecocar” which emphasises economic and environmental aspects, such as fuel use and CO2 emissions or economic advantages of cleaner cars due to tax exemptions. It also dedicates several articles to future propulsion technologies or the “three litre wonder”. The environment is generally not used as an argument in the car advertisements found in these magazines or any other magazines. BMW has six-page advertisements, promoting advanced diesel technology177, where environmental friendliness is also mentioned as an argument due to its high efficiency. Apart from this, “classical automobile values” are promoted such as design and performance.

175

Telephone interview of 03.09.99 with Dr. Raimund Medrisch, Head of the Environmental Department at BMW, Munich. Mr. Medrisch had not looked at the Volvo Environmental Product Declaration yet.

176

Telephone interview of 31.08.99 with Mary Ann Ruiz, Volvo, Brussels

177

auto, motor und sport, Heft 16, 28. Juli 1999, p 174-179

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Agathe Bolli

6.4 Summarising remarks Volvo seems to be the only company that really tries to communicate its environmental strategies on all levels; the environment seems to constitute an integral part of the business strategy. Volvo emphasises that the company’s three core values are safety, quality and care for the environment, and that every new model has to be safer, lighter and more fuel efficient that the one it replaces. These strategies are communicated aggressively on the corporate web-site, and with the Environmental Product Declaration of the S80, Volvo made a proactive step towards customer related environmental information. The case of BMW is an interesting example of inconsistent environmental communication. Hydrogen-technology is promoted as environmentally friendly solution for the future in the corporate web-site. The environmental report provides a comprehensive description of the company’s efforts (even though it does not contain many product performance data). On the other hand, the environment is not an issue in the annual report nor for the marketing of the products. Statements found on the web-site (see Chapter 6.1.2) give the impression of a rather defensive position towards internalisation of external effects from transportation. The environmental communication of Saab, Renault and PSA Peugeot-Citroën is very poor. Environmental issues are not emphasised in the web-sites, and the companies do not issue an environmental report (yet). Environmental reports Generally it can be noticed that the CERs do have quite a lot of information concerning the products. VW, Toyota and Volvo definitely give more weight to product-related information than to process-related information. Information concerning all the competition fields is provided in the reports. Product strategies are described as well as, in most cases, co-operation with suppliers and dealers. Efforts concerning new propulsion systems are highlighted especially in the newer reports. Nevertheless, when it comes to actual performance data of the products, the information is not sufficient for comparability of any reports. Most reports provide only information about some especially “environmentally friendly cars”, and not about the environmental performance of all the models in the car fleet. The shares of the different models with their respective emissions or recyclability properties should be stated clearly. Signs of such reporting could be found in the Toyota and Volkswagen report. Only two of the analysed reports are verified by a third party. This might have an impact on their credibility. In general the information provided in the reports seems to reflect the efforts and strategies chosen by the companies. However, none of the analysed reports is very critical in its reflections upon goals and measures. Following the typology of “environmental reporting” described in Appendix 2, the environmental reports of car companies could be classified as the “Corporate communication” type. All reports stress the positive examples. The information provided might therefore not be wrong, but in some cases may only be “half the truth”. GM for example emphasises its membership of CERES throughout the environmental report, and has a list of other initiatives it is involved in. On the other hand, the membership of the Global Climate Coalition (GCC178) is not mentioned anywhere.

178

The GCC is a US-based lobby group stressing the uncertainty of science concerning CO2 emissions and climate change. The GCC is battling reduction commitments with claims about the negative economic and job effects of climate change mitigation. The CGG includes a number of multi-nationals such as Exxon, General Motors, Ford, Chrysler, and manufacturers associations such as the AIAM.

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Agathe Bolli

Environmental product information Overall, it can be said that, apart from Volvo, no company uses environmental properties as a differentiation criterion for all the company’s cars. However, some specific models of certain brands are definitely marketed with their environmental advantages, especially concerning fuel consumption, such as the 3 litre Lupo of VW, the Prius of Toyota, the Multipla of Fiat or the smart of DaimlerChrysler. The current environmental communication concerning products clearly indicates a segmentation strategy. Fleet customers such as big companies or the government in fact do have explicit environmental criteria. The Volvo Environmental Product Declaration is apparently mostly directed towards such customers. In general, it seems to be difficult to win individual customers with environmental arguments. In product presentations on the corporate web-sites or product leaflets for customers, environmental arguments are not highlighted. Criteria like safety, power or interior and exterior design are more important. Nevertheless, it has to be noted that fuel consumption and CO2 emissions seem to be increasingly declared, whereas the issue of recyclability is not communicated to the customer.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

7. Applicability of the GRI guidelines for “competition-oriented” environmental reporting In Chapter 5, issues that might be of importance for reporting to enhance competitiveness were identified, and Chapter 6.2 analysed the issues that are reported in the CERs of car companies. How do those findings match the requirements that are planned for the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI)? Chapter 7.1 contains some general reflections about the differences between the requirements in the GRI Guidelines and the studied reports, and Chapter 7.2 shall draw conclusions about whether the GRI Guidelines are supporting such “competition-oriented” environmental reporting.

7.1 Comparison of the environmental reports with the GRI Guidelines As can be seen from Appendix 1, the Global Reporting Initiative requires companies to report on nine parts in a prescribed order179: 1. CEO statement, 2. Key indicators, 3. Profile of the Reporting Entity, 4. Policies, Organisation, and Management Systems, 5. Stakeholder Relationships, 6. Management Performance, 7. Operational Performance, 8. Product Performance, 9. Sustainability Overview. Each of these parts contains a number of items that have to be reported on. Taking the example of the car industry, it can be concluded from Chapter 5.5 that the most important issues for “competition-oriented” reporting are information concerning environmental problems caused by the industry along the life cycle of the product with the respective goals and measures, and information supporting environmental strategies (see also Figure 6-2 for items regarded important). The information should focus on product performance rather than process performance. This encompasses information about how environmental issues are considered in product design and procurement, and end-of-life treatment. If all the issues proposed in Chapter 5.5 are taken into consideration, then most of the “environmentally related” points proposed in the GRI Guidelines are covered in some way. Not considered in Chapter 5.5 are items that fall under Part 6 (Management Performance) of the GRI Guidelines, such as accidental spills, liabilities and penalties for non-compliance. The importance of reporting on a corporate level, about process-oriented indicators, for a car manufacturer can be questioned. Concerning compliance with law, it would, in my view, be most interesting to provide information about compliance with future product related laws, such as exhaust gas emissions. Comparing the contents of the studied environmental reports with the GRI Guidelines, it can be noted that Part 3, Part 5, Part 6, and Part 9 are not covered very well. Social and economic indicators are generally very poorly reported. Concerning Part 5, none of the reports contains a comprehensive overview of the stakeholders and the approaches with which they are engaged. It would be very interesting to know how stakeholders are viewed by a company, and how they are selected and engaged. It can show a lot about a company’s openness and proactiveness, and it can support a company’s credibility in its environmental efforts. However, it is questionable whether it is practical to report on a corporate level about all “approaches to consultation with each stakeholder” and “number of such consultations by type”180, as it is required in the GRI Guidelines. Appendix 6 shows all the items that were analysed in the reports. They are similar to the items in the GRI Guidelines, however they miss some of the social and management 179

CERES (1999). Sustainability Reporting Guidelines. Exposure Draft for Public Comment and Pilot Testing

180

ibid, Part 5, item 5.2

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Agathe Bolli

performance items. They are not discussed in detail further (refer to Chapter 6.2). Considering that environmental product performance indicators are very important for the reporting of complex goods industries, it has to be noted that the GRI Guidelines do not contain any specific requirements concerning such product indicators. When it comes to the operational performance indicators in the GRI Guidelines, it can be noted that generally all the items under “Environmental Performance” have been covered in the studied reports, apart from item 7.7 (”Total materials use other than fuel”). There is also a lack of relative performance indicators, such as energy use per produced vehicle (or m2), or VOC emissions per produced vehicle. Such indicators might be more useful for comparison. However, the GRI only requires absolute figures such as total energy use or total NPO181. The structures of the reports differ considerably from the structure proposed in the GRI. The GM Environmental report 1997 is the only one that is written according to reporting guidelines, that is, the CERES reporting principles. Even though it received a relatively high score in the SustainAbility/UNEP scoring182, I found it the least reader-friendly. Most points required for the GRI might be covered, however, it is very difficult to get an overview. The priorities for environmental strategies are not clear from the report. I found the presentation by Volkswagen, Toyota, Fiat and BMW, which are all somewhat similar, to be more appropriate. For example, the VW page contains a summary of the environmental performance on the cover page, a CEO statement, Facts and Figures about the company, and a chapter about environmental management in the beginning. Then the structure follows the life cycle stages of the car. Much weight was put on product related information. This structure makes the report easy to read. Similar is the Toyota report, where at each life cycle stage (Development & Design, Procurement & Production, Logistics, Recycling, New Transport Systems) the policies, objectives, tools, measures and the corresponding performance data are reported. The GRI Guidelines would probably restrict such a structure.

7.2 Implications for “competition oriented” reporting in complex goods industries It seems to me that the GRI Guidelines do not allow reporting based on a life cycle approach, where the main impacts from a company’s operations, and the goals and measures a company follows in order to reduce these impacts along the life cycle of the products, can be easily seen. For car manufacturers, but also for other complex goods industries, the Research and Development and Design phase as well as the Procurement and End-of-life Management are very crucial phases concerning reduction of the environmental impact. These phases cannot be emphasised enough in the prescribed structure of the GRI Guidelines. There are, in fact, items designated for information about these stages; for example, item 4.6 (”Management systems for supplier and supply chain”), item 6.11 (”Supplier performance per item 4.6”), and items 8.3 and 8.4 (Programs to minimise impacts of products and procedures to assist designers for creating products with reduced impact). However, they are somewhat scattered and do not allow a comprehensive insight. Information about the development and design, about product strategies and product performance should not appear only in the end under Part 8, but should constitute a core part. In general it can be said that such reporting frameworks like the GRI Guidelines are based on the information needs of the stakeholders and not on the communication needs of the company. For “competitive” communication there should be more information about strategies and visions, that 181

NPO is non-product output, and defined as waste prior to treatment, off-site recycling, or disposal

182

SustainAbility/UNEP (1997). The 1997 Benchmark Survey: The third international progress report on company environmental reporting

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M.Sc. Thesis, IIIEE

Agathe Bolli

is, more future oriented information rather than retrospective information. An environmental report should represent a compromise between satisfying the stakeholders “right to know” and the company’s “opportunity to tell”, which might not always be easy to combine. Whereas there might be some items that are important to report about for any industry, such as environmental policy, I do not think that there can be found a structure for an environmental report that suits all industries equally. In any case I regard the GRI Guidelines as too rigid, as it does not allow the companies to take a proactive approach: Too many frameworks prevent the companies from setting priorities concerning environmental communication. The priorities that a company has concerning environmental issues should be evident from the environmental report. Using a framework with so many requirements concerning structure and covered points, this is not possible. Companies should be able to choose the issues they want to emphasise themselves, and also decide on the order in which the information appears. After all, environmental reports can also be compared if they do not have the same structure. If one company in a certain sector reports on an environmental issue or a strategy and the other one does not, then this fact also leaves space for interpretation. Further, the time dimension has to be considered. The urgent environmental problems concerning a sector are changing. Correspondingly, the stakeholders who put up environmental requirements and their reference fields and steering systems are changing. This can influence the priorities for the contents of environmental reports, as not all stakeholders can be reached most effectively with an environmental report. Another problem with the time dimension is that according to the GRI, reports covering the same contents have to be reported with a certain frequency (e.g., every year or second year). It might not be too interesting to report every year about the whole structure of the environmental management, whereas on the other hand there are issues that should be reported more frequently. For example, the VW and BMW issue an environmental report only every second year. The information found in these reports issued in 1997 concerning future propulsion technologies was already quite outdated. From the problem with the time dimension and the changing information needs, it can be concluded that it might be more appropriate to publish only a defined set of environmental performance indicators in an environmental report or integrated in the annual report. These indicators should suit the characteristics of the industry sector and be comparable. In the case of final goods producers, the core of the indicators should concern product performance and supplier performance. The rest of the information could be provided with special reports published in different frequencies in order to allow a more stakeholder-specific approach. The Internet could in this respect represent a good platform for such an approach. An environmental report in paper format always confronts the companies with the question of choosing the “right” target reader-group and finding an appropriate way of providing information which is on the one hand complete and credible and on the other hand still can be seen at a glance. Through the possibility of hyperlinks, the information can be more stakeholder-specific on the Internet. The hierarchical structure can provide information on different “complexity-levels”, from general policies to goals and measures down to detailed emission data on a site level, if required. In this way, the reader is not confronted with an overload of confusing information but can choose better what she or he wants to know. The Internet also enables more dialogue through the possibility of online-communications and e-mail. If companies start to use the potential of the Internet for their environmental communication, the advantages of the Internet might soon make the discussions about guidelines for common structure of environmental reports obsolete. So far none of the analysed corporate web-sites provides an environmental report that takes advantage of these opportunities.

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M.Sc. Thesis, IIIEE

Agathe Bolli

PART III - SYNTHESIS Using the example of the car industry, this study aims to examine how, and if at all, environmental reporting and communication can be used strategically by complex final goods producers to achieve competitive advantages. The following research questions were posed Chapter 1.2 in order to explore this topic: 1. What role does environmental communication and reporting play in obtaining competitive advantages? 2. What and how should car companies communicate, concerning the environment, in order to reach competitive advantages? 3. Is this reflected in current environmental communication and reporting of car companies? 4. Do current reporting frameworks, like the Global Reporting Initiative (GRI), support such “competition oriented” environmental communication? These research questions have been discussed in Chapter 4 (Question 1), Chapter 5 (Question 2), Chapter 6 (Question 3), and Chapter 7 (Question 4). In Chapter 8, the findings will be concluded and compared, especially the findings of the questions 2 and 3. Chapter 9 contains conclusions to the actual thesis question and some final remarks.

8. Discussion of the research questions 8.1 There is no “general recipe” for environmental communication There is no clear link between environmental communication and competitiveness, and environmental communication is not of the same competitive importance for every company and every branch. The contents and the means of environmental communication therefore differ, depending on the strategies and the stakeholders targeted. In order to assess possible effects of environmental communication on competitiveness, a company has to be analysed in its interactions with the main stakeholders in the market, the public and politics. The key players concerning a certain environmental strategy have to be systematically identified together with the reference fields they are operating in. The ways of mutual influence that exist need to be assessed and the communication means that are appropriate to reach the respective stakeholders. The link between environmental communication and competitiveness is as ambiguous as the link between environment and competitiveness. The effects of environmental communication depend to a large extent on the environmental problems a company or a whole industry is causing, the respective environmental strategies of a company and its corporate communication. The need for environmental communication as a response to environmental requirements, as well as the opportunities that the environment poses for product differentiation, is not the same in every branch. As an example of complex final goods, a company producing telecommunication and IT equipment has the potential to market their products as a contribution to sustainable development, as they can reduce transportation and use of material by offering their services183. This is hardly possible in the case of the product private car. Overall, it could be said environmental communication could support competitiveness in two ways: 183

Interview of 28.06.99 with Mats-Olov Hedblom, Environmental Manager at Ericsson AB

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

1. Environmental communication is necessary for meeting stakeholders’ information needs tied to environmental problems. A verified corporate environmental report can be an effective tool for communicating comprehensive, transparent, continuous, comparable and credible information to a multitude of stakeholders. The effect of the environmental report works mainly over perceptions and attitudes. It can therefore add to the good image of a company, which indirectly has a positive effect on competitiveness. Not satisfying such information needs could influence a company’s image in a negative way. Identifying the actual information needs of the main targeted stakeholders is therefore of great importance. Also for this purpose, communication through the environmental report has to be complemented with further participatory or consultative, and more stakeholder-specific, environmental communication. 2. Environmental communication can be used proactively for supporting environmental strategies. Environmental problems can become important to competition if they are taken up by stakeholders and transformed into requirements, which can become effective over different steering systems—the market, public or politics. These requirements can lead to environmental competition fields, which offer companies to take different environmental strategies based on costs or differentiation. Environmental cost strategies and environmental differentiation strategies are more directed towards the market, whereas environmental market securing strategies and environmental market development strategies are aimed at the public. Environmental communication can be used proactively to support such strategies.

8.2 Shortcomings and opportunities for development in the environmental communication of the car industry The car industry has been used as an example for examining possible “competitivenessenhancing” environmental communication for complex final goods industries. Referring back to the comments above, the environmental communication of the car industry that is likely to support competitiveness should concern the problems caused by the car industry as well as support the environmental strategies chosen by the companies. The following are some conclusions that can be drawn from the comparison of the “desirable” environmental communication mentioned in Chapter 5.5 and the actual environmental communication analysed in Chapter 6. 8.2.1 Environmental communication about environmental problems In order to support competitiveness, car companies should report on the environmental problems that they are causing, together with clear goals and corresponding efforts to mitigate these impacts. This is the responsibility of car manufacturers as corporate citizens, but also a prerequisite for being credible in any environmental product strategy. The corporate environmental report therefore constitutes an important tool for communicating to a variety of stakeholders, mainly from the reference fields public and politics, such as environmental NGOs, authorities, or, in general, leaders. The communication should concern the direct and indirect problems caused by their products. As much of the environmental impact of the car is actually caused through the infrastructure built around the car, statements about these impacts would also be desirable. Even though the products have a higher environmental impact over the whole life cycle, data on environmental performance in production should as well be communicated. A company which wants to market “green cars” and does not implement environmental protection into production is not credible and could be publicly criticised for that184. 184

A report by the Council on Economic Priorities (CEP) “shows” that some of America’s cleanest cars are made in most polluting factories. Mitsubishi and Honda get top marks concerning fuel-efficient cars, but rank as overall worst performers in the manufacturing category. CEP

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

The study of the environmental reports in Chapter 6.2 shows that car companies are in fact communicating about the problems caused by the industry. However, only a few reports (Toyota, VW, Volvo) show a life cycle approach to the environmental problems which indicates clearly how priorities for environmental improvements are set. In most reports, the impact from the product itself during use and disposal is highlighted. Statements about environmental impacts arising from the infrastructure for cars and possible ways of influence cannot be found. Car companies generally do report on the environmental aspects of production in their environmental reports. Of importance would be a critical discussion of performance against goals, which could not always be found. Even though the impacts from production might be minor in comparison to the impacts from products, a comparison of key indicators, for example VOC emissions from the paint shop or total material use can give a good basis for comparing companies’ efforts (see comments in Appendix 7). However, comparison of process data between different companies seems problematic because not all companies have the same systems boundaries (e.g., degree of outsourcing) and the same way of measuring environmental aspects. There should be agreed ways of how to measure and present the data, which is obviously not the case today. Some reports still contain more information concerning the actual manufacturing of the cars compared to information about the products, but it seems to be a trend that more productoriented information is reported. Concerning products, measures to reduce the environmental impact are described, for example, measures to reduce exhaust gas emissions, fuel consumption or use of hazardous materials. However, there is not always a clear overview of the actual priorities and goals. Achievements are highlighted, whereas a critical discussion of problems in achieving certain goals is missing. Judgement about possible improvements of performance in the last years, and a comparison of product performance between the different companies on the basis of the environmental reports is difficult. Fleet fuel use is normally reported, but a comparison is problematic if the share of diesel powered cars in the fleet 185 and which car categories the fleet consists of, is not declared. BMW, for example, shows improvements in the fleet fuel use of 1.5 litres since 1990. Toyota declares the average fuel efficiency trends by car category, which do not show any substantial improvements since 1990. It makes sense to show the developments for the respective categories, however, in order to allow comparability there should also be an indication of which is the share of the different categories. Other issues such as exhaust gas emissions or recyclability are even more difficult to compare, as no company reports these aspects of environmental performance for the whole car fleet, but only for certain car models with especially good performance. The environmental reports of Volkswagen and Toyota show attempts of reporting product performance in a more comprehensive way. 8.2.2 Environmental communication supporting environmental strategies In Chapter 5.4, four environmental competition fields have been identified which arise from the problems caused by the product car and pose risks and opportunities for the car manufacturers: reducing exhaust gas emissions, fuel and CO2 efficiency, product stewardship and end-of-life management, and new mobility concepts. Different strategies can be used to reach competitive stresses that car manufacturers should make efforts both in environmental product performance as well as process performance. However, Mitsubishi emphasise in their answering letter to CEP that a comparison of manufacturing environmental performance on the basis of TRI data does not give an accurate picture because not all manufacturers perform the same functions in the same factories. Council on Economic Priorities, CEP (1999). The dirty secret about some fuel-efficient cars. Web-based source. 185 Diesel powered cars use less fuel for the same performance than gasoline powered cars. However, the CO2 emissions per litre are higher than with gasoline. A smaller fleet fuel use therefore does not automatically mean lower CO2 emissions, depending on the share of diesel cars within the fleet.

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M.Sc. Thesis, IIIEE

Agathe Bolli

advantages in these fields, and the environmental communication is directed towards different stakeholders. In the analysis, it turned out to be difficult to distinguish between the environmental strategies and the actual communication about environmental strategies. Also, it is difficult to distinguish between communication about certain environmental strategies and “general” corporate environmental communication. Communication supporting environmental cost strategies As mentioned in Chapter 5.5.2, environmental communication can be used to support cost strategies, where single firms or co-operations of firms can achieve competitive advantages by being proactive before legislation about materials or emissions is introduced or tightened up. Building up an internal “environmental spirit” through intensive internal environmental communication is important for such strategies, as well as communication with suppliers, car dealers or dismantlers. The corporate environmental report may not, in this respect, be the most directly used communication tool, but still has its value for providing information to the involved stakeholders about the goals the company wants to reach and the success of cost strategies. Communication for supporting cost strategies should happen on a more stakeholder-specific and frequent basis than with an environmental report, such as with environmental training, “black and grey lists” for suppliers, dismantling handbooks, networks on the Intranet or Extranet, or personal communication. From the study of the environmental reports and the corporate web-sites, it can be concluded that such communication is in fact taking place. However, the extent and possible improvement potentials could not be sufficiently assessed, as such communication is more stakeholderspecific. Drawing conclusions about the effect of environmental communication on competitiveness in the context of cost strategies—for example concerning end-of-life management or reduction of exhaust emissions—is therefore difficult. Communication supporting environmental differentiation strategies The identified competition fields, especially “reducing exhaust gas emissions” and “fuel efficiency” provide opportunities for environmental product differentiation, and the environmental report can support such differentiation strategies. However, the individual customer is rarely reached with environmental reports, but has to be informed in a more stakeholder-specific way. It can be noted that car manufacturers are in fact making efforts in the area of fuel efficiency and reduction of exhaust gases, and the achievements are promoted. Environmental communication can be found—in environmental reports as well as press releases and on the web-sites—on products with considerably lower emissions, such as new electrical cars, small cars like the smart, the first mass produced hybrid car “Prius” by Toyota or Volkswagen’s “3 litre-car”. However, it seems that these products are all viewed to be niche products. In general, no car company is achieving substantial fuel consumption reductions of their whole car fleet, and is correspondingly not communicating this. In this sense, the environmental communication of the car manufacturers reflects their segmentation strategy. Can car companies gain competitive advantages with such communication strategies concerning niche products? In the case of the smart, environmental marketing was not too successful (see paragraph “Communication supporting environmental market development strategies”). On the other hand, VW introduced its 3 litre Lupo very aggressively, stressing the fact that VW kept its promise and developed a “3 litre car” before the year 2000. Even though this car itself is only meant to be a niche product due to the premium price, this environmental publicity had,

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M.Sc. Thesis, IIIEE

Agathe Bolli

according to the judgement of Greenpeace186, a positive influence on the sales of other VW models, such as the “normal” Lupo model (which is also quite fuel efficient). From this, it can be concluded that communicating about environmental strategies and marketing especially environmentally friendly cars could in fact have an influence on competitiveness. The effect, in this case, is not directly reached through increased sales of this niche-car, but the good environmental publicity through such “alibi-products” (as Greenpeace calls them) can have a positive impact on the image of a company or a brand and therefore indirectly on competitiveness. The media can play a considerable role in this context. Could car companies gain competitive advantages by applying a consequent environmental marketing strategy for the whole car fleet? With its Environmental Product Declaration and other environmental information provided in product information on its web-site and customer leaflets, Volvo is showing signs of integrating environmental attributes into the marketing of all their products. Whether they are gaining competitive advantages with this strategy is not clear yet. In general, it seems that the right time for proactively marketing fuel-efficient cars (and, in the first place: producing fuel-efficient cars) throughout the car fleet is not regarded as appropriate yet. It could be said that the environmental communication concerning differentiation simply reflects the customer’s demands. Even though customers, according to polls, say that environmentally friendliness and fuel efficiency are important purchase criteria, there is somehow a gap between customers’ stated intentions and their actual demand. According to all three interviewees from the car industry, customers do not seem to be willing to pay premium prices for more environmentally friendly cars. The environmental benefit has to be provided in addition to other performance values, such as safety or comfort. Not every brand offers the same opportunities for being marketed with “environmental friendliness”. As long as fiscal incentives such as fuel taxes, car taxes or car scrapping costs do not support such differentiation, the demand is unlikely to increase substantially187. Communication supporting environmental market development strategies The automobile industry emphasises in its communication the importance of technology and electronics as a solution to all environmental problems caused by the car. There are no signs of a “real” shift towards offering mobility as a service instead. DaimlerChrysler does communicate in this direction with its “smartmove” concept, where the smart is promoted in connection with public transport and car sharing opportunities. However, branding seems to be difficult in this case, and the smart is a good example of “unfocused” marketing. Trying to sell “mobility and ecology” proved to be more problematic, as the “classical automobile values” could not be communicated easily in this case188. The marketing strategy was changed several times, from “mobility values” over classical automobile values to “lifestyle”, as sales were not as good as expected in the beginning. This can partly be attributed to technical problems with the car. Other voices say that the consumers simply do not demand such concepts189.

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Telephone interview of 26.08.99 with Wolfgang Lohbeck, responsible for climate, Greenpeace Germany

187

Some environmental properties, for example in the form of eco-friendly material for the interior design, might be possible to communicate easier together with a brand image. This goes rather for cars in the upper segment, where interior design constitutes an important purchasing criteria.

188

Presentation of R. Hossfeld, DaimlerChrysler, workshop at the Conference “Umweltschutz im Globalen Wettbewerb”, 9-10. June 1999, Hannover

189 In an interview, Klaus Fricke, the new responsible for marketing and sales at smart, remarked the following: “When the smart came on the market, we were using a marketing strategy from the eighties. It was based on the traffic jams in city centres, on search for parking spaces, environmental pollution and too high fuel use…The situation has changed in the meantime…Well, the car drivers are still confronted with traffic jams, however, environmental issues and fuel use are not playing the all dominating role anymore. Solely with the message «Buy a smart, and you are doing something for the public and the environment » we cannot reach the customers anymore”. Extracted from Rehsche, M. (1999). “Smart lässt sich nicht wie eine Swatch verkaufen” [”A smart cannot be sold like a Swatch”]. Web-based source

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M.Sc. Thesis, IIIEE

Agathe Bolli

Communication supporting environmental market securing strategies It is interesting to note that the car industry is communicating developments concerning future product strategies and trying to bring environmentally friendly niche-products on the market. On the other hand, communication towards political stakeholders shows signs of being defensive towards environmental challenges and reflects what was defined in Chapter 2.2.1 as market securing strategies. Proactive environmental communication towards the public and politics in the field of CO2 efficiency would be desirable, but cannot be seen. Automobile firms are not pleading for higher fuel taxes or CO2 taxes. “Environmental communication” of the car-lobby towards political stakeholders in this sense aims at slowing down internalisation of external transportation costs. The commitment of the European car manufacturers to reduce the CO2 emissions of their car fleet (see Chapter 5.3.1.1) can be an indicator of such market securing strategies. The car industry commits itself to voluntary CO2 reductions in order to avoid further regulation or fiscal measures. In this case, it is about “buying time” and securing the competitiveness of the whole sector against more environmentally friendly modes and concepts of transport. The fact that PSA Peugeot-Citroën emphasises its efforts concerning a carbon sink project could also be interpreted as a rather defensive strategy. Ford opposes the US CAFE standards and stricter air quality standards, and DaimlerChrysler emphasises in its annual report of 1998 that environmental regulation causes extra costs. The opposition of the German car makers against the End-of-life Directive might be another example of rather defensive strategies. 8.2.3 Implications for environmental reporting and reporting frameworks such as the GRI From the findings above, it can be concluded that the environmental report is well suited for communication of environmental impacts caused by the industry and corresponding efforts. When it comes to cost or differentiation strategies, it seems that the environmental report plays only a subordinated role compared to other environmental communication tools. However, the environmental report can still be a valuable tool for actually proving in a credible way, to a multitude of stakeholders, the environmental improvements that are promised with differentiation strategies. If a car company truly seeks to offer cars with a substantially lower impact on the environment or even move towards offering the “service mobility”, then obviously communication towards the public and politics would be very important, as attitudes and perceptions have to be influenced in the first place. The environmental report can represent a useful tool for such purposes. Raimund Medrisch from BMW regards the environmental report mainly as an image tool; they want to communicate “readiness for the future” with technology competence, visions, and new solutions for more sustainable mobility190. The focus groups are also customers, but above all opinion leaders from politics, media, or the finance community. Environmental reports are a good tool to reach opinion leaders from public and politics. In the context of supporting environmental product strategies such as future propulsion technologies, the environmental report should contain more information about long-term goals and visions, about how car companies see their products in the future. Such information can also be of increasing importance for financial analysts. An environmental report should contain statements of how a car company perceives the political framework it is operating in, and what is its position towards actual and future regulatory measures concerning internalisation of external road transportation costs. Environmental reporting is still quite a “young” tool. So far, a company’s image might have benefited simply by issuing an environmental report, without an actual connection to how good 190

Telephone interview of 03.09.99 with Dr. Raimund Medrisch, Head of the Environmental Department at BMW, Munich

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M.Sc. Thesis, IIIEE

Agathe Bolli

the company’s environmental performance actually is. The pressure to issue an environmental report or to inform openly in other ways about environmental efforts (e.g. on the Internet) is increasing. Generally it can be said that car companies have a certain credibility problem when it comes to environmental communication191. Car companies have been promising substantial environmental improvements for years, however the statistics do not show such a trend in all the areas, especially not in fuel efficiency. An environmental report or a similar information tool on the Internet might be of increasing importance for the credibility of car companies. With growing public pressure, for example, because of the CO2 emissions, the actual contents of such reports might be more carefully scrutinised. It might not be enough to simply show improvements for certain niche products, but should be done for the whole car fleet. If companies who in fact do have a good product performance want to use environmental reports for supporting their environmental strategies, then a comprehensive set of product environmental performance data should be provided and benchmarked against goals and their performance from former years, or legal limits. The data should encompass environmental information about all the models in the car fleet and their respective shares. After all, the environment does not really profit if improvements are only applied to one percent of the products. This also goes for other complex goods industries. In this respect, it can be discussed if reporting frameworks such as the GRI Guidelines could enhance such reporting. Referring back to comments made in Chapter 7, the GRI Guidelines do not seem to be very well suited for complex goods industries such as car manufacturers. Of course, some of the items required, such as CEO statements, the environmental policy, and the environmental organisation are important to report on for any industry. Nevertheless, the important issues to report about, such as environmental considerations in the design phase, the R&D phase and the end-of-life management, as well as product performance cannot be emphasised enough within the prescribed structure. Sticking to such a framework does not guarantee complete and comparable reporting yet. Instead of using a rigid framework applied for all kinds of industry sectors, it would make more sense to make companies commit to reporting principles, such as credibility and relevance192. For the criteria credibility, this could for example encompass requirements that companies have to disclose all memberships of coalitions concerning the environment (i.e., also a membership in the Global Climate Coalition). Further, in order to be credible, the environmental reports should be verified by a third party, the CEO statement should express the personal view of a member of top management, and there should be a more critical discussion of the environmental problems caused by the whole system needed to support the “product car”, as well as of problems in achieving goals. Companies should be able to make priorities themselves for what should communicated in which order in an environmental report. The contents of environmental reports have to be adapted to the information needs of the stakeholders and the actual environmental efforts that companies are doing. However, concerning environmental performance indicators there should be a few agreed items on a sector level which really allow comparability.

191

Earth 2000 day, The Consumer Clearinghouse for the Environmental Decade, has “honoured” Ford in April 1999 with a “1999 don’t be fooled award” for being one of the top ten greenwashers of 1999. It earned this title by publishing advertisements like “Only one thing smells better than a new car. Fresh Air.", while at the same time selling SUV (Sports Utility Vehicles) which are considerable so-called gas guzzlers (one gallon per ten miles). Further, Ford is criticised for having virtual “environmental education programmes” for children, while at the same time being member of the Clobal Climate Coalition. Earth 2000 day (1999). The Don't Be Fooled Report. The Top Ten Greenwashers of 1999. Web-based source 192

see also: FEE (1999). FEE discussion paper towards a generally accepted framework for environmental reporting,

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Agathe Bolli

Concerning environmental performance indicators, in the case of car companies the main indicators should concern product performance. There should be agreed ways on how to report about fleet fuel use, fleet CO2 emissions, environmental performance concerning exhaust gas emissions (e.g. compared to legal limits), contents of hazardous substances, or recyclability. The indicators should be presented for all sold car models, and not just refer to good examples. Performance indicators concerning processes should be communicated in site reports. On a corporate level, a few relative indicators such as VOC emissions or materials use per manufactured car might be enough, together with an information about the corresponding systems boundaries. The GRI guidelines require only absolute indicators, however, for better comparability the indicators should also be presented in relative terms, such as VOC emissions per vehicle produced or the ratio between materials use and the actual weight of the car. Appendix 7 contains a list with some reflections to environmental performance indicators that could be used in environmental reports. Emerging sustainability reporting guidelines and all the requests for more comprehensive information from various stakeholders may lead companies to issue reports that are quite long and detailed, and the respective stakeholders might have difficulties in finding the right information at a glance. The new Toyota environmental report, for example, is one hundred pages long and overloaded with information. The Internet can offer a solution for many of the problems existent with current reporting and the search for common reporting structures. Through its possibilities in building information into a hierarchical structure and connecting it though hyperlinks, the Internet allows a more stakeholder-specific access to information. 8.2.4 How can the customer be reached? Customers are very loyal to brands, and branding is very important in the car industry. The environmental report can in this context help to add the attribute “environmental” to a brand. For making environmental differentiation strategies successful, however, the customer has to be reached more directly. Important tools are the Internet, press releases, exhibitions, advertisements, product leaflets, environmental product declarations or personal information at the point of sale. As mentioned earlier in the text, it seems that there is not an enormous demand for more environmentally friendly cars. This may be mainly due to a lack of financial incentives, but also because the customer might not be informed properly about the different environmental features and simply not be aware of the savings that actually can be reached. As some manufacturers in fact do manage to produce more fuel efficient and less polluting cars than other producers in the same price range with similar performance, they could benefit if consumers had the appropriate information to compare different models and to become more aware of the (potential) financial benefits that environmentally friendly cars offer. “Green car lists” issued by consumer associations often lump all cars together in their ratings and do not distinguish between different car categories. This means that the small cars always have the best results. If a consumer needs to buy a larger car, it should however be possible to choose the car with the best environmental performance within the respective category. An environmental product declaration or other customer information should therefore take the different properties of the different car classes into consideration.

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Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

Information about the environmental product performance has to be communicated in a way that is transparent and comprehensible, and can be used by the customer to compare different car models. Tools such as environmental product declarations or more simple labels should be increasingly used. It would make sense if car producers agreed on criteria for such a product declaration. However, it should be made clear towards which customers such declarations are directed (i.e. fleet customers versus individual customers), and the kind of information and in what form such customers really want it in. The choice of the performance indicators and the presentation of the product performance should definitely be more transparent than in the Volvo product declaration (see comments in Chapter 6.3.2.1). For individual customers, fuel efficiency and CO2 emissions should at least be declared. Such environmental benefits should preferably be declared together with financial benefits, for example, savings in fuel costs or car taxes for low emission cars, as this might change the customers’ perspective on costs and benefits. The planned EU fuel economy information scheme (see Appendix 4) will support such information and can hopefully influence the consumers’ choice. Nevertheless, it is questionable if the above mentioned customer information measures are enough to substantially influence the customers’ choice. For nearly a century, the car industry has been promoting automobile values like personal freedom and fun, which are not necessarily compatible with care for the environment and social benefits. For a real shift, changes on a social level would be necessary in the first place, that is, changes in the whole current mobility systems, changes in infrastructure, and changes in how personal mobility is perceived. Whether the car industry itself is willing and actually capable of promoting such changes and influencing perceptions and the political framework, is questionable. The car industry is locked into an interdependent system with other industries and the whole infrastructure that has been built up to support the gasoline or diesel powered private car.

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Agathe Bolli

9. Final remarks How—if at all—can environmental reporting and communication be used strategically by complex final goods producers to achieve competitive advantages? Environmental communication can in fact add to competitiveness of complex final goods producers, also car manufacturers—under certain conditions. This thesis presents a framework for how companies could take competitive issues into consideration for setting priorities in environmental communication (see Chapters 4 and 5). This can be done through a systematic analysis of environmental problems caused by the industry, environmental requirements and actual, latent or potential competition fields, and the implications that this causes for environmental communication towards the stakeholders in the different reference fields market, public and politics. This thesis did not aim at proving a clear link between environmental communication and competitiveness. The interdependencies between environmental problems of an industry, environmental performance, environmental communication and competitiveness are very complex and different for every company, so it is not possible to provide a general and valid “recipe” for how environmental communication can be used to enhance competitiveness in final goods industries. This thesis was aimed at showing potential benefits of environmental communication for competitiveness, and the scope did not try to find evidence of such positive impacts from examples in the past. The need for environmental communication cannot be justified solely with competitiveness arguments. As a consequence, the contents of environmental reports cannot be defined by competitiveness criteria only. For the purpose of this thesis, the car industry has been taken as an example of how this framework could be applied for complex goods industries. Chapter 6 aimed at analysing whether such considerations as proposed in the framework are actually taken into consideration in the environmental communication of the car industry. Due to the scope of the thesis, which was focused solely on informative environmental communication tools such as the environmental report, Internet communication and product information, the analysis was limited. More stakeholder-specific communications, for example, for supporting cost-strategies, could not be assessed sufficiently. Another aspect which could not be assessed in depth within the given time frame was the specific environmental information needs that the different stakeholders actually have, and how they are using the environmental information received. In general, it turned out to be difficult to describe environmental communication and possible effects without analysing in detail the actual underlying environmental performance and its effects on competitiveness. It was also difficult to distinguish between environmental strategies that companies are using and the actual communication about them. Nevertheless, conclusions could be drawn from the analysed environmental communication tools. Even though the car is one of the most polluting consumer goods, proactive environmental communication does not seem to have such high priority for the car industry. In fact car manufacturers have made considerable environmental improvements in the last twenty years concerning processes as well as concerning reduction of exhaust gas emissions such as NOx or hydrocarbons, mainly due to legal pressure. Other fields, such as fuel efficiency, have not been improved substantially. In general it can be said that automobile firms have communicated environmental improvements out of a moral obligation in order to keep their “licence to operate”, rather than for real market reasons. It cannot be said that environmental reporting has so far had positive influences on the competitiveness of car companies who did issue an environmental report or negative influences on companies who did not. The analysed informative environmental communication tools can help to support competitiveness, however, they only constitute one 96

Environmental Communication and Competitiveness - Case Study in the Car Industry

M.Sc. Thesis, IIIEE

Agathe Bolli

piece within the environmental communication. They can only be fully effective in combination with more participatory and consultative environmental communication. Generally, two “levels” of environmental communication from car companies have been observed. The same message is not communicated to all the stakeholders. On the one hand there is environmental communication aimed at environmentally interested stakeholders through environmental reports, environmental communication on the corporate web-sites, press releases or other environmental communication tools, where achievements are promoted. In the environmental reports, information about all identified competition fields is found. For example, all analysed car companies communicate their efforts concerning future propulsion technologies. Environmental communication is used by certain car companies to capitalise on opportunities arising from new competition fields such as low CO2 emissions. They are promoting developments in new technologies and showing prototypes or selling nicheproducts, such as the “3-litre Lupo” of Volkswagen. This can have a positive influence on their image and indirectly on competitiveness. But on the other hand there is “environmental communication “ by the whole car industry and its industry associations towards shareholders, political stakeholders and legislators, which from a defensive position, aims at gaining time and preventing more stringent environmental legislation, for example, concerning CO2 emissions or end-of-life management. In this sense, they try quite successfully to “mitigate threats” arising from environmental requirements in the sense of a market securing strategy. It could be said that political lobbying, which can also constitute a form of environmental communication, may be more important for competitiveness than an environmental report, however in a negative sense from the point of view of the environment. Overall, some car companies might be reaching competitive advantages through both ways of communication. It is questionable how long such communication strategies can be successful. Lobbying against requirements arising from the CO2 issue in the framework of the Global Climate Coalition (such as GM) and on the other hand promoting “cars of the future” with extremely good environmental performance is a somewhat contradictory strategy. The full potential of environmental communication for reaching competitive advantages can only be achieved if environmental communication is consistent on all levels and in combination with the respective improved environmental performance, otherwise sooner or later there will be a credibility problem. Looking closer at the several environmental communication strategies that the analysed firms are having, it can be noticed that companies like Volvo, Toyota and Volkswagen are using environmental communication far more proactively than, for example, Saab or Renault. Does this reflect the actual environmental strategy of these firms and, most importantly, the actual environmental performance? Are Volvo cars really much more environmentally friendly than Saab cars? Or are some companies not taking advantage of all the opportunities that environmental communication can offer for supporting their environmental competition strategies? Or are some car companies, through environmental communication, simply capitalising on the environment without actually achieving overall improvements for the environment? This question could not really be answered in this study and would need further research. There are several explanations why environmental communication and reporting (and also, in the first place, the offering of products with a considerably lower environmental impact) has so far not been of such a high competitive importance for the car industry, in spite of the large environmental problems that cars are causing. In comparison with other industries, such as the chemical industry, one explanation might be that the car industry is somewhat difficult to put under pressure and to “attack” directly. The actual manufacturing processes do not cause considerable impacts and are not prone to dangerous accidents. In the case of the chemical industry, environmental NGOs, local interest groups as well as the “general” public could be 97

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Agathe Bolli

mobilised easily after the incidence of accidents with considerable impact on the environment (e.g. Bhopal, Schweizerhalle). There are high risks arising from certain well-defined sources, and the “culprits” can be identified easily. Tools like the US Toxic Release Inventory (TRI) can in this respect represent a powerful tool for identifying “big polluters” which can then publicly be criticised and put under pressure. Open and transparent environmental reporting which clearly indicates the measures done to reduce these risks and emissions have in this respect had a positive impact on certain chemical companies193. The situation is different for complex goods industries such as the car industry, or the electronics and white goods industry. The high environmental impact arises from the use and disposal of the product. The sources of pollution are “scattered”, and the negative effects on the environment cannot be proved as easily as, for example, in the case of a chemical spill. Further, the actual behaviour of the user of the product also plays a considerable role. Reducing the impact of products may require co-operation of the customers and cause negative impacts in individual “benefits” (in the case of cars, for example, personal freedom, feeling of speed), whereas the social benefit can normally not be perceived directly by the individual (e.g. lower CO2 emissions). In this respect, there might be differences between different complex goods industries. The opportunities for environmental strategies are not the same in all complex goods industries. Electrolux represents an example of a company with a successful environmental communication strategy. It is proactively marketing its environmentally friendly household appliances, and can apparently reach good sales and higher margins on such products194. Apart from protection of the ozone layer, the products are marketed as saving energy and water, which brings a direct economic benefit to the consumer. The case of marketing a car with environment is more problematic, as a car symbolises much more than simply a functional product, and buying a car with lower impact or using a service instead might actually require changes in behaviour. Furthermore, considerable improvements in products or shifts towards services require changes in the whole infrastructure built around cars. This is difficult to influence, and the car industry does not seem to have too many reasons for promoting such a shift itself. As long as external costs of road transportation are not further internalised and the customers do not have more financial incentives, the demand for more environmentally friendly concepts is unlikely to increase substantially. Nevertheless, with raising awareness about environmental problems due to the car, and the raising competence of stakeholders to interpret environmental communication, it can be expected that the importance of openly communicating environmental performance on a transparent and comprehensive way will increase. Companies who do not issue an environmental report, or something similar, might tarnish their image. It can be hoped that financial analysts also start to integrate environmental issues more into their analyses. Companies will have to show in their reports how they are planning to cope in a world with more sustainable mobility. The height of environmental performance indicators such as fuel use or exhaust emissions could be translated into potential risks that arise if, for example, fuel prices were increased or exhaust gas emission limits were tightened. It will not be enough to simply issue an environmental report, but what is actually communicated in the report will be of increasing importance. If car companies want to use environmental communication effectively and credibly, they have be able to communicate substantial improvements which concern the whole car fleet and not just prototypes or niche products. Environmental communication cannot, in the long term, be successful without the corresponding environmental performance. 193 Companies such as Hoechst and Ciba Geigy were quite information-passive in earlier years, and changed their environmental communication strategy drastically after an accident happened. These efforts seemed to have improved their image. However, it has to be noticed that the pressure and the focus of environmental considerations (and in turn also of environmental reporting) is also in the case of chemical companies shifting towards products, as stated Mr. Tanner from Novartis. Issues discussed are, for example, the effects of GMOs in products or the impacts of fertilisers. Telephone Interview of 27.07.1999 with Martin Tanner, Communication Sustainable Development, Novartis, Basel 194

AB Electolux, Group Environmental Affairs (1997). “Electrolux says aggressive environmental strategy has strengthened its market position”

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10. References 10.1 Printed sources AB Electolux, Group Environmental Affairs (1997). “Electrolux says aggressive environmental strategy has strengthened its market position”, Business and the Environment, 8:7, 12-13 Altauto-Politik auf Kosten der Kunden? [Car End-of-life policy on costs of the customer?] (1999). Auto Bild, 30, 20 Azzone G., et al. (1997). “A stakeholders’ View of Environmental Reporting”, Long Range Planning, 30:5, 699-709 BMW (1997). BMW Umweltbericht 1997/98, Bayerische Motoren Werke Public Affairs, Munich CERES (1999). Sustainability Reporting Guidelines. Exposure Draft for Public Comment and Pilot Testing, Global Reporting Initiative, CERES (Coalition for Environmentally Responsible Economies), Boston Clausen, J., Fichter, K., and Loew, T. (1998). Die Bewertungsskala für das Ranking der Umweltberichte [The Scheme for the Ranking of the Environmental Reports], (Diskussionspapier des IÖW 41/98), Berlin Corporate environmental reports: Relevant and required? (1997), by New Zealand Ministry of the Environment, Business and the Environment, 8:9, 2-4 Driëenhuizen, F., et al. (1998). “Environmental accounting and auditing: a status report”, Environmental Accounting & Auditing Reporter, 3:5, 3-9 Dyllick, T., Belz, F., and Schneidewind, U. (1997). Ökologie und Wettbewerbsfähigkeit [Ecology and Competitiveness], Verlag Neue Zürcher Zeitung, Zurich FEE (1999). FEE discussion paper towards a generally accepted framework for environmental reporting, European Federation of Accountants (Fédération des experts comptables européens FEE), Brussels Fiat (1999). Fiat Environmental Report at December 31, 1998, External Relations and Communications Department of Fiat S.p.A., Turin Fichter, K., and Loew, T. (1997). Wettbewerbsvorteile durch Umweltberichterstattung [Competitive advantages through environmental reporting] , (Schriftenreihe des IÖW 119/97), Berlin Fichter, K. (1998). Umweltkommunikation und Wettbewerbsfähigkeit - Wettbewerbstheorien im Lichte empirischer Ergebnisse zur Umweltberichterstattung von Unternehmen [Environmental communication and competitiveness. Competition theories in the light of empirical results about environmental reporting], Metropolis-Verlag, Marbung future e.V./IÖW (1998). Umweltberichte und Umwelterklärungen. Ranking 1998. Zusammenfassung der Ergebnisse und Trends [Environmental reports and environmental declarations. Ranking 1998. Summary of results and trends], future e.V., Munich Graedel, T.E., and Allenby, B.R. (1998). Industrial Ecology and the Automobile, Prentice-Hall Inc., New Jersey Grafé-Buckens, A. and Hinton, A.-F. (1998). “Engaging the stakeholders: Corporate views and current trends”, Business Strategy and the Environment, 7:3, 124-133

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Jönsson, K., and Jacobsson, N. (1999). Environmental Product Communication, Lecture in Cleaner Products Course, IIIEE, Lund Kuhndt, M. (1997). Towards a Green Automobile. Life Cycle Management in Europe and the United States, Lund (IIIEE Masters's Theses 97:15) Lober D.J. et al. (1997). “The 100 plus corporate environmental report study: A survey of an evolving environmental management tool”, Business Strategy and the Environment, 6:2, 57-73 Porter, M. E. (1998). Competitive Strategy: Techniques for analyzing industries and competitors, The Free Press, New York. (Originally published in 1980, The Free Press, New York) Proposal for a Council Directive on End of Life Vehicles. COM (97)358, 9th July 1997, Brussels Price Waterhouse (1999). Automotive. Industry Analysis, Internal document of July 1999 by Price Waterhouse Reed, D. J. (1998). Green Shareholder Value, Hype or Hit?, World Resources Institute, Washington DC Reinhardt, F.L. (1999). “Bringing the environment down to earth”, Harvard Business Review, July-August 1999, 149-157 Russo V.M., and Fouts, P.A. (1997). “A resources-based perspective on corporate environmental performance and profitability”, Academy of Management Journal, 40:3, 534-559 Schaltegger, S., and Figge, F. (1998). Environmental Shareholder Value, (WWZ-Study No. 54), Center of Economics and Business Administration and Bank Sarasin & Co., Basel Schumacher, I. (1996): Anspruchsgruppen und ihre Anforderungen an Umweltberichte Fallanalysen bei den Firmen Ciba Geigy und Henkel [Target groups and their requirements upon environmental reports - Case studies at the firms Ciba Geigy and Henkel], (Schriftenreihe des IÖW 103/96), Berlin/Wuppertal Skillius, Å. and Wennberg, U. (1998). Continuity, Credibility and Comparability - Key challenges for corporate environmental performance measurement and communication, The International Institute for Industrial Environmental Economics at Lund University Smith, D. et al. (1998). Adoption by Industry of Life Cycle Approaches - Its Implications for Industry Competitiveness, European Commission/European Communities, London SustainAbility/UNEP (1997). The 1997 Benchmark Survey: The third international progress report on company environmental reporting, SustainAbility Ltd and the United Nations Environment Programme, London Sustainable Asset Management, SAM (1998). Sustainability in der Automobilindustrie [Sustainability in the automobile industry]. SAM Research, Sustainable Asset Management, Zurich Toyota Motor Corporation (1999). Environmental Report 1998. Toyota Motor Corporation Environmental Affairs Division Volkswagen (1997). The Volkswagen Environmental Report 1997, Research, Environment and Transportation, Volkswagen AG, Wolfsburg Volvo Car Corporation (1998): Environmental Product Declaration. Volvo S80 2.9, Sweden Warburg Dillon Read (1999). Global Autos. Presentation to Investors. Q1 1999. Internal document of April 1999 by Warburg Dillon Read, UBS, Zurich

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Warburg Dillon Read (1999): Global vehicle demand, part of internal document of July 1999 by Warburg Dillon Read, UBS, Zurich WBCSD (1996). Environmental Performance and Shareholder Value, World Business Council for Sustainable Development, Geneva WBCSD (1999). Eco-Efficiency Indicators & Reporting. Report on the Status of the Project’s Work in Progress and Guideline for Pilot Application, World Business Council for Sustainable Development, Geneva Wennberg, U. (1999). Sustainability Communication Platform. - Project Description. Project description from 29.05.99 sent out to possible pilot companies.

10.2 Web-based sources and e-mail sources Web-based sources Association of International Automobile Manufacturers, AIAM (1999). World vehicle production. http://www.aiam.org/99short.htm (12.08.99) Rehsche, M (1999): “Smart lässt sich nicht wie eine Swatch verkaufen” [”A smart cannot be sold like a Swatch”]. Automobil-Revue - Politik und Wirtschaft, 31. http://www.automobilrevue.ch/31_99/pol_smart.html (25.08.99) Commission of the European Communities (1998): Proposal for a COUNCIL DIRECTIVE relating to the availability of consumer information on fuel economy in respect of the marketing of new passenger cars. COM(1998) 489 final. 10th November 1998 Brussels. PDF-file from http://www.eubusiness.com/environ/981110c3.htm (15.06.99) Council on Economic Priorities, CEP (1999). The dirty secret about some fuel-efficient cars. CEP’s campaign for cleaner corporation. Press release CEP Auto Report. http://www.cepnyc.org/pressreleases/c3report/c3_1999.htm (21.07.99) CNIE (1996). The Partnership for a New Generation of Vehicles (PNGV). The Committee for the National Institute for the Environment. Congressional Research Service. Report for Congress. http://www.cnie.org/nle/eng-9.html (12.08.99) DieselNet (1997). How emissions are regulated. Tailpipe Emission Standards. http://www.dieselnet.com/standards/intro.html (18.08.99) Earth 2000 day (1999). The Don't Be Fooled Report. The Top Ten Greenwashers of 1999. April 14. The Consumer Clearinghouse for the Environmental Decade. http://www.earthday2000.org/publications/greenwash99.html (03.10.99) Environmental Defense Fund (1999). Green car: a guide to cleaner vehicle production, use, and disposal. http://www.edf.org/programs/ppa/vlc/index.html (14.07.99) EU business (1999). Background feature: CO2 and cars - fuel economy labelling. http://www.eubusiness.com/environ/981110c8.htm (02.08.99) EU business (1999). Background feature: CO2 and cars - Introduction. http://www.eubusiness.com/environ/981110c2.htm (02.08.99) European Automobile Manufacturers Association, ACEA (1999). Automobile Trade, May 1999. http://www.acea.be/acea/210599JantoDecember.html (06.08.99) European Automobile Manufacturers Association, ACEA (1999). Motor Vehicle Taxation in the European Union: Summary Table. http://www.acea.be/acea/MotorVehicleTaxationhtml.html (11.08.1999) 101

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M.Sc. Thesis, IIIEE

Agathe Bolli

European Automobile Manufacturers Association, ACEA (1999). Taxes on Motoring. Status March 1999. http://www.acea.be/acea/publications.html (11.08.99) European Automobile Manufacturers Association, ACEA (1999). “Agreement in COREPER on end-of-life vehicles does not solve the retroactivity issue" emphasises ACEA. Press release by ACEA of 23.07.99, Brussels http://www.acea.be/acea/press_releases.html (05.08.99) European Commission DG XI (1999). An Environmental Agreement with the European Automobile Industry. http://europa.eu.int/comm/dg11/co2/co2_comm.htm (15.06.99) European Commission DG XI (1999). ACEA Commitment on CO2 Emission Reductions from New Passenger Cars in the Framework of an Environmental Agreement between the European Commission and ACEA http://europa.eu.int/comm/dg11/co2/co2_acea.htm (15.06.99) European Commission DG XI (1999). Management of end-of-life vehicles. http://europa.eu.int/scadplus/leg/en/lvb/l21225.htm WASTE MANAGEMENT (15.08.99) European Environmental Bureau (1999): EEB’s Evaluation of the German presidency. http://www.eeb.org/press/eeb.htm. (02.08.99) Fédération International de l’Automobile, FIA (1998). Clean Cars and Clean Fuels for the Twenty-First Century. Position paper on the Draft Directives on Vehicle Emissions and Fuel Quality. http://www.fia.com/homepage/selection-a.html (05.08.99) Ford (1999). Ford’s perspective on Corporate Average Fuel Efficiency - CAFE is a flawed policy. http://www.ford.com/default.asp?pageid=87&storyid=65 (25.08.99) Friends of the Earth (1998). Atmosphere and Transport Campaign. Cleaner, More Efficient Vehicles. http://www.foe.co.uk/camps/attran/car.htm (22.08.99) Greenpeace (1996). Deutsche Autoindustrie: Spritsäufer statt Klimaschutz [German car industry: “Fuel drinkers” instead of climate protection]. Press release of 27.08.96 by Greenpeace Germany. http://www.greenpeace.de/GP_DOK_3P/PRESSEMI/P960827.HTM (20.07.99) Greenpeace (1997). Verkehr: Aufräumen mit dem Mythos “Drei-Liter-Auto” [Traffic: Get the things right with the myth “Three-litre-car”], Greenpeace Germany. http://www.greenpeace.de/GP_DOK3P/ZUSAMMEN/C09FF01.HTM (22.07.99) Greenpeace (1997). Rhetoric Versus Reality. Greenpeace International http://www.greenpeace.org/-climate/smile/dirty76rhetoric.html (20.07.99) Hypercarcenter (1998): What’s a Hypercar? Hypercarcenter/Rocky Mountains Institute http://www.hypercarcenter.org/whats_a_hypercar.html (18.08.99) OECD (1997). Transport and the Environment. Background and Synthesis Report: Policy Measures and their Effects. http://www.oecd.org/env/trans/grphpage/backgrn2.htm#3.1 (13.08.99) Office for the Study of Automotive Transportation, OSAT (1998). Delphi IX - Forecast and Analysis. University of Michigan Transportation Research Institute http://osat.umtri.umich.edu/delphi5.html (12.08.99) PSA (1999). Press release of 9th July 1999. PSA Peugeot-Citroën. http://www.psa-peugeot-citroen.com/en_indexAAF.html (15.07.99)

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Society of Environmental Toxicology and Chemistry, SETAC (1998). “Volvo Makes an Environmental Product Declaration”, LCA News, Volume 18, Number 6 http://www.setac.org/nov98lca.html (27.08.99) Verband der Automobilindustrie, VDA (1999). Bittere Pille für die Autofahrer – Mineralsteuererhöhung gefährdet labile Automobilkonjunktur [Bitter pill for car drivers - mineral oil tax increase is threatening the labile automobile economic situation], Press release of 23.04.1999 by VDA. http://www.vda.de/autoaktu/register/230699.htm (12.08.99) Verband der Automobilindustrie, VDA (1999). The VDA advocates a modified scrap car directive. Press release of 25.06.1999 by VDA http://www.vda.de/autoaktu/register/250699e.htm.(12.08.99) e-mail sources Environmental Data Services (1999). “Danish minister defends end-of-life vehicle law”, ENDS Daily, [email protected] (22.06.99) Environmental Data Services (1999). “EU ministers “ban" GMOs, delay scrap car law”. ENDS Daily, [email protected] (24.06.99) Cutter Information Corp.(1999). “Steel, Aluminum Industries Debate Lifecycle Impacts”, CutterEdge Environment, [email protected] (09.07.99)

10.3 Further consulted sources AB Electolux, Group Environmental Affairs (1998). “Long-term, holistic approach” pays off for Electrolux”, Business and the Environment, 9:7, 5-6 Adams, R. (1997). “European Environmental Reporting Scheme gives out first awards”, Business and the Environment, 8:6, 10-11 Azzone, G., Manzini, R. and Noci, G. (1996). “Evolutionary trends in environmental reporting”, Business Strategy and the Environment, 5:4, 219-230 Borghini, S. (1998): “Environmental information in annual reports: Italy, rest of Europe and North America”, Environmental Accounting and Auditing Reporter, 3:10, p 4-7 CERES (1998): “Corporate environmental reporting moves ahead”, Business and the Environment, 9:5, 2-4 EAG ENVIRON (1999): “Putting a price on environmental reporting”, Environmental Accounting & Auditing Reporter, 4:1, 5-7 Gamboni G. et al (1997): Umweltberichterstattung in der Elektronikindustrie [Environmental reporting in the electronics industry], Thesis work at the University of Zurich Hambro, E. (1998). “Norway considers reporting obligation for industry”, Business and the Environment, 9:5, 11-13 Maltby J. (1997). “Setting its own standards and meeting those standards: Voluntarism versus regulation in environmental reporting”, Business Strategy and the Environment, 6:2, 83-92 Pauli, G. (1996). “Zero emissions research initiative moves forward with key supporters”, Business and the Environment, 7:8, 4-6 Rocky Mountains Institute (1996). “Future “Hypercar” Manufacturers likely to come from nonautomotive sectors”, Business and the Environment, 7:6, 11 SAE (1997): Design for Environmentally Safe Automotive Products and Processes, SP-1263, Society of Automotive Engineers, Warrendale, PA, 1997 103

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SAE ( 1998): Total life cycle conference. Land, Sea & Air Mobility, P-339, Society of Automotive Engineers, Warrendale, PA Schaefer, A. and Harvey, B. (1998). “Stage models of corporate “greening”: a critical evaluation”, Business Strategy and the Environment, 7:3, 109-123 Society of Management Accountants of Canada (1998). “New guidelines may advance state of the art for corporate environmental reporting”, Business and the Environment, 9:7, 2-4 Spencer-Cooke, A. (1994). Where Silence is not golden. Towards the strategic use of corporate environmental reporting for company valuation, Chartered Association of Certified Accountants, London SustainAbility/UNEP (1996). The Case Studies. Twelve users respond to company environmental reporting. SustainAbility Ltd and the United Nations Environment Programme, London SustainAbility (1997). “Stakeholders have great expectations for corporate environmental reports”, Business and the Environment, 8:1, 2-3 Verweyst, C. (1996). “US DOE urged to adopt refrigerator efficiency standards”, Business and the Environment, 7:10, 13-14 Tavinor, C. (1998). “Shell quits the Global Climate Coalition”, Business and the Environment, 9:5, 8 US Environmental Defense Fund (1998). “EDF launches “Chemical Scorecard” service on the web”, Business and the Environment, 9:5, 7 http://www2.gol.com/users/hsuzuki/report.html: Links to environmental reports http://www.sums.ac.uk/sigma/sea.htm: Sigma Internet Resources Environmental Reporting http://www.pirc.co.uk/pubs/env99.htm: PIRC Survey 1999 http://www.enviroreporting.com/: International Corporate Environmental Reporting Site http://www.citizen.be/standard/PUBLIC/NEWS/Envnews.htm#CO2: http://www.eubusiness.com/environ/981006co.htm

10.4 Interviewed persons Björn Brovik, Environmental Coordinator at Saab Automobile AB, Trollhättan Personal interview of 30.06.99 Mary Ann Ruiz, Volvo, Brussels Telephone interview of 31.08.99 Dr. Raimund Medrisch, Head of the Environmental Department at BMW, Munich Telephone interview of 03.09.99 Robert Niggli and Gianreto Gamboni, UBS Brinson, Environmental Performance Analysis, Zurich Interview of 08.07.99 Wolfgang Lohbeck, responsible for climate, Greenpeace Germany Telephone interview of 26.08.99 Thomas Loew, IÖW Berlin Telephone interview of 22.07.99

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Appendices

Appendix 1 - GRI Guidelines Appendix 2 - Environmental reporting types Appendix 3 - Environmental problems in the car industry - Life cycle approach Appendix 4 - European legislation concerning car use phase Appendix 5 - Analysed Corporate web-sites Appendix 6 - Analysis of environmental reports Appendix 7 - Remarks to Environmental Performance Indicators

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 1 - GRI Guidelines Part 1: CEO statement It must contain among other the commitment to targets, acknowledgement of successes and failures, comments about performance and about challenges for the enterprise Part 2: Key indicators It contains an overview of the selected items extracted from the report. Part 3: Profile of Reporting Entity It contains an overview of the reporting entity and scope of the report to provide a context for understanding and evaluating information in subsequent sections. Items are, for example, name of the enterprise, nature of ownership, contact persons, financial information, number of employees or coverage of the report. Part 4: Policies, Organisation, and Management Systems It contains a statement of the reporting entity’s public commitment to the elements of sustainable development and how the entity has implemented organisational structures and management processes intended to fulfil that commitment. Items are, for example, the environmental policy, charters subscribed, organisational structure or management systems for suppliers. Part 5: Stakeholder Relationships It contains information on the process and methods by which stakeholders—both internal and external to the enterprise—are engaged. Part 6: Management Performance It contains indicators of the reporting entity’s performance regarding compliance with applicable mandatory standards, and adherence to internal policies and standards reported in Part 4, for example, magnitude of penalties for non-compliance, environmental liabilities, awards or supplier performance. Part 7: Operational Performance It contains indicators of the reporting entity’s operational performance regarding key aspects of sustainability, such as energy use, materials use, water use, waste or social indicators Part 8: Product Performance It contains indicators of the reporting entity’s product(s) regarding environmental, social, and economic aspects of sustainability. It includes items such as impacts associated with the life cycle of the products or procedures to assist product designers to create products or services with reduced life cycle impact. Part 9: Sustainability Overview Here the reporting entity’s efforts and progress towards integrating sustainability into its decision making and performance measurement are discussed.

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M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 2 - Environmental reporting types The following is a short description of the six different “reporting types” which Fichter and Loew195 identified when analysing the effects of environmental reporting order to analyse effects of environmental reporting. These different types showed quite different characteristics of reports and different target groups.

Market-oriented reporting types For this type of reporters, market actors such as customers or suppliers are regarded the main readership of the CER. Type “Corporate communication” Companies associated with this type are large corporations from branches that do not suffer from a bad image. Their own performance is emphasised and positive examples are highlighted. The target groups are above all the own employees, the media and customers. As a part of corporate communication, the CER constitutes only one of many environmentally related information tool. Type “Eco-marketing” Those are rather middle-sized companies who are in branches and segments where environmental protection is a purchase criterion. Environmental reporting is seen as a part of the eco-marketing and important information tool. The reports do not only focus on process environmental information, but also stress product related information. Customers are the most important target group. Type “Eco-niche pioneer” They are small companies where ecology constitutes an important part of the whole business idea. They are active in a limited market segment, where “ecology” is a central purchasing criteria. The reports contain comprehensive, problem-oriented information, possibly with LCA approaches. The most important target groups are customers, the media and consumers associations or other environmental NGOs.

Public oriented reporting types Type “Image problems” Belonging to this type are companies from branches which have to fight for acceptance and have image problems. These could be companies from the chemical industry, nuclear energy, sometimes power stations, or cement plants (which have more problems with the immediate neighbourhood). The reports are dialogue-oriented and concentrates on site or emission based. The most important target group is the public, media and the own employees. Employees themselves often suffer from the bad image of the company, which can affect their working moral.

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Fichter, K. and Loew, T. (1997): Umweltberichterstattung und Wettbewerbsfähigkeit

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M.Sc. Thesis, IIIEE

Agathe Bolli

Management oriented reporting types Type “EMAS-member” These are not meant to be all companies who have an EMAS registration, but the ones who only make an environmental declaration because it is prescribed. The reports only contain the minimum required information and are very formal. They normally do not have a special target group, and customers do not constitute an important target group. Type “Environmental controlling” These can be normally middle-sized companies who have been performing environmental controlling for years and can base their reports on many data. The main purpose of the environmental report is to sustain the environmental controlling and the information for the employees, who constitute the most important target group. Accordingly, the reports contain data balances, are problem and data oriented and systematic.

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M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 3 - Environmental problems in the car industry – A life cycle approach Raw material use and impacts from raw materials extraction and processing and pre-assembly manufacturing Operation

Environmental aspects

Drivers for innovation and environmental efforts ”Threats and opportunities”

Cleaner production strategies

Use of metals

Energy use for production and associated emissions land use



No “real” driver?



Reduce vehicle weight



Cost savings in raw materials costs and end-of-life costs



Use of LCA as a decision tool for appropriate choice of material



Reduced fuel use in use phase



No “real” driver?





Differentiation of product

Use of renewable resources, such as cotton-fibre, wood, wood-fibre, wool, leather, rubber



Cost savings (?) Legislation (prohibition of several hazardous materials, for example, asbestos)



”Red lists” with forbidden materials and components declaration duties for suppliers



Materials information systems for control over properties of components

Use of non-renewable resources

Depletion of non-renewable resources

Use of hazardous/ toxic materials, for example, asbestos (brake and clutch linings), CFC (air conditioning)

Soil, water, air pollution during manufacturing and end of life



Use of plastics

Energy use for production Air emissions (e.g. dioxins) in end of life



Legislation (e.g. ban of PVC)



Phase out PVC, use of plastics which are easy to recycle



Legislation (EPR Æ Cost savings in end-of-life management)



Labelling of plastics for easy dismantling and recycling



Use of renewable resources

Production of fuel for car use

Emissions into soil, water air from extraction and processing of fuel



see “use phase”



see “use phase”

Pre-assembly manufacturing

Various emission into soil, water air



Legislation



Materials requirements for suppliers



Cost savings



Environmental auditing of suppliers and requirements concerning environmental management for suppliers

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M.Sc. Thesis, IIIEE

Agathe Bolli

Vehicle Assembly Process Operation

Environmental aspects

Drivers for innovation and environmental efforts ”Threats and opportunities”

Cleaner production strategies

Use of adhesives in body assembly

Air emissions such as VOC



Legislation (emission limits)



Using bigger parts



(Legislation EPR Æ ) Cost savings in end-of-life management



Avoiding adhesives through “clicking” materials together

Anticorrosion operation: aqueous washing, zinc phosphating and pacifying rinse

Hazardous liquid and solid waste and wastewater (containing, for example, nickel or zinc)



Legislation



Closed cycles, ultrafiltration

Priming operation

Hazardous waste containing lead from electro-deposition process



Legislation (?)





Waste costs savings

Product reformulation for lead-free electro-deposition coating



Powder coating

VOC emissions



Legislation (emission limits)



High-solid, low-solvent paints



Cost savings (materials and waste costs)



Water-based paints



Powder coatings



Elimination of paint through substitution with plastics

Finishing operation: colour coat and clear coat

Wastewater with paint residues

Hazardous paint waste

Rejected parts due to deficiencies

Metal (above all steel) scrap

All operations

Energy use



Legislation



Ultrafiltration



Cost savings (?)



Closed cycles, reuse of water



Powder coating



”Block painting” (painting practice that minimises the frequency of colour changes in finishing operations)



Improvement of transfer efficiency (e.g. electrostatic spraying)



Recycling or recovery of paint waste



Improved quality control system



First reuse and then recycling



Several cleaner production options, such as energy conservation, co-generation



• •

Cost savings in paint costs and waste costs

Material cost savings Cost savings

A-6

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Use phase: Product design Operation

Environmental aspects

Drivers for innovation and environmental efforts ”Threats and opportunities”

Cleaner production strategies

Combustion of fuel

CO2 emissions (greenhouse effect)



Public pressure

Technical means to reduce fuel use through:



Voluntary agreements about CO2 reductions: European Commission (Agreement 98)



Improved engine efficiency, for example, through direct injection





Future legislation (CO2 and fuel taxes, fuel efficiency declaration)

Lightweight constructions (e.g. with aluminium, magnesium, plastics)



Improved aerodynamics (reduced air resistance)



Reduced rolling resistance



Latent heat accumulators which absorb motor heat



Switching to fuels with higher combustion efficiency (diesel) or low carbon content (alcohols, compressed and liquefied natural gas, hydrogen)



Electric vehicles



Hybrids: Combustion engine (gasoline, diesel, natural gas) combined with electric motor



Fuel cells: Production of electricity through reaction of hydrogen with oxygen Other means to reduce fuel use:

Incomplete combustion of fuel

CO emissions (Æ acute toxicity)



Legislation (CO limits for car exhaust gases)

A-7



”Intelligent driving concepts”: GPS navigation systems for drivers



Influencing drivers’ behaviour with education



Co-operation in “intelligent transport concepts” to avoid traffic and allow smoother traffic flows and co-ordinate means of transport.



Completely different understanding of “functional unit”?, for example, car sharing, renting



Three-way catalytic converter for gasoline and oxidising catalyst for diesel motors



Switching to fuels with low carbon content

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Operation

Environmental aspects

Drivers for innovation and environmental efforts ”Threats and opportunities”

Cleaner production strategies

High combustion temperatures

NOx emissions (Æ ground level ozone, acidification)



Legislation (NOx limits for car exhaust gases)



Three-way catalytic converter



Better combustion technology, for example, exhaust gas recirculation for diesel engines

Incomplete combustion of fuel

Hydrocarbons (ground level ozone)



Legislation (VOC limits for car exhaust gases)



Three-way catalytic converter for gasoline and oxidising catalyst for diesel motors



Switching to fuels with low carbon content

Legislation (Particulate limits for car exhaust gases)



”Particulate catalyst”



Use of Biodiesel

Particulate emissions (Æ Carcinogenic)



Combustion process and rolling

Noise pollution



Legislation ( dB levels for cars)



Sound-engineering

Increased road traffic

Traffic jams



Public



Small cars



Politics



Intelligent transport systems (GPS, etc.)



Completely different mobility strategies?, for example, car sharing, combination with train

Combustion of diesel fuels

Speed/Drivers’ behaviour/Low quality

Accidents



Public



Strong, large, heavy cars



Insurance (Cost savings through lower insurance premiums, liabilities)



Education of drivers

A-8

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Disposal/recycling Operation

Environmental aspects

Drivers for innovation and environmental efforts ”Threats and opportunities”

Cleaner production strategies

General: disposal of cars

General: low reusability and recyclability of cars



Take-back legislation

Design for dismantling, reuse, recycling, recovery:



Cost savings for disposal



Reducing amount and number of materials used (”one-materials concepts”)



Avoiding adhesives



Use of reusable and recyclable components



Labelling components



Dismantling handbooks for dismantlers



Design for dismantling, reuse and recycling



Design for reuse



Design for dismantling and recycling, for example, through use of less adhesives, labelling of plastics, use of recyclable plastics

Disposal of cars

Incorrect dismantling and disposal of cars

Metal scrap



Cost savings



Take-back legislation

High waste amounts through unrecyclable plastic waste with adhesives



Take-back legislation

Emissions of dioxins from incineration of PVC parts



Legislation: Ban (?) of PVC for certain parts



Use of alternative materials

CFC emissions from air conditioning installation



Legislation: Ban of certain CFCs



Ensure proper disposal and destruction of CFC



Use of alternative refrigerants

Emissions from lubricants and other oils



Legislation?



Ensuring proper dismantling and disposal of hazardous waste

Emissions from car batteries



Legislation (duty to take back batteries)



Ensure proper dismantling and disposal of hazardous waste



Take-back guarantees



Legislation



Reuse and recycle of tyres



Cost savings



Recovery of tyres in specialised plants

Emissions from incineration of tyres

A-9

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 4 - European legislation concerning car use phase Regulation concerning fuel quality The banning of lead was an aim of fuel quality regulations during the eighties. According to Directive 85/210, all cars built after 1993 must run on lead-free petrol. From 1st January 2000, the sale of leaded petrol in the European Union will be banned. Recent efforts aim at reducing sulphur and benzene contents of fuel. The automobile industry always emphasise that the fuel quality plays a crucial role in achieving technological improvements concerning tailpipe emissions. In the framework of the Auto-Oil Programme which started in 1994, regulations concerning fuel quality were developed together with regulations concerning exhaust gas emission and the inspection and maintenance of vehicles196. The results were then used by the European Commission to develop five new directives to come into effect by the year 2000.

Exhaust gas emission limits Exhaust gas emissions limits exist in European countries since the sixties and have been tightened up several times since. It can be said that they encouraged the development and implementation of better technology to control emissions. The related testing, enforcement and administrative mechanisms are already in place, and are familiar to regulators, politicians, manufacturers and consumers. The catalytic converter is mandatory for gasoline-powered cars in Europe since 1993197. New, tighter exhaust gas emission limits, called Euro 3, will be introduced in the EU in the year 2000. Car manufacturers orient their efforts towards meeting the exhaust gas requirements in California, which are today the toughest in the world. Methods used for measuring exhaust gas emission and fuel use in the framework of the mandatory type approval have often been criticised as not reflecting the actual conditions during use. Since 1996, the new European driving cycle (MVEG) is in use, where some two-thirds are made up of urban driving and one-third of non-urban driving198. The new method of measuring leads to fuel consumption figures some 5 to 15 percent higher than with the old method and comes closer to actual consumption in everyday use.

Car taxation Nearly all European countries have a sales tax and annual vehicle taxes. However, the criteria for taxation (weight, value, engine power, cylinder capacity, pollutant emissions, environmental class), the height and the use of the revenue (general budget, infrastructure, mitigation of environmental impacts) of the taxes differ considerably and are not necessarily based only on environmental criteria. Sales and registration taxes are often based on value or cubic capacity (in Austria based on fuel consumption), whereas the criteria for annual taxes are different and range from weight, axles, fuel consumption, pollutant emissions, noise to cubic capacity199. Some countries also have tax exemptions for environmentally friendly cars, such as Germany. Such taxes have an impact on the price of a car and are considered by consumers. However, in certain car segments the price elasticity is probably quite low and drivers may be indifferent toward higher taxes of stronger and more fuel-consuming cars. 196

Friends of the Earth (1997). Atmosphere and Transport Campaign. Cleaner, More Efficient Vehicles. Web-based source

197

Fiat (1999). Fiat Environmental Report at December 31, 1998, p 21

198

Volkswagen (1997). The Volkswagen Environmental Report 1997, p 21

199

European Automobile Manufacturers Association, ACEA (1999). Motor Vehicle Taxation in the European Union: Summary Table. Webbased source

A - 11

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Fuel excise duties and CO2 taxes Gasoline is still very cheap in most European countries. Most countries have an excise duty on fuel which is sometimes partly earmarked for environmental purposes. Excise duties on diesel are normally lower than on gasoline (except for the UK). The excise duties for unleaded gasoline differs considerably from 319 Euro/1000 litres in Greece to 670 Euro/1000 litres in the UK, and the one for Diesel from 253 Euro/1000 litres in Luxembourg to 713 Euro/1000 litres in the UK. However, to get a better picture, these prices should be put into context with the actual fuel price in the respective countries200. Several Nordic countries have taxes explicitly declared as CO2 tax. However, they are not high enough to serve as a strong incentive for reducing fuel use. Some countries in Europe have started to increase taxes on fuels. As a part of its climate change strategy, England, in 1993, introduced the “fuel price escalator”. This is an annual increase on the duty of petrol and diesel of 3% a year. In 1994 this was raised to 4% a year and now it is planned to be 6% a year. In the framework of the ecological tax reform, the mineral oil tax in Germany has been increased in April 1999, and there are plans of the government to increase the fuel price gradually in four stages up to DM 2. This is opposed by the Association of German car manufacturers (VDA) as being unsociable (e.g., discriminating against people living in the countryside or with a low budget) and a threat to the competitiveness of the German car industry201.

Regulations and agreements on fuel use and CO2 emissions - European level The EU set out a strategy in 1995 to reduce CO2 emissions from cars202. The objective of the strategy is to reduce the average emissions of CO2 from new passenger cars by 35% down to a level of 120g/km by the year 2005 (or latest by 2010)203. This would relate to an average fuel consumption of about 5 litre/100 km for gasoline and 4.5 litre/100 km for diesel cars. The Commission put up three “pillars” of action fields: •

Environmental agreements with automobile manufacturers



A fuel economy information scheme



Fiscal incentives.

Underlying the whole strategy is an independent monitoring system that will allow the EU to monitor progress towards the policy goal. This includes an obligation of Member States to collect data for every new car that is registered in their territory. This data includes specific CO2 emissions, manufacturer, mass, engine capacity and power. Environmental agreements with automobile manufacturers: Commitment Negotiations with the ACEA (Association des Constructeurs Européens d'Automobiles/European Automobile Manufacturers Association204) concluded with an agreement reached in July 1998, approved on 8th October 1998 by the EU council 205. The ACEA members committed themselves to reduce CO2 emissions to the average of new passenger cars sold in the European Union down 200

European Automobile Manufacturers Association, ACEA (1999). Taxes on Motoring. Status March 1999. Web-based source

201

Verband der Automobilindustrie, VDA (1999): Bittere Pille für die Autofahrer - Mineralsteuererhöhung gefährded labile Automobilkonjunktur (Bitter pill for the car drivers - mineral oil tax increase is threatening the labile automobile economic situation. Webbased source

202

A Community Strategy to reduce CO2 emissions from passenger cars and improve fuel economy (COM 95/689)

203

EU business (1999): Background feature: CO2 and cars - Introduction. Web-based source

204

Members are BMW, Fiat, Ford of Europe, GM Europe, Daimler-Benz, Porsche, PSA Peugeot Citroën, Renault, Rolls-Royce, VW, Volvo

205

European Commission DG XI (1999). An Environmental Agreement with the European Automobile Industry. Web-based source

A - 12

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

to 140 g/km206 by the year 2008. The scope of the agreement is passenger cars of category M1207. As the current (1995) market average is 186 g/km, this means that CO2 emissions have to be reduced by 25 percent, compared to 1995. For 2003, ACEA considers an estimated target range of 165-170 g of CO2/km to be appropriate. At the same time ACEA committed itself to review the potential for additional CO2 reduction in 2003 again, with a view to moving further towards the Community’s objective of 120g CO2/km by 2012. According to ACEA, these targets will mainly be achieved by technological developments affecting different car characteristics and market changes linked to these developments. In particular, ACEA will aim at a high share—up to 90 %—of new cars sold being equipped with CO2-efficient direct injection gasoline and diesel technologies208. This agreement also contains intermediate objectives such as that some members of ACEA will begin to sell models emitting 120 g/km CO2 or less in the EU market not later than 2000. The Commitment will be jointly monitored by the Member States and the Commission. The Member States will provide the Commission with publicly available data on the development of the average CO2 emissions of new passenger cars. ACEA emphasised in its commitment that it is important that also non-ACEA members make similar commitments in order to avoid distortions of competition. A fuel economy information scheme The EU Commission has adopted (03/09/1998) a legislative proposal to provide consumers with information on the fuel economy of new cars, which is planned to come into force in December 1999. The aim is to influence consumers’ choice towards more fuel-efficient models. The essential elements of the Commission's proposal are209: •

• • •

A fuel economy label for all cars that are displayed at the point of sale (valid for cars of the category M1210). It has to be of a standardised format and be attached so it is clearly visible on the windshield of the cars. It should contain data on fuel consumption and CO2 emissions as well as estimated fuel costs for 10,000 km driving. The Member States have to set a representative fuel price once yearly for petrol and diesel which should be used to calculate the fuel costs that are required by the consumer information scheme. A fuel economy guide (appearing at least on an annual basis) which must be available free of charge and produced both as a booklet and in an electronic media form. A list, containing the fuel efficiency and CO2 emissions of all new passenger cars available at a particular dealership, displayed in the form of a poster at the point of sale. The inclusion of official fuel consumption data in promotional literature such as advertisements in magazines and newspapers, posters, brochures issued by car manufacturers and car dealers.

There are several national schemes in operation already notably in the USA, Canada, the United Kingdom and Sweden, and several European states are planning to introduce one, such as the Netherlands, Denmark and possibly France. The schemes are all quite different from one another. For example, not all the schemes include a calculation of the fuel costs211.

206

measured according to the Community’s current measurement procedure (Directive 93/116/EC)

207

as defined in Directive 70/156/EEC

208

European Commission DG XI (1999). ACEA Commitment. Web-based source

209

EU business (1999). Background feature: CO2 and cars - fuel economy labelling. Web-based source

210

M1, as defined in Annex 1 to Council Directive 70/156/EEC, that is used for the carriage of passengers and that has no more than eight seats in addition to the driver's seat. It does not include vehicles falling under the scope of Council Directive 92/61/EEC

211

Commission of the European Communities (1998): Proposal for a COUNCIL DIRECTIVE relating to the availability of consumer information on fuel economy in respect of the marketing of new passenger cars. Web-based source

A - 13

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Fiscal incentives The above described agreement about CO2 reductions does not exclude the possibility of member states introducing additional fiscal measures to cut down fuel use. However, the ACEA itself mentions in the CO2 commitment, “As long as its commitments are being honoured, ACEA is assuming that this Commitment provides complete and sufficient substitute for all new regulatory measures to limit fuel consumption or CO2 emissions”212.

End of life - Directive on End-of-life vehicles Several obligatory car take-back schemes already exist in Europe on national level, for example, in the Netherlands or in Sweden. However, the systems and the underlying objectives are quite different from each other. In July 1997, a proposal for a EU car take back legislation was presented by the Commission, and an amended proposal was presented on 28 April 1999. The aim of the proposal is to prevent the creation of waste from vehicles213 and render it less dangerous by promoting re-use, recycling and recovery of vehicles and their components. The core requirements in the proposal are214: •

Endeavour to reduce the use of hazardous substances when designing vehicles (Article 4). Also, mercury, hexavalent chromium, cadmium and lead (except lead used in electrical circuit welds) should be excluded from being shredded after the transitional period215.



Provisions on the collection of all end-of-life vehicles (Article 5). To reduce pollution from the dumping of vehicles, the proposal calls for the development of an economically profitable system for the collection of end-of-life vehicles under the responsibility of the Member States. As from 1 January 2000, all end-of-life vehicles must be transferred to authorised treatment facilities. From 1st January 2003, the costs for car scrapping should be borne by the car manufacturers



Provisions on the treatment (Article 6). Requirements concerning treatment of certain components.



Targets for reuse and recovery (Article 7): The aim of this proposal is to increase the rate of reuse and recovery to 85% (80% for reuse and recycling) by weight per vehicle up to the year 2005, and to 95% (85% for reuse and recycling) by the year 2015. At the moment, 75% of end-of-life vehicles are recycled (metal fraction).

212

European Commission DG XI (1999). ACEA Commitment. Web-based source

213

Applies to vehicles of the category M1 (vehicles used for the carriage of passengers and comprising no more than eight seats in addition to the driver seat) and N1 (vehicles used for the carriage of goods and having a maximum mass not exceeding 3.5 tonnes), as well as two and three wheel motor vehicles. 214

Proposal for a Council Directive on End of Life Vehicles. COM (97)358

215

Apparently, a provision to ban PVCs from vehicles was dropped before the proposal was published.

A - 14

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 5 Analysed Corporate web-sites Volvo Car Corporation http://www.car.volvo.se/index.asp (Volvo Cars Corporate, main consulted site) http://www.volvocars.com/home/index.html (Volvo Cars of North America) http://www.volvo.com/ (Volvo Corporation) http://www.volvo.com/environment/index.htm (Environmental Report 1998) Volvo is owned by Ford Motor Company Saab AB http://www.saab.com/global/index.html (Saab Cars, main consulted site) http://www.saab.com/ http://www.saab.se/ (Saab Group) Saab is to 50% owned by General Motors Volkswagen http://www2.vw-online.de/international/english/index_2.htm (main consulted site) http://www.volkswagen.de/umweltbericht/englisch/index.htm (Environmental Report 1997) BMW http://www.bmw.com/bmwe/homepage/index.shtml (BMW, main consulted site) http://www.bmw.com/bmwe/pulse/index.shtml (Environment under “Clean Energy”, Environmental Report 1997 under “Enterprise”) Audi http://www.audi.com/ (Audi World Site, main consulted site) http://www.audi.de/ (Audi Germany) Audi is owned by Volkswagen AG Opel http://www.opel.com (main consulted site) http://www.europe.opel.com/cars/ (Products) http://www.europe.opel.com/fleet/environment/index.jhtml (Environment) Opel is owned by General Motors DaimlerChrysler http://www3.daimlerchrysler.com/ (main consulted site) http://www3.daimlerchrysler.com/index_e.htm (Environment/Environmental Report 1999) http://www3.daimlerchrysler.com/products/products_e/index_e.html (Products)

A - 15

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

General Motors http://www.gm.com/ (main consulted site) http://www.gm.com/about/info/world/index.html (Environment) http://www.gm.com/about/info/world/98Enviro/index.html and http://www.gm.com/about/info/world/97Enviro/index.html (Web-customed Environmental Reports 1997 and 1998) Ford Motor Company http://www.ford.com/default.asp (main consulted site) http://www2.ford.com/default.asp?pageid=5 (Environment under “Better Ideas”) http://www2.ford.com/content/report.pdf (Annual/Environmental Report 1998) Fiat http://www.fiatgroup.com (main consulted site) PSA Peugeot-Citroën http://www.psa-peugeot-citroen.com/ (main consulted site) http://www.psa-peugeot-citroen.com/en_indexBBF.html (Environment) Renault http://www.renault.com/ (Group Corporate, main consulted site) http://www.renault.com/gb/index_produits.html (Products) http://www.renault.com/gb/index_entreprise.html (Environment under “Renault, R&D”) http://195.6.119.33/site/index_presse.cfm?LANGUE=2 (Environment under “R&D”) Toyota http://www.toyota.co.jp/e/top/index.html (main consulted site, Environment under “Cars and the Environment) http://www.toyota.co.jp/e/purchasing/ (Purchasing) http://www.toyota.co.jp/e/envrep98_e/index.html (Summary Environmental Report 1998)

Analysed Corporate Environmental Reports Volvo (1999). Volvo Environmental Report 1998, Environment and Public Affairs of AB Volvo, Gothenburg Saab (1999). Saab Environment, Saab Automobile AB, Trollhättan (not a corporate environmental report) Volkswagen (1997). The Volkswagen Environmental Report 1997, Research, Environment and Transportation of Volkswagen AG, Wolfsburg BMW (1997). BMW Umweltbericht 1997/98, Public Affairs of Bayerische Motoren Werke AG, Munich Fiat (1999). Fiat Environmental Report at December 31, 1998, External Relations and Communications Department of Fiat S.p.A., Turin General Motors (1997). the right road. General Motors Environmental, Health and Safety Report, General Motors, Detroit, Michigan Toyota (1999). Toyota Environmental Report 1998, Environmental Affairs Division of Toyota Motor Corporation A - 16

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 6 - Analysis of environmental reports information not found or only very basic

Information found partly, not comprehensive

Main criteria and sub-criteria 1

General information about the company

2

Environmental policy/environmental guidelines

2.1

CEO (or management) statement

2.2

Full information found

Toyota 98

Volvo 98

Saab ”99”

BMW 97/98

GM 97

VW 97

Fiat 98



Commitment to triple bottom line and SD

no

no

no



Trends in the political frameworks (fuel taxes, EPR, etc.) and challenges mentioned

statement

statement

statement



Achievements



Failures, non-compliance with goals



Priorities (product design, use phase, for example, fuel use efficiency)

Environmental policy/guidelines and principles •

Compliance with legislation



Involvement of stakeholders/employees



Life cycle approach



R&D/Products: fuel efficiency, emissions reductions



Procurement (Requirement on suppliers)



Process



End-of-life (EPR)



Transportation concepts, co-operation with public, politics



Membership in environm. associations, signatories of charters

A - 17

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli Main criteria and sub-criteria 3

Environmental management system

3.1



Overview/organigram, responsibilities for environ. protection

3.2



Environmental information systems in place

3.3



Employee information, participation and qualification

3.4



Workers health and safety

3.5



Involvement of suppliers

3.6



Involvement of dealers

3.7



ISO/EMAS certifications

4

Data about company related matter and energy streams

4.1 4.1.1

Prioritisation of environmental aspects/actions in production Process “strategies” • Powder coating •

4.2

Toyota 98

Volvo 98

Saab ”99”

BMW 97/98

GM 97

VW 97

Fiat 98

Water based paints

”Environmental balance sheet” Input: •

Steel



Other metals



Plastics



Rubber



Glass



Paints and lacquers



Solvents



Oils and greases



Industrial gases (oxygen, acetylene, CO2, argon)



Renewable resources



Recycled material



Toxic materials

metals

halog.

A - 18

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli Main criteria and sub-criteria •

Energy



Fuel



Water

Toyota 98

Volvo 98

Saab ”99”

BMW 97/98

GM 97

VW 97

Fiat 98

Output: • Products: Cars, Engines •

Air pollution: VOC (or HC, solvents)



Air pollution: CO



Air pollution: CO2



Air pollution: NOx

*

**



Air pollution: SO2

*

**



Air pollution: particulates

*



Waste: recycled



Waste: landfilled/incinerated



Waste: hazardous



Waste water amounts



Water pollution: COD/BOD



Water pollution: AOX



Water pollution: N



Water pollution metals: Ni



Water pollution metals: Zn



Water pollution metals: Cr



Water pollution metals: Cu



Water pollution: Cyanide (CN)

*

*

*

*

* The Toyota emission data is indicated in mg/m3, g/m3, or mg/l, and compared to the control value. There is no information about yearly volumes or masses

** The Volvo NOx and SO2 emissions are expressed in acidification potential (SO2-equivalents/tonne). More detailed data on process emissions is available on the Toyota web-site

A - 19

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli Main criteria and sub-criteria 4.3

Compliance with environmental standards of production

4.4

Indication of the method of data collection and systems boundaries (e.g. how much is manufactured in-house)

5

Ecological aspects of products and services

5.1

Discussion of relevant questions of product life cycle and prioritisation of efforts in product development concluding from life cycle perspective

5.11

Presentation and discussion of the broader impact of cars such as land use because of infrastructure

5.2

Product strategies

5.3



Comments about challenges (legislative framework, public requirements) and implications for product development



Use of LCA



Improvements in traditional combustion engines



Lightweight constructions



Different fuels, hybrid and electromobiles



New propulsion systems: Fuel cell



Drivers’ safety



Intelligent Transport Systems (GPS)



Efforts in drivers’ education



Co-operation with other transportation means, measures concerning infrastructure and car-pooling

Toyota 98

Volvo 98

Overview over car models and fuel use/emissions



Fleet fuel consumption



Examples of car models with fuel consumption, CO2, CO, NOx, HC and particulate emissions, driving noise



Overview over which cars comply with which exhaust limits

BMW 97/98

GM 97

VW 97

not really ….

(x)

Product performance data •

Saab ”99”

A - 20

Fiat 98

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli Main criteria and sub-criteria •

Overview of material composition of cars



Data to reusability and recyclability



Use of relative environmental performance indicators, for example, fuel use, CO2 emissions/car



Compliance with environmental requirements concerning ban and phase out of product substances



Compliance with exhaust emissions and fuel use standards

6

Environmental programme and environmental goals

6.1

Overview over performance towards goals with critical analysis

6.2

Description of the goals and measures •

EMS, auditing



Communication

Toyota 98

Volvo 98

Fleet fuel use and CO2 emissions



NOx, VOC, CO, SO2 and particulate reduction



Alternative propulsion systems, low fuel use prototypes



Reduction/Avoidance of hazardous materials



Phase out/reduction of CFC in air conditioning



Use of renewable materials



DfE: recycling/recovery quota



Vehicle noise reduction



Use of LCA



Intelligent transport systems

left side: goals

Procurement •

BMW 97/98

GM 97

VW 97

not really

Product development •

Saab ”99”

Requirements for and involvement of suppliers

A - 21

right side: measures

Fiat 98

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli Main criteria and sub-criteria •

Toyota 98

Volvo 98

Red/grey lists

Production •

EMAS and ISO Certifications



Reduction of solvent and VOC emissions



Reduction of heavy metal emissions (air and water)



Energy management



Water management



Waste management and recycling



Noise reduction

Logistics End-of-life •

Take back responsibility and requirements on dealers



Take back infrastructure



Recycling and closed materials cycles

7

Economic questions of environmental protection

7.1

Costs and savings

7.2

Assessment of the market situation and market potential •

Comments about possible influence of fiscal incentives

8

Communication with target stakeholders

8.1

Presentation of the actual and future activities with stakeholders

8.2

Naming of contact persons, invitation for feedback

8.3

Additional information and links

A - 22

Saab ”99”

BMW 97/98

GM 97

VW 97

Fiat 98

Environmental Communication and Competitiveness – Appendices

M.Sc. Thesis, IIIEE

Agathe Bolli

Appendix 7 - Remarks to Environmental Performance Indicators Remarks to environmental performance indicators for products Environmental performance indicators for products should at least provide information about fuel use, CO2 emissions, other exhaust gas emissions such as NOx, CO, HC, SO2 and particulates, contents of hazardous and otherwise problematic substances and recyclability. The following are some ideas for indicators which could be presented in environmental reports: • Fleet fuel use. The fleet fuel use shows the fuel economy performance of the whole fleet, which is actually what counts. The percentage of the fleet that runs with diesel and the percentage that run with gasoline should be declared, otherwise the comparability cannot be done concerning CO2 emissions. Furthermore, it would be useful if manufacturers agreed on one way of using metrics for declaring fuel efficiency (e.g., litres/100 km), or at least indicating the conversion factors from litres/km to miles/gallon. • Fleet CO2 emissions should accordingly also be declared. These emissions could be compared, for example, with the average European fleet CO2 emissions and goals stated in the ACEA commitment. As subcategories, it would also make sense to divide the fleet fuel use and the fleet CO2 emissions into the different vehicle classes. So could for example the CO2 emissions be declared in comparison with the average within the respective vehicle class. Otherwise producers of smaller cars can always show better performance. • The performance of the car concerning other exhaust gas emissions such as NOx, CO, HC, SO2 and particulates could be declared in comparison with legal limits, for example, as number of models complying with a certain emission standard. • Contents of problematic substances such as CFC (from air conditioning), asbestos, lead, mercury, cadmium or sodium azide (from airbags) should be declared for every model • Indication of recyclability of the cars. However, this indicator is problematic. There is a difference between the theoretical recyclability and the actual possibilities of recyclability in a certain region or country. Certain plastic parts might be recyclable from the technical point or view. However, such recycling facilities might not be existent or there might be no collection system for the concerned parts.

Remarks to environmental performance indicators for process phase The process environmental performance indicators published in the corporate environmental report should be limited to a few core indicators concerning materials use, energy use, waste production and VOC emissions. Relative environmental performance indicators would be useful for comparability, together with an indication of the systems boundaries (i.e. an indication of which manufacturing steps are included in the measurement). The following are some ideas for indicators: • kg material input/kg product. Most of the material used in the manufacturing plants can be recycled. However, recycling also requires energy use. A lower material use per product indicates higher resource efficiency. • kg recycled waste/kg total waste. • VOC emissions/car produced. In order to compare VOC emissions from paint shops between different production sites, it should be indicated how the VOC emissions are measured or estimated. Apparently, there are different methods. At Saab, for example, the VOC emissions are based on a calculation with a model. The model is based on the consumption of VOC containing substances and their properties and includes parameters for how much VOC are emitted at each process step. The results of this model are cross-checked with VOCmeasurements in the smokestacks. A - 23

Publications in the IIIEE communications series 2000 Agathe Bolli Environmental communication and competitiveness A case study of the car industry 2000:1 Raquel Garcia Product chain management to facilitate design for recycling of post consumer plastics: Case studies of polyurethane and acrylic use in vehicles 2000:2 Daniel Johansson The influence of eco-labelling on producers of personal computers The potential for eco-labelling as part of an IPP approach for reducing chemical risks related to PCs in Sweden 2000:3 Jessica Johansson Organic farming: Possibilities to increase organic cereals production in Skåne: A comparative study of Sweden and Denmark 2000:4 Wendy Kerr Remanufacturing and ECO-efficiency A case study of photocopier remanufacturing at Fuji Xerox Australia 2000:5 Alexandra Kielkiewicz-Young Packaging and packaging waste policy in Poland Case study of containers for beer and soft drinks 2000:6 Roberto López Chaverri Development of environmental performance indicator The case of fish canning plants 2000:7 Shuk-wai Freda Fung Handling the Municipal Solid Waste in China Case study of policies for ‘White Pollution’ in Beijing 2000:8 Antonia Simon Analysis of drivers and barriers for reducing hazardous chemical use in the computer industry 2000:9 Naoko Tojo Analysis of EPR Policies and Legislation through Comparative Study of Selected EPR Programmes for EEE-Based on the In-Depth Study of a Japanese EPR Regulation 2000:10 Alex Young Free Trade and Computers: Trade regime implications for an integrated product policy to reduce the risk of toxic substances in the computer product chain 2000:11 Christina Hansson Standardiserat miljöarbete i de minsta företagen En delrapport i projekt SMEMAS 2000:12

1999 Jens Birkenheim, Henrik Löfquist, Peter Arnfalk, Mikael Backman Miljödiplomeringar i Sverige: En delrapport i projekt SMEMAS 1999:1 Jessica Johansson Ekologiskt jordbruk: Möjligheter för ökad ekologisk spannmålsproduktion i Skåne: Jämförande studie mellan Sverige och Danmark 1999:2 Continuity, credibility and comparability Invitational Expert Seminar, Eze, France, June 13-16, 1998 1999:3 Total cost assessment: Recent developments and industrial applications Edited by Mikael Backman and Rabbe Thun 1999:4 Cleaner production: The search for new horizons Edited by Ralph Meima 1999:5 Budeanu, Adriana A tour to sustainability A discussion on tour operators' possibilities for promoting sustainable tourism 1999:6 1998 Kent Lundgren, Helena Frankel, Erik Ling Bioenergins nuvarande och framtida konkurrenskraft: föreställningar om konkurrenskraft 1998:1 1997 Ralph Meima On Account of Sustainable Industrial Development: a Proposal for Capabilities-Based Approach 1997:1 Mikael Backman et al Challenges and Approaches to Incorporating the Environment into Business Decisions Invitational expert seminar 1997:3 Lars Hansson Kostnadsansvaret för trafikens externa effekter En jämförelse mellan vägtrafik och tågtrafik 1997:4 1996 Karin Sannum Barti, Åsa Söderberg På rätt spår: benchmarkingstudie av miljörapportering inom transportsektorn 1996:1 Thomas Parker An Overview and Guide to the Literature of Environmental Accounting Issues 1996:2 (Communications 1996:3 not published) Virve Tulenheimo, Rabbe Thun, Mikael Backman Tools and Methods for Environmental DecisionMakingin Energy Production Companies; 1996:4

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