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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

The Ecological Allowance of Enterprise

Dr. André ReichelScientific Coordinator GSaME Associate Cluster Director

Barbara SeebergDoctoral Student GSaME

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

What size is right?

Source: Daly, H.E.; Farley, J. 2003. Ecological Economics: Principles and Applications. Washington DC: Island Press

Marginal Utility MU

Marginal Disutility MDU

Economic growth Uneconomic growth

ab = bca

bc

e d

MUMarginal Utility

MDUMarginal Disutility

MU = 0

MDU =

Material throughput

b = sustainable scale (MD = MDU)

e = futility limit (MU = 0)

d = catastrophy limit (MDU = )

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

Business in the balance

1. Boundary condition 2. Boundary condition

Economic balance Ecological balanceRevenues Costs Impact Allowance

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

Case of uneconomic firm growth

Idea Every firm has the right to use ecological space in relation to (1) absolute ecological boundaries and

(2) its economic value added

Ecological boundary at hand: Global cap on CO2 emissions, roughly some 750 Gigatons between now and 2050

Economic “allocator” variable: Gross value added (output approach of GDP accounting)

Industry in focus: Automotive

Product Allowance

2,075 Billion US-Dollar (2008)778 Million tons CO2 873 Million private cars (2007)891 kg CO2 per vehicle and year

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

Case of uneconomic firm growth

Pick a firm from the automotive industry:

Product Allowance

891 kg CO2 per vehicle and year

Calculate CO2 intensity throughout average product’s lifecylce (data from internal Lifecycle Assessment report)

Product Impact

1,833 kg CO2 in production12,000 km travelled per year170 g CO2 per km2,040 kg CO2 per year in use430 kg CO2 end of life2,228 kg CO2 per year

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

Strategic framework for ecological allowance

Reve

nue C

osts

Impact Allowance Impact AllowanceRe

venu

e C

osts

Rightsize Business

Ecological Excess

Economic Loss

Eco-Eco Disaster

Reducing impact

Þ Increase value added at the expense of other firms or industries

Þ Economic competition for “ecological space”

Þ Reducing product sales and product population

Increasing allowance

Þ Reducing product sales and product population (dominant strategy)

Þ Reorientation on longer lifecycles and/or product use

Þ Technology (Eco-efficiency and eco-effectiveness)

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

Prospective case of economic growth?

2.228 kg CO2 Impact of old business model

Product impact of a Smart: 1,628 kg CO2 per year

Replacement rate of carsharing ~ 1:4 to 1:8 private cars

Potential for CO2 reduction ≥ 80%

“Virtual” impact of car2go: 407 kg CO2 per vehicle and year

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

Modeling (un-)sustainable businessesScenario 1 2 3 4 5

Name Business as Usual Business as usual, 50 % more efficient 100 % Carsharing Mix, 50 % more

efficient

Mix, 50 % more efficient, increased gross value added

Change in fleet size in percent - - -74.99 -29.98 -23.98

Self-owned cars 49,980,000 49,980,000 - 30,000,000 34,000,000

Carsharing cars 5,000 5,000 12,500,000 5,000,000 4,000,000

Industry gross value added level in percent 100 100 11.3 64.6 98

CO2 emissions in t 111,407,824 60,418,023 58,071,875 49,286,250 51,514,833

Reduction compared to Scenario 1 in percent - -45.8 -47.9 -55.8 -53.8

Product impact in kg CO2 2,229 1,209 4,646 1,408 1,356

Product allowance in kg CO2 1,031 1,031 4,124 1,473 1,356

Overshoot 2.16 1.17 1.13 0.96 1

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Research Cluster HSustainability in Manufacturing

Seventh International Environmental Management Leadership Symposium

“The automotive industry need not worry, but it will have to make cars that consume dramatically less fuel. The great green vision is to transform this strong industrial region into a country with green product lines. We want to prove that economy and ecology can go together without destroying our livelihoods, economic as well as ecologically… Fewer cars are of course better than more. We cannot continue to sell just cars but have to move on to mobility concepts; this includes walking, cycling, driving cars, and using public transportation. We have to build intelligent mobility networks in order to stay mobile without destroying the environment. We have to show here in Baden-Württemberg that prosperity without destruction is possible. That is our responsibility, that is why a Green is going to be Prime Minister. Otherwise the others could do it!”

Winfried Kretschmann, PM-elect of Baden-Württemberg