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CLEANER PRODUCTION AND INDUSTRIAL PARKS

Prepared by: Prof. Dr. Heinz Leuenberger

Dr. Tran Van Nhan Vietnam Cleaner Production Center

 

1. INTRODUCTION

In many countries the development of industrial parks (estates) are seen as a powerful tool for to promote rapid industrialization by attracting private investments, reducing capital costs, eliminating delays in developing facilities and administrating procedures and reducing environmental impacts. Often, high polluting industries are relocated from residential areas to new established industrial parks outside the city center for to avoid complaints from the public.

If industrial parks have no proper and efficient environmental management system, impacts on the environment and human health and safety are still serious and will be not consistent with the goals of sustainable industrial development.

As we have seen in previous presentation, a good environmental management system for an industrial park includes the following key issues:

- the precautionary principle
- integration
- environmental planning
- ecological design
- total quality management
- cleaner production and resource recovery
- industrial ecology

In the following presentation we would like to show, how cleaner production strategy and methodology can be integrated in the environmental management system and the regulation of an industrial park. For to get the best result, CP-strategy must be considered already in thc planning and designing step of a new production process, and not only for to improve existing units. Therefore, CP-strategy should be implemented in the application procedure for new industries (compliance purpose) and in the regular controlling work (monitoring of emissions to (lie environment). In the first case it is the technology assessment, in the second case it is the CP-audit for a unit.

2. WHAT IS CLEANER PRODUCTION

- It is a new and creative approach (way of thinking) towards products and production processes.

- It is the continuous application of an integrated, preventive strategy to processes, products and services to increase efficiency and reduce risks to humans and the environment.

For production processes: Cleaner production includes conserving raw materials and energy, eliminating toxic raw materials and reducing the quantity and toxicity of all emissions and wastes before they leave a process.
For product: The strategy focuses on reducing impacts along the entire life cycle of a product from raw materials extraction to the ultimate disposal of the products.
For services: CP reduces the environmental impacts of the service provided over the entire life cycle, from system design and use to the entire consumption of resources required providing the services.

Cleaner production requires mainly applying know-how, changing attitudes, improving the existing technology and changing to new, better and cleaner technologies. It is important to introduce CP-strategy in this priority and in this order!

Many preventive terms, such as pollution prevention, waste minimization, source reduction or Eco-efficiency, are in use today. At UNEP, the term "Cleaner Production" was chosen to encompass a comprehensive approach to production. This cleaner production covers processes, products and services and their impacts, including their design, utilization and usage of raw materials and energy. It covers all wastes - hazardous/toxic or not whether emitted into the air, water or onto the land. The term acknowledges that cleaner production requires not only improving efficiency and material substitution-using tools such as technology and know-how but new managerial skills and policies as well. It also acknowledges the importance of design and use of products as well as services.

CP-opportunities can be divided in following main categories:

1. Impact material substitution: Change of input materials by less toxic or renewable materials or by materials with a longer service time.
2. Good housekeeping: Appropriate provisions to prevent leaks and spills (preventive maintenance, good maintenance) and to enforce the existing working instructions (through proper supervision, training).
3. Better process control: Modification and optimization of the working procedures, machine instructions and process parameters in order to run process in higher efficiency and lower waste and emission generation rates.
4. Equipment modification: Modification of the existing productive equipment and utilization - for instance by the addition of measuring and controlling devices, - in order to run the process at higher efficiency.
5. Technology change: Replacement of the technology, processing sequences and/or synthesis pathway in order to minimize waste and emission generating during production.
6. On-site recovery and reuse: Reuse of wasted materials in the same process or for another useful application within the company.
7. Production of useful by-products: Modification of the waste generation process in order to transform the lasted material into a material that can be reused or recycled for another application outside the company.
8. Product modification: Modification of the product characteristics in order to minimize the environmental impacts of the product deriving or after its use (disposal) or to minimize the environmental impacts of its production.

3. WHY IS CP IMPORTANT FOR THE INDUSTRY?

In the long run, cleaner production is the most effective way to design and operate industrial processes and to develop and produce products and services. The costs of wastes and emission, including negative environmental and health impacts, can be avoided or minimized by applying the cleaner production concept from the beginning and apply it continuously and throughout the entire life cycle of production.

Cleaner production is not only good for the environment because it reduces pollution. There are also some direct benefits to the companies that follow this approach, such as:

  • Cost saving through reduced wastage of raw materials and energy -> production costs can be reduced.
  • Improved operating efficiency of the plant.
  • Better product quality and consistency because the plant operation is more predictable.
  • Recovery of some wasted materials.
  • Possibility to improve the working environment.
  • Better position for an enterprise in negotiation with the authorities.
  • Improvement of the enterprises image.
  • Cost savings for the end-of-pipe waste treatment.

Also it is most of the time not possible to meet the environmental standards only with CP-measures, it will help to reduce this additional costs for end-of-pipe treatment. En-of-pipe treatment always adds costs without additional value to the products produced. In contrast. when cleaner production is applied, processes become more efficient because they require fewer raw materials and/or generate less waste. The continuos application of CP-strategy will help A company to be more competitive in the market:

4. WHAT ARE THE DIRECT BENEFITS FOR A COMPANY IMPLEMENTING CLEANER PRODUCTION?

As mentioned earlier, CP is good business. The lesson from the past is simple: it is less costly to prevent pollution at the source than to clean it up after it has been produced and in most of the cases, CP implementation will help to reduce production costs directly by using less raw materials, less energy or auxiliary chemicals for the production of the same amount of products.

Example 1:

A leather tannery installed a simple five-step chrome recovery procedure. The step included: collect of spent tanning liquor, add magnesium oxide and poly-electrolyte, control acidity and stir, stop stirring and settle, decanting, add sulfuric acid, control acidity and stir - ready for use as tanning agent. Investment cost was $40.000 but annual savings were $43.500 within the first year. The pay back period was 11 months.

Example 2:

A textile company reduced its dye, water and energy use and volume of wastewater discharge releases by reusing dye baths at the end of a cycle to prepare for the next cycle. Investment cost were $15.000 but annual savings were $100.000, so the pay back period was only 2 months.

Example 3:

A combination of 8 processes changes in a brewery reduced the. overall COD and suspended solid loads to its waste facility by 19% (a combined measurement in cubic meters). The savings in effluent charges alone were US$ 96,000 per year.

Besides these direct financial benefits and the already mentioned, a company will have the following advantages and benefits by implementing CP :

* Better access to finances

Financial institutions are awakening to the problems of environmental degradation, and now scrutinize proposed modernization or expansion projects for which loans are sought >From an environmental angle. CP programs project a positive environmental image of your mill to lenders, thereby improving access to financial support.

* Better compliance with environmental regulations

Regulatory standards for discharge of waste (liquid, solid or gaseous) are continually becoming stricter. Meeting these standards often requires installation of expensive and complex pollution control systems. CP makes the treatment of residual effluents, and thus compliance with discharge standards, easier, simpler and cheaper.

* New and improved market opportunities

Increasing consumer awareness of environmental issue demands that mills, especially those competing in international markets, demonstrate the environmental friendliness of their products and production processes. The appeal of meeting environmental standards, such as ISO 140001, or other market requirements such as Eco-labeling, can motivate companies to pursue CP.

* Better media and public image

The media plays a key role in establishing a company's public image. An adverse media report can instantly damage a reputation built over years. With public interest in environmental issues on the rise, many non-governmental organizations (NGOs) gain a high profile by acting as watchdogs and informers against polluters. CP, being a positive pro-active approach to environmental management, demonstrates environmental responsibility, and promotes confidence in company conducted by NGOs, pressure groups and media. .

5. HOW CAN THE CP-STRATEGY BE IMPLEMENTED INTO THE ENVIRONMENTAL MANAGEMENT SYSTEM OF AN INDUSTRIAL PARK?

A wide range of environmental, health and safety issues created by industrial parks are encouraging government agencies and industrial park/zone managers to adopt a comprehensive environmental management framework including CP.

There are two stages where CP-strategy can be implemented:

1. in the application procedure of a new company (Technology assessment)

2. in the environmental services provided by the IP management for his clients (CP-audit for a company)

a/ Application procedure

According to the new rules in Vietnam, new companies applying for an industrial park are not anymore forced to work out an Environmental Impact Assessment. This was done when the industrial park was planned and created. For a new industrial park it is therefore a must to define the environmental standards and loads for th6' acceptance of new clients. The sum of the emissions of the units will determine the environmental performance of the site, and this performance is the baseline used in the environmental impact assessment stage for the park. Clients and ETA will directly determine the environmental services that the park must of for to clients.

A technology assessment allows to compare the expected emissions with standards from Best available technology and Cleaner production Benchmarks. This technology evaluation will prevent the import of second on third hand technology.

Know-how and experience for this CP-technology assessment can be bought by external centers and agencies.

b/ Providing CP-Audits as an environmental services

The provision of environmental services will help an industrial park meet its environmental performance objectives, (defined in the EIA), earns the park new revenues and enhance the marketability of the park itself. The nature and externals of the environmental services is determined partly by the values and principles adopted by the industrial park, the nature of the state legislation or environmental performance, and the availability of financial and human resources.

 

These services may include the following areas:

- water services

- sewage collection

- sewage treatment

- industrial liquid waste collection and treatment

- hazardous waste collection, storage and destination

- solid waste collection and disposal

- energy from waste

- environmental monitoring

- environmental audit service's (CP-audits)

- multi-material resource recovery

- environmental training and education

- environmental operation and information center

- emergency preparedness and response capability.

Interesting for the environmental performance and CP-strategy is the environmental audit services.

CP-audits as we have seen arc a powerful tool for to improve the efficiency of a company and to reduce the environmental pollution load. Therefore this service provided by the industrial parks is another means of helping businesses 'and improving the environment at the same time.

An innovative approach for paying for audits is a contractual management between the auditor and the company in which the former receives a percentage of the savings resulting from improvements in efficiency.

6. CP AND ISO 14001

An industrial park aiming for higher efficiency and quality will also be a cleaner one. With the increasing attention given to environmental issue by governments and industry, a new ISO set of standards is evolving. The ISO 14000 services will include environmental policies, life cycle analysis, environmental auditing, waste management, emergency planning and prevention. ISO 14001 and other environmental management systems were developed for use by individual enterprises. Some adaptation is required before they can be easily applied by an entire industrial park, however, the concept of an EMS is just as valid as for companies. Industrial parks receiving ISO 14001 certification should in principle be attractive to companies which are also committed to an environmentally sound approach to the manufacture of goods and provision of services.

Environmental performance objectives normally include overall pollution loads, resource efficiency and industrial safely. However, they can also be applied to factors such as habitat, landscape, bio-diversity and species protection.

Audits arc being increasingly required by lending institutions and regulatory agencies for compliance purposes. Energy, health and safety, and environmental audits have in the past shown that there are many opportunities for improving efficiency, reducing waste and protecting the environment at the same time.

Cleaner production and ISO 14001 both aim at improved environmental management, CP on the operational level and ISO 14001 on the overall management level. Whole CP programs usually make it easier for companies to meet the requirements for an ISO 14001 certification, a CP program may be just as effective without certification. An important feature of CP is that CP program does not have to be certified or monitored by any outside organizations or authorities.

7. CLEANER PRODUCTION CONSTRAINS

Despite attractive economics and significant reductions in environmental impact, the widespread adoption of Cleaner Production in developing countries still remains to take place. Several studies have addressed the barriers for the adoption of Cleaner Production at the level of individual enterprises, and most often categorized these as "conceptual", "organizational", "economic" and "technical". It makes however sense to subdivide the "economic" constraints in "economic" and "financing" constraints, and to add constraints related to the policy-environment. "Economic" constraints are related to the cost-effectiveness of Cleaner Production opportunities, whereas "financing" constraints are related to the financing of Cleaner Production investments. Table I provides typical subcategories of each type of constraints, from the perspective of industries considering adopting Cleaner Production. The constraints for credit providers to make finances available for Cleaner Production investments, might coincide with these, but have not yet been systematically assessed. So far, most efforts for promoting Cleaner Production in developing countries (including the NCPC program and alike initiatives from other donor agencies (e.g. USAID, NORADD, DANCED, GTZ)) targeted at the technical, organizational, conceptual, and to a lesser degree, policy related and economic constraints, primarily by providing technical information on Cleaner Production techniques and technologies.

According to many Cleaner Production promoters, little progress has been achieved in directing already available finances from domestic and international sources into Cleaner Production investments in developing countries. This may have been caused by:

- difficulty for financiers and industrial authorities (in particular those in charge for industrial licensing) to distinguish Cleaner Production investments from other types of investments;

- frequently encountered habit to mix up 'economic' and 'financing' constraints in the debate on barriers and incentives for Cleaner Production in developing countries: it is often presumed by governmental organizations and public financiers that since Cleaner Production can save costs or generate benefits, it is in the businesses' own interest to invest in Cleaner Production and hence there is no further need to consider special financing arrangements for Cleaner Production investments;

- tendency to relegate problems encountered in funding Cleaner Production investments to other types of constraints, such as "misunderstanding that Cleaner Production is always a costly affair" (conceptual), the "non-involvement of accounting and financial departments in executing the. Cleaner Production assessment" (organizational) and "limited cost - effectiveness of Cleaner Production options, due to low prices of natural resources or lack of enforcement of environmental regulations" (policy-related);

- the complex nature of the financing issue: stakeholders in developing countries may argue that the environment is a luxury concern, and therefore, environmental measures, including Cleaner Production, can only be undertaken with financing from developed countries;

Table 1: Six categories of constraints for Cleaner Production investments (from the perspective of industries considering adopting Cleaner Production).

Type of constraints

Sub-categories

1. Financial

  • High cost of external capital for investments in industry.
  • Lack of funding mechanisms (lending schemes etc.) appropriate for Cleaner Production investments.
  • Perception that investments in Cleaner Production present a high financial risk due to the innovative nature of Cleaner Production.
  • Cleaner production not properly valued by credit providers in their evaluation procedures for lending, equity participation etc.)

2. Economic

  • Cleaner Production investments not sufficiently cost effective (compared with other investment opportunities), given present resource prices.
  • Immaturity of the company's internal cost calculation and cost allocation practices.
  • Immaturity of the company's internal capital budgeting and capital allocation procedures.

3. Policy-related

  • Insufficient focus on Cleaner Production in environmental, technology, trade and industry development and strategies.
  • Immaturity of the environmental Policy framework (including lack of enforcement, etc.).

4. Organizational

  • Lack of leadership for environmental affairs.
  • Perceived management risk related to Cleaner Production (i.e. no incentives for managers to put their efforts into implementation of Cleaner Production).
  • Immaturity of the environmental management function in the company's operations.
  • (General) immaturity of the organization structure of the company and its management and information systems.
  • Limited experience with employee involvement and project work.

 

Type of constraints

Sub-categories

5. Technical

  • Absence of a sound operational basis (with well established production practices, maintenance schemes etc.).
  • Complexity of Cleaner Production (i.e. need to undertake comprehensive assessment to identify appropriate. Cleaner Production opportunities).
  • Limited accessibility of equipment supportive to Cleaner Production (e.g. high quality engineering small wares for process instrumentation etc.).
  • Limited accessibility of reliable technical information tailored to the company's needs and assimilative capacities.

6. Conceptual

  • Indifference: perception regarding the own role in contributing to environmental improvement.
  • Narrow interpretation or misunderstanding of the Cleaner Production concept.
  • (General) resistance to change.

- a lacking supply of financing services customized to Cleaner Production investments diminishes the demand for Cleaner Production assessment services from industries: it has turned out to be difficult for Cleaner Production promoters to convince entrepreneurs in developing countries to undertake a Cleaner production assessment, as the entrepreneurs claim not to have own finance for implementation of the feasible options, nor to have access to external funds for doing so.

- international donors and development banks would be willing to finance Cleaner Productions projects, but lack Cleaner production investment proposals that fit in the present lending schemes most often due to limited size of Cleaner Production investments.

Given this complex nature of the debate on financing constraints for Cleaner Production in developing countries, there is a need of systematic and organized testing of strategies and mechanisms to finance Cleaner Production investments in developing countries. It makes sense doing so in dialogue with the international private and public sectors. Concentrating on financing issues is also a recognition of the fact that concerns for financing might have been overlooked in the recent past, when awareness for Cleaner Production was raised and basic capacity developed for conducting Cleaner Production assessments.

8. CLEANER PRODUCTION INVESTMENTS

Cleaner Production investments are investment designed to incorporate the Cleaner Production strategy into production processes, products and services. A Cleaner Production investment may thus include a wide variety of actions (equipment, managerial improvements, training, etc.), and hence Cleaner Production investments have to be interpreted widely. A key problem in talking about Cleaner Production investments is that such investments normally have an incremental nature, in a sense that the application of Cleaner Production principles increases the costs for a "regular" investment. For the case of a brewery replacing for instance its worn-out bottling line by an up-to-date bottling line, it can be argued that the entire investment is a Cleaner Production investment, since the new bottling line will consume less water and energy, and spill less beer. However, it can at the same time be argued that this reduction of water and energy consumption and of the waste water generation, is the result of a regular business decision not including environmental considerations, since all available new bottling lines are "better" than the ones they replace. A Cleaner Production investment would in this case only be made once the brewery selects a more expensive new bottling line, with below average water and energy consumption and/or waste water generation. The issue of defining the incremental costs and benefits due to the application of Cleaner Production principles is not yet solved by the international community and needs to be further clarified in order to avoid that funds earmarked for Cleaner Production are used for "business as usual" investments.

In case of existing production facilities, a Cleaner Production investment is - for the time being - interpreted as an environmental project designed to capture commercially valuable emissions and waste, to avoid the use and creation of hazardous components and / or reduce the use of inputs (materials, energy and water) and not consisting of the installation of additional production equipment or the direct expansion of existing production facilities. In case of new production facilities, the Cleaner Production investment is - for the time being - interpreted as the part of the total investment aimed specifically at reducing the waste and emission generation ratios and/or material, energy and water consumption ratios below levels normally achieved with being new production facilities designed on the basis of "business as usual" engineering and conventional economics. In case of products, the Cleaner Production investment is - for the time being - interpreted as the additional costs for the environmental assessment of the reference product and for the inclusion of environmental product attributes in product design and preparation for manufacturing.

At first sight there are many differences in financing of Cleaner Production in respectively existing and new industrial establishments.

  • As regards Cleaner Production investments in existing facilities, experience has shown that much can be achieved through no-cost good housekeeping measures. However, once the no- and low-cost options have been implemented, financing even small investments with the low pay back periods can be difficult. These projects are not realized due to, inter alia, lack of capital, poorly developed banking system, lack of appropriate financing mechanisms, lack of knowledge, technology risks, and management's unwillingness to borrow money. Few countries have developed financing mechanisms targeted at financing these projects with resources from the international donor community (e.g. Sri Lanka, China, etc.). Most available credit lines serve larger enterprises, environment is not a priority investment area and the size of the investments is too small to be considered by commercial banks and international financing institutions. Experience indicates that there is need for financing mechanisms that can be used to finance smaller investments with short pay back periods.

  • As regards inclusion of Cleaner Production in new investment projects there is far less experience. Although Cleaner Production can in principle easily be integrated in new industrial establishments, there are serious concerns that this is not happening so far. Investors generally feel inclined to cut initial investment costs, at the expense of lower productivity/ efficiency, and hence higher environmental impact, e.g. by:

- using superseded process technologies;

- reusing second-hand equipment;

- utilizing low quality pipes, valves, etc.; and/or

- minimizing on process instrumentation and automation.

This has to be analyzed in greater detail, in order to make a case for the international community to direct investment flows into Cleaner Production investments.

In industrial parks and zones, Cleaner Production presents a tremendous opportunity as all or most investment is new and the choice of technology not finalized. A park / zone can promote cleaner production in many ways, for instance:

- by including cleaner production technology assessment as a part of the application process for new investment;
- by promoting cleaner production assessments in enterprises already located in the zones;
- by pricing the services for water, electricity and use of common effluents treatment facilities to levels which encourage savings and minimization;
- by providing advisory services to entrepreneurs on the availability of alternative solutions to end-of-pipe (by organizing workshops and campaigns, by establishing a core group of expertise in the zone with the help VNCPC and other relevant institution, etc.)
- by including cleaner production as an explicit policy for the development of the park enhancing the image as a "green park/zone" (and by signing the cleaner production declaration); and

- by preparing regularly an environmental report on the zone for the public.

9. CLEANER PRODUCTION NETWORK

Since its Inception in 1989, the UNEP Cleaner Production program has played a catalytic role in establishing an international network for the promotion of Cleaner Production. The activities undertaken by the network participants contributed to putting Cleaner Production on the agenda of national governments, multilateral organizations and development banks, donor agencies, industrial organizations and various other non-governmental organizations. Without having evaluated the UNEP Cleaner Production program in detail it appears fair to conclude that the program has catalyzed the establishment of a global network of Cleaner Production promoters and practitioners. The network encompasses representatives from governmental organizations, multilateral organizations, industrial stakeholders, development banks, academia and other non-governmental organizations (including professional associations such as the World Cleaner Production Society, World Environment Center, World Business Council on Sustainable Development, etc.). Individual players in this network have launched their own Cleaner Production initiatives, and meet every second year under the auspices of UNEP to exchange results and experiences. Tablet 2 gives an impression of key activities of participants in the Cleaner Production network.

A bird eye's view of activities undertaken by the network participants, easily discloses the most valuable achievements, in particular (in random order):

  • building general awareness among key decision makers in governmental organizations, industrial organizations and other non-governmental organizations of the need for, and opportunities of a preventive strategy for industrial environmental management;
  • developing capacities for conducting Cleaner Production assessments in host institutions in developing countries and countries with economies in transition;
  • generating company-level case studies on the successful application of the Cleaner Production approach in different industry sectors, in a growing number of countries around the globe;
  • developing and distributing information dissemination and training materials for various target groups.

Table 2: Key activities of selected international participants in the global Cleaner Production network.

Category

Organizations

Key activities in promoting Cleaner Production in developing countries

United Nations agencies

UNEP

  • Networking with (inter) national governmental, industrial and other non-governmental stakeholders to raise awareness of Cleaner Production.
  • Exploration of new approaches and tools for promoting Cleaner Production, such as Life Cycle Assessment, Eco-Design, Environmental Technology Assessment and Environmental Management Systems.

UNIDO

  • Setting up of a global network of national Cleaner Production centers (in collaboration with UNEP), in particular to develop a national capacity for conducting Cleaner Production assessments and for providing training and policy advice.

UNDP

  • Integration of Cleaner Production into preparation and implementation of sustainable development plans, mainly for poverty alleviation and social and rural development.

Development banks

World Bank, IFC, ADB, IBD, AFDB, EBRD, etc.

  • Providing company-specific technical assistance for Cleaner Production assessment.
  • Financing selected Cleaner Production investment projects.

Donor Agencies

NORADD, DANIDA, GTZ, USAID etc.

  • Providing technical assistance for conducting plant-level Cleaner Production assessments and for development and implementation of Cleaner Production fostering policies.

Other international organizations

e.g. OECD, ICC, ILO, etc.

  • Provide a platform for dialogue on Cleaner Production fostering strategies and policies.

 

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