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Enhancing

Sustainability in the
Industrial Sector
Agenda
• Sustainability
• Industrial Sustainability
• Barriers
• Drivers
• Performance
• Take-home messages and food for thought
Sustainability
• Why is sustainability important?
• When did the sustainability concept first emerge?
• How would you define sustainability?
Sustainability
Sustainability
The origin of Sustainable Development
“Sustainable development is the development that meets the need of the
present without compromising the ability of future generations to meet their
own needs” (United Nations 1987)

1992 Earth Summit, Rio de Janeiro Agenda 21


Millennium Declaration and Millennium
2000 Millennium Summit, UN Headquarters in NY
Development Goals (MDGs)
World Summit on Sustainable Development, South The Johannesburg Declaration on Sustainable
2002
Africa Development and the Plan of Implementation
UN Conference on Sustainable Development
2012 “The Future we Want”
(Rio+20), Rio de Janeiro
The 2030 Agenda for Sustainable
2015 UN Sustainable Development Summit, New York
Development

Triple purpose (United Nations 2015):


• End poverty - Economic sustainability
• Protect the planet - Environmental sustainability
• Ensure prosperity for all - Social sustainability
Sustainability
What’s in a name?

The Cosmic
Interdependence
Model The Russian Doll
Mebratu, 1998 O’ Riordan 2001

The Mickey Mouse The three pillars


Model ?
O’ Riordan 2001
Sustainability
What’s in a name?

Institutional Pillar
(The Prism of Sustainability)
Spangenberg et al. 2002

Technical Pillar
Hill and Bowen 1997
Garetti and Taisch 2012

Cultural Pillar
Soini and Birkeland 2014
Sustainability
What’s in a name?
“The vagueness of the concept of sustainable development, coupled with its
increasing importance […] led to a large political battle for influence over our future
by linking interpretation to the concept” (Mebratu 1998)

Sustainability: I know it when I see it


(White 2013)
• Terms associated with the three pillars
• Nature
• System
Sustainability
What’s in a name?
Weak and Strong Sustainability
(As from Mulia et al. 2016)

Weak Sustainability
Focus on economic achievements with
social development at the expense of
environment.

Strong Sustainability
Focus on the sustained natural
environment; human impacts remain
manageable.
Industrial Sustainability
• Why should we implement sustainability in the industrial sector?
• What does it mean to implement sustainability in the industrial sector?
• How to enhance sustainability in the industrial sector?
Industrial Sustainability
And you might ask yourself “Well, how did we get here?”

• Current modes of production resulted the in socioeconomic and environmental


consequences
• Substantial technological, managerial, organizational and behavioural changes
are required to make them more sustainable in the short and long term
• Change is not possible without the transformation of industrial processes
Industrial Sustainability
Is it progress if a cannibal uses a fork?
“Can these corporate cannibals not only learn to use more civilised tools but
also begin to shift their diet towards inputs that are less economically, socially
and ecologically damaging?” (Elkington 1997)

Social
Bottom Line

Economic
Bottom Line

Environmental
Bottom Line

“Some of the most interesting challenges are found not within but between the
areas covered by the economic, social and environmental bottom lines” (Elkington
1997)
Industrial Sustainability
Is it progress if a cannibal uses a fork?
Wave 1 - Understand. Environmental impacts and natural resource demands
have to be limited: initial outpouring of environmental legislation. The business
response was likely to be defensive, focusing on compliance, at best.

Wave 2 – Realize. New kinds of production technologies and new products are
needed: development processes have to become sustainable. The business
response would began to be more competitive.

Wave 3 – Recognize. Sustainable development requires profound changes in the


governance of corporations and in the whole process of globalization. The
business response will need to focus on market creation.

People

Planet Profit

(Elkington 1997, 2004)


Industrial Sustainability
Is it progress if a cannibal uses a fork?
Sustainability simultaneously considers and balances economic, environmental
and social goals from a microeconomic standpoint, visually represented as the
intersection of the three pillars. (Carter and Rogers 2008)
Industrial Sustainability
Keys areas of Sustainability for Businesses

Natural Resource Use


Environmental Management
Pollution Prevention
Social-Environmental Environmental-Economic
Environmental Justice Eco and Energy Efficiency
Natural Resources Stewardship Environmental Subsidies/Incentives for use
Locally and Globally of Natural Resources

Sustainability

Social Economic

Standard of Living Profit


Education Cost Savings
Community Economic Growth
Equal Opportunities Research and Development

Economic-Social
Occupational Health and Safety
Business Ethics
Fair Trade
Industrial Sustainability
Keys areas of Sustainability for Businesses - Economic

Corporate governance
Governance policy
Governance Structure
Compensation of Directors
Succession planning
Emergency planning
Business Risk (e.g. geographic)
Financial Robustness
Business longevity
Profitability trends
Cash flow trends
ROCE
Credit risk score trends
Innovation Capacity
Investment record
Policies and process
Business Integrity and Ethics
Internationally recognised codes of conduct
Legislative compliance record

Source: Professor Andrew Douglas


Industrial Sustainability
Keys areas of Sustainability for Businesses - Social
Employment Practice Indicators
Accreditation or certification
Policy (e.g. diversity /equal opportunity / fair pay)
Procedures / Compliance management
Workforce restrictions
Workforce Demographics (e.g. location of facilities)
Longevity / Absenteeism
Occupational Health & Safety
Communication and worker feedback
Corporate Citizenship / Philanthropy
Community engagement
People management and Development
Training and development (job based, EHS etc.)
Talent attraction and retention policies
Performance and career development review
Human Rights Compliance
Child and forced labour compliance
Suppliers and Contractors Practises
Freedom of association
Supply Chain
Geography & management of known risk areas
Polices and process

Source: Professor Andrew Douglas


Industrial Sustainability
Keys areas of Sustainability for Businesses - Environmental
Environmental Management Waste Management
Management Systems Management Systems
Policies Policies
Roles Responsibilities Permit and Licenses
Continuous Improvement Reduction Plans (3R principles)
Annual/Management Reviews Hazardous Wastes
Legislative Compliance and updates Water Management
Aspect and Impact Registers Management Systems
Risk control – corrective and preventative Policies
Audit / Accreditation Permit and Licenses
Biodiversity Reduction Plans
Greenhouse Gas Emissions Sustainable Sourcing
Roles Responsibilities Policies / strategy
Policies Audit/ Accreditation
GHG Measurements and management Supplier management Scheme
Energy Consumption Packaging Management/Reduction Plans
Usage by Energy Source Materials and Resource Use
Deployment of alternative sources of energy Conservation of scarce resources
Packaging Management/ Reduction Plans
Eco-design

Source: Professor Andrew Douglas


Industrial Sustainability
Examples of Corporate Messages
Industrial Sustainability
Examples of Corporate Messages
Industrial Sustainability
Examples of Corporate Messages
Industrial Sustainability
A proposal for the definition

Sustainability

Corporate Sustainability

Industrial Sustainability

Sustainable Manufacturing

“Industrial Sustainability accounts for all the actions that are referred to the
production plant, at the levels of material, product, process, plant and systems of
production as well as integration into normal operations.” (Trianni et al. 2017)
Industrial Sustainability
Current landscape – Relevance and Opportunities
• Relevance
o Sustainable Development Goals address industrial systems as fundamental for the
improvement of sustainability performance
o Industrial sector is recognised as one of the most important for both the number of
people employed and turnover generated

• Opportunities
o External and internal stakeholders pressure industry to address environmental and
social aspects of sustainability, besides canonically economic ones
o Sustainability is a major competitive factor
Industrial Sustainability
Current landscape – Problems and Challenges
Environment-related Aspects Social-related Aspects

Raw material consumption Work–related accidents and diseases (non-fatal)


• Industrial sector 30% of EU (Eurostat, 2017b) • 340 M/y victims work-related accidents (ILO 2018)
Energy consumption • 160 M/y victims of work-related illnesses (ILO 2018)
• Industrial sector more delivered energy than any other • Over 3.2 M EU-28 (2015) (Eurostat, 2018a)
end-use sector, about 54% (EIA 2018)
• EU-28 consumption around 1,600 million eq. oil tons Work–related accidents and diseases (fatal)
(Eurostat, 2017a) • 2.3 M/y deaths (over 6,000/day) (ILO 2018)
• 40% consumed by industrial sector (Eurostat, 2017a) • 3,876 EU-28 (Eurostat, 2018a)
GHG emissions generated
• 4.4 billion CO2 tons EU (Eurostat, 2018c) The economic burden
• Industrial share 20% (EPA 2018) Cost for individuals, employers, governments (HSE 2018)
Waste generated • 3.9% GDP, - 2,680 G€/y (EU-OHSA 2017)
• 2 million tons industrial sector EU (OECD 2018) • Europe: 3.3% GDP - 476 G€/y (EU-OHSA 2017)

Small and Medium Enterprises

• Enterprises (according to the European Union) • Accounting for the 82% of occupational injuries and 90%
 < 250 persons of all fatal accidents
 Turnover < € 50 M • 93.6% of EU SMEs are independent  Growth and
• Key to economic growth, innovation, job creation and innovation played by owners
social integration (Eurostat, 2018b)
• 99.8% of European enterprises
• Consistent environmental impact
Industrial Sustainability
Current landscape – Problems and Challenges
Pillars consid.
Trianni et al. (2019) Firm
Eco Soc Env
Impact of sustainability on firm performance
A ● ● Any
B ● Positive effect on environment and employees’ wellbeing
Focus on the research C ● ● Any
Some aspects of D ● No direct impact on value creation
sustainability are still E ● ● ● Positive effect on employees’ wellbeing
F ● Any
missing still in the EU G ● ● ● Positive effect on overall firm performance
manufacturing sector and H ● ● ● Positive effect on economic and safety performance
SMEs, in particular, face I ● ● Any
J ● ● ● Positive effect on workers' wellbeing
difficulties in properly It leads to technical disadvantages and ethical advantages. Not sure of positive effects on final
K ● ●
evaluate sustainability customers
L ● ● ● Positive impact on employees’ wellbeing
impact.
M ● ● Any
N ● ● ● Sustainability as a philosophical concept. No economic advantages, but disadvantages
The Sample. O ● ● ● No advantages but the potentiality of advantage
P ● ● ● Positive effect on overall firm performance
26 industrial SMEs across Q ● ● ● Positive effect on overall firm performance
Germany and Italy R ● ● ● Advantages since world is moving towards sustainability. Positive effect on firm's image
operating in the chemical S ● ● ● Environmental issues and concerns as marketing instruments or related to economic reasons
T ● ● Positive effect on overall firm performance
and metalworking sectors. U ● ● ● Positive effect on overall firm performance
V ● ● ● Positive internal (employees' safety) and external (market) effect
W ● ● ● Positive effect on overall firm performance
X ● ● Any
Awareness of sustainability as possible advantages on overall firm performance, but not always
Y ● ●
considered in decision-making process
Z ● ● ● Economic internal benefits and community external benefits
Industrial Sustainability
Industrial Sustainability Interventions
The attainment of sustainable performances in all its dimensions in an industrial
context is pursued through the adoption of sustainability intervention.

An Industrial Sustainability Intervention is a technical or organizational


intervention tailored on firm's characteristics, that is intended to improve a firm's
overall sustainability performance or related to specific sustainability pillar, whilst
having no impact or a positive impact on the others (Trianni et al. 2017).

There is a good evidence that measures aimed at increasing sustainability in


industrial firms can be effective and have a positive impact on performance .
However firms still struggle with the implementation of them.
Industrial Sustainability
What’s next?

Barriers

Industrial
sustainability Adoption Process Performance
intervention
Barriers
• What is a barrier?
• What are the main barriers to the adoption of industrial sustainability
interventions?
Barriers
Definition
A barrier to an industrial sustainability intervention can be defined as: “a postulated
mechanism that inhibits a decision or behaviour that appears to improve industrial
sustainability performance” . (Sorrell et al. 2004; Trianni et al. 2017)

Barriers make industrial sustainability interventions perceived as burdensome or


unprofitable or requiring too many organizational changes.
Further, industrial sustainability interventions may be considered not strategic and
not linked to core business.
Barriers
Main barriers to the adoption of industrial sustainability interventions
Neri et al. (2021)

The Research Question


What are the main
perceived barriers to the
adoption of Industrial
Sustainability Intervention
in industrial SMEs?

The Sample.
26 industrial SMEs across
Germany and Italy
operating in the chemical
and metalworking sectors.
Barriers
The role of contextual factors
Neri et al. (2021)

The Research Question


How contextual factors
influence the perception of
barriers to the adoption of
Industrial Sustainability
Intervention in industrial
SMEs?

The Sample.
26 industrial SMEs across
Germany and Italy
operating in the chemical
and metalworking sectors.
Barriers
General barriers vs barriers to a specific intervention
Cagno and Trianni
(2014)

Focus of the investigation


The value of a given
intervention-dependent
barrier may differ when
evaluating it at the
company level, by
technology area, or with
respect to a specific
measure.

The sample
Italian metalworking SMEs.
Barriers
General barriers vs barriers to a specific intervention
Trianni et al. (2017)

Focus of the investigation


Evaluation of the main
barriers for specific
Industrial Sustainability
Intervention.

The sample
Italian manufacturing firms.
Barriers
The presence of multiple perspectives
Trianni et al. (2017)

During the empirical investigation in Firm 3, the two Industrial Decision-Makers interviewed (OHS Manager
and Energy and Environment Manager) disagreed very often on the identification of main barriers

The NVivo analysis of the transcripts were quite interesting:

• Different industrial decision-makers of the industrial sustainability areas may have different perspectives on
the same intervention.
• Different industrial decision-makers of the industrial sustainability areas may perceive different barriers to
the adoption of the same intervention.

COST PEOPLE, AWARENESS


Energy and Environment Manager OHS Manager
Barriers
What’s next?

Industrial Decision Maker

Industrial Decision Maker

Barriers Drivers

Industrial
sustainability Adoption Process Performance
intervention
Drivers
• What is a driver?
• What are the main drivers to the adoption of industrial sustainability
interventions?
Drivers
Definition
An industrial sustainability driver can be defined as a factor promoted by one or
more stakeholders, stimulating the adoption of an industrial sustainability
intervention, influencing a portion of the organization and a part of the decision-
making process so to tackle existing barriers (Neri et al. 2018).

Drivers are a means to overcome barriers.


Drivers
Main drivers to the adoption of industrial sustainability interventions
Neri et al. (2021)

The Research Question


What are the main
perceived drivers for the
adoption of Industrial
Sustainability Intervention
in industrial SMEs?

The Sample.
26 industrial SMEs across
Germany and Italy
operating in the chemical
and metalworking sectors.
Drivers
The role of contextual factors
Neri et al. (2021)

The Research Question


How contextual factors
influence the perception of
drivers for the adoption of
Industrial Sustainability
Intervention in industrial
SMEs?

The Sample.
26 industrial SMEs across
Germany and Italy
operating in the chemical
and metalworking sectors.
Drivers
The relationship between barriers and drivers
Trianni al. (2017)

Focus of the investigation


Not only the full
comprehension of the
obstacles, but also the
ways to overcome them
are crucial to achieve a
higher level of industrial
sustainability.

One of the most effective approaches would be to investigate the decision-making


process of adopting an intervention from the perspective of the industrial
decision-maker(s) as, on the basis of the perceived barriers, they will take the
decision to adopt or not the intervention.
Drivers
What’s next?

Industrial Decision Maker

Industrial Decision Maker

Barriers Drivers
Performance
Indicators

Industrial
sustainability Adoption Process Performance
intervention
Performance
• Why measuring performance?
• How to measure performance?
Performance
Relevance of performance measurement
“Sustainability reporting is a voluntary activity with two general purposes: (1) to
assess the current state of an organisation’s economic, environmental and social
dimensions, and (2) to communicate a company’s efforts and sustainability
progress to their stakeholders” (Lozano and Huisingh 2011)
Performance
External stakeholders
• Firms receive strong pressures towards increased sustainability and transparency
about the results achieved by external stakeholders to whom firms communicate
their sustainability practices and performance
• Improving the relationship with external stakeholders companies aim to enhance
and protect their reputation
• External communication plays a relevant role in influencing the indicators
measured by a firm leading to a focus on external rather than internal reporting

“Pressure from stakeholders to publish sustainability performance information is


often perceived as a main driving force for sustainability performance evaluation in
industrial enterprises” (Staniskis and Arbaciauskas 2009)

“[Business cases for sustainability] rarely, if at all, consider sustainability in any


explicit sense […]. Consequently, through repetition, sustainability comes to be
synonymous with other notions such as social responsibility or environmental
management and, and most especially, becomes a term that offers no threat to
corporate attitudes and activity” (Gray 2010)
Performance
Internal stakeholders
Internal performance
• Sustainability and its measurement should be included in industrial firms at a
plant level to effectively understand where specific actions should be taken
• Measuring performance helps to raise awareness, guide decisions and evaluate
the achievements of established goals, while also identifying which interventions
to adopt, and evaluate and track the effect of the adoption

Benchmarking
• Benchmarking activities are crucial, by conducting a closer and continuous
comparison with peers and competitors, identifying areas for improvement and
stimulating change
• Benchmarking traditionally entails comparison with peers operating in the same
sector, but the importance of other contextual factors is emerging, such as the
geographical area or firm size
Performance
The relevance of performance indicators
“In order to document and show the current status and improvement in
sustainability, sustainability indicators are crucial” (Engida et al. 2018)

• Performance indicators enable the performance measurement process and


motivate industrial decision-makers in the achievement of goals
• Performance indicators organized in a set are referred to as Performance
Measurement System (PMS)
• The critical elements helping decision-makers to focus on central activities are
the Key Performance Indicators (KPIs)
Performance
The relevance of performance indicators

Characteristics of performance Characteristics (and challenges) of a


indicators PMS
• Measurable • Strategy aligned, Strategy
• Relevant development, Focused on stakeholders
• Understandable • Balanced
• Reliable/usable • Depth and breath, Clarity and
• Data accessible simplicity (what about the
• Timely manner development of an index?)
• Long term-oriented • Context of applicability
• Holistic perspective on sustainability
• Selection and prioritization of
indicators based on reliable methods
• Number of indicators

“While metrics, methods, and benchmarks are abundant in the assessment


literature, it is often difficult for manufacturing companies to find and use the ones
most relevant to their industry and company goals” (Lee and Lee 2014)
Performance
Measurement of sustainability performance in industrial firms
Trianni al. (2019) Indicators measured

Focus of the study


Exploration over the
adoption of sustainability
indicators among SMEs

The sample
26 industrial SMEs
across Germany and
Italy operating in the
chemical and
metalworking sectors.

• Only 18 indicators are in place on average


• Too many firms still focus almost on the economic pillar of
sustainability, while social and environmental pillars are addressed
almost exclusively for compliance with legislation
• Contextual factors may influence the firms’ perspective on
sustainability and the way it is managed, as well as the certifications
held by firms, influencing, in turn, the number and types of indicators
Performance
Measurement of sustainability performance in industrial firms
Cagno al. (2019) Firm 1 Firm 2 Firm 3 Firm 4 Firm 5
“We seldom “A set of “We don’t have a “We realised it was “We are developing
measure, mainly performance system to measure necessary to have right now a system
Research question

Performance Measurement: How


when some problem indicators is sustainability data to evaluate […] capable of
How are sustainability- arises and we have to fundamental to performance, but it
We have different evaluating the
take remedial actions” understand where it is could be metering allowing us productivity of each
related performance “We mainly based necessary to take interesting to have
to monitor different machine and each
measured?

Sustainability
measurement on actions” it” areas” worker”
experience and “Once certificated, a “We miss an analysis “I’m really focused on
sensitivity […] firm must concern by the operators, who […] the exchange of
The sample without a quantitative with every single are the ones at the information among
approach. However, detail [...] we cannot production site every them and between
5 industrial Italian firms. the quantification leave anything up to day […] we would like them and me”
helps in better change and to translate the idea
developing corrective everything must follow of the suggestion box
actions” a plan” in an integrated
system of data
collection”
“We focus on “We don’t have an “We focus on costs” “We have a very good “Just measuring we
economic aspects” index to measure, but “We are currently control on the realised how many
Performance Measurement:

“We had never had different indicators working for improving production […] for the scraps we were
the time to focus on according to the our efficiency. Our other performance, producing and how
the measurement of specific needs for technician suggested we have a person in much we are wasting”
Sustainability

performance other example of paints, us to install smart charge of the “I’m really focused on
What

than the ones related wood panels metering in each supervision of the the constant
to compliance with production or for the department and on health, safety and monitoring of the
legislation” production or each machine for the environment areas” relationships among
purchase of evaluation of the the workers”
complementary consumption”
materials”
Performance
Measurement of sustainability performance in industrial firms
A1 A2 A3 B1 B2 B3
Neri al. (2021) "Management of "Products, "Competitiveness “We mainly use “We try to focus "We monitor
production, process, in terms of price." three channels, on products with a different KPIs,
management of technology." two non-official, high level of used also to evaluate
Research question the the customers technology, to our supply chain:
How are sustainability relationship and the be competitive commercial
with the suppliers, and and be different insolvency; new
related performance

Benchmarking
supplier, one official, the from our product development
measured in the context times, price." result of the competitors.” lead time; product
of the SC? firm in the
market.” “A comparison is
quality; delivery
reliability, in terms of
made difficult by time, quantity and
The sample the fear of being documentation;
too exposed and complaints towards
6 manufacturing Italian allowed the others our suppliers and the
firms from 2 SCs. to have too many suppliers’ response
information about time.”
production.”
“We indirectly “The economic - “We have never “We don’t do “We are aligned
compare aspect is relevant, analyzed so far benchmarking on with the request
ourselves with but we also try to our sustainability sustainable from our
our peers by identify the compared to our aspects." customers, as
trying to adoption of peers. Through almost all the big
Benchmarking on sustainability

implement sustainable the energy and multinationals of tier


what they do practices by our environmental one."
and criticizing peers: I can’t certification,
them so to deny it would be we try to be on
understand what useful for our firm top. […] This is
not to do.” to be able to write not a priority.”
on our catalogue
that we use green
politics.”
“Unfortunately, in
the mechanical
sector
sustainability is
not so fashion
as in other sectors
[…] the risk is to
lack substance.”
Summing up…
• Current modes of production result in unsustainable socioeconomic and environmental
consequences: substantial technological, managerial, organisational and behavioural
changes are required to make them more sustainable.

• With a large share of responsibility in the hands of organisations offering products, a


change in production modes should be implemented through both sustainable products and
sustainable industrial processes, and should be oriented in the short and long-term .

• Changes in current production modes cannot be possible without transformation of


industrial processes.

• In order to address these changes it was necessary to identify industrial sustainability


intervention and all factors related to the adoption of such interventions .
… and looking forward
• Firms are not stand-alone entities but interact with the industrial system(s) in
which they operate
o How the discourse on industrial sustainability can be extended to supply
chains and network?
o How the discourse on industrial sustainability can be extended to supply
districts?

• Sustainability is strongly interrelated with other aspects within the industrial


sector, and these aspects should be considered to have a complete overview on
the topic:
o Circular Economy
o Industry 4.0
o Resilience
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Drivers
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the barriers affecting the investment decision-making process. Energy Effic. 10, 199–215.
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Performance
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