Current Issues of Sustainable Development 9781846638114, 9781846638107

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ISSN 1477-7835

Volume 19 Number 2 2008

Management of Environmental Quality An International Journal

Current issues of sustainable development Guest Editors: Professor Joost Platje and Professor Walter Leal Filho

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Management of Environmental Quality:

ISSN 1477-7835 Volume 19 Number 2 2008

An International Journal Current issues of sustainable development Guest Editors Professor Joost Platje and Professor Walter Leal Filho

Access this journal online _______________________________ 151 Editorial review board____________________________________ 152 Guest editorial ____________________________________________ 153 Patterns of environmental management in the Chilean manufacturing industry: an empirical approach Marı´a Teresa Ruiz-Tagle _________________________________________

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Combined geo-electrical and hydro-chemical methods to detect salt-water intrusion: a case study from southwest Saudi Arabia Abdulaziz M. Al-Bassam and M. Tahir Hussein_______________________

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Governance barriers to local sustainable development in Poland Agnieszka Sobol ________________________________________________

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Does the environmental management standard ISO 14001 stimulate sustainable development? An example from the energy sector in Poland Bartosz Fortun´ski _______________________________________________

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CONTENTS

CONTENTS continued

Adaptation of enterprises to the requirements of sustainable development in the light of new institutional economics Robert Kudl/ ak __________________________________________________

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An institutional capital approach to sustainable development Joost Platje ____________________________________________________

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Talking about the future within an SME? Corporate foresight and the potential contributions to sustainable development Markus Will ___________________________________________________

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Urban development versus sustainable development in Poland Elz˙bieta Strzelecka_______________________________________________

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News _______________________________________________________ 253 News from the net ________________________________________ 256 Books and resources _____________________________________ 257 Diary _______________________________________________________ 260 Features ___________________________________________________ 263

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MEQ 19,2

EDITORIAL REVIEW BOARD Dr Joseph D. Beasley Director, The Mother and Child Corporation, New York, USA Professor Per Berg Uppsala Agricultural University, Sweden

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Dr Alan Bernstein Senior Investigator, Samuel Lunenfeld Research Institute, Toronto, Ontario, Canada

Professor Robert E. Pollack Columbia University, New York, USA

Professor Luca Bonomo Polytechnic of Milan, Italy

Professor F. Brian Pyatt Nottingham Trent University, UK

Mary Ann Curran US Environmental Protection Agency, Cincinnati, USA Professor Bo R. Do¨o¨s Environment Programme, Austria

Professor William J. Rea MD Environmental Health Centre, Dallas, USA

Rick Durbrow US Environmental Protection Agency, Georgia, USA Dr John E. Ehiri School of Public Health, University of Alabama at Birmingham, USA Dr David Elliott Open University, Walton Hall, Milton Keynes, UK

Dr Konstantinos A. Spanos N.AG.RE.F. – Forest Research Institute, Greece Professor Gerald Vinten British Accreditation Council, London, UK Dr J. Warford Visiting Professor in Environmental Economics, CSERGE, London, UK Ceri Warnock Faculty of Law, University of Otago, New Zealand

Mr Samuel O. Idowu London Metropolitan University, UK

Professor Myron Winick MD President, University of Health Sciences, The Chicago Medical School, Illinois, USA

Professor Nikolay Ivanov Russian Academy of Sciences, St Petersburg, Russia

Dr Vesa Yli-Pelkonen Department of Biological and Environmental Sciences, University of Helsinki, Finland

Professor Robert J. Levine MD Yale University, USA Professor Dominique Lison Universite´ Catholique de Louvain, Belgium

Management of Environmental Quality: An International Journal Vol. 19 No. 2, 2008 p. 152 # Emerald Group Publishing Limited 1477-7835

Professor Dr Munir Ozturk Ege University, Turkey Professor Wai-on Phoon University of Sydney, Australia Professor dr Joost Platje Faculty of Economics, Opole University, Poland

Guest editorial About the Guest Editors Joost Platje is a Professor at the Faculty of Economics of Opole University (Poland). He received his PhD at Groningen University (The Netherlands) on the topic “Institutional change and Poland’s Economic Performance since the 1970s – incentives and transaction costs”. His current research focuses on the application of theories of New Institutional Economics to issues of sustainable development. Walter Leal Filho is a Professor and Head of the Research and Transfer Centre “Applications of Life Sciences” at the Hamburg University of Applied Sciences in Germany.

Guest editorial

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Welcome to this special issue of MEQ, containing a selection of papers from the 7th international conference on “Current Issues of Sustainable Development”, held in April 2007 in Opole (Poland), as well as two interesting further papers on environmental management in Chile and Saudi Arabia. The papers from the “Current Issues of Sustainable Development” conference consider the importance of institutions and governance, as well as the role of business for sustainable development and environmental management issues. As the achievement of sustainable development requires policy and activities at different levels, an institutional approach, interdisciplinary by its nature, may be useful. The general question is not only to what extent government policy at different administrative levels, but also culture and mental models influence the functioning of markets and enterprises, and in turn hamper or contribute to sustainable development. This is related to Donna Meadows’ argument about leverage points – where to intervene most effectively in the system in order to achieve sustainable development? For example, companies may use environmental management systems for marketing reasons and to increase competition, but when management and employees are not really convinced of its usefulness, positive effects for the environment are likely to be small. Other questions concern e.g. how to create effective policy to get enterprises interested in environmental issues, and to stimulate them to use longer time-horizons in decision making. The institutional basis for environmental management and sustainable development is likely to increase in importance in a world where not only the economy is globalising, but also environmental problems seem to become of a more and more cross-border or global nature. This poses the question – who is able to influence what kind of sustainable development? We hope that the papers, besides enjoyable reading, provide some thoughts on these issues. Enjoy your reading! Joost Platje and Walter Leal Filho

Management of Environmental Quality: An International Journal Vol. 19 No. 2, 2008 p. 153 q Emerald Group Publishing Limited 1477-7835

The current issue and full text archive of this journal is available at www.emeraldinsight.com/1477-7835.htm

MEQ 19,2

Patterns of environmental management in the Chilean manufacturing industry

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An empirical approach

Received 6 December 2006 Revised 29 August 2007 Accepted 27 September 2007

Marı´a Teresa Ruiz-Tagle Department of Land Economy, University of Cambridge, Cambridge, UK Abstract Purpose – The purpose of this paper is to allow environmental policy makers to identify the sort of problems and obstacles and the kind of influences that firms face from different economic actors, when trying to improve their environmental performance. It aims to identify the actions that are taken by firms to cope with more difficult environmental regulations. These will help the regulator in the design of strategies to foster environmental improvements by firms. Design/methodology/approach – This paper analyses some of the specific questions of an environmental management survey that was carried out in the manufacturing industry in Chile in 2001. A large number of variables from the survey were involved and they are hard to handle in such disaggregated terms. The factor analysis (FA) methodology is thus applied to reduce the information to a manageable number of variables. Findings – The results of the FA methodology provide the regulator with fewer dimensions to concentrate on when designing environmental strategies, while they also provide an insight into each general area of concern. The indices of environmental performance that are developed in the paper contribute to the targeting of policy recommendations, as they allow comparisons of the levels of environmental performance between different sorts of manufacturing plants. Practical implications – This paper helps to determine patterns of environmental performance in manufacturing firms, which are very helpful for environmental policy makers when designing strategies to foster environmental improvements by firms, particularly when countries are facing budget constraints. This case study could also be illustrative for other countries with similar characteristics. Originality/value – The approach used in this paper allows environmental policy makers to count on certain indicators to efficiently target their environmental policies. Keywords Environmental management, Manufacturing industries, Environmental regulations, Incentive schemes, Chile Paper type Case study

Management of Environmental Quality: An International Journal Vol. 19 No. 2, 2008 pp. 154-178 q Emerald Group Publishing Limited 1477-7835 DOI 10.1108/14777830810856555

1. Introduction One particular goal for the environmental regulator should be to foster and to promote the improvement of the environmental performance of firms and to force them to comply with environmental regulation targets (Tietenberg, 1990; OECD 1989, 1994). Nonetheless, policy makers need to know about the sorts of problems or obstacles and the kinds of influences that different industrial plants face when trying to improve their environmental performance, and which actions are being implemented by plants to cope with more demanding environmental regulations (see Khanna and Anton, 2002). Once the regulator knows about those issues, among others, it could be in a

better position to assist certain groups of firms that are particularly affected. For instance, it might try to reduce obstacles that hinder environmental improvements, or to encourage environmental training, among other policies. Indeed, it has been shown that firms have various reasons for improving their environmental performance (see Dasgupta et al., 2000; Arora and Cason, 1995; Henriques and Sadorsky, 1996). Examples of these are national and international environmental standard requirements, pressure from communities and neighbours and the requirements of clients and suppliers. Likewise, there are various factors that inhibit plants from improving their environmental performance, or that simply impede them from complying with environmental regulations. In general terms, it is possible to recognise two different kinds of obstacles that affect the environmental performance of firms. Some are obstacles that are external to the plants and the others are internal obstacles. External obstacles correspond to barriers that are in the external environment that firms face, which plants cannot control or affect directly and which can determine their capacity to cope with environmental demands. Thus, imperfect capital markets, excess of government bureaucracy and lack of environmental information, among others, are factors that could determine the plants’ ability to improve their environmental performance. Internal obstacles, on the other hand, correspond to the internal limitations that firms have to overcome in order to improve their environmental performance. Lack of economic and/or human resources, or environmental training programmes, or a low priority given to training by firms, or simply lack of time, are some examples (see surveys in Dasgupta et al. (2000) and Henriques and Sadorsky (1996)). Firms also try to implement internal environmental management policies in order to control and improve their environmental performance. Examples of these commitments are the existence of a written environmental policy, plans and procedures to cope with environmental problems faced by plants, and so forth. Plants also try to train their personnel in environmental issues in order to cope with more demanding environmental requirements. However, plants sometimes face impediments when they try to invest in environmental training (see Khanna and Anton, 2002). It is interesting to attempt to identify the relative importance or influence of each of these elements for different groups of manufacturing plants (e.g. by plant size, industrial sector and/or plant location), to give some background for policy recommendations. A large number of elements with several variables have been mentioned, but they are hard to handle in such disaggregated terms. Therefore, a procedure that allows us to define the general areas of the different problems or issues is still required. Moreover, an important issue in policy design is the possibility of supplying tools that might facilitate the targeting of usually scarce governmental resources. Hence, tools that allow us to differentiate groups of plants with similar characteristics are necessary. Indeed, some of the previous elements depend on the specific characteristics of firms, such as the type of industry, plant size or location. This paper continues by briefly presenting the factor analysis (FA) methodology as a reduction technique in section 2 and the actual FA results in section 3. Section 4 develops some indices of environmental performance and internal and external obstacles, in order to have even fewer dimensions relating to the same issues, and then to be able to compare the environmental performance of firms, the obstacles faced by firms in

Patterns of environmental management 155

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improving their environmental performance, etc. between different types of plants (see Henriques and Sadorsky, 1996). Section 5 shows the results of cluster analysis performed on some of the previous aspects, with the purpose of distinguishing different groups of plants with similar characteristics. This will again assist in the focalisation and recommendation of environmental policies. Section 6 concludes the paper.

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2. FA methodology In order to be able to reduce the information into a more manageable and meaningful form, FA methodology[1] is applied to a number of questions in an environmental performance survey that was carried out in the manufacturing industry in Chile in 2001[2]. The choice of Chile as a country was based on the fact that it is a developing country with important environmental problems and with budget constraints on designing, implementing and enforcing environmental policies. So, instruments or indicators that allow policy makers to be more efficient in the allocation of resources are highly valued. FA is a method that reduces multiple information or dimensions into a single or lower level (reduction technique), disentangles the latent structure of the data matrix, develops empirical typologies of variables, allows index construction and the orthogonalisation of predictors. This technique can achieve this by analysing the structure of the interrelationships (correlations) between a large number of variables. The use of FA is helpful for identifying the obstacle-dimensions that impede the capacity of plants to improve their environmental performance and impede them in investing in environmental training programmes, among other issues (see Nunes, 2001). 3. Application of FA As part of this research, a list of 44 variables (items) is initially considered from the environmental survey (related to several questions from the questionnaire). FA is then applied in order to investigate the nature of the different areas under research. It is likely that the perceptions of firms in relation to obstacles, for instance, will vary with plant size and/or different industrial sectors. It is thus thought that grouping a priori all the firms in the FA will have little meaning. However, it is first necessary to establish a broader structure for each of the issues involved and, subsequently, to develop a more specific analysis for different industrial classifications. 3.1. External obstacles to environmental performance The first question to be analysed is No. 18 from the questionnaire. This requests information concerning the factors external to the plant which inhibit the improvement of their environmental performance (see Figure 1). Three components were extracted as suggested by the scree test criteria[3]. The total explained variance by this latent structure of three components is 72 per cent. As a result, the pattern of loadings arising from the retained three-factor structure shows a common conceptual meaning, which is[4]: (1) Component No. 1: “Lack of information”. (2) Component No. 2: “Regulation problems”. (3) Component No. 3: “Costs of financing environmental improvements”.

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Figure 1.

The next step in the process is to compute the component scores through the regression method. This will then allow the carrying out of a scale, industrial sector and location of plants heterogeneity analysis. High score values in Table I indicate that the plant considers that component highly. For small plants, “Lack of information” and “Costs of financing environmental improvements” seem more important external obstacles to improving environmental performance than “Regulation problems”, whereas, in the case of medium and large size plants, “Regulation problems” is clearly the most important factor. For the three components there is scale heterogeneity, indicating a significant influence of plant size[4].

Plant size Small Medium Large Industrial sector 31 32 33 34 35 36 37 38 Location RP RM Total

Lack of information

Regulation problems

Costs of financing environmental improvements

0.06 2 0.04 2 0.032

20.13 0.19 0.44

0.06 20.20 0.02

2 0.13 2 0.29 0.38 2 0.01 0.14 2 0.35 2 0.21 0.17

20.15 20.04 0.18 20.10 20.06 20.05 0.87 0.21

0.10 0.01 20.04 20.40 20.27 0.12 20.18 0.09

2 0.13 0.11 0

20.09 0.08

0.10 20.09 0

Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

Table I. Components’ mean external obstacles

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When analysing the responses by industrial sector, it is apparent that the first component (“Lack of information”) is a particularly important obstacle for the Wood (33)[5], Chemical (35) and Metal products (38) industries. The second component, “Regulation problems”, is especially relevant for the Basic Metals (37) industry and to a lesser extent for the Wood (33) and Metal Products (38) industries. The third component, “Costs of financing environmental improvements”, is a particular external obstacle for the Food (31) and Non-metallic Mineral Products (36) industries and, in a lesser degree, for the Metal Products (38) industry, which represent the majority of the most polluting industries in Chile. The Paper (34) industry, which is also highly polluting, seems to have fewer external obstacles than the previous ones, although its most important factor is “Lack of information”. The analysis of variance (ANOVA) test supports sector heterogeneity for each of the components. For those plants which are located in the Metropolitan region (RM), “Lack of information” and “Regulation problems” seem to be the more important external obstacles to improving their environmental performance. Instead, firms located outside the RM are more susceptible to the “Costs of financing environmental improvements”. Despite the fact that the means differ less between the location groups, as compared with the size groups or industrial sectors, the ANOVA test supports the hypothesis that the means are different between locations. 3.2. Internal obstacles to environmental performance The second question to be analysed is No. 19. This requests information concerning the internal factors that inhibit plants from improving their environmental performance (see Figure 2). Two components were extracted, defining two dimensions: (1) Component No. 1: “Lack of internal information and environmental concern”. (2) Component No. 2: “Economic factors (costs and resources)”. The first component differs considerably between different plant sizes (see Table II). The latter component (economic factors), while still statistically different for diverse plant sizes, varies less. Both components are relevant for small plants. Medium size plants seem to have fewer internal obstacles to improving their environmental performance

Figure 2.

Lack of internal information and concern Economic factors (costs and resources) Plant size Small Medium Large

0.02 2 0.13 0.18

0.02 20.02 20.10

Industrial sector 31 32 33 34 35 36 37 38

2 0.11 0.15 0.53 0.16 2 0.16 2 0.35 2 0.01 2 0.18

0.12 20.12 0.12 20.67 20.15 20.07 0.10 0.18

Location RP RM Total

0.01 2 0.01 0

0.11 20.09 0

Patterns of environmental management 159

Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

than do plants of other sizes (negative score values). In particular, large plants report a particular problem with “Lack of internal information and environmental concern”. The results show conclusive evidence concerning sector heterogeneity for both components, which means that problems vary considerably between different industrial sectors. The first component seems to be more relevant for the Wood (33), Paper (34) and Textile (32) industries. The second component represents a particularly important internal obstacle for the Food (31), Wood (33), Basic Metals (37) and Metal Products (38) industries. Finally, there is no strong evidence that there is any location heterogeneity regarding the first component “Lack of internal information and concern”. The second component is more relevant for plants located outside the RM. 3.3. Influence of factors on environmental improvements Question No. 25 requests information concerning the influence of different factors on the decisions of plants to take action towards environmental improvements. It aims to distinguish the elements that most encourage environmental improvements in firms. This question differs from the previous ones since it covers factors that involve a positive influence rather than a hindrance to environmental improvements (see Figure 3). Four components or factors are extracted, which provide information about the factors that influence plants’ environmental performance: (1) Component No. 1: “Responding to external institutions”. (2) Component No. 2: “International market”. (3) Component No. 3: “Productive chain”. (4) Component No. 4: “Formal and informal regulation”.

Table II. Components’ mean: external obstacles

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Figure 3.

When we analyse the forces that foster environmental improvement in different plant sizes, it is evident from Table III that the most important one for small firms is the “Productive chain”. For medium and large size plants “International market” and “Formal and informal regulation” are the two most relevant factors. For large plants “Responding to external institutions” is also an important factor. The ANOVA test supports the claim that all the components differ statistically by plant size, although there is no positive relationship. Small and medium size plants are not clearly distinguished by the first component, nor are small plants distinguished from large plants by the results of the third component (Bonferroni test)[4]. The available data (see Table III) supports sector heterogeneity for all four components, which means that the different sectors respond to different forces. The Food (31) and Basic Metal (37) industries are more sensitive to “Responding to external institutions”. The Basic Metals (37), Non-metallic Mineral Products (36), Food (31) and Chemical (35) industries are the most responsive to “International markets”. The industries that are most receptive to the indications of the different agents of the “Productive chain” are the Chemical (35), Paper (34) and Wood (33) industries. And, finally, the plants that are most sensitive to “Formal and informal regulation” are the Basic Metals (37), Food (31) and Metal Products (38) industries. It is interesting to note that all the most polluting industries are fairly responsive to “Formal and informal regulation”, as a factor that influences their decisions to take action on environmental improvements. Location also affects the influences on plants. Plants in the RM are more sensitive to “Responding to external institutions” and to the pressure coming from the “Productive chain” (see Table III). In contrast, plants in the RP are more influenced by the “International market”. It is also interesting to note that, despite the fact that there is not a huge difference in the mean of the “Formal and informal regulation” component for RP and RM, this factor is a stronger influence for plants situated in the RM than for those in the RP. These results suggest a larger influence of formal regulation on the Metropolitan region, as well as a stronger informal regulation. 3.4. Obstacles to environmental training Question No. 43 gathers information concerning the influence of different factors on plants’ decisions to invest in environmental training (see Figure 4).

Responding to external institutions

International markets

Productive chain

Formal and informal regulation

Plant size Small Medium Large

20.01 20.09 0.25

20.29 0.30 1.22

0.04 20.11 20.03

20.10 0.11 0.42

Industrial sector 31 32 33 34 35 36 37 38

0.27 20.06 20.03 0 20.02 20.20 0.21 20.36

0.11 20.15 20.13 20.01 0.08 0.23 0.19 20.15

20.22 20.18 0.21 0.27 0.38 20.12 0.04 0.1

0.26 20.61 20.08 20.08 20.19 0.05 0.47 0.12

Location RP RM Total

20.13 0.11 0

0.08 20.07 0

20.09 0.08 0

20.04 0.03 0

Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

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Table III. Components’ mean: influence of factors on environmental improvements

Figure 4.

One component is extracted and it is defined as follows: Component No. 1: “Lack of environmental training supply as well as lack of interest from workers”. Observing the data, it is possible to notice that there is not only scale heterogeneity, but also a positive relation (see Table IV). Nonetheless, the Bonferroni test suggests that small plants do not differ statistically from medium sized ones. Large plants find more problems with environmental training than do medium and small plants. This might be explained by the fact that staff at small plants receives much less environmental training than those at large ones; and, when they do receive it, they do so in more basic areas. Therefore, different perceptions of these obstacles are likely to be reflected in the responses of small and large plants.

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Table IV. Components’ mean: obstacles for environmental improvements

Lack of environmental training supply as well as lack of interest from workers Plant size Small Medium Large

2 0.03 0.03 0.15

Industrial sector 31 32 33 34 35 36 37 38

0.1 2 0.03 0.36 2 0.25 0.03 0.06 0.25 2 0.38

Location RP RM Total

0.14 2 0.12 0

Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

There is also sector heterogeneity regarding the obstacles to environmental training. The component identified is particularly relevant for the Wood (33) and Basic Metal (37) industries and has some relevance for the Food (31), Non-metallic Mineral Products (36) and Chemical (35) industries. The data also support the claim that this obstacle in environmental training is more relevant to plants situated in the RP than to those in the RM. 3.5. Environmental management of firms In the following section, question No. 14 will be analysed. This question gathers information about the internal environmental policy of the firm, with particular reference to the ISO 14.001 (see Figure 5). Three components were extracted and the total explained variance was 57 per cent. The components are:

Figure 5.

Patterns of environmental management

(1) Component No. 1: “Written environmental policy”. (2) Component No. 2: “Clean production system”. (3) Component No. 3: “Commitment to informal regulation”. Analysing the resulting scores values by plant size in Table V, it is evident that there is scale heterogeneity regarding firms’ environmental management commitments. It is possible to appreciate a positive relation; larger plants implement more elements of environmental management than do medium and small plants. Small plants tend to implement more elements of “Clean production system” and “Commitment with informal regulation” instead of having a “Written environmental policy”. However, medium and large-sized plants prioritise a “Written environmental policy”. There is sector heterogeneity regarding the level of implementation of environmental management elements within firms. “Written environmental policy” and “Clean production systems” are usually implemented in the Basic Metal (37) industry. Similarly, but to a lesser extent, they are implemented in the Chemical (35), Paper (34) and Metal Products (38) industries. Finally, a “Commitment to informal regulation” is particularly observed in the Basic Metal (37) industry, although it is also found in the Non-metallic Mineral Products (36), Wood (33) and Chemical (35) industries. There is also heterogeneity between plant locations. Plants located in the RP tend to implement more “Commitment with informal regulation” than plants situated in the RM. Perhaps being more isolated allows plants in the RP to sign agreements with local communities, or perhaps plants in the RM simply have fewer opportunities. Plants placed in the RM tend instead to implement more “Written environmental policy” and “Clean production system”, which is consistent with a more demanding environmental regulation in the Metropolitan area. Written environmental policy

Clean production system

Commitment with informal regulation

Plant size Small Medium Large

20.15 0.16 0.62

2 0.10 0.007 0.51

20.11 0.11 0.51

Industrial sector 31 32 33 34 35 36 37 38

20.05 0.2 20.28 0.08 0.18 20.02 1.86 0.08

2 0.03 2 0.48 2 0.06 0.44 0.21 2 0.05 1.24 0.17

20.10 20.19 0.31 20.24 0.27 0.36 2.65 20.13

Location RP RM Total

20.08 0.07 0

2 0.18 0.16 0

0.1 20.09 0

Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

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Table V. Components’ mean: obstacles for environmental improvements

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4. Aggregated indices of environmental performance and internal and external obstacles A limitation in the analysis of the original data is the fact that it has too many dimensions; indeed the original survey considers hundreds of variables. That is an impediment if the objective is to characterise industrial plants by economic sector, plant size or location in a more aggregated manner. It is thus interesting to construct a few indices (one dimension variable) in order to be able to compare different areas of interest among plants. In particular, it is interesting to see how different plant sizes, as well as plants from different industrial sectors or diverse locations, perform in specific areas. Some of the most interesting areas, and the ones chosen for the following analysis are: . the level of commitment of the managers of plants to Environmental Management policies; . the level of Technical Assistance and Environmental Training received by manufacturing firms; and . The Adoption of Standards by types of plants. An additional hypothesis to consider is that there is a relationship between the level of environmental performance of firms and the level of expenditure on environmental improvements and/or the amount of money spent on environmental permits and declarations by firms. Besides, the educational level of the firms’ employees, as well as the percentage of time that the environmental manager assigns to environmental issues, is also thought to be related to the environmental performance of firms. Likewise, it is of interest to analyse the correlation between the environmental performance of plants and the perceived internal and external obstacles to investing in environmental improvements. Therefore, in order to address all these issues, the construction of some indices is required. In particular, the following indices will be constructed: (1) Indices of environmental performance: . Index of Environmental Management (“EM”); . Index of Technical Assistance (“TA”); and . Index of Environmental Training (“ET”). (2) Indices of adoption of standards: . use of the standards (“S1”); and . requirements of using standards in their plants (“S2”). (3) Indices of obstacles: . Index of Internal Obstacles (“IO”); and . Index of External Obstacles (“EO”). 4.1. Index of Environmental Management In order to build the Index of Environmental Management, FA is applied to the responses to question No. 14, which addresses this issue. From Section 3.5, we can recall that three components were initially extracted when applying FA to all the variables. Unfortunately, this is not helpful in achieving a one-dimension result. It is

still necessary to extract only one component that represents our Index of Environmental Management. Thus, some variables that strongly determine the second and third components need to be omitted from the analysis. Just one combination of variables suggests extracting one component as necessary. This single extracted component explains 44 per cent of the variance of the variables under consideration, which is rather high[4]. The Index of Environmental “EM” shows a very low mean of 0.16, which suggests a low level of environmental management implementation by Chilean plants. The standard deviation is 0.24 and indicates that the index may permit us to discriminate among plants. The skewedness is 1.75, which indicates that the distribution is not symmetrical; indeed it is concentrated to the left of the median. The kurtosis is 2.57, which means that observations cluster more than in a normal distribution, and then the distribution has a longer tail. In fact, 45 per cent of the plants show an index of 0.00; while only 10 per cent present an index above 0.50. 4.2. Index of Technical Assistance To construct the Index of Technical Assistance, FA was applied to a subset of variables from question No. 31 (it asks about the areas in which plants have received technical assistance). Only a subset of variables was considered because there are some that are sector specific and are clearly biased towards some industrial sectors and thus cannot be generalised to all industrial plants. Based on the analysis of the subset of general variables, one factor was extracted, explaining 43 per cent of the total variance of the set of variables. The Index of Technical Assistance “TA” has a mean of 0.18 and a standard deviation of 0.24. The mean is again fairly low, but the standard deviation indicates differences among firms. It is important to point out that 45 per cent of the firms have not received any Technical Assistance (TA ¼ 0:0) and only 10 per cent of the firms have an index above 0.54. 4.3. Index of Environmental Training In order to calculate an index regarding firms’ investment in environmental training, FA is applied to a subset of variables of question No. 41, which deals with this subject. That subset was built in order to achieve only one component. Variables that scored too differently between economic sectors were eliminated. After some selection, only one component presents an eigenvalue larger than the unit. This explains 44 per cent of the variance of the set of variables. The latent vector of this component is used in the construction of the Environmental Training index (ET). The Index of Environmental Training “ET” has a mean of 0.11 and a standard deviation of 0.21. 70 per cent of the plants have not trained their employees in the areas mentioned here at all and only 10 per cent of the firms have an index above 0.39. 4.4. Indices of adoption of standards Two indices of adoption of standards were constructed and for that purpose FA was applied to two sets of variables. The first group corresponds to variables of question No. 16 (about the use of the standards) and the second group to those of question No. 45 (about the requirements of using standards in their plants). After applying FA to question No. 16, one eigenvalue appears larger than the unit and therefore it is extracted. This component explains 53 per cent of the variance of the variables

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analysed. The Index of Adoption of Standards “S1” has a mean of 0.39 and a standard deviation of 0.25. This is a fairly high mean and could be seen as a positive indicator of the commitment of firms to environmental standards. In addition, the standard deviation is also high, allowing a reasonable discrimination among firms. The first attempt to apply FA to question No. 45 to build the second index resulted in many components, reflecting the low level of correlation among the initial set of variables, and therefore giving a poor reduction in the number of dimensions. In order to identify a single index, it was necessary to decompose the available data. The results of this attempt suggest extracting just one component, which accounts for 48 per cent of the variance. This Index of Adoption of Standards “S2” has a mean of 0.20 and a standard deviation of 0.27, which show that plants are fairly concentrated. Indeed, 75 per cent of firms have an index below 0.11 and only 5 per cent of firms have an index value above 0.62. 4.5. Indices of internal and external obstacles faced by firms while trying to improve their environmental performance In order to have an even more reduced indicator of the internal and external obstacles to improving their environmental performance that are faced by plants, which allows us to analyse the relationship of these obstacles with the indices of environmental performance and the expenditure and education indicators, the FA methodology is again applied (see sections 3.1 and 3.2). The results were the production of an Index of External Obstacles (“EO”) and an Index of Internal Obstacles (“IO”). Although “High Interest Rates” (P_IR) is considered an important external obstacle, it was eliminated from the index because it suggests statistically the existence of a second component. It has therefore been decided to separate that variable as another explanatory variable, when considering the external obstacles[4]. 4.6. Interdependency among the indices In order to contribute to the design of environmental policies for manufacturing plants, it is worth analysing the existence of a certain dependency among the different indices of environmental performance. It is clear that the data from the survey do not allow us to determine causality in the relationship between the different indices; however, it allows us to compute statistical correlations that measure the strength and direction of the dependency among them, obtained from the entrepreneurs’ assessments. It is also worth considering whether there is any kind of dependency between the level of certain indices of environmental performance and the plants’ expenditure on environmental improvements. In other words, it would also be interesting to find out whether manufacturing plants are really investing in order to improve their environmental performance. In this regard, four different measures of environmental expenditure are also included in this analysis. The first two are obtained from the questionnaire and they ask about the investment in financing environmental improvements during the periods 1995-1999 and 2000-2005 (called Inv95_99 and Inv00_05, respectively). The second two, also obtained from the questionnaire, ask about the total investment and total annual operating costs of all the necessary actions required to comply with environmental permits or declarations that apply to their plants (Pydinv, Pydoper, respectively).

Moreover, it is also worth finding out whether there is any dependency between the level of the indices of environmental management and the level of education of the firms’ personnel and the effort of the environmental manager on environmental issues. Indeed, it is believed that more educated employees, as well as more specialized environmental managers, could have an impact on firms’ environmental management commitments and firms’ environmental performance, measured here by the different indices. The variables related to the level of education are obtained from the questionnaire and provide information about the level of education of the executive director of the plants (P_ED), the head of the departments or areas (P_HD) and the rest of the employees (P_RE). Another question provides information about the percentage of time that the environmental manager dedicates to environmental issues (P_%T). For that purpose, an initial correlation matrix among the first five indices (“EM”, “TA”, “ET” – also called indices of environmental performance, “S1” and “S2”), four measures of expenditures (Inv95_99, Inv00_05, Pydinv and Pydoper) and four measures of education and effort (P_ED, P_HD, P_RE and P_%T) was computed[4]. As expected, the correlation between the index of Environmental Management (“EM”) and Technical Assistance (“TA”) and Environmental Training (“ET”) are positive and fairly high (54 per cent and 55 per cent, respectively), suggesting that plants that invest in “TA” and “ET”, also tend to have a high “EM” index. This suggests that these indices are determined by similar factors. However, these three indices are less positively correlated to the first index of adoption of standards “S1”, but even less so to “S2”. It is notable that all the variables regarding investment in environmental improvements are positively correlated with the indices of environmental performance (“EM”, “ET” and “TA”). This means that the more firms spend on environmental improvements, the more they implement Environmental Management policies (“EM”), Technical Assistance (“TA”) and Environmental Training (“ET”), among others. The investment indicators are also statistically correlated with the indices of Adoption of Standards. The indicators of the costs of complying with environmental permits and declarations are usually less correlated with the indices of environmental performance and are sometimes correlated negatively. As expected, the investment in permits during the period 1995-1999 is highly correlated (88 per cent) with investments during the period 2000-2005. This suggests that the firms that invested in the period 1995-1999, were most likely to do so again within the following five years. However, it is worth noting that while firms have been investing in environmental improvements (Inv95_99), they are also likely to have been spending more on environmental permits and declarations – Pydinv – (correlation is 59 per cent), but they also have had higher annual operating costs (Pydoper), which is worrying in the sense that environmental improvements seem to be linked to higher operating costs. Nonetheless, the correlation with Pydoper (expenses in operating costs) is smaller (10 per cent), which is encouraging. Finally, plants that are expecting to invest in environmental improvements in the following years (Inv00_05), have also declared that they are likely to have invested large amounts of money in acquiring environmental permits and declarations (the correlation is 54 per cent), and even more money in operating costs – Pydoper – (the correlation is 91 per cent). The correlations between the level of education of the different personnel of the plants and the indices of environmental performance are generally positive. The more

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highly educated are – for instance, the executive directors of the plants – the more likely these plants are to implement environmental management elements or to receive technical assistance or environmental training. The same happens with the level of adoption of environmental standards. However, the correlation factors are not that high. Besides, the level of education of employees does not seem to be particularly relevant to decisions on how much plants invest in environmental improvements or permits and declarations. Finally, the percentage of time that the environmental manager devotes to the issue of the environment (P_%T) is highly correlated with “TA” (42 per cent), and slightly less with “ET” (33 per cent) and “S2” (34 per cent). It should be noticed that although P_%T is related to the level of implementation of environmental management policies (“EM”), that correlation is fairly low (26 per cent). Besides, P_%T is positively correlated with the level of investment in environmental improvements by firms. However, it is not highly related to the level of expenditure on environmental permits and declarations. We are now going to consider the interdependency of the Index of External Obstacles (“EO”) and the Index of Internal Obstacles (“IO”) with all the previous indices and indicators. This might guide some policy recommendations if, for instance, some of the indices of environmental performance are targeted. As expected, there is a high positive correlation between the two indices of obstacles and the indicator of “High Interest Rates” (P_IR). In other words, managers that perceive internal obstacles also tend to perceive external ones and to detect a high interest rate when trying to invest in improving environmental performance. It was found that plants that have internal obstacles (“IO”) also tend to have a low index of “EM” (negative correlation). Surprisingly, the index of “IO” is not correlated with “ET”. Moreover, “IO” is slightly positively correlated with “S2” and is negatively correlated with “S1”, which is not very intuitive. There is a negative correlation between “IO” and Inv95_99 and a positive correlation between “IO” and Pydoper. Finally, the correlation of the “IO” index with all the variables related to the level of education of employees and with the variable that represents the time dedicated by the environmental manager are, as expected, statistically negative. The “EO” index is slightly positively correlated with “TA” and “ET”. And, surprisingly, it is also positively correlated to the Index of Adoption of Standards “S2”. Moreover, it is negatively correlated with Inv95_99, Inv00_05 and Pydinv, while it is positively correlated with Pydoper. As expected, the interest rate (P_IR) is negatively correlated with both indicators of expenditure in environmental improvements. Finally, External Obstacles (“EO”) is not significantly correlated with any of the education variables, nor with the variable P_%T (time dedicated by the environmental manager). In conclusion, as perceived obstacles to improving environmental performance increase, plants tend to implement fewer elements in order to improve this performance. Even though this sounds pretty obvious, it is rather interesting to find that entrepreneurs’ opinions confirm it. 4.7. Scale, sector and location heterogeneity among the indices It is also interesting to explore the existence of heterogeneity among the previous indices. Therefore, the mean of the indices and expenditure and education indicators is

computed for each plant size, productive sector and location of the plant in order to check for statistical differences. There is a high degree of heterogeneity of scale associated with the first five indices (of environmental performance and adoption of standards: “EM”, “TA”, “ET”, “S1” and “S2”) and all indicators (of expenditure and education). Moreover, the scale effect is positive for all these indices, which means that larger firms have larger indices than smaller ones. This clearly suggests that environmental actions increase with the scale of the plants. Nonetheless, there are some cases in which the distinction between small and medium-sized plants is not significant. This is the case of the level of investment on environmental improvements (Inv95_99) and the investment in acquiring environmental permits and declarations (Pydinv). Besides, in the case of how much money plants invest in annual operating costs (Pydoper) it is interesting to note that small plants invest much more relatively than do medium-sized ones. Environmental managers from medium-sized plants tend to invest approximately the same amount of time (P_%T) on environmental issues as do managers in small-sized plants. This is discouraging, as it was expected that medium-sized plants would allocate more time to environmental issues. However, the first band available for this question in the questionnaire was a fairly high percentage (less than 25 per cent of their time); therefore, a large number of small and medium-sized plants chose that option and it was not possible to differentiate their answers very much. There is only one case in which medium sized plants are not statistically different from large plants; this happens when considering the level of education of the executive directors. The analysis of sectoral heterogeneity suggests significant differences in the indices among the industrial sectors. The highest indices of “EM”, “TA”, “ET”, “S1” and “S2” are concentrated on industries which are intensive in scale, in particular the Basic Metal (37) and, to a lesser extent, the Paper (34), Chemical (35) and Non-metallic Mineral Products (36) industries. Sectors with a lower environmental dynamism (lower means) are the Food (31), Textile (32), Wood (33) and Metal Products (38) industries. Considering the most polluting industries (Food (31), Paper (34), Non-metallic Mineral Products (36) and Metal Products (38)), it has been shown that they present different environmental performances. In fact, while the Paper (34) and Non-metallic Mineral Products (36) industries show high indices, the Food (31) and Metal Products (38) industries present lower ones. Regarding the level of investment in improving environmental performance, it is possible to observe that while the Chemicals (35) and Metal Products (38) industries have invested much more than the average in the period 1995-1999, only the Chemicals (35) and the Wood (33) industries were expected to achieve high investments for the period 2000-2005. Regarding expenditure on environmental permits and declarations (Pydinv), the Food (31) industry seems to have already invested a great deal, and even more in annual operating costs, than the Chemical (35) industry. Nonetheless, from among the most polluting industries, only the Paper (34) industry declared that it had spent a large sum of money on operating costs, which is slightly surprising. Considering now the level of education of personnel throughout the different sectors, it was found that executive directors tend to be more highly educated in the Non-metallic and Mineral Products (36), Basic Metal (37) and Textile (32) industries. The Heads of Departments and the Rest of the Employees in the Basic Metals (37), Paper (34) and Metal Products (38) industries have the highest levels of education.

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However, the level is worryingly low in the Food (31) and Non-metallic and Mineral Products (36) industries, which are highly polluting sectors. Regarding the length of time that the environmental manager dedicates to environmental matters, this is much greater in the Basic Metals (37) industry, followed by the Chemical (35) and Non-metallic and Mineral Products (36) industries. Among these, the last is highly polluting, and the Basic Metals (37) industry is a fairly high polluter. Considering location heterogeneity, we have to say that while some indices or indicators differ among different regions, others do not. The means of indices “TA” and “ET” are not statistically different across locations; while those of the index “S2” and Inv00_05 are only different at the 90 per cent confidence level. The means of “EM” and “S1” indices are larger for plants that are situated in the RM (Metropolitan region) than in the RP (rest of the country). This suggests that plants situated in the Metropolitan area tend to implement more elements of environmental management, as well as to adopt more environmental standards than do plants outside that area. This could reflect the stricter environmental regulation in the RM. Regarding the level of investment in environmental improvements, it was found that plants outside the RM have invested more in the last five years and have intentions to invest more in the following years, than plants in the Metropolitan area. This is surprising, but may reflect differences in industrial sectors. Plants in the RM have spent more on environmental permits and declarations than plants outside the RM. This is consistent with a more demanding regulation in the RM. The level of education of the different employees, the heads of departments and the rest of the personnel of plants situated in the Metropolitan area is higher than that in plants outside the RM. The same is true for the length of time dedicated by the environmental manager. This is likewise consistent with stricter environmental regulation in the RM. Further, it is also interesting to see whether different types of plants (diverse plant size, location and industrial sector) perceive different levels of obstacles (“EO”, “IO” and High Interest Rates – P_IR). Therefore, the same heterogeneity analysis is carried out. Analysing these indices by plant size, it is possible to note that they vary with plant size in the case of “IO” and “P_IR”. However, the differences are not in a positive direction. In other words, there is not a consistent relationship between the level of obstacles and plant size. In the case of the “EO” index, the ANOVA test of variance suggests that there is no difference between the means of the different plant sizes. It is therefore not possible to state that small plants perceive more obstacles (or obstacles of greater importance) than larger plants. The ANOVA test for sectoral diversity is significant for all three variables (“EO”, “IO”, P_IR). Thus, different sectors show significantly different means for these variables, suggesting that the levels of internal and external obstacles faced by plants vary with their industrial sectors. The industries that report more external barriers to the improvement of environmental performance are Wood (33), Basic Metal (37) and Metal Products (38). Those finding more internal problems are the Textile (32), Wood (33) and the Basic Metal (37) industries, while those that consider that high interest rates are an important obstacle are the Food (31), Textile (32), Non-metallic Mineral Products (36) and Metal Products (38) industries. It can be observed that the most polluting industries face more problems in trying to access the capital market than do the others. In fact, the “IO” and “EO” indices seem to be higher for industries that are not the most polluting ones.

The ANOVA test also indicates that only the “EO” and “IO” indices are significantly associated with location. It is interesting to note that while the index of external obstacles is higher for plants in the Metropolitan area (RM), the index of internal obstacles is higher in the rest of the country (RP). Finally, a high interest rate for financing environmental equipment (P_IR) is considered as the same type of obstacle for plants inside and outside the RM. This confirms our hypothesis, since location should not affect the indebtedness of plants. 5. Classifying groups of plants using cluster analysis Where possible, an environmental policy maker should seek to identify different groups of firms with similar characteristics, in order to develop different strategies for promoting environmental policies to them. Focalisation of government resources is expensive and it usually involves some bureaucracy. Therefore, indicators that allow us to identify groups of firms are required. From the previous analysis, it is apparent that there are different groups of plants. Indeed, plants of dissimilar size, from diverse industrial sectors and from different locations, have different levels of the indices. However, in the preceding analysis, only one variable at a time has been considered. In what follows, we intend to see if different types of plants cluster in a particular way when considering more than one variable. In particular, two different cluster analyses[4] are performed; one uses the indices of Environmental Management (“EM”) and Environmental Training (“ET”) as determinant variables and the second uses the “EM” and Technical Assistance (“TA”) indices. These combinations of variables are chosen because there are theoretical and conceptual considerations that can determine the differences between a plant’s environmental commitment and its performance, and that is why they were particularly considered in the survey and later in the indices (see Groenewegen and Vergragt, 1991; Henriques and Sadorsky, 1996; Porter and van der Linde, 1995, among others). Indeed, it is expected that plants with high levels of environmental training will be in a better position to implement elements of environmental management. The same applies to plants that invest in technical assistance. Besides, the selected variables are also easily identifiable by the regulator, which is useful when designing policy recommendations. Different methodologies can be used to classify firms into groups. It is appropriate to use a flexible and general measure of the differences between firms. Cluster analysis is a methodology that allows us to incorporate the previous considerations. It is a multivariate method that groups the observations according to some pre-predetermined criterion, in order that the members of each cluster have high internal homogeneity (within each cluster) and that clusters have high external heterogeneity (between clusters). 5.1. Cluster analysis using “EM” and “ET” indices Four clusters were specified exogenously and indeed the results show that they represent distinctive groups. Firms from Cluster 1 (C1) are the least environmentally committed (see Table VI)[6], while those from Cluster 4 (C4) are the most committed. The ANOVA test suggests the existence of significant differences between clusters. It is worth mentioning that while C1 represents 77 per cent of the total number of plants, C4 represents only 4.1 per cent.

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Moreover, it is also interesting to determine to which categories of plant size, industrial sector and location in the country these clusters correspond. In this cluster analysis it is apparent that there is an association between plant size and cluster. Small plants tend to belong to C1 (84 per cent), while large plants are relatively more prevalent in C4 (43 per cent is in C1, but 21 per cent is in C4). As a general classification, it can be said that plants of all sizes are essentially concentrated in C1 (77 per cent), reflecting a low environmental commitment, this being particularly the case with small plants (73 per cent). However, large plants are more divided between clusters, which suggest that the level of plants’ environmental commitment increases with plant size. The Pearson chi-square and Cramer’s V statistics support the hypothesis that there is a relationship between cluster and industrial sector. The Textile (32) and Wood (33) industries, as well as the Non-metallic Mineral Products (36) and Metal Products (38) industries tend to have a lower environmental commitment and hence concentrate in C1 (more than 80 per cent of each sector). Instead, the Paper (34), Chemicals (35) and Basic Metals (37) industries tend more towards C4 (very high environmental commitment). Indeed, 7 per cent of Paper (34) plants, 10 per cent of Chemical (35) plants and 64 per cent of Basic Metal (37) plants belong to C4. It is also notable that not all the most polluting firms are the most environmentally committed. Nonetheless, the Food (31) industry presents a higher proportion of plants in C2 than the average of all the other sectors, which is quite positive given its pollution level. Non-metallic and Mineral Products (36) industry is more concentrated than the average in C1 and C4, suggesting 2 types of firms, those that are highly environmentally committed and those that are less committed. Metal products (38) plants are more concentrated than the average in C1 and C3. Despite the above, it should be recognised that the general level of environmental commitment appears to be relatively low, with the exception of the Basic Metals (37) industry, which is clearly concentrated in C4. The Pearson chi-square suggests that there is an association between clusters and the location of plants. However, it is more difficult to differentiate between plants using location than using size or industrial sector. As a general classification, it can be said that plants in all locations of the country are agglomerated in C1 (above 75 per cent), which suggests generally a low environmental commitment. However, plants in the RM are more common in C3 and C4 (17 per cent in total), than plants in the RM (12 per cent in total). Indeed, plants that are outside the Metropolitan area (i.e. in the RP) characteristically are in C2. C3 is predominantly composed of plants from the Metropolitan region.

Clusters

Table VI. Cluster analysis using EM and ET

C1 C2 C3 C4

Low: EM, ET Low: EM, High: ET High: EM, Low: ET High: EM, ET

Plant size

Industrial sector

Region

S, M, L M, L M L

31, 32, 33, 34, 35, 36, 38 31 34, 35, 37, 38 35, 37

RM, RP RP RM RP

Note: Italics means more concentrated in that particular cluster Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

5.2. Cluster analysis using EM and TA indices Four groups were specified exogenously. The results in Table VII show that there are four rather different groups of plants. Plants from Cluster 1 (C1) correspond to those with a lower level of environmental commitment, while those from Cluster 4 (C4) are those that are more committed to the environment. The results also suggest that it is equally possible to discriminate by using the “EM” index as by using the “TA” one. In this exercise, C1 represents 65 per cent of all plants, while C4 represents only 6 per cent. This shows a slightly more even distribution of plants between clusters than the previous exercise. Likewise, it is also interesting to determine to which categories of plant size, industrial sector and location each of these clusters belongs. There is a degree of dependency between the plant sizes and the clusters. Indeed, this is better supported than when using the previous cluster analysis (“EM” and “ET”). As a general classification, it can be said that small and medium-sized plants tend to be concentrated in C1 (76 per cent and 55 per cent, respectively), which suggests a low level of environmental commitment. Medium-sized plants are also concentrated in C2 (28 per cent). On the other hand, large plants are concentrated in C2 and C4 (44 per cent and 27 per cent, respectively), which suggest that the level of environmental commitment increases with plant size. The Pearson chi-square statistic supports the hypothesis that there is a relationship between cluster and industrial sector. Once more, this statistic indicates that it is easier to discriminate by plant size than by industrial sector. Generally all industrial sectors, other than the Basic Metal (37) industry, tend to be concentrated in C1. Sectors with lower environmental commitment correspond, principally, to the Food (31), Textile (32) and Wood (33) industries (89 per cent, 81 per cent and 75 per cent of plants in C1). Instead, industries with a very high environmental commitment (more than the average) are clearly the Basic Metals (37), Chemical (35), Paper (34) industries and also Non-metallic mineral products (36) (64 per cent, 10 per cent, 7 per cent and 6 per cent, respectively). Again, not all the most polluting industries (Food (31), Paper (34), Non-metallic minerals (36) and Metal products (38)) are the more environmentally committed. Nevertheless, plants from the Food (31) industry tend to be more prevalent in C2 than the average of all the other sectors. The Non-metallic Mineral Products (36) industry is more concentrated than the average in C2 and slightly concentrated in C4, which means that there are clearly two types of firms, those that are highly environmentally committed and those that are receiving more “TA” than the average. Finally, the Metal Products (38) industry is more concentrated than the average in C2 and C3.

Clusters C1 C2 C3 C4

Low: EM, TA Low: EM, High: TA High: EM, Low: TA High: EM, TA

Plant size

Industrial sector

Region

S, M S, M, L

31, 32, 33, 34, 35, 36, 38 31, 33, 34, 35, 36, 38 35, 37, 38 35, 37

RM, RP RM, RP RM

l

Note: Italics means more concentrated in that particular cluster Source: Own elaboration using data from the Chilean Environmental Performance Survey 2001

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The Pearson chi-square and Cramer’s V statistics support the hypothesis that there is a relationship between cluster and plant location. However, the latter statistic indicates that it is easier to discriminate by plant size and by industrial sector than by plant location. Generally, most plants belong to C1, which suggests a low level of environmental commitment (above 62 per cent of plants in the Metropolitan region (RM) and 69 per cent in the Rest of the Country (RP)). However, plants in the RM are more divided between clusters. Plants with high environmental management and low environmental training, C3, are essentially the plants of the Metropolitan region. 6. Conclusions Policy makers need to know about the types of obstacles and influences that are faced by diverse manufacturing plants when trying to improve their environmental performance. Besides, they also need to know about the actions that are implemented by plants to cope with more difficult environmental regulations. All this is necessary for the regulator to be in a better position to design strategies to foster environmental improvements, to implement more specialised policies, and to concentrate on groups of plants that are more affected by obstacles that prevent them from improving their environmental performance, or on groups of plants that are particularly called to the attention of the regulator. The environmental survey carried out in Chile asks about a series of areas that are extremely relevant for the design of environmental recommendations. However, there are several questions that are involved in these areas, with each of them requiring consideration of a series of variables. Therefore, a procedure that allows us to reduce the information in order to make it more manageable is still required. In this paper, FA methodology was used as a tool to reduce information and to extract the latent structure of the data. After applying FA, an underlying structure of internal and external obstacles to the improvement of environmental performance was obtained from the data. The factors associated with the incentives that drive plants to improve their environmental performance, as well as the dimensions that inhibit environmental training, were identified. Finally, the different elements that plants implement in order to comply with their own environmental management requirements, or with compulsory requirements, were also recognised. The results of the FA give the environmental regulator in Chile a smaller set of concepts to consider in any strategy, while still providing insight into what constitutes each general area. Additionally, as this information has also been analysed by plant size, industrial sector and location, and in all cases it has shown heterogeneity among plants, it allows environmental policy to be directed fairly precisely. Once the regulator knows about these issues, it will be in a better position to assist certain groups of firms that are particularly affected. For instance, it might try to reduce obstacles that hinder environmental improvements, or to encourage environmental training, among other policies. In particular, regarding the presence of “external obstacles” when plants try to improve their environmental performance, FA suggests that manufacturing plants located in the Metropolitan area tend to have information problems, as well as regulatory ones. However, plants located in the rest of the country essentially have problems with the cost of financing improvements. Large plants tend to declare problems with costs and concerns regarding the existing regulatory framework, while small plants report information and cost constraints. Considering “internal obstacles”,

large plants report a lack of internal information and environmental concern. Small plants also report this but they consider in addition that economic factors constitute another obstacle. Moreover, plants located outside the Metropolitan region mostly considered that economic factors represent an obstacle. The above considerations allow the Chilean regulator to promote specific policies in order to solve or reduce the obstacles that are faced by different types of firms. For instance, if the regulator is particularly concerned about the environmental performance of small plants, because they might constitute the group that complies least with environmental regulation, it can design a strategy that particularly targets the obstacles faced by this group of plants; in this case, it might promote methods of financing environmentally friendly technologies and/or strategies to disseminate environmental information. Considering the factors that positively influence the decisions of plants to invest in environmental improvements, the results of this research have shown that all the industries are affected by the presence of both formal and informal regulation. Small plants tend to be more affected by the actions or decisions coming from the productive chain, while medium and large plants add that they are also affected by the presence of international markets. This last source of influence principally affects plants located outside the Metropolitan region (RM). Plants situated in the RM tend to be more affected by the productive chain, external institutions and formal and informal regulation. It follows that the Chilean regulator has to consider different elements in connection with the diverse groups of plants if it wants to foster actions that will lead them to invest in environmental improvements. Considering now the obstacles faced by plants to investments in environmental training and in environmental management procedures, the data suggest that there are clear scale, sector and location heterogeneities. However, in the latter case, it is possible to recognise a positive and consistent relationship when considering plant size. It is clear that the use of FA can collaborate in the design of policy recommendations in Chile. However, even fewer indicators are required when you need to target scarce resources. Thus, some indices of environmental performance were also developed. They include: indices of Environmental Management (“EM”), Environmental Training (“ET”), Technical Assistance (“TA”), Internal Obstacles (“IO”), External Obstacles (“EO”). Besides, some additional indicators that represent the plants’ level of expenditure on environmental improvements or permits were also included, as well as the level of education of the personnel. The results show that there is not only scale heterogeneity, but also usually a positive relationship among the indices. Regarding the different industrial sectors, the indices suggest that plants commit themselves environmentally or perform differently across sectors, but there are no clear differences between more or less polluting plants. There is not always a difference between locations, which would suggest that plants’ environmental performance does not differ systematically according to region, even though environmental restrictions in Chile do vary. The construction of these indices evidently contributes to the targeting of policy recommendations, as they easily permit comparisons of the levels of environmental performance between different sorts of plants. Moreover, these indices allow the checking of the level of interdependency between them and they allow us to determine certain patterns of environmental performance in Chilean manufacturing plants.

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Finally, cluster analysis is used in order to distinguish between different groups of plants with similar characteristics. In particular it is applied to two sets of indices: Environmental Management (“EM”) and Environmental Training (“ET”) and then to “EM” and Technical Assistance (“TA”). The results suggest that larger plants tend to acquire more environmental management, training and technical assistance, showing a scale effect. As expected, diverse industrial sectors cluster into different groups, not according to a unique pattern of environmental performance. Plants in the Metropolitan Region (RM) tend to show relatively more implementation of “EM” than those outside that region; but those outside the RM are likely to have a relatively higher level of “TA”. However, there is a group of plants from the rest of the country (RP) that presents high “EM” and high “TA”. This analysis clearly contributes to the focalisation of policy recommendations, as it suggests which types of plants have consistently reported lower or higher levels of environmental performance in Chile, according to the previous environmental considerations. In particular, it could be suggested that the Chilean regulator needs to create incentives for environmental training in plants that are situated in the Metropolitan region, while fostering the implementation of environmental management elements in plants located outside the RM. However, it should be considered that environmental requirements vary across the country, as does the level of pollution. The results of the FA methodology provide the regulator with fewer dimensions to concentrate on when designing environmental strategies, while they also provides an insight into each general area of concern. In particular, it contributes to the understanding of the influences that foster environmental improvements by plants, the types of obstacles that plants face, as well as the environmental measures that are implemented by plants to improve their performance in Chile. The indices of environmental performance developed in this paper contribute to the targeting of policy recommendations, as they allow comparisons of the levels of environmental performance between different sorts of manufacturing plants. This structure may help to determine patterns of environmental performance in manufacturing firms in Chile, as well as to tailor its environmental policy towards those areas that are more relevant for specific groups of plants. This is very helpful for environmental policy makers when designing strategies to foster environmental improvements by firms, particularly when that country is facing budget constraints, as is the case in Chile. It is worth mentioning that this case study could also be illustrative for other countries with similar characteristics. Nevertheless, while the previous analysis supplies several antecedents regarding different patterns of environmental performance of manufacturing plants, and recommendations of areas in which the regulator should target its policy in order to promote environmental improvements in Chile by specific industrial sector, plant size or location, it does not give information regarding the determinants of environmental compliance by firms, or those elements that determine whether a plant has a high or a low level of environmental management. Therefore, a multivariate analysis is still required in order to establish those determinants. In particular, policy makers might still need to know which sorts of plants have the lowest expected level of environmental compliance or have implemented the fewest elements of environmental management[7].

Notes 1. For a detailed explanation of the factor analysis methodology see Kline (1994), Tacq (1997) and Hair et al. (1998). 2. The survey was carried out in 700 manufacturing plants across Chile and across all manufacturing industrial sectors. The sample represents 15 per cent of the total manufacturing plants existing in Chile and has statistical significance across industrial sectors, location and plant’s size. 3. The scree plot is a plot of the variance associated with each factor. 4. For all tests see extended version in working paper: http://crrconference.org/downloads/ 2006ruiztagle.pdf 5. SIC (International Standardised Industrial Classification) 2nd revision. 6. Environmentally committed plants are those that implement environmental management elements, tend to sign agreements with the regulator and/or neighbours and communities, etc. 7. The author has already developed this multivariate analysis in the following working papers: “What are the determinants of environmental compliance in the Chilean manufacturing industry? A case study” http://www.landecon.cam.ac.uk/research/eeprg/ pdf/200617.pdf and “Why do manufacturing plants invest in environmental management?” http://www.landecon.cam.ac.uk/research/eeprg/pdf/200620.pdf

References Arora, S. and Cason, N. (1995), “An experiment in voluntary environmental regulation: the 33/50 program”, Journal of Environmental Economics and Management, Vol. 28 No. 3, pp. 271-86. Dasgupta, S., Hettige, H. and Wheeler, D. (2000), “What improves environmental performance? Evidence from Mexican industry”, Journal of Environmental Economics and Management, Vol. 39 No. 1, pp. 39-66. Groenewegen, P. and Vergragt, P. (1991), “Environmental issues as threats and opportunities for technological innovation”, Technology Analysis and Strategic Management, Vol. 3, pp. 43-55. Hair, J., Anderson, R., Tatham, R. and Black, W. (1998), Multivariate Data Analysis, Prentice-Hall, Upper Saddle River, NJ. Henriques, I. and Sadorsky, P. (1996), “The determinants of an environmentally responsive firm: an empirical approach”, Journal of Environmental Economics and Management, Vol. 30, pp. 381-95. Khanna, M. and Anton, W.R. (2002), “Corporate environmental management: regulatory and market-based incentives”, Land Economics, Vol. 78 No. 4, pp. 539-58. Kline, P. (1994), An Easy Guide to Factor Analysis, Routledge, London. Nunes, P.A. (2001), “Using factor analysis to identify consumer preferences for the protection of a natural area: evidence from a valuation survey in Portugal”, paper presented at the EAERE 2001 Conference. Organization for Economics Cooperation and Development (OECD) (1989), Economic Instruments for Environmental Protection, OECD, Paris. Organization for Economics Cooperation and Development (OECD) (1994), Applying Economic Instruments to Environmental Policies in OECD and Dynamic Non-member Countries, OECD, Paris.

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Porter, M.E. and van der Linde, c. (1995), “Towards a new conception of the environment-competitiveness relationship”, Journal of Economic Perspectives, Vol. 9 No. 4, pp. 97-118. Tacq, J. (1997), Multivariate Analysis Techniques in Social Sciences Research: From Problem to Analysis, Sage, London. Tietenberg, T.H. (1990), “Economic instruments for environmental regulation”, Oxford Review of Economic Policy, Vol. 6, pp. 17-33. About the author Marı´a Teresa Ruiz-Tagle is a Chilean Economist, MSc in Economics LSE, MPhil. and PhD. in Environmental Economics, at the University of Cambridge. She has work experience in the fields of Environmental Policy, Environmental Economics and Economics of Institutions, with particular emphasis in Environmental Regulation. Dr Ruiz-Tagle is Affiliated Lecturer of the Department of Land Economy, University of Cambridge; Course Director of the MSt. in Social Enterprise and Community Development, University of Cambridge, and Research Associate of the Department of Economics, University of Chile. Marı´a Teresa Ruiz-Tagle can be contacted at: [email protected]

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Combined geo-electrical and hydro-chemical methods to detect salt-water intrusion A case study from southwest Saudi Arabia Abdulaziz M. Al-Bassam and M. Tahir Hussein College of Science, King Saud University, Riyadh, Saudi Arabia

Methods to detect salt-water intrusion 179 Received 17 June 2007 Revised 10 September 2007 Accepted 28 September 2007

Abstract Purpose – Salt-water intrusion has always been a source of contamination in coastal aquifers that hinders sustainable groundwater development. Classical techniques to detect its occurrence are costly and time consuming. The application of combined geo-electrical and hydro-chemical methods is cheaper, executable in reasonable time, and successfully applied in mapping the interface between saline and fresh groundwater. The current study aims at detecting and delineating salt-water intrusion in the downstream part of Wadi Gizan in southwest Saudi Arabia using geo-electrical and hydro-chemical methods. Design/methodology/approach – The case study area is the downstream part of Wadi Gizan in southwestern Saudi Arabia. Geo-electrical data were obtained from field measurements using both Shlumberger and Wenner procedures. A number of 65 groundwater samples were collected and analysed for its total dissolved solids and major ionic composition. Findings – The results show variations in the resistivity of the water-bearing strata in the study area. Resistivity values decrease towards the Red Sea, and, in separate pockets. The total dissolved solids (TDS) and chloride distributions show the same pattern. Overlapping the areal distributions of the resistivity, TDS, and chloride concentration yield a map showing the limits of salt-water intrusion and up-coning pockets of saline water. Practical implications – Planners, decision makers and other interest groups can use these findings for a sustainable groundwater development in the study area, and, to safeguard the aquifer from further advancement of salt-water intrusion. Originality/value – The case study indicates the importance of applying combined geo-electrical and hydro-chemical methods for groundwater quality variations and especially in detecting and delineating the contact between saline and fresh groundwater in coastal aquifers. Keywords Salt, Water, Groundwater, Geochemistry, Saudi Arabia Paper type Research paper

Introduction Since the last two decades the world has been facing wide spectrum of environmental changes. These changes are continuing today with different rates and in different parts of the globe. Among these environmental changes, the shortage of fresh water supplies comes first, especially in arid regions. The environmental elements in these regions are very fragile; rainfall is scarce, sporadic, evaporation rates are high and air temperature is high most of the year. Groundwater use is becoming more important in these regions. It plays an important role in supporting unique aquatic systems, especially in coastal margins of arid regions. Improved hydrogeological knowledge, new groundwater exploration technologies, new improvement in equipments and data

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processing facilitated investigations and evaluation of groundwater resources. The role of surface geophysical techniques for evaluating groundwater resources is well known in the literature (Reilly and Goodman, 1985; Mazac et al., 1987; Ayers, 1989; Hoekstra, 1990). Geo-electrical methods were used to detect variations in aquifer electrical resistivity and this in turn has been inferred with changes in groundwater salinity. There are a number of applications in the literature where both geo-electrical method and groundwater quality studies have been integrated together (Zohdy et al., 1974; Todd, 1980; Telford et al., 1988; Hussein and Ibrahim, 1990; Hussein and Awad, 2006; Al-Sayed and El-Qady, 2007). The main purpose of this work is to use geo-electrical methods integrated with hydrochemical methods to detect salt-water intrusion. This includes detection and mapping contacts between fresh groundwater and saline groundwater. The case study here is the downstream part of Wadi Gizan in the southwest of Saudi Arabia, within the coastal plains of the Red Sea. The study area The study area lies in the southwestern corner of Saudi Arabia (Figure 1). It consists of two geomorphic units, a vast, arid plain known as Tihama, and a Precambrian uprising mountain range. The plain is 500 km long. It stretches in a north-south direction and averages about 50 km in width. The plain is bordered to the west by the Red Sea and to the east by the foothills of the mountain system. Rainfall is low and there are few rainy days during the year. Rain-fed farming provides very poor returns and grazing lands are practically inexistent. Irrigated agriculture, based on primitive flood-type system. Groundwater is tapped mainly by hand-dug wells, but the water is essentially destined for domestic use. The water is utilized primarily for irrigating minute vegetable plots. Because of the extreme aridity of the climate and the rudimentary yet costly method of obtaining water, the economic and social status of the inhabitants of the Tihama has remained primitive. Some 20 years ago a dam was erected in the upstream of Wadi Gizan to protect villages from sporadic flash floods and to store water. Recently the area has witnessed large environmental changes. These changes are due to natural causes or to human causes. Natural causes can be responsible for the variation in rainfall intensity and general increase of aridity in the last years. Decrease in rainfall intensity and desertification highly affected the area. Human causes were noticed by unwise use of the resources and the depletion of groundwater in the area. Groundwater levels are continuously lowered. Many of the dug wells in the Gizan plain became more saline, even those containing relatively fresh water. As more wells are dug or drilled to deeper levels more saline-water is pumped out. The groundwater is threatened by salt-water encroachment and/or up-coning. The aquifer is actually a subterranean channel-like system analogous to the present drainage pattern and to former wadi system. The maximum thickness of the water-bearing zone is little more than 100 m. The depth to groundwater from the ground surface varies from 5 m to 35 m. This depth increases towards the up stream and the water flow from up stream to the sea. The hydraulic gradient varies from 0.013 in the up stream to 0.004 in the down stream. The groundwater flow direction is roughly parallel to the wadi drainage (Figure 2). The average transmissivity is 173 m2/day. The average hydraulic conductivity is 2.163 m/day and the average storativity is 0.16 (Al Hazmi, 2005).

Methods to detect salt-water intrusion 181

Figure 1. Location map of the study area (a) indicating well numbers and sub-areas (b)

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Figure 2. Water level contour map for the study area (in m amsl)

Geo-electrical methods The practice of using geo-electrical methods involve passing electrical current into the ground by means of two electrodes and measure the potential difference between a second pair placed on the same line between them. Using the value of the potential difference, the current applied, and, the electrode separation, the resistivity of the material can be calculated. A quantity termed the apparent resistivity (ra) is obtained. Changing the electrode spacing and position gives information about the variation in apparent resistivity with depth. In practice one always uses two current electrodes, a positive one through which the current enter the ground and a negative one to which it returns. The absolute potential in the ground is not directly measured; however measurement is obtained for the potential difference between the other two electrodes. The simplest method of conducting resistivity surveying is to arrange the four electrodes in a straight line on the surface of the ground. Although a great number of different electrode spacing configurations were introduced in electrical prospecting there still remains only a few which are in general and common use in resistivity surveying. These are Wenner and Schumberger arrangements. Wenner array The Wenner array is in very common use and well known as horizontal electric profiling (HEP). The four electrodes A, M, N and B are placed at the surface of the ground along a straight line, so that AM ¼ MN ¼ NB , a (see Figure 3).

Figure 3.

Hence the apparent resistivity for the Wenner array is given by:

ra ¼ V =I 2pa: Schlumberger array The Schlumberger array is one of the most common used for vertical electrical sounding (VES). Four electrodes are placed along a straight line on the surface in order the AMNB with AB . 5MN (see Figure 4). The apparent resistivity equation is: (
2
2 ) AB 2 MN DV 2 2 ra ¼ : I MN

Methods to detect salt-water intrusion 183

Field procedures The resistivity measurements in the field were conducted by using ELREC-T equipment, which is a high power electrical equipment designed for AC/DC electrical exploration surveys and include transmitter and receiver in one single unit. ELREC-T has internal batteries for the supply of its electronic circuits. The power source is a motor generator 220 V-50 HZ supplied 1,200 W AC/DC converter and the output voltages available on this converter are 50 V, 100 V, 200 V, 400 V, and 800 V, and the maximum current available on each voltage is 2.5 A. ELREC-T generates the current I, measures the voltage between receiving electrodes V and displays the apparent resistivity value ra. The measurement is made fully automatically through the control of microprocessor, automatic self-potential correction automatic running and digital stacking for signal enhancement. An error will display in case of procedure troubles. Five locations have been investigated in the study area. In each location a vertical electrical sounding VES and three horizontal electrical profiles HEP were measured. In the Schlumberger vertical sounding measurements, the current electrode spacing (AB) extended up to 200 m. In Wenner horizontal profiles the resistivity was measured at distances 15 m, 30 m, and 60 m. The five sites of resistivity investigations are Al Matree upstream, Al Kawamla, Al Eshwa, Al Khasawia, and Al Gawabra downstream westward (Figure 1). Results and interpretation Data plotting and results were obtained using an updated version of Zohdy’s automatic interpretation computer program (Zohdy, 1989). The apparent resistivity, ra, was computed versus distance AB/2 to obtain the VES curve for each station. The

Figure 4.

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automatic interpretation was made by an interactive procedure in which, for the first approximation, the observed VES curve was assumed to be a Modified Dar Zarrouk curve, MDZ curve (Zohdy, 1975). This MDZ curve was solved for layer thickness and resistivity. By means of the convolution technique using O’Neill filter coefficient, the VES cures were then calculated for the layering thickness. The calculated VES curve was compared with the observed one. A second approximation to the thought MDZ curve was obtained by utilizing the difference between the observed and calculated VES curves. This iteration was continued until a match within a prescribed fitting tolerance, was obtained between them. The number of layers in the initial resulting model (detailed solution) was always acquired to the number of digitized points used to define the observed VES curve. Equivalent solutions consisting of a fewer number of layers may be determined by automatically smoothing the MDZ curve of the detailed solution and inverting it. The results of geo-electrical measurement are summarized in Figure 5: Al Matree Area is located upstream, in the upper part of the valley, at about 40 km from the sea. The field curve shows three layers K-type (Figure 5a). The upper layer is at 3 m depth with high resistivity. The second layer is at 20 m depth with high resistivity. The third layer has low resistivity. Very high readings of resistivity for the upper layers mask the water table and show that, the water level in this area is low, at the depth of 22 m from the ground surface. The same is found in Al Kawamlah and Al Eshwah areas with some differences in the level of water table, where the depth of water table ranges between 18 and Al Kuwamlah area is located in the middle of the valley at about 30 km from the sea. Its curve shows three layers, K-type. The upper layer is at 1.5 m depth, with low resistivity. The second layer is at 5 m depth with high resistivity. The third layer has low resistivity at 20 m depth. Al Eshwah area is located in the middle part of the valley. It is about 26 km from the sea. The field curve shows three layers (Figure 5b): an upper layer at 3 m depth with high resistivity. The second layer is at 8 m depth with low resistivity. The third layer has low resistivity and believed to be saturated layers Al Khasawiah Area is located downstream, in the lower part of the valley, at about 12 km from the sea. The field curve shows three layers (Figure 5c). The upper layer is at 3 m depth with high resistivity. The second layer is at 8 m depth with low resistivity. The third layer has very low resistivity. Here a marked difference in resistivity values and the depth of water table were noticed. This indicates that groundwater quality has changed from what was observed in those of mid and up-stream areas discussed above, the depth of ground water decreased. It approximately measures 13 m. Al Jawabrah area is located down stream, in the lower part of the valley at about 4 km from the sea.The field curve shows three layers K-type (Figure 5d). The upper layer at 2 m depth with low resistivity, the second layer at 7 m depth with high resistivity and the third layer at 10 m depth is low resistivity. Resistivity values of this area are almost the same as those of Al Khasawiah area. This indicates and assures the sudden variation in water quality or salinity. Consequently, resistivity values are clearly lowered. The water table is not deep, it ranges between (4 to 7 m). These results conform with those obtained in an earlier study carried by Al-Amri (1998).

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Figure 5. Geo-electrical curves for the different sub-areas

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The resistivity value of the water-bearing layer shows a sharp decrease at Al Eshwah. This may indicate the approximate position of sea- water encroachment. Geophysical modeling The interpreted five measured vertical electrical soundings were used to build a 3D model to show the distribution of resistivity for the different layers (Figure 6). The model shows three different geoelectric layers; a layer with resistivity values varying from 25-45 Ohm-m and extends from the east to the middle parts of the area. This layer is below the surface at a depth of about 15 m. The second geoelectric layer is characterized by resistivity values varying from 110 to 140 Ohm-m, it represents the aquiferous zone. Within the second geoelectric layer, the higher resistivity zone is dry coarse wadi deposits. The third geoelectric layer has resistivity values less than 20 Ohm-m. This layer extends below the surface to a depth of about 20 to 30 m in the eastern part of the area and exposed at the surface in the western part of the area. This layer is the portion of the aquiferous zone intruded by seawater. Hydro-chemical methods A complete well inventory has been established for all water points in the study area. The inventory included the location of all existing water-wells, the measurement of depth to water in each well, ground elevation and thereby having the groundwater level above mean sea-level in each well, well diameter, well depth, discharge rate and

Figure 6. Geo-electrical model for the study area

pumping duration. A number of 65 wells were inventoried in this study (Figure 1). Field measurements also included sampling of water and measuring of temperature, electrical conductivity and pH. Samples were collected in plastic containers for further laboratorial analysis. Analysis was conducted using standard methods (APH/AWWA/WPCF, 1989). The elements analyzed were Caþ 2, Mgþ 2, Naþ , Kþ , HCO-3, SO-2 4 , Cl, and Boron as outlined in Table I. Total dissolved solids (TDS) The TDS in the study area ranges between 871.7 mg/L (well no. 26) to 5,567.9 mg/L (well no. 38), with standard deviation of 1,305.5 (Tables I and II). The mean value of TDS is 2,353.5 mg/L indicating that most of the groundwater in the region is highly saline. The spatial distribution of TDS (Figure 7) shows a general increase towards the flow direction. The general increase of TDS is from the east towards the west. An anomalous area of relatively higher TDS value has been shown around well 47. Table II provides an overview of the measured parameters. Major ions The concentration of calcium in the study area varies from 100 mg/L upstream to 355 mg/L downstream, with a mean value of 190 mg/L. It increases from up stream to down stream, towards the sea, and in Al Khasawiah and Al Jawabrah areas. The concentration of magnesium ranges between 39 mg/L up stream and 450 mg/L down stream. The spatial distribution of magnesium increases from upstream to downstream, towards the sea. The variation is lower in upstream and downstream areas. It is relatively higher in the middle of the Wadi, Al Eshwah and Al Kawamlah areas. The concentration of sodium ranges from 180 mg/L to 960 mg/L. It increases from upstream to downstream, towards the sea, as well as in Al Khasawiah and Al Jawabrah areas. Relatively higher values are located in middle of the Wadi. This may indicate that, the mid area of the Wadi is a transitional area. The concentration values of potassium are between 2.7 mg/L and 17 mg/L. The values rise from upstream to downstream, towards the sea; they are lower at the middle of the Wadi, and of higher values in the down stream. The bicarbonate ranges from 180 mg/L (downstream to 308 mg/L (upstream). This distribution is opposite to those of previous elements (Naþ , Kþ , Mgþ 2, Caþ 2).This is associated with recharge waters coming from the upstream areas. This indicates that the water recharge or supply is higher in the upper valley than that of the lower valley. The sulphate distribution shows high values, which range between 500 mg/L and 1,400 mg/L. The value rises from upstream to downstream. Chloride values in the study area are generally high. It ranges from 190 mg/L to 2,100 mg/L, increasing from upstream to downstream (Figure 8). Conclusion Coastal aquifers are subject to continuous over-exploitation, which causes a reduction of peizometric levels, and thus intrusion of salt-water results in a salinity breakthrough (Hussein, 1982; Qahman and Larabi, 2003). This is the case in Wadi Gizan where limitation of aquifer recharge and over-exploitation had led to deterioration of groundwater quality in most parts of the aquifer. The results of hydrochemical and geo-electrical investigations were integrated together to delineate the salt- water

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Table I. Measured hydrochemical parameters. (ionic concentration in mg/L)

Well

pH

Temperature

EC

TDS

Na

K

Mg

Ca

Cl

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

6.39 6.64 5.36 6.84 6.5 6.27 6.87 6.56 6.7 7 5.62 8.19 6.94 5.98 6.9 6.63 6.87 7.26 6.4 6.2 7.73 6.81 6.8 5.33 6.75 6.58 6.34 6.81 6.24 6.17 7 6.54 6.65 7 6.87 7.01 6 6.16 6.63 6.58 6.64 6.66 6.75 6.56 6.93 6.53 6.98 6.6 6.42 6.55

36.5 35.9 35.4 36.2 35.8 38.7 35.7 35.1 36.2 36 34.7 35.3 36 35.6 34.8 33.2 35.7 34.5 36.6 36.2 34.7 35.8 35.3 35.1 35 35.2 35.4 35.8 34.9 37 36.3 36.8 36.5 36.9 35.7 36.7 36.7 36 36.9 36.3 36.2 36.3 35.2 34.9 34.8 34.1 35.7 36.1 36.5 36.1

2,610 2,190 1,580 1,690 1,270 1,280 1,480 1,770 1,310 2,460 12,490 6,100 5,680 10,070 2,300 720 2,060 680 3,010 2,100 3,360 2,800 3,350 3,260 3,330 1,660 2,500 2,900 3,400 2,800 5,100 3,700 4,000 3,600 3,860 5,000 2,620 5,700 4,300 5,270 6,100 5,240 6,900 7,320 5,600 7,470 9,500 7,310 7,080 5,690

1,229.311 1,056.142 1,056.142 1,056.142 1,056.142 911.1872 1,056.142 1,056.142 1,056.142 1,498.246 5,242.653 2,822.809 2,822.809 4,254.568 1,863.067 1,455.719 1,588.33 1,216.133 1,917.968 1,526.262 1,491.151 1,198.008 1,198.008 1,581.096 1,593.057 871.7152 1,593.057 1,576.987 1,841.754 2,078.297 2,799.685 5,386.149 2,434.077 2,199.101 2,202.498 2,040.633 2,202.498 5,567.952 2,040.633 2,477.993 2,477.993 2,481.39 2,484.786 2,713.817 2,713.817 5,215.48 4,339.295 3,663.905 2,985.3 2,884.383

200 250 250 250 250 180 250 250 250 270 880 610 610 780 410 325 360 270 420 320 275 200 200 270 250 180 250 270 290 400 520 920 490 450 450 400 450 930 400 530 530 530 530 600 600 880 780 680 600 615

4.5 3 3 3 3 2.8 3 3 3 4 13 7.4 7.4 9.2 4.3 3.5 3.6 3.3 4 4.5 4.1 3.5 3.5 4 3.5 2.8 3.5 3 4 7 7 16.5 6.7 7.3 7.3 7 7.3 17 7 7 7 7 7 7.1 7.1 13 9.2 8 7.5 7.1

75 39 39 39 39 40 39 39 39 90 420 140 140 288 95 70 75 60 98 60 80 70 70 92 95 40 95 90 96 105 161 425 125 110 110 105 110 450 105 118 118 118 118 123 123 420 290 220 160 140

139 110 110 110 110 110 110 110 110 150 318 207 207 286 140 125 130 111 140 145 160 140 140 179 180 100 180 181 224 195 220 338 190 187 188 186 188 352 186 190 190 191 192 212 212 310 285 250 230 218

220 200 200 200 200 200 200 200 200 210 1,900 790 790 1700 420 300 360 240 400 190 230 200 200 250 300 190 300 250 330 400 570 2100 500 500 500 420 500 2,150 420 550 550 550 550 780 780 1,900 1,200 1,200 800 760

SO4

HCO3

526 283 454 273 454 273 454 273 454 273 306 280 454 273 454 273 454 273 774 280 1,592 120 1,068 235 1,068 235 996 195 794 260 632 275 660 270 532 267 856 257 807 240 742 280 539 280 539 280 775 308 694 290 294 282 694 290 772 308 867 264 971 260 1,322 198 1,492 95 1,122 220 945 255 947 255 923 260 947 255 1,589 80 923 260 1,083 255 1,083 255 1,085 255 1,088 255 988 258 988 258 1,572 120 1,686 187 1,106 200 1,188 210 1,144 237 (continued)

Well

pH

Temperature

EC

TDS

Na

K

Mg

Ca

Cl

SO4

HCO3

51 52 53 54 55 56 57 58 59 60 61 62 63 64

6.8 6.13 6.45 6.56 6.51 6.83 6.65 6.64 6.64 6.59 6.62 6.57 6.61 6.6

35.4 36 36.2 36.1 35.7 35.1 35 34.7 34.7 34.7 34.5 34.7 37.2 35.4

6,100 12,940 10,380 6,240 8,100 11,300 6,180 1,800 1,680 1,640 1,970 2,750 2,700 4,410

2,849.888 5,075.965 4,256.414 4,294.068 4,188.002 4,691.213 3,389.867 1,224.454 1,246.649 1,100.71 1,172.215 1,467.97 1,771.328 1,815.827

610 920 780 770 720 830 660 270 270 220 250 320 370 320

7.2 15 9 10 9 10 8 3.2 3 2.7 3.6 4.5 6 5

140 423 290 260 240 270 180 60 65 58 49 48 75 100

217 228 284 300 332 353 270 117 118 118 122 148 167 190

780 1,880 1,700 1,250 1,150 1,300 950 260 250 210 180 220 310 370

1,096 1,530 1,003 1,504 1,517 1,728 1,261 509 541 459 568 727 843 798

248 80 190 200 220 200 240 280 285 290 250 238 262 279

intrusion zone. The TDS, chloride concentrations and electrical resistivity measurements were used to define zones of different water quality (Figure 9) as follows: . Salt-water intrusion zone. This zone lies at the western part of the area and extends from the Red Sea to a distance of about 9 km inland. It is characterized by TDS values greater than 3,500 mg/L, chloride concentration greater than 25 meq/L, and electrical resistivity less than 20 Ohm-m. This zone is contaminated by salt water, non-exploitable for municipal or any other uses. . Transition zone. This zone occupies the middle parts of the study area. TDS values ranges between 2,000 to 2,500 mg/L, chloride concentration ranging between 15 to 20 meq/L, and electrical resistivity between 110 and 20 Ohm-m. Its average width varies from some 7 to 12 km. Drilling of new wells should be avoided in this zone to prevent further advancement of salt- water. . Up-coning zone. Two zones of very high salinity are located in the middle and the south of the study area. These zones are characterized by TDS values greater than 3,000 mg/L, no corresponding increase in chloride concentration, and lower electrical resistivity measurements in the aquifer horizon. The high salinity in these zones is attributed to up-coning of saline water due to overexploitation in these areas. Artificial recharge of groundwater through injection wells may help to improve the water quality in these pockets and depress the phenomenon of up-coning. . Fresh water zone. This zone extends from the middle parts of the study area to the upstream part of Wadi Gizan. This zone is characterized by TDS of less than 1,500 mg/L, chloride content ranging between 6 and 12 meq/L, and electrical resistivity between 110 and 140 Ohm-m. Development of groundwater resources in the study area should be restricted to this zone only. All in all, this paper has demonstrated that the application of combined geo-electrical and hydro-chemical methods in southwest Saudi Arabia has proved to very useful in

Methods to detect salt-water intrusion 189

Table I.

pH

7.61 0.05 6.63 6.64 0.44 3.94 0.04 1.86 6.33 8.19 7.99

Mean Standard error Median Mode Standard deviation Kurtosis Skewness Range Minimum Maximum Red Sea (average)

Table II. Summary statistics of measured parameters for 64 water samples (ionic concentration in mg/L)

Statistics 4,402.50 3,64.52 3,380.00 6,100.00 2,916.15 0.90 1.15 12,260.00 680.00 12,940.00 65,000

EC (ms) 2,353.46 162.94 1,979.30 1,056.14 1,303.51 0.08 1.04 4,696.24 871.72 9,500 39,797

TDS (mg/L) 455.70 27.79 400.00 250.00 222.35 20.72 0.68 750.00 180.00 930.00 11,440

Na 6.21 0.42 6.35 3.00 3.36 2.02 1.38 14.30 2.70 17.00 355

K 135.38 13.44 102.50 39.00 107.52 2.13 1.70 411.00 39.00 450.00 1,422

Mg

.

35.69 0.11 35.70 34.70 0.88 1.46 0.26 5.50 33.20 38.70 35

T8C)

189.63 8.58 186.50 110.00 68.61 20.12 0.79 253.00 100.00 353.00 554

Ca

622.81 67.87 410.00 200.00 542.93 1.30 1.51 1,970.00 180.00 2,150.00 22,747

Cl

906.00 46.21 894.88 454.14 369.65 20.52 0.47 1,433.89 294.35 1,728.24 3,140

SO4

243.44 6.40 258.00 273.00 51.22 3.18 2 1.82 228.00 80.00 308.00 136

HCO3

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Figure 7. Total dissolved solids distribution for the study area (in mg/L)

Figure 8. Chloride distribution for the study area (in mg/L)

detecting variation in groundwater quality and thereby was successful in delineating the contact between salt-water and fresh groundwater. The methodology is cheap, easy to perform and, is recommended to be applied elsewhere in coastal aquifers of similar geological environment.

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Figure 9. Groundwater quality zones in the study area

References Al-Amri, A. (1998), “The application of geoelectrical vertical soundings in delineating the hydrostratigraphy of the Southern Red Sea Coastal area, Saudi Arabia”, Journal of King Abdul Aziz University: Earth Science, Vol. 10, pp. 73-90. Al Hazmi, A.A. (2005), “Salt water Intrusion in coastal aquifer in Jazan, Kingdom of Saudi Arabia”, MSc. thesis, King Saud University, Riyadh. Al-Sayed, E.A. and El-Qady, G. (2007), “Evaluation of sea water intrusion using the electrical resistivity and transient electromagnetic survey: case study at Fan of Wadi Feiran, Sinai, Egypt”, paper presented at the EMG 2007 International Workshop, Capri, April 15-18. APH/AWWA/WPCF (1989), Standard Methods for the Examination of Water, Wastewater, American Public Health Association, Washington, DC. Ayers, J.F. (1989), “Conjunctive use of geophysical and geological methods in the study of alluvial aquifer”, Ground Water, Vol. 27 No. 5, pp. 625-32. Hoekstra, P. (1990), “Surface geophysics – tool for ground water management in coastal aquifers”, Water and Wastewater International, Vol. 5 No. 3, pp. 15-21. Hussein, M.T. (1982), “Evaluation of groundwater resources in Tokar Delta, Sudan”, Hydrological Sciences Journal, Vol. 27 No. 2, pp. 139-45. Hussein, M.T. and Awad, H.S. (2006), “Delineation of groundwater zones using lithology and electric tomography in the Khartoum basin, central Sudan”, Comptes Rendus Geoscience, No. 338, pp. 1213-8. Hussein, M.T. and Ibrahim, K.E. (1990), “Empirical relations between hydraulic properties and geoelectric properties of shallow alluvial aquifers in the Arabian Shield of Saudi Arabia”, Jour. Hydro. Sci. and Tech., Vol. 6, pp. 24-37. Mazac, O., Kelley, W.E. and Landa, I. (1987), “Surface geoelectrics for groundwater pollution and protection studies”, Journal of Hydrology, Vol. 93, pp. 277-94.

Qahman, K. and Larabi, A. (2003), “Identification and modeling of seawater intrusion of the Gaza Strip aquifer”, Tecnologia la Intrusion de Agua de Mar en Acuiferos Costeros, Madrid, pp. 245-54. Reilly, T.E. and Goodman, A.S. (1985), “Quantitative analysis of saltwater-freshwater relationship in groundwater systems: a historical perspective”, Journal of Hydrology, Vol. 80, pp. 125-60. Telford, W.M., Geldart, L.P., Sheriff, R.E. and Keys, D.A. (1988), Applied Geophysics, Cambridge University Press, Cambridge. Todd, D.K. (1980), Groundwater Hydrology, John Wiley & Sons, New York, NY. Zohdy, A.R. (1975), “Automatic interpretation of Schlumberger Sounding Curves using modified Dar Zarrouk functions”, US Geological Survey Bulletin, No. 1313 E, 39 pp.. Zohdy, A.R. (1989), “A new method for the automatic interpretation of Schlumberger and Wenner Sounding Curves”, Geophysics, Vol. 54 No. 2, pp. 245-53. Zohdy, A.R., Eaton, G.P. and Mabey, D. (1974), “Application of surface geophysics to ground water investigations”, USGS Techniques of Water-resources Investigations. Book 2, Washington State Department of Ecology, Olympia, WA, Ch. DI. About the authors Abdulaziz M. Al-Bassam is Vice Dean, College of Science, King Saud University (KSU), a graduate of KSU in BSc., Ohio University (USA) in MSc. and Birmingham University (UK) in PhD. He is an active researcher, and has published his work in international, regional and national journals and periodicals. Al-Bassam is a technical advisor for the Ministry of Water and Electricity (MOWE), member of the advisory committee for Prince Sultan International Water Prize (PSIWP), and member of the board for the Saudi Geological Society. He was member of the board for the Saudi Society for Earth Sciences and Water Science and Technology Association. He participated in organizing over 15 conferences. He is an author of an Arabic book titled Groundwater. M. Tahir Hussein is Associate Professor at the College of Science, King Saud University, Riyadh, Saudi Arabia.

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Methods to detect salt-water intrusion 193

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Governance barriers to local sustainable development in Poland

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Agnieszka Sobol

Received 30 July 2007 Revised 10 September 2007 Accepted 1 November 2007

Department of Environmental Protection Management, The Karol Adamiecki University of Economics in Katowice, Katowice, Poland Abstract Purpose – This paper seeks to review multidimensional aspects of local sustainable development policy in the context of governance. It aims to focus on the general conditions in Poland and to base its analysis on empirical research in selected Polish communities. Design/methodology/approach – In the first theoretical part the paper presents multidimensional aspects of governance for local sustainability. Identified barriers are the analyzed, based on case studies of local communities. Findings – The paper shows that even if sustainable development and governance are integrated in theoretical discourses, in the practice of local policy making they are rarely considered in conjunction with each other. A lack of understanding of the importance of governance for sustainability and for local development has been identified on the practical level of local policy making. The Polish case studies show that the responsibility for governance barriers to local sustainable development is shared by local decision-makers and local societies. Practical implications – Creation of partnership and dialogue between the local community and government is believed to be of critical importance for local sustainable development. The relationship between local government and society can greatly enhance or obstruct sustainable development initiatives. The change towards local sustainable development requires more open and transparent decision-making procedures that promote participation by a wide range of stakeholders. Originality/value – The paper is another voice in the debate on governance for local sustainable development. Based on empirical examination it shows the issue of governance barriers for local sustainable development from a Polish local perspective. Keywords Governance, Sustainable development, Local economies, Poland Paper type General review

Management of Environmental Quality: An International Journal Vol. 19 No. 2, 2008 pp. 194-203 q Emerald Group Publishing Limited 1477-7835 DOI 10.1108/14777830810856573

Introduction The concept of sustainable communities was originally derived as an attempt to describe the large number and variety of environmental and interpersonal impacts of economic growth. Ever since the term “sustainable communities” appeared, it has had strong environmentalism or environmental connotations. That is to say, it was mainly understood as a way of promoting and facilitating various kinds of pro-environmental change. Nevertheless, the concept of sustainable development is not just about protecting the environment, or controlling economic growth, as it is frequently depicted to be. It is more about the relationships between the environment and people who populate it. It also deals with interactions within the social dimension of such development. Nowadays, we can observe a stronger accent on humanistic values and a shift from emphasizing a “strong” economy to a multidimensional approach. This view of

sustainable local development places great importance on the function of civic society and social processes that influence interaction (or non-interaction) between residents. The process of creating a civic society requires the introduction of governance patterns for policymaking and management. In this context, human factors are crucial to development. At the same time, however, it is the communitarian character of sustainable cities that often makes the pursuit of sustainability a very challenging process. The social dimension and citizenship status are therefore key factors in the concept of governance and the idea of sustainable development in general. The concept of local sustainable development An introduction to the issues regarding the governance of local sustainable development requires, ex ante, a brief overview of what sustainable cities are; i.e. a definition of local sustainability. Unfortunately, such a definition seems to be quite difficult, as this term appears to mean many different things. What is more, in the process of its evolution, the idea of sustainable communities has developed in such a way as to gain a wider meaning than is initially apparent. The concept of local sustainable development or sustainable cities has its roots in a general, i.e. global, concept of sustainability. This concept of sustainability achieved increased recognition and legitimacy during the late 1980s after the United Nations World Commission on the Environment and Development was established. The commission is commonly known as the Brundtland Commission from the name of the chairman – Gro Harlem Brundtland. The global definition focuses on inter-generation concerns as described in the Brundtland Report – Our Common Future in 1987 (WCED, 1987). This Report puts forth the very general notion that sustainable development consists of activity that “meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987, p. 8). The Brundtland Commission Report served as the foundation for the debate on sustainable development that took place at the United Nations Earth Summit held in Rio de Janeiro in 1992. The main result of the Earth Summit, which was a milestone in the history of the concept of sustainable development, was a program of action – Agenda 21. Agenda 21 is a kind of a guide for nations in their quest for development in the twenty-first century. As part of the Agenda 21 resolution, significant attention was given to the role of the local level. As Agenda 21 states: Because so many of the problems and solutions being addressed by Agenda 21 have their roots in local activities, the participation and cooperation of local authorities will be a determining factor in fulfilling its objectives . . . As the level of governance closest to the people, they play a vital role in educating, mobilizing, and responding to the public to promote sustainable development (UNEP, 2000).

In the context of global concern for the sustainable development of nations, the idea of sustainable communities is born out of an understanding of the importance of individual human behavior and the local governance context in which that behavior takes place. Although the idea of sustainable communities is grounded in the need to address environmental and existential issues as they affect individual people, it has also grown out of a particular understanding of the role of community. Sustainable development is a global task to be achieved by local actions. Simultaneously, local structures interact

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closely with higher-level structures i.e. regional, national and even international or global ones. They function as systems in which hierarchical interrelations exist. National government can indirectly be a guarantor of the equal entitlements and rights of all citizens and promote collective action by them. The central level can introduce different mechanisms facilitating and legitimizing networks and social structures conducive to the growth of civil society. From this point of view, the state should actively promote devolved and robust local government. The importance of national government is not as great as that of the local level. Nevertheless, it should not be passive. Communitarian character of the process of local sustainable development The process of sustainable development is fundamentally communitarian. The starting point for understanding the communitarian foundations of sustainable communities must be recognition of the problems that are thought to lie at the heart of unsustainability. These problems are closely tied to the phenomenon of “the tragedy of the commons”. In practice these are the individual attitudes, values, and behaviors described by the not-in-my-backyard (NIMBY) syndrome. The debate on common goods was instigated by Garrett Hardin and immediately became linked with the term “tragedy.” In his well-known 1968 essay “The tragedy of the commons”, Hardin described the negative consequences of common property (Hardin, 1968). Hardin states that if a common good is left for free use, then everybody tries to use as much of its limited resources as possible to their own advantage. In consequence this finally leads to the ruin of all and tragedy. Another syndrome that corresponds to the “tragedy of the commons” is described by game theory. The main argument is that people act in the name of public interest when they believe that most other people are also doing the same. But if they are convinced that most people are doing the opposite, it makes no sense for them to be the only ones doing good. In practice, it seems to be pointless to be the only one to be fair, sort your garbage, not corrupt, etc. This example is also a good illustration of the development of distrust. When a person starts thinking that the norm for governments, authorities, decision-makers, etc. is to break the law, his trust in fellow citizens will also go down. This works because, regardless of the quality of the people who are in power, they are more likely to enjoy higher respect than the general public. Hence, distrust in government institutions and authorities leads to distrust in most other people. A major motif that runs through this syndrome and generally “the tragedy of the commons” is individualistic orientation, in which the actions and behavior of individuals are based on their own self-interest. Contrary to the basic tenets of neoclassical economics and political liberalism, the communitarian view suggests that what is good for the whole community is not always the sum of what is good for each independent individual. Liberalism focuses on individualism. As Barber (1994, p. 24) states, liberalism has created an anti-public system that “can conceive of no form of citizenship other than the self-interested bargain”. The result is that citizens concentrate on their own personal interests and goals and do not care how the impacts of their actions affect others. Much of the contemporary communitarian movement is based on the notion that liberalism has fostered the evolution of communities without shared values. Nevertheless, its representatives do not reject the general ideas of liberalism and postulates of democracy, freedom, tolerance and pluralism. They aim to increase civic

participation in public life (Łucka, 2006). Advocates of sustainable communities seem to think that promoting partnership and interpersonal interactions will create the foundation and support necessary for the pursuit of responsible local policies aimed at improving all dimensions of the quality of life. Governance for local sustainable development A response to the effect of the “tragedy of the commons” and negative aspects of externalities is the concept of governance. Governance is based on the activities of and relationships between social actors. The concept of sustainable development attaches great importance to the process of shaping civil society and the role of the citizens. The key component of this process is social capital, which enables the local policy to be based on trust and public interest. Governance improves the understanding of common goods, both in everyday life, as well as in public actions. Governance is the process of steering societies in such a way that it circumvents the dangers of problems related to collective action or inequitable social relationships and removes barriers to the enhancement of social welfare. The idea of governance is developing along with the concept of sustainable development. Governance is given a broad definition that encompasses an array of issues in the socio-political and economic order. The English term “governance”, which does not have a suitable equivalent in many languages, signals the need for decentralized administration structures. Decentralization means not only division of power between particular levels of government, but also participation of inhabitants in the decision-making process. Governance arises as a public concern whenever the members of a social group find themselves engaged in interdependent decision making in the sense that the actions of each individual affect the welfare of the others. The higher the level of interdependence among the members of the group, the more complex the problems of collective action are and the greater the need for governance. The general proposition of the idea of governance is that groups of interdependent actors can succeed in handling the function of decision making without creating governments in the conventional sense. Government is one of the actors in governance. We are used to thinking of governments in the ordinary sense as the principal decision-making powers of local development. However, in the process of developing governance there is a need to minimize bureaucracy and simplify hierarchy structures. The transition to governance means a review of the role of political systems and institutions in the context of the interests of and options open to citizens. Real transition to governance means a systematic process that requires a change in the way of thinking of both groups i.e. decision-makers and societies. Governance in practice Governance in practice means a me´lange of governmental and non-governmental, corporate, social and individual actors who cooperate to reach common goals. Governance involves the establishment and operation of sets of rules and decision-making procedures that serve to define social practices and guide the actions of those participating in these practices. The role of local authorities is very important in this. In practice, governance means the involvement of many stakeholders in the decision-making process and implementation. Participation processes based on

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collaborative action should result in greater democracy and community building. From this point of view, the sector of non-governmental organizations (NGOs) seems to be of special meaning. In many countries only NGOs have supported or even initiated the process of local sustainable development. The central focus of local governance relates to participatory tools and procedures. Participatory processes can take many different forms and public participation is manifested in many different ways. This refers to efforts aimed at promoting greater interpersonal interaction, increased citizen engagement and, in general, fostering civil society. Governance for local sustainable development is often adopted through the process outlined in Local Agenda 21 (LA21). The primary purpose of this method of strategic planning for sustainability is collecting data on the directions in which representatives would like to see the city move. This process includes making city governments more responsive to the wishes of residents, or making residents more active. From this point of view, public debate, workshops and brainstorming are part of a shift from government to governance. However, initiatives directed at citizen participation seem to prefer polling and surveys for obtaining input from residents into the process. Polling and surveys can provide much accurate information. Nevertheless, they are not connected with human relations and, consequently do not lead to community building. In this context, the participation of stakeholders should be based on a broad public forum in the sense of actors representing different social groups. The creation of partnership and dialog between the government sector, business sector and local community, i.e. establishment of local governance, is believed to be of critical importance for sustainable development at the local level. Participation procedures give rights to citizens to co-decide on their own affairs in private, as well as public spheres. If people are encouraged to enter into broader societal communication and active participation as important actors in sustainable development, they feel responsible for its vision and goals. A society’s wellbeing depends on ensuring that all its members feel that they have a stake in it and do not feel excluded from the mainstream of that society. Participatory mechanisms also help citizens to hold governments accountable for their commitments by controlling the implementation of strategic documents. They introduce or enhance social control, which is based on the assumption of limited confidence, i.e. the assumption that uncontrolled political power can lead to abuse of power. Sustainability policies can only be successful when citizens recognize political institutions as their own and acting in their interest. When people feel subject to local government, they tend to react against or obstruct its decisions or, at least, they remain inactive. Political actions responsive to the needs and interests of people require all local stakeholders to be included in the process of local development. There should be more direct democratic control, more transparency and openness in communication and enhanced participation of inhabitants in local policy making (Sobol, 2006). Problems and barriers related to governance of local sustainable development in Poland An active society is of paramount importance in the process of governance for sustainable development,. In this context, Polish society is far from the “ideal model”. There have been, of course, many unfavorable conditions, especially the political

system that destroyed the natural activeness of local societies and faith in public authorities. It is very difficult to rebuild this after so many years and the process of building civil society takes a long time. The inactivity of inhabitants is indicated as one of the key problems in the context of local sustainable development in Poland. This inactivity can be perceived as a barrier, because when people are not engaged in a process, they do not feel important and responsible for it. The lack of activity of Polish society and inertia in public affairs is directly manifested in low turnouts in general elections, even at the local level. The average turnout is around 50 percent. The passive attitude and public alienation of Poles can also be seen in the lack of civil movements and underdevelopment of non-governmental organizations within it. Nevertheless, in the last few years the NGO sphere in Poland has experienced significant quantitative and qualitative changes. These changes are mostly a result of the Act on Public Benefit Activity and Volunteer Work which was enacted in 2003. This law made cooperation with NGOs a mandatory task for local authorities. Declared membership in NGOs in Poland is estimated at about 20 percent of the whole population (Gumkowska and Herbst, 2006). The mechanisms of governance should be initiated by decision makers, especially in nations with relatively new democratic structures, as in Poland. Unfortunately, Polish local authorities are unwilling to use participatory procedures in the process of local decision making. Often local authorities do not think that they should engage people in the process of development and they explain this position using their mandate for power obtained through democratic elections. Even if some decision-makers are conscious of the importance of citizen’s activeness for local development, they rarely use tools of social mobilization. Lack of transparency and openness increases the level of distrust. Society thinks that if the authorities do not let them decide in the process of local development, or the decision-making process seems to be “top secret”, there must be something unfair. In consequence, people do not believe in the existing system of rules and do not trust either the local authorities or others from their community. The effect is that people count on personal contacts and build an environment favoring clientism and corruption. In fact, when society is not engaged in the decision-making process of local development, it is an open field for corruption and narrow interests. The “European social survey” (Norwegian Social Science Data Services, 2004) highlighted that Polish society is characterized by a very low level of trust. People do not just have a low level of trust in politicians and institutions, but in other people as well. A comparison of the level of trust in Poland with other European countries is shown in Figure 1. This illustrates that the Eastern European countries have, in general, a lower level of trust. In the literature, this is commonly thought to be a result of the former oppressive regime. This broad issue will not be described in this paper. As a consequence of this common distrust, a phenomenon defined by Edward Banfield as ”amoral familizm” appears. This means that people in Poland are close to their families, but distant from the rest of society. This results in “particularized trust”, in which a person only trusts close relatives and friends and thinks that people outside his close circle cannot be trusted (Ulsaner, 2002). This leads to barriers to governance, described as the phenomenon of clientism, which is unfavorable in itself, but is also a good ground for corruption.

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Figure 1. Trust in people in European countries

In many Polish cities the pursuit of sustainability is perceived to be a highly technical and professional endeavor. This means that there is no need for large-scale public involvement and one does not need to build a public forum to redress existing local problems. This way of thinking is very often represented and practiced in the process of strategic planning and management. The main strategic documents of many Polish municipalities are, therefore, prepared by experts. These are often external professionals, who have very little or even nothing in common with the municipality. What is more, the local community rarely has a voice in the preparation of any documents defining the main long term polices of development. Local authorities are not interested in the expectations of society and they rarely ask about their needs. That explains why they undertake unnecessary investments, instead of making positive changes (Sobol, 2006). The barriers to governance in Polish local communities have been studied by empirical examination. A study was held in 2005 in the following selected municipalities: Krako´w, Katowice, and Racibo´rz. In this survey, a face-to-face questionnaire was given to residents with questions on local sustainable development. The sample was made up of 138 respondents (84 in Krako´w, 34 in Katowice and 20 in Racibo´rz). The problems of, and barriers to, governance for local sustainable development in Polish communities will be outlined by answering the following questions: . What opportunities are there for inhabitants to participate in the local decision-making process? . How many people participate in the local development process? . How many people act in NGOs? According to this survey, citizens of Polish cities reported widespread problems in gaining access to the process of local development and little opportunity for collective action in this field. Most inhabitants claimed that local authorities mainly use mechanisms of social control. They rarely apply methods of consultation and participation and almost never use tools to empower the local community. The lack of

opportunities for people to interact with each other undermines the creation of shared values, trust, common identity and civil society. The findings regarding the question of the work of local authorities with their communities in the process of local policy development are presented in Table I. The small number of inhabitants who stated there were opportunities for partnership also said that local authorities engage citizens in the process of local development. The percentage of respondents involved in various methods of governance in the selected municipalities are presented in Table II. A small number of inhabitants in the selected municipalities declared involvement in NGOs. The appropriate numbers are shown in Figure 2.

Municipalities Krako´w Katowice Racibo´rz

Characteristics of the process of local development Community Community Community Community control consultation involvement empowerment 75 62 70

14 32 25

6 3 5

5 3 0

Note: Percentage of positive responses in particular municipalities Source: Author’s own research

Method Conferences, public hearings Focus groups, workshops Surveys of public interest, polling

Krako´w

Local unit Katowice

Racibo´rz

20 14 25

12 6 12

5 5 5

Note: Percentage of positive answers in particular municipalities Source: Author’s own research

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Table I. Which of the following best describes the local authorities in your city in working with the community in the process of local development?

Table II. Do you take part in action directed at public engagement in the process of local development?

Figure 2. Are you active in any non-governmental organization? Percentage of positive answers in particular municipalities

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Concluding remarks Governance is a prerequisite for local sustainable development. Nevertheless, even if sustainable development and governance are integrated in theoretical discourses on the practice of local policy making, they are rarely considered in conjunction with each other. In practice, the distinction between governance and government and the resultant mechanisms directed at local sustainable development do not seem to be clear. There is still a lack of understanding of the meaning of sustainability and governance for local development. Creation of partnership and dialogue between the local community and government, i.e. establishment of local governance, is believed to be of critical importance for sustainable development. If people are encouraged to perform as important actors in local development, they feel responsible for the vision and directions of development set in local policy. A society’s wellbeing depends on ensuring that all its members feel that they have a stake in it. The relationship between local government and society can greatly enhance or obstruct sustainable development initiatives. The change towards local sustainable development requires more open and transparent decision-making procedures that promote participation by a wide range of stakeholders. Unfortunately, the reality of municipal government in Poland is far from the ideal model of governance directed at sustainable development. As outlined above, there is a lack of transparency, participatory procedures and willingness to cooperate. These negative aspects, which are barriers to governance, are not only exhibited by local decision-makers. Inactivity and inertia in public affairs is also typical for the rest of Polish society. Nevertheless, it seems that local authorities should initiate the process towards sustainability with the support of governance mechanisms.

References Barber, B.R. (1994), Strong Democracy: Participatory Politics for a New Age, University of California Press, Berkeley, CA. Gumkowska, M. and Herbst, J. (2006), Podstawowe fakty o organizacjach pozarze˛dowych, Raport z badania, Warszawa. Hardin, G. (1968), “The tragedy of the commons”, Science, Vol. 162, pp. 1243-8. Łucka, D. (2006), “Communitarian concept of civil society: between liberalism and . . .?”, in Gawin, D. and Glin´ski, P. (Eds), Civil Society in the Making, IFiS Publishers, Warsaw, pp. 34-61. Norwegian Social Science Data Services (2004), “European social survey”, available at: http://ess. nsd.uib.no/ Sobol, A. (2006), “Governance for sustainable development – conditions and experiences in the Polish communities”, in Filho, W.L., Dzemydiene, D., Sakalauskas, L. and Zaadskos, K. (Eds), Citizens and Governance for Sustainable Development, Leidykla Technika, Vilnius, pp. 29-34. Ulsaner, E.M. (2002), The Moral Foundations of Trust, Cambridge University Press, Cambridge. United Nations Environmental Programme (UNEP) (2000), Agenda 21, United Nations, New York, NY. World Commission on Environment and Development (WCED) (1987), Our Common Future, Oxford University Press, New York, NY.

Further reading Stolle, D. (2004), “Social capital and local government: generalized trust in regional settings”, in Prakash, S. and Selle, P. (Eds), Investigating Social Capital. Comparative Perspectives on Civil Society, Participation and Governance, Sage Publications, New Delhi, Thousand Oaks, CA and London, pp. 184-206.

Governance barriers

About the author Agnieszka Sobol is a Researcher and Lecturer at the Karol Adamiecki University of Economics in Katowice, Poland. Her research focuses on the multidimensional character of the concept of sustainable development. Her primary research relates to the local level and in the PhD dissertation she examines the conditions for local sustainability with a comparative perspective on Polish and Swedish communities. Agnieszka Sobol can be contacted at: agasobol@ ae.katowice.pl

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Does the environmental management standard ISO 14001 stimulate sustainable development? An example from the energy sector in Poland Bartosz Fortun´ski Faculty of Economics, Opole University, Opole, Poland Abstract Purpose – The purpose of this paper is to discuss the relation between the ISO 14001 standard and sustainable development, and to present a case study of the energy sector in Poland in order to provide an example of the influence of the environmental management system according to ISO 14001 on environmental quality and sustainable development. Design/methodology/approach – The relation between sustainable development and the environmental management system related to the ISO 14000 series is discussed by comparing these series with the ICC Business Charter for Sustainable Development. The case study is based on the analysis of the fulfilment of environmental goals and tasks, which are part of the environmental management system, introduced in the company under research. Findings – The case study provides arguments that the ISO 14001 standard may support sustainable development, in particular when standard legal enforcement mechanisms are weak. Practical implications – The introduction of standards for business may be a tool for achieving sustainable development. Originality/value – The paper shows an example of opportunity for business to contribute to sustainable development. Keywords International standards, Environmental management, Sustainable development, Energy industry, Poland Paper type Case study

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Introduction Increasing environmental problems related to the increase in production and consumption have contributed to the development of the concept of sustainable development. Although many authors provide different definitions of the concept, in most of the cases the focus is on economic and social development, not leading to degradation of natural resources and the environment. However, the number of definitions is large and increasing. More than a decade ago, Winpenny (1995, p. 19) already indicated the issue by mentioning two publications, one discussing 60 definitions and another discussing 30 definitions (The Pearce Report) of sustainable development. Piontek (2002, pp. 10-17), a Polish scientist specialised in issues of sustainable development, discussed different approaches to the issue based on an analysis of 44 definitions. While the focus of sustainable development in developing countries is rather on socio-economic development (e.g. reducing poverty, access to

health care and education, stimulating economic growth) (Rao, 2000), there is a tendency in higher developed countries to focus on the environmental aspects of economic development. This approach can be found in the work of many Polish authors, where “eco-development” is used as a synonym for sustainable development (e.g. Łaguna, 2004, pp. 20-21; Go´rka et al., 1995, pp. 78-9; Borys, 1999, pp. 65-6; Gollinger-Tarajko, 2002, p. 13). In Poland, as in many other countries, the principles of sustainable development are defined in different legal documents, as well as the Polish Constitution (Sejm of the Republic of Poland, 1997, p. 4), where is written that Poland assures environmental protection based on the principles of sustainable development. However, although, for example, each of the 16 voivodeships (provinces) in Poland currently possesses programmes and schemes in the field of environmental protection, related to the general aim of sustainable development, they are not always properly developed, while implementation lags behind (Kistowski, 2006). The International Organization for Standardization (ISO) standard PN-ISO 14050 (ISO, 2002, p. 42) uses the “traditional” definition given in the so-called Brundtland Report (WCED, 1987, p. 4): . . . to meet the needs of the present without compromising the ability of future generations to meet their own needs.

However, although this definition does not specify whether focus is on economic, social or environmental issues, the aim of ISO is to stimulate “proper” environmental management systems, which fits well in the practive of interpreting sustainable development as eco-development, and takes a “weak sustainability” approach, as the use of non-renewable resources is allowed. However, certain principles oblige, such as efficient use and management of natural resources, applying economic cost-benefit analyses to the use of natural resources and taking environmental costs and benefits already into consideration when an investment is planned (Winpenny, 1995, p. 21). First, the environmental management system according to the ISO 14001 standard will be discussed. Then, the relation between the growing importance of sustainable development and the ISO 14001 standard is elaborated. Finally, a case study of the electricity sector in Poland is presented in order to give an answer to the question whether their efforts to fulfil necessary conditions in order to obtain the ISO 14001 certificate has a positive influence on the natural environment, and as such stimulates sustainable development. The environmental management system according to ISO 14001 Although the main objective of the commercial enterprise is profit, environmental issues become more important for companies, e.g. as a result of increasing consumer interest in environmentally-sound production and the increasing awareness of the importance of the natural environment for long-term survival, which, for example, leads to focus on environmentally-sound production processes as well as recycling and reuse of materials (Zalewski, 2000, p. 29). The ISO 14000 series of environmental management standards provide companies with an opportunity create an environmentally friendly image. In some cases, such activities may be an important condition for survival on the market (PKN, 2003, p. 4).

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An environmental management system may de defined as that part of the organisational management system that is used for the design, implementation and management of the organisations’s environmental policy (ISO, 2005). This system includes interdependent elements such as the organisational structure, the assignment of responsibilities, the planning of practices, procedures, processes and resources needed for determining policy and goals. The basis for creating an environmental management system according to ISO 14000 standards are two standards – ISO 14001, guidelines and requirements for application, and ISO 14004, general guidelines regarding principles, systems and supporting techniques. However, organisations only may obtain certification based on the ISO 14001 standard, as the other standards in the ISO 14000 series are auxiliary. This environmental management standard is flexible enough in order to be adapted to the size of the organisation, its type of activity and the geographical, social and cultural circumstances in which it functions. In order to introduce the environmental management system, the organisation should, based on the standard, create an environmental policy (general aims and organisational focus regarding the effects of environmentally-related activities), establish environmental goals and assess the effectiveness of its activities. It is of particular importance that the organisation identifies and monitors those important environmental aspects it has an influence on. The fundamental task of the environmental management system is to support the organisation in environmentally-sound activities in a balanced way, which is compatible with socio-environmental needs. The application of the standards in the organisation does not lead to strict requirements regarding the environmental impact of its activities. However, the organisation is obliged to act in agreement with the law and to improve the environmental policy and processes related to its implementation and management, in order to make its activities more environmentally sustainable. Sustainable development and the ISO 14001 environmental management system Increasing emphasis on environmental protection and the increasing importance of sustainable development have been an important stimulus in the development of the ISO 14000 series of environmental management standards. In 1991, ISO and International Electricity Commission (IEC) created the Strategic Advisory Group on the Environment (SAGE), which was related to the United Nations Conference on Environment and Development (UNCED), to be held in Rio de Janeiro in June 1992). SAGE’s task was to analyse the situation related to the environment as well as the need for standardisation, and to prepare recommendations, in order to facilitate the introduction and functioning of environmental management systems. The recommendations, presented at the end of 1992, created the basis for the ISO 14000 standard (Seria ISO 9000:2000, 2001, pp. 4-6). The ISO 14000 series of environmental management standards may be helpful in reducing different types of environmental problems, e.g. problems related to climate change or the negative environmental impact in the life cycle of a product (PKN, 2003, p. 6). The Rio Declaration rather concerned countries, while the Business Charter for Sustainable Development of the International Chamber of Commerce (ICC) concerns

organisations. There exists a strong relation between this Business Charter for Sustainable Development and the ISO 14000 series. The Business Charter for Sustainable Development was created in 1991 at the forum of the ICC’s World Economic Council for Sustainable Development, where the basis for all environmental management systems, including the ISO 14000 series, was developed (Pochyluk et al., 1999, pp. 23-36). The relation between environmental management systems and sustainable development in confirmed by the statement that environmental management should receive the highest priority and is an important determinant of sustainable development (ISO, 1998a, p. 65). The most important items in the charter and their relation with the environmental management system ISO 14000 is presented in Table I. Part of the issues mentioned in the Business Charter for Sustainable Development should be realised by using the ISO 14000 series, while managing other issues mentioned is stimulated by the standard. In this sense, the ISO 14000 environmental management standard contributes to sustainable development. The following goals mentioned in the standard confirm this: . A goal of the international standard for environmental management systems is to help organisations to achieve environmental and economic aims (ISO, 1998b, p. 7) and to improve the impact of environmental activity (ISO, 1998b, p. 21), as well as to assist in the field of protecting and improving environmental quality (ISO, 1998a, p. 9). Achievement of the environmental aims certainly contributes to sustainable development, in particular when it is interpreted as eco-development. ICC Business Charter for Sustainable Development

Environmental management system – ISO 14000 series

Item 3 – process of improvement

Permanent improvement – the pillar of the model of the environmental management system Organisation of training for employed. Guidelines are in the standard PN-EN ISO 14001:1998, Chapter 4.4.2 These aims are represented in the ISO 14000 standard, in particular in the ISO 14040 standard related to life cycle assessment

Item 4 – education of employees Item 5 – prior assessment of environmental impacts Item 6 – products or services – environmental impact and safety assessment Item 7 – customer advice

Item 10 – precautionary approach Item 11 – contractors and suppliers – communication of environmental management principles Item 12 – emergency preparedness

ISO 14001:1998, Chapter 4.4.3, emphasises communication related to environmental issues with external partners (also concerns Item 11). Eco-labelling is an example of communication with customers – ISO14020 standard Pollution prevention is one of the aims of the ISO 14000 series See remarks under Item 7 ISO 14001:1998, Chapter 4.4.7

Source: Author’s own elaboration on the basis of ICC’s Business Charter for Sustainable Development and the ISO 14000 series of environmental management standards

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Table I. The relation between ICC’s Business Charter for Sustainable Development and the environmental management systems according to the ISO 14000 series

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.

In the PN-ISO 14004:1998 standard it is explicitly stated that a general aim of this international standard is to assist organisations with the introduction and perfection of an environmental management system, which is consistent with the concept of sustainable development (ISO, 1998a, p. 7). The continuous perfection of the environmental management system may even lead to an improvement of the natural environment, and in this way contribute to intra-generational equity. A model of an environmental management system is presented in Figure 1.

Also Rao (2000, pp. 298-9) points at the relation between the ISO 14000 series and sustainable development. The development of environmentally-sound technology and ecological products may change the whole production process (see also Weizsacker et al., 1999). Furthermore, the standards may support continuous organisational improvement, indirectly supporting sustainable development (Rao, 2000, pp. 312-13; Chen, 2005, pp. 927-33; MacDonald, 2005, pp. 631-43). The environmental management system according to the ISO 14001 standard and sustainable development on the example of the electricity sector The organisation researched is mainly involved in electric energy sales and its physical distribution in the Opole region in Poland. Long before introducing the ISO 14001 standard, the company developed an environmental policy, and received the Certificate of the Clean Production Company in 1999. It never paid any environmental fines, which may be an indicator of proper environmental management (although it may be argued that enforcement of fines may be poor). In 2004 an integrated management system was introduced, including the environmental management system according to the ISO 14001 series. The following environmental aspects related to the companies activities were identified:

Figure 1. An environmental management system model

emission of electromagnetic fields with a frequency of 50 Hz; noise emission; and soil and underground water pollution with oils containing polichlorinated biphenyls (PCBs) – the most significant environmental threat.

ISO 14001

PCB is a very dangerous chemical, causing, among other things, cancer, infertility, diseases of the immune and nervous system and liver diseases. It decomposes very slowly in the natural environment, while it leads to soil and water pollution with dioxane, which is difficult to abate (http://pl.wikipedia.org/wiki/Polichlorowane_biofenyle). The relation between environmental management systems and the concept of sustainable development can be shown by the environmental impact of the introduction of the environmental management system according to the ISO 14000 series. The environmental impacts research stem directly from the environmental goals and tasks the company established for the year 2006 (see Table II). The impact of the first, most important, goal and the related tasks were a reduction of the threat of PCB pollution. The company thoroughly examined 240 devices out of the planned 550 on the presence of PCB. In three devices the level of PCB exceeded the norm. These devices were withdrawn from use and neutralised.

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. . .

Goal 1

Elimination of PCB

Task 1

Thorough examination of 550 devices on PCB content

Goal 2

Minimalisation of negative environmental impact of the organisation’s production technology and inputs used

Task 1

Modernisation of heat exchange buildings (not implemented) Exchange of power transmissions, modernisation of safety devices and exchange of cables (partly implemented)

Goal 3

Optimalisation and rationalisation of waste management

Task 1

Segregation of waste paper in the organisation’s offices

Goal 4

Rationalisation of waste water management

Task 1

Installation of sink basin on the energetic post Installation of sewage system on the energetic post

Task 2

Task 2 Goal 5

Increasing environmental awareness of the organisation’s workers and partners

Task 1

Task 2 Task 3

Goal 6

Propagation of an environmental-sound image of the company

Task 1 Task 2

Periodical training of staff in the field of health and safety-at-work legislation, fire safety and natural environment protection Specialist (external) training for certain professions Monitoring and control of objects, where devices are used that may create environmental threats Building of platforms for stork nests Articles on environmental issues related to the company’s activities

Source: Author’s own elaboration based on internal documents of the researched organisation

Table II. Environmental goals and tasks of the company in 2006

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The second goal, minimalisation of negative environmental impact of the organisation’s production technology and inputs used, was partly achieved. However, the situation improved and a process of improvement could be observed. Goal 3 and 4 were achieved. Concerning waste management (goal 3), 6.5 tonnes of waste paper was segregated in 2006, leading to increased recycling, but also to a process of creating the habit of waste paper segregation among workers. In order to increase the environmental awareness of the company’s workers, three tasks were formulated. Periodical training involved 664 workers. The expected result is that they can react adequately in case of an environmental threat. A total of 76 workers received specialist training in order to prepare them to manage the removal of the effects of environmental damage. Furthermore, eight objects were controlled. In three cases, dramatic negligence, which required immediate action, was detected. In three cases some negligence was detected, while only in two cases no problems were observed. Regular inspections are likely to prevent future environmental threats caused by the devices used in the company. In order to achieve goal 6, the creation of an environmentally-sound image, ten platforms for stork nests were constructed while articles concerning environmental issues were published. At least, storks were protected, while they contributed to a better outlook of the company. The impact on the image of the company is a topic for further research. In 2006 also long-term environmental goals from 2004 were accomplished (see Table III). As a result of the realisation of goal 1, 3.2 tonnes asbestos was utilised. Furthermore, 185 m3 of wood waste containing creosote was stored. Part of this wood is periodically utilised. Concluding remarks Although not all environmental goals were completely achieved, the environmental impact of the organisation in the energy sector under research was positive, contributing to sustainable development (or, a less unsustainable development). This provides arguments for the statement that the environmental management system based on the ISO 140001 standard contributes to sustainable development in general, and to sustainable business in particular.

Goal 1

Elimination of products which contain Task 1 asbestos Task 2 Task 3

Table III. Environmental goals and tasks of the company in 2004, accomplished in 2006

Goal 2

Elimination of wood waste containing Task 1 creosote

Render construction materials containing concrete and asbestos harmless Replacement of asbestic tiles from the umbrella roof of the refilling station Replacement of elements of the roof containing asbestos and render them harmless Replacement of overhead transmission lines containing creosote and render them harmless

Source: Author’s own elaboration based on internal documents of the researched organisation

What are the reasons for this conclusion? The environmental goals and tasks that have to be set according to the ISO 14001 standard can be divided into two categories: (1) Environmental goals and tasks resulting from the existing legal requirements to be fulfilled. (2) Environmental goals and tasks contributing to permanent organisational improvement. All organisational goals and tasks, although they directly follow from the environmental management system, may be qualified to the first category. This means that also organisations not possessing the ISO 14001 certificate contribute to sustainable development, when fulfilling legal requirements. Why, then, argue that the ISO 14001 standard contributes to sustainable development when it leads to the same result as fulfilling legal requirements? In the Polish situation there is the problem of enforcement of legal requirements. Government agencies are often not able to monitor and enforce all these requirements. It may be argued that there is a culturally determined tradition of bending the rules or not complying to rules, or to fulfil these rules on paper, while practice may look completely different. In this sense, ISO certification contributes to the compliance to the environmental goals, as an additional control mechanism exists. This effect may be smaller in countries where environmental law is more efficiently enforced. Of course, this argument needs deeper research. Furthermore, although formally the goals may be included in the first category, the compliance may lead to organisational learning and an increase in environmental awareness. Goals 5 and 6, the use of trainings to increase environmental awareness and the propagation of an environmentally-sound company image, may indirectly contribute to organisational improvement. Also in this case a process of learning-by-doing may work, which is in particular valuable in a country like Poland where there is not a real tradition of environmental management, an inheritance of the wasteful planned economy. Of course, much depends on the way in which such trainings are provided, and whether consumers in Poland appreciate environmentally-sound production. In Poland, compared to other countries, environmental marketing may be less important. However, based on experience of other countries, this awareness is likely to increase, while enforcement of environmental laws and regulations is likely to become more efficient as a result of implementation of e.g. EU directives. References Borys, T. (Ed.) (1999), Wskaz´niki ekorozwoju, WEiS´, Białystok. Chen, C.-C. (2005), “Incorporating green purchasing into the frame of ISO 14000”, Journal of Cleaner Production, Vol. 13 No. 9, pp. 927-33. Gollinger-Tarajko, M. (2002), Metody oceny ekologicznej i ekonomicznej modernizacji proceso´w technologicznych. Na przykładzie wytwarzania zwie˛zko´w chromu i fosforu, WAEwK, Krako´w. Go´rka, K., Poskrobko, B. and Radecki, W. (1995), Ochrona s´rodowiska. Problemy społeczne, ekonomiczne i prawne, PWE, Warszawa. Kistowski, M. (2006), Wpływ programo´w ochrony na s´rodowisko przyrodnicze, Polska Akademia Nauk, Gdan´sk-Warszawa.

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Łaguna, T.M. (Ed.) (2004), Ekonomiczne podstawy zarze˛dzania s´rodowiskiem i zasobami naturalnymi, UWM w Olsztynie, Olsztyn. MacDonald, J.P. (2005), “Strategic sustainable development using the ISO 14001 Standard”, Journal of Cleaner Production, Vol. 13 No. 6, pp. 631-43. Piontek, B. (2002), Rozwo´j zro´wnowaz˙ony i trwały w miernikach oraz w systemach sprawozdawczos´ci, WSEiA w Bytomiu, Bytom. PKN (2003), Zarze˛dzanie s´rodowiskowe, komentarz do norm serii ISO 14000, PKN, Warszawa. Pochyluk, R., Gradowski, P. and Szyman´ski, J. (1999), Zasady wdraz˙ania systemu zarze˛dzania s´rodowiskowego zgodnego z wymogami normy ISO 14001, EKO-KONSULT, Gdan´sk. International Organization for Standardization (ISO) (1998a), PN-ISO 14004:1998, International Organization for Standardization, Geneva. International Organization for Standardization (ISO) (1998b), PN-EN ISO 14001:1998, International Organization for Standardization, Geneva. International Organization for Standardization (ISO) (2002), PN-ISO 1450:2002, International Organization for Standardization, Geneva. International Organization for Standardization (ISO) (2005), PN-EN ISO 14001:2005, International Organization for Standardization, Geneva. Rao, P.K. (2000), Sustainable Developement, Blackwell Publishers, Oxford. Sejm of the Republic of Poland (1997), “Konstytucja Rzeczypospolitej Polskiej”, available at: www.sejm.gov.pl/prawo/konst/polski/kon1.htm Seria ISO 9000:2000 (2001), Seria ISO 9000:2000 nowoczesne zarze˛dzanie jakos´cie˛, Poradnik dla przedsie˛biorstw w zakresie norm serii ISO 9000:2000 rozszerzony o ISO 14000 i PN-N-18000, Verlag Dasho˝fer Sp. z oo, Warszawa. Weizsacker, E.U., Lovins, A.B. and Lovins, L.H. (1999), Mnoz˙nik cztery- podwojony dobrobytdwukrotnie mniejsze zuz˙ycie zasobo´w naturalnych, Wydawnictwo Rolewski, Torun´. Winpenny, J.T. (1995), Wartos´c´ s´rodowiska. Metody wyceny ekonomicznej, PWE, Warszawa. World Commission on Environment and Development (WCED) (1987), Our Common Future, Oxford University Press, New York, NY. Zalewski, R.I. (2000), “Aktualne trendy w nauce o jakos´ci”, Problemy Jakos´ci, No. 4. About the author Bartosz Fortun´ski is a Graduate of the University of Opole, Faculty of Economics. From 2002 he worked as an assistant at the Faculty of Economics at the University of Opole. He is currently working on a PhD study titled “Economical results of applying the environmental management system based on ISO 14001”. Bartosz Fortun´ski can be contacted at: [email protected]

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Adaptation of enterprises to the requirements of sustainable development in the light of new institutional economics

New institutional economics

Robert Kudłak

Received 30 July 2007 Revised 10 September 2007 Accepted 1 November 2007

Institute of Socio-economic Geography and Spatial Management, Adam Mickiewicz University, Poznan´, Poland

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Abstract Purpose – This article seeks to explain the mechanism of adapting enterprises to the requirements of sustainable development. It aims to base this analysis on the concept of new institutional economics. Design/methodology/approach – The theoretical basis of new institutional economics is used to understand and explain the behaviour of enterprises in relation to the natural environment. Findings – The article finds that new institutional economics, compared to rather formalised and abstract mainstream economics, may be quite successfully used in answering why economic entities undertake actions for environmental protection. Practical implications – New institutional economics may be used as a tool for understanding e.g. why some instruments aiming at environmental protection are more effective and efficient than other instruments. It may provide useful knowledge about the institutional environment while creating new environmental protection instruments. More empirical studies on a greater number of enterprises (not only individual case studies) are necessary to find out which institutions and mechanisms mentioned in the paper are crucial, and which should be supported in order to achieve environmental goals. Originality/value – There are a great number of empirical papers containing case studies, but only few theoretical attempts to generate a synthesis. This paper fills this gap. Keywords Organizations, Sustainable development, Organizational economics, Organizational change Paper type General review

Introduction Neo-classical economics, while an extremely important direction of economic thought, with time became highly formalised and abstract, which opened it up to criticism and gave rise to increasing interest in institutions. As Sobiech and Woz´niak (2005, p. 133) stated, the creators of traditional institutional economics rejected neo-classical economics altogether, but they failed to set up a theoretical framework for the new school or to overturn the output of mainstream economics. Traditional institutional economics caused a return to discussing the subject matter of economics, relations between society and the economy and the significance of institutions in the economy. In 1937 Ronald Coase published his famous article “The nature of the firm”, which is often regarded as the start of new institutional economics (Coase, 1937). Its proponents do not reject the output of neo-classical economics, but strive to complement it. According to North (1993), new institutional economics is an attempt at modifying and extending neo-classical economics. This new trend in institutionalism accepts the underlying assumptions of neo-classical economics concerning the individual

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rationality of economic agents with regard to their operation under conditions of resource scarcity and hence competition, but rejects its instrumental treatment of rationality as a mechanism that is always effective, unlimited, objective in nature and existing in a world of complete information. North (2000) points out that there is no such thing as laissez-faire economics, because each economy and political system is embedded in a structure created by rules, norms, customs and beliefs determining human behaviour. New institutional economics does not seek to replace neo-classical economics, but to employ it while augmenting it in such a way as to make the model reality better. Sustainable development is understood as the kind of “socio-economic development which rests on an integration of political, economic and social actions while preserving the natural equilibrium and permanence of basic natural processes in order to ensure the satisfaction of basic needs to individual communities or citizens of both, the contemporary and the future generations” (Polish Environmental Protection Act, 2001, article 3, point 50). With reference to enterprises, sustainable development means rational use of non-renewable resources, reducing the level of damage caused to the environment by enterprises and staying within the limits of the environment’s carrying capacity. The state employs several instruments intended to change the behaviour of enterprises with regard to the environment. Social and economic factors play an even bigger role. Thus, enterprises experience pressure from a variety of sources, of various intensity and spatial extent. Institutions and mechanisms of their change Institutions according to North (1990, p. 3) are “humanly-devised constraints that shape human interactions”. They generate sets of rules which structure and intensify the processes of exchange. Institutions, North (1990, p. 6) goes on to argue, “reduce uncertainty by establishing a stable (but not necessarily efficient) structure to human interaction”. In other words, they create a limited set of behaviour patterns available to humans and organisations. However, institutions do not only define what is permissible, but also what is forbidden under the given conditions. Institutions are taken by North (1991, p. 98) to include both formal rules (constitutions, legal norms, business contracts) and informal constraints (conventions, traditions, values, norms of behaviour). Formal institutions can augment and improve the efficiency of informal ones. They can reduce the costs of information, monitoring and contract execution, thus creating conditions for more complex exchange and increasing the number of its forms. Formal institutions can also modify or replace informal ones (North, 2000, p. 8). The question that arises is why interpersonal relations need constraints in the form of institutions. In answering this, North (1991, p. 97) indicates conditions that make individuals and organisations engage in exchange: . the repetitive nature of exchange; . the fact that parties exchange and possess information about each other’s past performance; and . a limited number of players. Adams (1993, p. 247) understands institutions as “a learned, habitual pattern of behaviour supported by ingrained attitudes, values, and ways of thinking”. In his opinion, institutions serve to reduce the huge complexity of social reality to a size the

human mind can grasp (Adams, 1993, p. 252). Scott (1994, p. 58) refers to the opinions of Langois when he states that institutions introduce some regularity into the behaviour of individuals, which enhances the predictability and continuity of social processes. A very important concept in new institutional economics is that of transaction costs. Williamson (1985, p. 35) takes them to include those of contract design, negotiating and enforcing (ex-ante costs) and those resulting from maladjustment, renegotiation of a contract and dispute settlement (ex-post costs). Institutions are the product of transaction costs, which arise from the asymmetrical possession of information by market players and measures taken to reduce this asymmetry. These two factors – the asymmetry of information and measures of its reduction – limit the process of exchange. Hence, to reduce uncertainty people create informal and formal rules of behaviour in the form of institutions. According to Coase (2000, p. 4), transaction costs depend on the institutions operating in a given country: its legal, political, and socio-cultural systems. The reason for institutional change is the continuous interaction of institutions and organisations under conditions of resource scarcity and competition. Institutions change because individuals and organisations perceive that they could do better in a different institutional environment (North, 1993). The source of such perceptions may be of two kinds: (1) exogenous to a socio-economic system – e.g. a change in technology, prices, or quality of a competitive product in another economy, which in turn alters the perceptions of entrepreneurs in the first economy about profitable opportunities; and (2) endogenous, because the fundamental source of change is learning by entrepreneurs within organisations. Changes in formal rules are initiated by those in power who, in the face of excessive transaction costs, modify those institutions which they think do not contribute to general welfare as much as they might, at least theoretically (Eggertsson, 1996, p. 8). Figure 1 presents the mechanism of institutional change. Institutions define the organisational form and performance of the socio-economic system made up by economic entities and households. These two groups of agents produce specified economic outcomes. During their activity, market participants “learn” which solutions are advantageous for them and which they should avoid as unfavourable. This knowledge leads to a modification of informal institutions, which then effect a change in formal ones through various forms of interaction with the political system. Also, state authorities observe the entities making up the economic system and their performance, and strive to amend unfavourable situations through a change in formal institutions. Formal institutions can change overnight, e.g. as a result of political decisions, but changes in informal ones are very slow and noticeable only in the long run. Organisations as a product of institutions New institutional economics differentiates between the notions of institution and organisation. An organisation is a group of individuals bound by some common purpose to achieve objectives (North, 1990, p. 73). Organisations owe their existence to institutions. This is due to the fact that by reducing the uncertainty that accompanies

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Figure 1. Mechanism of change of formal institutions

social and economic reality, institutions provide a basis for intensifying the processes of production and exchange. This is accomplished by the establishment of such organisations as firms. On the other hand, organisations can modify the institutional matrix. According to Eggertsson (1996, p. 11), institutions determine the set of organisational forms practicable in a given socio-cultural milieu. However, only some of them, namely those most efficient, tend to be actually implemented. Thus, out of all the known organisational forms, only a limited set is available to economic entities operating in a given socio-economic system. Further constraints on this set is imposed by the market mechanism and court rulings. This is presented in Figure 2. The mechanism of adapting enterprises to the requirements of sustainable development What distinguishes a good organisation from a bad one in the opinion of Barnard (1962, taken from Williamson, 1985, p. 19) is active adaptation: “the ability of an organisation to survive in the conditions of permanent change in physical, biological and social substances, components and forces which require adjustments of the organisation’s internal processes”. Hayek (1945, taken from Williamson, 1985, p. 21) claims that “the primary economic problem of society is rapid adjustment to changes in the particular conditions of time and space”. In the light of new institutional economics, the adaptation of firms is the effect of institutional change. Under the pressure inherent due to the existence of institutions,

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Figure 2. Effect of institutions on the available set of organisational forms

economic entities strive to legitimise their activity. This leads to their growing similarity, because even though they represent widely different lines of business, they share the institutional matrix in which they are embedded (Brunsson, 1997). Thus, they can implement increasingly similar, or even standardised, management systems. This similarity can result both from relations between organisations and from a wider socio-cultural context. In this way organisations “accommodate” themselves to the surrounding institutional milieu (Brown, 2005). Scott (2001) lists three basic adaptive mechanisms leading to the isomorphism (similarity) of firms: (1) a coercive mechanism; (2) a normative mechanism; and (3) a mimetic mechanism. These mechanisms are parts of regulatory, normative and cognitive processes, respectively. A coercive mechanism enforces the legitimisation of organisations as a result of pressure from the political system. The source of such pressure can be the state or other influential entities. Institutional structures create a variety of legal rules, e.g. anti-monopoly laws or intellectual property rights. Thus, institutions determine the forms of organisation and modes of operation possible in a given statutory context. Brown (2005) notes that, apart from the state, large transnational corporations can affect the behaviour and degree of similarity of firms, because they impose specified procedures and standards on their suppliers. Instruments employed by state authorities to protect the environment are examples of institutions generating this mechanism, such as emission standards, technological norms, charges and fines for making use of the environment, or a system of marketable

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permits. Enterprises adapt to these regulations, because non-compliance means sanctions from the state. The aim of the state is to promote public welfare by creating a more efficient institutional system. The adaptation of firms to new institutional conditions manifests itself in such things as a reduction in their effect on the environment, changes in their manufacturing and management systems, etc. Successful adaptation depends both on a firm’s own potential (financial, technological, organisational, intellectual) and on the construction of the rules implemented by the state. When transaction costs resulting from the application of these instruments are reduced, adaptation will be quicker and more effective, hence the goals of the state will be achieved sooner and the institutional framework will be more efficient. A normative mechanism makes organisations behave in accordance with social expectations. Thus, enterprises undertake actions which a given socio-cultural milieu defines as proper and right. Decisions taken by managers result from rational economic calculus, but are also determined by specified social conditions. A cognitive mechanism consists of imitation. An economic entity copies other organisations embedded in the same socio-economic milieu. A firm makes decisions under conditions of information asymmetry and uncertainty. The imitation of other entities is supposed to reduce this uncertainty. Two patterns of behaviour can be distinguished here (Brown, 2005, pp. 6-7): (1) competitive imitation – an activity is undertaken for fear of losing a competitive advantage if the activity is abandoned; and (2) institutional imitation – an activity is undertaken for fear of losing the support and confidence of stakeholders. An example of this type of behaviour is the implementation of environmental management systems based on ISO and EMAS standards. On launching such a system, a firm is often not fully aware of what costs and advantages its implementation involves, but their growing role, recognition and popularity in society and among other market players incline enterprises to make this type of investment. Thus, fear of a deterioration in their market position or loss of social legitimisation makes economic agents alter their operations. The success of adaptations seen to be desirable by the authorities and society depends on the construction and functioning of various types of institutions, which in turn affect transaction costs. The literature supplies examples of research focusing on explaining the efficiency of various instruments controlling firms in terms of transaction costs. Rosen et al. (2003) studied voluntary systems of environmental management in the information sector of the USA. In the authors’ opinion, enterprises trying to set and legitimise such standards are attempting to cope with the weaknesses of the institutional environment, i.e. a lack of generally adopted and accepted rules controlling exchange processes. The growing social pressure in the field of industrial impact on the environment has made the information sector attempt to introduce environmental management standards embracing all the links of the distribution chain. Any social, economic or technological change makes the existing informal and formal institutions insufficient to carry out efficient and predictable exchange under

the new conditions. Hence, a lack of an institutional framework leads to an increase in uncertainty and hampers the efficiency of exchange. Therefore, firms make efforts to create an institutional milieu, which results in an increase in stability and efficiency of exchange. In the example analysed above, adaptation was initially the effect of growing social expectations for firms to reduce their impact on the environment, hence it was normative in nature. In turn, enterprises immediately below in the distribution chain adopted new management systems under the influence of those that had been the first to implement them. What we have here is a coercive mechanism of adjustment. Rosen et al. (2003) also try to explain why some environmental management standards are a success and others are not. In their opinion, for a system to be successful it has to fulfil two conditions: (1) a standard has to guarantee greater economic advantages than an alternative type of standard; and (2) acceptance of a standard is the result of the participation of a wide circle of actors in a given market in the creation and popularisation of the standard. Hahn and Hester (1989), Stavins (1994) and Solomon (1999) tried to elucidate the effect that transaction costs have on the performance of the market in tradable permits and the level of the adaptation of enterprises to this system. Transaction costs in the system of tradable permits result from the efforts required to transfer property rights, which involves searching, contacting and exchanging information between the potential parties to a transaction. Research shows that cost efficiency in these markets is lower than was expected when this type of environmental protection instrument was introduced. Solomon (1999) and Stavins (1994) show that the reason for this lies in the high transaction costs involved, among other things, in permit-trading enterprises having to meet very high administrative requirements, which diminish or even eliminate the potential advantages of emission trading (e.g. cost efficiency). It is also possible to find emission-trading markets that have been successful precisely because of low transaction costs. This is due to the low level of administration required and the fact that the parties involved have already been engaged in trading and thus there was no need to employ middlemen to establish business contacts (Hahn and Hester, 1989). Brown (2005) studied the range of ISO standards in the world. In his opinion, their implementation is the result of a rational choice made by economic entities, which involves the selection of the optimum form of organisation and adaptation to institutional changes. The aim of enterprises, therefore, is to improve their performance and win the acceptance of society and their business partners. According to Brown, coercive, normative and mimetic mechanisms act simultaneously; they complement and reinforce one another. Conclusion Enterprises function in a specified socio-cultural and economic milieu. This milieu is made up of formal and informal institutions, such as legal norms, business contracts, social norms and values, as well as customs. Enterprises – their organisational form and mode of operation – are a result of the existence of institutions. Hence, changes in the institutional milieu produced changes in enterprises. The concept of sustainable

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development has appeared as a result of man’s growing knowledge about the dependence between the socio-economic system and the natural system. The fear of potential irreversible changes in the natural system and their possible effect on the socio-economic system has lead to a change in the values and opinions of society, which in turn has produced a change in the institutional milieu in which enterprises are embedded. The resulting changes in the formal and informal rules of the game have caused firms to adapt: to change their attitude towards the environment, to increase their investments in protecting the environment, and to lessen their environmental impact. Their adaptation to new institutional conditions results from both their efforts to achieve the best market position possible and to legitimise their operation, both in terms of the law and social expectations. The level of adaptation to these new institutional conditions depends, among other things, on transaction costs. On the one hand, high costs are an incentive to seek common standards for environmental management systems, but on the other hand they can be responsible for the low efficiency of state-introduced instruments. The state can take measures to reduce these costs, e.g. by setting up an organisational structure intermediating in permit trading among enterprises. New institutional economics turns out to be an extremely interesting and effective tool in explaining the causes and mechanisms of the adaptation of enterprises to the requirements of sustainable development. References Adams, J. (1993), “Institutions and economic development: structure, process, and incentive”, in Toll, M.R. (Ed.), Institutional Economics: Theory, Method, Policy, Kluwer Academic Publishers, London, pp. 245-81. Barnard, C. (1962), The Functions of the Executive, 15th ed., Harvard University Press, Cambridge, MA. Brown, B. (2005), “Building global institutions: the diffusion of management standards in the world economy – an institutional perspective”, in Alvstam, C.G. and Schamp, E.W. (Eds), Linking Industries across the World, Ashgate, London, pp. 3-27. Brunsson, N. (1997), “The standardisation of organization forms as a cropping-up process”, Scandinavian Journal of Management, Vol. 13 No. 3, pp. 307-20. Coase, R. (1937), “The nature of the firm”, Economica, Vol. 4 No. 16, pp. 386-405. Coase, R. (2000), “The new institutional economics”, in Menard, C. (Ed.), Institutions, Contracts and Organizations. Perspectives from New Institutional Economics, Edward Elgar Publishing, Cheltenham, pp. 3-6. Eggertsson, T. (1996), “A note on the economics of institutions”, in Alston, L.J., Eggertsson, T. and North, D.C. (Eds), Empirical Studies in Institutional Change, Cambridge University Press, New York, NY, pp. 1-15. Hahn, R.W. and Hester, G.L. (1989), “Marketable permits: lessons for theory and practice”, Ecological Law Quarterly, No. 16, pp. 361-406. Hayek, F. (1945), “The use of knowledge in society”, American Economic Review, Vol. 35 No. 4, pp. 519-30. North, D.C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge University Press, Cambridge. North, D.C. (1991), “Institutions”, Journal of Economic Perspectives, Vol. 5 No. 1, pp. 97-112.

North, D.C. (1993), “The new institutional economics and development”, available at: http:// econwpa.wustl.edu:8089/eps/eh/papers/9309/9309002.pdf North, D.C. (2000) in Menard, C. (Ed.), Institutions, Contracts and Organizations. Perspectives from New Institutional Economics, Edward Elgar Publishing, Cheltenham, pp. 7-10. Polish Environmental Protection Act (2001), 27 April. Rosen, C.M., Beckman, S.L. and Bercovitz, J. (2003), “The role of voluntary industry standards in environmental supply-chain management: an institutional economics perspective”, Journal of Industrial Ecology, Vol. 6 Nos 3-4, pp. 103-24. Scott, W.R. (1994), “Institutions and organizations: toward a theoretical synthesis”, in Meyer, J.W. and Scott, W.R. (Eds), Institutional Environments and Organizations: Structural Complexity and Individualism, Sage Publications, London, pp. 55-80. Scott, W.R. (2001), Institutions and Organizations, Sage Publications, London. Sobiech, K. and Woz´niak, B. (2005), “Institutional economics”, in Ratajczak, M. (Ed.), Modern Economic Theories, Academy of Economics, Poznan´, pp. 133-57. Solomon, B.D. (1999), “New directions in emissions trading: the potential contribution of the new institutional economics”, Ecological Economics, Vol. 30 No. 3, pp. 371-87. Stavins, R.N. (1994), “Transaction costs and tradable permits”, Journal of Environmental Economics and Management, Vol. 29 No. 2, pp. 133-48. Williamson, O.E. (1985), The Economic Institutions of Capitalism, Free Press, New York, NY. About the author Robert Kudłak works at the Institute of Socio-Economic Geography and Spatial Management, Department of Regional Development and European Integration at the Adam Mickiewicz University in Poznan´, Poland. His areas of interests are sustainable development, environmental and resource economics, economic policy. Robert Kudłak can be contacted at: roberto.rk@ poczta.fm

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Faculty of Economics, Opole University, Opole, Poland

Joost Platje

Received 30 July 2007 Revised 10 September 2007 Abstract Accepted 1 November 2007 Purpose – The paper aims to outline and analyse some important elements of institutional capital

and their potential effect on sustainable development. Design/methodology/approach – The paper presents four elements of institutional capital: public domain, institutional strength, good governance, and institutional equilibrium. The choice of these elements and the analysis of their economic, social and environmental impacts are based on literature study and interpretation and extension of existing analyses which rather focus on either economic or environmental issues. Findings – The main argument of the paper is that institutional capital is a fundament of sustainable development, and that a lack of such capital is likely to cause unsustainable development. Practical implications – The paper creates a general theoretical basis that may be a useful background for developing policy based on a system approach. Originality/value – New institutional economics has often been used to analyse institutional determinants of economic growth and, to a lesser extent, to elaborate conditions for environmental protection and social development. The paper has tried to integrate and extend existing theory, focusing on economic activity, natural resource use and negative externalities, into a more general framework presenting the fundamental importance of social and economic order (institutional capital) for achieving sustainable development. Keywords Sustainable development, Organizational economics, Governance Paper type Conceptual paper

Management of Environmental Quality: An International Journal Vol. 19 No. 2, 2008 pp. 222-233 q Emerald Group Publishing Limited 1477-7835 DOI 10.1108/14777830810856609

Introduction New institutional economics (NIE) is the name of a school of economic thought that is strongly related with transaction-cost economics and the influence of property rights and other institutions on economic development. Economic issues, generally speaking, are analysed at a macroscopic and microscopic level (Furubotn and Richter, 1997, pp. 265-6). The microscopic level is represented by, e.g. Williamson (1975, 1985, 1998) who, following the ideas of Nobel Prize winner Ronald Coase (1937), analyses the existence of different types of governance[1] resulting from the existence of different types of transaction costs (the costs of obtaining information, negotiation, monitoring and control). The focus in this article is rather on the macroscopic level, which is represented by, e.g. Noble Prize winner Douglas C. North (1981, 1990), who, in the tradition of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (Smith, 1998), looks at the relation between formal institutions (the rules of the game in society) and economic development. The focus in this field of NIE is often on, for example, the relation between well defined and enforced property rights and economic activity, expressed by different measures of national income. Issues of poverty and social exclusion are seldom of direct interest, although De Soto’s (2000) The Mystery of Capital: Why Capitalism Triumphs in the West and

Fails Everywhere Else provides an interesting approach to the poverty of nations related to a lack of well-defined and enforced property rights, related to high transaction costs of the establishment and functioning of, for example, small business in developing countries. This is related to the question of who has the opportunity to be a “player” on the market. Institutional arguments concerning, e.g. social exclusion, can be found with many scientists, who may not be directly related to NIE. Castells’s (1998, p. 73) definition of social exclusion, “a process by which certain individuals and groups are systemically barred from access to positions that would enable them to an autonomous livelihood within the social standards framed by institutions and values in a given context”, shows the importance of institutions in this matter. Which rules of the game determine whether people have access to the fruits of economic activity of not? Although already Aristotle (1995) in his Politics emphasised the importance of private property for incentives for economic activity, his worldview contained a large group of people excluded from what he called the “good life.” As Bromley (1989, 1991) strongly argues, private property is based on the exclusion of other people from use and income generation of a piece of land, capital assets, etc. Of course, this may provide incentives for economic activity, as is emphasised by most economists since Adam Smith. However, already Smith was strongly suspicious to the inclination of businessmen to establish a monopoly, while Aristotle argued that people, in general, prefer more to less, while their appetite for acquisition is rather unlimited, which not necessarily leads to a “good life”: (1257b23) [T]he art of household management, as distinct from the art of acquisition, has a limit; and the object of that art is not an unlimited amount of wealth. It would thus appear, if we look at the matter in this light, that all wealth must have a limit. In actual experience, however, we see the opposite happening, and all who are engaged in acquisition increase their fund of currency without any limit or pause . . . (1257b35) . . . the fundamental cause of this state of mind is concern about living, rather than about living well; and since their desire for that is unlimited, their desire for the things that produce is equally unlimited (Aristotle, 1995, pp. 27-8).

Following Bromley (1989, 1991) it can be argued that the assessment the effects of private property rights depends on its distribution. When, in a hypothetical example, 20 per cent of the population possesses 80 per cent of all arable land, which leads to an increase in production, while the other 80 per cent of the population suffers from poverty and famine, as they only possess a small piece of land or no land at all, the question may arise whether a private property regime is desirable in such a society. Property rights, and rights in general, are indispensable for achieving a good life. In this context, Sen’s (1999) development as freedom and expansion of capabilities approach[2] would be very useful to enrich NIE and to transform it from a theory focusing on economic efficiency or economic activity to a theory of socio-economic development. He distinguishes five different types of freedom (Sen, 1999, pp. 10-11), which are closely related to rights needed for human development: (1) Political freedoms, such as freedom of speech and elections. (2) Opportunities for participation in the economic process. This is, e.g. related social inclusion or exclusion created by access to means of production, but also by the functioning of institutions (efficiency and strength of institutions) and access to institutional governance (discussed below).

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(3) Access to education, health care, and other social services, which not only may stimulate development in itself, but also create conditions for economic participation and economic growth. (4) Transparency, which is closely related to good governance (discussed below). (5) Protective security, which is related to institutional strength. As Sen argues, such freedoms may create the conditions for people to construct their own life and to become independent from different types of development or welfare programmes. This is related to the basic idea of the subsidiarity principle – when people can do something themselves, let them do it. People not only often possess more information on what they want and what is needed at the local level, but having real influence on your own life may also strengthen incentives for improving your own circumstances. NIE is also related to Coase’s (1960) famous article, The Problem of Social Costs, which is standard in environmental economics, and emphasises the importance of well-defined and enforced property rights as well as low transaction costs for internalising so-called negative externalities (where someone not involved in a transaction/exchange between two parties is harmed by this, e.g. in the form of pollution, noise, etc.). In reality, property rights on the environment are often poorly defined, as is the case with water and air, while transaction costs of solving environmental problems are high. In general, the more transboundary or global the problem, the higher the transaction costs of solving the problem while the property rights are more poorly defined (Platje and Van der Gaast, 1997; Platje, 2006a). A good example is climate change, where, even when the Kyoto Protocol was signed in 1997, a bargaining process on emission levels, enforcement mechanisms, etc., has been taken place since that time. The aim of this article is to show some important elements of what I call institutional capital for sustainable development (see also Platje, 2006a, b, 2007, 2008). The idea is that human activity and social organisation is at the basis of issues of sustainable development. Human activity takes place on the level of governance (the “play of the game”) which is influenced by institutions (the rules of the game in a society[3] (North, 1990, p. 3)). A distinction can be made between formal and informal institutions. Generally speaking, formal institutions concern, e.g. the property rights regime, laws and regulations, which in principle can be enforced in court. Informal institutions include culture, values and mental models. For achieving sustainable development, the importance of physical capital, human capital, social and ecological or natural capital has been emphasised (see Rao, 2000). Institutional capital includes social capital, and, as social organisation is the fundament for survival of human societies, it may be argued that institutional capital is a fundament of sustainable development. Rules of the game in the form of enforced laws and regulations, but also mental models or values stimulation sustainable activities, are a valuable asset to society. A working definition of institutional capital is institutions, “institutional governance” (organisational structures that create and enforce the rules of the game, such as judiciary, police, tax office, environmental protection agencies) and governance structures that are effective in reducing uncertainty while stimulating adaptive efficiency (meaning that a system is able to adapt itself to a change in conditions),

while stimulating an effective functioning of the allocation system as well as sustainable production and consumption patterns (Platje, 2004a, p. 15, 2006a). Institutional capital contains, among other things, low value in the public domain, strong institutions, an institutional equilibrium and good governance. These factors of institutional capital and the potential general effects of a lack of such capital are discussed in the next section.

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225 Factors of institutional capital and their influence on sustainable development The analysis of the four elements of institutional capital and their influence on sustainable development is on a general level, and should be a basis for further research on this topic. The general framework presented may be helpful to stimulate inter- and multi-disciplinary research, as it integrates, e.g. legal, social, psychological and economic aspects of sustainable development. The four factors of institutional capital and their expected influence on sustainable development are summarised in Table I. The elements of sustainable development that are taken into consideration are (Munasinghe, 1993 quoted in Jepma and Munasinghe, 1998, p. 55): . economic elements: efficiency, growth, stability; . social elements: poverty, consultation/empowerment, cultural heritage; . environmental elements: biodiversity/resilience, natural resources, pollution; . link between economic and social elements: intragenerational equity, targeted relief/unemployment; . link between economic and environmental elements: valuation, internalisation; and . link between social and environmental elements: intergenerational equity, popular participation. When analysing the importance of the different factors of institutional capital, it should be kept into mind that all of them are strongly interrelated, but that focus differs. Property rights play a crucial role, as “who owns what” and “who has the right to what,” as is emphasised in NIE, provides incentives for economic activity. Furthermore, e.g. ownership of land or access to natural resources is an important factor in food provision and energy supply (e.g. woods). Furthermore, property rights may generate income, create opportunities for access to markets as well as protection of rights (access to judiciary is costly), while a lack of property rights may lead to overuse of natural resources and other environmental problems. However, the term property rights should be interpreted as broadly as possible. It does not only concern property rights on land, physical capital and commodities, but also information[4], and rights in the broadest sense of the word. The last issue does concern human rights such as the right to a safe existence, education, access to health care, or a clean environment. This broad interpretation of property rights is the basis for the analysis of elements of institutional capital. When talking about a commodity, such a commodity has many attributes on which property rights can be defined. For example, Honore´ (1961, discussed in Bromley, 1989, pp. 187-90) argues that ownership concern the following eleven characteristics: the right to possess (physical control), the right to use, the right to manage, the right to

Table I. Factors of institutional capital and their influence on sustainable development

Public domain

General category including institutional strength, good governance and institutional equilibrium In the theoretical case, when all characteristics of property rights are well defined and transaction costs are zero, and all elements of control, management, alienation, transmissibility, etc. (Honore´, 1961) are in force no value is in the public domain (conditions for the Coase Theorem are fulfilled) The value in the public domain increases when transaction costs increase and/or property rights are not/poorly defined or enforced

Well defined and enforced property rights accompanied by low transaction costs provide strong incentives for economic activity and productive efficiency (e.g. North, 1990; Platje, 2004a, b), lead to internalization of externalities (Coase, 1960), while stable institutions reduce uncertainty and support economic stability (North, 1960) However, environmental problems may not be solved due to short-time horizons of owners. Perfectly delineated and enforced private property implies exclusion of other people (current and future generations), which, e.g. may lead to social exclusion, poverty, a lack of many rights and/or the enforcement of these rights. An inalienability rule and lack of transmissibility may solve some intergenerational issues (Bromley, 1991). Unequal distribution of property rights may lead to inter- and intra-generational inequity Private property rights on environmental resources may lead to environmental problems. Biodiversity, the ecosystem, air and water, etc. are important for life-sustenance (provide positive externalities). Negative externalities are becoming more transboundary and global Thus, private property on environmental resources is limited, as they are often related to the use of de facto open access resources (water, air, etc.), in particular when environmental issues are transboundary or global, which is related to high transaction costs and problems with delineation of property rights and enforcement When the value in the public domain increases, incentives for rent-seeking, redistributional activities and overuse of environmental resources become stronger as natural resource management is rather becoming an open access regime. (continued)

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Factor of institutional capital Description

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Focus on the influence of the incentives for human (economic) activity provided by the existing property rights regime and transaction costs of using institutional governance on the functioning of governance structures, outcomes, and the sustainability of all human activity

Determinants of good governance are elements of sustainable development itself, e.g. consultation/empowerment and popular participation Related to policy development and decision-making procedures which in effect lead to institutional change (change in the rules of the game) Important elements of good governance are participation, accountability, effectiveness and coherence (CEC, 2001, p. 10), lack of corruption, lack of state capture by interest groups (Rose-Ackerman, 2004, p. 301), subsidiarity principle

Institutional strength

Good/bad governance

Factor of institutional capital Description

(continued)

In case of high transaction costs and poorly defined property rights, related to, e.g. corruption, strong interest groups, etc.: corporate interests may prevail over environmental and social issues; economic activity as a total may be negatively influenced; social exclusion may prevail/increase; strong players may influence the rules of the game at different levels of territorial scale, increasing the probability of survival/appearance of inefficient institutionsa

Missing and poorly functioning institutions increase uncertainty and information problems, leading to shorter time horizons in decision-making Which property rights regime provides incentives for sustainability? Private property may stimulate production, but may be less socially “efficient” compared to common property, in particular when property rights are unequally distributed Which institutions exist that stimulate sustainable development, such as democracy, political freedom, market institutions, access to education and health care, etc. Which institutions exist, are they enforced and what is the level of transaction costs at what level of territorial scale (local, regional, national, international, global), creating the preconditions of good governance?

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Table I.

Table I. Informal institutions (mental models) support the functioning of formal institutions and institutional governance

An institutional equilibrium either stimulates sustainable development or sustainable developmentb. When mental models support sustainable development (e.g. sustainable production and consumption patterns), the inefficiency of formal institutions and institutional governance becomes less important, or the other way round

Notes: a In this context, inefficient institutions mean rules of the game that, e.g. hamper economic activity, hamper the solutions for social problems or even increase them, and hamper the solution of environmental problems or increase them. Of course, in reality, as North (1990) argues, a mix of efficient and inefficient institutions exists. Furthermore, institutions may exist that support, for example, economic activity, while leading to negative social and/or environmental effects. Environmentally-sound rules may hamper social and economic development, and so on. This issue is related to setting priorities in the process of policy making and development of sustainability indicators, as in reality often trade-offs appear. b Of course, this argument is a simplification, as there are many complex interrelated factors influencing sustainable development Source: author’s own elaboration – the discussion of the elements of institutional capital is based on Platje (2004b, 2006a, b, 2007, 2008). For the analysis of public domain issues, I am indebted to Henk Plasmeijer. The analysis of strong and weak institutions, although a quite commonly used term in development economics, is inspired by Poznan´ski’s (1996) analysis of strong and weak economic systems

Institutional equilibrium

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income, the right to capital (alienation), the right to security (e.g. protection by institutional governance), transmissibility (e.g. the income generative function and other functions of property rights are also in force after the decease of the owner), absence of term (e.g. full ownership means that there is no time limit on it, which is not the case with tenancy), prohibition of harmful use (e.g. causing negative externalities such as pollution), liability to execution (e.g. makes it possible to use the property as a collateral for loans) and the right to residuary character. I would add, based on Coase’s (1960) analysis, that there can also exist a right to cause harm to others, as is the case with pollution standards, allowing producers to pollute up to a certain level. It is not necessary that one person has the right to all attributes. On each attribute, private property, common property or public property can be established. The first element of institutional capital, the public domain, is a general category embracing all the effects of the other elements of institutional capital. In this context, value is in the public domain when the fundamental conditions of the Coase Theorem are not fulfilled: either characteristics of property rights are poorly or not at all defined, or they are/cannot be enforced due to high transaction costs. This implies that no owner(s) take(s) direct care or is responsible for, e.g. a natural resource. When no property rights exist on a natural resource, and this resource is of no one’s interest, value is in the public domain, but there are no social, economic and environmental consequences. However, this is a very unlikely case with the increasing population over the last centuries. When no property rights are delineated on a natural resource, implying also that no one is responsible for resource management, we can speak of an open access regime, where everyone can make use of a resource, creating incentives for overuse[5]. Externalities are another example of value in the public domain, as the right to pollute or the right to be free from pollution may either be poorly defined, not defined at all, or difficult to enforce due to high transaction costs, which may be related to a poorly functioning institutional governance[6]. An important issue is that when the value in the public domain increases, the incentives for so-called opportunistic behaviour (lying and cheating (Molho, 1997)) and rent-seeking increase (Platje, 2004b) with all its negative effects on sustainable development (Platje, 2007). Weak institutions, “bad” governance and an institutional disequilibrium are reflections of value in the public domain. Institutional strength or weakness focuses on the incentives for human economic activity provided by the form existing property rights regime (e.g. private property, public property, common property) related to the economic system (e.g. capitalism, state socialism, market socialism, mixed regulated economy (see Poznan´ski, 2000)) and the existing structures of governance (i.e. state enterprises vs. different forms of private enterprises such as one-man company, partnership, limited liability company, public company), in relation to enforcement and support of the formal system by the culture, values and mental models of the population (institutional equilibrium). The focus here is the influence of the existence and functioning of institutions and their enforcement (or the lack of all three) on the functioning of governance structures and whether institutions and institutional governance provide incentives for activities and outcomes that are in accordance with sustainable development. Good governance is related to policy making and the process of changing the rules of the game at different administrative or geographical levels (institutional change). An example is the EU principles of good governance: participation, accountability,

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effectiveness and coherence (CEC, 2001, p. 10) to which can be added the lack of corruption and lack of state capture by interest groups (Rose-Ackerman, 2004, p. 301). In the current process of globalization, the lack of good governance is often mentioned as one of the most important problems. Stiglitz (2002, 2006) is an important representative of this critique. He provides the example of the policy of the International Monetary Fund (IMF), a public organisation run by highly developed countries with the USA as a veto player, operating rather in less developed countries. An important aim of the IMF in the 1990s was creating macroeconomic stability by, e.g. lending money in case of a crisis, with, according Stiglitz, an excessive focus on contractionary monetary and fiscal policies in the form of increased interest rates and/or decrease in government spending, e.g. in order to reduce inflation and create exchange rate stability. This created deep recessions with all its negative consequences for poverty and employment. He also argues that the IMF, by its market fundamentalism and policies contributed to the financial crises in, e.g. South-Korea, Indonesia and Russia in 1997 and 1998. An important critique is that the IMF did not discuss its policies with the different stakeholders in the recipient country (lack of participation), created policy behind closed doors (lack of accountability), and was ineffective in achieving its main goals. Furthermore, the deep recessions and the resulting increase in poverty and unemployment may have had negative effects on social capital and the trust in the government, in international organisations such as the IMF and the belief in positive effects of the process of globalization itself in the recipient countries, creating or increasing an institutional disequilibrium. Following Furubotn and Richter (1997), an institutional equilibrium exists when informal institutions support formal institutions and institutional governance. For example, when people belief the economic and legal system is just and fair, and the state does a good job, they are less likely to cheat. When there is trust in the judiciary that they will enforce the law, individuals and firms are less likely to cheat on contract partners, and more likely to comply to environmental regulations, as there is a higher probability of facing the consequences of misconduct. When people think the law is just, they are less likely to break the law. The focus here is rather on the mental models (culture, values, ideology, mentality, etc.) of people and its influence on the functioning of the formal institutions, institutional governance and governance structures, and, in effect, its influence on sustainable development. Meadows (1999) provides strong arguments that a change in mental models is likely to be more effective in achieving sustainable development than the creation of, e.g. new laws and regulations. When people would change their way of thinking and living and reduce energy use, less or no regulations on CO2 reduction would be needed. In the utopian case where people are completely honest, the need for laws and regulations and enforcement by police and judiciary will be either zero or radically reduced. Stiglitz (2006) argues that a change in mentality is required for achieving sustainable development in the sense that it is a condition to start to change the rules of the game and to stimulate good governance in order to achieve a more sustainable development. Concluding remarks An important aim of the paper was to present a basis for extending New Institutional Economics from a theory mainly analysing determinants of economic growth and productive efficiency to a theory elaborating the fundaments of sustainable

development. Four important elements of institutional capital and their general influence on economic, social and environmental aspects of sustainable development were discussed. An institutional approach is useful for analysing reasons for unsustainable development as well as reasons for difficulties with, e.g. changing production methods and consumption patterns. For example, many revolutionary technologies may be theoretically available or become available in the near future (see Weizsacker et al., 1999). However, there are different mechanisms that hamper invention and innovation, which may be related to weak institutions, a lack of good governance, high transaction costs, etc. An institutional analysis may be helpful not only in identifying problems, but also in creating a theoretical framework for policy making and discussion on fundamental change that may be required in order to achieve sustainable development. Furthermore, the institutional approach may be a useful method for supporting other system approaches, for elaborating issues of sustainable development at different levels of territorial and administrative scale (urban vs rural, local, regional, national, international, global levels) as well as for analysing the environmental effectiveness of, e.g. quality standards or environmental management systems. The challenge is to extend and deepen the analysis presented in this paper, and to apply it to different (interrelated) issues of sustainable development in the context of globalisation, a process which seems to lead to weakening of many institutions and strengthening of unsustainable tendencies. Notes 1. “[T]he level at which transactions and the production of goods and services take place and concerns the organisation of decision-making arrangements” (Platje, 2004a, p. 20). Different types of governance structures are markets and hierarchies such as firms, government bureaucracies, government agencies, non-profit organisations but also networks of enterprises. 2. Capability means “the power that makes you able to do something” (Dictionary of Contemporary English, 1995, p. 190).” 3. According to North (1990), stable institutions are necessary in order to reduce uncertainty and transaction costs in the economy (see also Bromley, 1989, 1991). 4. Information (or the lack of it) is an important factor in the functioning or failing of markets, a problem which increases in the process of globalisation (see, e.g. Stiglitz, 2002, 2006). Furthermore, information technology and knowledge, e.g. obtained by education has become indispensible for production and trade. 5. According to Bromley (1991) when in literature is written about the tragedy of the commons in fact they often discuss an open access regime. In case of common property, owners can be identified (e.g. a local community) who can manage the resource and exclude others. However, problems with resource management are likely to increase with an increase in the number of co-owners. 6. This idea is drawn from Henk W. Plasmeijer’s lecture synopsys for the course “An Introduction to Institutional Economics” given at Groningen University during the academic year 1994-1995. References Aristotle (1995), Politics, trans. by Barker, E., revised with an introduction and notes by Stalley, R.F., Oxford University Press, Oxford.

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Bromley, D.W. (1989), Economic Interests and Institutions: The Conceptual Foundation of Public Policy, Basil Blackwell, Oxford. Bromley, D.W. (1991), Environment and Economy – Property Rights and Public Policy, Basil Blackwell, Oxford. Castells, M. (1998), End of Millennium, Blackwell Publishers, Cambridge.

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CEC (2001), European Governance: A White Paper, European Commission, Brussels. Coase, R.H. (1937), “The nature of the firm”, Economica, No. 4, pp. 386-405. Coase, R.H. (1960), “The problem of social cost”, Journal of Law and Economics, Vol. 3 No. 1, pp. 1-44. De Soto, H. (2000), The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, Basic Books, New York, NY. Dictionary of Contemporary English (1995), 3rd ed., Longman, Harlow. Furubotn, E.G. and Richter, R. (1997), Institutions and Economic Theory – The Contributions of the New Institutional Economics, The University of Michigan Press, Arbor, MI. Honore´, A.M. (1961), “Ownership”, in Guest, A.G. (Ed.), Oxford Essays in Jurisprudence, Oxford University Press, Oxford, Ch. 5. Jepma, C.J. and Munasinghe, M. (1998), Climate Change Policy – Facts, Issues and Analyses, Cambridge University Press, Cambridge. Meadows, D. (1999), Leverage Points – Places to Intervene in a System, The Sustainability Institute, Hartland, VT. Molho, I. (1997), The Economics of Information – Lying and Cheating in Markets and Organizations, Blackwell Publishers, Oxford. Munasinghe, M. (1993), Environmental Economics and Sustainable Development, World Bank, Washington DC. North, D.C. (1981), Structure and Change in Economic History, W.W. Norton, New York, NY. North, D.C. (1990), Institutions, Institutional Change, and Economic Performance, Cambridge University Press, Cambridge. Platje, J. (2004a), “An analysis of trends and requirements for the development of sustainable agriculture in Poland”, in Leal Filho, W. (Ed.), Ecological Agriculture and Rural Development in Central and Eastern Europe, NATO Science Series V: Science and Technology Policy, No. 44, IOS Press, Amsterdam, pp. 15-37. Platje, J. (2004b), Institutional Change and Poland’s Economic Performance since the 1970s – Incentives and Transaction Costs, CL Consulting i Logistyka, Wrocław. Platje, J. (2006a), “Institutional capital as a condition levels of territorial scale”, in Preisner, L. (Ed.), pospodarczego Polski, Wydawnictwo Ekonomia

for sustainable development at different S´rodowiskowe bariery i czynniki rozwoju i S´rodowisko, Białystok, pp. 184-92.

Platje, J. (2006b), “Nowa Ekonomia Instytucjonalna jako ‘narze˛dzie’ analizy i implementacji zasad i celo´w zro´wnowaz˙onego rozwoju”, paper presented at Conference on Zro´wnowaz˙ony rozwo´j w teorii i praktyce, Wrocław, 29-30 June. Platje, J. (2007), “Good governance as a condition for urban sustainable development”, European Urban and Regional Studies, forthcoming. Platje, J. (2008), “Institutional capital as a factor of sustainable development – the importance of an institutional equilibrium”, Economic and Environmental Studies, forthcoming.

Platje, J. and Van der Gaast, W. (1997), “Industrial development in Poland, the environment as a boundary condition”, in Olszewski, L. and Mozrzymas, J. (Eds), Struktury Przemysłowe w Gospodarcze, Wydawnictwo Uniwersytetu Wrocławskiego, Wrocław, pp. 161-82. Poznan´ski, K.Z. (1996), Poland’s Protracted Transition, Cambridge University Press, Cambridge. Poznan´ski, K.Z. (2000), “Paradygmat ewolucyjny ekonomii poro´wnawczej: nowa interpretacja komunizmu i postkomunizmu”, in Kowalik, T. and Hauser, J. (Eds), Polscy Ekonomis´ci w S´wiecie, PWN, Warszawa-Krako´w, pp. 204-22. Rao, P.K. (2000), Sustainable Development – Economics and Policy, Blackwell Publishers, Oxford. Rose-Ackerman, S. (2004), “Governance and corruption”, in Lomborg, B. (Ed.), Global Crises, Global Solutions, Cambridge University Press, Cambridge, pp. 301-44. Sen, A. (1999), Development as Freedom, Anchor Books, New York, NY. Smith, A. (1998) in Sutherlands, E. (Ed.), An Inquiry into the Nature and Causes of the Wealth of Nations, Oxford University Press, Oxford (originally published in 1776). Stiglitz, J.E. (2002), Globalization and Its Discontents, W.W. Norton, New York, NY. Stiglitz, J.E. (2006), Making Globalization Work, W.W. Norton, New York, NY. Weizsacker, E.U., Lovins, A.B. and Lovins, L.H. (1999), Mnoz˙nik cztery – podwojony dobrobyt– dwukrotnie mniejsze zuz˙ycie zasobo´w naturalnych, Wydawnictwo Rolewski, Torun´. Williamson, O.E. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, Free Press, New York, NY. Williamson, O.E. (1985), The Economic Institutions of Capitalism, Free Press, New York, NY. Williamson, O.E. (1998), “Transaction cost economics: how it works; where it is needed”, The Economist, Vol. 146 No. 1, pp. 23-58. Further reading Rose-Ackerman, S. (1998), “Bribes and gifts”, in Ben-Ner, A. and Putterman, L. (Eds), Economics, Values, and Organization, Cambridge University Press, Cambridge, pp. 296-328. About the author Joost Platje is a Professor at the Faculty of Economics of Opole University (Poland). He received his PhD at Groningen University (The Netherlands) on the topic “Institutional change and Poland’s economic performance since the 1970s – incentives and transaction costs”. His current research focuses on the application of theories of new institutional economics to issues of sustainable development. Joost Platje can be contacted at: [email protected]

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234 Received 30 July 2007 Revised 10 September 2007 Accepted 1 November 2007

Talking about the future within an SME? Corporate foresight and the potential contributions to sustainable development Markus Will University of Applied Science Zittau/Go¨rlitz, Zittau, Germany Abstract Purpose – This paper aims to try to link sustainable development, small business management and strategy setting with corporate foresight. Corporate foresight aims to transfer methodological sound instruments of future and technology analysis to (small) business contexts and can be described as an information-based communication process aiming in vision-building on future markets, changes in society and customer needs. Design/methodology/approach – The paper is based on a literature research and on the results of an interdisciplinary expert workshop and is part of an ongoing case study. Findings – The paper finds that sustainable development is widely acknowledged as key concept for humanities future. Sustainability calls for balancing short-term business interest and long-term development of both the society and the company itself. Regardless of whether a business manager is committed to an ethical fundament of sustainable development (normative attempt), there is also a rational basis for taking (voluntary) actions for corporate sustainability. Notably, regarding the development of commodity prices in the last years (e.g. steel, copper, coal) or the long-term preservation of value brands, there is a call for strategic response. Corporate foresight may support this strategy-setting process. Originality/value – Although foresight procedures are not new in management literature, there is a lack in implementation in small businesses. The paper presents a step-by-step approach on corporate foresight to be adopted in small businesses. Keywords Sustainable development, Innovation, Forecasting, Small enterprises Paper type General review

Management of Environmental Quality: An International Journal Vol. 19 No. 2, 2008 pp. 234-242 q Emerald Group Publishing Limited 1477-7835 DOI 10.1108/14777830810856618

Corporate sustainability With the term corporate sustainability one can describe the transfer of the vision of sustainable development from a societal to a business level. From an anthropocentric point of view, the normative concept of sustainable development, as it was defined by the Brundtland Commission (WCED, 1987), refers to equity[1], in particular concerning today’s and future generations. This first, implies that decisions taken today should not restrict possible decisions in the future. Second, the level of welfare (or well-being) should be stabilised or even be enhanced while the carrying capacity of ecological and social systems ought to be respected. This implies, for example, the reduction of the consumption of non-renewable resources or abdicating a possibly profitable affair out of ethical reasons[2]. Although, normative concepts and ethical imperatives as corrective for institutional actions are inevitably abstract, ambiguous and elusive and therefore not always fitting to business thinking. Generally one can ask anyway, if a business bears the responsibility, besides making as much profit as possible, of

pursuing the interests of employees and shareholders while conforming to legal rules (Friedman (1970) allegedly said that “The business of business is business”). Taking voluntary actions and investments for sustainable development that are going beyond legal requirements needs to be based on a rational justification and a broader definition of success (Hu¨lsmann, 2003; Mu¨ller-Christ, 2001), especially as it can be assumed that investing in sustainability measures means higher costs and slower processes (“delta costs”). Regarding an enterprise as an open system that is depending on scarce resources[3] an obvious rationale would be to reduce, for instance, commodity and electricity inputs per economic value added. This is clearly connected to cost-saving potentials, so that a business case can be assumed while the economic mini-max calculus is met. In addition, a further rational motivation would be to secure the long-term supply and healthiness[4] of the resources needed. Regarding financial resources, businesses already follow that rationale as they need to assure sufficient cash flow (liquidity). Not only natural resources such as crude oil, copper and steel are scarce on world markets and commodity sources, but also intangible resources such as value brands and reputation or the stakeholder-related licence-to-operate can become rare[5]. Because of stronger shareholder awareness, growing visibility and the activity of sustainability rating agencies and indexes, this becomes relevant for managers[6] (see Anderson, 2005). On this background it is possible to define corporate sustainability rationally as an approach to enhance competitive position by taking opportunities and managing sustainability risks drawn from global trends to ensure that the needs of direct and indirect stakeholders will be met today and in future (Elber, 2007; Dyllick and Hockerts, 2002). Thereby a broader understanding of economic success can be derived focussing not only on thriving marketplace performance but also maintaining the resource base of the firm (Mu¨ller-Christ, 2001). This entails a dilemma situation and classical management task, as both aspects cannot be maximised at the same time (Hu¨lsmann, 2003) and need to be balanced somehow[7]. Measures to be obtained for corporate sustainability may take place at operative level (management systems) and at strategic level (enterprise philosophy and strategy), so that development and fabrication of new products is arranged according to defined sustainability principles. Corporate foresight However, the discourse on sustainability covers questions on the future and long-term trends by looking ahead, as the title of the mentioned Brundtland report Our Common Future indicates. To ask and think about “a” desirable or doomsday future that is somehow likely to be, has a long history and is certainly not a modern fashion. Instead it is an ancient profession and almost all human cultures and civilisations have known and know their “prophets and seers”, as, for instance, the Oracle of Delphi in Ancient Greece or visionary and utopian thinkers as Plato, Leonardo, Tomasso Campanella, Tomas Moore, Karl Marx or George Orwell – all of them have had an own picture or that what could happen and all of them influenced future developments in a visible way (Strathern, 2007; Van der Duin, 2006; Coates et al., 2001; Bradfield et al., 2005). Contemporary forms of systematic foresight can be traced back to early 1950s and military contexts. The US Department of Defence was seeking a methodology to derive pictures of the future. This led to the Delphi technique, systems analysis and scenario

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planning prevailingly developed by RAND Corporation (Bradfield et al., 2005). The systems-analytical scenarios from Meadows et al. (1972) “Limits-to-growth” gained world wired public attention and pointed out the concordance of future studies and sustainable development. Early future-oriented methods (forecasting) were based on the assumption that it would be possible to predict by identifying one single option that will certainly become reality. But in general, visionary thinking and anticipation is problematic as the future is fundamentally uncertain and not reliably predictable. What will happen is not a linear or simple extrapolation of past and present trends, but those decisions taken today are shaping it. Furthermore people are tending to construct their view of the future by their hopes and fears drawn from their values and mindsets. Respecting this, foresight methods are not intended to forecast a single future, but to create an understanding of likely trends in society and economy, technology and science in a longer term (Cuhls, 2003, referring to Coates, 1985). Hence, foresight is closely related to strategy setting and planning. Foresight exercises are well established in the context of business strategy, decision making and management of front-end innovation processes, where it is often entitled “environmental scanning” (Fuller and Tilley, 2005; Porter, 2000; Welge and Al-Laham, 2001, referring to Aguilar, 1967). In conclusion, corporate foresight can be defined as a process of communication to build a mid- to long-term vision on future markets, costumer needs and societal challenges. Thereby corporate foresight may support capabilities for strengthening competitiveness as its aims in (Baecker, 2002; Cuhls and Johnston, 2006; Burmeister et al., 2004): . delivering business intelligence by gathering background information; . early warning of recent developments; . agenda and priority setting for strategic management; . innovation catalysing; and . support for present-day decision making. The toolbox of foresight contains a variety of quantitative and qualitative methods and instruments that are also used in other contexts as technology assessment. Most common used methods are trend and market analysis, environmental scanning, scenarios and roadmaps as well as expert surveys (via Delphi techniques) supported by creativity methods as mind mapping (Steinmu¨ller, 1999; Cuhls and Johnston, 2006). Supposing that both new product development and maintaining the necessary base of tangible and intangible resources would be essential for long-term business success, then sustainability-oriented foresight methods can be applied usefully in a decision-making and strategy setting. Sustainability-road mapping seeks for and evaluates potential solutions for innovative products and cleaner technologies (Behrendt, 2006; Erdmann and Behrendt, 2006; Fichter and Kiehne, 2006). With the help of foresight methods also legal regulations and their impact on businesses may be analysed in advance with the goal of developing an appropriate strategic response and products, as i.e. in the case of the EU’s Eco-Design and RoHS guidelines (European Commission, 2002) or national waste regulations.

In focus: small businesses Several studies underline that corporate foresight is an “old hat” and commonly exercised as a inherent entrepreneurial activity in major companies (i.e. Baecker, 2002; Burmeister et al., 2004), especially in their strategic technology management. Also the issue of sustainable development is widely acknowledged as the growing number of sustainability reports and CSR initiatives shows. On the other side there is poor empirical evidence that sustainability is adequately anchored in small businesses[8], although they put a growing attention to environmental and quality management. Some studies reveal that there is only little use of strategic foresight and systemic assessment methods (Rammer et al., 2006; Tilley and Fuller, 2000) and management is often driven “by emotion”. There are some reasons for this: nowadays small businesses are faced with challenging global and regional economic situation. Furthermore, human and financial resources are restricted, and no organisational implementation of a systemic approach as an “add-on” will be possible. Thus toolboxes need to be tailored to the specific situation and the process must be arranged carefully. Networking or formation of clusters of small businesses with regional trade associations and/or external consulting might be an effective approach along the decision of “make or cooperate or buy”. This is especially important concerning sustainable development, as it requires broader alliances and new ways of thinking. Generally, the practicability and usability is determined by factors as (Lichtenthaler, 2005; Will and Schubert, 2007): . functionality and adequateness; . culture of the firm and style of decision-making (“owner-manager”); . temporal, personal and financial expenditures; . requested level of knowledge and information demand – level of systemic; and . scientific background of the user and familiarity with the tool. Besides the methodological tools, a process of communication must be induced within the small business focussing on questions like (Burmeister et al., 2004): . How will our market niche look like in future (five to 15 years)? . Which assets do we have to develop for long-term success? . Which innovations/new products will be necessary, in particular regarding sustainability? . What does it mean for our strategy? Again, the questions point out that there is an apparent accordance between foresight and entrepreneurship (Fuller and Warren, 2006). Elements of foresight in innovation- and technology analysis Innovation and technology analysis (ITA) represents a further development of technology assessment (TA) aiming in a systematic evaluation and assessment of technical systems related to a value system (for instance, sustainable development). ITA is in contrast to TA considerably business-oriented and focuses on potentials and chances. ITA is intended to offer orientation in a high tech industry by anticipating potentials and risks at early stage innovation stages. Therefore ITA is closely

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Figure 1.

connected to the described activities within a foresight exercise. In addition to giving orientation, ITA comprehends life cycle-oriented assessment for shaping (“constructing”) technological progress towards sustainable innovations. As a “small business is not a little big business” (Welsh and White, 1980) the foresight instruments used in major companies cannot be assigned merely. It is necessary to find proper linkages to existing processes as management systems for quality or environmental performance (as the process-oriented ISO 9000:2005 and ISO 14000:2004)[9] and options for streamlining and simplifying. The following step-by-step approach is recommended for small business foresight (Will and Schubert, 2007; Erdmann and Behrendt, 2006): (1) Scoping. Determining goal, search areas, and system boundaries (time and geographical scale, life cycle perspective). (2) Gathering intelligence. According to the given scope various information needs to be collected, for instance, by an extended research in (patent) databases, at fair trades, in scientific and popular literature and the world wide web. Also, layman and expert-knowledge can be gained by qualitative methods like focus groups or multi-stage interviews or surveys. For this, a lot of supporting software tools and consultancy services exist in the framework of business intelligence (for an overview see Fichter and Kiehne, 2006). (3) Scenarios. This is the development of alternative scenarios that can be derived by cross-impact analysis of before defined influencing factors (Vester, 1999). It is thereby not intended to catch the most likely future, but to understand factors that influence the addressed area. Following a system theoretical understanding, one can interpret a scenario as a construction of interplay of different systems and their elements. That is why different systems need to be marked off, as shown in the notation in Figure 1 (following Baecker, 2002, referring to Spencer-Brown, 1969). Depending on which factors of the different scenarios are characterised as active (highly influencing), passive (not influencing) or neutral, a matrix of priorities can be deducted. With only little changes in the characterisation of influencing factors a number of alternative scenarios can be extracted (Wilms, 2006). With regard to sustainability it seems to be important to address the topic considering a sustainable, unsustainable and business-as-usual perspective. By support of computer based spreadsheet-calculation or use of scenario software this step may not need more than a six hours inhouse-workshop, perhaps supported by an external expert. (4) Backcasting. Based on the scenarios development this step seeks to retropolate with the aim of detecting which business options that are current for present

decision making. This is to say: what should or could we do today if we desire a certain scenario or a certain development is likely to be. Regarding sustainability it is important to understand that this is not a fix point but a process to be induced in a business (Kopfmu¨ller et al., 2001). It is explicitly not the goal to develop a determined plan, as the inherent level of uncertainty is high (see Collingridge, 1980) and unforeseen events may happen (“wildcards”, see Steinmu¨ller and Steinmu¨ller, 2003). But this exercise should support a kind of flexibility and openness in decision making and strategy setting (examples: when carbon-taxes are likely to be introduced on EU level, how should the business way of production and manufacturing be changed? Suppose that RFID technologies will become available and attractive, what does this mean for electronically products?) (5) Transfer of information. The last step is perhaps the most crucial, as the achieved information on long-term perspectives need to be transferred to staff and into short-term business tactics. Summary and conclusion In summary the paper presented an attempt to corporate foresight for small businesses on the background of sustainable development. Beside of normative and ethical reasons for sustainable development there is also a rational one, focussing on long-term supply and healthiness of resources needed for the company’s undertakings. Corporate sustainability could be considered as an approach for enhancing competitiveness by taking opportunities and managing risks related to global trends as climate change. For this, it seems to be necessary to analyse possible future developments in a systematic way in order to build a long-term vision on future markets and societal challenges and to derive proper business strategies. As the majority of companies in Europe suite to the EU’s SME definition (EC, 2006) it can be assumed that there is a broad potential for taking actions towards sustainable development, if small business management and decision making can be supported by proper analytical instruments. ITA and more precisely corporate foresight with its capacious tool box offers such kinds of instruments but it is often tailored to policy-consulting or for the needs of major businesses. But due to the principal situation in SME, characterised by restricted resources and high workload in day-to-day business, a reliable but simple methodological toolkit is appreciated – one possible attempt at this was described in the text. Ongoing research at the University of Applied Sciences Zittau/Go¨rlitz is focussing on an explorative case study for introducing ITA and thereby a foresight process, in small businesses. Besides the methodological questions, further research should deal with the role of internal communication processes and the way in which societal discourses and ethical issues are reflected in small business strategy. Furthermore, the next steps in small business and sustainability research could investigate “windows-of-opportunities” for implementing a corporate foresight and/or ITA approach in small businesses and the role of regional networks across companies, institutions of higher education, technology transfer agencies and regional government. Notes 1. Intra- and intergenerational justice (or fairness).

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2. There are two major attempts in the field of business ethics and CSR: either to avoid ethical “misbehaviour” (child labour, worse working conditions, use of outlawed substances in Third World countries (outsourcing and off-shoring)) or to do “good” things, e.g. by social sponsoring, etc. 3. A resource is an item that is needed by and available for the company to gain profits. In this paper the term resource includes natural resources, physical resources (capital) and intangible resources as stakeholder acceptance/licence-to-operate. Scarcity of resources can be explained with limitation of factors of production and limited demand due to an assumed high diversity of products. External input-related resources: commodities, electricity; internal input-resources: personnel, time, “slack money”, creativity, dynamic capabilities; external output-related resources: assimilation of emissions by the environment and ecosystem functions. 4. The term healthy has been used to describe the strong functionality of economies and productive and fully-functioning ecosystems (Louks and Leavitt, 1999). 5. Particularly risks and hazards causing negative environmental impacts (as in the case of Shell Oil/Brent Spar in 1995) or scandalous business behaviour (as in the case of Nike “sweatshops”, Enron, Andersen, etc.) can induce boycott campaigns by NGOs with long-lasting damaging effects to reputation. 6. Although mostly large-scale companies are concerned with boycott this can also have heavy effects for suppliers. 7. This in turn cannot be solved only rationally but requires normative commitment of the management, an adequate strategic response and escorting management systems. 8. A small business is defined here according to the definition by the European Commission, as a micro, small and medium-sized enterprise that employs fewer than 250 persons and which has an annual turnover not exceeding 50 million EUR and/or balance sheet total of not more than 43 million EUR (see EC, 2005). 9. The research project “itams – innovation and technology analysis and integrated management systems“ that is conducted at the University of Applied Sciences (2006/2007) and funded by the German Ministry for Education and Research (BMBF) follows that approach (see www.innovationsanalysen.de/de/projekte/ita_ms.html). References Aguilar, F. (1967), Scanning the Business Environment, Macmillan, New York, NY. Anderson, D.R. (2005), “Corporate Survival – The Critical Importance of Sustainability Risk Management”, iUniverse.com, Lincoln. Baecker, D. (2002), Wozu Systeme?, Kadmos Kulturverlag, Berlin. Behrendt, S. (2006), “Integrated Roadmapping. Unterstu¨tzung nachhaltigkeitsorientierter Innovationsprozesse in der Informationstechnik und Telekommunikation”, in Pfriem, R., Antes, R., Fichter, K., Mu¨ller, M., Paech, N., Seuring, S. and Siebenhu¨ner, B. (Eds), Innovationen fu¨r eine nachhaltige Entwicklung, DUV, Wiesbaden, pp. 395-417. Bradfield, R., Wright, G., Burta, G., Cairnsb, G. and Van Der Heijdena, K. (2005), “The origins and evolution of scenario techniques in long range business planning”, Futures, Vol. 37 No. 8, pp. 795-812. Burmeister, K., Neef, A. and Beyers, B. (2004), Corporate Foresight. Unternehmen gestalten Zukunft, Murrmann, Hamburg. Coates, J.F. (1985), “Foresight in federal government policy making”, Futures Research Quarterly, Vol. 1, pp. 29-53.

Coates, V., Farooque, M., Klavans, R., Lapid, K., Linstone, H.A., Pistorius, C. and Porter, A.L. (2001), “On the future of technological forecasting”, Technological Forecasting and Social Change, Vol. 67 No. 1, pp. 1-17. Collingridge, D. (1980), The Social Control of Technology, St Martin’s Press, New York, NY. Cuhls, K. (2003), “From forecasting to foresight processes – new participative foresight activities in Germany”, Journal of Forecasting, Vol. 22 Nos 2-3, pp. 93-111. Cuhls, K. and Johnston, R. (2006), “Corporate future-oriented technology analysis”, anchor paper presented at the Second Seville Seminar on Future-oriented Technology Analysis: Impact of FTA Approaches on Policy and Decision-making, IPTS, Seville. Dyllick, T. and Hockerts, K. (2002), “Beyond the business case for corporate sustainability”, Business Strategy and the Environment, Vol. 11 Nos 2-3, pp. 130-41. Elber, S. (Ed.) (2007), The Sustainability Yearbook 2007 – Insights from SAM’s Sustainability Research and PwC’s Approach to Supply Chain Risks, SAM Group and PricewaterhouseCoopers, Zurich. Erdmann, L. and Behrendt, S. (2006), “From technology-driven roadmapping towards sustainability-oriented roadmapping: development and application of an integrated methods”, paper presented at the Second Seville Seminar on Future-oriented Technology Analysis: Impact of FTA Approaches on Policy and Decision-making, IPTS, Seville. European Commission (2002), Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) 2002/95/EC, European Commission, Brussels. European Communities (EC) (2006), The New SME Definition. User Guide and Model Declaration, European Communities/European Commission (2003/361/EG), Enterprise and Industry Publications, Luxembourg. Fichter, K. and Kiehne, D.O. (2006), Szenariomanagement im Trendmonitoring, Nova net Studie, Fraunhofer IRB Verlag, Stuttgart. Friedman, M. (1970), “The social responsibility of business is to increase its profits”, in Chryssides, G.D. and Kaler, J.K. (Eds), An Introduction to Business Ethics, Chapman, London. Fuller, T. and Tilley, F. (2005), “Corporate ethical futures: responsibility for the shadow on the future of today’s ethical corporations”, Futures, Vol. 37 Nos 2-3, pp. 183-98. Fuller, T. and Warren, L. (2006), “Entrepreneurship as foresight: a complex social network perspective on organisational foresight”, Futures, Vol. 38 No. 8, pp. 956-71. Hu¨lsmann, M. (2003), Management im Orientierungsdilemma. Unternehmen zwischen Effizienz und Nachhaltigkeit, DUV, Deutscher Universita¨tsverlag, Wiesbaden. Kopfmu¨ller, J., Brandl, V., Jo¨rissen, J., Paetau, M., Banse, G., Coenen, R. and Grunwald, A. (2001), Nachhaltige Entwicklung integrativ betrachtet. Konstitutive Elemente, Regeln, Indikatoren, Edition Sigma, Berlin. Lichtenthaler, E. (2005), “Methoden der Technologiefru¨herkennung und Kriterien zur ihrer Auswahl”, in Mo¨hrle, M.G. and Insenmann, R. (Eds), Technologie-Roadmapping. Zukunftstudien fu¨r Technologieunternehmen, 2 Auflage, Springer Verlag, Berlin, pp. 55-80. Louks, O.L. and Leavitt, A.R. (1999), “Natural science foundation of sustainability: health and integrity of resources”, in Louks, O.L., Erekson, O.H., Bol, J.F., Gorman, R.F., Johnson, P.C. and Krehbiel, T.C. (Eds), Sustainability Perspectives for Resources and Businesses, Lewis Publishers, Washington, DC, pp. 63-80. Meadows, D.H., Meadows, D.L., Randers, J. and Behrens, W.W. III (1972), The Limits to Growth, Universe Books, New York, NY.

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Mu¨ller-Christ, G. (2001), Nachhaltiges Ressourcenmanagement. Eine wirtschaftso¨kologische Fundierung, Metropolis Verlag, Marburg. Porter, M.E. (2000), Wettbewerbsvorteile, 6 Auflage, Campus Verlag, Frankfurt Main. Rammer, C., Zimmermann, V., Mu¨ller, E., Heger, D., Aschhoff, B. and Reize, F. (2006), Innovationspotenziale von kleinen und mittleren Unternehmen, Vol. 79, ZEW Wirtschaftsanalysen – Schriftenreihe des ZEW, Mannheim. Spencer-Brown, G. (1969), Laws of Form, Allen & Unwin, London. Steinmu¨ller, K. (1999), “Methoden der TA – ein U¨berblick”, in Bro¨chler, S., Simonis, G. and Sundermann, K. (Eds), Handbuch Technikfolgenabscha¨tzung, Vol. 2, Edition Sigma, Berlin, pp. 655-69. Steinmu¨ller, A. and Steinmu¨ller, K. (2003), Ungeza¨hmte Zukunft – Wild Card und die Grenzen der Berechenbarkeit, Gerling Akademie Verlag, Mu¨nchen. Strathern, O. (2007), A Brief History of the Future. How Visionary Thinkers Changed the World and Tomorrow’s Trends Are Made and Marketed, Carroll & Graf Publishers, New York, NY. Tilley, F. and Fuller, T. (2000), “Foresighting methods and their role in researching small firms and sustainability”, Futures, Vol. 32 No. 2, pp. 149-61. Van der Duin, P. (2006), Qualitative Futures Research for Innovation, Eburon, Delft. Vester, F. (1999), Die Kunst vernetzt zu denken. Ideen und Werkzeuge fu¨r einen neuen Umgang mit Komplexita¨t. Der neue Bericht an den Club of Rome, DTV Deutscher Taschenbuch Verlag, Mu¨nchen. Welge, M.K. and Al-Laham, A. (2001), Strategisches Management. Grundlagen – Prozess – Implementierung, 3 Auflage, Gabler, Wiesbaden. Welsh, J.A. and White, J.F. (1980), “A small business is not a little big business”, Harvard Business Review, Vol. 59 No. 4, pp. 18-32. Will, M. and Schubert, J. (2007), “Was bedeutet Innovations- und Technikanalyse (ITA) fu¨r ein KMU? Konzept zum systematischen Hervorbringen nachhaltigkeitsfo¨rdernde Produkte”, working paper, Hochschule Zittau/Goerlitz, Junior Research Group ITA (Project: itams) Zittau. Wilms, F.E.P. (2006), “Szenarien sind Systeme”, in Wilms, F.E.P. (Ed.), Szenariotechnik. Vom Umgang mit der Zukunft, Haupt, Stuttgart and Wien, pp. 30-60. World Commission on Environment and Development (WCED) (1987), Our Common Future, Oxford University Press, New York, NY. Further reading Becker, P. (2003), “Corporate foresight in Europe: a first overview”, working paper, Institute for Science and Technology Studies and European Communities, Luxembourg. About the author Markus Will works as a Project Manager and lectures at the Faculty of Mathematics and Natural Sciences at the University of Applied Science Zittau/Go¨rlitz in Germany.

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Urban development versus sustainable development in Poland Elz˙bieta Strzelecka Technical University of Lodz, Ło´dz´, Poland

Urban vs sustainable development 243 Received 30 July 2007 Revised 10 September 2007 Accepted 1 November 2007

Abstract Purpose – The purpose of this paper is the evaluation of the degree of sustainable urban development in Poland in terms of spatial management and laws applying to the process. Design/methodology/approach – The study provides an analysis of the key legal bases fundamental to sustainable development. Instruments that can be used to implement development guidelines (strategy, budget, “the study”, local zoning plan), revitalisation processes and to identify barriers to sustainable urban development. Findings – The paper finds a recognition of the main spatial and legal barriers to urban development. The lack of zoning plans in many cities delays new investments. Revitalisation programmes are essential for maintaining a sustainable and stable polycentric structure of cities and towns within regions and across the country as a whole. Practical implications – Results of analysis describe the main barriers to urban development, while the lack of zoning plans and practical strategies mainly contribute to unsustainable development of cities. Long-term planning requires more rigorous and coordinated measures on different levels of administration. Originality/value – The paper provides specialists and students with a new look at sustainable urban development; the latter is assumed to not only be connected with economic, social and environmental spheres, but also with spatial spheres. Keywords Sustainable development, Urban areas, Forecasting, Poland Paper type Research paper

Introduction The European Union (EU) Commissioner for Regional Policy, Danuta Hu˝bner, is of the opinion that “in the years to come, European cities will have a key role in driving the development of whole regions; there exists a permanent link between them which must be exploited (. . .). The role of urban policy is vital since capital investment in cities improves the competitiveness of the whole economy. In Europe, we have assumed that regional policy will be the basis for implementing the Lisbon strategy – under which cities in particular contribute to development”[1]. The EU’s earlier experience is related to urban development in the material and technical spheres (buildings and infrastructure), as well as in the social and economic spheres. This experience was crucial to the URBAN I programme, which addressed the issues of urban revitalisation and social cohesion in cities (1994) and the URBAN II programme, which was its second generation (2000). Poland did not take part in the URBAN II programme. The contemporary understanding of urban development is primarily related to two EU policy targets: building a city’s translocal competitiveness and improving the

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quality of life in cities. These processes have a multi-sectoral character and, apart from housing and infrastructural development, they include economic growth, protection of the environment and cultural heritage, as well as social policy. Space is crucial in ensuring the quality of life. Currently, it has a territorial dimension – congruent with spatial planning. It is recognised as being an obvious and natural setting for development, a component of sustainable development. Spatial management in the context of Poland, where the existing spatial plans only cover approximately 19.7 per cent of the country’s territory, is, therefore, constrained. Some authors are of the opinion that while sustainable development is a universal challenge, practical responses can only be defined nationally and locally. Thus in Poland sustainable development is assumed to be connected with the integration of five spheres: the three classic spheres: economic, social and environmental (ecological), as well as the spatial and institutional/political spheres (Toczyski, 2004). The new regional policy is to ensure the free flow of ever increasing European regional funds to cities. City authorities will therefore be required to display greater commitment to new EU initiatives, such as: . The Joint European Support for Sustainable Investment in City Areas (JESSICA), which is an initiative of the Commission in cooperation with the European Investment Bank (EIB) and the Council of Europe Development Bank (CEB), in order to promote sustainable investment (renewal and revitalisation projects – and urban development), economic growth and jobs in Europe’s urban areas. . “JASPERS”, which provides support in the process of developing large infrastructure projects (technically complex projects, like the construction of the Warsaw ring road, or the development of broadband internet in the eastern regions of Poland). The questions that arise in connection with the subjects discussed in this paper are as follows: What is the current situation of Polish cities? Does the principle of sustainable development represent a legal and socio-economic basis for urban development? What is the role of spatial management in realising sustainable development in Poland? Is urban development sustainable? What follows are selected aspects of urban development relating to these questions. Structure of Polish cities The structure of Polish cities is typically characterised by a polycentric settlement network, in which the capital city does not obviously dominate, while the distribution of towns and cities is deemed to be relatively even. This is perceived as the optimal settlement structure. These circumstances are conducive to the development of diffusion channels, thus helping to equalise the processes of concentration and metropolisation. According to data from the end of 2005, Poland had 889 towns, 75 per cent of which have populations in excess of 20,000 – these towns account for approximately 35 per cent of Poland’s population. Around 15 per cent of towns are medium-sized (with populations of 20-50,000), while only 18 cities boast populations exceeding 200,000. The level of urbanisation is 61.42 per cent. The highest level of urbanisation is observed in the S´le˛skie Region (Silesia) (78.65 per cent) – the whole region is characterised by a well-developed urban network – second and third are the Dolnos´laskie Region (Lower Silesia) (71.05 per cent) and the Zachodniopomorskie

Region (West Pomerania) (69.17 per cent). For central regions, e.g. the Mazowieckie Region, the level of urbanisation is 64.72 per cent, and for the Lodzkie Region it is 64.74 per cent. The lowest levels of urbanisation are found in the Podkarpackie Region (40.58 per cent), S´wie˛tokrzyskie Region (45.41 per cent), and the Lubelskie Region (46.65 per cent). The Polish regions are highly differentiated in terms of their levels of urbanisation and the number of towns and cities, and these differences are reflected in the spatial dimension (see Mliczyn´ska-Hajda, 2007). The network of small and medium-sized Polish towns, whose foundation and municipal rights most often date back to the thirteenth and fourteenth century, has survived notwithstanding various historical transformations. This is a distinctive feature on the European scale. According to Krzysztof Skalski (SFR), an urban planner, this network is more evenly distributed across the whole country than can be seen in the so-called “old European” countries. For instance, in post-war France, Germany, Spain and Italy, certain areas became largely depopulated due to migration and the rapid growth of metropolises. Poland’s urban system still remains stable, due to its highly stable population structure, uniform distribution of cities and towns and the relatively negligible discrepancies between the development of large cities, despite their diverse economic profiles. Nevertheless, negative changes can be observed. The uniform structure of Polish cities and towns is becoming weaker, which is doubtlessly caused by lower development dynamics in certain urban centres. Such a slowdown, or even inhibition of development results, e.g. from difficulties in overcoming development barriers present in crisis areas within these cities and towns, from deepening discrepancies in the levels of economic activity between regional capitals and other towns and from spatial changes with respect to business operations, which are all indicative of a certain disparity. Such changes are particularly noticeable in five of the 16 regions, i.e. S´wie˛tokrzyskie, Podlaskie, Podkarpackie, Lubelskie and Warmin´sko-Mazurskie, and to a lesser degree in Lubuskie, Opolskie, Zachodniopomorskie, Mazowieckie and Ło´dzkie. Since 2002, the process of depopulation in cities has been clearly on the increase. The changes in the populations of cities in Poland in 2005 was as follows (Porawski, 2006): . Cities with populations above 100,000 (in 2002 – 41; in 2005 – 38) – in the period 2002-2005 their total population fell by nearly 108 000 (with only two of them showing a slight increase in population: Olsztyn and Białystok). . The total population of medium-sized towns (50-100,000 population) fell by approximately 30,000 (in 39 a population loss was observed, in ten a population growth was observed). Warsaw is not undergoing any significant changes in population. The regional innovation strategies (RIS) of each of the 15 regions, developed and approved for implementation in 2005, contribute to further growth in the significance and competitiveness of major urban centres and to the concentration of development processes in these centres. Research carried out in the EU, including Poland, confirms the theory that cities will continue to be engines for regional development concentrating innovative advances and promoting growth in new labour markets. This will certainly accelerate the already visible changes and further weaken the cohesion of the polycentric system. Therefore, to prevent the structure of urban centres

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from destabilising any further, apart from other measures, it seems necessary to accelerate the dynamics of revitalisation and increase the number and scope of revitalisation schemes in towns and cities in regions which are falling behind. Sustainable development in Poland Since 1997, sustainable development has been a constitutional goal in Poland. Article 5 of the Constitution states that the Republic of Poland “ensures environmental protection, informed by the principle of sustainable development”. The key legal bases that are fundamental to sustainable development, i.e. the law on land use and environmental protection, together with the Constitution, are highly cohesive. However, the term eco-development is left out of both of these laws. Nevertheless, it is attributed a certain value as a pursuable target. The law on land use contains a provision that defines spatial order and sustainable development as being the basis for any action relating to the scope and methods of practice in matters of assigning land for certain purposes and determining rules for land development. On the other hand, in terms of environmental protection law, sustainable development is understood as “social and economic development that incorporates the process of integrating political, economic, and social actions with the maintenance of sustainable elementary natural processes and balance in nature, in order to ensure that the basic needs of each community or citizen can be met both in the present and in future generations”. It should be underlined that this definition defines sustainable development as a dynamic and integrating process for the first time. In Poland, sustainable development was at first conceived as being the same as eco-development and this was reflected in various state documents, as well as in regional and local strategies. For instance, the principle of sustainable development, or eco-development was adopted, under the Gdansk Municipal Assembly’s Resolution (1993), as the key premise in formulating the strategic vision and objectives of Gdansk’s development until 2010. Gdansk has participated in such EU programmes as “Sustainable Cities”, and “Healthy Cities” which were an expression of the tendency for environmental issues to be solved under local government development programmes and strategies based on sustainable development (eco-development) policies. Under Polish legislation, the greatest responsibility is borne by local governments, which should play a decisive role in creating, initiating, coordinating, and supervising local development. Municipalities have a number of instruments at their disposal that can be used to implement guidelines of sustainable development. The general instruments are (see Table I) (Strzelecka, 2004a): . A municipality’s development strategy – this enables charting the direction of the long-term development of a municipality, taking into account changes that may occur in its surroundings. . A municipality’s budget. . “Study of the local context and directions of spatial planning” (“the study”), which expresses the spatial policy of a commune. . Local zoning plan, which together with the study, makes up a communal zoning system. This document is related to the study, as provisions of the draft zoning plan are implemented in the master zoning plan and its decisions should always be evaluated in terms of a project’s compliance with the spatial policy of a

Study of the local context

Tool

Strategy

Budget

Description

Long-term plan for achieving goals Long-term Voluntary

Basis of financial Outline of management communal zoning

Comprehensive spatial planning

Annual Mandatory

Long-term Mandatory

Time horizon Character Status quo

Present in most municipalities

Coverage All municipalities Effects on citizens Indirect Citizens’ Large contribution

Present

Long-term Mandatory

Present in 96 per cent of municipalities (2004) All municipalities All municipalities Indirect Indirect Insignificant Insignificant

Local zoning plan

Not present in many municipalities All municipalities Immediate Average

Source: Strzelecka (2004a)

municipality laid down in the study. Properly developed plans should provide a clear vision of how space should be utilised, taking into account the interests of various groups, areas with diverse functions, short and long periods. In addition, a forecast of its effects on the natural environment is an integral part of such a plan. Public administration is responsible for tasks that require knowledge and understanding of territorial marketing or sustainable development. It is mandatory for a municipality to have a budget and a zoning plan, but a strategy is a voluntary document, at least according to the letter of law. Most municipalities have prepared a strategy, but its quality depends on (Strzelecka, 2004a): . Internal factors, including: lack of objective analytic syntheses pertaining to the region, using the appropriate assumptions. It is necessary for the strategic plan to be internally cohesive, adapted to the environment (using both static and dynamic approaches) and available resources, as well as to determine the priority of short-term objectives with respect to strategic targets. . External factors, which primarily include: “independence” of the province’s strategy from that of municipalities and cities – and vice versa, politics, the effect of a “small” group of influential people on a strategy’s logic and methodology, the strategy of financing priorities, including EU funds. It is rather difficult to claim that the organisation structures of municipalities, management systems and human resources are together fully fit to implement local strategies. The knowledge of such concepts as territorial marketing or sustainable development is definitely too small to claim that these areas are commonly utilised in the preparation of local governments’ development strategies. Therefore, the concept of foresight is useful. This has already been used at regional level during work on the RIS. Knowledge is fundamental to achieving sustainable development. Foresight, therefore, may play a key role in building a framework of knowledge that will be based on the required studies, development, innovation and other fundamental knowledge-based factors that serve the economy of cities and regions.

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Table I. General instruments for the implementation of sustainable development in municipalities

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In Poland, the National Foresight Programme was launched in 2000. The expected outcomes of this programme include: redirecting the development of studies and technologies towards areas that ensure dynamic mid- and long-term economic growth, optimising public capital expenditure, as well as creating a language for public debate and a culture of building future-oriented visions that will lead to the coordination of joint efforts to enhance economic development and improve the quality of life in Poland. In 2003, priority strategic areas were identified and scheduled to be implemented between 2003 and 2006. One of these areas is sustainable development, which includes such aspects as: living standards, energy, ecology, environmentally friendly technology, natural resources and new materials, economic growth and infrastructure. Legal determinants of urban development In 2003 zoning plans passed in Poland before 1995 became invalid. Approximately 96 per cent of municipalities have a “study of the local context and directions of spatial planning” (the study, 2004). Experts have criticised such studies for not taking social-economic realities into account. Also, larger areas should be included in local zoning plans. This has only occurred in large conurbations Warsaw, Krakow, Silesia). The current local zoning plans cover 19.7 per cent of Poland’s territory (GUS, 2005) and 2,105 municipalities have local zoning plans (82 per cent). However, on average they cover a smaller area than the previous ones. Rural municipalities cover the largest area for which “studies of the local context . . . ” exist (approximately 47 per cent), while the regional capitals cover only 10 per cent of this area. It is more difficult to implement policy in large cities and it is in cities where tendencies for development to be unsustainable will be most strongly apparent. After all, it is large cities that will have a decisive role in the development of socio-economic life within the local area and of whole regions. The consequences are as follows (Strzelecka, 2004b): . A municipality is entitled to suspend the issuance of decisions specifying development requirements for a period of 12 months, consequently projects are blocked. . Several months or more are needed to get a planning permit. . So-called town-planning analysis is required, as a precondition for the issuance of development requirements; according to the ordinance of the Minister of Infrastructure, mayors are expected to prepare an analysis that covers an area three times as large as a developer’s site, the specification of the outline of the development, height of any buildings and the shape of roofs. . Inability to change the designated land use, for instance from agricultural land to a site for development; before such a change is possible a local council has to pass a zoning plan and take a decision to change the designated use of a given piece of land, which allows a developer to apply to the county office for exemption of the land from agricultural use. . A municipality’s refusal to issue a decision specifying development requirements to a developer, if the neighbouring parcels are not developed (the good neighbourhood principle). . Arbitrariness of officers as regards the form of building and development rules.

Spatial planning is a municipality’s own responsibility. The law on land use deprives mayors of the right to issue planning permits and passes it to the next higher level of local administration – county offices. Uncertainty regarding whether and to what extent local authorities will be able to maintain control over local development projects is justified. These concerns are magnified, since the large financial burdens resting on municipalities (insufficient financing) may render the preparation of a zoning plan an unrealised intention. Municipalities are no longer responsible for measuring and registering land, exempting land from agricultural use and planning permits. Such legal deficiencies hamper the investment process and lead to conflicts between participants in the investment process. For the time being, this is significant in as much as EU funds may not be fully utilised due to the absence of spatial plans. Unfortunately, the ongoing discussions on the scope and consequences of changes in the model of land use show that only after a number years will we be able to claim that the issues fundamental to the investment process have been put into reasonable order. The question arises, however, as to whether we will create unsustainable development in the regions within this period resulting from the possibility of focusing on short-, rather than long-term, Spatial planning is the sole responsibility of municipalities. In 2003, in view of the absence of local spatial plans, land use legislation took away the right to issue building permits from chief executive officers (municipality level) and gave them to higher-level authorities (district authorities). It is not certain then, whether and to what extent local government is still in control of local investment activities. This is due to the fact that investment initiatives are increasingly often regional or national projects. The high financial burdens (underfunding) carried by the communes increase the likelihood that a municipality does not develop a spatial plan. Additionally, municipalities no longer deal with land registration (geodesy), exclusions from agricultural use of land or building permits. The development of land use and the settlement network in Poland is not only affected by land use legislation, but a number of other laws and regulations, including more than 60 laws (of which more than ten have a direct impact on the execution of spatial plans) and more than 100 executive ordinances from various ministries. Therefore effective land use management requires knowledge and continuous monitoring of such regulations. This means that such regulations need not be sectoral, but are often “cross-sectoral” in nature, which is a significant characteristic of contemporary European legislation with respect to the issues in question. Revitalisation Revitalisation is not an exclusively Polish issue. In practice, it is present in all EU countries. Without addressing revitalisation, it will be impossible to address housing deficiencies. Revitalisation, understood as an integrated set of long-term actions designed to radically improve a critical situation (permanent and deep degradation) in selected inner city areas that are key to a city’s development, has for quite some time been recognised as an effective and sustainable instrument of introducing socially necessary and sustainable changes to urban areas (Mliczyn´ska-Hajda, 2007). The following principles are advocated for revitalisation processes: . use a (long-term) strategic approach with a concurrent structural (spatial) approach; . use multifaceted, interdisciplinary measures, even for small areas;

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processes should be organised in partnership with the parties involved (residents, investors, businesses, non-government organisations, local and regional authorities, etc.); and the role of the authorities is to coordinate and stimulate.

Legal basis for revitalisation In Western European countries, revitalisation is regulated by legislation in the area of spatial planning, urban planning, housing, in particular legislation on rent, housing benefits, credit, and – more broadly – property management and development. Revitalisation in Poland, despite being an advanced form of urban transformation, is not a significant part of the state’s policy and is not strongly supported, either financially or legislatively. Revitalisation did not appear as a strategic objective in regional or local development (municipal strategies) until 2004. Efforts to create a legal framework in this field have been made in Poland since 1992. The latest version of the law was developed between 2002 (assumptions) and 2004. Whether revitalisation activities will be included in the strategic objectives of municipalities after 2004 depends on the awareness and knowledge of local government decision-makers. It is a big challenge for the state to adapt the law, since it requires expenditure from public sources. For this reason, no revitalisation law yet exists. The expectations of the circles that are interested in such a law are such that it should be part of spatial planning in Poland. Poland has not yet developed any urban policy either. Its initial premises were prepared in mid-2005 by the Institute of Urban Development in Krakow, but were rejected. Revitalisation was not included as one of the strategic objectives in the regional strategies to be implemented between 2004-2006, or in local strategies (municipalities). The term was artificially introduced into administrative circulation as a supplement to the Integrated Regional Development Programme (2004). Slightly more than 11 per cent of cities and towns in Poland treat revitalisation as a measure that is necessary or key for their own development (Mliczyn´ska-Hajda, 2007) Therefore, regardless of the strategic objectives for municipalities, cities and towns have planned and timetabled revitalisation, since without any local revitalisation plans it is impossible to apply for EU funds under the Integrated Regional Development Programme. In view of the local context, these revitalisation plans are not a product of a long-term and comprehensive approach to urban space management. For this reason, they commonly cover a limited area of a city or town focusing on a small number of facilities, only infrequently taking into account the interrelations between each area of development. Support for revitalisation projects should be included in the framework of each region’s Regional Operative Programme for the years 2007-2013. The first revitalisation programmes in Poland were already being developed as local government programmes in the early 1990s. These efforts frequently ended up in failure, most often due to the withdrawal of partners from projects which basically focused on the renovation and modernisation of buildings, residential buildings in particular. Some municipalities undertook more successful efforts in the late 1990s utilising American internships and experience. The first programme with the characteristics of a mature revitalisation strategy, though, was developed for Z˙yrardo´w (2001). At present, approximately 70 cities and towns maintain revitalisation

programmes. Using the Integrated Regional Development Programme implementation manual, cities and towns have developed at least 104 plans, whose implementation, however, is conditional upon sources of funding (Mliczyn´ska-Hajda, 2007). Based on the experience of Western countries, it is possible to identify various financial models for revitalisation projects:, e.g. British, Spanish and German. Some of them involve public and private partnerships. The “vertical” involvement of central, regional, and local governments in renovating urban areas is characteristic of the British model. In Sweden, many of the revitalisation programmes have been implemented through the “horizontal” cooperation of local public institutions and private partners, utilising public and EU funding. Until 2004, revitalisation projects in Poland were implemented out of local or central government funds. Between 2004 and 2006, the EU funds (Integrated Regional Development Programme) proved to be too small in relation to the needs reported by cities and towns. More than a half of the projects proposed under the Local Revitalisation Programme did not receive any financial support at all (158 out of 287 approved proposals). 96.5 million Euro were assigned to revitalisation efforts in Poland, while applications were made for an amount of more than a billion Euro, which represented 279 per cent of the EU funds assigned to them (Mliczyn´ska-Hajda, 2007). The effects of revitalisation programmes in Poland largely rely on the activity of the municipalities themselves, but without an adequate state policy one should not expect a significant improvement from such measures. A number of municipalities have chosen to wait (due to the lack of a revitalisation law), some are proactive and have launched modernisation projects using council resources or organised revitalisation. Their actions are intended to create local instruments for cooperation between councils and the private sector, examples of which are the “Trzcina” Centre in Warsaw and the “Manufaktura” Centre in Ło´dz´ (Europe’s largest brownfield site, the former textile factory was transformed into a shopping, entertainment, and hotel centre). Both of these exemplify the implementation of revitalisation, whose programme does not have the objective of retaining “old” residents within an area, but of developing new urban functions. Therefore, they do not meet the full characteristics of sustainable development, as they do not take into account the social issues in a given context. Revitalisation in a given area is expected to bring about evident improvements in quality, upgrade an area’s status and the role it plays in the urban environment. It goes without saying that integrative revitalisation is a more beneficial option, for it integrates social, technical and economic measures thus causing the quality of life to improve and the barriers between the “old” and “new” residents in an area to fade away. Concluding remarks Urban development is strongly interrelated with sustainable development, which is one of the most frequently quoted political aspirations of the EU. Therefore, regional and local development in Poland requires more rigorous and coordinated measures, including those regarding local management tools (strategies, budget, contextual studies, local spatial plans), and legal bases. The planning and implementation of revitalisation programmes in urban centres are essential, not only for the development of a given city or town, but also for maintaining a sustainable and stable polycentric structure of cities and towns within regions and across the country as a whole. Also, it

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is essential to remove the barriers that hamper mobilisation of EU structural funds for the needs of urban development. Note 1. Hu˝bner on urban policy in the EU regional policy. PAP service 12 January 2007, http://ec. europa.eu/news/

252 References GUS (2005), Rocznik Statystyczny, Gło´wny Urze˛d Statystyczny, Warszawa. Mliczyn´ska-Hajda, D. (2007), “Revitalisation of Polish Cities and Towns – the needs, forecasts, and prospects”, Conference on: “ Revitalisation of Urban Centres – Architecture, Structure, Economy – Review of the Existing Output and Future Prospects”, Poland Revitalization Forum Association, Czestochowa, pp. 1-4. Porawski, A. (2006), Revitalisation in Cities. A Strategy to Revitalise the Inner Cities in Crisis, Association of Polish Cities, Torun, available at: www.torun.pl/dokumenty/prez_zmp.ppt Strzelecka, E. (2004a), “Town development in its European Union context”, International Seminar on: European Projects for Developing Cities and Regions, EUROARCH, Prag/Ceske Budejowice. Strzelecka, E. (2004b), “Regional and local strategies versus development of the cities”, International Conference on: Strategically Planning and Information Technologies, SPMIT/EUROARCH, Prag/Ceske Budejowice, pp. 5-8. Toczyski, W. (2004), Sustainable Development Monitoring, Gdansk University Publishing, Gdansk, pp. 45-51. About the author Elz˙bieta Strzelecka holds a PhD in Technology and Organization of Building from Warsaw Technical University. She is a Lecturer and Researcher at the Technical University of Łodz (Faculty of Civil Engineering, Architecture and Environmental Engineering) Poland and a lecturer in University of Personnel Management in Warsaw. Her expertise lies in the fields of marketing, strategic planning, strategic management, regional foresight, sustainable development (also rural), firm organisation and management, human resources management and civil engineering. Elz˙bieta Strzelecka can be contacted at: [email protected]

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News Planet’s tougher problems persist, UN report warns The United Nations Environment Programme says that major threats to the planet such as climate change, the rate of extinction of species, and the challenge of feeding a growing population are among the many that remain unresolved, and all of them put humanity at risk. The warning comes in UNEP’s Global Environment Outlook: Environment for Development (GEO-4) report published 20 years after the World Commission on Environment and Development (the Brundtland Commission) produced its seminal report, Our Common Future. GEO-4, the latest in UNEP’s series of flagship reports, assesses the current state of the global atmosphere, land, water and biodiversity, describes the changes since 1987, and identifies priorities for action. GEO-4 is the most comprehensive UN report on the environment, prepared by about 390 experts and reviewed by more than 1,000 others across the world. It salutes the world’s progress in tackling some relatively straightforward problems, with the environment now much closer to mainstream politics everywhere. But despite these advances, there remain the harder-to-manage issues, the “persistent” problems. Here, GEO-4 says: “There are no major issues raised in Our Common Future for which the foreseeable trends are favourable.” Failure to address these persistent problems, UNEP says, may undo all the achievements so far on the simpler issues, and may threaten humanity’s survival. But it insists: “The objective is not to present a dark and gloomy scenario, but an urgent call for action.”

Scientists for Global Responsibility condemns the UK government on renewables policy change Scientists for Global Responsibility (SGR) condemns the government decision to abandon its target of 20 per cent of UK electricity generated from renewable energy sources by 2020. The government has, for many years, been less than whole-hearted in its support for the expansion of renewable energy. This has been evidenced not least by a lack of significant R&D funding, disorganised and over-complex schemes for demonstration programmes, and a lack of support in the planning process. While there are real opportunities to make up for this mismanagement, the government has instead – as evidenced by comments to the media in advance of the conclusion of the public consultation – decided to return to supporting new nuclear power. The government’s own advisors, the Sustainable Development Commission, warned last year that a new nuclear power programme would be likely to undermine efforts on the alternative ways of reducing carbon emissions, and that this would likely compromise the overall effort. We believe the abandonment of the renewables target is the first sign of this.

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EU cuts back on biofuel crop subsidies A special farm aid scheme aimed at developing Europe’s energy crop sector will be scaled back, after it emerged that farmers have already massively shifted production towards biofuels, overshooting a 2 million hectare (ha) target, the Commission has announced. The amount of land for which farmers may receive a subsidy of e45 per ha in exchange for planting energy crops (such as rapeseed or sugar beet that can be processed into biofuels for cars or biomass for heating or electricity) will be reduced after the scheme proved too popular, the Commission has said. The programme was introduced in 2004 as part of the reformed Common Agricultural Policy, in order to stimulate the European biofuels sector. At the time, just 0.31 million ha were devoted to biofuel crops and the Commission hoped to raise this to 2.0 million ha in 2007. But with applications already reaching 2.84 million ha in 2007, the EU’s e90 million budget is unable to cope.

BMW, Norsk Hydro among the world’s most sustainable companies In the ninth annual survey of the Dow Jones Sustainability Indexes, Norwegian aluminium company Norsk Hydro took the overall top score, while BMW topped the automotive index for the third year running. The survey has been conducted every year since 1999 by the Zurich-based SAM Group, and evaluates the companies in 18 supersectors within the Dow Jones and STOXX classifications. BMW announced its results yesterday, saying that it is the only company in the automotive sector to have made the sustainability indexes every year since their creation. Norsk Hydro, Norway’s largest publicly-traded industrial company, scored very high across the three dimensions of the survey: economic, environmental and social dimensions are taken into account in the ranking. The report cites Norsk Hydro’s “excellent risk management and compliance systems” as reasons for its success in the survey, and cites the company’s smelter in Sunndal, Norway, as an example of how innovation can improve energy use and lower emissions. BMW was recognized for a range of achievements, including its efficiency enhancements and its steady work on developing hybrid technologies. Although the report notes that BMW’s focus on the premium auto market results in “rather high” CO2 emissions, the company’s commitments to lower its overall footprint have offset the emissions of its high-end cars.

World Environment Day 2008 to be hosted by New Zealand with focus on fostering low-carbon economies New Zealand, one of the first countries to pledge a carbon-neutral future, will be the main host of World Environment Day 2008, the UN Environment Programme (UNEP) has announced. The challenge of climate change and threats to polar regions and beyond were spotlighted in Norway as part of World Environment Day (WED) 2007. The focus of the global 2008 celebrations hosted in New Zealand will be on the solutions and the opportunities for countries, companies and communities to “Kick the habit” and make the transition to a low carbon economy and lifestyle.

Measures include greater energy efficiency in buildings and appliances, including light bulbs, up to a switch towards cleaner and renewable forms of electricity generation and transport systems. The focus will also be on the role of forests in reducing greenhouse gas emissions. An estimated 20 per cent of emissions contributing to climate change globally are a result of deforestation. New Zealand, where forestry is an important industry and conservation of forests is a high priority, plans to use WED to highlight the role technologies and forestry management can play in achieving domestic and international climate goals.

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News from the net Cost of saving the climate meets real-world hurdles On the internet, erasing your role in climate change seems as easy as ordering a DVD – and cheaper than a cup of coffee a day. With a click, a credit card and $99, visitors can pay a Silver Spring non-profit group, Carbonfund.org, to “offset” a year’s worth of greenhouse-gas emissions. Whatever the customer put into the atmosphere – by flying, driving, using electricity – the site promises to cancel out, by funding projects that reduce pollutants. Sites such as this one, offering absolution from the modern nag of climate guilt, have created a US$55 million industry that once would have been beyond the greenest of imaginations. The market for “voluntary carbon offsets” now encompasses dozens of sellers and thousands of buyers, including individuals and corporations. But in some cases, these customers may be buying good feelings and little else. A closer look reveals an unregulated market in which some improvements bought by customers are only estimated, extrapolated, hoped-for or nil. Some offsets support projects that would have gone forward anyway. Others deliver results difficult to measure. Carbonfund.org, for example, has advertised offsets that finance wind farms and tree-planting projects. But some wind farms said the donations have not led to anything new. And the benefits from some tree projects were unclear enough that Carbonfund.org no longer uses them to back offsets. Many offset sellers do seem to deliver measurable cuts to pollution. One Vermont company, for instance, has been praised for offering customers a chance to support projects in development, effectively guaranteeing positive future impact. But the market for the product grew by 80 per cent in 2006 alone, according to a recent report from the market analysts New Carbon Finance and Ecosystem Marketplace. That was apart from the Chicago Climate Exchange, where companies can trade credits for greenhouse-gas reductions among themselves. That exchange has made efforts to verify that carbon offsets sold represent real pollution reductions. Large corporations have bought offsets by the millions. Last month, one utility, American Electric Power, agreed to offset about 4.6 million tons of carbon dioxide by paying for projects that reduce methane – a powerful pollutant – seeping from farm manure. For individual consumers, an offset can be a tempting alternative to a radical lifestyle makeover. People concerned about climate change could sell their cars and cover their roofs with solar panels. Or, on an offset site, they could become “carbon neutral” with a click. Further information can be obtained at: www.Carbonfund.org

Books and resources Sustainable Food Production and Ethics Edited by Werner Zollitsch, Christoph Winckler, Susanne Waiblinger and Alexander Haslberger Wageningen Academic Publishers Wageningen October 2007 550 pp. ISBN-13-978-90-8686-046-3 e59/US$79

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Sustainability has become an issue widely debated in many countries. Given the central role of food supply and the emotional relationship that modern mankind still has to its food, sustainability is seen as a value that has to be maintained throughout food supply chains. The complexity of modern food systems invokes a variety of ethical implications that emerge from contrasts between ideals, perceptions and the conditions of technical processes within food systems, and the concerns connected to this. This book covers a broad range of aspects within the general issue of sustainable food production and ethics. Linking different academic disciplines, topics range from reflections about the roots of sustainability and the development of concepts and approaches to globalisation and resilience of food systems as well as specific ethical aspects of organic farming and animal welfare. Modern technologies which are intensely advocated by certain stakeholder groups and their societal challenges are addressed, as are many other specific cases of food production and processing, consumer perception and marketing. A table of contents can be seen at: www. WageningenAcademic.com/eursafe2007

Case Studies in Sustainability Management and Strategy: The Oikos Collection Edited by Jost Hamschmidt Greenleaf Publishing September 2007 320 pp. ISBN 978-1-906093-01-3 £ 25.00/e37.50 With the rapidly growing importance of sustainability and corporate responsibility in a globalised world, management schools are increasingly integrating long-term economic, environmental and social issues into their teaching and research. Climate change, poverty, labour standards and human rights are among the many topics that future decision-makers will need to face in their careers. Business education needs to reflect this new reality and provide a broadened understanding of value creation in order to create economic capital while developing social and preserving natural capital. Many sustainability trends also offer interesting new business opportunities that are ripe for entrepreneurial thinking.

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Case studies can be important tools for creating learning processes on different levels – students are forced to struggle with exactly the kinds of decisions and dilemmas managers confront every day. In this reflection of reality, the values and goals of the student are systematically challenged. This can be especially valuable in the context of sustainability and strategy – organisations are now continually forced to value the different aspects of sustainability and their interrelations: How do social issues impact the economic bottom line? How can an environmentally sound strategy create a positive impact on employee motivation and thus have measurable impact on economic performance? What comes first and why? This innovative collection has been produced to fill this gap. It is based on the winning cases of an annual competition organised by oikos – the International Student Organization for Sustainable Economics and Management. So what makes an excellent case in sustainability management? These cases have been highly praised because they provide excellent learning opportunities, tell engaging stories, deal with recent situations, include quotations from key actors, are thought-provoking and controversial, require decision-making, provide clear take-aways and are all supported by teaching guidance and comprehensive teaching notes available to faculty.

Sustainable Nuclear Power (Sustainable World) Galen J. Suppes and Truman Storvick Academic Press Burlington, MA December 2006 416 pp. ISBN-13: 978-0123706027 US$ 59.95 By 2050, the world’s population is expected to reach 10 billion. In the same time, industrial activity will increase by at least three times. Whether considering the use of hydrogen fuel cells or continuing with current energy techniques, nuclear power is the only sustainable energy option available for large-scale development to help meet future energy needs with minimal affect to the environment. This realisation has sparked renewed interested in this method of energy generation. Sustainable Nuclear Power addresses the safety and disposal issues that have plagued the development of the nuclear power industry for almost two decades and evaluates modern advances. This book brings together the experience of two active and experienced engineers to present the technical side of nuclear power as a safe, abundant, and sustainable energy source, which should be utilised to fulfil our energy needs. The book provides non-nuclear engineers, scientists and energy planners with the necessary information to understand and utilise the major advances in the field. It also demonstrates that nuclear fission technology has the abundance and attainability to provide centuries of safe power with minimal greenhouse gas generation. It also addresses the safety and disposal issues that have plagued the development of the nuclear power industry and scared planners and policy makers as well as the general public for more than two decades. In addition, the authors provide a companion web site which gives access to government reports and case studies. There is no need for the reader to have a background in nuclear science! This book guides engineers, scientists and energy professionals through a concise and easy-to-understand overview of key safety and

sustainability issues affecting their work. It details the very latest information about today’s safest and most energy-efficient reactor designs and reprocessing procedures.

Democratizing Technology: Risk, Responsibility and the Regulation of Chemicals Anne Chapman Earthscan London September 2007 240 pp. ISBN 1844074218 £49.95 This book is an original and critical examination of a key debate in science and technology: how society controls, governs and makes decisions about the development and use of technology. The book focuses on chemicals as the most pervasive technology on earth with wide ramifications for industry, government, society and the environment. It provides detailed coverage of the new EU 2006 Registration, Evaluation and Authorisation of Chemicals (REACH) regulation that requires chemical companies to divulge information about all substances in their chemicals in order to protect humans and the environment. Attention is also given to the immensely important new EU chemical regulations, REACH, the EU’s largest ever legal framework, discussing the problems that are likely to occur in REACH’s reliance on risk assessment methods and suggesting an alternative way forward for the regulation of chemicals. This volume is a breath of fresh air, providing much needed clarity and insight into the heart of the science and technology debates that are key to academic study, risk analysis and mitigation, as well as the domestic and international law, regulation and policy that govern all aspects of our relationship with the human and biological worlds.

IPPR Report: Warm Words II Gill Ereaut and Nat Segnit IPPR 19 September 2007 Free The climate is changing – and so is the way that people talk about it. And just as climate change is occurring more rapidly than it appeared just a few years ago, the language that we use in relation to the phenomenon develops and changes quickly too. Last year, the Institute for Public Policy Research (IPPR), commissioned Linguistic Landscapes to undertake research into the use of language about climate change with sponsorship from the Energy Saving Trust. Warm Words: How Are We Telling the Climate Story and Can We Tell It Better? written by Gill Ereaut and Nat Segnit and published by ippr proved to be such a hot topic and the subject so fluid, that this year a follow up, extended report has been produced. The new report is called Warm Words II: How the Climate Story Is Evolving and the Lessons We Can Learn for Encouraging Public Action and can be downloaded from: www.ippr.org.uk/publicationsandreports/publication.asp?id ¼ 561

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Diary Climate Protection and Renewable Energy: Medium and Small Communities facing the Challenge 2-4 April 2008, Rovigo, Italy This capacity-building event aims to transfer good practice and know-how from experienced and successful communities to as many communities as possible. The event will be of special interest to: . Medium and small communities to learn about the impacts of and solutions to climate change, and how to move towards more sustainable energy use and local production. . Associations of neighbouring communities wishing to cluster and cooperate on mitigation and adaptation to climate change focussing on sustainable energy. . Successful and ambitious communities that can transfer know-how and experience in the field of climate change and sustainable energy management. . Provinces and metropolitan areas in their roles as facilitators and guides for the medium and small communities in their jurisdiction. . Local Agenda 21 coordinators interested in further engaging citizens and stakeholders on climate action and a sustainable energy future. Further details are available at: www.iclei.org/rovigo2008 International Conference “An End to History? Climate Change, the Past and the Future” 3-4 April 2008, Birmingham, UK The premise of this conference is that human society has had a potentially catastrophic effect on the earth’s climate. For some commentators it is not out of the question that we will bring about our own extinction unless we modify our behaviour. And while the scientific community has had a major influence on governments’ and the public’s understanding of climate change, the contribution of the humanities has been less significant. Therefore this conference seeks contributions from not only the environmental sciences, but from across the humanities, from historians, archaeologists, anthropologists, sociologists, psychologists, human geographers, demographers, philosophers, writers, and from students of politics, economics, international relations, religion, literature and culture. Further details are available at: http:// rescue-history-from-climate-change.org/Birmingham_Conference.php

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Eighth International Conference on Current Issues of Sustainable Development 7-8 April 2008, Opole, Poland The EU’s Lisbon strategy aims at making Europe the most dynamic and competitive knowledge-based economy in the world. At the same time, sustainable economic growth with more and better jobs and greater social cohesion should be gained while

the carrying capacity of the ecological environment needs to be respected. Indeed, these ambitious goals call for innovations, in the meaning of social and organisational changes, new product development or more sustainable industrial processes. With respect to transition countries in Eastern and Central Europe, this again raises questions such as: . How to steer societal processes towards sustainable development (top down)? . How can consumption and production patterns be influenced (bottom up)? . What kinds of tools are needed? For whom (i.e. businesses/industry/designers, planners, governments)? Is there a common use of tools that are already developed? . How can regional innovation systems, clusters or networks support regional sustainable development? . Policy making for sustainable development: policy coherence, the importance of prices and incentives for sustainable development, investment in science and technology, stakeholder involvement (citizens, business, NGO’s). Papers for the conference are invited from scholars from disciplines involved in issues of sustainable development, e.g. economics, geography, environmental sciences, natural sciences, legal sciences, social sciences. Further details can be obtained from: [email protected] Sustainabilitylive! 2008 20-22 May 2008, NEC, Birmingham, UK Sustainabilitylive! 2008, the UK’s most comprehensive forum for excellence and innovation in the water, environment, land remediation and energy sectors, will take place 20-22 May 2008 at the NEC in Birmingham. Launched in 2007 by Faversham House Group, Sustainabilitylive! brings together under one roof the respected shows of Environmental Technology (ET) and Environmental Services (ES), National Energy Management Exhibition (NEMEX), International Water and Effluent Exhibition (IWEX) and Brownfield Expo – formerly known as International Clean-Up (ICU). Building on the success of Sustainabilitylive! 2007, which hosted 450 exhibitors and attracted around 7,000 visitors, the 2008 event will allow visitors to keep up-to-date on the latest legislation and technologies, to hear from industry leaders and to network with peers. Further details are available at: www.sustainabilitylive.com/ Thinking through Nature: Philosophy for an Endangered World 19-22 June 2008, University of Oregon, Eugene, Oregon, USA The International Association for Environmental Philosophy (IAEP) invites interested delegates to this conference, to be held 19-22 June 2008 at the University of Oregon in Eugene. Taking as its theme “Thinking through Nature: Philosophy for an Endangered World”, the event will focus on the following topics: . Environmental Ethics; . The Aesthetics of Natural and Built Environments; . Environmental Restoration and Design;

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Architecture, Place, and Dwelling; Humanities and Environmental Policy Development; Environmental Justice, Social Ecology, and Ecofeminism; Traditional Ecological Knowledge and Indigenous Perspectives; Non-Western and Comparative Approaches; Ecocriticism; Ecophenomenology; and Environmental Metaphysics and Theology.

The first afternoon of the conference will be devoted to workshops emphasizing active learning and participation. Although the range of topics is open, a special attention will be given to papers on pedagogy, service learning, campus sustainability, and related themes. Further details are available at: www.uoregon.edu/, toadvine/IAEP/ ThinkingThroughNature.html “Fuelling the Climate” – European Symposium on Technological Developments in Renewable Energy 26-27 June 2008, Hamburg, Germany Further to the successful 1st European Symposium on Technological Developments in Renewable Energy held in Hamburg in March 2007, the Hamburg University of Applied Sciences is pleased to announce the 2nd European Symposium on Technological Developments in Renewable Energy – “Fuelling the Climate” (FTC 2008), to be held in Hamburg, Germany, on 26-27 June 2008. Similar to the 2007 event, the 2008 event is based on the pressing need to discuss initiatives, methods and projects which are in line with the EU’s Energy End-use Efficiency and Energy Services Directive (adopted in December 2005) and which obliges member states to reduce their energy consumption by 9 per cent until 2017. One of the ways of pursuing this goal is by means of information exchange and know-how transfer on appropriate technologies. According to the EU’s Directive on the Promotion of Biofuels and other renewable fuels for transport, research and technological development in the field of the sustainability of biofuels should be promoted. It is on this basis that FTC 2008 is being organised. This time, the emphasis of the event will be on biofuels. To this purpose, FTC 2008 will congregate not only the automotive industry and scientists developing biofuels, but also automobile clubs and end-users, i.e. consumers. The main aims of the event are to: . show-case and demonstrate the various technological developments seen until now; and . educate the general public about the usefulness and value of biofuels and how their use can be related to individual attempts to protect the climate. Under the slogan “Fuelling the climate” (Tanken fu¨r das Klima), the 2008 Symposium will show what science and industry are doing to address the challenges posed by climate change. Further details are available at: www.haw-hamburg.de/ftz-als/FTC2008

Features Planet wins Nobel Prize The awarding of the Nobel Peace Prize to Al Gore and the United Nations’ Intergovernmental Panel on Climate Change (IPCC) is a triumph for the planet and its inhabitants, who will increasingly struggle to adjust as the world warms. The awarding of the Prize reinforces the importance of the environment in global security policy. The work of hundreds of IPCC scientists convened by the UN has been crucial to establishing a scientific consensus about the urgency of climate change. Gore, who has spent years studying the issue and its impacts, has used his famous film and slide show to bring a greater awareness of climate change to a wide popular audience. The IPCC has concluded that as the world warms, storms, droughts, and floods will intensify, leading to increased natural disaster risks. Populations already living in areas prone to drought or extreme weather patterns, many of them with limited capacity to adapt and cope, will face even greater challenges. Climate change will also overtax the world’s food and water systems, which will exacerbate conflicts over resources. The world’s poor, many of whom lack adequate water, sanitation, or reliable food supplies, will be most directly affected. The Nobel Peace Prize was awarded to an environmental leader for the first time in 2004. Wangari Maathai from Kenya was honoured for founding the Green Belt Movement, which has helped women plant over 30 million trees in Africa. Worldwatch welcomes this renewed focus on the connection between human needs, security, and the environment, a theme that will resonate throughout the twenty-first century.

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