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Business barriers to the uptake of
resource efficiency measures
Grant Agreement no. 308371
ENV.2012.6.3-2 - Policy Options for a Resource-Efficient Economy
- Collaborative project -
This report represents the deliverable D1.5 Report about business barriers to the uptake of
resource efficiency measures. As such it is part of
WP 1 - Why have resources been used
inefficiently?
Submission date: 04 / 04 / 2014
Start date of project: 1
st
October 2012
Duration: 42 months
Lead beneficiary for this deliverable: TNO
Authors: Ton Bastein, Wietske Koers, Koen Dittrich,
Julianna Becker, Fernando J. Diaz Lopez
Contributors: -
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Description of work
This task will examine business barriers to adoption of resource efficiency measures and
examine business innovation decisions with regard to the use of materials, barriers to the
use of secondary materials, and business opportunities in service life extension and product-
service systems (with liaison with the FP7 SPREE project). Data sources for the analysis are
the Community Innovation Survey 2008 (which contained a module with 15 questions about
eco-innovation) and the Eurobarometer survey about barriers to resource efficiency
innovations, based on answers of 5,222 managers of small and medium-sized enterprises
(SMEs) in EU-27. In a second step, business barriers are analysed as part of a broader
analysis looking at recycling systems, financial arrangements and issues of extended
producer responsibility. The tasks will also include a case study of why companies fail to
take up cost-effective resource efficiency opportunities (based on an analysis of the UK
National Industrial Symbiosis Programme).
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History table
Version Date Released by Comments
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31.03.2014
01.04.2014
02.04.2014
03.04.2014
04.04.2014
06.04.2014
Wietske Koers
Julianna Becker
Wietske Koers
Julianna Becker
Wietske Koers
Julianna Becker
Ton Bastein
Koen Dittrich
Ton Bastein
Julianna Becker
Julianna Becker
Fernando J. Diaz Lopez
Koen Dittrich
Julianna Becker
Ton Bastein
Template with framework
Set-up chapter 2
Set-up chapter 1
First draft chapter 2
First draft chapter 1
Second draft framework
Review framework (ch 2)
Chapters 4-6
Chapters 3 and 7
Review ch 3-7, first set-up chapter 8
First draft chapter 8
Review chapters 1 and 2
Chapter 8
Review/revision of chapters 3 to 8,
updating references, lay-out, etc.
Final version
This project has received funding from the European Union’s Seventh Programme for
research, technological development and demonstration under grant agreement No
308371.
Dissemination Level
PU
Public
X
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Table of contents
Description of work ............................................................................................................................... 1
History table .......................................................................................................................................... 2
Table of contents .................................................................................................................................. 3
Key word list .......................................................................................................................................... 5
Definitions and acronyms .................................................................................................................... 5
Executive summary .............................................................................................................................. 6
1. Introduction ........................................................................................................................... 8
1.1. The POLFREE project ....................................................................................................... 8
1.2. Problem definition .......................................................................................................... 8
1.3. Data and methods ......................................................................................................... 10
1.4. Report contents ............................................................................................................ 11
2. Business barriers to the adoption of resource efficiency measures ................................... 12
3. Institutional barriers ............................................................................................................ 26
Overview of institutional barriers ................................................................................. 26
3.1.
3.2. Empirical examples of institutional barriers ................................................................. 28
3.3. Discussion and summary of findings ............................................................................ 33
4. Market barriers .................................................................................................................... 35
4.1. Overview of market barriers ......................................................................................... 35
4.2. Empirical examples of market barriers ......................................................................... 36
4.3. Discussion and summary of findings ............................................................................ 39
5. Organisational barriers ........................................................................................................ 40
5.1. Overview of organisational barriers ............................................................................. 40
5.2. Empirical examples of organisational barriers ............................................................. 41
5.3. Discussion and summary of findings ............................................................................ 43
6. Behavioural barriers ............................................................................................................. 45
6.1. Overview of behavioural barriers ................................................................................. 45
6.2. Empirical examples of behavioural barriers ................................................................. 46
6.3. Discussion and summary of findings ............................................................................ 49
7. Technological barriers .......................................................................................................... 50
7.1. Overview of technological barriers ............................................................................... 50
7.2. Empirical examples of technological barriers ............................................................... 50
7.3. The use of Technology Readiness Assessment and Technology Maturation Planning 54
7.4. Discussion and summary of findings ............................................................................ 56
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8. Linked barriers for resource efficiency: the web of constraints .......................................... 58
8.1. Analysing business barriers to resource efficiency in a systemic context: the case of
GreenElec ............................................................................................................................. 58
8.2. Additional Examples...................................................................................................... 62
8.2.1 Product-service systems ......................................................................................... 62
8.2.2 (Re-) Use of product components .......................................................................... 63
8.2.3 Resource efficiency in the construction sector ...................................................... 63
8.2.4 Green Business Model Innovation .......................................................................... 64
8.3. Summarizing ................................................................................................................. 66
9. Barriers to Resource Efficiency measures: concluding remarks .......................................... 67
9.1. Prioritizing barriers: a challenging task ......................................................................... 68
9.2. Resource efficiency barriers from a company perspective: a brief comment ............. 70
9.3. Policy implications: barriers to Resource Efficiency from a company perspective ..... 71
10. Bibliography ....................................................................................................................... 75
Annex 1. Selected examples of Resource Efficiency Measures (REM) at company level ....... 81
Annex 2. Overview of select literature on barriers ................................................................. 85
Annex 3. Overview of Top Country Barriers: Eurobarometer ................................................. 87
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Key word list
Eco-innovation
Green business model innovations
Web of constraints
Resource efficiency
Institutional, market, behavioural, organisational barriers
Circular economy
Resource efficiency measures
Definitions and acronyms
Acronyms Definitions
BAT
EOL
EOW
PSS
Best Available Technology
End of Life
End-Of-Waste
Product Service System
REM Resource Efficiency Measures
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Executive summary
POLFREE is a European project focusing on Policy Options For a Resource-Efficient Economy.
The research in the POLFREE project addresses the fundamental complexities of improving
resource efficiency, including the challenging issue regarding how policy measures can
stimulate economic growth, job creation and innovation without further increase of waste
and over-exploitation of natural resources.
This report focusses on the barriers that businesses may experience upon increasing their
resource efficiency. Businesses have always been aware of their resource consumption and
strived for optimal resource efficiency in order to control costs or increase supply security.
Increasingly, sustainability awareness as a source of value creation is increasing among
business stakeholders. Despite this awareness, companies face a number of partly
independent, partly related barriers that will on the one hand prevent them from improving
their resource efficiency beyond the current state, and on the other hand help to define the
current, seemingly optimized resource efficiency. Based on literature reviews, the report
sets up a framework consisting of 5 barriers for resource efficiency improvements:
Barrier Type Definition Examples
Institutional barriers caused by political
institutions
Regulations and laws
Market Market conditions, economic
climate, value network conditions
Monopolies, lack of
information, subsidies,
supplier leverage, etc.
Organizational firms as social systems influenced
by goals, routines, organizational
structures, etc.
company strategy or focus,
lack of funds, lack of CSO, etc.
Behavioural Individuals’ values and attitudes
within companies
lack of attention, lack of
perceived control, lack of
information, etc.
Technological Insufficient or too costly
technology
lacking equipment or other
tools, undeveloped technology
from the market, unable to
support technology, etc.
Descriptions of these barriers and empirical evidence from literature and recent studies are
provided in the report. A basic notion in the study is that resource efficiency improvements
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are hampered by webs of constraints, combinations of the 5 barriers. It follows that the
barrier mix (and the priority among barriers that companies encounter) depends on
material, sectorial and company details. Furthermore, the situation is additionally
complicated in case networks of companies need to cooperate for system changes.
Institutional barriers and market barriers constitute external barriers, not necessarily in the
span of control of companies. It is argued that policy measures not only impact these two
barriers, but may also act as a flywheel to organizational and behavioral barriers, and thus
act as drivers for systemic change.
Still, these policy measures aiming at external barriers will not be sufficient to bring along
changes: organisational (split incentives) and behavioral (conservative and risk adverse
attitude) barriers in complex value chains and networks might not be overcome. The
systems approach presented by the web-of-constraints should in all cases be followed, once
policy options are designed and their consequences modelled.
Policy changes in itself are not sufficient. One of the lessons from the empirical evidence is
that, whatever the policy interventions are, it is the volatility of the political decision making
process which probably paralyzes the process towards resource efficient innovations more,
than the sheer presence or absence of institutional measures. However, businesses also ask
for versatility and agility of government. This paradox calls for a knowledgeable government
that seeks to find the right balance, and takes the systems approach into account. Finding
the right balance is also required when adapting waste regulations (for instance facilitating
the use of waste through end-of-waste regulations without endangering the environment,
or through adapting too relaxed Best Available Technology Practices in permit regulations).
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1. Introduction
1.1. The POLFREE project
POLFREE is a European project aimed at Policy Options For a Resource-Efficient Economy.
The research in the POLFREE project addresses the fundamental complexities of improving
resource efficiency, including the challenging issue regarding how policy measures can
stimulate economic growth, job creation and innovation without further increase of waste
and over-exploitation of natural resources. The project will construct a theoretical
framework for the analysis of resource utilization in economy and society up to 2050 and
beyond, as well as the impact of resource utilization on to the environment. In addition, a
scenario analysis will be conducted to open discussion and exploration of new concepts and
paradigms that can create a radical increase in resource efficiency, and a vision for a
resource-efficient economy in the EU. In addition, it will provide suggestions for new, more
resource-efficient business models for firms as well as ideas for a global governance regime
to promote resource-efficient economies among the EU's trading partners (POLFREE, 2012).
1.2. Problem definition
The present economy is not sustainable with regards to its per capita material consumption
(Stahel, 2012). Global use of natural resources – such as metals, minerals, fossil fuel carriers,
construction materials and biomass - has significantly increased over the past decades to
reach levels of 60 billion tons per year (Krausmann, 2009), (UNEP, 2012). The material
impact of the consumer goods industry is set to rise exponentially (McKinsey, 2013). The
OESO estimates 45% more waste in 2020 compared to 1995. Most of the waste (67%) is
dumped in landfill sites which limit the availability of other resources such as land or fresh
water. Despite certain gains in resource efficiency in specific EU sectors and member states,
extrapolation of historical growth in resource consumption and - disposal indicates that the
natural resource base, on which all global economic activity still relies, is in danger of
overexploitation.
Resources represent costs for companies – with reported figures between 4,5 to 6,5% of
total costs can be attributed to primary raw materials, excluding labour costs (Bruyn, et al.,
2009). Businesses have therefore always been aware of their resource consumption and
strived for optimal resource efficiency in order to control costs or increase supply security,
particularly in energy and resource intensive industries (e.g. chemicals, cement, etc.). Diaz
Lopez & Montalvo (2012) noted that: resource efficiency and the use of by-products and
waste as a source of value creation has been known to chemical producers for over 100
years (Richardson, 1908). Since the 1960s, the ecology movement has led to changes in
corporate environmentalism due to a combination of social and regulatory pressures
(Hoffman, 1999). Companies engage into resource efficiency as a demand driven and cost
reduction incentive (Hart & G.Ahuja, 1996). Of course it is an open question whether
companies may change business as usual without major systemic changes to force them in
that direction. Likewise, the evidence of technical change for sustainability promoting
systemic changes without major institutional, economic and social transformation is a
subject of open debate (Van den Bergh, et al., 2011).
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Depending on the speed in which either such a systemic change is implemented or in which
environmental circumstances force industries to change their business models, there will be
different sets of companies who will either benefit or succumb. In 1934, economist Joseph
Schumpeter introduced the term "creative destruction" to describe the pattern in which
small, entrepreneurial new entrants unseat large, incumbent corporations. His argument
was that, in times of great change, incumbents could not change quickly enough to seize
opportunities, and that small entrepreneurs would enter the market with new ways of doing
business and take the lead. Schumpeter described this as the norm for capitalist economies,
rather than the exception. Drucker (1985) also identified change as a source of opportunity,
and the ability to leverage that change, to respond entrepreneurially, as necessary to
survive. This author stated that: “Today’s businesses, especially the large ones, simply will
not survive in this period of rapid change and innovation unless they acquire entrepreneurial
competence.” [p.132]. Hart (1997) explicitly linked sustainability and creative destruction,
further emphasizing the need for an integrated strategic response to the business
challenges of sustainability, rather than continuous improvement that is not integrated into
the business model (although the analysis is essentially limited to environmental
sustainability through the ecological footprint construct) (Hart & Milstein, 1999).
Sustainability awareness as a source of value creation is increasing among business
stakeholders. Moreover, it is well-known to companies that satisfying shareholders is no
longer good enough; consumers will punish companies that do not fulfil their public
responsibilities, causing their market shares to decline (Bielac, 2007). The onset of social
media in recent years has certainly contributed to this sense of urgency: a consumer action
is quickly spread and may do severe market damage. It is therefore that several business
leaders have committed themselves to action to improve resource efficiency (World
Economic Forum, 2013), beyond the business as usual. This commitment is thus given
without the systemic change mentioned earlier. A McKinsey survey of 2663 companies
identifies actions beyond reputational management contributing to their return on capital
(McKinsey, 2012). This survey found that a growing percentage of companies are currently
engaged in implementing actions for the reduction of resource use in operations, with
advantages for those identified as sustainability leaders (see Figure below).
F
IGURE
1
M
C
K
INSEY SURVEY RESULTS ON VALUE CREATION FROM RESOURCE EFFICIENCY MEASURES
Source: McKinsey 2012
Despite these positive moves, and without systemic changes being in place, companies face
a number of partly independent, partly related barriers that will on the one hand prevent
them from improving their resource efficiency beyond the current state, and on the other
hand help to define the current, seemingly optimized resource efficiency. It is the purpose
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of the current report to provide a comprehensive view on the barriers that companies face
when improving their resource efficiency, on the links between these barriers and on the
effect institutions and policies may have on fighting these barriers.
1.3. Data and methods
One of the goals of POLFREE is to examine business barriers to adoption of resource
efficiency measures and examine business innovation decisions with regard to the use of
materials, barriers to the use of secondary materials, and business opportunities in service
life extension and product-service systems. Conducting an analysis of barriers to resource
efficiency is a critical component in order to achieve the objectives of this report. Such
analysis was implemented to gain a better understanding of the factors that constrain
companies to adopt further resource efficiency measures.
The analytical methods employed for such analysis were primarily based on the analysis of
secondary data sources (literature review), template analysis of case study evidence, and
(descriptive) statistical analysis. A literature review was first conducted in order to make an
inventory of perceived business barriers to sustainable measures in general and resource
efficiency measures in specific. Next, the findings from the literature review were
corroborated by empirical data sources, including:
Survey data:
1) Meta-data from the Community Innovation Survey 2008, which contained a module
with 15 questions about eco-innovation.
2) The Eurobarometer survey results about
barriers to resource efficiency
innovations, based on answers of 5,222
managers of small and medium-sized
enterprises (SMEs) in EU-27
And evidence from recent case studies:
3) The study Opportunities for a Circular
Economy in The Netherlands (2013),
which included results and opinions from
over 20 interviews and participants to
validating workshops (Bastein, et al.,
2013);
4) The study Regions for Resources (2013),
financed by the FP7-REGIONS funds. This
project aimed at improving resource
efficiency in 6 chemical regions
throughout Europe (see text box);
5) Study results from ‘Sustainable
Entrepreneurship in the Dutch
Construction Industry’ (2010) a joint
study of TNO and the University Utrecht into barriers in the construction sector; the
Box1. Introducing R4R
In the project ‘Chemical Regions for
Resource Efficiency’ (R4R) (Suurs, et al.,
2013) six chemical regions with an
ambition to increase their resource
efficiency, a thorough self-assessment (on
the basis of methods from Technological
Innovation System (TIS) analysis) was
performed This project also aimed at the
identification of strengths, weakness,
threats and opportunities (SWOT). These
regions engaged in stakeholder interviews
and workshops with participants (at least
15 per region)from government,
academia and industry. The results were
assessed along the following lines:
Policies & regulations, Markets,
Resources, Knowledge development,
Entrepreneurial experimentation and
Legitimacy (Suurs, et al., 2013)
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results were based on 16 interviews with innovative entrepreneurs in this sector
(Klein Woolthuis, 2010).
6) Results from the on-going FP7-funded project GreenElec are used to illustrate the
complex situation of a multitude of business barriers acting simultaneously.
GreenElec has the objective to assess green electronics and sustainable product
manufacturing. This project is focused on the analysis of, the entire electronics value
network, ranging from components and Printed Circuit Board (PCB) design and
manufacturing, through product design to recycling and recovering.
1.4. Report contents
The content of this report is as follows:
• Chapter 2 presents a brief literature review and describes the conceptual framework
for conducting the business barrier analysis.
• Chapter 3 to 7 describe the results of the barrier analysis based on the specific
categories of barriers that have been defined in chapter 2.
• Chapter 8 contains a case study of the GreenElec project, outlining how the defined
categories of barriers provide a web of constraints for resource efficiency measures
within the European electronics industry.
•
Chapter 9 provides the conclusions, focussing on the relations between the various
barriers with an emphasis on the potential relations between policy related barriers
and actions on the one hand, and the ‘other’ barriers on the other hand.
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2. Business barriers to the adoption of resource efficiency
measures
This report is about business barriers to improving resource efficiency in companies.
Accordingly, the primary focus is to examine how businesses currently characterise their
resource efficiency approach and how they make innovation decisions with regard to
improving their resource efficiency. This report also provides an overview of the types of
barriers companies encounter when adopting these resource efficiency measures.
Resource efficiency can be defined as useful material output divided by material input, and
thus as a measure of the technical ability to produce “more from less” (Dahlström & Ekins,
2005, p. 173).
1
It is different from the term resource productivity, which is the ratio between
economic output and material input. Therefore, when companies increase their resource
efficiency, they reduce the quantity of resources needed to offer the same or improved
products and/or services. Hence, resource efficiency measures (REM) could be understood
as the implementation of (technological and non-technological) methods, tools, techniques
and technologies applied by companies in order to reduce the resources needed for their
goods or services. Unavoidably, when talking about resource efficiency measures (REM) we
immediately fall into the realm of eco-innovations (Kemp, 2010; Ekins 2010).
2
The remainder of this chapter is divided in four main parts. The first section briefly discusses
the business rationale to implement resource efficiency barriers. The second section
provides an overview of resource efficiency measures currently undertaken by companies.
The third section presents a classification and general discussion of perceived business
barriers to resource efficiency reported in the literature. The final section introduces a
systems-view to business barriers to resource efficiency leading to the development of a
conceptual framework for the analysis of empirical evidence presented in subsequent
chapters.
2.1. The business rationale for resource efficiency
The EC flagship initiative on Resource Efficiency suggests that a great deal of technological
improvements and behavioural change are needed in order to achieve the desired levels of
resource efficiency in the energy, industrial, agricultural, and transport systems (European
Commission, 2011). Derived from the aims of this initiative, it is expected that REM
contribute to European competitiveness and to an overall cost efficiency by reducing
material and energy consumption.
1
The term eco-efficiency (in firms) is often used interchangeably with resource efficiency (e.g. in Dahlström & Ekins, 2005).
The WBCSD desfines it as follows: “At a basic level, eco-efficiency means, “doing more with less” … “eco-efficiency is
achieved by the delivery of competitively priced goods and services that satisfy human needs and bring quality of life, while
progressively reducing ecological impacts and resource intensity throughout the life-cycle to a level at least in line with the
Earth’s estimated carrying capacity” (WBCSD, 2010). It is considered as a ratio of an output (value of products and services)
and an input (sum of environmental pressures) (OECD, 1998).
2
One of the most accepted definitions of eco-innovation was provided by Kemp & Pearson (2008), within the context of
the MEI project. These authors defined eco-innovation as: “the production application or exploitation of a good, service,
production process, organisational structure, or management or business method that is novel to the firm or user and which
results, throughout its life cycle, in a reduction of environmental risk, pollution and the negative impacts of resources use
(including energy use) compared to relevant alternatives.”
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As noted in the introduction, depending on sector specificities, the rationale for companies
to implement resource efficiency measures has long been noted in the literature. As an
example of this we have the message of the first president of the Royal College of Chemistry
in London A. W. Hoffman, who in in 1848 declared that: “In an ideal chemical factory, there
is, strictly speaking, no waste but only products. The better a real factory makes use of its
waste, the closer it gets to its ideal, the bigger its profit” (Lancaster, 2002, p.21 after von
Hoffman, 1866).
The World Business Council for Sustainable Development and others specifically argue that
there is a strong business case for pursuing resource efficiency and circular forms of
production and consumption (e.g. Ellen McArthur Foundation, 2013; World Economic
Forum, 2011). The rationale for companies to improve their resource efficiency can be
summarised in the following benefits: improved productivity, cost reduction and increased
competitiveness, opportunities for developing new products and services, minimizing
material inputs and waste outputs, and significant changes both production and
(potentially) consumption patterns (e.g. Ghisetti & Rennings, 2014; Berns & al, 2009).
Mainstream businesses see resource efficiency primarily as a cost measure, route to
revenue diversification, and to some extent risk mitigation (Eurobarometer, 2012). Costs
and opportunities are considered some of the most important decision factors contributing
to the adoption resource efficiency measures at the company level (Hart and Ahuja, 1996).
A well-known example of resource efficiency gains is the implementation of 3M’s pollution
prevention programme. Hart and Ahuja (1996) reported that during the period 1975-1990
3M reduced their total pollution by over 530,000 Tons and saved over $500 million through
lower raw material, compliance, disposal and liability costs. Companies tend to focus on the
so-called ‘low hanging fruits’: low-cost or no-cost measures that provide substantial benefits
and are relatively simple to implement. The potential gross benefits from quick wins are
estimated between 10% and 17% of turnover on average ( AMEC Environment &
Infrastructure; Bio Intelligence Service, 2013).
In Europe, only 23% of SMEs and 36% of large companies (with 250+ employees) are taking
action on resource efficiency motivated by competitive advantage and new business
opportunities (the majority doing it for cost saving reasons) (Eurobarometer, 2012).
Inefficiencies are now being scrutinised across the supply chain highlighting the role of focal
companies in promoting resource efficiency and eco-innovation (Dewick & Foster, 2011).
The 2010 Environmental Lost and Profit Accounts of PUMA reported that 94% of their
environmental costs were located outside the company gates (PUMA, 2012)
3
. Depending
on changes to corporate and government policies in the future, it would be no surprise a
plausible scenario were external environmental costs would be shifted across the supply
chain.
3
The EPL account included the categories of water use, greenhouse gas emissions, land use conversion, other air pollution
and waste. Total monetary value of environmental impacts was estimated at EUR 145 million. Results showed that 6% (EUR
8 million) of the impact was caused by PUMA direct operations, 9% (EUR 13 million) by Tier 1 suppliers, 9% (EUR 14 million)
by Tier 2 suppliers, 19% (EUR 27 million) by Tier 3 suppliers and 57% (EUR 83 million) by Tier 4 suppliers.
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For some time now there is myriad of evidence on the positive relation between
environmental and economic performance at the company level (c.f. Ghisetti and Rennings,
2014; Hart and Ahuja, 1996). At the industry and national economies levels, estimations of
the relationship between resource productivity and competitiveness have led to non-
conclusive results (Bruyn et al., 2009, Bleischwitz, 2010). The widespread adoption of
resource efficiency varies according to each industry, region and country. In a recent
Eurobarometer study 93% of European SMEs reported having implemented resource
efficiency measures ranging from energy and material savings to waste reduction and
recycling (Eurobarometer, 2012).
T
ABLE
1:
R
ESULTS REPORTED IN
E
UROBAROMETER
F
LASH
S
TUDY
(E
UROBAROMETER
,
2012)
Measures % SME taking action % Large companies taking action
Energy saving 64 82
Waste minimisation 62 72
Recycling 61 76
Material savings 57 74
Scrap materials reselling 24 44
A recent study from the OECD shows those resource efficiency actions of companies are
beneficial, resulting in improved material productivity and a relative decoupling between
material consumption and economic growth (OECD, 2011). But despite these relative gains,
material consumption and waste generation in the OECD countries is still growing in
absolute terms, although this growth has decelerated significantly in the last years (OECD,
2011). In order to reach an absolute decoupling between global growth of wealth and
material consumption, more radical resource efficiency gain is needed. We depend on
companies to implement these resource efficiency measures.
The following section explores current measures to resource efficiency at the company level
followed by an exploration to barriers constraining companies to adopt further these
measures.
2.2 Company measures to resource efficiency
As earlier defined in this text, resource efficiency measures (REM) can be understood as the
implementation of (technological and non-technological) methods, tools, techniques and
technologies applied by companies in order to reduce the resources needed for their goods
or services. Describing a list of specific REM would be a complex task beyond the scope of
POLFREE.
4
Therefore, in this section general classification of REM and a number of brief
examples are provided.
4
POLFREE Deliverable 2.1 offers a preliminary list of concepts for promoting resource efficiency, with different levels of
applicability (e.g. production system, company, industry, National economies, etc). The aforementioned report considers
the following concepts as those bearing a high plausibility of pathways of change: waste prevention, extended producer
responsibility, supply chain management, weak sustainability, strong sustainability, eco-innovation, green growth, green
economy, cleaner production, eco-efficiency, and pollution prevention pays. However, in D1.5, not all these concepts can
be associated to business-level activities (e.g. directly affecting the implementation of REMs in operations or production
systems).
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Albeit the objective of the Resource Efficiency Flagship Initiative communication was not to
provide specific measures, it is possible to identify from this document the following REM at
the company and industry levels:
• Use of clean technologies (emissions reduction, air quality, noise and public health)
• Recycling, reuse, and waste management
• Product re-design (increasing durability and recyclability, materials substitution)
• Reduction of demand on input materials (primary raw materials, commodities, energy)
• Energy efficiency measures (insulation materials, heat recovery)
• Sustainable production (just in time, circular economy, waste as a resource, 3R,
improved efficiency, resource use)
• Sustainable logistics (distribution, storage)
In terms of specific methods, techniques and tools, from a green engineering point of view
each production system has manifold areas for improving the overall efficiency of
operations (Graedel and Howard-Greenville, 2005). Moreover, a number of approaches,
methods, techniques, and tools to implementing sustainable production are available in the
literature (e.g. pollution prevention, cleaner production, eco-efficiency, sustainable
manufacturing) (e.g. in 3M and UNEP, 1982, OECD, 2011, GEMI, 1993, Ilgin and Gupta, 2010,
Geibler et al., 2011). These approaches include a large amount of resource efficiency
measures, such as the implementation of cleaner technologies, waste management
systems, environmental management systems, recycling and closed-loop manufacturing,
etc.
5
F
IGURE
2
E
XAMPLES OF
S
USTAINABLE
P
RODUCTION
A
PPROACHES INCLUDING
R
ESOURCE
E
FFICIENCY
M
EASURES
.
Eco-efficiency hierarchy
Source: WBCSD 2010
Life cycle and 3R strategies
Source: Ellen MacArthur Foundation; 2012
Presumably, one of the most comprehensive methods for the introduction of resource
efficiency measures at the company level is provided by the United Nations Environment
Program cleaner production toolkit (UNIDO, 2010)
6
Irrespectively of the approach or
proposer, these REMs are often based on the propositions of the waste hierarchy,
5
These measures often referred as to: best practices, good housekeeping, pollution prevention techniques, eco-efficiency
measures, etc.
6
Available at: http://www.unido.org/en/resources/publications/energy-and-environment/industrial-energy-efficiency/cp-
toolkit-english.html
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environmental life cycle, and pollution prevention approaches (see figure 2). Additional
examples of company-level approaches to resource efficiency are summarized in Annex 1.
The typologies described above focus on resource efficiency improvements of processes and
products, and places less emphasis on development of service oriented measures. A recent
study of Henriksen et al. (2012) on green business model innovation classified strategies in
the following categories: product and service based models (with an emphasis on
innovation of products or services for others) or process based models (based on technical
and organisational improvements of the company’s own manufacturing process, or on
improving product life-cycle or incentivizing customers). These categories are comparable to
propositions found in eco-innovation studies that include among their typologies energy
and resource efficiency innovations (EREI) (Cleff and Rennings, 1999, Rennings and Rammer,
2009).
7
Since the focus of this report is on the identification of barriers to resource
efficiency measures, this report discusses barriers to improvements to resource efficiency
for these two main categories of Resource Efficiency Measures.
8
The following section addresses the topic of barriers to the implementation of resource
efficiency measures, from the point of view of companies and the perceived effect upon
their activities. This section is followed by a systems-view to resource efficiency barriers, in
the context of the wider environment stimulating or hampering the implementation of such
measures.
2.3 A classification of business barriers to resource efficiency
Business barriers to resource efficiency could be understood as internal and external
negative stimuli hampering the innovation activities of companies towards an efficient use
of resources. Concrete barriers are defined based on three distinct features (Weber, 1997):
the objective obstacle (what is the obstacle?); the subject hindered (to whom is it an
obstacle?); and the action hindered (for reaching what?). In this report the focus is primarily
on the objective obstacle, since both the subject (a company) and the action hindered
(reaching more resource efficiency) are pre-defined by the description of work of POLFREE.
Throughout the years, multiple studies have examined business drivers and barriers in the
context of the diffusion of eco-innovations and cleaner technologies (Horbach, 2008).
Energy studies are particularly resourceful in the study of barriers to resource efficiency. For
example, York et al. (1978) compiled a bibliography of studies on the barriers towards
energy conservation and Weber (1997) investigated the barriers for companies to the
efficient use of energy and presented four main categories: institutional, market,
organisational and behavioural. These are described below.
• Institutional barriers caused by political institutions. This category typically includes
barriers such as political rules and regulations, pressure groups and policy acts.
7
Ghisetti and Rennings (2014) define Energy and Resource Efficiency Innovations as innovations whose effects consist in a
reduction of material and energy used per unit of output, and Externality Reducing Innovations (ER from now on), i.e.
those innovations aimed at reducing production externalities such as air, water, noise pollution and harmful materials.
8
Deliverable D2.4 of Polfree also uses the same category of resource efficiency measures. In the remainder of this report,
and giving the categorisations used in the literature, we often refer to cleaner technologies, eco-innovation or eco-
efficiency measures as a proxy term to REM.
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Institutional barriers are difficult to change by individuals and action to remove them
develops slowly.
• Market barriers typically include market failures, costs of introductions of new
technologies, monopolies, market entry barriers, split incentives, subsidies, lack of
information among others, but also consumer behaviour that has a decisive influence on
the uptake of a product innovation by the market.
• Organisational barriers within firms. Organisational barrier models stem from the view
of companies as social systems subjective to goals, routines and organisational
structures. Organisational barriers also refer to the knowledge and know-how that
actors have in house to engage in innovation. This includes the technological and/or
technical knowledge and know-how to for instance develop a new product successfully,
but also to the organizational and marketing skills that are required to manage the
innovation process and the successful introduction of a product or process into the
market.
• Behavioural barriers within individuals. These barriers arise from individual values and
attitudes and can exist either inside the company or in customers and suppliers with
whom the company engages in upstream and downstream relationships. Behavioural
barriers typically contain lack of awareness or attention, reluctance to change or lack of
commitment. For the current study, the behavioural aspects of customers and (e.g.)
suppliers is grouped under the term ‘market barriers’; behavioural aspects are confined
to those behaviours of the work force, management and executives that may form a
barrier (or, of course in some cases, a strong driver) towards investing in resource
efficiency measures.
Innovation system studies have provided further information about the nature of
institutional and organisational barriers. Building on institutional theory (North, 1990), Klein
Woolthuis (Klein Woolthuis, 2010) describes ‘soft institutions’ referring to the implicit ‘rules
of the game’, the norms, values, cultures that implicitly shape actors preferences,
interpretations and consequent behaviours. Informal ‘rules’ can stimulate innovation if they
value creativity and change, whereas the opposite is true if the consensus tends towards
keeping things as they are. Absence of well-functioning formal institutions (i.e., absence of
contract law or IP protection) hinders innovation, but too rigid formal institutions may have
the same effect (i.e., bureaucracy) (Klein Woolthuis, 2010). Organisational barriers are
described by the same authors in regard to the type of interaction in a network: hard
network failure is referring to too much interaction between parties that know each other
well and for a long time (strong ties) leading to ‘lock in’ and blind spots. Weak network
failure is referring to too little interaction between parties, or absence of linkages all
together which hinders innovation as parties do not know each other (well enough) and will
hence not engage in knowledge exchange, learning and/or collaboration (Klein Woolthuis,
2010).
A review of additional literature stemming from research on technological responses to
environmental problems (Ashford, 1993), environmental technologies (COM, 2004), cleaner
technologies (Montalvo, 2008), eco-innovations (Horbach, et al., 2012) and resource
efficiency measures ( AMEC Environment & Infrastructure; Bio Intelligence Service, 2013)
emphasise the role of technological barriers representing obstacles to innovation, which are
in turn conditioned by the process of technological development (see Table below).
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T
ABLE
2:
O
VERVIEW OF
B
ARRIERS TO THE IMPLEMENTATION OF ENERGY EFFICIENCY
,
ENVIRONMENTAL TECHNOLOGIES
,
ECO
-
INNOVATION AND
R
ESOURCE
E
FFICIENCY
Weber (1997) Ashford (1993) European Commission’s
Environmental Technologies
Action Plan (ETAP) (2004)
(COM, 2004)
Montalvo (2008) Horbach,
Rammer &
Rennings (2012)
AMEC Environment &
Infrastructure and Bio
Intelligence Service (2013)
Innovation
type
Energy efficiency
measures
Technological responses to
environmental problems
Environmental technologies Cleaner technologies Eco-innovation Resource efficiency measures
Factors
hampering
adoption
Institutional Regulatory
- Disincentives to invest due to
work-intensive permit
application process
- Depreciation tax laws
- Uncertainty about future
regulations
- Regulatory focus on
compliance by use of
conventional technologies
Regulations and standards
- Unclear
- Overly detailed technical
specifications
- Unstable
- Fragmented over EU Member
States
Public policy Regulation - Inconsistent policies &
messages
- External support and
assistance
Market Financial
- Costs related to risks
- Non-comprehensive cost
evaluations
- Lack of understanding future
liability costs
- Low tolerance for longer
payback periods
- Lack of capital investment
flexibility due to low profit
margin
- Economies of scale
- Investment in process
modification can be inefficient
for old companies
- Actual cost of current
technologies masked in
operating costs
Consumer-related
Economic
- Market prices
- Switching costs
- Inadequate availability of risk
capital
Markets
Economics
Market - Lack of clear pricing signals
- Lack of consumer demand
- Supply chain constraints
- External support and
assistance
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- Customer expectations
- Willingness to pay
Organizational Financial
- Lack of funds
Labour force-related
- Lack of management, control
and implementation
personnel
- Reluctance to employ
trained personnel
- Inability to manage
environmental program
- Increased management
requirements with
implementation of new
technologies
Diffusion
- Lack of adequately trained staff
- Inadequate distribution channels
Organisational
capabilities
Firm specific
factors
- Physical limitations
- Incentives to invest
- High cost and low ROI
- Access to capital
- Lack of targets &
benchmarks
- Business & commercial
model
- Knowledge and expertise
- Competing priorities
- Internal capacity &
resources
Behavioural
(internal)
Managerial
- Lack of management
commitment
- Hierarchical separation of
areas of responsibility
- Reluctance to change
- Lack of education, training
and motivation of employees
- Lack of expertise
Diffusion
- Lack of information
- Lack of acceptance
Communities and
social pressure
Attitudes and social
values
- Habitual behaviour
- Negative attitudes &
cultures
Technological - Availability
- Performance
- Lack of alternative
substances
- Higher degree of
sophistication
- Reluctance to invest
- Process inflexibilities
Technological
- Insufficient research effort
- Lack of R&D support
Technological
opportunities and
capabilities
Technology - Thresholds in technologies &
infrastructure capacity
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Resource-efficient technologies often face the need to overcome industry-level barriers to
adoption. For the case of cleaner technology, it has been noted that: “despite strong forces
to induce industry to adopt new cleaner technologies, diffusion might advance at a very slow
pace or not at all. This could be explained by the capacity at the industry level to innovate
and to change” (Montalvo, 2008). Not only is technology critical for resource efficiency
changes, but it plays an integral role in business operations and strategy. At the company
level, empirical evidence has suggested that about 70% of the decision to implement
cleaner technologies is based on the manager’s perception of the company’s own
technological capabilities (~40%), the potential economic benefits (21%) and the influence
of community pressures (8%) (Montalvo, 2003).
More recent studies continue noting the
critical role technology plays in the manufacturing of the next generation of resource
efficient products (Greenovate! Europe, 2012).
In relation to industry vs. firm level differences in implementation of REM, it is convenient to
differentiate between the external and internal nature of barriers as these have an impact
on the room for manoeuvre of companies and the likeliness to promote change at the
systemic and company levels. The AMEC and BIOIS (2012) study in resource efficiency
provides a good pictorial representation of different barriers in view of their external and
internal (see Figure 3). Because the lack of conclusive evidence, the degree of influence of
internal and external barriers affecting the company’s business strategy and prospects for
government intervention is a crucial to be explored in further detail in resource efficiency
studies.
F
IGURE
3
I
NTERNAL AND
E
XTERNAL
B
ARRIERS TO RESOURCE EFFICIENCY IMPROVEMENTS
(S
OURCE
:
AMEC,
BIO-IS,
2012)
Building on the review presented in this section, barriers to resource efficiency and their
definitions are presented in Table 3. These definitions are primarily based on those of
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Weber (1997) taking into account that the current report is on resource efficiency instead of
Weber’s focus on energy efficiency.
T
ABLE
3:
M
AIN CATEGORIES OF BARRIERS
Barrier Type Definition Examples
Institutional Barriers caused by political institutions Regulations and laws
Market Market conditions, economic climate,
value network conditions
Monopolies, lack of information,
subsidies, supplier leverage, etc.
Organizational firms as social systems influenced by
goals, routines, organizational
structures, etc.
company strategy or focus, lack of
funds, lack of CSO, etc.
Behavioural Individuals’ values and attitudes within
companies
lack of attention, lack of perceived
control, lack of information, etc.
Technological Insufficient or too costly technology lacking equipment or other tools,
undeveloped technology from the
market, unable to support
technology, etc.
Traditional barrier models are based on the implicit assumption that improvements to the
current situation – in this case the improvement of a company’s resource efficiency – stem
from ‘positive’ action, such as substituting old production capital with new resource
efficient production capital, to reach an objective and normative desired level of resource
efficiency. In reality, however, resource inefficiencies often exist because companies
continue within a business-as-usual approach. For example, 51% of European SMEs are
stating that they comply with environmental legislation but do not wish to go beyond these
requirements. (Eurobarometer, 2013). Therefore, it is important to view the topic of
barriers and their removal from the broader perspective of the enabling environment
supporting innovation and change (Coenen and Diaz Lopez, 2010), a systems view to
resource efficiency. Such a view is presented in the following section. A system perspective
to resource efficiency implementation can enable companies to completely restructure their
operations and offerings in such a way that large resource efficiency potentials can be
achieved.
2.4 A systems-view to resource efficiency barriers: a conceptual framework
In this project, a barrier is not considered a concrete obstacle on the road to resource
efficiency that can be removed. Instead, the project views barriers as a web of constraints
that stems from the co-evolution of (eco)innovation, institutions and markets (Kemp &
Soete, 1992). This concept addresses the observation that barriers may be related and in
any case should be viewed integrally: all barriers play a role (of course depending on the
particular resource, country or culture of relevance) to some extent and should all be
addressed to potentially improve on a robust change.
The web of constraints is not always recognized by companies. What companies perceive as
one barrier is often the culmination of multiple constraining factors. Balancing such
interconnectivities is a real challenge within a business and one that can create paralysing
inaction on resource efficiency, especially when operational day-to-day demands are
factored in. Optimal resource efficiency would seem to rely on all factors being balanced in
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decision making and yet such practical challenges often means movement towards greater
business resource efficiency is compromised ( AMEC Environment & Infrastructure; Bio
Intelligence Service, 2013).
The web of constraints is not confined to the barriers within one company, it also extends to
the constraints of its enabling environment, namely the innovation system and the
industrial system. Through the process of cumulative causation, barriers within a system
may strengthen each over time (Suurs, et al., 2010). As a consequence, a ‘landscape’ of
existing norms, values, and the development of some technologies emerges. Other physical
realities such as infrastructures that reward the current socio-technical trajectory also come
into play. This landscape influences the actions companies can take at the present time.
Related to this, firms are not acting on their own but are part of a network context of
suppliers and downstream chains, that are often highly optimized in their interaction, and
from which it is not easy to radically break away. According to the resource dependence
perspective of Pfeffer and Salancik (1978), organisations are not internally self-sufficient,
but they require resources from their environment and therefore they have to interact with
those stakeholders who control the resources they need. As a result organisations are highly
interdependent with the organisations with which they interact (Pfeffer J., 1978). This web
of constraining factors is expected to provide a strong rationale for businesses to keep doing
business as usual.
A conceptual model for a better understanding of resource efficiency barriers is presented
in Figure 4, following on from the classification of barriers presented in Table 3.
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F
IGURE
4
C
ONCEPTUAL
M
ODEL
:
W
EB
O
F
I
NSTITUTIONAL
,
M
ARKET
,
O
RGANISATIONAL
,
B
EHAVIOURAL
A
ND
T
ECHNOLOGICAL
B
ARRIERS
C
ONSTRAINING
T
HE
I
MPLEMENTATION
O
F
R
ESOURCE
E
FFICIENCY
M
EASURES
Source: own elaboration
To add an additional level of complexity to the conceptual framework in Figure 3, these
interrelated constraints vary depending on specific business circumstances, the resource-
specific nature of the barrier, etc., which are not necessarily controlled by companies. Based
on our literature review, three main variables can be identified that cause differences
between the webs of constraints for businesses: 1) the type of firm, 2) the sector and
country in which it operates (Coenen & Díaz López, 2010), and 3) the type of resource
efficiency measure the firm tries to implement. These aspects are briefly described below.
Firms are not a homogeneous group. Some firms operate in a business to business context,
while others offer their products and services to consumer markets. Some are just starting
with little resources, while others are large corporates with vast resources. Some provide
only services, while others are manufacturers. The factors that constrain these companies
are expected to be related to the type of business they are. For example, according to
Wernerfelt (1984) companies with a strong position in a certain market enjoy the protection
of a resource position barrier. Contrary, these vested interests will provide a market barrier
for entrants introducing new resource efficient products and services in that same market.
Furthermore, companies are part of a wider industrial web and share common factors such
as (1) similar operations, process or practices, (2) similar environmental challenges, and (3)
similar regulatory compliance needs (Graedel & Howard-Greenville, 2005). Being economic
sectors highly interdependent and the industry working as a system, changes in the use of
resources by one sector have a tendency to create constrains through many others –hence
the need to optimise the entire system paying special attention to value chain interactions.
Hence, the need for systemic change is always present.
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The sector and country dependency can be supported by results from the Eurobarometer.
The Eurobarometer found that “for each of the potential barriers related to financing and
funds, a majority of respondents thought that it was a very or somewhat serious barrier to
an accelerated development and uptake of eco-innovation. Insufficient access to existing
subsidies and fiscal incentives was considered a barrier by 6 in 10 respondents (30% “very
serious” and 30% “somewhat serious” responses) (Eurobarometer, 2012)”. A lack of a
financial incentive can cause a great barrier as it impacts not only one of the categories, but
often is related to multiple areas.
Table 4 Top Barriers to Resource Efficiency identified by the Eurobarometer Survey
Most important barriers for each of the 27 countries Top 3
appearances
Uncertain demand from the market 19
Uncertain return on investment 18
Lack of funds within the enterprise 16
Insufficient access to existing subsidies 8
Reducing energy not a priority 7
Existing regulations not providing incentives 5
Lack of qualified personnel 3
Market dominated by established enterprises 2
Lack of external financing 2
Technical and technological lock-ins 1
Source: Eurobarometer, 2012
There are also some interesting variations between companies in different countries across
Europe. The main barriers experienced by SMEs in each of 27 countries investigated in the
Eurobarometer (2012) vary from country to country. However, two main barriers are
prevalent in all countries. The most important barrier in all countries is related to financing
and investment in eco-innovation. In 6 out of 27 countries, SMEs find the lack of funds
within the enterprise the most important barrier, while in 5 out of 27 countries SMEs stress
that the uncertainty of the return on investment is holding them back to invest more in
developing eco-innovations. Insufficient access to subsidies (2 out of 27) and lack of external
financing (1 out 27) are other finance-related barriers experienced by SMEs. The second the
most important barrier, experienced as the most important barrier for the uptake and
development of eco-innovation in 11 out of 27 countries, is the uncertainty of demand
from the market. Other barriers experienced are the lack of qualified personnel (in 2 out 27
countries). For a full overview of country differences, see Annex 3.
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Besides country differences, there are some sectorial differences as well. Companies in the
water supply and waste management were the least likely to have made innovation
investments in the past five years (Eurobarometer, 2012). Other companies that were less
likely to have made innovation investments were the smaller ones (in terms of workforce or
turnover), the ones that had experienced a decrease in turnover in the past two years and
those with low material costs. For each of the potential barriers related to financing and
funds, a majority of respondents thought that it was a very or somewhat serious barrier to
an accelerated development and uptake of eco-innovation. For example, insufficient access
to existing subsidies and fiscal incentives was considered a barrier by 6 in 10 respondents
(30% “very serious” and 30% “somewhat serious” responses).
Different business barriers exist relative to the scope of the resource efficiency measure.
Efficiency improvements in the production system typically require the least of companies
to introduce and implement, but the resource efficiency potential of these improvements is
also limited. The redesign of a product or service allows the entire life cycle and value chain
to be taken into consideration. This includes not only processes within the company but also
involves suppliers and other stakeholders in the value chain of the product or service.
Shifting to a significantly more resource efficient process or product technology typically
requires more investment and knowledge to implement, but it can also result in
considerable resource savings.
The conceptual framework described in this section is used in chapters 3 to 7 to perform a
detailed analysis of each business barrier. An important limitation of the approach selected
for the analysis of barriers to resource efficiency measured should be noted. Although, as
noted above, we acknowledge the importance of differences induced by the type of the
firm, sector dynamics and the type of resource efficiency measure, in the remainder of this
report it is rather challenging offering research findings to such a level of detail. Albeit we
make an attempt to provide useful insights in this regard, such a detailed analytical focus
would go beyond the aims of this report. Each of the chapters will provide a review of
detailed barriers to resource efficiency in each category presented in Table 3, followed by
examples derived from the literature sources consulted.
The following chapter presents an analysis of institutional barriers to the implementation of
resource efficiency measures.
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3. Institutional barriers
This chapter discusses the barriers experienced by companies related to institutional
conditions, such as laws and regulatory conditions. In the first section, we discuss the main
findings from current literature. In the second section, we discuss empirical findings based
on CIS and Eurobarometer survey data, case studies and some additional studies on
resource efficiency. In the third section we summarize conclusions and findings.
Overview of institutional barriers
3.1.
Institutional barriers relate to political rules or policy acts (Dijk, et al., 2013) that act upon a
single citizen, a social group, organisation or whole nation. North (2010) defined the as the
rules of the game, as they refer to rules, legislations, and norms, etc. This report focusses on
the barriers for companies.
9
Although it is noted that institutions can hardly be changed by
individuals and develop slowly (Weber, 1997), it is by the nature of this study essential to
include institutional barriers, since it is the purpose to reflect on policy measures that may
lead to dismantling of institutional barriers.
It is important to note that there are a number of barriers which fall under institutional
barriers. Below is a list of the different sub-barriers which will be discussed in the remainder
of the chapter.
• Environmental policy (lack thereof)
• Enforcement of regulations (weak enforcement, no repercussions, etc.)
• Incentives (regulations are not demanding enough, do not provide the right
environment to go beyond compliance)
• Regulatory schemes for the prescription and use of technical solutions, such as Best
Available Technology (BAT) schemes
• Anticipated legislation
• Access and availability of grants and subsidies
Institutional barriers represent, in themselves, a paradox. On the one hand, the literature on
environmental policy recognises that one of the major drivers of environmentally
responsible behaviour (and therefore also for many resource efficiency measures) in
industry is the intervention of public policy in the form of environmental policy and
enforcement of regulations, for instance about waste disposal, extended producer
responsibility, the end-of-waste regulations, regulations about cross-border transport of
waste, emission control, the guiding use of permits, etc. (Ashford, 1993); (Montalvo, 2008).
If there are no sanctions for operating in a traditional way, change might only come about
through legislation.
On the other hand, public policies (and even the same public policies that form a driver for
the onset of improving resource efficiency) may hamper further improvement of resource
9
Institutions are defined by North as “the rules of the game in a society or, more formally, are the humanly
devised constraints that shape human interaction.” (North, 1990)
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efficiency measures. When regulations are not demanding enough, the level of company
investments does not increase; emissions and discharge rate standards (or penalties)
provide little or no incentive to go beyond the required standard reduction (Montalvo,
2008) and may even form a stimulus to implement state-of-the-art technology and an
inhibition for product development (Ashford, 1993). In other words, a company will
optimise its efforts according to the imposed regulations. From a company perspective, such
relaxed measures do not self-evidently pose a barrier, though from a societal point of view
this may be interpreted as a barrier. Only for those companies which may reach a
competitive advantage through innovative processes or technologies, ‘mild’ policies may
see this as a barrier for investment in these technologies.
Furthermore, existing regulatory schemes are designed to promote the optimum available
technology (Best Available technology or “BAT”) which is by nature ‘yesterday’s’ technology
and unable to induce process embedded innovation (Montalvo, 2008); (Reijnders, 2003).
Thus, the impact of regulation could be negative from a societal point of view. Again, from
the point of view of an individual company this can be seen as a barrier to companies which
have developed technologies or activities that would provide a competitive advantage in
case regulations were stricter. A consequence of the use of BAT can be seen in the case of
recycling and waste disposal companies: since most company activities in waste recycling
are partially or completely financed by public funds (recycling often costs more than the
market price of the recycled products), any innovation through a best-available-technology
scheme that would save operational costs, would start a debate on reducing the public
funding of the activity. This would strongly put a brake on resource efficiency innovations in
recycling companies
10
Companies are very keen to anticipate the developments in environmental legislation and
EU policy. The waste management approaches of the companies are production oriented,
technology driven, and focused on their own business and their own waste and by-products.
Upcoming legislation may, therefore, lead to in-company activities, where cooperation
between companies might eventually lead to more effective results. The internal activities
may lead to preventing looking for ways of looking for cross-sector cooperation (Pajunen,
2012).
It is generally acknowledged that the lack of predictability in delivering strong signals to
push behaviour in a particular direction, is among the main flaws of public policy and
constitutes a main barrier (Pajunen, 2012). Again a paradox is observed here: “although
excessive regulatory uncertainty may cause industry inaction, too much certainty will
stimulate only minimum compliance technology” (Ashford, 1993). Uncertainty in regulatory
signals or agency position can also deter innovation. Faced with uncertainties which create
risks that the technology developed will not ultimately be needed, or will be unnecessarily
costly, potentially innovative industries will simply adopt low-risk existing technology.
An important measure to improve resource efficiency is the potential use of waste for
industrial purposes (industrial symbiosis). An important factor determining the success of
10
Discussed in an interview with Ministry of Infrastructure and Environment, The Netherlands, 2014.
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such industrial symbiosis is the concept of the End-Of-Waste (EOW) status of an industrial
waste flow. The introduction of criteria to define EOW status will define when waste is
waste and when it is a by-product. Originally set up to prevent adverse use and inadequate
disposal of waste, it may now hamper innovation and investment in the area of industrial
symbiosis. Since details may be decided on a national level, the EOW effect may differ
among nations and potentially introduce a non-level playing field within the EU (Pajunen,
2012).
The case of the use of by-products of the forest industry (solid residues, ashes) as a fertilizer
serves as an example (Pajunen, 2012). Though ecologically preferable as a fertilizer or earth
construction agent, the use was limited by the strict legislation concerning residue limits
and the high cost of obtaining a CE labelling. Of course, the low economic potential
compared to the value of the main products did not help either. If the use of waste from
other companies in industrial activities requires environmental permits and may lead to
potential court proceedings over the waste or by-product question, this may soon be felt to
be too time-consuming and costly.
3.2. Empirical examples of institutional barriers
From both the CIS and Eurobarometer data we can see that one of the most important
institutional barriers for companies engaged in innovation activities in the uptake of
resource efficiency was the availability of subsidies.
For each of the potential barriers related to financing and funds, a majority of respondents
of the Eurobarometer survey thought that it was a very or somewhat serious barrier to an
accelerated development and uptake of eco-innovation. For example, insufficient access to
existing subsidies and fiscal incentives was considered a barrier by 6 in 10 respondents (30%
“very serious” and 30% “somewhat serious” responses) (European Commission, 2011).
Looking at the proportions of respondents that described each eco-innovation driver as
being very important, there were mostly small differences between the small and medium-
sized companies. There were, however, a few exceptions; for example, managers of small
companies were more likely than their counterparts in medium-sized companies to say that
access to existing subsidies and fiscal incentives was a very important driver of eco-
innovations in their company (41% vs. 36%) (European Commission, 2011).
Respondents in companies with an annual turnover of less than €2 million were also more
likely to say that good business partners and access to existing subsidies and fiscal incentives
were very important drivers of eco-innovation in their company; securing one’s market
share and expected future regulations and new standards were more frequently said to be
very important to accelerated eco-innovation uptake in companies with an annual turnover
of more than €50 million.
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Furthermore, the majority of respondents indicate that existing regulations and structures
do not provide incentives to eco-innovate (Eurobarometer results see Figure 6).
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While access to subsidies and incentives to eco-innovate are viewed as top barriers,
regulations also play an important role. Results from the 2008 CIS show that both existing
and expected future regulations are the top motivators to introduce an environmental
innovation with 27% and 20% of overall responses, respectively (EuroStat, 2008). This
surpasses the motivation from companies due to their access to existing subsidies as this
accounted for only 8% of overall responses (EuroStat, 2008). The influence of regulations
was seen across four sectors accounting for nearly half of the responses, Figure 7, and over
half when including the access to subsidies and grants. This is likely due to the nature of the
Eurobarometer and the CIS demographic. The Eurobarometer focuses more on SMEs within
Europe, which would suggest that for smaller companies financing from the government
plays a large role in their eco-innovation activities. While the CIS looks at companies of all
sizes across Europe, with a larger response group from larger companies. A Eurobarometer
report focusing on SME’s confirms this assumption, “SMEs are most likely to say that grants
and subsidies would help make their company more resource efficient (34%)”
(Eurobarometer, 2012).
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In addition to the CIS and Eurobarometer data, in the R4R project (Suurs, et al., 2013) gave
insight in the institutional barriers to achieve improved resource efficiency that the 6
chemical regions experienced. These barriers were reported as threats, as identified by
these stakeholders, towards increased resource efficiency. For almost every interviewee,
policies and regulations are seen as an important fact in order to preserve environment and
health, but also as a potential hampering factor to the implementation of innovation and
change (most often when it comes to waste regulations).
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The following barriers were observed by the stakeholders:
- Waste regulation:
As soon as a material stream is regarded as waste, the possibilities to use
and process them have become problematic for all companies other than
waste processing companies or recycling companies. Many waste streams are
obliged to be processed by expensive machinery and are regulated by
extensive risk management processes. Many firms, especially SMEs, don’t
have the financial and human resources to comply with these procedural
obligations.
Regulations are only poorly adapted to the needs of resource efficient
technologies. Moreover, the regulatory system differs across regional
borders, even for EU regulations (which are translated differently by each
member state). This has partly to do with the vast number of chemical
substances involved, which poses a huge challenge to regulators in keeping
up with new technological possibilities. It was felt that also on a local level,
complex and long bureaucracy hampers useful use of waste materials. As an
example, it was argued that (in Aragon, Spain) any company that wants to
use, even a small quantity of waste in its process must also be registered and
approved as authorized waste agent. The bureaucracy of this step is almost
as complex as being granted permission for landfill or other kind of industrial
site for final treatment of waste. This is even worse when local communities
set up a ‘positive’ list of waste management operations, requiring extensive
evidence to be admitted. The procedure to change the zoning in order to
treat waste materials or to get an acceptation on the zoning are also seen as
too lengthy
The same counts for transport of waste material; especially SMEs face a hard
time coping with the regulations of waste transportation.
Adaptation of waste legislation is seen as too rigid and slow. Policy measures
keep lagging behind techno-economic developments due to a lack of
expertise with the authorities.
More generally it can be stated that the consequence of a successful
execution of waste regulation in the past is now often a barrier for
innovation. Waste is indeed seen is treated as waste and not as a source of
potentially valuable raw materials.
- Consistency of regulations: Since large investments are needed there is a need for a
stable legislation that will last for at least the investment period, otherwise the risks
are too high and companies might not invest.
A recent study into the (economic) opportunities for a circular economy in The Netherlands
included a discussion on barriers towards implementation of circular economic activities,
based on 15 interviews and 2 workshops (Bastein, et al., 2013). Since the selected topics in
this study were the potential of circular activities with metal-containing product streams
(including WEEE) and with bio-based waste streams, the observed barriers relate to those
areas:
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- It takes too long to implement new rules and regulations. It often takes less time to
bring products to market then it does to draft new rules and regulations. As a result,
licencing procedures can take a long time or are accompanied by strict requirements,
and this has a negative impact on profitability
- Risk-averse behaviour by local governments hampers innovation: the observed slow
speed is partly related to an attitude of risk aversion with authorities which creates
business continuity problems particularly for small, innovative companies. This
behaviour also extends to ‘space to experiment’ thus impeding the onset of small-
scale learning curves.
- Government inconsistency with regard to potentially encouraging measures.
- The thinking behind waste rules and regulations is that ‘we have to get rid of waste’
rather than regarding it as a raw material. It would be interesting to view the waste
rules and regulations, but also other regulations, from the perspective of a circular
economy to see whether they provide insights into when they act as incentives and
when they create obstacles. For example, the rules and regulations for plastics vary
for each type of plastic, complicating the recycling of plastics from electrical and
electronic appliances.
- (Dutch) Subsidy schemes only encourage purchases of environmentally friendly and
energy-efficient appliances. It would be useful to explore the potential of these and
other subsidy schemes to encourage circular behaviour, such as the shared use of
appliances and other ways to reduce the use of raw materials.
Several studies into barriers for (innovative) companies in the housing sector (Klein
Woolthuis, 2010), (Brouwer J, 2013), (Klein Woolthuis, et al., 2012) provide insight in the
institutional barriers experienced by entrepreneurs in this sector. These barriers are:
- The building industry is the most regulated industry in Europe (together with
aerospace), related to the obvious safety and thus liability aspects of housing, which
hampers the diffusion of innovations
- Short term and unreliable governmental policy frustrates long term investment; this
situation is projected on The Netherlands which have a track record for changing
policies in the energy sector, compared unfavourably to the situation in Scandinavia
or Germany;
- Formal tendering processes and subsidies are too prescriptive since tendering
processes are mostly done on basis of a detailed building plan, for which applicants
can make an offer. These plans give barely any room for innovative solutions that are
not prescribed. This greatly limits the possibilities for implementing innovative
energy (and thus resource) efficiency measures .
Another type of institutional barrier concerns the cultural contribution of the national
government towards change (Klein Woolthuis, 2010). Respondents state that the
government does not adequately build a culture, norms, values, or a long-term vision that
supports sustainability in general, and in the construction industry in specific: ‘it does not
clearly indicate a direction for progress of society’, ‘the government does not stick to the
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choices they make’. This short-term behaviour, coupled with major political changes every 4
years, is hurting the national reliability and stability’ ‘the government should worry about
vision and the long-term, then I can start worrying about my short-term survival’.
This observation is supported by Rademaekers, et. al. (2011): according to industry
representatives, the current state of affairs in the EU policy development arena is perceived
as being uncoordinated and is giving contradicting signals to industries. These signals create
a high level of uncertainty to industries and may inhibit long term vision and solid
investment plans for the development of industries.
3.3. Discussion and summary of findings
It is generally acknowledged that policy interventions have been the main driving force for
many eco-innovations and technologies that have improved resource efficiency (Ekins,
2010; Montalvo 2003; Kemp 1997). Nevertheless, a common institutional barrier is the
unpredictability of the policy landscape. Unpredictability does not lead to enthusiastic
investors. Therefore, any sustainability agendas, agreed between policy makers and other
stakeholders must have a long term perspective and designed in such a way they can outlive
sudden changes in the policy landscape. Agreement on a common long term goal should be
the basis.
In this light it is a challenge to find solutions for updates of the legislation on waste. Often
this legislation has its roots in unwanted events with respect to inadequate waste
management. It is the steady nature of such legislation that has stimulated great
improvements in the way we deal with our waste streams. Any change of waste legislation
should therefore be planned carefully, assessing whether any positive effect on waste
management outweighs the potential unwanted side effects through misuse of a change of
rules.
Related to this is the common observation of the low reaction speed of authorities and their
risk adverse behaviour. From a government’s perspective being cautious is understandable,
but in an environment of experimenting, providing frontrunners with opportunities and
swiftly changing market environments, a balance between responsible behaviour and
courage is asked from authorities.
A final observation relates to the stringency of legislation. The literature studied here makes
it clear that a fine line exists between asking too much and asking too little. When asking
too much, and imposing overly strict rules on resource efficient actions, there will be no
support, and regulations are bound to become ‘paper tigers’. If rules are too relaxed there
will be no incentive to innovate, but rather companies will merely to do what is absolutely
necessary. An intense debate between authorities, academia and entrepreneurial
frontrunners seems required here to pose challenging, though feasible, goals for resource
efficient innovations.
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Finally, institutional barriers may also been seen in tax regimes which have led to the
current economy, and its state of resource efficiency. The literature and empirical evidence
discussed here does not question the current status of taxation. The clearest example may
come from the taxation of landfill. From a company viewpoint this is understandable. Tax
regime changes –if feasible at all- represent an extremely lengthy process, beyond the
horizon of most companies. Still, taxation changes on labour or on the use of secondary
materials may change the landscape in such a way that new resource efficient pathways will
evolve. It will be one of the purposes of POLFREE to explore those shifts.
An example of resource innovation through impending tax laws from NISP (lack of
regulations providing incentives) is seen in Hungary. Hungary had been considering
implementing a landfill tax for the last few years, in response to the EU Directive. In
response, International Synergies Ltd assisted IFKA to establish a NISP programme in 2010
focused on landfill diversion. At the time, there was only a gate fee to pay to dispose to
landfill, and interest in the programme was less likely than anticipated. With the landfill
tax’s impending implementation, companies that were not interested in NISP when it
started are now asking to join, because their previous tax-free disposal route (landfill) is now
increasing in cost. For example, NISP contacted a company generating foundry sand in its
early days to replicate existing synergies with that resource, thus diverting it from landfill.
Although not interested when there was no landfill tax, the same company has since
contacted NISP in Hungary to ask for assistance to avoid the impending tax.
The following chapter presents an analysis of market barriers to the implementation of
resource efficiency measures.
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4. Market barriers
This chapter discusses the barriers experienced by companies related to failures in the
market. In the first section, we discuss the main findings from current literature. In the
second section, we discuss empirical findings based on CIS and Eurobarometer survey data,
case studies and some additional studies on resource efficiency. In the third section we
summarize conclusions and findings.
4.1. Overview of market barriers
Market barriers are another form of external influences acting upon businesses. These
barriers have been identified from several perspectives and act differently upon businesses.
This section will explore the following market sub-barriers identified through various
studies.
• Market pull (demand from the market)
• Consumer behaviour (willingness to pay, consumer sensitivity)
• Lobbying parties (may block developments which do not match their interests)
• Market structure (size, prices, etc.)
• Split incentives (hinders one actor but benefits another)
Market pull offers some potential benefits regarding resource efficiency innovations as they
can be strengthened by increased productivity and higher cost reductions, as well as
improved product quality (Rennings & Rammer, 2009). However, when such benefits are
not obtained the market acts as a barrier. In this analysis the consumer behaviour is, from
the perspective of a company, in itself also an important factor in creating drivers and/or
barriers. It is the willingness of consumers to embrace new concepts, to potentially pay an
on-cost for a resource-efficient technology that will create the potential for any resource
efficient innovation.
Obstacles resulting from the anticipated attitudes of citizens and consumers include
(Tertium, 2013):
- The extra effort required to contribute to a resource efficient technology should not
be too great or cost too much.
- For most consumers, the price of a product is a more important consideration than
whether it contains sustainable raw materials.
- Consumer sensitivity to the latest fashions could be at odds with circular consumer
behaviour. The rapid succession of new electronic appliances is a good example,
where the sensitivity to fashion is based on continually improved functionality rather
than on seasonal influences, as is the case with clothing.
Not surprisingly, therefore, Rademaekers et al. (Rademaekers, et al., 2011) conclude that
“there is an observed lack of market demand for more resource efficient products”.
Lobbying forces in society may also add to the market barriers (Bastein, et al., 2013). For
various parties with vested interests, the economic returns on their investments, and
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perhaps even their existence, may depend on the introduction of a resource efficiency
measure (e.g. repairing goods instead of re-selling them as a concept in the circular
economy). As an example, incineration plants have substantial economic value to defend
because their core activities depend on the availability of high-caloric wastes. These parties
do not necessarily stand to benefit from a transition to a resource efficient economy, and so
cannot be expected to give their immediate support.
In case the market acts as a barrier the likely fast uptake by the market is hampered as well,
introducing a related market barrier (Klein Woolthuis, 2010). A characteristic of the
introduction of new products and processes is that the rate of adoption can be very slow in
the beginning. As a result economics of scale cannot be achieved and costs remain high
creating a vicious circle. Although the development and commercialisation of any new
technology already has its challenges, this may be particularly true in the context of
environmental innovation due to a more uncertain market demand (Horbach, et al., 2012) ;
(Hemel & Cramer, 2002).
Furthermore, the market structure may cause significant entry barriers for new processes
and products: in case the market is dominated by a limited amount of actors, they can
effectively determine (or influence) the quantity and prices of the goods available in that
market.
A common market barrier in the area of resource efficiency is caused by the phenomenon of
split incentives: resource efficient innovation is hindered if actor A invests in, for example,
more energy efficient buildings and actor B benefits from this investment without A having
the possibility to earn back its investment. Several forms of split incentives may be caused
by :
- The value chain: investments and benefits lie with different actors in the value chain,
e.g., energy efficient building where the end-user benefits from low energy bills
without sharing the investment
- Time: benefits and/or costs resulting from an investment are delayed in time, e.g.,
the costs of the demolition of a building is not carried by the builder
- Place: the costs and benefits are split geographically, e.g., environmentally
hazardous ships are sailed to third world countries.
Market barriers take many forms and are all potentially very restrictive to the development
of eco-innovations for companies. However, it is also critical to understand how businesses
are experiencing these barriers today. The following section explores empirical example of
market barriers as experienced by businesses.
4.2. Empirical examples of market barriers
One of the largest barriers to extending eco-innovation for companies comes directly from
the market. In a recent poll amongst managers, two-thirds said that the uncertain demand
from the market was a barrier to a faster uptake of eco-innovation in their company (34%
“very serious” and 33% “somewhat serious” responses) (European Commission, 2011).
Figure 8 provides a country breakdown of these responses. What is interesting to note is
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that while most countries had over 50% of their managers respond that this was in some
way serious, a drastic majority of respondents in Hungary, Cyprus, Malta and Spain said that
an uncertain demand from the market was a very serious barrier (55%-62%). While within
these countries this is a very serious barrier, the proportions of “not at all serious”
responses were highest in Estonia (22%), Sweden (24%) and Latvia (29%); but remained
below 10% in about half of the countries surveyed (European Commission, 2011).
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While uncertain demand from the market is seen as a serious barrier across most all EU
surveyed countries, the market demand is indeed not perceived as a dominant motivator
for companies upon introducing an environmental innovation (EuroStat, 2008). External
pressures are seen as much stronger motivators for environmental innovations. Figure 9
summarizes industry results for across information, transportation, industry, and
manufacturing industries regarding motivation to introduce an environmental innovation.
Even when looking across these industries, the current or expected consumer demand for
environmental innovations remains in the lower half of companies’ motivators ranking 4
th
out of 5 in 3 of the 4 sectors and ranking 4
th
overall (EuroStat, 2008). What primarily
motivates businesses has more to do with existing regulations or their own personal
commitment to environmental innovations.
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Research based on 16 interviews with innovative entrepreneurs from the construction and
housing sector (Klein Woolthuis, 2010) reveals very complex market barriers for innovations
related to the sector specific aspect of having, by nature, many parties that need to
collectively embrace resource efficient innovations. Projects in the built environment sector
require inputs and effort from many stakeholders: from governments, businesses, owners,
developers, suppliers etc., which makes cooperation and coordination crucial. The
interactions between these actors, based on historic relations, are considered as rigid and
fixed. The whole supply chain, up to the contacts with the customers, is dominated by the
large players. This creates strong network failures based and ‘lock-in’ in the sense that new
knowledge, know-how and working routines will be hard to establish with these (often
rather traditional, and not very innovative) players. Obviously this ‘market’ barrier is closely
related to behavioural and organisational barriers of these network partners.
In the current state of the art in the construction industry, demand is still very much
dependent upon price. In many sectors of the construction industry, tendering procedures
decide who will get the job. The result of these purchasing processes is that temporary
coalitions between price fighters prevail over longer term strategic partnerships that strive
for quality and innovation. While this is largely the case in the construction industry, other
industries such as the chemical industry are likely to face different market barriers.
The extensive self-assessment of six chemical regions in Europe (reported in the framework
of the project Regions for Resources (Suurs, et al., 2013) reveals the market barriers
experienced by these actors:
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- Lack of fiscal stimuli and economic incentives: One of the negative common points
among interviewees is the lack of support by the Government to industry, as well as
to (green) energy, in an increasingly tertiary based economy, which hampers the
market development. (Aragon)
- There is no established market for resource efficient manufactured products
- Waste regulation hampers the creation of industrial symbiosis by impeding an easy
use of waste
- B2B markets have difficulties in seeing a specific market for green products with a
premium price. Overall, the existing markets for green products are very small and
not very stable so the need for a first larger market is critical
- To initiate a first market, a public procurement would be a solution, however the
rules are very rigid
All regions consider the absence of a near-term market for resource efficient technologies
as an important barrier. And there is, as yet, limited stimulation via policies and licenses (see
the section on policies) to compensate for this.
4.3. Discussion and summary of findings
Innovations motivated by market pull will have much more commercial potential than
innovations motivated by regulatory push/pull. However, as the results have shown, the
market pull for resource efficient technologies is weak. This is caused by a combination of a
market which is not prepared to pay a premium for ‘green’ products, and by an uncertain
market demand for environmental innovations. The latter can more obviously be influenced
by environmental regulations (Jakobsen & Clausen, 2013). Additional market barriers exist
when complete networks of actors need to cooperate in the direction of resource efficient
process or products, especially when the costs at the time of purchase appear higher than
the conventional product. In that sense, market barriers are strongly linked to behavioural
barriers within both companies and large (government) customers.
The following chapter presents an analysis of organisational barriers to the implementation
of resource efficiency measures.
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5. Organisational barriers
This chapter discusses the barriers experienced by companies related to organisational
conditions, such as R&D budgets, expertise within the organisation, and company culture
and mind-set. In the first section, we discuss the main findings from current literature. In the
second section, we discuss empirical findings based on CIS and Eurobarometer survey data,
case studies and some additional studies on resource efficiency. In the third section we
summarize conclusions and findings.
5.1. Overview of organisational barriers
Organisational barriers are focused on internal factors which put pressure on businesses
regarding resource efficient innovation. Through various studies, an overview of the most
prominent and influential organisational barriers has been identified. This section will
explore the following organisational sub-barriers identified through various studies (A
complete table summarizing the organisational barriers mentioned in this section can be
found in Annex 2).
• Barriers to implementation of technology (R&D budgets, research infrastructure,
networking with other firms in supply chain)
• Lack of information (fundamental knowledge gaps, insufficient information)
• Company culture/fit with organisation (outside core business area)
• Supply chain issues (reliance on suppliers, unavailable alternatives, costs)
• Lack of information (related to processes, techniques, technology, etc.)
• Financial barriers (unavailability of funds, negative business case)
• Labour force-related (insufficient capabilities, training)
• Supplier-related (lack of supplier support)
• Managerial (lack of education and expertise by managers)
• Network and value chains issues (e.g. occurrence of split incentives)
The organisational barriers are a culmination of multiple company elements. One such
element consists of barriers to implementation of technology, such as supply chain
problems and financial constraints of organisations (Rennings & Rammer, 2009); (Pajunen,
2012); (Ashford, 1993). Examples are problems in finding the right subcontractors or
suppliers for resource efficient inputs in either the production process or the manufacturing
process of clean technologies.
A second element is internal organisational issues which play a role, such as the lack of R&D
budget, information on alternative inputs, company culture or the lack of long-term strategy
(Rennings & Rammer, 2009); (Pajunen, 2012); (Ashford, 1993); (Bleischwitz, 2012).
Thirdly, labour-force issues play a role, both on the level of finding the right managers, as
well as the skills of existing employees and supervisors which presumably need to adapt
when introducing new technologies. High sunk costs in capital equipment and associated
training and management can act as a significant deterrent to new investment, particularly
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when the innovation is radical and risks are higher (Ashford, 1993). Of course this
organisational barrier is closely linked to internal behaviour: if organisational changes are
required, it is the conviction of management that can provide the means to do so.
Fourthly, the costs and benefits of innovations at the chain level are often unevenly
distributed across the links in the chain demonstrating organisational issues on an inter-
company level (Ellen McArthur Foundation, 2013); (Willems & Weterings, 2011). This may
happen if a business designs its products differently in order to reduce waste or it collects
and reprocesses waste materials so that they have a secondary use. While the entire chain –
and society as a whole – saves costs through these kinds of initiatives, the initiator faces
additional costs. In such cases, it is extremely difficult for a business to make a viable
business case if agreements have not been made within the chain to spread the costs.
Naturally, in order to solve such issues a willingness to overcome this hurdle needs to be in
place first, linking this issue with a potential behavioural issue (see Behavioural barriers).
When it comes to organisational barriers, it is important is to distinguish large from small
firms, since they experience organisational barriers differently. Large firms are typically
better equipped for continuous innovation since they have the financial and human
resources to internalise research and development in the production process. Small
entrepreneurial firms, however, are more likely to reform or revolutionise the pattern of
production by exploiting an invention or, more generally, an untried technological possibility
for producing a new commodity or producing an old one in a new way, by opening up a new
source of supply of materials or a new outlet for products, by reorganising an industry and
so on (Schumpeter, 1939). However, despite being more flexible to address niche markets,
these entrepreneurs typically lack the capacity to come with radically new products on a
continuous base. Furthermore, small firms often lack a dedicated R&D department or an
alliance function, which large firms typically have in place. They do not have the time to
build networks and find partners, nor do they occupy positions of power in the chain to
‘command’ certain changes. Long-standing market conditions can, therefore, cause
economically promising initiatives to run aground.
Smaller companies that are less aware of the potential of resource efficiency measures are
more like to experience barriers due to a lack of information and knowledge of alternative
technologies, materials or practices. In particular many smaller companies do not seem to
have a clear view of the benefits that resource efficiency can provide to them and often
view resources as fixed inputs over which they perceive to have limited control. ( AMEC
Environment & Infrastructure; Bio Intelligence Service, 2013).
5.2. Empirical examples of organisational barriers
Among the organisational barriers, financial barriers constitute a large proportion of barriers
related to eco-innovation. Survey results, highlighted in Figure 10, from managers across
Europe found that “for each of the potential barriers related to financing and funds, a
majority of respondents thought that it was a very or somewhat serious barrier to an
accelerated development and uptake of eco-innovation” (European Commission, 2011).
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Looking at the overall list of barriers featured below, it is striking to see that 2 of the top 3
ranked barriers are related to financial barriers within firms (risky investments or no access
to funding).
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When looking at innovation cooperation during 2006-2008, the greatest source of
cooperation for EU companies was with their suppliers (EuroStat, 2008). However, these
results highlight the companies which did in fact innovate. Companies which were not able
to innovate may largely have been blocked due to a lack of access to the right suppliers as
this is the largest source of cooperation for those who were able to achieve innovations
during this time period. If anything these results highlight the importance suppliers play in
many eco-related innovations. Further, when looking at the difficulties encountered by
SME’s when trying to enforce resource efficient actions, 24% reported encountering
difficulties with the cost of such environmental actions as seen in (Eurobarometer, 2012).
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As discussed in paragraph 4.2, the evidence from the research work in the construction
sector shows that market and organisational barriers are very closely linked (Klein
Woolthuis, 2010): creating a network of organisations that have a common understanding
and motivation proved to pose a significant barrier. It is the creation of networks that more
often than not is instrumental in achieving business model innovations that may lead to
improved resource efficiency. If these alliances are not constructed, no innovative steps can
be expected.
5.3. Discussion and summary of findings
At first sight the organisational barriers discussed above are closely linked to behavioural
barriers within a company. Since, in case company executives and the work force show a
motivation to engage in resource efficient innovations, organisational changes are likely to
be made. Hiring or training an appropriately trained work force will then be the
consequence. However, there will be organisational barriers that may not be overcome,
even with motivated staff and a receptive market. These barriers relate to the required
network for an innovation and the to the size of companies.
Every company requires a value chain network in order to implement resource efficient
innovations. In the construction sector these may be complex, having vested interests and
robust traditions. Engaging all players in such a value chain poses a great barrier. But even a
relatively simple case will require financial organisations that may (especially in the current
times) introduce barriers in the light of the potential uncertainty of a resource efficient
innovation.
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The size of a company determines to a certain extent the potential to absorb all changes
required for a successful innovation, again despite highly motivated staff.
The following chapter presents an analysis of behavioural barriers to the implementation of
resource efficiency measures.
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6. Behavioural barriers
This chapter discusses the barriers experienced by companies related to behavioural
conditions, such as management and employee commitment, social values, and cultural
norms. In the first section, we discuss the main findings from current literature. In the
second section, we discuss empirical findings based on CIS and Eurobarometer survey data,
case studies and some additional studies on resource efficiency. In the third section we
summarize conclusions and findings.
6.1. Overview of behavioural barriers
Behavioural barriers consist of both internal as well as external factors. They focus on the
attitudes and beliefs of individuals. This may be individuals within the company itself or
external parties, such as consumers. This section will explore the following behavioural sub-
barriers identified through various studies (A complete table summarizing the behavioural
barriers mentioned in this section can be found in Annex 2).
• Management and employee attitude towards innovation and change (lack of top
management commitment, reluctance to change within the company, focus on own
disciplines and own company)
• Attitudes and social values (personality, ethos, and position, beliefs)
Sustainable entrepreneurship lies mainly in the personality, ethos and position of high-
ranking official and CEOs (Montalvo, 2008) and references therein. Such entrepreneurship is
believed to arise from an awareness of the salient environmental issues and supported by
the vision that cleaner technologies have the potential to abate risk and environmental
impacts. In the light of both market and regulatory uncertainties it is the personal conviction
of management (and other staff) that will be the essential starting point and inspiration for
steps towards resource efficiency measures.
An excellent example is provided by the Dutch Sustainable Growth Coalition, in which the
efforts to achieve sustainable growth beyond shear market incentives is supported by
leading CEOs in The Netherlands (Unilever, Royal DSM, HEINEKEN, AkzoNobel, Royal Philips
Electronics, KLM Royal Dutch Airlines, FrieslandCampina, Shell, Confederation of Dutch
Industry and Employers VNO-NCW, Ernst & Young Belgium and The Netherlands): “Last but
not least, board level executives are taking the lead in embedding sustainability in their
businesses”, as it says in their manifesto Towards Sustainable Growth Business Models.
Ashford (1993), mentions besides the lack of top management commitment, two other
main behavioural barriers for a slow uptake of resource efficient innovation. First, the lack
of cross-disciplinary cooperation in engineering departments (e.g., production engineers do
not cooperate with environmental engineers in charge of the treatment and disposal of
hazardous substances). Second, the general reluctance to change that exists in many
companies (Ashford, 1993).
This last point is confirmed by study on the construction industry, many entrepreneurs are
of the opinion that it is not yet ‘normal’ to use sustainable innovations in constructions and
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houses (Klein Woolthuis, 2010). One phrases it as ‘people first need to grasp the concept of
sustainability in their mind’. The required change not only includes the products and
processes, but the whole value chain. However, this change is difficult. Some entrepreneurs
state that actors around them fear innovation, they rather stay within the old, safe routine
(Klein Woolthuis, 2010).
6.2. Empirical examples of behavioural barriers
Businesses often face behavioural barriers which are imbedded in the companies’ strategy
and mission. When there is no corporate strategy focusing on resource efficiency this poses
a great barrier. Recent survey of businesses shows that 17 of 27 EU countries found it a very
serious or somewhat serious barrier that their companies do not have a priority in their
innovation strategy to reduce energy (European Commission, 2011). Figure 12 summarizes
the results per country, highlighting some interesting country differences in this regard. In
countries like Cyprus, Ireland, Estonia, and Latvia over 70% of respondents found this
behavioural barrier to be very or somewhat serious compared to only 25% in Sweden.
Interesting to note, 95.8% of Cyprus’s energy use comes from oil, a non-renewable energy
source, while the EU average is only 36.5% (European Environmental Agency, 2011). This
overwhelming difference highlights a lack of interest in other energy sources which is
difficult to so drastically reduce without a mentality shift nation-wide.
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Behavioural barriers may also be imbedded in the company’s core values and brand image.
A 2013 survey found that 22% of SMEs not offering green products or services reported not
offering green products or services because it is not a core aspect or consistent with their
company image (E
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2012). Closely related to this is the company’s core values.
The brand image and core values often are in line with one another and perpetuate an
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overall company feel and image inside and out. This is consistent with the results that 20%
of those same SMEs not offering green products or services do so because it does not line
up or is not important for their company values (E
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In addition, company actions reflect this lack of focus or interest in resource efficient
behaviour or innovation. A 2008 survey across countries found that overall 69% of
companies had no procedures in place to regularly identify and reduce environmental
impacts (CIS 2008). While the overall average was 69%, Information and Communication as
well as Transportation and Storage have a strikingly higher percentage of companies with no
procedures in place as shown in Figure 14. Information and Communication has an
overwhelming 85% of respondents which have no procedures in place, and Transportation
and Storage is not far behind with 71%, highlighting a large disparity in the industry’s focus
compared to the overall market average, representing an even larger behavioural barrier.
Such results suggest large organisational barriers, but –as stated in chapter 5- such
organisational barriers can only be overcome once the behaviour of company staff and
management has taken the decision to take resource efficiency and environmental impact
seriously.
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CIS
Another behavioural barrier hampers innovative network formation: from a Dutch survey it
was concluded that entrepreneurs tend to focus on themselves, and that trade associations
focus on traditional chains ( Bordes, O; Feenstra, L; Roelofs, E, 2001). Resource efficiency
measures characteristically involve players from multiple companies and sectors. Besides
the phenomenon of ‘split incentives’, creating a common ground for discovering the
potential for resource efficiency measures requires that these players meet and trust each
other. Examples of such chains can be found in the collective sustainable development of
industrial estates and closed-loop recycling projects in the construction sector. In these
examples resource efficiency improvements are hampered by this behaviour. Likewise,
chain innovations are hard to introduce in traditional chains, in which traditional companies
have an important say in the sectorial organisations. It is not self-evident that trade
associations will offer their support during the development of a cross-cutting resource
efficiency measures, such as the circular economy, since they often focus on traditional
chains and much less, if at all, on cross-sector cooperation and international cooperation.
This barrier has a strong cultural element, which may differ from country to country. In a
survey among chemical regions in Europe, the region of Aragon (Spain) explicitly stated that
“an important threat that hampers multi sector/company experimentation and
collaboration is the strong cultural barrier for cooperation and the mutual mistrust.” (Suurs,
et al., 2013).
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Lastly, there is also risk-averse behaviour by local governments regarding innovation. In a
study by Willems and Weterings (2011), interviewees were under the impression that the
government is responding insufficiently to business and citizen initiatives (Willems &
Weterings, 2011). The long wait for licences for technologies unfamiliar to new or low-level
local government agencies is a sign of risk aversion. Co-digestion plants are an example. Risk
aversion creates business continuity problems particularly for small innovative companies.
6.3. Discussion and summary of findings
Without jumping to conclusions, overcoming behavioural barriers may represent the single
most important (internal) activity for a company to engage in technological changes, adapt
its organisational structure, create new networks and actively influence the market. Even
externally, such behavioural convictions can represent a strong force as is shown by the very
loud and visible performances of CEOs of leading companies in the Dutch Sustainable
Growth Coalition. The impact of such coalitions on policy makers and thus on institutional
barriers can hardly be overestimated.
The business challenges related to resource efficiency impose a managerial mind-set that
should be creative, risk-taking, visionary, and entrepreneurial in nature in order to match
the turbulent environmental discontinuities. Senior management must have the goal of
aligning its management team with those individuals whose goals, mentality, leadership,
problem solving skills, and knowledge create the best ‘managerial competencies fit’ to
match the firm’s environmental conditions. And it should do so consistently, although other
topics will deserve attention on the management’s agenda as well.
The following chapter presents an analysis of technological barriers to the implementation
of resource efficiency measures.
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7. Technological barriers
This chapter discusses the barriers experienced by companies related to technological
conditions, such as available technology in-house and in the market as well as feasibility of
technology. In the first section, we discuss the main findings from current literature. In the
second section, we discuss empirical findings based on CIS and Eurobarometer survey data,
case studies and some additional studies on resource efficiency. In the third section we
summarize conclusions and findings.
7.1. Overview of technological barriers
Technological barriers seem the most straightforward of the barriers: superficially the
barrier seems to be whether a particular technology can be proven to be technically and
economically feasible. Such a picture however underestimates the complex nature of the
steps that need to be taken to mature technology until it is ripe for market; technological
barriers are strongly linked to behavioural, organisational and financial aspects (and
barriers). The following technical sub-barriers will be discussed in this section as well as the
next.
• Strong links with other barriers
• Unproven technology (risk, uncertainty of investment)
• Lacking available technology choices
Perhaps the most comprehensive way of assessing technological barriers is the
methodology of Technology Readiness Level (TRL). Technology readiness levels (TRLs) are
measures used to assess the maturity of evolving technologies and were developed by NASA
in the 80’s. Since then these measures are widely adopted. A description of the Technology
Readiness Levels is given in section 7.3.
Technological barriers (potentially evaluated through a Technology Readiness Assessment)
lead to important barriers for radical innovations, since a high risk is involved in committing
capital to unproven technology, and the intertwinement of the current production system
and risks to that sunk investment is at stake (Moors, et al., 2005) (Pajunen, 2012).
When looking at the more general technological (and knowledge) nature, information on
available technology choices is often lacking. This also holds for information on alternative
chemicals, raw materials and alternative process technologies (Luken & Rompaey, 2008).
7.2. Empirical examples of technological barriers
A study into the (economic) opportunities for a circular economy in The Netherlands
included a discussion on technological barriers towards implementation of circular
economic activities. The summary of the findings given below is based on 15 interviews and
2 workshops (Bastein, et al., 2013). The discussions focused on the technological hurdles on
the way to efficient use of bio-based waste streams. The effective use of biotic waste
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streams requires substantial investment in a period of volatile agro-commodity prices. Since
the feasibility of many bio-based technologies has not yet been proven, investing in these
technologies entails significant risk. The risks related to bio-based products based on biotic
waste streams are considered relatively high since they may products have different
properties (for example, composition, colour and smell); approval may not have been given
yet, for instance in the framework of the EU directive on the Registration, Evaluation,
Authorisation and Restriction of Chemicals (REACH). Because of these different properties
entrepreneurs are uncertain whether consumers will accept bio-based products.
In these examples it is clear that an implementation of the TRL methodology may provide a
clear order of ‘technological’ aspects to tackle. Currently, the activities based on bio-based
waste have a character of bottom up experimenting without using the systematic
assessment of barriers that is provided by the TRL methodology.
The importance of technological barriers can take on several forms and this is crucial to
note. Businesses primarily experience a lack of technological capabilities in-house and the
development of new technology requires expertise which may also not be found in their
company. A recent study found that 23% of managers found the lack of qualified personnel
and technological capabilities as a serious barrier and 28% said it was somewhat serious
(Eurobarometer, 2012). Figure 15 below shows the results per country as well as the EU 27
results. Here there are quite striking cross-country differences in terms of deemed
importance. Hungary and Denmark had by far the lowest percentage of respondents who
found this to be a serious barrier in any way at 32% and 34% respectively, while Luxemburg
and Cyprus had an overwhelming majority of respondents who found it serious, 80% and
69% respectively (European Commission, 2011).
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In addition to scoring low regarding lack of technology and qualified personnel, Hungary
also scored low in terms of limited access to external information and knowledge including a
lack of well-developed technology support services, 33% said this was a very serious or
somewhat serious barrier (European Commission, 2011). Cyprus again scored quite high and
Luxemburg was above average. However, the EU average was lower at 44% compared to
51% suggesting that there is indeed access to the external information, but there may be a
barrier bringing this internally to the firm or perhaps that companies prefer to have the
technology and information in-house and see a lack of such capabilities as a larger barrier
then external access. It would then seem to be consistent with reported business activities,
as seen in Figure 17 results from the 2008 CIS data show that the second largest source of
expenditure on innovation was for in-house R&D activities (EuroStat, 2008).
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When looking at reported company activities in regards to eco-innovation in 2008 the CIS
survey found that on average 22% of companies had invested in technology: machinery,
equipment or software (EuroStat, 2008). This was the largest of the expenditures across all
sectors, as can be seen in Figure 17, and was largest in the transportation and storage
industry.
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This internal investment is critical as over 53% of SMEs were found to rely on their own
technical expertise to become more resource efficient (Eurobarometer, 2012). Without such
internal technical capabilities, many of these enterprises are bounded by their own internal
capabilities. This suggests linkages with other barriers as in-house technology may be
influenced by organisational, market, or other factors.
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Overall, technology plays a large role in companies innovation activities at least in terms of
their expenditure. While for some countries acquiring the right capabilities is seen as a very
serious or somewhat serious barrier there are quite some which have less trouble in this
area. Therefore linkages between technology and other barriers should be investigated. In
the next section we outline what other barriers are likely influencing technology and may
account for some of this cross country difference.
7.3. The use of Technology Readiness Assessment and Technology
Maturation Planning
Excellent guides are available indicating how to assess Technology Readiness Levels and hot
to progress on that ‘ladder’ through a Technology Maturation Plan (TMP) (See for example
DoE, 2008) (Department of Energy, 2008). The TMP describes how to question the various
so-called critical technical elements (CTE) and in doing so pays attention to technological
and technical aspects, manufacturing and quality control, and programmatic, customer-
focused elements. It is thereby acknowledged that technological barriers are strongly linked
to market related and behavioural barriers. By using the TRL methodology, a sound,
systematic and well established description of all potential barriers for technology
development is available. By its nature it also provides a generic insight in the level of
investment required until market implementation (=TRL 9) and the planning until that
moment. Furthermore, while executing a TMP, one can identify the transfer of each TRL to
the next as a quantifiable barrier. Looking at any innovation from start to finish, one can
assess the technological barrier by just looking at the TRL at the time, the distance from that
TRL to TRL as an accurate measure of the size of the barrier.
The use of the TRL systematics also clearly demonstrate that the links between plain
technical issues and other elements (and this barriers)(financial capabilities, cost aspects
and market demands) get more intense once the TRL gets higher. This is undoubtedly
related to the ever increasing investment costs that are required for execution of any next
step in technology development. Whereas at low TRL levels the issues are merely concerned
with technological confirmation (and a superficial notion of a potential –market- problem
that needs solving), higher TRLs deal with issues like safety, environmental compliance, cost
and actual deliverable planning.
Since the main focus of the current study is to reflect on policies that may enhance the
introduction of resource efficiency, the detailed description of TRLs provides insight in to
what policy measures have impact on specific TRLs. A clear distinction can thus be made
with respect to the impact of a policy measure on (for instance) full implementation or
advancement of rather fundamental research steps.
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Relative Level
of
Technology
Developme
nt
Technology
Readiness Level
TRL Definition
Top Level Questions for Determining Anticipated
TRL
System
Operations
TRL 9
Actual system operated over the full
range of expected conditions. Has the actual equipment/process successfully
operated in the full operational environment
(hot operations)?
System
Commissio
ning
TRL 8
Actual system completed and qualified
through test and demonstration. Has the actual equipment/process successfully
operated in a limited operational environment
(hot commissioning)?
TRL 7
Full
-
scale, similar (prototypical) system
demonstrated in relevant
environment
Has the actual equipment/process successfully
operated in the relevant operational
environment (cold commissioning)?
Technology
Demonstrat
ion
TRL 6
Engineering/pilot
-
scale, similar
(prototypical) system validation in
relevant environment
Has prototypical engineering scale
equipment/process testing been demonstrated
in a relevant environment?
TRL 5
Laboratory
scale, similar system
validation in relevant environment Has bench-scale equipment/process testing been
demonstrated in a relevant environment?
Technology
Developme
nt
TRL 4
Component and/or system validation in
laboratory environment
Has
laboratory
-
scale testing of similar equipment
systems been completed in a simulated
environment?
Research to
Prove
Feasibility
TRL 3
Analytical and experimental critical
function and/or characteristic proof
of concept
Has equipment and process analysis and proof of
concept been demonstrated in a simulated
environment?
TRL 2
Technology concept and/or application
formulated Has an equipment and process concept been
formulated?
Basic
Technology
Research
TRL 1
Basic principles observed and reported
Have the basic process technology process
principles been observed and reported?
In his extensive overview of barriers for technological innovations (in his case focusing on
technologies for pollution prevention), Ashford enumerates a vast array of barriers that for
a major part form an element in the Technology Maturation Plan, the latter having the
advantage that the issues and their gravity differ as the TRL progresses (Ashford, 1993).
Ashford distinguishes technological, financial, labour-related, regulatory, managerial,
supplier related and consumer related barriers. In the following table an overview is given
of barriers to technological innovation as identified by Ashford, that are included in the
Technological Readiness Assessment (Ashford, 1993).
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Area
Description of barriers (Ashford, 1993)
(selection)
Element of Technology readiness
assessment
Technological
►Availability of technology for specific applications.
►Performance capability of technology under
certain economic requirements and process design
standards.
►Scepticism in performance of certain technologies
and therefore a reluctance to invest.
►element of TRL2 questions: design solution
and technology identified
►element from TRL2 onwards: risk areas
identified
Financial
►Research and development costs of technology.
►Costs related to risk of process changes with
regard to consumer acceptance and product quality.
► Non-comprehensive cost evaluations and cost-
benefit analysis as well as cost calculation method.
►Actual cost of current technologies masked in
operating costs.
► essential element of TMP
►customer acceptance and participation form
TRL 3 onwards
► TRL2 onwards: risk and cost assessments
► - as above-
Labour force-
related
►Lack of person(s) in charge of management,
control, and implementation of waste reduction
technology.
►Inability to manage an additional program within
the company and, therefore, reluctance to deal with
a waste reduction program.
►Increased management requirements with
implementation of waste reduction technologies.
► team membership essential component for
TMP process
►-as above- if this inability persists a program
will not reach the subsequent TRL phase; the
issue will be identified early on.
► element of assessment : costs should be
outweighed by benefits
Consumer-
related
►Tight product specifications (e.g., military
purposes).
►
customer acceptance and participation form
TRL 3 onwards
Managerial
► Lack of top management commitment.
(these elements receive further attention when
discussing organisational barriers)
►essential function of TRL methodology is to
seek commitment from early stages
This assessment be a useful tool for companies to understand their technical limitations and
update accordingly. Further, it has been noted that companies are looking to make technical
advancements in-house, so such a tool would be a critical process in overcoming any inter-
related barriers involved.
7.4. Discussion and summary of findings
Technological barriers may seem straightforward, and may be seen as merely the usual
issues when showing the availability of technology for a given application, the vested
interests and process knowledge (and trust in these) that the new technology needs to beat,
and so on. They are far more complex than this, including many different factors from the
market, organisation and behaviour. This is where the Technology Readiness Assessment
provides added value. Though at first sight bureaucratic in nature and complex and lengthy
in its procedures, the methodology of Technology Readiness Assessment provides a way to
put technological issues to be solved in a proper order, giving local management the
obligation to be aware and active of the ‘barriers’ to be taken when ‘climbing up the ladder’
of increasingly mature TRLs.
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The methodology makes it evident that there is a clear and intense link between the
technological barriers and the company organisational barriers (is local management
involved, is sufficient engineering capability available, are marketing departments involved,
etc.), the market barriers (is there a clear problem answered by the technology, has a cost
calculation been made, are safety aspects included, etc.) and the behavioural barriers (are
customers ready for the introduction of a new product). These barriers lead to large
uncertainties about new technologies and their performance and return on investment,
which leads the application of relatively high discount rates to investments towards
resource efficiency (Rademaekers, et al., 2011).
Linking technological barriers (from a company viewpoint) to institutional barriers is of
course a one-way street: legislation poses the boundary conditions to which either the
technology provides an answer, or by which the technology is not blocked. During the
systematic planning of the introduction of technology it seems, therefore, relevant to
continuously update potential changes with respect to these boundary conditions, given
their sometimes unpredictable nature.
The following chapter presents results of this report, showing the intertwined nature of
barriers to the implementation of resource efficiency measures within the web of
constrains. This is based on the analysis of a number of additional examples where the
combination of barriers and their removal is made evident.
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8. Linked barriers for resource efficiency: the web of
constraints
In the previous sections we discussed the main barriers to resource efficiency regarding the
5 primary categories: institutional, market, organisational, behavioural, and technological.
However, these barriers are often intertwined. For example, institutional factors will by
nature play a role in how the market is constructed, and therefore impose market barriers.
When assessing resource efficient measures which impact an entire stakeholder network,
such as enabling recycling systems, or the construction sector, often more than one barrier
will be faced.
This chapter presents a case study showing the complex interplay of barriers in recycling
systems and involving institutional (extended producer responsibility) and financial
arrangements, as identified through the GreenElec project. This analysis corresponds to the
second step prescribed in the objectives of this report, where business barriers are analysed
as part of a broader analysis.
In subsequent paragraphs a number of additional examples that
demonstrate this intertwinement of barriers is presented.
8.1. Analysing business barriers to resource efficiency in a
systemic context: the case of GreenElec
GreenElec is a European project in the scope of the ENIAC Joint Undertaking aimed at green
electronics by sustainable product manufacturing.
11
In the project stakeholders throughout
the electronic product value network are brought together to increase resource efficiency
and try to close the loop to electronic product recycling providing a complex network of
actors and a complex system of barriers to achieving the overall goal of the project.
While to some extent stakeholders are driven to achieve increased resource efficiency,
there are many individual and interacting barriers which are holding them back. For
example, when looking at producers of electronic products their responsibility for their
products has been extended past the sales point to after use. This was implemented
through the WEEE (Waste Electrical and Electronic Equipment) Directive which requires
producers to play an active role in the collection of electronic waste both through collection
schemes and financial support (European Union, 2012). Producer Responsibility
Organisations (PROs) are meant to help drive the recycling process to fully close the loop in
the electronic product lifecycle. While these organisations provide some additional incentive
for producers to become more resource efficient, as a part of the price of every electronic
product sold goes to support the PRO, the costs of the PROs are passed down to the
consumers when paying for the product. Thus, while this WEEE Directive is a good first step
towards resource efficiency in the electronic product network, there are many other
barriers facing stakeholders to become increasingly resource efficient and ultimately a more
circular economy.
11
http://www.hitech-projects.com/euprojects/greenelec/
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Increasing collection is one thing, but increasing resource efficiency within products and
processes across the network requires more, this is what GreenElec tries to tackle. Smelters
and producers are important players in this network. Smelters have strong contracts with
recyclers which require certain material standards be met regarding the waste they deliver.
Further, they have a strong negotiating position for material reuse, making them an integral
stakeholder in achieving innovations as they will have power to accept or reject changes
which directly impact their role in the network, thereby also impacting their direct suppliers
and customers. Further, producers are central in the achievement of resource efficient
innovations in the network. They set the standards for how their products are assembled
and have a strong negotiating position with their component manufacturers regarding the
materials used. However, currently their focus is primarily on reliable, low-cost materials in
their production process, not resource efficient materials.
Focusing more on the producers, there are potential changes to their product design or
their processes which may increase resource efficiency, especially at the end of life (TNO,
2013). However, the greatest barrier for the producers regarding these changes is that they
do not offer lower costs or other direct benefits (such as a large market demand for these
products). Producers find many resource efficient or eco-innovations to be a large cost
investment for them where they cannot directly reap the gains, but instead the end of life
(EOL) actors (such as sorters and recyclers) will see the benefits (TNO, 2013).
The biggest issue we have found is communication throughout the network and the large
barriers faced by the power holders in the network (primarily the producers). Producers
then often act as a barrier for the end-of-life stakeholders to achieve their goals as they hold
crucial information and do not have the incentive to share. For instance, sharing specific
product or material information could directly impact their competitive advantage as such
information is valuable for their competitors, they would be taking a risk without direct
benefits in return. So there are strong inter-actor links as well as inter-barrier links relating
to market and technology barriers primarily as well as organisational and market barriers.
Producers will update their products and become more resource efficient if there is a
consumer market for it or other direct financial incentives (such as lower-cost processes),
but processes which do not directly translate into a positive business case are often ignored
as it is not the focus of these producers (market and behavioural barrier).
When we take a closer look at the electronic product value network, we observe an
interesting interplay between the different barriers (Figure 19) that influence the uptake
and diffusion of resource efficient innovations, that facilitate optimizing component and
material re-use (such as setting up materials databases, simulating recycling and re-use
processes). This figure represents a simplified version of the web of constraints which the
electronic product network faces. There are several actors with various barriers which need
to be overcome. How the stakeholders are connected to one another, in addition to how
their barriers are related (for example: producers risk aversion further supports the end-of-
life actors barrier to like of information) creates a complex web of constraints.
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A
SCHEMATIC REPRESENTATION OF THE ELECTRONIC PRODUCT VALUE NETWORK
Though the primary materials manufacturer is not directly involved in the innovations, they
do experience costs. They do not have the power in the network, so these costs or barriers
are not prevalent. They will have to compete more heavily with recycled material with the
successful implementation of these changes. Therefore, it is important to keep the
competitive advantage perspective in the story.
The component manufacturers experience more barriers than any other actor in the
electronic product value network (Figure 19). An institutional barrier for the component
manufactures is the lack of standards. The work to compile a database or perform extra
analysis on their products is only seen to be costly, so there is no internal motivation. This
would require an external push by regulation to motivate them. Currently, this lack of
external incentive is a large barrier for the component manufacturers to change anything.
Organisational barriers for the component manufacturers exist in extra paperwork, while at
the same time there are no economic rewards. This can be linked to the market as their
primary customer is the electronic producer. They want to keep production costs low (and
have large power in the network) and implementing such innovations is costly for secondary
manufacturers which is passed down to the producers. This hurts their competitive
advantage as they do not gain much by adding these in. A behavioural barrier exists in a
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general resistance to change, but market barriers are probably the most important barrier
for the component manufacturer. First, availability of data is a problem among component
manufacturers. Without support for external information on data, this creates a large
burden for the component manufacturers as they would need to find a way to gather this
information. Second, communication through the value chain is problematic.
Communication two steps up or down the chain is virtually non-existent. Companies focus
on themselves and their core suppliers and customers. These innovations mainly benefit the
EOL actors, but this does not impact them so to speak. Lastly, component manufacturers
also experience a risk for their competitive position when providing deep intelligence about
component composition.
Electronics producers mainly experience organisational and market barriers. Organisational
barriers exist in the extra steps in the production process, which thereby will take more
time. Production costs for the whole supply network will be higher and it is unclear who will
be in charge of the new services. On the market side, there is a risk for the competitive
position of the electronics producers, especially when sharing too much information with
other actors in the network. Similar to component manufacturers, there is a lack of
information from the value chain and data gathering is expensive and time consuming.
Separators and recyclers experience technological barriers in insufficiently accurate
assessment techniques. This is largely linked to lack of data availability and communication,
which is at the same time a market barrier. Without certain information elements, the
technology is limited in its capabilities.
Government and regulatory agencies mainly indicated to experience behavioural barriers in
the lack of consensus on recyclability. Besides this, on the market side policies and
regulations seem to be ineffective because of a lack of market demand and lack of
governance for the services provided. The other actors in the electronic product market,
have not reported notable barriers.
The producers do not only face financial barriers there are also organisational, behavioural,
market, technical, and institutional barriers to increasing eco-innovation and resource
efficiency within the stakeholder network. Below are some examples of these barriers:
• Institutional: No subsidies or policy incentives to make more recyclable products.
• Market: More costly products impacts market competitiveness (working within
current market conditions)
• Organisational: Mentality within organisations to comply or only to innovate if it
provides a positive business case, which is not always immediately the case
• Behavioural: Not on the foreground of people’s minds, not a primary concern.
Within producer organisations designers have a focus to meet their targets and
only comply to what is absolutely necessary
• Technical: Requires investment in new technology and/or software (TNO, 2013)
Each of these barriers is linked to another and can be acting against the same eco-
innovation, creating a complex system to change. Further, market conditions limit their
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ability to invest in more resource efficient products when they currently require higher
costs. Most companies invest in resource efficient innovations to reduce costs, but in some
cases it may be too costly to invest as is the case found in GreenElec.
In the remainder of this chapter we present a number of examples and case studies that
demonstrate this intertwinement of barriers.
8.2. Additional Examples
8.2.1 Product-service systems
Product-service systems (PSS) hold great promise for increased resource efficiency (Tukker
& Tischner, 2006). PSS persuades consumers to ‘buy’ the service provided by a product
rather than the product itself. PSS exists in different formats such as (the version with most
footprint-reducing potential) result-driven product service systems (PSS), product-oriented
services in the form of maintenance contracts and user-oriented services in the form of
pooling, sharing or renting (these formats consist of less radical changes to business models
and have less potential regarding footprint reduction). The benefits lie in the potential
motivations that both producers and consumers experience in reducing lifecycle costs and
the use of raw materials during the use of a product. A comprehensive discussion of barriers
(and opportunities) of product-service systems is given in (Tukker & Tischner, 2006).
The challenges of result-driven PSS lie in drawing up agreements that are sufficiently clear
about what the functional result will be, and limiting the risks for producers when it comes
to delivering on their promises. The starting point of this is to ‘replace’ a product with a
suitable result-driven PSS – one that will not clash with the desire for status, convenience or
freedom. The barriers for companies to change business models into PSS models are
manifold:
- Though the market (the consumers) becomes more closely linked to the service
provider, this introduces a barrier as well. Consumers may feel that they become too
dependent on the producers, either because of long-term contracts or other
conditions included by the producers in the PSS (market barrier)
- Since access to the product is more complicated, the user might be faced with
tangible or intangible costs (market barrier)
- The (internal) behavioural change within a company should not be underestimated:
the transition to a result-driven PSS represents a huge change for companies whose
core business is selling new products. Different forces or divisions within a company
may experience the transition as undermining their business sector. Sales of new
products are likely to decline because consumers will no longer focus on the
products, but on the functions they perform (behavioural barrier)
- The transaction costs of switching from current business practices to PSS should not
be too high; this transition will likely introduce a whole new workforce and working
spirit, clearly leading to both an organisational and a behavioural barrier to a
company in transition (organisational barrier)
- The risks of PSS should not be too high for producers, and should be reasonably easy
to predict. This is more the case in the business-to-business (B2B) market than in the
business-to-consumer (B2C) market, and also if the use phase is closer to the
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company’s core business. Consider a company that is responsible for maintaining a
swimming pool, for example, that is also asked to prevent teenagers from
vandalizing it. Since security was never the company’s core business, this gives rise
to unanticipated problems and financial risks (organisational barrier)
- Last but not least, financing a PSS requires a completely different financial structure
for a company and a different relationship with its investors. Whereas, in a sales
oriented company, sales provide income at the moment of transaction, a PSS
provides a gradual income over the lifetime of the contract, requiring, thus, a pre-
financing of the material costs (organisational barrier).
8.2.2 (Re-) Use of product components
Another example of the interplay between various barriers can be seen in the use of
(primary or secondary) product components in order to repair or refurbish products. This
step is considered a very relevant step in the concept of the circular economy (Ellen
McArthur Foundation, 2013). There are several factors obstructing the use of used product
parts and components (Ellen McArthur Foundation, 2013):
- Used components are often more expensive than the resale margin and are
therefore less attractive options for producers or second-hand dealers (market
barrier)
- Company purchasing departments have to become a part of integrated business
strategies and include repair, secondary parts and integral costing into their strategy
(behavioural and organisational barrier).
- Businesses need to work together on repairing and reusing components. This
requires close communication and trust, which takes time. One problem is that the
availability of product components for repair by independent operators is often
blocked by businesses that have a monopoly on supplies of components or products
(behavioural, organisational and market barrier)
- Consumers tend to look more at the price of a product and less, if at all, at the entire
lifecycle costs. In the construction sector, for example, there is huge potential for the
use of better materials and modular systems that are easily replaced, but in practice
buyers focus on price rather than on entire lifecycle costs (market barrier)
8.2.3 Resource efficiency in the construction sector
For sustainability, energy and resource efficient innovations in the built environment,
institutions are of crucial importance in stimulating and coordinating the diffusion of
efficient technologies (in this case study, for example, smart grids and renewable energy).
For companies, there are large challenges to improve their capabilities for cooperation and
value chain integration (organisational barriers). Sustainable buildings require close
collaboration between all value chain partners to reach optimal solutions. Marketing of
sustainable innovations is also still a big challenge (market barrier).
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The market, lastly, has many barriers that make sustainable innovation problematic. As the
housing market is not a consumer market, and owner – user – and producer are often all
different, the drivers for innovation are diffuse. There is no real market for sustainable
innovation as an energy saving light bulb does not have the same natural appeal as, for
instance, a new i-phone, and the market is characterised by strong split incentives. These
split incentives form a strong obstacle for investments in insulation, efficient installations
and renewable energy equipment.
The study from Klein Woolthuis, cited earlier in this report, prioritised barriers among
interviewees who were active as innovative entrepreneurs in the construction sector (Klein
Woolthuis, et al., 2012). These barriers were:
- beliefs and old routines that keep actors ‘imprisoned’ in the old paradigm
(behavioural barrier)
- rules and regulations which were considered to lack long-term vision, clarity,
coherence and consistency, making entrepreneurial strategy and action difficult
(institutional barrier)
- strong market dominance of (closed networks of) incumbent firms in the
construction industry that blocks the entry of new actors, products and processes,
and practices (organisational barrier)
Entrepreneurs interviewed in (Klein Woolthuis, 2012) make a very conscious choice in
dealing with these barriers, based on their interpretation of to what extent they can change
the status quo. The research distinguishes system builders and system entrepreneurs. The
former are actively seeking to influence beliefs, networks and even policy making; are more
ideologically driven and (must) have long-term planning horizons. System following
entrepreneurs are entrepreneurs for which the introduction and diffusion of sustainable
innovations does not coincide with large changes in the system context; they believe they
‘simply can’t change the system themselves’.
8.2.4 Green Business Model Innovation
In an exploratory study into ‘Green Business Model Innovations’ (including the following five
types of GBMI: Green Supply Chain Management, Take-Back Mechanisms, Functional Sales,
Cradle to Cradle and Industrial Symbiosis), 41 interviewed companies identified barriers to
their innovations and prioritized these barriers (Henriksen, et al., 2012).
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B
ARRIERS IN COMPANIES VALUE CHAIN REGARDING GREEN BUSINESS MODEL INNOVATIONS
(H
ENRIKSEN
,
ET AL
.,
2012)
The companies in this study experience several different barriers throughout the entire
value-chain when working with their green business models. These barriers are of a
different nature, indicating that the web of constraints plays an active role in the cases in
this research.
- At the core it was found that a lack of knowledge, skills and awareness was seen
throughout the value chain, from suppliers, to employees and customers.
Introducing new or recycled materials is complex process and introduces a technical
barrier caused by the necessity to change existing processes or the lack of
knowledge about the content in the recycled materials (technological barrier).
- It was also mentioned that it may be costly to initiate a new business model as new
types of manufacturing systems, product design and development require
investments and increased knowledge in companies (organisational barrier).
- Cooperation in the value chain (partners, suppliers, distributors) was identified as a
barrier (organisational barrier) as these actors had a different attitude towards risks,
cooperation innovation and investments in sustainability.
- One of the greatest barriers experienced by the case companies is related to sales
and marketing issues, as it proved to be a challenge to train marketing towards the
more sustainable portfolio (behavioural and organisational barrier).
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- It was seen as difficult to market sustainability as a proposition different from
business-as-usual and companies experienced that price is the dominant driver for
consumers (market barrier).
Technological and organisational barriers are also experienced with take back systems and
ways to close the material loop.
Behavioural barriers existed within the companies: it was either difficult to change
conservative company cultures or to improve relevant skills among employees. Regulations
and absence of government policies and interventions (in infrastructure investments) were
felt as a barrier, though very industry specific.
8.3. Summary
The examples and the more detailed case study for the GreenElec case in this chapter have
shown that barriers to resource efficiency improvements generally experience a web of
constraints. Not coincidentally, all these cases heavily rely on networks of actors to jointly
come into action in order to change a business model or a mode of action. Besides
introducing elements of organisational barriers (changing within one company is obviously
simpler than changing processes within a network of stakeholders), this network dependent
change also leads to the complexity that any actor may experience a different set of
barriers. Communicating about these barriers and solving them becomes a very difficult
task. Such complex networks may only come into action once systemic changes have been
implemented that lead to a common goal and a focus of all players involved, without them
having to agree on the common goal.
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9. Barriers to Resource Efficiency measures: concluding
remarks
In this chapter we provide an overview of the main conclusions, findings, salient limitations
and avenues for future research derived from the elaboration of this report.
Based on the framework presented in chapter 2, this report corroborated 5 main barriers to
resource efficiency improvement. Each of these main barriers has several sub-barriers that
may be applicable to individual cases. An overview of these barriers and sub-barriers in
presented in the table below.
Barrier Sub-barriers
Institutional • Environmental policy (lack thereof)
• Enforcement of regulations (weak enforcement, no
repercussions, etc.)
• Incentives (regulations are not demanding enough, do not
provide the right environment to go beyond compliance)
• Regulatory schemes for the prescription and use of technical
solutions, such as Best Available Technology (BAT) schemes
• Anticipated legislation
• Access and availability of grants and subsidies
Market • Market pull (demand from the market)
• Consumer behaviour (willingness to pay, consumer sensitivity)
• Lobbying parties (may block developments which do not match
their interests)
• Market structure (size, prices, etc.)
• Split incentives (hinders one actor but benefits another)
Organisational • Barriers to implementation of technology (R&D budgets, research
infrastructure, networking with other firms in supply chain)
• Lack of information (fundamental knowledge gaps, insufficient
information)
• Company culture/fit with organisation (outside core business
area)
• Supply chain issues (reliance on suppliers, unavailable
alternatives, costs)
• Lack of information (related to processes, techniques,
technology, etc.)
• Financial barriers (unavailability of funds, negative business case)
• Labour force-related (insufficient capabilities, training)
• Supplier-related (lack of supplier support)
• Managerial (lack of education and expertise by managers)
• Network and value chains issues (e.g. occurrence of split
incentives)
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Behavioural • Management and employee attitude towards innovation and
change (lack of top management commitment, reluctance to
change within the company, focus on own disciplines and own
company)
• Attitudes and social values (personality, ethos, and position,
beliefs)
Technological • Unproven technology (risk, uncertainty of investment)
• Lacking available technology choices
In the remainder of this chapter we will briefly discuss whether one can establish a priority
among these barriers, how companies may perceive these barriers (are barriers external or
internal) and a preliminary view how policy measures may or may not have an impact on
overcoming these (sub-)barriers.
9.1. Prioritizing barriers: a challenging task
This report has demonstrated that a broad array of linked barriers plays a role in
determining the current status of resource efficiency and the ease of improving a company’s
resource efficiency. In none of the cases discussed in chapter 8, a single barrier can be
identified as the dominant barrier. Of course this phenomenon is of high relevance for
designing effective policy mixes. Designing an effective policy mix may be guided in case a
prioritization can be made among the proposed barriers. This section shows a number of
attempts to prioritizing barriers towards resource efficiency.
From the Eurobarometer results that were presented in paragraph 2.4, we can conclude
that the most important barriers are:
• Uncertain demand (and thus uncertain return on investments) from the market
hinders the uptake and development of eco-innovations
• Insufficient access to existing subsidies or internal funds (especially with SMEs) is
experienced as problematic
• Existing regulations do not provide enough incentives
A study in the area of resource efficient innovations in the construction sector (Klein
Woolthuis, 2010), cited earlier in this report, prioritized barriers among interviewees who
were active as innovative entrepreneurs in the construction sector. The results provide a
different picture than the Eurobarometer results and place more emphasis on behavioural
aspects in the construction sector. These barriers were:
- beliefs and old routines that keep actors ‘imprisoned’ in the old paradigm
(behavioural barrier)
- rules and regulations which were considered to lack long-term vision, clarity,
coherence and consistency, making entrepreneurial strategy and action difficult
(institutional barrier)
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- strong market dominance of (closed networks of) incumbent firms in the
construction industry that blocks the entry of new actors, products and processes,
and practices (organisational barrier)
With respect to technological barriers, it was concluded that technology is important, but
not a hindering factor for innovation. The actors either have capabilities in-house, or know
very well where to get it when they need it.
In a UNEP study into overcoming barriers for SMEs ( (UNEP, 2012) it was concluded that the
main challenges were inadequate skills and knowledge (organizational barrier), perception
of high costs associated with resource efficiency measures (market barrier), difficulties with
evaluation of environmental aspects and impacts of a company (technological barrier), and
resistance to change (behavioral barrier). The key external challenges to the uptake of
resource efficiency highlighted through the survey were uncertainty about the effective
economic benefits of available methods and tools (market barrier), high costs associated
with verification and certification, lack of awareness of economic benefits in connection
with environmental compliance (institutional and market barriers), and lack of support (e.g.
tailored information, networking, suitable consultants and tools).
From (Rademaekers, et al., 2011) the main conclusions on barriers are that
- The technological limits have been reached;
- Availability of financial resources is limited , especially amongst SMEs for R&D and
establishing a patent portfolio;
- Transparency across industries is little in order to protect best practice technologies;
- High costs of resource efficiency measures in an international context do not always
lead to greater competitiveness
And thus that barriers are strongly related to technological barriers.
As noted in chapter 7, Moors et al. (2005) studied efficiency improvement in the steel
manufacturing industry) and concluded that the most important barriers appeared to be:
economic motives, such as the high costs of capital investments in the base metals industry
and the high risk involved in committing capital to the scale up of unproven technology; the
embeddedness of the physical intertwined production system and an underdeveloped
available knowledge infrastructure. This author suggested that the implementation of
radical cleaner production technologies is a complex problem on various levels, and that, in
general, it can be stated that companies are concentrating more on incremental innovations
because the existing infrastructure and capital investments are already in place.
The examples sketch a very complex landscape where both the interlinking and the
prioritization of the barriers do not lead to a unified picture. As ( ( AMEC Environment &
Infrastructure; Bio Intelligence Service, 2013) conclude in their assessment into resource
efficiency barriers: “Quantifying the influence each driver or barrier has in business decision-
making is an imponderably complex task and one far beyond the boundary of this study.
Examinations of the drivers and barriers, as well as interventions that could act to reduce
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barriers whilst promoting drivers, could be an area of research for the policy maker aiming
to understand whether and where to invest resource at the most cost effective point.”
What is clear from this picture is that barriers are perceived differently according to the
sector, the type of company (e.g. SME or large firm, or place in the value chain) and the type
of resource efficiency measure. Any activity that addresses resource efficiency will
necessarily have to take all the potential barriers into account, addressing both the potential
direct effect on each barrier and the indirect effect that results from the complex linkages
between the various barriers.
9.2. Resource efficiency barriers from a company perspective: a
brief comment
From a company perspective, it may be impossible to prioritize barriers towards improved
resource efficiency, but it is feasible to assess the span of control a company has over these
barriers. Internal barriers in that sense are within the hands of the company, whereas
increasingly external barriers are much less under control.
As noted earlier in this report, the overview of barriers to resource efficiency provided by
(AMEC, BIO-IS, 2012) is helpful in understanding the influence and nature of internal and
external barriers (Figure 2). The steps identified in the above mentioned report can be
linked to the barriers discussed in this report. This simple exercise can show that going from
external to internal barriers a hierarchical order can be inferred: (1) Institutional barriers, (2)
Market barriers; (3) Technological barriers; (4) Organisational barriers, and (5) Behavioral
barriers (see figure below)
F
IGURE
21
S
UMMARY OF THE
I
NFERRED
H
IERARCHICAL
O
RDER OF
B
ARRIERS TO
R
ESOURCE
E
FFICIENCY FROM
A
COMPANY
P
ERSPECTIVE
.
S
OURCE
:
O
WN
E
LABORATION
Instituti
onal
MArket
Technol
ogical
Organis
ational
Behavio
ural
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From a company perspective it seems self-explanatory to focus on the identified behavioral
barriers instead of the policy related barriers. Indeed, the empirical evidence shown in
chapters 3-7 indicate that companies do not reflect on policies related to taxation. However,
they do experience severe market barriers when introducing new products, processes or
services. Obviously such market barriers may benefit from changes in taxation of labour or
externalities. Improving market conditions may obviously change behavioural attitude
within companies, causing organizational changes or investments in R&D leading to
overcoming technology barriers. In that sense policy changes (and therefore systemic
changes) do not just impact the institutional barriers but have as a characteristic that they
may act as a flywheel for many of the other barriers identified throughout this report.
In the review presented in this report the intertwined nature among different barriers and
the capacity of industries for innovation and change is evident. It is this intertwinement that
conditions business decisions and the scope of change to be achieved by the
implementation of Resource efficiency measures. It would be important to analyse in
further detail specific organisational and behavioural aspects (internal barriers) of business
strategy and the perceived constraining environment (external barriers) affecting company-
level decisions to implement REM. This is an avenue of research demanding urgent
attention.
Though overcoming or fighting institutional changes is not the first objective of companies,
the more powerful entrepreneurs may engage in political strategies, such as lobbying and
creating advocacy coalitions to change institutional constraints in their favour (Klein
Woolthuis, et al., 2013). Such entrepreneurs are known as institutional entrepreneurs; they
are actors that have sufficient resources to realize an interest of value to them. Such
institutional entrepreneurship can be executed through means such as framing (depicting a
preferred institutional arrangement as appealing to the widest possible audience),
theorization (creating support for their ‘right’ solution by emphasizing chains of cause and
effect that legitimize their solution), initiating cooperation and collective action
(entrepreneurs bring together the interests of different groups, e.g., by providing common
meaning or identities or sketching a pervasive vision on a common development path),
lobbying (using political tactics and power to bring forward the vision and interests of the
collective or of the single entrepreneur) or negotiating property rights (initiating contractual
forms, property rights and financial arrangements in realizing new ventures, negotiable
between government, and (in the area of the construction sector) developers, real estate
owners, and tenants or buyers).
9.3. Policy implications: barriers to Resource Efficiency from a
company perspective
Although it is not the objective of this report, in this section we offer some preliminary
reflection about the role of policy for the removal of barriers based on the review and
evidence hitherto presented.
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Tukker (Deliverable 2.1 POLFREE) states that when the problem and pathway of change is
reasonably clear, and public goods are in danger, then authorities are legitimized to enforce
the change and regulation-induced technological change is most appropriate. Market-based
instruments are useful if one knows which changes to the market incentive system will
change the behaviour of actors in the direction of more sustainability. Regulatory
instruments in combination with economic incentives are likely to be most appropriate for
technology forcing. Companies may strive for resource efficiency in that case since it
ultimately lowers costs and enhances competitiveness. Though the direction of impact upon
such measures may be clear, the size of the impact and potential non-linear and rebound
effects will be the subject of further study through such tools like economic or agent-based
modelling.
Von Weiszäcker (2009) provides an overview of regulatory and economic instruments that
have been introduced to improve the sustainable use of resources in the last decades.
Though both elements have led to significant ecological reforms and improvements, they
have not resulted in significant reductions in consumption. Von Weiszäcker therefore pleads
for more far stretching ecological tax reforms. Similar messages have been provided by
Ekins and Speks (2011) and Brown (2010) when suggesting measures to promote green
growth and to overcome the ecological crisis, respectively. Though a further analysis of
these measures is beyond the scope of this report, a preliminary view of the effect of these
measures on the barriers identified in this report is presented in the table below.
T
ABLE
5
S
UMMARY OVERVIEW OF
P
OLICY
M
EASURES FOR THE
R
EMOVAL OF
B
ARRIERS TO
R
ESOURCE
E
FFICIENCY
M
EASURES
.
S
OURCE
:
O
WN ELABORATION
.
F
RAMEWORK MODIFIED FROM
V
ON
W
EISZACKER ET AL
(2009)
Policy measure Focus of implementation Effect on barrier
Pollution control legislation Banning substances Technology barrier
Energy Efficiency Regulation Minimum efficiency
requirements, including
progressive BAT measures in
environmental permits
This is a potential
institutional stimulus (and
thus possibly a barrier if BAT
is not ambitious enough)
Banning wasteful
technology
e.g. banning incandescent
light bulbs
Impact on barrier and
flywheel effect over most
barriers. Technology (LEDs)
may even be a driver.
Public procurement Important though potentially
hampered by public
procurement rulings
Launching customership may
impact market and
technological barriers and
may function as flywheel
Voluntary Environmental
management systems
“appropriate regulation, in
terms of economic
instruments needed to
increase the commercial
viability of such noble
management strategies"
Behavioral and market
barrier (e.g. through
convincing consumers)
Emissions trading e.g. CO2 trading through ETS Market barrier through
promoting efficient
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Policy measure Focus of implementation Effect on barrier
technologies
Product/pollution fees and
taxes
e.g. EPR (Extended Producer
Responsibility) leads to funds
for recycling
Organisational and market
barrier: funds become
available for chain activities
that would not evolve from
the market itself
Deposit refund systems May stimulate the circular
economy
Ecological fiscal reforms Shifting fiscal policy to
stimulate positive
environmental outcomes
(e.g. lowering labour
taxation)
Fighting market barrier with
flywheel effect on other
barriers
Subsidies Grants or loans to promote
specific activities or
purchases
Market and technological
barriers (through R&D
subsidies for environmental
technologies)
The instruments in this table refer mostly to a change in the institutional barriers (with the
aim of adopting more resource efficient technologies, decreasing waste generation, or using
secondary materials) or in the market barriers. Especially the latter ones will be essential to
induce systemic changes that may act as a flywheel for other barriers to be taken (more
market demand, will lead to behavioral and thus organizational changes, and to increased
development funds, thus decreasing technological barriers). Of course, the extent to which
market demands and prince incentives will influence the uptake of resource efficiency
measures will be determined by the size of the changes: when it comes to investing,
resource efficiency measures will always have to compete for management attention and
(thus) funds with other innovations in a company.
Still, these policy measures will not be sufficient to bring along changes. Organisational
barriers in complex value chains and networks might not be overcome. The phenomenon of
split incentives, and the difficulty of creating trust among partners (also a behavioral barrier)
may hamper uptake of new technologies despite the introduction of market incentives.
Organisations that –almost by nature- have a conservative nature may require strong
incentives to change. This may be related to deep-rooted personal conservatism, but also to
the complex interplay with legislation with respect to liability and safety. Conflicting
legislation will in such cases arise, calling government into action.
Self-evidently, technological barriers do not respond quickly to resource efficient policies:
though R&D funds may be freed, the complex steps up to TRL 9 (and the concurrent
increasing required funds) still have to be taken. Even with systemic changes, the market
value depends the funds that may be invested in maturing products or services.
As a conclusion form the arguments above, one can state that the systems approach
presented by the web-of-constraints, should in all cases be followed once policy options are
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designed and their consequences modelled. For, not all aspects in the web-of-constraints,
easily follow from economic modelling.
In this final chapter, it is worthwhile re-iterating arguments discussed earlier in chapter 3
(on Institutional Barriers). One of the lessons from the empirical evidence is that, whatever
the policy interventions are, it is the volatility of the political decision making process which
probably paralyzes the process towards resource efficient innovations more, than the sheer
presence or absence of institutional measures. Analogous to the situation in the mining
industry, where price volatility places a brake on exploration investments, the industry will
not engage in resource efficient innovations enabled by policy changes in case sudden
changes in political landscape may alter the business case drastically. Paradoxically,
stakeholders also called for a responsive government, enabling entrepreneurs to engage in
new activities. Finding the right balance between agility and consistency is a real challenge
for government here.
When it comes to re-think waste regulations, it is again a matter of finding the right balance:
as was stated earlier in chapter 3, waste regulations have had a strong and beneficial effect
on our environment. The call for change (for instance about redefining end-of-waste status)
in order to increase the efficiency with which we use resources, should not compromise the
environmental protection that originally was the background for introducing these
regulations.
A final observation relates to a more general role of government in changing our behavior
and practice towards resource efficiency. Though innovative taxation and stringent
regulations may play a dominant role in increasing our resource efficiency, government has
a broader role and responsibility. The government may set good examples by changing
procurement procedures, and re-thinking the constant cry for economic growth in terms of
crises. Again, consistency, aligning what you say with what you do, will stimulate society.
Government may embed longer-term thinking about resource efficiency in educational
programs, thus working on long-term change of tacit behaviours. Our future captains-of-
industry may be educated right now in this spirit. Government may act as a neutral broker,
bringing parties in complex value chains together, and enabling cooperation despite split
incentives. In return, government as a chain director may enable change through removing
specific barriers.
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Annex 1. Selected examples of Resource Efficiency
Measures (REM) at company level
Figure A1-1. Waste hierarchy in the EU Directive 2008/98/EC
Source: adapted from Zunft and Fröhlig, 2009
Figure A1-2. Pollution control hierarchy
Source: Perry’s chemical engineering handbook, page 25-14
Figure A1-3. Pollution prevention techniques
Source: Perry’s chemical engineering handbook, page 25-15
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Figure A1-4. Dow’s Europe Eco-compass
Source: WBCSD, 2010
Figure A1-5. The Sustainable Product Innovation method (SPIN)
Source: Crul et al 2012
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Figure A1-6 Elements of the Cleaner production methodology
Source: UNIDO 2010
Table A1-2. Methods and techniques for the management of solid waste
Source: Perry’s chemical engineering handbook, page 25-17
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Table A1-3 Methods used in process safety management to support hazard analysis as part of
inherently safer design
Process Hazard Analysis methods listed in the OHSA process
safety management rule
•
What if
• Checklist
• What if/checklist
• Hazard and operability study (HAZOP)
• Failure mode and effect analysis (FMEA)
• Fault tree analysis (FTA
Source: Perry’s chemical engineering handbook, after Dowell, 1994, p. 30-34
Figure A1.5 McKinsey strategies to resource efficiency
Source: McKinsey, 2012
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Annex 2. Overview of select literature on barriers
Orgnisational barrier literature
Reference Innovation type Barrier Explanation
Rennings & Rammer, 2009 energy and
resource efficiency
Technology push • R&D budgets
• research infrastructure
• networking with other firms
Pajunen et al., 2012 Material efficiency • Lack of information
• Company culture/fit
with organisation
• Supply chain issues
•
• Lack of knowhow and data on resource
efficient processes
• Business secret of competing firms
• Differences in company cultures
• End-of-pipe thinking
• Outside core business area
• Lack of long-term planning
• Lack of subcontractor/supplier
Bleischwitz, 2012 • Lack of information
• Information deficits at the business level
on options to save material purchasing
costs and their cost/benefit ratio
• Fundamental knowledge gaps on raw
material price trends, anthropogenic
stocks and asymmetrical information on
new green products and systems
• Orientation deficits resulting from missing
targets and objectives as well as from
path dependencies for most capital goods
and infrastructures.
Ashford, 1993 Financial barriers • Research and development costs of
technology.
• Costs related to risk of process changes
with regard to consumer acceptance and
product quality.
• Non-comprehensive cost evaluations and
cost-benefit analysis as well as cost
calculation method.
• Lack of understanding and difficulty in
predicting future liability costs (e.g., of
waste disposal).
• Short-term profitability calculations
resulting in low tolerance for longer
payback periods of equipment
investment.
• Alleged drawback in competitiveness as
other companies are not investing in
waste reduction technologies.
• Lack of capital investment flexibility due
to low profit margin.
• Economies of scale preventing smaller
companies from investing in waste
reduction options (e.g., in-plant recovery
technologies).
• Possibilities that investment in process
modification can be inefficient for old
companies.
• Company financially (and even
technically) tied up due to recent
investment in wastewater treatment
plant.
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• Actual cost of current technologies
masked in operating costs.
Ashford, 1993 • Labour force-related
barriers
• Lack of person(s) in charge of
management, control, and
implementation of waste reduction
technology.
• Reluctance to employ trained engineers
for the alleged time consuming design of
waste reduction technologies.
• Inability to manage an additional program
within the company and, therefore,
reluctance to deal with a waste reduction
program.
• Increased management requirements
with implementation of waste reduction
technologies.
Ashford, 1993 • Consumer-related
barriers
• Tight product specifications (e.g., military
purposes).
• Risk of customer loss if output properties
change slightly or if product cannot be
delivered for a certain period.
Ashford, 1993 • Supplier-related barriers • Lack of supplier support in terms of
product advertising, good maintenance
service, expertise of process adjustments,
and so forth.
Ashford, 1993 • Managerial barriers • Lack of education, training, and
motivation of employees (e.g., in good
housekeeping methods or operation and
maintenance of recovery technologies).
• Lack of expertise of supervisors.
Behavioural barrier literature
Reference Innovation type Barrier Explanation
Ashford, 1993 energy and
resource efficiency
Management and employee
commitment • Lack of top management commitment.
• Lack of engineering cooperation to break
hierarchical separation of areas of
responsibility (e.g., production engineers
do not cooperate with environmental
engineers in charge of the treatment and
disposal of hazardous substances).
• Reluctance on principle to initiate change
in the company ("Uncle John did it this
way; therefore we are doing it the same
way!").
Montalvo, 2008 Clean technology Attitudes and social values Sustainable entrepreneurship lies mainly in the
personality, ethos and position of high-ranking
official and CEOs
Ramus (2000, 2001)
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Annex 3. Overview of Top Country Barriers: Eurobarometer
