Table of Contents

Acknowledgments

1. Introduction.............................................................................................3

2. Promotion of Participatory structure.......................................................4

3. The Green Rating Initiative (GRI)...........................................................6

4. Guideline for assessment .......................................................................7

5. Benefits of Green Rating ........................................................................7

6. The project components.........................................................................8

7. The industrial sector to be considered for Green Ratings.......................9

8. The key institution of GRI ........................................................................9

8.1 The Project Advisory Panel (PAP).....................................................9

8.2 The Technical Advisory Panel (TAP).................................................10

8.3 The Green Rating Network (GRN).....................................................10

9. The Process of GRI..................................................................................10

10. The rating system of GRI: Public Disclosure............................................11

10.1 Discrepancy Policy...........................................................................13

10.2 The Rating System of GRI (Weightage)...........................................14

10.3 The Rating System of GRI (Rating Scale)........................................15

10.4 Comparative analysis........................................................................15

10.5 The Rating System of GRI (The Green Leaves Award)..................16

11. Green Rating Network...............................................................................16

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Acknowledgement

The Environment Protection Authority would like to acknowledge the United

Nations Industrial Development Organization and the Royal Dutch Government for
their assistance under the Ecologically Sustainable Industrial Development (ESID)
Project US/ETH/99/068/Ethiopia in the preparation of these policy Implementation
tools and guidelines.

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1. Introduction

A growing number of developing countries are significantly cutting industrial

pollution by using the combined power of local communities, NGOs, markets and
the news media to police air and water discharges from Companies. This new
community-based approach is proving more effective in curbing pollution than
relying on traditional approaches to environmental regulations. Public disclosure -
the regular collection and dissemination of information about a firms’
environmental performance-has been characterized as the “third wave” in
environmental regulation, after command-and-control and market based
approaches (Tietenberg 1998). Public disclosure does not necessarily require an
effective enforcement capability or even a well-defined set of environmental
regulations. The costs of administrative activities it does require-data collection
and dissemination-appears to be falling due to new information technologies. As a
result, public disclosure holds particular promise for Ethiopia, where the regulatory
institutions are short of funding, expertise and committed support. These are more
so, as the private industry sector is expanding and developing in the Country.

The Green Rating Initiative, which is one form of public disclosure mechanism,
invites for the voluntary participation of stakeholders outside the regulatory public
institutions of the Country to implement the Industrial environmental policy. These
include the private sector, Industry, Civil societies, NGOs and others. Interested
NGO or civil society group can take the lead to initiate the process of GRI in
Ethiopia.

This guideline is prepared to lay the ground for the establishment of such a
mechanism in Ethiopia. The first four chapters deal with the principles and benefit
of the Green Rating Initiative. The next three chapters (chapter 6 to 8) outline the
key project components and Institutions of the GRI. The process of GRI, its rating
system, analysis and the purpose of Green Rating Network are discussed in the
consecutive chapter 9 to 11.

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2. Promotion of Participatory Structures (The Green Rating
Initiative, “GRI”)

Institutions involved in environmental management and planning are not only

those representing the public sector. Although the public authorities are
responsible according to their spheres of responsibility for environmental
planning, management, legislation and enforcement – whether solely or as
intergovernmental institutions – there are other parties whose participation and
involvement is indispensable. These are namely the private sector, the industry
and civil society organizations and the community (both known as the voluntary
sector, including women). The participation of these groups in the industrial
environmental policy implementation is thought necessary because they are the
interested groups beside the governmental authorities. Among them are those
who would contribute to awareness, inducing and motivating for creativity,
contributing by way of research and direct training, enriching the efforts on policy
development and analysis, and protecting the interest of the neighborhood.
Participation beyond consultation is, therefore, very much called for.

It is also widely agreed that participation as a vehicle of good governance is the

main method by which sustainable economic management can contribute to the
institutional crisis of lack of convergence of the public and private sectors,
neglect of the wide productive base in the urban and rural sectors and to the
structural and functional disconnect between formal and informal institutions.
Structured NGO and community participation is being considered here by
introducing a new concept: The Green Rating Initiative (GRI). This is a structure
meant to facilitate participation by participants and operators outside the
Government structure. As mentioned above the “people of Ethiopia” is not a term
that applies to the Government structure alone, but to a much broader one. What
then is meant, and how can we put the GRI to work? This will be discussed
below.

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This exercise has been pursued by several NGOs in the West. In the USA the
Council of Economic Priorities (CEP) based in New York has run the exercise,
and was promoted by investors, as most investors today want to invest in socially
responsible and environment friendly companies. CEP ratings are used by
financial companies to decide on which companies meet these criteria. In India
there exist an NGO, Center for Science and Environment, which developed a
similar project and avails of a central industrial pollution database. The CEP in
the US uses the Toxics Release Inventory, a database maintained by the US
EPA, which has yearly information on the waste and emissions of the companies
and is openly accessible to everyone. Once such data is available it would be
easy to set up some benchmark and rate establishments according to those
benchmarks. In the case of Ethiopia voluntary disclosure is basic to the success
of this initiative. These can also be obtained from annual environmental reports
required by law (if passed) in Ethiopia. Yet it is more beneficial to industries to
open up for direct data collection and thereby benefit from advice and
constructive hints provided by the GRI team. This project builds on Ethiopia’s
biggest strength: its democracy which gives its people the chance to participate,
to create and to effect positive change. The GRI is likely to be a powerful, but
also a legitimate and knowledgeable supervisory body. Its role can further be
strengthened by its participation in other projects than the rating exercise alone,
e.g. in the development and monitoring of the negotiated agreements between
industry and the regulators or supervising bodies.

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3.The Green Rating Initiative

The GRI is a participatory effort for conducting a popular assessment of

Ethiopian industries’ environmental performance and social commitment.

The project is an attempt to provide an independent and fair evaluation of the

comparative environmental performance of companies from a perspective, which
supports responsible industry and encourages poor performers to improve. The
key objectives of the GRI are:

 To monitor the environmental performance of Ethiopian companies and

create a reputational incentive for improving this performance over time
through a transparent rating system.

 To raise the importance of environmental management within the

company to the level of top management, including the CEO.

 To make the managers of the company aware of what is expected of

them – which is not fairly the case in Ethiopia – in terms of good
environmental management, which goes beyond the rules and norms
set by the Government, so that companies begin to take a proactive
role in this aspect.

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4. Guidelines for the Assessment:

 To consider company's future environmental commitment

rather than it's past track record
 Give considerable weightage for voluntary disclosure of
information
 Provide a company first opportunity to view the report before
public dissemination
 Have a transparent rating methodology
 Seek participation from the industry specialists on the
advisory and technical panel.

5. Benefits of Green Rating

By evolving a "Green Rating" method to assess the relative performance of

Ethiopian industries and making this evaluation and corresponding data available
to the public, public pressure from investors, financial institutions, government
regulatory bodies, media, consumers can be harnessed. It is beneficial also to
think of such an institution being supported by industry itself, popular initiative
and professional bodies than by the Government as such. This may promote the
creation of more confidence by financial institutions granting credit on basis of
sound environmental performance – as mentioned in the terms of reference to
this project.

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Major Benefits of the Green Rating System

 Increased voluntary environmental improvements by industry

 Increased voluntary disclosure of environmental performance
to enhance public image
 Increased public awareness of environmental issues.
 Increased choices and empowerment for investors and
consumers.
 Increased ability of industries to compete in national and
international markets.
 Increased ability of industries to attract investors and
business partners.
 Due diligence from financial institutions in supporting
responsible industries.
 Progress towards sustainable industrial growth.

6. The Project Components

The project has four primary components

 Data collection/dissemination
 Environmental performance analysis and rating
 Advocacy
 Education

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 7. The Industrial Sectors to be considered for Green Ratings

Agro Inputs Cement Dyestuffs

Textiles Distilleries Beverage
Food Sugar Steel and Rolling Mills
Oil and Gas Non-ferrous Metals Pharmaceuticals
Plastics Chemicals Tanneries

8. The Key Institutions of GRI

These are:

 The Project Advisory Panel (PAP)

 The Technical Advisory Panel (TAP)
 The Green Rating Network (GRN)

The GRI can be put (administratively and geographically) under the auspices of
one of the committees of the Environmental Protection Council or, preferably, an
NGO or some independent and reputable and well-respected civil society
organization or environmental research organization.

8.1 The Project Advisory Panel (PAP):

Comprising of eminent politicians, scientists, civil society leaders, lawyers,

judges, celebrities, and industrial leaders. It can be made of a Chairperson, four
Vice Chairpersons and 12 members.

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8.2 The Technical Advisory Panel (TAP):

This is sector-specific and has leading technical experts. It can be formed for the
textile, tannery, food processing, chemical, mining, and engineering sectors.
Composition can be made of less or more members as above.

8.3 The Green Rating Network (GRN):

 Includes volunteers from across the country who inspects the units.

9. The Process of GRI

 A detailed sector study is prepared

 On the basis of the sector study, a sector-specific plant-level
environmental Performance questionnaire is prepared on the
principles of life cycle analysis
 The sector-specific plant-level environmental performance
questionnaire is sent to the company together with a questionnaire
about corporate environmental policies and management
systems.
 Meanwhile, a member of the GRN visits the plant and interviews
the plant manager, talks to the local community, NGOs and media,
and collects information from the local/state pollution control
officials on the company.
 GRI team starts work on preparing an environmental profile of the
company using all available data from secondary sources including
inputs from pollution control boards.

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  Information provided by the companies is scrutinized by the GRI
team and queries are discussed with the TAP. The GRI team then
sends the queries to the companies.
 A company profile is made on the basis of the information from the
GRN inspector, answers to queries from the companies, and other
information received on the company from secondary sources.
Each profile is reviewed by the TAP.
 The final draft of the profile is sent to the company for its review. At
this stage the company can inform the GRN team if it disagrees
with any information. But in that case it has to provide hard
evidence in support of its position.
 The TAP reviews the comments of the company and takes a final
decision. The profile is finalized and if the TAP disagrees with any
information supplied by the company, the company’s position is
appended to the profile but it is not taken into account for the rating.
 The GRI team finalizes the ratings based on the rating scheme
cleared by the TAP for the specific sector.
 The rating scheme and the environmental performance ratings
are presented to the PAP for its clearance.

Note: This is an evolving process and will change with time and
experience. But full care will be taken to ensure that the process
and rules remain the same for the rating of one sector so that
different rules do not get applied to companies within one sector.

10. The Rating System of GRI: Voluntary Disclosures

As the GRI is built on voluntary disclosure by companies, the rating system

consists of both a stick and a carrot. The rating exercise automatically provides a
‘reputational incentive’. Companies which have already made an effort or are

11
currently making an effort to improve their environmental performance clearly
have an incentive to seek public recognition of the effort they are making.

In order to push this ‘reputational incentive’ further, we also have a stick in our
rules. The stick is a "default option" under which we would automatically rate any
company which does not voluntarily disclose information as the worst company.
The logic being that whereas a company can legitimately argue that its profits
and its financial dealings are its private business, its environmental impact is a
public matter simply because the environment belongs to the public and not the
company. Therefore, non-disclosure of its environmental performance is just not
acceptable. This argument is today also supported by international trends.
Voluntary disclosure in the case of environment is today an accepted good
business practice in the West.

Therefore we use the following multiplication factors for voluntary

disclosures:

Conditions Multiplication Factors

Full disclosure and participation at all stages 1
No disclosure in the first phase but feedback is 0.5
provided only after profile is sent to companies
No feedback to profile/no disclosure or participation 0

The carrot, on the other hand, is a certain weightage in the ratings given to
companies that are trying to make a difference. We begin by assuming that most
Ethiopian companies have been performing badly on the environmental front —
partly because of inadequate/lack enforcement of laws or stark lack of laws as is
the case now in Ethiopia, and partly because industrial leaders not having given
enough attention to pollution control. In these circumstances, if a company is
making an effort to set up good environmental management policies and systems

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to bring about a change in its current environmental performance, then we
respect that effort and give it a certain weightage.
Over time, of course, this weightage would be reduced and full weightage given
mainly to actual environmental performance.

10.1 Discrepancy Policy

Data discrepancy may be identified in some cases during a specific sector rating.
To deal with this the following discrepancy policy has been evolved and will be
used in all sectors.

a. If the information supplied in the environmental statement to the

Pollution Control Board (or factory inspectorate) of the EPA is
different from that supplied to Region 14, for instance, then the
discrepancy will be disregarded as long as the company can justify
the data it has given to Region 14.

If a firm gives data that is found/considered to be wrong by the TAP

and if the firm is not able to give adequate justification, a
multiplication factor of 0.95 will be used against its entire rating. If a
firm shows signs of/or admits carelessness during the submission
of data, then too this multiplication factor will be used.

b. If the company has voluntarily disclosed data but has not

answered a query, 0 marks will be given to the company for the
criteria to which the query relates.

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 c. If the data supplied by a firm at the initial or the feedback stage is
incorrect, then a multiplication factor of 0.95 will be used against the
entire rating.

10.2 The Rating System of GRI: Weightage

The weightage are distributed in the following way:

i. Criteria for Corporate Environmental Policy and Management System (35)

 Corporate Environmental Policy (7)

 Corporate policy on procurement of raw materials, water,
energy and chemicals (3)
 Corporate policy on waste management, technology
adoption, and community relations and communications (2)
 Status of corporate environmental management (19.5)
 Transparency (2)
 Awards (1.5)

ii. Criteria for Plant and Product-Level Environmental Performance (50)

 Plant-level performance
o Input Management (8)
o Process Management (including recycling and
reuse of resources and wastes) (31)
o Waste Management (11)
 Product-use performance (0)
 Product-disposal performance (0)

iii. Criteria for community and regulatory perception and compliance

Status (10-15)

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  Compliance with pollution control board regulations and
perception of Pollution Control Board officials (2.5)
 Perception of local community (2.5-5.0)
 Perception of local NGOs and media (2.5)
 Perception of CSE’s green inspector (2.5)
 Perception of Neighbors (factory or other) (2.5)

Note: The weightage given in parentheses are those used in a hypothetical case. They
will vary from sector to sector.

10.3 The Rating System of GRI: Rating Scale

Rating of plant/product-level performance uses the following scale:

Theoretical Best 10
Global best practice 8
Ethiopian Average/Standard/Legal Requirement 2

Notes:

1. Wherever a regulatory standard exists it will be taken as the lowest benchmark (2 marks)
and in case of no regulatory standard the Ethiopian average will be considered (e.g.,
there is no regulatory standard for total SOx and other sulphur-related emissions; in this
case the average of all say, textile mills is taken and given 2 marks). Performance below
the average gets zero. There is a linear scale between 2 and 10.

2. The Global Best Practice will be given 8 marks out of a maximum score of 10 marks. The
theoretical best practice will be given 10 marks, as we would like to drive technology to
achieve better environmental performance rather than become a captive of existing
technology.

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10.4 Comparative Analysis:

For those parameters which neither have any regulatory standard nor any
precedent exists, a comparative analysis is done in which the value of the
parameter with the maximum positive impact out of the total sample will get 10
marks and that with the minimum positive impact will get 0 marks.

10.5 The Rating System of GRI: The Green Leaves Award

Green Leaves Award Weighted Scores

Five Leaves Award 75-100
Four Leaves Award 50-74.9
Three Leaves Award 35-49.9
Two Leaves Award 25-34.9
One Leaf Award 15-24.9
No Award 0-14.9

11 Green Rating Network

This is a countrywide network of volunteers undertaking survey & data collection

on industries on behalf of GRI’s group.

Given political commitment for the Initiative to take place, and given the
preparedness of the industry to disclose and prove transparency in operation,
this is the most challenging part of the project and it is where the greatest
workload and thereby the success or failure of the project is determined.

Ethiopia may not be prepared right now to undertake such a project. But we have
mentioned earlier that directly after this policy project the first logical step for the

16
industry and the regulatory authorities is to engage the industry in intensive good
housekeeping practices. A stage where the consciousness of clean
environmental behaviour would start to be inculcated in the industrial community.
After the first three or four years the regulatory structure (standards, inspection
and monitoring, etc.) would be in place and ready for implementation. It is then
that additional and independent effort to encourage good behaviour and creativity
and discourage environmentally unfriendly behaviour of the industries would be
much needed. The GRI may thus be best launched now with much flair, celebrity
and commitment. By the coming few years there would be enough participants
and volunteers for the project. We expect more participation in Addis Ababa and
first then the next larger urban centers would take it up. There will then be
enough experience for replication and correction.

Volunteers are expected to come from all walks of life, but they should be
selected such that they are qualified to do the job and located near the sample
industries. Short listing for higher quality is always a favorable exercise.
Participants to the network are expected to come from professionals, students,
civil servants, NGO members, etc. These must be backed by a credible civil
society organization able to garner support from civil society itself, government
organizations, research institutions, etc. This exercise has been launched a few
years back in India where it came to score a high level of success in the initial
stages.

Communication to and with volunteers is of utmost importance. The design of an

appropriate guideline document explaining what is expected of them and how to
go about it is very important. Detailed forms for rating parameters like raw
material efficiency, energy and water efficiency have to be prepared and have
volunteers trained on their use. The guideline document should also give detailed
input on all aspects of the surveys and data collection exercise, along with GRI’s
questionnaires for the industries and pollution control boards (Inspectorate of the
EPA or Region 14). If e-mail is widespread in Ethiopia by the time these could be

17
dispatched to volunteers and exchange of information and ideas would be
simpler.

Eventually the success or failure of the project could only then be judged if:

 Green Rating Team is able to get complete information on a

significant proportion of its sample industries.
 Considering the secrecy adopted by industries and to some
extent public institutions, tremendous effort need to be made in
collection of data –perhaps with photos and plans of industries
to organize and decrease releases to the environment and
improve on material handling, process improvements, devising
recycling or pretreatment implements and plants as additional
achievements.

Homogeneity of information provided by GRN members that would enable

ranking/rating all industries on their environmental performance is necessary.

18
Guidelines on Green Rating
Initiative

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