Towards greener products

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ORDERS

Order telephone: +46 (0)8-505 933 40 Order telefax: +46 (0)8-505 933 99

E-mail: natur@cm.se

Address: CM-Gruppen, PO-Box 110 93, SE-161 93 Bromma, Sweden Internet: www.naturvardsverket.se/bokhandeln

NATURVÅRDSVERKET (The Swedish EPA) Telephone: +46(0)8-698 10 00

E-mail: upplysningar@naturvardsverket.se Address: SE-106 48 Stockholm, Sweden

ISBN 91-620-5296-9 ISSN 0282-7298 © The Swedish EPA 2003

Cover photograph: Megapix / Sven Oredson Layout: ORD&FORM / Naturvårdsverket

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Preface

The Swedish Environmental Protection Agency (Swedish EPA) was commissioned by the Swedish Government ) to develop a basis for further development of the environment-oriented product policy. The basis was to focus both on how instruments can interact and be made more effective and on whether there is a need for new instruments to achieve the goals laid down in the environment-oriented product policy.

An environment-oriented product policy aims to prevent and reduce the negative impact products have on the environment and on human health during the entire lifecycle of the products. To achieve this, all actors must take a responsibility and administrative, economic and market-driven instruments as well as the initiatives of industry and other actors must be effectively combined. Attempts to minimise the environmental impact of products are continuing both national and internationally. One such attempt within the EU is commonly known as the integrated product policy or IPP. The two concepts have the same aim and content, however. People have also begun using the concept of IPP in Sweden. For the sake of simplicity, this concept will be used in this report but it should be noted that the proposals for action are aimed both at the national as well as the international level.

The Swedish EPA produces an annual report on how the producer responsibility legislation is being adhered to. In the 2001 report, (Swedish EPA report no. 5237), presented separately, proposals for how the regulatory framework might be improved are put forward.

This report was produced by Ylva Reinhard (project manager), Eva Ahlner, Isa Bergman, Bengt Davidsson, Johanna Lissinger, Anna-Maria Lundholm, Lars Christian Roth and Karin Öberg. Ulrika Hagbarth, Sverker Högberg, Eva Jernbäcker, Inger Klöfver and Helen Ågren, all from the Swedish Environmental Protection Agency, have also taken part.

Karin Thorán from the National Chemicals Inspectorate, Marianne Jönsson and Anna Öfele from the National Board of Trade, Helena Bergström from the Swedish Consumer Agency, Henrik Frijs and Göran Uebel from the Business Development Agency

(NUTEK) have also contributed within their respective areas.

We would like to extend our gratitude to all those who have contributed with valuable opinions.

Stockholm in July 2002 For the Swedish EPA

Eva Smith Ylva Reinhard

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Summary and proposals

Commission to develop the environment-oriented product policy

The Swedish Environmental Protection Agency (Swedish EPA) was commissioned by the Swedish Government 2001 to develop a basis for further development of the environment-oriented product policy. The basis should focus both on how instruments can cooperate and be made more effective and on whether there is a need for new instruments to achieve the goals laid down in the environment-oriented product policy.

The aim of the environment-oriented product policy is to minimise the impact of products on human health and the environment throughout their lifecycles, from the cradle to the grave, in order to contribute to sustainable production and consumption and help achieve the government’s environmental quality objectives. The current structure of industry and the considerable amount of international trade require a strategy which takes these conditions into account.

Working with products embraces many different environmental problems, instruments, actors, various policy areas, etc. As part of its commission, the Swedish EPA has

therefore chosen to employ a wide approach primarily to identify barriers and

opportunities as well as any goal conflicts that further development of the policy may lead to on a general level. The Agency has also tried to identify gaps in the current way of greening products.

The environmental impact of products

Today’s environmental problems are associated to a great extent with the industrialised world’s consumption of products. Consumption leads to different kinds of environmental impact from all parts of a product’s lifecycle, raw material extraction, production, use, recovery, final disposal including transportation throughout the cycle. Products can be everything from perishable everyday commodities to a building construction that might stand for several hundred years. Products also include services. Examples of significant environmental problems that are intimately associated with the consumption of goods and services are climate change, diffuse emissions of chemicals as well as environmental problems that arise from the disposal of large amounts of waste that consumption causes.

Total energy use in Sweden is estimated to increase by 35 per cent and raw material use by between 20 and 40 per cent by 2030 if nothing is done. It is the environmental impact of resource use that is the fundamental problem, e.g. as a result of heavy metal emissions and their impact on flora and fauna. Climate change is a global environmental problem. More than 75 per cent of the world’s energy supply is based on fossil fuels which when combusted produce greenhouse gases. Emissions of carbon dioxide, the most prevalent greenhouse gas, originate in particular from the combustion of fossil fuels within the transport and energy sectors and from the manufacturing industry.

There are large numbers of chemical products, an estimated 20-70,000, on the market. The production, consumption and disposal of products can lead to the spread of chemicals and increase the risk of varying degrees of damage to human health or the environment at different stages of a product’s lifecycle.

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Rising waste volumes along with the increased consumption of material and energy indicate that development is not progressing towards ecological sustainability. This implies a risk of increased environmental impact at different stages of the lifecycle, e.g. during waste disposal. The composition of the waste can be crucial for its environmental impact. Waste that consists of inert material, on the other hand, constitutes a resource management problem.

Goods transportation is responsible for a significant part of the environmental impact from the lifecycle of many products and seldom are all the stages of production located in one and the same country. Goods are almost always transported by lorry over short distances. It is the EU Commission’s assessment that goods transportation by lorry is likely to rise by 50 per cent over the next ten years if nothing is done.

Emissions of phosphorus and nitrogen can mostly be attributed to all the stages of the food supply chain. Such emissions cause eutrophication which, for example, leads to the impoverishment of biological diversity and overgrowth in lakes and watercourses.

Collected knowledge is needed of the environmental impact that products cause from their extraction as raw material, through manufacture, use and disposal as well as when being transported at all stages of their lifecycle. A good, long-term supply of knowledge should enable us to track environmental impact over time. This is needed to be able to allocate future priorities within the framework of the environment-oriented product policy. Developing knowledge on the environmental impact of products demands collaboration among the relevant authorities and actors.

Sustainable production and consumption

The link between increased growth and the impoverishment of natural resources has been placed on both the international and the national political agenda, mostly as a result of the Rio Conference in 1992. Environmental problems had previously been of a regional or national character and mostly concerned finding a solution to emissions from

environmentally hazardous industrial operations. Today, they are becoming ever more global. Industrialisation has created well-being but at the same time has caused large-scale environmental problems. If current production and consumption patterns continue, there will be direct consequences for the global environment. Even if new technology might in the long term contribute to reversing these unsustainable trends as a result of better resource efficiency, this effect risks being “eaten up” by an increase in total consumption.

An integrated product policy should contribute to sustainable development not just by reducing the negative impact of products on the environment, but also by directing supply and demand towards greater sustainability. Use of the world’s resources needs to be rationalised in order to meet the ever-increasing demand.

In its Green Paper on IPP), the EU Commission emphasises the importance of efforts on the demand side. Regarding thehouseholds consuming, the Commission states that consumers must have access to information that is easy to understand, relevant and reliable. The Swedish EPA agrees with this view but believes that it is an insufficient measure if development is to be driven forward. Barriers hindering people from acting in an environmentally compatible way can be individual-related, such as certain habits, and external, such as lack of efficient transport systems. For people to act in an

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environmentally compatible way, external prerequisites to encourage such action need to be put in place. All actors along the chain have a responsibility within their area, but governments have the overall responsibility guiding society towards sustainable production and consumption.

The Swedish Government’s Environmental Objectives Bill adopted by the Swedish Riksdag stipulates a number of goals and targets. To achieve the goals and targets, three strategies have also been designed that are to act as guiding principles to help accomplish the environmental quality objectives. IPP, a main ingredient of the strategy for non-toxic and resource-efficient eco-cycles, contributes mainly to the achievement of the

environmental quality objectives A non-toxic environment, Zero eutrophication, Reduced

climate change and A protective ozone layer as well as some targets under the Good built environment objective. Developing IPP will therefore help achieve the objectives. The

integrated product policy is also linked to the other strategies. What does IPP cover?

The EU Commission’s Green Paper on IPP establishes overall goals for the strategy to reduce the environmental impact of products throughout the whole lifecycle. According to the Council conclusions, IPP can make a valuable contribution to all three dimensions of the EU strategy for sustainable development by promoting general concern for the environment on the market, getting to grips with unsustainable trends, promoting the innovation of environmentally sound products, raising the level of consumer protection and acting as a link between social and economic aspects. According to both the Green Paper and the Council conclusions, IPP covers both goods and services.

A product policy based on a holistic view where important requirements on the products such as requirements concerning safety, ethics, equality, quality, environmental compatibility and functionality, should be coordinated.

Whether or not all types of goods, including for example food, should be covered by IPP has been the subject of discussions. Regardless of which product groups are involved, the Swedish EPA believes that it is of the utmost importance to comply with the

intentions of IPP regarding a holistic approach, cooperation among actors, etc., and that all goods should be covered by the IPP strategy.

We are moving away from the industrial society towards a service and know-how society. The service sector is in all likelihood going to increase in Sweden. More and more enterprises are contracting out their activities. Parts of the service sector are responsible for relatively major environmental impact. Within the framework of IPP, there is cause to pay more attention to the service sector than previously.

Based on the intentions expressed by the Government in its communication on an environment-oriented product policy as well as on the EC’s Green Paper and the Council conclusions regarding IPP and on what has been learnt during the course of drafting this report, it is proposed that the IPP strategy be founded on three fundamental elements:

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• A more holistic approach by improving the flow of information and increasing

knowledge on the environmental impact of products in a lifecycle perspective. • Better conditions for market actors by laying down clearer rules, increased supply

and demand of green products and the internalisation of environmental costs.

• Greater cooperation among actors by increased dialogue along the production chain,

more exchange of experience and knowledge transfer and the involvement of “new actors”.

Based on these fundamental elements, a number of proposals are put forward aimed at driving development forward. Indicators to monitor development also need to be developed in cooperation with the relevant actors.

Greater cooperation among actors

Using market forces to promote green products is a part of the IPP strategy. There are many actors who both directly and indirectly influence the buyer (individuals and organisations) and/or the seller (enterprises).

The instruments and mechanisms being discussed within the IPP framework will not reach all the actors who influence the products that are placed on the market to a

sufficiently high extent. Neither have instruments that already exist made enough impact. To achieve sustainable production and consumption, it is necessary for all actors to be involved and for the instruments and mechanisms that are being employed to collaborate and steer society in the right direction. The government has a role to fulfil to ensure that all actors are both aware of and indeed take their responsibility. Both the government itself and the authorities have already struck up dialogues with various industries on various greening approaches. This initiative must be further developed and extra funding will be needed. There must also be actors who supply enterprises with knowledge and competence, such as, for example, various research institutes who can act as

intermediaries between the research community and consumers. The environmental protection efforts of small and medium-sized enterprises (SMEs) must increase. Greater integration of different policy areas

One of the necessary conditions that must be fulfilled for IPP to make an impact is for measures within different policy areas that are of significance for production and

consumption to reinforce each other. Within the framework of this commission, a general review of these measures has therefore been carried out with the aim of trying to pinpoint and eliminate possible goal conflicts and uncertainties, of clarifying the links and creating a holistic picture.

The areas that are probably most difficult to coordinate are the environment and cross-border trade. Here it is not simply a matter of how environmental regulations are worded that is important. Varying levels of ambition as regards environmental protection and different standards of environmental requirements can also create trade barriers. As the number of environmental conventions increases, and hence the trade-related provisions they incorporate, the risk of conflict between WTO regulations and the international

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environmental conventions has also escalated. It is important to try and make regulatory frameworks compatible.

Goods transportation is responsible for a significant part of the environmental impact from the lifecycle of many products and seldom are all the stages of production located in one and the same country. The trend in constantly increasing goods transportation must be broken. Environmentally sound goods transportation must increase. This also demands effort within the EU.

Instruments

Until now, much of the research and development within the field of environmentally sound product development has lacked a holistic perspective. This has been true

especially of individual instruments rather than the systems that affect the various actors, material flows and products. In this respect, the integrated product policy has an

important role to fulfil in order to create instruments that can also tackle entire large-scale product systems as well. A number of instruments have been analysed from a broad, general perspective. A special model based on a number of barriers that need to be removed in order to be able to reach overall objectives, such as the environmental quality objectives, has been used. The analysis has also concerned how different instruments and mechanisms might work together and be made more effective and whether there are gaps in existing systems that need to be plugged.

It is clear form the conclusions of this analysis that private persons practising a profession and decision-makers lack the sufficient knowledge needed to understand the origins and consequences of environmental problems. Good environmental education constitutes one of the basic requirements for society to be able to change and become more sustainable. Educational initiatives are therefore needed in many different areas of society. More interdisciplinary research that supports the development towards

sustainable production and consumption is a necessity. Access to sound information adapted to the needs of the various actors all along the product chain is also a basic pre-condition. Considerable effort to coordinate different types of information and

environmental mechanisms are required to achieve this. Different environmental tools do not themselves inspire involvement or the desire to change concerning environmental issues. But they do help to compile and disseminate information.

If economic instruments were introduced to a greater degree, they would provide incentive to change. But the introduction of such instruments requires acceptance. This can be achieved through better education, more information and dialogues with industry and other groups in society.

Legal instruments can create clear rules. Public procurement is one area where the game rules are unclear. It is clear from available studies that legislation is a driving force behind enterprises’ environmental work. Reinforcing the lifecycle perspective in the Environmental Code should lead to both enterprises and authorities allocating greater priority to the most important environmental problems. Such a change should also lead to an increased lifecycle perspective within the framework of, for example, environmental management systems.

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Proposal for the development of the

environment-oriented product policy

A more holistic approach

by improving the flow of information along the product chain and increasing knowledge on the environmental impact of products in a lifecycle perspective.

The analysis indicates a considerable need for access to information and knowledge in order to be able to take decisions that lead to reduced environmental impact from production and consumption. The proposal outlined below has been developed with the aim of overcoming these barriers.

Information

• Additional resources should be set aside to make information available and to adapt it to the needs of the various actors. Work is already ongoing in many fora and this should be strengthened. These fora should work together more, for example, within the framework of proposed future IPP cooperation (see below). Efforts also presuppose a high level of international collaboration. The work should include: - increasing the accessibility of public lifecycle data, which requires public

resources. The practical design needs further development as does the knowledge of what measures are required to increase the demand for lifecycle-related information

- reviewing the scope for coordinating different types of information such as environmental product declarations and eco-labelling and review the scope for adapting current certified environmental product declarations to different target groups

- clarifying how chemicals can be dealt with better both in lifecycle assessments and environmental product declarations

- evaluating how other environmental issues are taken into account when criteria for the energy labelling of various products are being developed.

• In the future development of applicable standards within the ISO 14000 series, Sweden should drive forward the issue of getting the different components to work together as a whole using the environmental management systems as a basis. The environmental management systems EMAS and ISO 14001 should have a clearer product focus and lifecycle perspective. A requirement for official reporting should be incorporated into ISO 14001, in line with EMAS.

• Further harmonisation and coordination between the Nordic Swan ecolabel and the EU Flower ecolabel should take place. Increased global cooperation should be sought for.

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Knowledge development

• A research programme that supports development towards sustainable production and consumption should be built up and financed by the Swedish EPA along with the relevant research funders. The research programme should include scientific, socio-scientific and humanistic aspects. Aspects that should be especially highlighted include incentives and driving forces for the greening of production and consumption and the development of system analysis methods as the basis for decision-making. It is important for such research to be conducted on the EU level as well and Sweden should participate in such projects.

Education

• Environmental education must be more interdisciplinary and more focussed on sustainability than it is today. Conflicts between different social objectives should be elucidated, etc. The National Agency for Education should in future endeavour to support such a development in cooperation with other relevant authorities.

• Institutes of higher education should emphasize on integrating environmental issues into different types of other educational programmes such as in the fields of

economics, technology and design, within their work on environmental management. • Procurement officers and purchasers generally need more environmental

knowledge but their training should also encompass issues such as

resource-efficiency, sustainable consumption and the importance of taking lifecycle costs into consideration (which are often linked to energy use). It is also important for corporate executives to receive both information and training. Training needs to be carried out constantly. Concerning procurement officers, training programmes should be coordinated and linked, for example, to the responsibility for the Committee for Ecologically Sustainable Procurement’s (CESP) Internet-based procurement tool.

Better conditions for market actors

by laying down clearer rules, increased supply and demand for green products and the internalisation of environmental costs.

The analysis indicates a need for common international rules both with regard to trade rules and environmental and product legislation. Clarification of the lifecycle perspective when applying environmental legislation is likewise required. Internalising environmental costs would provide a competitively neutral directive for reducing environmental impact.

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A clearly marked-out international playing field

• Sweden should promote the development of a strategy within the EU to strengthen international cooperation with regard to sustainable production and consumption. The results of the Johannesburg conference should be followed up and further developed.

• Sweden should push for environmental issues to be put on an equal footing with free trade on an international level and that a well-functioning mechanism is set up to deal with possible conflicts. One alternative would be to form a green equivalent to the WTO. Another alternative would be to integrate environmental issues into the WTO’s regulatory framework in a better way.

• Sweden should push for a clarification of the regulatory framework when issues concerning the relationship between eco-labelling and trade rules is discussed in the forthcoming round of trade negotiations resulting from the Doha declaration. Different requirements in product legislation such as safety, health and work environment should at least in the long term be coordinated as far as possible. A point of departure should be that the regulatory framework should be as far as possible the same within the EU. The Swedish EPA has initiated a research project which includes a review of European product legislation and the identification of possible ways of incorporating requirements for environmental concern. There are different feasible options; introducing general product legislation in the

environmental field, attaching environmental concerns to the product safety directive, attaching environmental aspects to existing product directives, using the New

Approach, etc.

Sweden should push for the incorporation of a lifecycle approach into relevant EC directives directed at products and operators.

• Sweden should push for the revised procurement directives to clearly stipulate the scope and obligation to impose environmental requirements in accordance with the intentions of the EC treaty and the development of EC case-law. Sweden should push for the introduction of technology procurements with clear environmental

requirements at EU level.

National legislation

• The Environmental Code Committee is currently reviewing the general rules of concern in Section 2 of the Code and how they are applied. The Swedish EPA believes it must be clarified that these general rules of concern incorporated in the Environmental Code also cover a lifecycle perspective. The aim of such a

clarification is to emphasise that all operators or all those taking action have an obligation to urge a limitation of the environmental impact of products and services throughout their entire lifecycle. By clarifying the lifecycle perspective, those phases of a product’s lifecycle that cause the most environmental impact can be identified and a basis for a necessary allocation of priorities will have been provided. The Environmental Code Committee should also look into how such a clarification can be

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effected. It may also be suitable for the Swedish EPA to supplement these rules with general guidelines and other guidance regarding the Code in this current regard.

• The Environmental Code Committee is currently reviewing the licensing system in accordance with the Environmental Code. The Committee should also look into whether more operations in addition to those currently needing a license should be covered by the obligation to report their activities or apply for a license. Such a review should be based on the real environmental impact that an operation/activity gives rise to.

Internalising costs

• The tax on energy sources that impact the climate such as carbon and oil should continue to rise gradually. A committee should be appointed to evaluate the possible introduction of new taxes on raw materials as a step to reducing environmental impact in connection with resource extraction. The committee should also look into the scope for removing environmentally damaging subsidies and exemption rules, not least for energy-related taxes.

The impact of property tax on “green investment” should be reviewed with the aim of changing the wording so as not to counteract environmental initiatives taken by households and enterprises.

• Within the EU, Sweden should drive forward the issue of common minimum levels for environmental taxes where environmental problems are of an international/global nature.

Greater cooperation among actors

by increased dialogue all along the production chain, more exchange of experience and knowledge transfer and the involvement of “new actors”.

Efforts to green production and consumption are being made by the government in collaboration with industry and voluntary organisations in several different fora and employing different funding models .The project is well off the ground but lacks

resources to be able to develop and be made use of in wider circles. The government has an important role in driving this initiative forward and facilitating its future development and the implementation of the mechanisms that are described.

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Implementation

• Special investment to further develop and implement IPP. The Swedish EPA suggests that a special investment be made in which SEK 20 million a year will be rechannelled from the remediation appropriation into preventive measures over a five-year period. These resources should be channelled to cooperation bodies that run the eco-labelling system, develop environmental product declarations, manage CESP’s information tool for public procurement, etc. In addition, funding needs to be set aside for continued development work within the framework of the cooperation projects on sustainable production and consumption in which the Swedish EPA participates.

A platform is needed for further cooperation on the greening of production and consumption between the Swedish EPA and other parties aimed at implementation, for example for relevant product groups. The Swedish EPA proposes that a special council with representatives for the relevant parties and attached to the Swedish EPA be formed to manage this work.

• An action plan for sustainable consumption should be developed proposing measures for achieving sustainable consumption, as well as pinpointing and

broadening the perspectives surrounding the concept. The inquiry should be based on existing knowledge about consumption patterns. The social, economic and ecological aspects of sustainable development should be equally taken into account in the action plan. This should take the form of a public inquiry which should employ an open working method that stimulates the creation of visions and debate.

• The government should utilise its role as an owner and exercise clear

environmental and ethical concern in its activities such as in pension funds and properties and thereby set a good example in the efforts to achieve sustainable production and consumption.

Goods transportation

The need to coordinate different goods transportation systems has been highlighted by dialogue partners in industry. This concerns transportation within the EU in particular. Sweden should urge development work to be conducted within the EU aimed at

developing systems that cause less environmental impact and facilitate sound logistical solutions. Particular attention should be paid to harmonising Europe’s various railway systems.

Goods transportation issues, which constitute an important part of a product’s lifecycle, need to receive a greater amount of attention. This can be effected by conducting various types of dialogue with industry and when applying the Environmental Code.

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1. Introduction

1.1 The commission

The Swedish Environmental Protection Agency has been commissioned by the Swedish Government to develop a basis for the further development of the environment-oriented product policy in accordance with the government report 1999/2000:114. The basis should focus on instruments, on how these could interact and be rendered more efficient and whether there are instruments with a counteractive effect. The Swedish EPA should furthermore analyse the need for instruments in order to achieve the objectives of the environment-oriented product policy. The Swedish EPA should also review the need for knowledge concerning the environmental impact of products and services. The

assignment should be conducted in cooperation with the authorities which took over the activities of the Swedish Business Development agency in 2001, the Swedish Consumer Agency, the National Chemicals Inspectorate and the National Board of Trade. A progress report was produced in 2001. This report will constitute the final report for the assignment.

1.2 Implementation and method

The aim of this assignment is to contribute to a more tangible perception of the

environment-oriented product policy, analyse its role in sustainable development and to provide proposals for measures to attain the aims of the IPP.

The work has primarily focused on national conditions but as the market for trading products becomes increasingly international, it has also been necessary to attempt to analyse which issues Sweden should promote in various international fora, mainly within the EU. For the sake of simplicity, the environment oriented product policy will be referred to as IPP in this report.

The Swedish EPA has focused on the following areas for this assignment: • Knowledge requirement for the environmental impact of products • Sustainable production and consumption

• Barriers and opportunities for the achievement of sustainable production and consumption

• Actors • Instruments • Relevant policy areas

The work with products spans many different environmental problems, instruments actors, different policy areas, etc. For the purpose of this assignment, the Swedish EPA

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has therefore chosen a broad approach primarily with the aim of identifying the barriers, opportunities and potential goal conflicts regarding future development on a general level. The Agency has also attempted to identify gaps in current policies.

The assignment has been conducted in cooperation with the National Chemicals Inspectorate, National Board of Trade, the Swedish Consumer Agency and NUTEK (Swedish Business Development Agency). Contact has also been established with the Swedish Competition Authority, the Swedish National Energy Administration, the National Agency for Education, the National Board for Public Procurement and Vinnova (Swedish Agency for Innovation Systems).

Cooperation has been pursued with certain research scientists within the framework of the social science-humanities research programme “Vägar till uthållig utveckling – beteenden, organisationer och strukturer” (Ways towards Sustainable Development

regarding behaviour patterns, organisations and structures), also known as

“UTVÄGAR”, or Ways ahead. In their respective fields, scientists have summarised the results of their research with the aim of analysing barriers and opportunities for the achievement of sustainable production and consumption. Their report “Handla rätt från början" (Getting it right from the start, Swedish EPA report no. 5226) represents an independent document in which existing research associated with the government assignment has been summarised.

Within the framework of this assignment the following background material was also produced at the request of the Swedish EPA1_:

• “Produkter i miljölagstiftning” (Products in environmental legislation), Carl Dalhammar, International Institute for Industrial Environmental Economics, Lund University.

• “Av vem skapas marknaden för miljöanpassade produkter” (Who creates the market

for sustainable products) Teareq Emtairah, Nicholas Jacobsson, Beatrice Kogg,

Johanna Lissinger, Oksana Mont, International Institute for Industrial Environmental Economics, Lund University

• “Tjänstesektorn och miljön” (The service sector and the environment), Swedish EPA report no. 5227

• “Kunskap om produkters miljöpåverkan – tillgång, behov och uppbyggnad av

livscykeldata” (Knowledge about the environmental impact of products - access, need

and construction of life cycle data,) Swedish EPA report no. 5229

• ”Kunskap om produkters miljöpåverkan – vad ger dagens statistik?” (Knowledge

about the environmental impact of products - what do current statistics prove?)

Swedish EPA report no. 5231

• “Funktionsperspektiv på varor och tjänster” (A functional perspective of products and

services), Swedish EPA report no. 5230 with background reports:

“Funktionsförsäljning och produkters miljöpåverkan” (Functional sales and the

1_{All of the reports are in Swedish with an English summary, except the report Functional thinking, Swedish} EPA report no 5233

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environmental aspect of products), Swedish EPA report no. 5234 and Functional

thinking, Swedish EPA report no. 5233

The International Institute for Industrial Environmental Economics at Lund University (IIIEE) in conjunction with the Swedish EPA has also produced a model for a problem-oriented analysis of instruments and tools...

During the course of the project, discussions have taken place with the national IPP network. A reference group became involved in the project in the spring of 2002 comprising:

Eren Andersson, Municipality of Gothenburg Magnus Enell, ITT Flygt

Annika Helker Lundström, Swedish Recycling Industries’ Association Anders Linde, Rexam

Inger Strömdahl, Confederation of Swedish Enterprise Gunnel Wisén, ABB

The Swedish EPA has arranged four workshops during the course of the project with the aim of gaining viewpoints from the relevant actors on the following themes:

• Economic instruments (in cooperation with NUTEK) • Research

• Product-service systems and functional sales

• IPP dialogue VI with the government assignment as the theme (in cooperation with the National Chemicals Inspectorate, the National Board of Trade, the Swedish Consumer Agency and NUTEK).

Within the framework of building up knowledge on the environmental impact of

products, a special reference group was set up including approximately 30 representatives from the business sector, authorities and institutes of further education/universities. Swedish Standards Institute arranged the IPP dialogue VII seminar on the theme of standardisation, which also provided a basis for this report.

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2. Background

From having been a local or national matter primarily focussing on reducing emissions from factories, environmental problems have become more global as a result of the internationalisation of enterprise and increase in world trade. Consumption produces various types of environmental impact throughout a product’s lifecycle; from the

extraction of raw materials, production, use, recovery to final disposal and transportation at all phases. Significant environmental problems closely connected to the consumption of goods and services include climate impact mainly originating from the consumption of energy, diffuse emissions of chemicals and environmental problems caused when

handling the huge amount of waste generated by consumption. Eutrophication and acidification are further examples. In the annual follow-up of national environmental quality objectives, it is estimated that some environmental objectives including Limited climate change, Non-toxic environment and No eutrophication, will be difficult to achieve even if further measures are introduced.

Environmental problems are a consequence of the unsustainable trends created by the current focus on growth. Since large parts of the world are on the brink of similar

development to that of the West, it is not difficult to realise that we have to use the earth’s resources more efficiently and change our patterns of consumption to become more sustainable.

There is an increasing trend towards production companies outsourcing their

manufacturing operations to contractors. Many industrial suppliers and trading partners are in other parts of the world such as in Asia, at the same time as the products are becoming more complex. It is very seldom the case that all manufacturers and suppliers of a product can be found in the same country.

Today Sweden is part of the single EU market. A large number of products made in countries outside the EU can also be found on this market. The vast flow of goods on the market and the large number of actors, often in different countries, who may come into contact with a product during its lifecycle, mean that there are many actors capable of influencing the design of the products. It is becoming increasingly difficult for a single actor to see the whole environmental impact of a product from a lifecycle perspective. Uncertainty may also arise concerning the issue of responsibility. It is therefore becoming increasingly important for environmental consideration to be taken at all phases of the cycle. In order to attain national environmental objectives, we have to cooperate

internationally and exploit opportunities to influence the production of products imported to Sweden. The design of instruments has also to be seen in an international perspective. A great challenge now lies in minimising the environmental impact of products

throughout their entire lifecycles.

How do we achieve change

It is more complicated to regulate the environmental impact of goods by means of legislation than to regulate emissions from individual factories. It is in the light of this, that the need has arisen to achieve a greening of products via other instruments as well.

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Lately, a series of instruments and mechanisms have also been developed as a

complement to legislation. Furthermore, market forces have become more tangible over the years since requirements are now imposed both on greened products as well as on the environmental policies of companies.

One way of promoting further development has been through the development of the integrated product policy. The point of departure for the integrated product policy can be found in the Treaty of Amsterdam. During the environmental summit in Weimar in 1999 it was agreed that an innovative strategy should be introduced to coordinate instruments and initiatives bearing in mind the importance of observing current regulations. The focus has primarily been on the environmental problems caused by products. What

distinguishes IPP from earlier ways of working with instruments individually is the achievement of a greater holistic perspective for products, greater actor participation etc.

IPP is therefore a strategy, a way of working for the achievement of certain social goals. Since in principle IPP affects all products in a lifecycle perspective, IPP work spans a very broad range.

National work

The government, in the document ‘An environment-oriented product policy’, presented a strategy for how work with an the environment-oriented product policy should be conducted in Sweden and internationally. An environment-oriented product policy aims to prevent and reduce the negative impact products have on the environment and on human health during the entire lifecycle of the products. By products we include both goods and services. All actors have a responsibility and administrative, financial and market instruments in conjunction with initiatives from enterprise and other actors are needed. Strategies for product policy include: integration, cooperation among actors along with development and coordination of instruments and mechanisms for products. The Swedish Government gave priority to the issue of an integrated product policy during its presidency of the EU in the spring of 2001. A national network convened by The Swedish EPA with representatives from the business sector and the authorities has been created with the aim of promoting development.

There are also other projects underway which are linked to the IPP work. Sweden, for example, devised a national strategy for sustainable development as a contribution to the world conference in Johannesburg in the autumn of 2002. This strategy incorporates all dimensions of sustainable development and provides a summary of objectives, measures and strategies reflected in the policy pursued. Within the strategy, environmental policy is seen as an important driving-force for growth, development and employment. The

necessity of sustainable patterns of consumption is also specified.

The Government’s Environmental Objectives Bill specifies three strategies in addition to the objectives and targets mentioned. One of the strategies - the strategy for non-toxic and resource-efficient eco-cycles - cites the environment-oriented product policy.

The Producer Responsibility Supervisory Committee of Enquiry was requested to

evaluate current producer responsibility and voluntary undertakings and to consider whether the legislated producer responsibility should be extended to further product

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groups. In The Swedish EPA’s annual follow-up of producer responsibility, a number of improvements to the current regulatory framework are proposed.

The Waste Tax Committee of Enquiry has evaluated the regulatory impact of the waste

tax system, i.e. the landfill tax introduced on January 1, 2000.

The Swedish EPA has, in its assignment from the government on ecologically

sustainable waste management, and on the basis of the national environmental quality

objectives and the environmental impact of waste management, proposed guidelines for future waste management.

International work

The EU Commission’s Green Paper on IPP establishes general objectives for the strategy

to reduce the environmental impact of products throughout their lifecycles. The green paper focuses on three areas; correct pricing through internalisation of what are known as external costs, in other words, social costs for deterioration in water quality and air pollution, for instance, along with the necessity of working with both the supply and demand aspects.

According to the council conclusions, IPP should be a general policy which is able to contribute to filling in the gaps in the existing structure by using a lifecycle approach and by engaging all the parties involved. IPP can provide a valuable contribution to all three dimensions of the EU strategy for sustainable development by promoting general environmental thinking on the market, by discouraging unsustainable trends, by promoting products which are healthy from an environmental viewpoint, by increasing the degree of consumer protection and by providing a link between social and financial aspects. The Commission is currently working on the production of a white paper for IPP. On Sweden’s initiative, an informal European IPP network has been created.

In the EU’s sixth environmental action programme (6EAP), IPP is highlighted as an

important instrument to promote greater resource-efficiency and to prevent the generation of waste. There is a need for a strategy r changing patterns of production and

consumption with an impact on the environment. Within the framework for the

environmental action programme, work is currently in progress on a number of thematic strategies such as enhanced resource efficiency and waste recovery.

The EU strategy for sustainable development focuses on a number of problems

constituting a serious or irreversible threat to sustainable development. Examples of such threats include climate change due to increase consumption of energy and the increase in transport volumes, diminishing biological diversity and greater volumes of waste.

In 1998 the prime ministers of the Nordic countries signed a Declaration on a

Sustainable Nordic Region. The declaration includes a proposal for a number of

objectives for further development covering, for example, emissions of hazardous substances and more efficient use of energy and natural resources. There is also an objective that the principle of sustainable development should continue to be integrated in the work in all sectors. A follow-up of the strategy is currently under production. There is also a Nordic product oriented environmental strategy adopted by the Nordic Ministers for the Environment.

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The World Summit on Sustainable Development in Johannesburg at the beginning of

autumn 2002 will evaluate the implementation of Agenda 21 adopted in 1992 and will agree on new measures. The theme of the meeting is sustainable development in its various dimensions - ecological, economic and social. The overriding theme is combating poverty and sustainable production and consumption.

UNEP has devised a strategy for sustainable consumption. The strategy is founded on

two areas: dematerialisation and optimisation of products and services. The term

optimisation implies different, wiser and more appropriate consumption.

As a result of the WTO negotiations in Doha in 2001, the issue of the relation of international environment agreements to the WTO regulatory framework will be raised at the forthcoming world trade round . As the number of environmental conventions

increases, along with the trade-related regulations incorporated in them, the risk of conflict between the WTO regulations and the international environment conventions also increases.

The OECD sustainability strategy was adopted in May 2001. It presents proposals for improving the integration of economic, environmental and social objectives in addition to ways in which economic growth can be decoupled from environmental damage.

Baltic 21 - Agenda 21 for the Baltic Sea region - a regional cooperation for the

achievement of sustainable development focuses on eight different areas; agriculture, commerce, energy, fisheries, forestry, tourism, transport and education.

To sum up, work is underway in a number of areas which will have a considerable bearing on the environment-oriented product policy. Several documents, moreover, refer directly to IPP as a significant strategy. It is a matter of urgency that this strategy be developed further both nationally and internationally.

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3. What does IPP comprise?

3.1 Aim and scope

The EU Commission’s Green Paper on IPP establishes general targets for the strategy to reduce the environmental impact of products throughout their lifecycles. According to the Council conclusions, IPP can provide a valuable contribution to all three dimensions of the EU strategy for sustainable development by promoting general environmental thinking on the markets, by discouraging unsustainable trends, by promoting products which are healthy from an environmental viewpoint, by increasing the degree of consumer protection and by providing a link between social and economic aspects. According to both the green paper and the Council conclusions, IPP covers both goods and services.

Many of the instruments available today are directed towards increasing resource-efficiency per product or service. With increased material growth, there is an obvious risk that this gain in efficiency will be completely neutralised by an increased consumption of goods and services. A review of various instruments and their usefulness in being able to change patterns of consumption in a more sustainable direction indicated that several instruments and policy principles did not sufficiently take consumption into

consideration. Nor have the instruments focused on counteracting the backlash that results from increased consumption. Working towards more sustainable consumption therefore has to be more tangibly included within the framework of IPP efforts. All actors along the production chain have a responsibility within their own areas. Nevertheless, the mastering of this ‘rebound effect’ at the societal level should ultimately be a task for the government.

IPP work has primarily focused on the environmental problems caused by products. Today, the social aspects are observed to an increasing extent not least within the business sector. Global Reporting Initiative (GRI) has been developed by organisations representing the business sector, the environment, human rights, etc., to help companies to develop their reporting of economic, environmental and social factors. The World Wildlife Foundation along with fifteen large companies and a consulting firm have started working together in ‘the Nordic Partnership’ with the aim of devising a model for how companies should incorporate the concept of sustainable development in their activities. Belgium has recently enacted a law aimed at introducing a labelling system that considers both the ecological and social aspects of production.

An important issue for the generation of “green” demand is for consumers to see the products as sound from a number of perspectives. The Swedish Consumer Agency believes that the products should fulfil basic requirements concerning safety,

environment, quality, etc. Environmental issues cannot be observed in isolation but in the same way as they are integrated in other sectors, so must other issues affect them. There are some areas in which different requirements may conflict with each other such as the requirement for fire safety and the reduced use of brominated flame retardants. This

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should, however, be a problem that can be seen as technically resolvable. If the consumer believes that environmentally sound products are of inferior quality compared to other products there is a risk of a backlash. According to the national strategy for sustainable development, the consumer should feel secure that the product s/he is purchasing fulfils other basic requirements regarding safety, quality, energy-efficiency, etc.

A development of IPP should in the long term lead to both economic as well as social dimensions being considered to a greater extent. Health, safety and work environment issues are, for instance, areas with strong links to IPP but even ethical aspects are

significant. IPP should in the long term be developed from being an environment-oriented product policy to being a policy in which consideration is taken to such aspects as far as possible. This attitude is also supported by the government in the national strategy for sustainable development in which it states that for the integrated product policy to have an impact on and be attractive to the consumer, environmental issues have to be incorporated with other significant product requirements. A product policy based on a holistic view, in which significant requirements for products such as the demand for safety, ethical concerns, quality, greening and functionality are coordinated, should therefore be created. Discussions have been conducted, within the informal European IPP network for instance, around the idea that all types of goods including food products should be covered by IPP. Regardless of what product categories are involved, it is of the utmost importance to work according to IPP’s intentions concerning a holistic view, cooperation among actors, etc. Appendix 2 presents a brief description of the

environmental problems of the food product chain. The Swedish EPA believes that all products should be covered by IPP. It should also be noted that IPP should not only cover goods supplied to end-consumers but also industrial products.

Products are defined as goods and services. According to both the green paper and the council conclusions, IPP comprises both goods and services. There is, however, in this context a need to study the concept of services more closely.

Development tendencies indicate that we are moving away from the industrial society towards a service-and-know-how society. The service sector in Sweden is likely to increase. More and more companies are outsourcing parts of their activities to

contractors. Appendix 3 presents a description of which sectors are defined as services today according to how they are categorised by Statistics Sweden.

It is increasingly apparent that the distinction between goods and services is becoming more obsolete, among other things since peripheral services are becoming increasingly important for accessing the market and increasing profits. Products and/or product systems are therefore a more appropriate description. This does not mean that goods have changed in their nature, but rather that increased earnings for companies are guaranteed by differentiating themselves from their competitors in the form of trade names and peripheral services. There is cause to pay more attention to the service sector than previously within the framework of IPP.

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3.2 Basic elements for IPP

The long-term overall goal of IPP can be seen as a vision of achieving a society with efficient and sustainable patterns of production and consumption, in which changes in consumption are a core issue for developing strategies for sustainable development. For IPP to become a successful strategy it must have a long-term time perspective.

The Government’s Environmental Objectives Bill, adopted by Parliament, contains a number of objectives and targets. For the purpose of achieving these objectives, three strategies have been devised to help attain the environmental quality objectives. They are: • A strategy for more efficient energy consumption and transport - to reduce emissions

from the energy and transport sectors

• A strategy for non-toxic and resource-efficient ecocycles - to create energy and material-efficient ecocycles to reduce the diffuse emissions of hazardous substances. • A strategy for conserving land, water and the urban environment - for greater

consideration of biological diversity, the cultural environment and human health, for the efficient use of land and water along with green physical planning and sustainable urban structures.

IPP is the main element in the strategy for non-toxic and resource-efficient eco-cycles but is also linked to the other strategies. Transport, for instance, represents a significant aspect in the lifecycle of a product.

The following objectives are included in the government report on the environment-oriented product policy: "The aim of the environment-environment-oriented product policy is to develop goods and services which lead to the least possible negative impact on human health or on the environment in every phase of a product’s lifecycle."

In addition to these objectives, there are further objectives and strategies devised within the EU. The proposal to the EU’s sixth environmental action programme (6EAP) includes general objectives for the four priority areas in the programme. Of these, the following are relevant to the greening of products:

• the reduction of emissions of greenhouse gases in accordance with the Kyoto Protocol

• an environment in which the levels of pollution from human activities do not give rise to significant effects or unacceptable risks for human health

• better resource-efficiency and resource and waste management through the consumption of renewable and non-renewable resources and their effects not exceeding the load capacity of the environment and a significant reduction in waste volumes through preventative measures; the waste which is produced should be harmless or involve only the minimum possible risk.

The Swedish EPA proposes that the IPP strategy, on the basis of the intentions in the Government’s report on an environment-oriented product policy as well as the green

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paper and council conclusions for IPP in addition to what has arisen during the work on this report, should be based on three basic elements;

• A more holistic approach by improving the flow of information and increasing

awareness of the environmental impact generated by products in a lifecycle perspective.

• A better platform for market players as a result of clear game rules, an increased

supply and demand of greened products along with the internalisation of environmental costs.

• Greater interaction among actors through more dialogue along the product chain,

increased exchange of experiences and knowledge transfer, as well as the involvement of “new actors”.

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4. Sustainable production and

consumption

4.1 Introduction

Of the world’s population, 15 per cent in high-income countries account for 56 per cent of total consumption, while the poorest 40 per cent of the population in low-income countries account for only 11 per cent of total consumption. Spending on food and clothing increased in Europe by 29 per cent during the period 1980-1997. Spending on recreation and transport rose in the EU by 73 and 65 per cent (excluding inflation) during the same period. In industrialised countries, diseases associated with an unhealthy diet, a sedentary lifestyle and obesity, have increased. Energy consumption in the transport sector is expected to rise by 1.5 per cent per year in industrialised countries and by 3.6 per cent in developing countries.

The total consumption of natural resources in global terms has continued to increase since 1992 (especially water, food, energy). The question whether natural resources are endless or not is not an important question anymore. Focus is rather on the renewable resources. Sustainable production and consumption also has to consider the fact that the extraction of these resources tends to be so high that it affects vital parts of ecosystems which, for example, has resulted in the depletion of certain species of fish, the decimation of the rainforest and extensive extinction of species. The annual net loss of the world’s forest area amounts to 9.4 million hectares (0.2 per cent of the total forest area). More than 11,000 species are listed as in danger of extinction and over 800 species have already become extinct largely due to the loss or destruction of their habitats.

The social chasm between rich and poor countries is increasing, as is the gap within the poor countries. A large proportion of the natural resources consumed in the western world is extracted and produced in poor countries. This is despite the fact that the wealthy countries possess vast quantities of recyclable metals in products and waste. The reasons include the natural conditions such as the climate and the existence of minerals as well as low wages. In the prevailing conditions of power in these countries, the population is adversely affected by poor working conditions and wages along with the depletion of natural resources and environmental impact.

The current and future production and consumption patterns have direct consequences on the global environment. To narrow the social gaps between rich and poor,

consumption by the poor has to increase. This demands a readjustment of consumption in large parts of the world. Even if new technology were in the long term able to help change these unsustainable trends as a result of even greater resource efficiency rendering aspects of consumption more sustainable, there is a danger that this effect would be counteracted by increased growth or an increased/displaced consumption (population growth, demographic changes, increase in material standard, values etc).

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Growth based on sustainable production and consumption where environmental and social aspects are taken into account would then be feasible in the highest degree. However, the demand for a sound environment doesn’t have to be in direct opposition to growth.

The traditional GDP does not reflects damage to the environment despite this having long term significance both for the results of production and for human welfare. In

environmentally adjusted national accounts (environmental accounts), environmental

statistics are combined with economic statistics. In Sweden, the National Institute of Economic Research (KI) and Statistics Sweden (SCB) have been commissioned to produce environmental accounts since 1992. Internationally, the development of primarily physical environmental accounts is underway. Both in Sweden and in Europe, the main emphasis is on the significance of environmental accounts as a database and as the basis of indicators and model simulations.

In order to combine environment and growth, we need a series of measures aimed at improving the environmental performance of products and at increasing the demand for greened products. The government stresses that the environment should be a driving-force for growth and that the creation of growth and employment should be better coordinated with measures to achieve environmental quality objectives. A number of different measures have been taken at various political levels to integrate environmental aspects in programmes aimed at increasing growth. The EU structural fund programme requires a sustainability perspective to be considered in projects that receive support. In Sweden the government has place demands on the integration of ecological sustainability in the regional growth agreements.

Nevertheless, the first generation of growth agreements display considerable shortcomings in the way the environment has been integrated. The Swedish EPA has therefore been requested by the government to devise proposals, in conjunction with three pilot counties, for future work on growth. In brief, this means that a pro-active attitude taking environmental conditions into account and making the most of them from the start so that environmentally damaging action is avoided at the same time as environmentally generated growth is prioritised. Such an attitude should be applied within all areas of government expenditure and ownership. The government should set an example if requirements are to be placed on companies and consumers.

4.2 Barriers and opportunities for sustainable

production and consumption

There are a number of different barriers but there are also opportunities for the

achievement of sustainable production and consumption. This often involves complex questions. To promote development, barriers and opportunities have to be identified and as far as possible barriers should be removed, both generally on a societal level and in various business activities and at the individual level.

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The societal level

In this section, we discuss the government’s role in attaining sustainable development. Despite globalisation and internationalisation, the government should play an important role in the reduction of environmental problems. It should be pointed out that this section has a national focus.

The issue of the environment has lately become one of many issues on the political agenda - the environment has become a ‘common’ political issue. Since the days of glory for environmental issues at the end of the 80s, a lot has happened in the field of the environment. The environment issue is believed to be important and the Swedish Parliament made a number of environmental decisions during the latter part of the 90s. Today there is almost total political consensus on striving for sustainable development. The environment has become one of many political issues.

In this perspective, it is perhaps not so surprising that the significance of the

environment issue no longer rates so highly in the opinion polls. Surveys also reveal that people do not feel that the threat to the environment has been removed and they also reveal a fairly extensive state of readiness to act. In all normalisation processes, however, there is a risk that the issue loses its sense of urgency.

A new orientation in environmental policy occurred at the end of the 80s and can be described as an ecological modernisation. By combining what are known as flexible instruments, consensus solutions and information exchange between the government and the business sector, the idea is that greening would be stimulated rather than compelled. The active exploitation of market forces is a central idea. One of the basic ideas is that there is no need for any conflict between economic growth and a sound environment. A sustainable production and consumption policy, however, would imply difficult choices, not least at local level, as well as costs for society. There will be both winners and losers. The government is the only actor with the resources required to take the lead in this transformation.

Barriers

In order to realise change the government has to adopt a position in various issues such as implementation problems, regulatory problems, management problems as well as

democracy and justice issues. The transformation of patterns of production and

consumption represents, without doubt, reform that is very demanding to implement. It can be simplified by unambiguous decisions, sufficient resources and a mutual

understanding among actors about the objectives of the reform and which path to pursue. It is difficult to draw general conclusions about the efficiency of an instrument - it is very much dependent on in which context it will be implemented. One important aspect is, however, the legitimacy of the instrument, i.e., the extent to which people feel its introduction is justifiable. A policy not perceived as legitimate by the citizens has very little chance of succeeding. Some scientists claim that if user influence increased in environmental protection, greater legitimacy would be gained. An example of this is the work on local Agenda 21 but in a holistic perspective there is no extensive participation by the citizens in environmental protection. Pressure from one direction (such as an