Responsible Entrepreneurship
ICC Commission on Environment, 30 January 1998

ICC/ WBCSD Background document
UN Commission on Sustainable Development
2O April -1 May 1998

"Responsive and entrepreneurial businesses are required as the driving force for sustainable economic development and for providing the managerial, technical and financial resources to contribute to the resolution of environmental challenges…"

Executive Summary

Since the UN Conference on Environment and Development held in Rio de Janeiro in 1992, business and industry have already broadly improved environmental performance, while simultaneously creating jobs and improving living standards. Acting jointly, business organizations have further established voluntary business initiatives like the ICC Business Charter for Sustainable Development.

Eco-efficiency - a management approach championed by the WBCSD - is a practical example of how business has responded to the imperatives of responsible entrepreneurship. In addition, a number of specific initiatives have been adopted: among them, the chemical industry’s Responsible Care initiative.

Due to very different social, economic and environmental conditions around the world, responsible entrepreneurship cannot be comprised in a "one-size-fits-all" definition. To be successful, responsible entrepreneurship needs to combine regulatory instruments with voluntary approaches and market-based initiatives, in a truly flexible and integrated manner. The goal is to create value for society and the companies, by doing more with less over a product or service life cycle.

Key tenets of voluntary initiatives are coordination among companies, dialogue and openness and recognition of stakeholders' concerns, and partnership with operators along the chain. Proper reporting of the voluntary initiative’s achievements and wide communication of these results are also essential for the initiative’s credibility and its benchmarking, and business and industry will continue to explore verification of adherence to voluntary initiatives.

Voluntary Systems, and other agreements with policy makers, demonstrate that business strategies can indeed address the complex problems of environmental, health and safety aspects of products and processes. Voluntary approaches should, therefore, be used by policy makers as they respond to business needs and market conditions complementing regulation.

1 Introduction

As recognized by Agenda 21, "Business and industry, including transnational corporations, play a crucial role in the social and economic development of the country. ... Increasing prosperity, a major goal of the development process, is contributed primarily by the activities of business and industry. Business enterprises, large and small, formal and informal, provide major trading, employment and livelihood opportunities".

Sharing the views of Chapter 30 of Agenda 21, ICC and WBCSD believe that "Responsible entrepreneurship can play a major role in the improvement of the efficient use of resources, the reduction of risk, the minimization of wastes and safeguarding environmental qualities".

The principle of Responsible Entrepreneurship, which is usually understood in an economic sense, here speaks to the more flexible, market driven and innovative response that the private sector has increasingly brought to bear on the new, ever more demanding challenges associated with all three aspects of sustainable development.

The ICC Business Charter for Sustainable Development and voluntary initiatives like it provide a common, global basis for improved environmental performance, cooperation between companies, and for interactions with stakeholders. The emphasis is on a process of continuous improvement rather than judgement on any absolute standard, given the diversity of the business community. In so doing, voluntary approaches minimize competitive distortions, transactions costs associated with regulatory compliance, and inspire many companies to go beyond the regulatory minimum.

Eco-efficiency - a management approach championed by the WBCSD - is a practical example of how business has responded to the imperatives of responsible entrepreneurship becoming at the same time more competitive, more innovative, and more environmentally responsible.

The formal definition is: "Eco-efficiency is reached by the delivery of competitively priced goods and services that sati sfy human needs and bring quality of life while progressively reducing ecological impacts and resource intensity throughout the life cycle, to a level in line with the earth’s estimated carrying capacity".

The concept makes seven main demands on companies:

reduce the material intensity of goods and services
reduce the energy intensity of goods and services
reduce toxic dispersion
enhance material recyclability
maximize sustainable use of renewable resources
extend product durability
increase the service intensity of goods and services

Eco-efficiency is designed to help companies support sustainable development, and encourages businesses to adapt to new ways of working without immediately abandoning their traditional practices. Furthermore, the philosophy links the business concept of value creation to environmental concerns. The goal is to create value for society and the company, by doing more with less over a product or service life cycle.

There are many contributions to improved environmental performance and quality which business is uniquely placed to make, but it must fit into a framework of science-based, non-discriminatory environmental regulations relevant to the country or region concerned.

Moreover, business and industry recognizes that much remains to be done, and in this paper, identifies priority areas for further action, building on successes in each.

2 Regulatory framework in support of responsible entrepreneurship

With conditions so very different around the world, and with nations at different development stages, it is hard to make a "one-size-fits-all" list of policies to help business better support sustainable development. But it is clear that such policies must be based on an integrated view of the economy, society, and the environment.

Every government’s responsibility is - working with business and citizen’s groups - to devise the policy framework that will allow consistent and realistic goals to be developed and met. Such a framework should be target-oriented and cost-effective in implementation.

Governments should use market mechanisms to encourage actions that work towards the goal of sustainable development. For example favourable treatment of investments in clean technologies, within a revenue-neutral tax shift, could speed their introduction. Such instruments will encourage, rather than force, industry to improve and reward companies which pursue good environmental management in keeping with sustainable development, often inducing improvements that go beyond minimum standards.

A truly integrated approach to sustainable development calls for a range of measures, including market-based approaches, economic incentives and voluntary approaches. In particular, voluntary approaches provide flexibility, allowing business to achieve the desired goals in the most cost-effective manner possible.

Voluntary policies come in many forms, ranging from binding agreements to voluntary initiatives and benefits the entire economy of the nation, in line with Agenda 21. For example, in negotiated agr eements between government and industry, certain industrial sectors agree to take specific actions without the need for legislation. The negotiations allow industry to influence the targets and objectives and to set a suitable time scale. Industry is left largely free to determine the means by which targets and objectives will be met. The Dutch have pioneered these agreements, and other countries, such as Portugal, Australia and the US, are experimenting with them.

Initiatives taken voluntarily by industry, independent of government, such as those on energy efficiency by the European chemicals industry and those by Japanese industry, may not have legal status but nonetheless can achieve specific goals. The new "hybrid" voluntary environmental management system processes such as the EMAS Regulation and the ISO 14001 standard look to entrepreneurial solutions to environmental problems. Their value and benefit alongside, or in place of, the regulatory requirements for inspection and reporting is already being usefully explored in a number of countries.

3 Voluntary initiatives / Codes

In addition to general principles embodied in the ICC Charter, a number of specific initiatives have been developed. For example, the chemical industry’s Responsible Care initiative seeks to continuously improve the environmental, health and safety (EHS) performance of the chemical industry’s operations and products in a manner responsive to the concerns of all stakeholders. Responsible Care was first adopted by the Canadian Chemical Producers Association (CCPA) in 1985 and has since been implemented by chemical associations and their members in an additional 39 nations. Responsible Care represents an important corporate cultural change which has led to improved performance and new levels of openness with the public.

3.1 The Voluntary Route
In initiating and participating in voluntary programs like Responsible Care, industry’s expectation is that through improved performance the public’s trust and industry’s credibility will be gained and enhanced and that this will enable it to operate, innovate as a fully accepted member of the community and to contribute further to human development.

Since its beginnings in the mid 1980’s, the chemical industry has extended the reach of this voluntary program to approximately 86 % of the world’s chemical production. In each country, the initiative is managed by the nation’s primary chemical trade association representing both domestic and multinational chemical producers. Participating chemical companies, led by their chairmen and CEOs, commit themselves to adhere to the Responsible Care Guiding Principles which state that a company will manage its activities so that they represent an acceptably high level of protection for the health and safety of employees, customers and the public and for the environment.

The chemical industry has made a concerted effort to respond to the challenges outlined in Agenda 21’s Chapter 19. These efforts include risk reduction efforts, many of which were underway prior to Agenda 21. In many cases these voluntary risk reduction efforts have been conducted with the participation of customers, suppliers and other stakeholders within the chemical distribution chain.

The chemical industry’s success with Respons ible Care has led to its recognition at the 1992 UNCED meeting in Rio, by the Intergovernmental Forum on Chemical Safety at numerous forums, by the United Nations Environment Programme, by UNGASS in June 1997 and by President Clinton’s Council on Sustainable Development. Japan’s Ministry of International Trade and Industry’s Council for Chemical Safety recognized Responsible Care as an example of an effective, voluntary initiative which in combination with regulations can promote chemical safety.

Another interesting example of voluntary initiative are the guidelines for global environmental issues taken by Keidanren (Japan Federation of Economic Organizations) of 1991. Responding to the Charter, the member companies established voluntary plans and reinforced action.

Commemorating five years after Rio, Keidanren published Keidanren Appeal on Environment in July 1996, a declaration of voluntary action taken by Japanese industries to conserve the global environment, which covered four focus areas: global warming, structuring of recycle-based society, restructuring of environmental management systems and auditing, and attention to environmental considerations in overseas projects.

The Appeal has been reinforced by the voluntary action programs covering 36 business sectors with 138 associations, which shows the business’ commitment towards and after the year 2000 in the four focus areas identified in the Appeal.

3.2 Voluntary, Collective Action to Reduce Risk
An important aspect of voluntary initiatives by industry has been the transformation of EHS management from an individual company activity to the responsibility of a group of like-minded companies representing significant segments of a nation’s industrial production. These companies seek broad-based performance improvement, reduction of risk and the establishment of best management practices, while lessening concerns about competitiveness, and taking advantage of opportunities to network and cooperate.

Factors supporting this trend include:

• agreement among participating companies that successful EHS management can be shared to promote collective performance improvement
• peer pressure among companies driven by an understanding that the failure of one company to deliver on its commitment threatens the entire group’s license to operate
• input from interested parties or stakeholders both within and outside the industry which continually emphasizes their expectations and raises industry performance
• belief that given the opportunity to innovate and introduce flexibility into their response to regulation, companies can meet and exceed regulatory and stakeholder expectations

4 Partnerships

All sectors of society, including government, business, public interest groups and consumers have a role to play in contributing to sustainable development and business recognizes that these sectors need to work in partnership, bringing their values and experience to bear on the challenge. Sustainable development will best be achieved if each stakeholder fully plays its part, focusing on what each can do best. Through partnerships, local, nationa l and global, society can build on the strengths of each group.

4.1 International Business Partnership in Voluntary Initiatives
The growth and integrity of Responsible Care is guided by the Board of the International Council of Chemical Associations (ICCA) and its Responsible Care Leadership Group. The latter has identified certain fundamental features of Responsible Care which must be present in each national association’s initiative and which are designed to ensure global consistency of the initiative for the chemical industry and for its stakeholders. The ICCA is actively promoting the spread of the Responsible Care ethic both within and outside the chemical industry.

An important function of the international Responsible Care network has been its ability and success in bringing EHS innovations from one company or country to the attention and benefit of all. So, for example, a novel technique for presenting safety performance data in Norway, verification trials being conducted in the US, an Australian approach to management commitment and a successful working practice in Japan are all readily accessible to the 40 federations and their companies.

Some concrete examples of the practical results of this leadership are listed below:

• working with the OECD’s Risk Reduction Program, a group of chemical companies concerned about the health and environmental effects of brominated flame retardants have conducted extensive research and education activities, including a series of conferences on brominated flame retardant issues in Europe, Japan and the US.
• chemical companies working in concert with shippers and users of hydrogen fluoride in the United States and Mexico have sponsored a number of programs to improve the safe handling of this material. This is part of a larger effort to co-ordinate chemical distribution safety programmes in North America, which is co-sponsored by the US, Canadian and Mexican chemical associations.
• In Europe, 16 of 21 member federations of the European Chemical Industry Council (CEFIC) have processes for responding to chemical transportation emergencies under the umbrella International Chemical Environment (ICE) program, and information on best practices have been transferred to countries in eastern Europe. A similar programme has been operated in the U.S. and the Mexican and Brazilian federations are operating emergency response centres.

4.2 The Product Supply Chain as a Vehicle for Partnership
Chemical manufacturing associations are aware that the Responsible Care message and its benefits must be shared, and policed, throughout the chemical supply and customer chain to foster product stewardship and improve chemical risk management. An increasing number of corporate buyers are demanding comprehensive environmental and social information on the products or materials they purchase - a practice that has become known as supply-chain auditing.

Consequently there has been a campaign to encourage those associations involved in the supply chain to become literally "Partners" in the Responsible Care program. The international distributor and coatings associations have entered into partnership agreements with a number of organizations and in many of the countries where Responsible Care has been established. The strength of the resulting coverage of a product life c ycle has become very substantial and is a powerful example of a voluntary partnership.

The strategy adopted by a major Italian car manufacturer in reducing the number of suppliers and demanding improved quality is an example of how higher-quality products can be combined with better partnership with suppliers. A document called "Guidelines for Cooperation," signed in February 1994, states that "the partners accept the increasing environmental compatibility of their products and manufacturing processes as a priority, while respecting the economic and competitive balance."

A survey of 360 suppliers was conducted in 1994 to monitor their management of environmental resources (energy, water, air, and so on). The information allowed improvements that led to savings and the anticipation of expected legislation.

A "waste database" has been created with the local Chamber of Commerce. This puts companies producing waste in contact with those who can re-use or recycle it. A real "goods exchange" is operating with the company’s expertise under the "Control of Machine Waste" program, which is extended to 20 first-level suppliers, and is also on the Internet.

At a local plant, which produces car instrument dashboards and bumpers, a "packaging waste control" programme is under way with 70 suppliers, monitoring incoming and outgoing materials. The above partnership with suppliers has proved valuable in creating significant improvements in the company’s quality and environmental performance.

4.3 Dialogue with Stakeholders
One of the key tenets of Voluntary industry initiatives such as Responsible Care is openness and responsiveness to public and stakeholder concerns. Public interest groups and individual consumers exert pressure through their behaviour and attitudes. Therefore, industry appreciates the need to seek out these concerns and to include them in its development of policy.

Following the example pioneered by the Canadian CCPA, several national chemical associations have established National Advisory Panels to provide public input into the development and implementation of Responsible Care. These panels ensure that the performance expectations of interested groups are a part of the industry's planning processes. Formal national Responsible Care panels are now also sponsored in the US, Australia, Japan and Germany.

In addition to these national advisory processes, individual chemical companies have realized the need for local community dialogue about their production and distribution facilities. A growing number of formal and informal mechanisms are being established by chemical companies around the world to foster dialogue with local communities. One successful example is the Community Advisory Panel, the local version of the National Advisory Panel, which provides input to chemical facility management and reinforces the local facility’s accountability to the community in which it operates. In cases where panels do not yet exist, facility managers seek outside parties’ input through other forums such as meetings with local leaders, open houses or progress reports to the media.

Discussions between stakeholders on the best way to reach sustainability are often hampered by a lack of credible information. A pioneering study to address this problem with regard to the pulp and paper industry is the WBCSD initiative to commission, with multi stakeholder funding, a study by the International Institute for Environment and Development entitled "Towards a Sustainable Paper Cycle"

The findings were published after over two years of research. They created a focal point for further debate and consultation, triggering a series of presentations and seminars to analyze the study’s recommendations and evolve local programs of action.

Also useful within such debates are examples such as that of a paper company active in Brazil which has created social development in a sustainable way in areas where hardly anything existed but poverty and misery. It now employs more than 5000 people directly and indirectly, supporting a local population of over 20 000, and has invested $125 million in creating a social services infrastructure, such as schools, medical facilities and housing. It also provides financial and human resources for projects that lead to self-sustaining improvements in the living conditions of neighbouring communities.

The company planted eucalyptus trees in areas which had mostly previously been degraded and manages them, in a way to preserve the Biodiversity and protect the soil and water resources. To assure a balanced environment, the eucalyptus plantations are interspersed with 56 000 hectares of native reserves, where about one million native trees per year are planted in order to enhance biodiversity. These preservations correspond to 27 % of the company's total landholding. The eucalyptus wood is processed into pulp in a modern mill, which complies with world class environmental standards.

5 Goal setting and reporting on progress

There has been a substantial growth in company environmental performance reports called for in the ICC Charter's 16th Principle on compliance and reporting. Modelled on financial reports and accounts, these reports typically describe corporate responses to environmental issues, such as management and company attitudes to emerging areas of debate, along with data on wastes and emissions performance.

Various broad-based standards, such as the Public Environmental Reporting Initiative (PERI), the Coalition for Environmentally Responsible Economies (CERES) and those from the United Nations Environment Programme (UNEP), have emerged to make the data more comparable across sectors and the reports more consistent in their content. The production of such reports often helps companies to get to grips with parts of their business that have not come under such specific management scrutiny before. Many stakeholders, particularly the investment community, are increasingly looking to these reports for evidence of the effective management of environmental risk.

5.1 Sustainable Development Report
An example of the role such reports can play is that of a major electricity utility, which has recently completed the transition from an annual environmental performance report to a Sustainable Development Report (for 1995) that addressed the company’s goals and performance relative to all three components of sustainability: environmental, financial and social integrity.

The rationale underlying the reporting is to provide employees and external stakeholders a frank, even-handed assessment of the company’s achievements and shortcomings with respect to its initial progress towards sustainability.

In the future, business will need both to achieve and demonstrate continuous improvement. Business must recognize that there is growing stakeholder awareness that business decisions are skewed when environmental performance, costs, and liabilities are not integrated into the strategic decision-making of companies. Increasingly, business will be required to demonstrate management of environmental and social issues along with traditional financial performance to secure the social license to operate.

Future environmental reporting will need to integrate both financial and non financial performance measures and serve the information needs of external stakeholders, internal management, and front-line personnel; eventually, such information will be integrated into annual reports.

5.2 Reporting on Responsible Care Achievements
Since the early 1990s, when chemical companies were among the first to publish environmental reports, many of the national chemical associations implementing Responsible Care began to collect EHS data from their members to measure the impact on performance. While the amount of performance data varies between countries, positive trends are beginning to emerge wherever Responsible Care is being implemented. Reporting at national association level also provides a basis for benchmarking, an aspect not usually covered in corporate reports.

Specific examples of the global chemical industry’s achievements through Responsible Care taken from national association reports include:

the German chemical industry achieved a reduction in CO2-emissions of 25 % between 1990 and 1993, and has undertaken to reduce CO2-emissions by 40 % by the year 2005.

as a result of voluntary reduction efforts sponsored by the Japan Chemical Industry Association (JCIA), the level of vinyl chloride monomer (VCM) emissions at VCM/PVC production facilities decreased by almost 50 percent between 1990 and 1993.

in the United Kingdom, member companies of the Cement Industry Association have reduced discharges of " Red List " substances by 89 percent since 1990. Members of the Dutch chemical industry (VNCI) continue to make progress in emission reductions where a goal of reducing emissions by 50 % was achieved in 1994, more than five years ahead of schedule.

member companies of the CCPA have voluntarily reduced emissions of all substances except CO2 by 50 % since 1992 and have projected a further 50 % reduction by 2000.

Finland’s Kemianteollisuus Ry collects and publishes more than 20 performance indicators. Since 1988 lost time accidents have decreased by 50 percent while the number of member company personnel participating in safety training courses has doubled.

members of the Plastics and Chemicals Industries Association (PACIA) in Australia have reduced the number of transportation incidents involving chemicals by more than 35 % since 1990. Employees’ lost time injuries are down 30 % since 1990 and workdays lost per employee by 50 %.

Federchimica, the Italian chemical industry federation showed an average improvement of 50 % in overall EHS performance between 1989 and 1995. A survey, carried out on 42 000 employees at 57 companies, demonstrated a high awareness of environmental issues.

Although far from comprehensive, these results and activities reflect a general trend within associations which have adopted Responsible Care. Currently, more than half of the associations implementing Responsible Care are collecting EHS performance data, and results are made widely available, particularly to local communities. CEFIC is issuing a Guidance on EHS reporting to facilitate a CEFIC report covering all European federations. Many associations are just beginning to identify performance indicators for future use. The ICCA fully expects EHS performance results in these countries to mirror the progress being made in those countries where the data is already being reported.

The ICCA will pursue the goal of ensuring the Responsible Care verification within its member associations, to confirm their commitment to, and progress in, implementing Responsible Care. Moreover, ICCA is extending Responsible Care to an ever-increasing number of chemical companies around the world, and spreading its partnership ethic to customers, suppliers and allied industries. Such partnerships will allow a fuller exercise of responsibility through a product's entire life cycle.

6 Future Challenges and Conclusions

There is a lively global debate today about how various sectors of society are, and should be, changing. Business, through freer trade, is spreading the technologies, skills and processes required for development and, given the right global frameworks, for more sustainable development. Economic growth provides the conditions under which the protection of the environment can best be achieved. Responsive and entrepreneurial businesses are required as the driving force for sustainable economic development and for providing the managerial, technical and financial resources to contribute to the resolution of environmental challenges.

Business acknowledges that many challenges remain. Industry must continue to improve performance and increase its collection and dissemination of data demonstrating this progress as a way of keeping stakeholders informed of its policies and practices. Business and industry will continue to explore verification of adherence to voluntary initiatives. As other forms of auditing and verification such as ISO-14001 and EMAS are adopted, business and industry will strive to integrate their verification processes with these useful voluntary standards and programs.

A particular challenge in pursuit of responsible entrepreneurship will be bringing SMEs into the mainstream of good environment management, and using investment, trade and the market to carry good practices, technologies and expertise to developing countries and countries with economies in transition. Partnerships with government and other stakeholders will be crucial to support this effort in the next phase of Agenda 21 implementation.

The ICC Business Charter, which conveys the spirit of responsible entrepreneurship, is a good example of an industry-led voluntary initiative which encourages companies to go beyond regulatory system limits. Voluntary systems, and other agreements with policy makers, demonstrate that business strategies can indeed address the complex problems of environmental aspects of products and processes. Voluntary approaches should, therefore, be used by policy makers as they respond to business needs and market conditions c omplementing regulation.

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ICC Environment Commission

WBCSD

UNCSD

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