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4. Case Studies 4.1 Introduction The following chapter entails analysis on five case studies. There are good reasons to include those case studies. It has been spelled out in the previous chapters that the approach to governance aims at involving corporate actors towards sustainable development. In theory, this might happen due to the analysis provided in Chapter 1. Keywords are: governance systems learning from both markets’ and governments’ failures, knowledge-based firms, and markets for sustainability. Chapter 2 has laid down a concept of “responsible corporate governance”, which goes beyond standard approaches of corporate governance. Ensuing synergies between political and responsible corporate governance are likely to be enhanced when long-term trends as analysed in chapter 3 become part of today’s agenda. Taken together, the previous chapters indicate consistent analytical evidence about our governance approach to sustainable development. There is, however, a need for more detailed analysis about what’s actually going on out there. Case studies provide a testing for theoretical analysis; theoretical analysis moves forward via empirical analysis. This is especially relevant when the proposals made about learning processes hold true. Analysis on multi-actor coalitions and their learning processes heavily demand applied research on such case studies. This is why case studies are essential for WI’s analysis. The case studies chosen meet a particular demand. Though each is unique, they share some common ground: multi-actor coalitions in the areas of climate protection, sustainable energy use, and eco-efficiency; heavy involvement of corporate actors; maintaining some supervisory functions of governments across different levels; no urgent regulatory need while aiming at learning processes; adding to rather that substituting prevailing areas of environmental policy. More specifically, they may be regarded prototypical as regards to

* EcoProfit: local level, stakeholder dialogue, qualification. * PIUS: regional level, publicly-sponsored consultancy to industry, approaching

“ordinary” SME’s. * ProKlima: Regional level, driven by municipal utility, funding with low transaction

costs. * Energy+: European level, involvement of different levels including member states and

corporate actors, triggering technical standards, demand creation across slightly different markets.

* Tradable permits: International, European and national level, strong corporate involvement (BP).

The screening process towards these case studies was relative intense. It can be estimated that first-hand information on some fifty case studies is accessible throughout the Wuppertal Institute and related experts. Possible case studies were briefly assessed in an internal workshop. The decision taken reflects the analysis as well as the access to fresh information. The study team underlines that there are more examples for case studies available. The selection has led to a few that might be considered best-practise for purposes of our analysis. This means that each example is an ongoing activity, which might yield different outcomes in near future. Each example, too, can be improved and should not be seen as any “optimal” solution. Given these remarks, analysis on the case studies is worthwhile.

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4.2 Ecoprofit - A local public private partnership programme for

sustainable development Description Various concepts for implementation of sustainable development are suggested such as, for example, “corporate social responsibility”, “social accountability”, “Cleaner Production”, “Factor 4/10”, “Eco-Efficiency”, “management of resource flows”, environmental management systems (e.g. “ISO 14000 series” and “EMAS”), or “Ecoprofit”, which is presented briefly in this chapter. Ecoprofit1 is an excellent example for a stakeholder dialogue, which has earned an outstanding reputation across Europe. Ecoprofit is a simple yet highly effective methodology for co-operation between municipalities and enterprises, aiming at additional company profits and increased competitiveness through improvement of companies’ environmental performance. Ecoprofit stands for "Ecological Project For Integrated Environment Techniques" and is an on-going project initiated by the city of Graz, Austria, which attempts to offer small and mid-sized enterprises (SMEs) consultative and financial support in order to help them apply preventive environmental strategies regarding processes, products and services. Based on a co-operative approach between municipalities, companies and experts, Ecoprofit’s core objective is to strengthen companies economically by the reduction of costs through the minimisation of waste and emissions, say increased eco-efficiency. The project is an outstanding good practice initiative and has been awarded by many European Institutions for several reasons, e.g.:

* triangle co-operation between SMEs, environmental authorities and expert consultants * help for self-help for SMEs * setting up of an educational programme for SMEs * paving the SMEs` way to the ECO-audit * dissemination to other cities

The Ecoprofit methodology is based on a series of workshops. Over a period of a year employees from companies of different sectors and size come together in monthly workshops. Candidates for the Ecoprofit certificate undergo a basic programme of at least 10 workshops. A single workshop programme covers a maximum of 15 enterprises. Each company sends a number of employees to participate in the workshop programme, which cover at least the following subjects:

* waste/emissions and how to avoid them * development of a company environmental programme * creation of a company environmental team * logistics of waste and environmental cost identification and evaluation * material- and commercial aspects of waste reduction (analyses of material flow,

energy flow etc.) * treatment of hazardous material * development of creative/innovative ideas and measures * environmental regulations * ecological purchasing methods * ecological controlling, best practices

The workshops are programmed to teach basic know-how on cleaner technologies and production processes as well as additional organisational and management skills. The

1 The case study builds on a series of research projects and consulting activities of Wuppertal Institute.

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participants shall be able to transfer the know-how they acquire in the workshops into their company and its environmental team. The programme is fully based on a “learning by doing” approach making use of training material that has been developed. After having participated successfully in the basic Ecoprofit programme described above companies’ efforts can be awarded with an Ecoprofit Certificate. A precondition is the fulfilment of certain criteria set up by the city of Graz. Analysis

Relevance The objectives of Ecoprofit address the official and more or less quantified positions of the European Commission and especially some of its member states to minimize waste and emissions with a primarily output-oriented approach. Apart from the European and national positions a lot of municipalities signed the Aalborg-Charta and frequently set more ambitious goals to contribute to the challenges of a sustainable development. Much too often the municipality goals are the result of a dialogical process with the relevant actors on this level. Small and mid-sized enterprises (SMEs) are increasingly regarded as an important target group of urban environmental policies as their cumulative contribution to pollution is not anymore underestimated by policy makers. Although these companies generate relatively small amounts of waste, one has to pay special attention to these undertakings as they use many different hazardous and/or toxic substances in their production processes. However, from the municipal authority point of view there is only a limited scope of action to influence SMEs in order to change their production patterns. In regard to the low degree of regulation or the lack of statutory instruments, and in view of the great number and variety of SMEs, local governments are adopting a co-operative policy style to a greater extent. Ecoprofit helps the environmental authority to put itself into a position from which it can facilitate preventative environmental strategies by mobilising technical expertise and entrepreneurial skills of the academic, business, and industrial sectors. Characteristic for the implementation of Ecoprofit is the close co-operation between public bodies such as municipalities or regional development organizations, private companies and external experts on a voluntary basis. Its success formula is based on the particular partnership approach between municipalities and companies and the networking between small and large enterprises of different business sectors. Partnership and networking produces synergies, which turn Ecoprofit into a public-private win-win methodology. The idea behind Ecoprofit is to create a methodology that helps to identify and realize classic win-win solutions. Companies benefit economically from implementing environmentally sound processes/technologies and at the same time improve the environmental conditions in the respective city/region. Both, the companies and the municipalities share the profit, each of them in the area of particular interest. The main benefits eco-profit offers can be summarised as follows:

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Benefits for Enterprises Benefits for Municipalities Ecoprofit... * reduces employment of working capital,

raw material, auxiliary material and energy

* enhances transparency of cost structures and processes

* prepares the implementation of environment management systems such as EMAS or ISO 14001

* fosters motivation and teamwork * supports accomplishment of legal

requirements * honours companies with the "Ecoprofit"

award and integrates them into the project related PR-activities

* creates partnerships between enterprises and public bodies

* offers joint training programmes

Ecoprofit... * improves the environmental conditions for

inhabitants of the region * provides competitive advantages to bring

in international investment * saves expenses for ecological recovery * improves the image of the region * attracts visitors and tourists * prevents environmental pollution * improves the municipal infrastructure * helps successful businesses to create

local employment

Source: WI 2003

Although a lot of municipalities gave their self-commitment to foster a sustainable development on a local or regional level not all can present veritable results up to this day. Contrary to this observation the need for action is more urgent than ever especially under the demanding economic conditions. The reduction of waste is apart from the ecological point of view, in particular in smaller countries with a high population density like Germany an important economic issue. The prices for land are quite high in urban areas that perpetual rising costs for waste disposal in landfills can be observed. Incineration processes with the best available technologies as an alternative are not existing and/or profitable in all places.2 This economic effect stimulates naturally at the same time the enterprises interest in waste reduction through more efficient production processes. The need to find significant optimisation potentials is higher in cases of highly competitive markets or products and in difficult economic situation. Ecoprofit offers consequently an opportunity for municipalities and enterprises at the same time at the recent demanding economic conditions.

Effectiveness The Ecoprofit’s core objective to strengthen companies economically by the reduction of costs through the minimisation of waste and emissions is clear, verifiable and consistent to political objectives. To achieve the objectives the main impetus of the workshops is on knowledge increasing of the participants. Nevertheless the methodology is not based on a defined norm and apart from the core objective the implementation performance depends on the quality and the willingness of the participating enterprises and experts. However, within the last ten years the methodology spread mainly over Germany, Austria and the Suisse. Since its inception in Graz, Austria, in 1991, numerous leading businesses have successfully implemented Ecoprofit. Graz counts about 20 new participants every year.

2 For ecological reasons an input-oriented approach to minimize the waste production is more favourable, see WI’s previous reports

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Companies having earned the Ecoprofit Certificate often join the Ecoprofit Club and continue to strive for increased eco-efficiency. So far, Ecoprofit is disseminated by municipalities who learn about this best practice methodology at international conferences, study facts and figures and start its implementation. A number of European cities such as Vienna, Munich and Heidelberg have already opted for Ecoprofit as their environment protection scheme. In recent years the so called “Ecoprofit Academy” helped to spread Ecoprofit at an international level. Its goal is to advise and train future Ecoprofit consultants from all over the world and to serve as platform and competence center for public-private regional Eco Efficiency programmes to follow the Graz example. The results of Ecoprofit projects are mostly given as reduction of costs, of use of energy and materials and of waste as these can be measured in absolute numbers. Other results may be described according to the table of benefits above. Some German examples:

* In Berlin in 2002 20 enterprises reached reductions of costs by 275,000.- , of 277.000 kWh/a energy supply, 120 t/a of material, 16,000 m3/a water (www.oekoprofit-berlin.de)

* In Augsburg in 2000, 15 enterprises, reductions of 250,000.-, 1.7 million kWh/a, 1.0 million kg CO2/a, 280 t/a waste, 2,800 m3/a water

* In Wiesbaden in 2001, 9 enterprises, reductions of 281,000.- , 1.5 million kWh, 0.56 kg CO2/a, 23 t/a material, 180 t/a waste, 5.700 m3/water

* In Hamburg in 2001, 15 enterprises, reductions of 335,000.- , 800,000 kWh/a, 150 t/a CO2, 500 t/a waste, 160 t/a material, 80 kg/a hazardous material, 9,000 m3/a water (www.hamburg.de/behoerden/umweltbehoerde/)

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Fig. 12: Results of Ecoprofit in Wuppertal, Remscheid, Solingen.

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Many more cities and regions give similar summaries of their Ecoprofit programmes. There are also tables of enterprises with their respective reductions and invested money. These figures are impressive but not easy to interpret: not all of these reductions can be attributed to the Ecoprofit programme as several measures taken by the enterprises would have been taken anyway. Most likely few reasons are responsible for the success of the Ecoprofit methodology, expressed through the increasing number of participating enterprises. Ecoprofit gives a framework where business actors can broaden their knowledge while receiving a financial support. Possible management deficits are set off through offered workshops with practical checked information materials. In general the management should be aware of the opportunities for production-cost reduction through the minimisation of used materials and produced waste but the experiences made in the last decade tell other stories. The management deficits on the emission side are depending more on the fact of missing internalisation of external cost effects. The new emissions trading rules will probably counterbalance this market deficits. This step is not observable for the input-side. A shortage or the different ecological backpack of certain materials are often not represented through market prices. As a result the prices do not give a sufficient incentive to take the necessary steps by business actors.

Efficiency The cost efficiency depends certainly on the workshop qualities and expert experiences as well as on the competences of the business actors. According to multiple performed workshop in the past it could be assumed that the instrument achieve its objective relatively cost efficient. The more aware of so called “best practices” closely related to the production process of the business case the expert is the more the expert is able to support specific efforts. But nevertheless the given Ecoprofit results above illustrate the economic range of different activities. If the Ecoprofit programme spurs some innovation within an enterprise depends also on the mentioned framework. From the organisational point of view an innovation process is intended through a separate workshop dedicated only to this issue. An enterprise can certainly support an innovation process through forming/establishing a specific innovation team. Unfortunately do the available reports on finished Ecoprofit activities not explain the success of launched organisational or implemented technological innovations. But it can be guessed that a more input-oriented approach stimulates an innovation process probably more than this primarily output-oriented approach. In the case of Ecoprofit it is more likely that best available technologies and organisation models, at least at the beginning, have been “only” transferred from company to company than new innovations have been implemented. However, in our days an input-oriented view is also part of the Ecoprofit programme so that innovation can be stimulated easier.

Adaptation flexibility & long-term sustainability The Ecoprofit programme could be adapted very simple to new conditions by changing the workshop contents or adding specific issues dealing with emerging problems. The workshop materials have to be revised under new conditions and the expert has to train himself, e.g. for modified limiting values. An explicit formal adaptation process is as well not provided for by the programme. In some cases the Ecoprofit activities of an individual business actor is involved in overall business strategies. This depends more or less on the business objectives which is set up by the top management. In harsh times the top management tends to adjourn the so called “green

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activities” to concentrate on main business. Unfortunately they often forget that saving resources is one of the most profitable businesses. This is even more true in harsh times when new customers do not invest in articles apart from real basics.

Side-impacts As discussed in the second Wuppertal report the implementation on taxes for certain resources could probably foster a more resource-efficient economy. But it has to be discussed further if the implementation on a national level is good policy and feasible. Certainly the implementation is more effective on the European level in a more and more globalised economy. But the higher the institutional level the more difficulties will appear while trying to form a political majority. However, the Ecoprofit programme does not have an obvious effect on issues like individual freedom, free markets, employment, social security and social capital. A negligible effect can be assumed for the question of employment. The cost-reduction effects through resource saving activities give the enterprise theoretically the opportunity to hire new employers or to safe some jobs in danger. Protagonists of the true theory of free markets will possibly make out a market intervention through the financial support by the state. This could be neglected because the Ecoprofit programme is a voluntary approach that is open to all enterprises. Conclusions The main interest of enterprises is the reduction of costs, which may arise from changes in the production process. To support this business efforts new models of cost controlling are probably necessary that conclude together cost and material flows within the production process should be implemented. A successful approach in this direction has been started with the project CARE, a joint cooperation between several SME’s and the Wuppertal Institute (www.oekoeffizienz.de). This general motive has its variations in different firms. The interest in programs like Ecoprofit and PIUS is especially great when problems are established or ideas for improvements have already been formed. These programs help enterprises to develop a broader basis or in other words a enhanced knowledge for decisions that have to be taken. This leads to a higher capacity to act, which could simultaneously an advantage for the economic interests of the enterprises as well as for other stakeholders, as in the Ecoprofit case f. i. the local authorities. The most pressing problems are seen in the fields of waste production and treatment, hazardous substances and energy (Evaluation Report Munich, www. sustainability.at/oekoprofit/; Umweltbehörde Hamburg). Concerning energy however there seems to be no potential of cost reduction especially for high-energy-using enterprises as they (or some) have very good contracts with energy suppliers. Important for enterprises is the consulting (the view of a neutral consultant from outside) and the gaining of information. Furthermore a good contact to authorities is of use; firms are interested in non-bureaucratic treatment. So called multiplicators have great influence on the decision for Ecoprofit, such as talks between business people, chambers of commerce (IHKs), RKWs and other associations which make information available and organize meetings. 4.3 PIUS - Production Integrated Environmental Protection Description

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PIUS is the abbreviation of “Production Integrated Environmental Protection” (German: ProduktionsIntegrierter UmweltSchutz)3. While most people are using the term in this sense by some it is simultaneously used for “Product Integrated Environmental Protection”. This is a slightly different approach by focusing not only on the production process but also on the qualities of the product (environmental performance, durability, recycling ability, degradation ability) and primary products. PIUS has been discussed at least since the early 1990s as a desirable alternative to end-of-pipe-technologies in industrial production. These measures had a great effect on environmental standards in the 1980s and lead to a substantially reduced pollution of air, water and soil, but also produced high expenses. The integrated approach on the other hand (clean technologies) has the entire production process in view, aiming at the optimisation of each step in a complex system. It is at the same time able to reduce costs by reduction of use of resources (energy, water, raw materials), production of less waste and use of new technologies. The use of PIUS gives thus the chance of an increase of the competition capacity. Magazines, professional associations, unions and public authorities have been treating this subject for the last decade. E.g. PIUS was made a major topic for prevention of environmental pollution from industrial production in the support framework of the Federal Ministry of Education and Science (BMBF) in 1994. Many projects were conducted by producing enterprises and/or research institutions, and PIUS is now part of economic studies of several universities as well as of international research projects (BMBF protocol with Rumania; German-Japanese PIUS Conference 2001). Today, PIUS projects are being promoted by several of the Federal States of Germany (f.i. Bremen, Northrhine-Westphalia). In Northrhine-Westphalia (NRW) the most prominent PIUS project has its office in the Efficiency Agency (EFA) of NRW. Originally it was an initiative of the ministry of environment in Schleswig-Holstein and waste management agencies (privatised public agencies), especially of hazardous waste, of five Federal States and was for two years (1999 – 2001) subsidised by the German Federal Foundation for the Environment (Deutsche Bundesstiftung Umwelt). Now it is supported by the EFA NRW, the Environmental Agency (LANU) Schleswig-Holstein (SH) and the Hazardous Waste Management Association (SAM) Rhineland-Palatinate (RLP). More than a dozen further cooperation partners also support this initiative in various ways. The centre part of PIUS is the Internet Forum, an information pool of PIUS material (www.pius-info.de). It gives free access to project reports, industry sector manuals, fact sheets, seminar proceedings and literature and is continually being extended. There are also interactive services for information exchange and expert discussion. The PIUS Internet Forum is a good complement to the website “Cleaner Production Germany” (CPG) of the German Federal Environmental Agency (www.cleaner-production.de), an information service for innovative environmental technology and federal projects in Germany. The Efficiency Agency of NRW is offering further support for enterprises (SME) by finding consultants and sponsors and by integrating single initiatives in aggregated projects. The main tool for SME is the “PIUS Check”, an initial check of an enterprise to make a status-quo-analysis and find potentials for improvements by PIUS measures. EFA finances 70 % of the consulting costs. The target group for PIUS are small and medium-sized enterprises (SME) but the information material is also valuable for authorities, associations, innovation centres, universities and other research institutions.

3 The case study builds on a series of research projects and consulting activities of Wuppertal Institute.

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Analysis

Relevance For the development of sustainability, in this case especially ecological sustainability, efficiency is an important factor. Production integrated environment protection is aiming at the increase of resource efficiency in production processes, i. e. reduction of use of water, energy and material. This objective is consistent with policies of all levels proclaiming resource preservation (raw materials, energy, soil etc.) and thereby also with worldwide climate protection. Damages as a result of a wider distribution of production integrated environment protection are possible but not probable; ecological charges may not be reduced but shifted. The elimination of toxic parts of a production process may lead to higher use of water or energy and vice versa. First evaluations however show mainly ecological improvement for most environmental issues (Gege 1997, WBCSD 2000). An economical evaluation showing reduction of costs for ecological repair is still not possible because of the well known difficulties to internalise external costs for common goods as the nature. The available numbers in literature vary about a factor of 10. However, the contribution of PIUS to minimise the material input will reduce all outputs (not only emissions) and simultaneously the external costs. Following the estimations of Arthur D. Little, an engaged ecoefficiency programme could lead to a cost reduction over 60 Billion EUR per year only for energy savings in enterprises in Germany without including the external costs.The respective national and international reports in preparation of the Johannesburg conference have emphasized the need for action. Besides the reduction of the world wide human mortality rate the protection of the ecosphere is the essential condition for sustainable development. All actors are called upon to cope with this challenge. Meanwhile also the economy actors realized their responsibility or were made realize it by customers and capital markets (s. EC 2001), and started acting pro-active. The more enterprises go this way the more pressure will be put on those who refuse to change. On a national level the picture is complex. Ecologically sensible acting often leads to higher (economic) expenses but not always to more customers and better competitive strength. There were not few “Eco-firms” closed and bought by “normal” competitors. But the reasons for their failures are many. Very often there was simply a lack of economic know-how which lead to false estimations of market and economic capacity. Today most enterprises have learned their lesson and there are many examples of economy and ecology going hand in hand. Moreover, not only customers but also capital markets, insurances and municipalities honour more responsible entrepreneurial action today. Resource efficient business is therefore profitable in many cases. The basis of PIUS always is a sponsorship by the municipality, district or Federal state. This financial support is an important point for enterprises. In NRW and Bremen, up to 70% of the consulting costs are taken over by sponsor programmes. The benefits of communities from PIUS are:

* improvement of environmental conditions of the region/ prevention of environmental pollution

* close contacts to enterprises * improvement of the image of the region * competitive advantages (economy support, job maintenance) * saving of expenses for ecological recovery * “control” of enterprises (more information about environmental “behaviour”, data

survey) * support of realization of environmental laws

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Effectiveness There are no definite objectives in terms of numbers and amounts. The reduction of ecological charges is the aim of the described measures but there is no set norm. A comparison before – after can show improvements in eco-efficiency. It is desirable that supporting authorities keep a record so that the development of a region is shown. Objectives do naturally vary from enterprise to enterprise. It might be a possibility to define overall objectives for a region which would then give a framework to all cooperating actors. Like the Cleaner Production programme, launched by UNEP, PIUS is contributing to ecological sustainability. In comparison to the Cleaner Production programme PIUS is focussing more on the optimisation of single processes for one product than to optimise the life cycle wide production chain. Support schemes of public authorities are based on the Agenda 21. Financial support comes from different programmes of Federal states, of the federal Republic or the EU. Generally the extent depends on the number of enterprises taking part in the programme and on the kind of business and measures taken in the course of the programme. To give an example: In NRW 150 PIUS checks were carried out in the past two years, next year there will be another 100. The quantity and quality of changes caused by theses checks are not recorded. Thus the question arises how enterprises can be reached. According to the RKW Bremen and EFA NRW a mix of enterprises is taking part in PIUS programmes, depending on individual interests, problems and contacts. About “motives of enterprises” see chapter “Relevance”. There are also objections to partaking in PIUS that may lessen the success of the programme:

* One problem in partaking in one of the programmes is the amount of time that is needed.

* Also important is the period of amortisation of investments: it should not exceed two years. Small firms are more sensitive to these factors than bigger ones: as well the amount of time needed by employees as the amount of money for investments have more weight in a smaller business.

* Apart from that a business man has mainly his product and marketing in view. It takes an impulse to make him look at the whole production process.

* Also it is often necessary to break with long-lasting contacts, f. i. between enterprise and facility constructor (installation constructor? machine constructor?).

* Generally there is a great perseverance in enterprises especially while no problems arise (“never touch a working system”).

It seems to be difficult to reach enterprises, even through internet information; technology-transfer-projects of universities find it hard to find interested firms (Schleswig-Holstein). The instrument is supported by political actors in different ways. Examples are the awards of a PR effective competition of the MUNLV NRW, tax reductions in Hamburg (Umweltbehörde der Hansestadt Hamburg). Also there is always some financial support by public authorities (s. a.).The PIUS Internet Forum gives free access to relevant information for all interested firms and other actors. Apart from that the instrument supports the economic interest of the enterprises in reducing expenses; it directs the attention on resource efficiency and production processes and shows them how to use reasonable measures for public relations. These described support structures and public relations do help to make ecologically sustainable economy better known. For the customer there is the chance to gain more information about products and sustainable production.

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Efficiency Partaking enterprises are interested in reducing costs so they will rarely choose measures of which the amortisation is not clear. But the focus is on financial expense so that the “lowest cost” may not be the optimal solution ecologically speaking. From a political point of view the PIUS concept seems to be cost extensive. PIUS is trying to spread and broaden knowledge on eco-efficient management within and between enterprises. The need for other probably more expensive political instruments, as taxes f.i., seems to be little, at least in case of the partaking enterprises. But the small number of partaking enterprises in total leads one to assume that PIUS should be promoted in another way or (at the same time) other instruments have to be chosen to stimulate more enterprises to act as an ecological responsible actor. Public authorities do not have much money to spend either but there may be organizational synergies not yet used. Theoretically the optimisation of a production process as a whole can initiate innovation (s. MIPS in WI 2001a); practically it does probably mostly “spur” the achievement of the latest technical and/or legal standard.

Adaptation flexibility & long-term sustainability PIUS is a very flexible and voluntary instrument for two reasons. As stated above it has no defined objectives but works with the general directive that production processes should be optimised from an ecological point of view. Thus it is open for any changes of law, of limit values, of knowledge. Secondly it works with individual enterprises, giving them every freedom to find the optimal way for themselves. As said above each participant is free to find the individual solution. It is up to the respective enterprise to spot the possible improvements, choose measures and define the extent. It is merely necessary to reach improvements in environment protection. Generally all kinds of enterprises are free to use PIUS at any time. Financial support however is limited and is restricted to SMEs. As far as known enterprises are not forced to make anything public but they are validated by a commission of the sponsor. The initial “checks” of the enterprises are performed by external consultants in cooperation with the enterprise. Thus, PIUS is a voluntary instrument and consequently no formal process for sanctions is provided for by the initiators. The objective of PIUS is the reduction of resources used for the production process without sanctions. In some sectors/branches production integrated environment protection is part of an overall strategy. Examples are “Responsible Care” of the chemical industry and sustainable-development-programmes of the European aluminium industry (www.oekoeffizienz.de). It is then not officially a PIUS programme. The benefits actors are hoping for in working with PIUS are described above (motives of enterprises, interest of public authorities, see chapter “Relevance”.)

Side-impacts Politically PIUS and similar projects are connected with the Local or Regional Agenda 21. It could be useful to organize programmes on a Federal level. Nationwide consistency would allow comparability and transparent support structures for enterprises with several sites. The financial support for PIUS programmes mostly depends on the policy of the Federal states, Federal Republic or EU; i. e. it works on a given setting of policies and programmes. Legal regulations have to be favourable.

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The partaking of an enterprise in a PIUS programme makes information available about the “ecological acting” both for the enterprise itself and for public authorities. On this basis a cooperation as in environment alliances of some Federal states is facilitated (s. chap. 4.2, side impacts case study ecoprofit). PIUS does not interfere with individual freedom, free markets, employment, social security, social capital. Generally resource efficiency can enhance employment though there are no validated data (Fischer 2002). For an evident effect though it needs intensified activity in this field. Conclusions PIUS is a good flexible instrument for aiming at ecological improvement in production processes and is a good example for a responsible management system. It is easy to handle and gives individual solutions. It is not used by enough enterprises though. However, enterprises are as well as all other institutions “learning organisations”. Therefore it is reasonable that not all enterprises realise ecoefficiency promptly but it ought to be ensured that political regulations encourage more enterprises to become learning organisations. Results of the PIUS approach are hard to ascertain. In numbers: in NRW 150 PIUS Checks were carried out in the past two years, next year there will be another 100. The quantity and quality of changes caused by these checks are not recorded. Programmes in other Federal States do not necessarily use the name of PIUS. In Hamburg f. i. it is called “Enterprises for Protection of Resources”. Furthermore there are other “programmes” aiming at innovation processes in SME, like “Ecoprofit” and EMAS. The question arises if these different measures (or systems) complement or rather supplant each other or if this can be ignored because they lead to the same results. It is necessary to reach more business actors with this programme. This could be tried by improvement of information and communication; especially communication between public authorities and economy seems to be problematic. Objections (s. a.) have to be overcome. Also more incentives should be created (like profit sharing financing, tax reductions etc.; see also “environment alliances”). If a verified publication is aimed at the programme needs an obligatory manual and possibly an independent validation/inspection. Ecologically sensible acting over all areas must be secured. A life cycle optimisation should be the overall objective. A shifting of problems (f. i. to other environment areas, other dimensions or other locations within a life cycle) should be precluded. A programme like PIUS is easily applicable in other countries. For practical use it seems to be important though to install a legitimate agency which is accepted as being neutral by both public authorities and economy. The Federal state NRW did this in establishing the EFA which is widely accepted by enterprises. 4.4 The “proKlima” partnership contract as a model for cooperative climate protection on community level Description The “proKlima” is a climate protection fund that was established as a model of cooperative climate protection (global thinking) by combining management interests, consumer needs,

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and local activities (local acting) in the region of Hanover4. The scheme covers an area of about 20,636 square kilometres with about 677,000 residents. Building on extensive activities in the field of Integrated Resource Planning (LCP/IRP) during the mid-90's, the climate protection fund was founded in June 1998 when the proKlima partnership contract was signed three years after the first outlines were made. The proKlima office also started operating in 1998. The term of contract of partnership proKlima is effective through June 2006, the agreement will automatically renew for successive one year unless terminated. In signing this nation-wide unique partnership contract the Stadtwerke Hannover AG, the City of Hanover and the additional partners agreed on the goal for the proKlima climate protection fund "to support and progress monitoring of measures and third party projects (...) for climate protection, (...) which otherwise would not have been realised or only in scaled-down extent due to a lack of (given) economic efficiency." For the City of Hanover the commitment to climate protection plays an important role in order to meet their obligations within the framework of the Local Agenda 21 process. For the Stadtwerke Hannover AG the objectives are the following:

* promotion of energy efficiency and back-up of its voluntary commitment to environmental protection,

* better positioning ahead of other competitors in a deregulated energy market through promotion of regional responsibility and innovation leadership,

* implementation of the 1996 declaration of the German corporate sector on global warming prevention imposing a voluntary commitment of industry to reduce GHG emissions.

The proKlimascheme enlarges the already ongoing activities of the utility in the field of market orientated services and environmental actions. Since October 1999, for example, the Stadtwerke Hannover offers customers the electricity tariff “enercity Strom & More” which includes electricity from cogeneration plants and a set of energy services, several of which are designed to enhance energy efficiency. There are some included in the tariff offered for free, and some for which rebates are given (e.g., a detailed individual on-site energy audit for domestic customers).

Design of the proKlima funding scheme The “proKlima” climate protection fund is a private public partnership formed by different local institutions in the Hanover Region. The fund members provide up to 4,5 Mio. Euro annually to support climate protection measures undertaken by their customers and citizens. The capital of Lower Saxony, Hanover, the surrounding towns Langenhagen, Seelze, Laatzen, Ronnenberg, Hemmingen and the local energy supply company Stadtwerke Hannover AG/ enercity are financing the fund. The corporate share amounts 76,7 % of the total budget whereas the public share covers 23,3 %. Thereby, the majority of the fund comes from the Stadtwerke Hannover AG´s previous year's profit and from a newly introduced surcharge for gas paid by all customers. The contribution of the municipal partners such as the city of Hanover, that ranks first among all municipal fund partners, is linked to the annual revenues from the licence fee paid by the utility and is defined as 2,5% of these payments.

4 Information on the scheme is available at the website (www.proklima-hannover.de) as well as on related

initiatives www.enercity.de, www.haus-partner-hannover.de, www.proklima-hannover.de, www.region-solar.de. The case study builds on a series of research projects and consulting activities of Wuppertal Institute undertaken within the region during the past 10 years, especially in cooperation with the Stadtwerke Hanover.

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The fund is supported non-materially and with know-how by the Trade Corporation of Hanover, National Association of Energy Consumers, Consumer Advice Centre Lower Saxony, Citizens Action Group for Environmental Protection, Ruhrgas PLC and Thüga PLC (non-public shareholder of Stadtwerke Hannover AG). All partners signed the contract of partnership "proKlima". From an organisational perspective, three institutions are of relevance. The proKlima Board of Trustees consists of representatives of Stadtwerke Hannover AG/ enercity and of all municipal fund members. The advisory council is composed of representatives of all partners. Both committees decide together on individual projects and the setting-up of support programmes. The proKlima office decides on plans within the framework of the public support programme. It is responsible for management and monitors progress of this climate protection fund. In addition, it cooperates with well-known institutions in conducting studies, impulse programmes and innovative projects. The office also participates in local climate protection activities via "networking" with the City of Hanover or the Greater Hanover Regional Association. According to its strategic goals, proKlima supports local climate protection measures which could not have been implemented without financial aid and for which the applicants are not obliged to pay. Furthermore, the fund aims at mitigating economically unacceptable costs of innovative projects which are not paid off by reduced energy costs. Five public support programmes have been established:

* energy-efficient modernisation of existing residential buildings (e.g. better insulation, optimised windows, efficient ventilation systems, the use of co-generation, quality control)

* heating energy conservation in new apartment complexes (e.g. ambitious low energy houses, passive house standard ( 15 kWh/m²a), quality control)

* solar water heating * photovoltaic - solar generation of electricity This programme is on stand-by since the

law Erneuerbare Energien (special support for renewable energies on a national level) has been enacted in March 2000.

* solar energy & climate protection in schools, organisations and public institutions (e.g. solar panels for demonstration, educational material, measures to popularise the use of solar energy etc.)

In addition, individual projects and promotion measures are funded each year, for example:

* Investment measures (e.g. hydroelectric power station, various photovoltaic-projects) * development and research (e.g. scientific research to passive house standard,

development of the Energie Pass (low energy consumption certificate)) * educational measures (e.g. qualification in the field of solar-marketing, energy -

coaching in social institutions) * promotional and advisory measures (e.g. support of campaigns dealing with solar-

energy and insulating for existing houses) Additional 200,000 Euro p.a. are spent for promotion and the support of campaigns with other partners, for example: the “Haus-Partner-Hannover” older buildings campaign is canvassing for optimized insulation on buildings and the “Solarenergie Kommt! campaign furthers the demand for the use of solar energy.

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Analysis

Relevance The proKlima fund addresses energy efficiency and GHG reduction potentials on the local level with special focus on private end-users and public institutions. It aims at enhancing the implementation of measures that are usually hindered through a series of market barriers. Hereby, the scheme makes a contribution to implementing the national obligations under the Kyoto Protocol as a keystone of sustainable development. It particular contribution can be seen in linking the global perspective of climate change to the scope of local activities which is a prerequisite for success in this field.

Effectiveness Within the funding structure all project proposal are assessed with regard to the following criteria for supporting individual projects or establishing programmes: CO2-efficiency (US$/ ton of avoided CO2), overall reduction of CO2, multiplier effects, introduction of new technologies for climate protection to the market. Actual achievements and results are monitored and evaluated on a annual basis and published in annual progress reports. The financial structure of the funds is controlled and certified every year through independent certification bodies. The proKlima fund could generate a significant response among the target groups, triggering an increasing number of applications (1804 proposals in 2001, 1015 in 2000). The following table provides an overview over supported projects from 1998 to 2000. In 2001 the fund is continuing on a comparable scale, exact figures have yet to be confirmed.

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Tab. 4: Balance sheet of support 1998-2000 of the climate protection fund proKlima

Programmes What will be supported? Grants provided (Euro)

Reduction of CO2

(in t per year) *) Approved

applications

renewal of existing residential buildings

investments in insulation and efficient heating systems, "Gebäude-Energie-Pass", quality control ...

2,.951,000 6,900 2,043

new buildings "5-liter" and "1,5-liter" houses (passive house), quality control ...

525,000 380 407

solar water heating solar panels for water heating 214,000 110 279

Photovoltaic solar panels for generation of electricity (until 3/2000)

139,000 40 21

solar energy & climate protection at schools, organizations and public institutions

solar panels, models, materials for teaching, further education and dissamination at schools, public institutions and organizations

298,000 not quantifiable 39

Sub-total of public support programmes

applications that were approved directly by the office

4,127,000 7,430 2,789

individual projects larger or smaller projects that were approved individually by the board of trustees and the advisory council

4,268,000 7,530 75

Water power Hydroelectric power plants 1,564,000 7,410 2

Completion of the long-distance heating system

Connection of 47 objects with overall power of 7,2 MW

483,000 960 47

Total 10,442,000 23,330 t 2,913

*) only as far as quantifiable; including the multiplier effects of sundry measures the general effect will be higher

Source: WI 2003

Summing up, the following result of the activities of the climate protection fund can be derived:

* Overall reduction of CO2: In the period 1998 – 2000 the granted measures led to a direct GHG reduction by about 24,000 t CO2 p.a. (see table above).

* CO2 efficiency: Putting the direct effects of CO2 reduction in relation to an average duration of effects for a period of at least 10 to 20 years the efficiency amounts to about 23 US$ per t of avoided CO2 emission.

* Introduction of new technologies: Obviously the concept of funding by proKlima assists introducing innovations in the regional market as well as with the qualification of different enterprises. On the one hand this is caused by the standards required for

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funding, on the other hand by innovations and educational measures provided by proKlima itself.

* New investments and effects on the labour market: Due to methodical difficulties we cannot provide exact figures concerning new investments. In terms of effects on the labour market an economical survey dealing with the public support programme “existing buildings” 1998 +1999 shows a total effect of 700 “person-years”.

On account of the long duration of investment measures (at least for a period of 15 to 20 years, in some cases for more than 50 years) the anual reduction is increasing year by year on condition that the support by proKlima is continuing. After 10 years this will be anually 80,000 tons and accumulated 440,000 tons avoided CO2 emission. To give an impression of the possible dimensions: The numbers of proKlima projected on the Federal Republic of Germany would reach a budget of 550,000,000 Euro p.a. and 1,000,000 tons avoided CO2 p.a.. The impact mechanism relies on two core elements (Fig. 13). On the one hand, proKlima provide economic incentives to private consumers and public bodies to engage in climate protection measures. Hereby it affects the objective pros and cons of the alternative, and, in addition, triggers the subjective perception of pros and cons of the participants. At the other hand, proKlima initiated widespread marketing campaigns in order to promote the scheme and its key message of local climate protection. It contributed to increase the knowledge about already available, market-proof options as well as on innovative approaches to reduce energy consumption and GHG emissions. Moreover, proKlima supports innovative ideas and provided the ground for testing new concepts and innovations. At least in the long-run, therefore, the scheme contributed to enlarge the set of options.

Fig. 13: Organisation and impact mechanism of the proKlima fund scheme (Source: WI 2003).

Efficiency The efficiency of the proKlima scheme can be judged with regard to the specific costs of GHG abatement induced by the funds. As mentioned above, this aspect is one key assessment

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criteria for selecting project proposal. Referring to the - still limited - quantitative data base of the first years' results it can be estimated that specific abatement cost rank about 23 Euro per t of avoided CO2 emission. Especially with regard to the numerous other ecological, economic and non-monetary benefits of the measures this can be considered a positive result. From an administrative perspective the scheme is characterized by a lean structure. The proKlima office is headquartered in the Stadtwerke Hannover AG building and the part-time working staff of 9 persons is recruited from the Stadtwerke personnel. Moreover, the majority of funds stems from the Stadtwerke budget and the surcharge on gas. This way, not only the shareholders of the energy supply company contribute to the fund but also the Stadtwerke´s customers participate as consumers. The resulting additional costs per household amount to merely a few Euros a month. According to recent surveys, the population in the development area is accepting the surcharge because the money flows back to the region and secondly because they are able to take part in a considerable and recognised climate protection programme through "their" energy provider and "their" city.

Adaption flexibility and long-term sustainability The proKlima approach is characterized by the cooperation of various local stakeholders. This very fact caused some problems in the beginning and it took three years to find a co-operative model to combine the interests of all shareholders of the Stadtwerke Hannover AG, the license-granting municipalities and the lobbies for clients´ interests. During the years to come, however, the common commitment stabilized the initiative under changing frame conditions. After its successful introduction proKlima had been put to a severe test in 2000. Due to the deregulation of the German energy market the Stadtwerke Hannover faced difficult economic conditions. The company was forced to reduce expenses drastically. A consultat outlined a potential for savings of 45 Mio. Euro and advised the Stadtwerke to terminate the contract. In addition, the budget of the city of Hanover showed a deficit which jeopardised the financial support of proKlima as well. The fund came out of this conflict with a somewhat reduced budget but also with new strength and support by its stakeholders. To cut a long story short: The fund was created before the deregulated energy market, put into action in spite of the (beginning) deregulated energy market and, finally, continued because of the chance to achieve comparative advantages within a deregulated energy market. The concept has proven its efficacy even under the difficult circumstances of the deregulated energy market. It is able to prevail as all participants realise advantages:

* the Stadtwerke Hannover AG can give interesting offers to their clients and gain a credible and convincing profile concerning environmental issues

* the City of Hanover fulfils a part of its commitment in the agenda 21 process * the clients of the Stadtwerke Hannover AG/ enercity and the people in the region even

gain on several levels e.g. reduced costs, improved standard of living and value of buildings etc.

Besides reduced energy consumption and GHG emissions the measures undertaken induce manifold other environmental effects such as water savings, reduction of local air pollution, greening of settlements, etc. Furthermore, the initiative fosters qualification and innovation of industry and trade within the region, e.g. in the case of building constructors, installers, etc.. Conclusions The proKlima fund is unique and exemplary in Germany and Europe due to the involvement of all essential local stakeholders (including the local energy supply company). All partners are bound to the partnership contract on a co-operative basis but show a strong commitment to secure the funding even in times of tight budgets.

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With regard to the Stadtwerke Hanover AG the case illustrates the opportunities of a local utility to take up responsibility for an efficient use of its product "energy" and to investigate new business models in the area of energy services while supporting sustainable development within the region. The initiative starts from a strong commitment of public actors to advance towards more energy efficiency and climate protection in the Hanover region. This impulse was the necessary precondition for the establishment of the public-private–partnership that builds on voluntary commitment and involvement of stakeholders from the region. Due to its uniqueness proKlima has gained recognition in Germany as well as in neighbouring countries. A transfer of the approach, however, has not yet been taken place although the model is replicable. The proKlima partnership contract demonstrates how – under the conditions of a deregulated market – the economic interests of the local energy providers, public interests and consumer’s interests are united in order to support effectively climate protection. Given a comparable motivation and political commitment, therefore, a successful application in other countries appears to be feasible. 4.5 ENERGY+ - an example for a public-private market

transformation initiative on the European markets for household appliances

Description The Energy+ project is an initiative of the European Commission and ten national energy and environment agencies and institutes to promote the development and use of highly energy efficient refrigerators and freezers throughout the European Union5. In September 1999 the European Union implemented a Directive banning sales of most E, F and G-rated refrigerators and freezers. At the same time, many products have now reached and exceeded the minimum requirements for receiving an "A" rating. The labelling scheme is currently under review but it is likely to be a couple of years before any new requirements come into effect. In order to give visibility to the most efficient products available on the market, the goal of the Energy+ project is to promote appliances that are far more efficient (-25%) than those just meeting the minimum criteria for an A-label rating. The project builds on the concept of cooperative technology procurement (EM 1998, Ostertag, Dreher 2002, STEM 1998, Westling 1996), and, initially, should serve as a first test for exploring the scope for coordinating demand power on the European level. Placed as a pilot project, already in its test phase Energy+ has rapidly succeeded in creating genuine market opportunities for Energy+ appliances. The principle idea of Energy+ builds on a public-private-partnership aiming at providing an information platform that contributes to increased market transparency in national white goods markets in Europe (Energy+ 2001). The national efforts are coordinated through a European platform and coordination team in order to enhance information flow and learning between the member states. The project design is simple and follows a three-step approach:

* On the one hand, participating retailers and institutional buyers sign a document where they declare their intention to promote and/or purchase appliances according to the Energy+ specifications. The participating organisations are shown under retailers, supporters and institutional buyers respectively, but the lists are also promoted through

5 All information on Energy+ can be obtained at the website (www.energy-plus.org). The Wuppertal Institute acts as the national coordinator for Germany and has been involved into the initiative since the very first feasibility studies on European procurement (see Landwehr et al. 1998).

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a number of channels by the organisations behind the project. Hereby, market power in favour of energy efficient products is enforced.

* On the other hand, manufacturers who submit products that meet the specifications are compiled on another list promoted in parallel (see Energy+ products). For each model or prototype submitted to the project a test report stating the levels of criteria fulfilment should be submitted with the entry data. Random testing of the appliances is performed at an internationally recognised testing laboratory. All models that meet the mandatory specifications will be included in the Energy+ appliance list. Should the random testing show that the model performance does not comply with the reported values in the test reports, the Energy+ project steering group will communicate this to all participants and may decide to withdraw the model from the list.

Moreover, Energy+ organised the First European Energy+ Award competition. This competition was based on the Energy+ specifications with additional optional requirements of importance to buyers. The European March 2001 Energy+ Award Competition singled out the best two-door Energy+ appliance and the best one-door Energy+ appliance that met optional requirements of importance to buyers, such as increased energy efficiency and low environmental impact. The international jury selected a unit from Electrolux and one from Whirlpool as winners based on their fulfilment of mandatory specifications as well as a set of optional requirements. The winning appliances only use 33 and 35 percent of the energy used by an average European cold appliance of comparable size and type. Analysis

Relevance The Energy+ initiative is directed to an important area of household energy end-use in Europe. Almost 6% (109 TWh per year) of all the European Union's electricity consumption is used by domestic refrigerators and freezers. Overall they are estimated to need some 20 large base load power stations (20 GWel) to satisfy their power demand. A typical European household will have more than one refrigerator or freezer. On average refrigerators and freezers account for about 25% of the household electricity bill but this share will be higher if the space and water heating is non-electric. A typical average sized European refrigerator-freezer (one with ~257 litres of net storage capacity) will use about 590 kWh of electricity per year. The same sized refrigerator-freezer having a European Energy Label class A rating will use less than 325 kWh per year but if it were an Energy+ appliance it would use less than 248 kWh per year, which is 42% or lower of the energy of an average appliance. The electricity consumed by domestic refrigerators and freezers in the European Union accounts for some 62 million tonnes of carbon dioxide emissions per year, which is the most well known greenhouse gas. Many refrigerators also use refrigerants and foaming agents in the insulation that are powerful greenhouse gases and which can increase their life cycle global warming impact by ~10%. Overall domestic refrigerators and freezers alone account for about 2% of the EU's total greenhouse gas emissions.

Effectiveness The Energy+ started as a pilot project aimed at testing aggregated purchasing of energy-efficient (consumer) products on a pan-European scale. The project sought to build an international buyer group where, in particular, retailers, kitchen specialists, energy agencies and NGOs were involved as intermediaries between the suppliers and the end-users in the

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process. Institutional buyers, traditionally associated with technology procurement, also had an important role in the buyer group. Although a few business actors on the national resp. European level are still missing the project could achieve its goal. In order to expand the positive impact of Energy+, to broaden consumers' choice and to allow market actors to market a complete Energy+ range of products, the project is continued and enlarged to all 10 categories of cold appliances defined in the European energy labelling Directive 94/2/EC. From a practical perspective, an important tool of the project were the so-called Energy+ lists, where all participating organisations as well as all qualifying Energy+ refrigerator-freezers were listed. The lists were updated during the course of the project. Hence, at the core of the project were technical and functional specifications that defined the criteria of the product type targeted by the project. Manufacturers were invited to present products that would qualify to enter the Energy+ lists by meeting a set of strict specifications. The mandatory specifications set up by the project required that products had to be available on the European market, and to have an energy efficiency index (EEI) of not more than 42% to qualify for participation in the project. In practice, Energy+ appliances use 3/4 or less of the energy used by an appliance that just meets the A criteria of the European energy label. Although being active for little more than two years now, Energy+ could achieve quite substantial results. The first rounds of Energy+ and the European Energy+ Award competition successfully sped the production and demand for super-efficient appliances on the European market. The Winter 2001-2002 lists comprise more than 100 participating organisations and 23 Energy+ appliances. Meanwhile 188 Energy+ cooling appliances from all leading manufacturers are available on the European market. Furthermore, Energy+ contributed to a market shift within the frame of the existing labels so that more A-class rated appliances have been sold than before. The project has clearly succeeded in speeding up market introduction of highly energy efficient refrigerator-freezers on the European market that only use 33 and 35 percent of the energy used by an average European cold appliance of comparable size and type. It helped moving the whole market to higher efficiency over time. The project results also indicate that supply and market availability of energy efficient refrigerators throughout Europe has been enlarged, but it is too early to quantify these effects. Building on the positive experiences, the impact on energy consumption in the EU can be substantial. The figure below shows a forecast that up to 50% less electricity in this sector in the European Union (40TWh) would be consumed were all new refrigerators and freezers bought in the EU from the year 2000 onwards to meet the Energy+ efficiency specifications. Also shown is a forecast of the expected electricity consumption trend for refrigerators and freezers resulting from the European Union's current energy efficiency policy initiatives including energy labelling and mandatory minimum efficiency standards.

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Fig 14 (Source: Energy+)

Building on this success, Energy+ enters now in a new phase and expands its scope to all ten categories of domestic cold appliances. In addition, the Energy+ group will continue its promotion activities for qualifying products and it is discussed to expand the approach to other household appliances. The impact mechanisms of Energy+ build on various new communication channels that could have been established in addition to existing policy instruments and market relations (Fig. 15). They can be characterized as follows: The instrument has only little impact on the number of behavioural alternatives. Apart from the newly introduced high-end award-winning appliances that expand the frontier of high efficiency appliances the overall supply of cooling appliances remains the same as before. To a certain extent, the instrument influenced the pros and cons of alternatives. As a result of the Energy+ marketing campaigns and promotion activities, the prices of high-efficient cooling appliances has been reduced. This lowers the typical obstacle to consumers to pay high up-front costs for equipment with low lifetime running cost. Designed as an information and promotion tool, the Energy+ instrument contributed to change the importance that actors attach to the pros and cons of alternatives. Within the marketing and dissemination campaigns special emphasis has been given to underline the advantages of buying more efficient cooling appliances. Attention has not only been given to the advantages for the environment but primarily to the economic benefits for the private energy bill. Especially with regard to the private consumer, the instrument could contribute to a better understanding of the life-cycle cost benefits of a high-efficiency purchase and, thus, increase the awareness for sustainable investment decisions.

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Fig. 15: The organisation of Energy+ (Source: WI 2003).

By nature, Energy+ increased the available knowledge about the set of available alternatives. Through a systematic listing and comparison of available appliances, market transparency could be increased. New knowledge has been generated both on the side of dealers and consumers. Manufacturers used the Energy+ label to market explicitly their high-end appliances to the dealers. The manufacturers of the products have indicated that this project has been very helpful in their efforts to commercialise and promote new energy efficient products. For the winning companies of the European Energy+ Award, the project appears to have been instrumental in securing internal support within the companies for extra efforts in launching super-efficient products. Several retailers have explained that the Energy+ project has given them an ability to influence the type of goods offered by the suppliers, especially retailers in countries without domestic producers of cold appliances (e.g., the Netherlands and Norway).

Efficiency Due to the innovative character of the pilot project benchmarks for cost efficiency are not available. In terms of programme costs, however, Energy+ can be considered as a rather lean activity that has achieved its results at very reasonable cost. The demand for administration and personnel is limited to small coordination teams in the participating countries (1-2 persons each) and a European steering group. The practical realization of the internet platform does not require large budgets, neither. In order to expand the scheme and to provide a fast up-date of information tools, quite some more capacities will be needed. The second phase is expected to deliver more insights into this issue.

Adaptation flexibility and long-term sustainability Due the open and cooperative character of the initiative, Energy+ offers comprehensive flexibility to all participants. New participants are free and explicitly encouraged to enter the scheme – at the same time everyone can leave the scheme at any moment. In technical terms, from the very beginning Energy+ has been designed as a supporting element of the European labelling system. The energy label itself is organized as a dynamic

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system and the mandatory requirements for meeting the efficiency classes will be tightened in line with the next revision foreseen. Most likely, the current Energy+ standard will be considered as an input. Thereby it was a guiding principle for the programme design to allow for adaptation to technical progress. Due to the regular update of the appliance list technology advances can be easily integrated. The same holds for modifications of the relevant policy framework, e.g. in terms of standards and labels. As a result of the dynamic nature of the standard, the instrument can be seen as innovation friendly tool that imposes a permanent incentive for improvements as one aspect of market differentiation and positioning. Typical for a outcome orientated policy instrument the practical details of implementation of Energy+ are determined by each participating company. Products have to meet the standard, but by what means the supplier will achieve the target set remains the responsibility of the individual company. Taking the general process of a continuous shift of the average market efficiency into account it can be concluded, that manufacturers will not fall back behind the Energy+ level. On the contrary, the limited range of available Energy+ appliances so far will most likely become the usual standard (see above for a quantitative estimation). The primary focus of Energy+ is on reducing the electricity demand of households in Europe. The instrument, thus, contributes to all major goals of European energy and climate policy. However, the award-competition triggered innovation among manufacturers and pushed new cooling technologies. Besides energy efficiency, the strict rules pushed alternative natural gases as foaming agent and as coolant of the appliances. hereby, additional positive impacts on climate change abatement and the mitigation of ozone layer depletion could be achieved. From an economic perspective, the instrument induced changes in market structure through a promotion of certain manufacturers and retailers offering high-efficient appliances. Their competitiveness could be strengthened. Market distortions, however, cannot be expected due to the fact that all major players in Europe are participating in the scheme. Conclusions Energy + can be seen as a promising feasibility test of new type of market transformation programmes on the European level. Taking up the political impetus in the European Commission to foster energy efficiency, it adds to existing national and European initiatives and establishes new information channels that increase market transparency and trigger competition among suppliers of high-efficient appliances. The scheme serves as a framework to award these companies striving to improve the energy efficiency of their products and it provides incentives to others to engage in the field. Energy+, therefore, can be seen as a helpful contribution to enhance eco-efficiency among manufacturers and dealers of household appliances in Europe. Companies that take responsibility for the ecological performance of their products and want to position themselves as leaders of innovation take benefit from the marketing impact of the Energy+ scheme. By nature, Energy+ works on the basis of voluntary commitments of the participating actors. It has to be taken into account, therefore, that the working principle is directed to the innovative edge of the market, i.e. frontrunners are stimulated to improve even further whereas less performing manufacturers are not addressed (Fig. 16). For this reason, Energy+ represents a promising enlargement but by no way as a substitution of the existing regulatory European framework of minimum performance standards and the labelling directive.

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Fig. 16: The necessary mix of policy approaches to enhance market transformation towards high efficiency appliances (Source: WI 2003). As already mentioned it is planned to initiate more pan-European actions of this kind and to expand the scheme to other appliances. The conceptual framework, marketing tools and graphical image created around the Energy+ project could be used to transform other markets as well. Using the work carried out would substantially ease future actions with other product categories. However, lessons learnt need to be taken into account. The Energy+ concept depends on a specific market setting, characterized by a limited number of European manufacturers, a strong position of dealers and retailers as well as a rather homogeneous product profile. Experience from the feasibility studies and the project implementation suggest that Energy+ would not have been possible to run on a purely national level because a coordinated market transformation activitiy needs to cover the whole of the relevant market, i.e. in this case the European internal market for white goods. Without major changes, therefore, it appears hardly transferable to completely different technologies such as industrial production equipment. 4.6 British Petroleum – a pro-active business strategy to meet the

challenges of climate change Description British Petroleum - one of the leading companies in the oil and gas sector worldwide – has adopted a pro – active business strategy towards climate change (see for a comparison with other corporations in the field van den Hove/le Menestrel/de Bettignies 2002)6. The starting point if this new strategy was a speech by BP CEO John Browne in 1997 at the University of Stanford (Browne 1997). Therein Brown stated that „we must now focus on what can and should be done, not because we can be certain climate change is happening, but because the possibility can’t be ignored. If we are all to take responsibility for the future of our planet, then it falls to us to begin to take precautionary action now“. The strategy itself consists of five main areas (BP 2003a):

6 The case study builds on a series of research projects and consulting activities of Wuppertal Institute.

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* The reduction of the climatic impact of BPs operations and its products. BP has taken on a commitment to limit greenhouse gas emissions7 from its operations at a level that is 10 % below the emissions in 1990. BP further intends to shift its product portfolio towards cleaner, lower emissions sources of energy. It invests into renewable energies and hydrogen as alternative sources of energy.

* Promoting flexible market instruments. BP has decided to achieve its target for reducing greenhouse gas emissions through flexible mechanisms. In this vein BP has set up and been operating an internal emissions trading scheme with the business units of BP as participants. BP further pushes the use of the instruments joint implementation (JI) and clean development mechanism (CDM), which have been established under the framework of the Kyoto-Protocol. And British Petroleum participates on a voluntary basis in the UK emissions trading scheme.

* Co-operation in order to accelerate new energy technologies. BP invests into energy efficient technologies and plans to work with the car manufacturing industry to develop the technologies needed for the introduction of hydrogen as a transport fuel.

* Active role in the policy process. Representatives of BP actively communicate the lessons that BP has learned during the operation of its internal emissions trading scheme at very different policy levels (International, European, National).

* Research and Development. BP sponsors a range of high quality institutes to carry out vital research into climate science and energy technology.

In order to keep the complexity in this case study low, the authors will concentrate on the first component of BP’s strategy to meet the challenges of climate change, i.e. the commitment to reduce the greenhouse gas emissions of all of BP’s operations throughout the world relative to 1990. Originally BP wanted to achieve this objective by 2010, but it has already achieved this goal in 2002, so that the original commitment has become a limitation commitment. Now BP strives to sustain a level of greenhouse gas emissions 10 % below 1990 levels until 2010. It wishes to do so even though it plans to expand its business activities (BP 2003a). BP has implemented an internal scheme for greenhouse gas emissions trading, in which the business units of BP can trade emissions allowances (BP 2003b). In doing so BP has been the first company worldwide that introduced such a scheme. The company openly reports its total emissions worldwide, the audit notes of the greenhouse gas emissions are placed on the internet (BP 2003c). BP’s approach towards its own greenhouse gas emissions incorporates three elements of responsible corporate governance. It adopted a voluntary commitment, it implemented responsible measurement systems and made the implementation of the greenhouse gas emission trading system very transparent. Furthermore BP organised itself as a learning company and it allowed other stakeholders to benefit from the lessons learned.

British Petroleum and its relation with different actors Following the extended model of Bressers and Klok BP is assumed to be a subjective rational actor. As such it stands in relation with other actors that set or change the factors that BP takes into account for decision-making. Following this model these actors must first of all be identified. Natural candidates that all must be scrutinised for such relations are the national governments, the European governance bodies, the international governance bodies, the NGOs, BP’s competitors, other companies, the shareholders and the customers.

7 Throughout the study the term greenhouse gases refers to all the gases listed in Annex A to the Kyoto-Protocol (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride)

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BP and the national governments (restricted to the UK) As a multinational company BP must naturally accept the legal and economic framework that national governments set under their jurisdiction. However, in the various nation states there is only very little implemented policy that directly targets greenhouse gas emissions from industrial processes. In the United Kingdom, where the headquarters of BP are based, a number of policy instruments are in place that directly target the operations of BP (see for a good overview Langrock 2001). The business units of BP UK that belong to the chemicals operations pledged to cut emissions in a negotiated agreement with the UK Government. In exchange for delivery of the corresponding emission reductions the business units will receive an 80 % reimbursement of the UK climate change levy – an energy tax. The negotiated agreement with the UK Government is not public, so that it is impossible to assess the proportion of BP UKs total emissions that are subject to this agreement. It is further impossible to assess the magnitude of the Climate Change Levy reimbursement that BP receives in exchange. Further parts of BP UK participate in the UK emissions trading scheme as so-called direct participant. BP UK entered an agreement with the UK Government, wherein it accepted to report its emissions from a defined set of sources of GHG during a specified commitment period and, more importantly, to make sure that at the end of the commitment period an amount of emissions allowances is handed in that is equivalent to the amount of emissions by the participating business units. As participating business units BP mentions its refineries and the various oil and gas production sites in the North sea as well as onshore in the UK. BP expects to realise a large magnitude of the emissions reduction through reduced gas flaring at the oil and gas production sites as well as through increased energy efficiency. In exchange for a pledged reduction of 350000 t CO2 eq. BP UK received around 20 Mio. Pound incentive money (BP 2002, DEFRA 2002). Clearly, the two policy instruments, negotiated agreement as well as emissions trading make it more economically attractive for BP UK to reduce greenhouse gases. Thus the two instruments can clearly be regarded as a change of the economic pros for those behavioural alternatives that are climate friendly. Yet it is very difficult to establish a clear link to the global emission reduction and limitation commitment that BP took on. The reason for this being the lack of available data which does not allow assessing the proportion of BP’s total emissions that is subject to the UK emissions trading or the UK negotiated agreement. Summarising, there is a clear relation between the UK government and BP, the relation being a change in the economic pros and cons of climate friendly behavioural alternatives (more pros) and climate unfriendly behavioural alternatives (more economic cons).

BP and the European Governance Bodies The European Union will very likely introduce EU-wide emissions trading for carbon dioxide (EU 2002). This EU-wide emissions trading is mandatory for certain types of industrial sites and will start operating in 2005. It is important to note that the design of the EU-wide emissions trading significantly deviates from that of the UK so that the UK will be forced to revise its own scheme. As regards BP the differences may be significant. First of all, methane as well as other greenhouse gases presumably will not be included in the EU-wide scheme and as the directive stands now oil and gas production sites will not be part of the scheme. Thus it may very well be that a significant fraction of BPs business in the EU member states will not be part of the EU-wide emissions trading scheme. So far it is not possible to predict whether the EU will incorporate other measures that target the operations of BP. Clearly, as long as nobody can predict the procedure for allocating emission allowances in the framework of the EU-wide emissions trading, nobody can seriously predict the costs of it for BP. Due to the early action of BP a situation is imaginable wherein BP receives more

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emission allowances than it plans to emit. Then BP could sell emission allowances and thereby realise revenue. However, the more likely case is that EU-wide emissions trading will cause costs either for purchasing allowances or for investing into climate friendlier (behavioural) alternatives. Summarising, there is a clear relation between European governance bodies and BP. EU-wide emissions trading can be interpreted as a change of the economic pros and cons of climate unfriendly behavioural alternatives similar to UK emissions trading. However, due to the lack of data it is – as in the case of the UK – impossible to assess which proportion of BP’s total greenhouse gas emissions will be targeted by the European governance bodies.

BP and International Governance Bodies The Conference of the Parties to the UN Framework Convention on Climate Change (CoP) is the law-making actor regulating greenhouse gas emissions on a global level. The Kyoto-Protocol is one of the major outcomes of this negotiation body. It was adopted in 1997 and is expected to enter into force during 2003, the entry into force being dependent on the ratification by the Russian Federation. The Kyoto-Protocol compels the parties who are listed in its Annex B (mainly the industrialised western and eastern European OECD countries) to limit the amount of greenhouse gases that they emit during the years 2008 to 2012. The Kyoto-Protocol as a legal document only contains provisions for subjects of international law (nation states, European Union, some international governmental organisations). Thus it compels nation states to introduce policies and measures that are suitable to reduce the amount of greenhouse gas emissions from their territory. As a novelty to international law the Kyoto-Protocol contains the so-called flexible mechanisms International Emissions Trading, Joint Implementation (JI) and Clean Development Mechanism (CDM). JI and CDM are instruments for cooperation on a project-by-project basis (the so-called CDM and JI projects) between parties to the Kyoto-Protocol. These CDM and JI projects are not developed by the parties themselves but by private entities, notably private companies. The basic idea of CDM and JI is that these entities develop investment projects into climate friendly technologies and receive a certain amount of internationally accepted emissions certificates in return. Various nation states intend to accept these emissions certificates under their jurisdiction. The Netherlands for example already commissions such internationally accepted emission certificates (Carboncredits 2003). As regards BP the CoP obviously has no mandate to establish regulation that has a direct impact on BP’s operations. The only way how BP will be affected is when governments of parties to the Kyoto-Protocol implement the provisions. Due to the architecture of the Kyoto-Protocol only the countries listed in Annex B of the Kyoto-Protocol are likely to do so. Thus, coming back to BP as a subjective rational actor, there is an indirect relation between the CoP and BP through the national governments. Yet this indirect relation will never hit the entirety of all of BP’s operations because only the industrialised countries are likely to implement significant policies and measures. There is however another relation between the CoP and BP. BP announced that it wants to use the CDM and JI as a means of achieving its internal greenhouse gas emissions reduction and limitation commitment, i.e. BP intends to invest into CDM and JI projects and accept the resulting emission certificates as a means to achieving its internal commitment. Summarising, the only direct relation between CoP and BP is the provision of a new behavioural alternative for fulfilling the internal commitment of BP.

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BP and the Non-Governmental Organisations The oil and gas sector has repeatedly been exposed to intense NGO campaigns. One of the most prominent campaigns clearly was the one of Greenpeace against the dumping of the Shell oil platform Brent Spar in 1995 (Greenpeace 1995). More recently Greenpeace demanded - based on a study commissioned from the Wuppertal Institute (Luhmann et al. 2002) – that oil and gas producing companies invest more heavily into renewable energies. The most important campaign on a worldwide level running at the moment is one the carried through by Greenpeace, Friends of the Earth and Planet & People. This campaign focuses on Esso the branch of ExxonMobil, which is in contact with end-consumers as it operates petrol stations worldwide. It asks customers to boycott Esso until ExxonMobil stops pushing its climate skeptic position in various political arenas. The campaign further targets the political influence that ExxonMobil is supposed to exert in US foreign policy (Greenpeace/FoE/Plant &People 2003) None of the campaigns focused on the greenhouse gas emissions from the operations of the oil and gas producing companies. And none of the campaigns targeted BP. Of course NGOs seem to acknowledge the fact that BP has implemented its emissions reduction and limitation commitment, yet there seems to be no mechanisms through which NGOs have positively acknowledged BP’s initiative (Kier 2003). Summarising, it is very difficult to establish a clear relation between BP and the NGOs with respect to the greenhouse gas emissions of its operations. There seems to be neither a change in the “ethical” cons of the emissions of BP’s operations nor a change in the “ethical” pros” for the reduction of these emissions.

BP and the capital markets (shareholders) An analysis of the relations between the shareholders and BP is very difficult to undertake. Methodologically, it can be done in various ways. First, it could be tested whether BP indeed communicates the emissions reduction and limitation commitment to its shareholders. Second, it could be checked through surveys whether the shareholders indeed are aware of this commitment and whether they honour it. Lastly, the formal relations between shareholders and BP (meetings of the shareholders, etc.) could be analysed. Such a study however, is beyond the scope of this project.

BP and its customers The emission reduction and limitation commitment is extensively communicated via the Internet site of BP. Also BP uses its pro-active strategy towards climate change as an element it its new brand campaign in the United States. As has been written above BP has not been confronted with NGO campaigns that call for boycotting BP. Summarising, there is probably a direct relation between BP and its customers that is very difficult to assess. An indirect relation via NGOs between BP and its customers does not seem to exist. In a concluding view one could say that the various direct and indirect relations between BP and the lawmaking bodies at different policy levels presumably had a major impact on the formulation of BPs emissions limitation and reduction commitment. When formulating it the Kyoto-Protocol was already adopted through the CoP, so that BP knew that legislation with respect to greenhouse gas emissions would come sooner or later. Despite this it remains a remarkable fact that BP has taken on an emissions reduction and limitation commitment that will remain more comprehensive than the sum of all the action that is being required through the various law-making bodies on different policy levels.

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The analysis further shows that NGOs probably had only minor impacts on the formulation of the emission reduction and limitation commitment. The analysis unfortunately cannot contribute to an understanding of the shareholders as well as the customers as crucial driving forces behind the initiative under scrutiny. Analysis

Relevance The relevance of the voluntary emissions reduction and limitation commitment of BP can be assessed by putting the commitment in a context with the entire sector and the sector’s emissions in terms of products and processes. In terms of market share BP is among the top three largest mineral oil corporations (together with Shell and ExxonMobil). Its market share is around 18 percent and thus the commitment is highly relevant. As almost all other competitors of BP are like BP active in the upstream as well as in the downstream business of the oil and gas producing sector the market share is probably a good first hand approximation for the proportion of the emissions of BP operations relative to the total emissions of the operations of the entire oil and gas sector (Luhmann et al. 2003: 16). Thus BP’s emissions reduction and limitation commitment covers a significant fraction of the emissions of this sector. The oil and gas sector is providing highly greenhouse gas intensive products. Thus an assessment of BP’s commitment must be put in a perspective relative to the carbon content of BP’s products. BP itself acknowledges that the carbon content of its products is approximately ten times higher than the emissions of its operations (BP 2003a). Thus it must be deduced that the commitment to reduce emissions does leave out a huge potential for emission reductions.

Effectiveness BP committed itself to reduce the greenhouse gas emissions of all its operations until 2010 by 10 per cent relative to 1990 levels. It wants to achieve this through its internal emissions trading scheme. The effectiveness of the commitment is largely determined by the scope of the commitment (i.e. the set of sources that is subject to it) and the quality of the monitoring that is being done. BP includes all sources of greenhouse gases that belong to business units in which BP has a share of equity. BP always includes in its commitment the proportion of emissions that is equal to its equity share. An effective implementation of the commitment would require an emission reduction and limitation of a fixed set of sources. However, the business reality makes it difficult to keep the set of sources fix, as BP is subject to mergers and acquisitions. BP has merged with Amoco after 1990 and included the emissions sources of Amoco in the baseline. However, there seems to be a problem with divestments that could not be answered through consultations of the Internet site. In its audit note BP reports emission reduction that result from such portfolio changes (BP 2003c). This clearly reduces the effectiveness of the emission reduction and limitation commitment, yet it has to be noted that BP openly reports this problem and distinguishes between real emissions reductions and reductions due to portfolio changes. Depending upon interpretation, the effectiveness of the commitment will also be reduced through the inclusion of internationally agreed emission certificates that stem from JI and CDM projects. This is because such an inclusion allows substituting emission reductions at BP’s sources with emission reductions at sites outside BP. This type of substitution has been introduced in the Kyoto-Protocol and therefore it seems to be a principle that is widely agreed. Thus it is a matter of interpretation whether the effectiveness of the commitment really suffers

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from it. In any case BP appears to be prepared to openly communicate the amount of emission certificates that stem from JI and CDM projects. The monitoring of BP’s emissions follows the current state of the art as BP applies wordwide standards (GHG Protocol and the Monitoring Guidelines applied under the UK emissions trading scheme). The greenhouse gas emissions are audited by KPMG and DNV, two distinguished companies active in the field of verification and certification. A real assessment of the effectiveness of the commitment will only be possible after the end of the commitment period.

Efficiency BP itself states that the benefits associated with the emissions reductions have so far exceeded the costs for implementation. BP states that “by managing reductions in emissions through our business performance contracts, we have already accrued economic benefits by using less fuel to produce our products and less gas is being flared or vented - we have estimated that this is worth approximately $650 million to our company (on a net present value basis over 8 years).” (BP 2003d). Elsewhere BP states that “We have demonstrated, through our performance in meeting our target to reduce our operational GHG emissions by 10% at no net cost, that it is possible for industry to take precautionary action. The saving we have made through avoidance of hydrocarbon flaring and venting combined with greater energy efficiency has outweighed the expenditure involved in achieving the reductions.” (BP 2003a).

Adaptation Flexibility and Long-Term Sustainability The emission reduction and limitation commitment by BP will last until 2010. Then it must naturally be extended in time. Structurally, a continuation of this commitment is possible and achievable without technical problems. It remains to be seen whether BP will continue its pro-active strategy to meet the challenges of climate change. Conclusions The case study could not clearly answer, why BP has taken on a pro-active strategy towards reducing greenhouse gas emissions from its operations. The two parts of the case study suggest two main motivations: After publication of the Kyoto-Protocol BP knew that it would face legislation that targets its operations. Despite the fact that none of this legislation was on table BP took on a very comprehensive commitment to reduce its emissions. The evaluation of the objectives suggests motivation that lies within BP. The fact that BP could deliver its commitment eight years ahead of the original goal as well as the significant savings that BP openly talks about suggests that BP pursues this component of its climate change strategy out of commercial motivations. However, the case study was only designed to understand behavioural change that occurs due to external changes in factors that BP takes into account for decision-making. And more importantly, it remains to be seen whether the delivery of the commitment will remain such a good business case until the end of the commitment period. The evaluation of the implementation of the emission reduction and limitation commitment revealed at the same time the high degree of transparency of BP as well as the limits, if an outsider (even though expert of emissions trading) without access to the actual production facilities evaluates such a complex scheme.

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5. Overall Conclusions

The study has explored synergies between political and corporate governances within the policy areas of climate protection, energy, and eco-efficiency. It has been proposed that governance of sustainable development goes well beyond traditional, state-centred policy-making because it aims at pro-active changes of private actors’ behaviour at different levels. By necessity, it must involve lower levels of policy-making and those private actors in policy formulation and implementation. For reasons of outreach and power, corporate actors play a particular role. They can, as it has been proposed, play a public role, outperforming traditional profit-maximizing behaviour while doing good business on competitive markets. Our notion of responsible corporate governance not only accepts profit-seeking in emerging markets for eco-efficiency and related areas, in fact it foresees it as a driving force towards sustainable development in those activities. There are empirical examples where corporate actors create new markets for sustainable development that have previously been perceived as public domain. Along this perspective, the state keeps responsibility for setting and reforming framework conditions. In many cases decisive impulses for responsible entrepreneurs have resulted from political interventions in combination with societal actors. The three policy areas investigated in this study, climate protection, sustainable supply and efficient use of energy, and sustainable production and efficient use of resources (eco-efficiency), underline our thesis for the following reasons:

* In line with adjusting the incentives via a legal framework, energy efficiency and new, clean technologies of energy supply can become strong forces in energy market development. The scenario analysis for German long-term policies has revealed that a stabilization of self-sustaining markets is technically possible and economically as well as politically feasible. It has been shown that national energy policy can “create” sustainable markets even in globalized and liberalized markets. The wind power market in Germany is one example for such a created success story.

* Climate protection policy might be considered a difficult task, as the future of the Kyoto -Protocol is, by the end of January 2003, still uncertain. It has become more difficult due to the stepping back by some national governments from former commitments in the reduction of GHG. However, to a surprising extent climate policies survive and are revitalized at the regional and local level where private actors’ are involved and benefits occur. On the regional and local level it could be demonstrated that a remarkable share of climate protection actions create net benefits (“no regret options”). Again, private actors help policy-makers to continue a path towards sustainable development.

* Eco-efficiency has started to become a trend at the level of individual firms in many sectors. Starting with some pioneers mainly from big companies like those from WBCSD, it now has reached SME’s and is being diffused from pioneers towards others. This process is backed by specialized networks and agencies as well as by some policies.

Responsible corporate governance deals with these areas at the level of individual firms. The case studies have shown characteristics that together may render a new form of governance comprising state and non-state actors, thus superseding the traditional distance between both. This is especially important when learning processes ought to be organized where governments rely upon solutions developed by private actors. The study indicates that some tasks usually performed by governments will not become completely obsolete, but will likely be transformed by involving corporate actors. As new markets evolve gradually, corporate action will take place under risks and uncertainties. Reducing these risks and uncertainties via intelligent regulation is the price governments have to pay for reducing the scope of public tasks. This transformation is not a zero-sum game; rather it is a positive-sum game that may

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lead to win-win solutions. The new form of governance might be called “open method of coordination” (Héritier 2002). With a concluding view to our study, some governance characteristics are as follows:

* The function of political agenda setting has been taken up by public alliances with private actors, partly from the corporate level. Whether this comes close to a general shift from parliament, political parties, and administrations towards private actors, however, remains to be seen.

* In some cases, the location of authority (i.e. making the rules) may shift from governments towards multi-actor coalitions with participation from corporate business. Though strategic interests might drive such a shift too, it also contains motivations and perspectives of mutual learning. Whether and how public actors maintain the possibility of stepping in and taking over the functions should private actors not perform well, is subject of further research.

* The legitimacy is increasingly transferred to a stakeholder involvement, i.e. processes of evaluation and communication with minor involvement of governmental actors. Whether these processes may actually grant legitimacy, however, remains to be seen.

* An indirect enforcement in the case of non-compliance is undertaken with the help of stakeholders, enabling them to raise their voices and putting items back to the top of agenda setting. These processes partly take place in networks and programmes at work, i.e. below the usual policy arena. Whether and how this may include legal aspects of corporate actors’ accountability and liability deserves further research.

The review lends support for the development of new approaches along the three policy areas from our study’s scope. As some case studies reveal (e.g. PIUS, EcoProfit), these policy areas may be melting in order to meet the need for synergies stemming from the physical interrelation between energy and materials use, and the resulting technological-economical potentials for action. Such melting is especially relevant for corporate actors, whose priorities are set by very different signals from outside. Too many governmental signals impose high regulatory costs on companies. Cross-cutting policy instruments are more likely to fit into the scope of corporate activities, because they allow for adaptation flexibility as regards to other signals and innovations. This conclusion refers a) to the policy scope of WI’s study, which aims at stimulating pioneers rather than restricting “ordinary dirty” businesses and b) to the notion of responsible corporate governance (RCG), which presupposes business behaviour of active innovation management and foresight. For this reason, the study once again underlines the normative dimension of RCG beyond usual corporate governance. What can be concluded with a view to both forms of corporate governance is a shift towards transparency of firms. The policy conclusion here is that governments should give incentives towards RCG and will have to monitor to what extent such a shift takes place. Again, public functions are transformed rather than substituted. Along this vein, the study verifies the thesis about increasing importance and a possible public role for responsible corporate governance. These conclusions certainly do not imply that governments and administrations could relax and wait for further action to be undertaken by private actors. There is striking evidence that initiatives have profited from a first signal (“impulse”) provided through public or municipal actors, which have actively been taken up by private actors. Soft signals lead to strong corporate response. The diffusion of such corporate response relies upon market response, actions outside the markets from other societal actors as well as upon further regulatory signals. Setting a framework is thus not an one-off shot but rather an ongoing activity with feedback mechanisms. Such feedback caused by responsive regulation marks a distinction to traditional policy-making. Policy-making becomes an evolutionary, dynamic process. Maintaining legal and administrative capacities is hence important for the diffusion of responsible corporate governance. The following conclusions might be worth underlining for policy-makers:

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* In order to become translated into private business interests, policies ought to meet a corridor where a minimum condition of clarity and long-term, verifiable targets should be met and where a maximum threshold of regulatory density should not be overstretched. Though this might make evaluation for effectiveness more difficult, it enhances learning processes at the level of individual actors. In many fields, there is a trade-off between effectiveness (favouring narrow targets and static instruments) and dynamic efficiency (favouring strategic open targets and learning tools).

* Benefits not only occur in terms of market development, but also in terms of capacity building, reputation, motivation, etc. Again, this can only partly be measured but it can be analysed via interviews and monitoring progress. When policy-makers intend to initiate and maintain those processes, they may keep an eye on those positive side-benefits, too.

* Local and regional initiatives for sustainable development can horizontally diffuse into other regions without entering the sphere of federal or international arenas. Networks of scientists, green or industrial NGO’s contribute to this horizontal diffusion. A regulation at higher levels, however, is rational when more severe constraints are to be tackled (e.g. national laws or norms) or if reaching a critical mass of demand is pivotal for further market development (e.g. procurement). In this case, local and regional initiatives may act as a laboratory, thus pre-selecting a superior approach for policies at the federal or international level.

* Along with adjusting the legal framework, technical decentralization and political decentralization may coincide to a large degree. The study espouses distinct ways in which local actors cooperate with SME’s. Legal aspects of decentralisation are especially relevant when a natural monopoly (such as the electric grid) needs to be regulated. Though decentralized providers e.g. for renewable energies can be strengthened by a regulatory framework for competition, a plea for federal elements at lower levels of policy-making can be made (see Hanover ProClimate case study).

* Agencies and other organizations acting close to the market seem promising to economize the need for information processing, transparency and knowledge diffusion (see PIUS case study). By signalling innovation, attracting imitators and “ordinary” firms, they can overcome the drawback of expanding emerging markets beyond some like-minded pioneers. Their capacity as regards to enforcement and monitoring, however, still is and will remain to be weak.

* Administrations on the federal and regional level can play a positive role as provider of platforms for communication and as facilitator for advocacy coalitions, which take over responsibility for enforcement and monitoring processes. The provision of platforms may include public space (offices, meeting places etc.) and moderate financial resources, as has been illustrated in the EcoProfit and ProClimate case studies. The facilitation for enforcement and monitoring processes may also include moderate financial support for organizations outside single firms as well as active processes of bringing actors together (see energy+ case study).

Looking ahead to the remaining research needs, one may admit that WI’s study has not yet sufficiently addressed some shortcomings of corporate self-regulation, which may become more important in the next years. What might be done if speed and direction of these corporate activities deserve stronger incentives? What might be done if some countries and companies take a free-rider position and remain, by and large, outside sustainable development policies and can produce at lower costs while causing externalities? How can governance address the demand for transforming the “old and dirty” parts of businesses? To what extent can financial markets take over supervisory functions towards sustainable development? Further research steps to be undertaken in 2003/04 will have to analyse the diffusion of corporate pioneers onto the national and international markets, a responsive

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regulation of private and public law (in conjunction with economic incentives) as well as the role of financial markets and public budget reforms.

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