# Presentation: 690273

## CLEANER PRODUCTION FINANCING

**CLEANER PRODUCTION FINANCING**
**by A. Huhtala**
**UNEP DTIE**

** **

**NATO/CCMS CONFERENCE ON INDUSTRIAL ECOLOGY**
**VILNIUS, LITHUANIA, 13 MAY 2002**

**Notes:**
 The purpose of this presentation is to introduce most recent developments at the United Nations Environment Programme implementing a project which aims at promoting cleaner production investment financing.  

##  What is Cleaner Production?

**Cleaner Production is a preventive approach applied throughout the life-cycle of a process to reduce the unproductive costs associated with remedial action.**

**Notes:**
 Cleaner Production has many parallel concepts:

 Eco-efficiency (used in the european Union and by the World Business Council for Sustaianble Development)
 Pollution prevention (used in North America)
 Green productivity (used by the Asian Productivity Organisation)
 Waste minisation

## Other names for the

**preventive approach**

** ****Pollution prevention**
** ****Green Productivity**
** ****Eco-efficiency**
** ****Waste minimisation**

**Notes:**
 Cleaner Production has many parallel concepts:

 Eco-efficiency (used in the european Union and by the World Business Council for Sustaianble Development)
 Pollution prevention (used in North America)
 Green productivity (used by the Asian Productivity Organisation)
 Waste minisation

## Is financing an important issue in Cleaner Production ?

** ****pollution is a cost item to be avoided**
** ****accidents are costly events to be minimized**
** ****prevention is a process efficiency item to be **
**  ****maximised**
** ****environment is a business opportunity to be realised **
**  ****(and financed)**
**How to operationalise the above?**

**Notes:**
 Cleaner Production has many parallel concepts:

 Eco-efficiency (used in the european Union and by the World Business Council for Sustaianble Development)
 Pollution prevention (used in North America)
 Green productivity (used by the Asian Productivity Organisation)
 Waste minisation

## Some perceptions to get right

** ****what is the difference between financing   treatment and financing prevention?**
** ****how much does waste really cost?**
** ****where are environmental cost hidden?**
** ****what is attractive about the prevention approach?**
** ****applies to new plant investments **_**and**_** plant upgrading**

**Notes:**
 Cleaner Production has many parallel concepts:

 Eco-efficiency (used in the european Union and by the World Business Council for Sustaianble Development)
 Pollution prevention (used in North America)
 Green productivity (used by the Asian Productivity Organisation)
 Waste minisation

## Cost of the waste iceberg

**THE HIDDEN COST**
**OF WASTE**

- Company Image

- Liability

- Regulatory
- Compliance

- Treatment &
- Disposal

- Lost Raw
- Materials, Energy,
- Labor

** ****THE VISIBLE  COST OF WASTE**

**Managers ’ time**

**Notes:**
 Research in North America has shown that sometimes two thirds or even three qurters of the actual cost of waste and its management is not quantified or included in the costing of a project flow
 If we do not know what each step in the process actually costs, we cannot assess how much we can save by adopting alternative strategies 

## Environmental Management Costs

**“****Hidden” in an Overhead Account**

**	**

**Product Manufacturing Cost Statement**

**Variable Costs**
**Raw Materials**
**Intermediates**
**Additives**
**Utilities**
**Direct Labor**
**Packaging**
**Wastewater Treatment**

**$2.27/lb.**
**$0.87/lb. $0.41/lb. $0.96/lb. **
**$11.32/lb. $10.31/lb. $9.14/lb.**
**$0.04/kW-h $0.07/kW-h**
**$27.40/hr  $31.43/hr.**
**$0.60/pkg.  $0.57/pkg**
**$0.01/gal.**

**Fixed Costs**
**Supervisor**
**Fixed Labor**
**Depreciation**
**Divisional Overhead**
**General Services & Administration**

**$4,600**
**$57,800**
**$1,227**
**$13,662**
**$1,294**

**Total Variable Cost**
**Total Fixed Cost**
**Total Manufacturing Cost**
**Total Cost**

**legal expenses**
**disposal driven R&D**
**permitting time and fees**
**environmental training**

- Fixed Costs
- Supervisor
- Fixed Labor
- Depreciation
**Divisional Overhead**
- General Services & Administration

**Notes:**
 Waste management costs are often hidden in company overhead accounts
 Therefore they do not appear in process flow costs and are not included in calculations for investment projects related to those processes

##  Financial attractiveness of Cleaner Production investments (1)

**Cost Reduction**** **(materials, energy, waste treatment)** **
**Business Upgrading**** **(improved quality &
- competitiveness of  “green” product/service)
**Risk Reduction**** **(inherent in the process)
**Improved efficiency and competitiveness **

**Notes:**
 Cleaner production reduces the cost in inputs, improves the competitiveness of the product and recudes risk
 An enterprise adopting a preventive strategy tend to be generally efficient and well managed and more prone to apply total quality management systems
 An enterprise with a cleaner production focus will find it much easier to qualify for ISO14000 certification

##  Financial attractiveness of Cleaner Production investments (2)

** **CP is **behaviour**, not a technical solution which requires thinking about the life cycle of consumption, production and distribution
-  This behaviour looks beyond immediate necessities of the project and reflects good management, risk reduction, social responsibility and competitive advantage

**Notes:**
 Cleaner production reduces the cost in inputs, improves the competitiveness of the product and recudes risk
 An enterprise adopting a preventive strategy tend to be generally efficient and well managed and more prone to apply total quality management systems
 An enterprise with a cleaner production focus will find it much easier to qualify for ISO14000 certification

##  Challenge:

**Mainstreaming and integration of**

** ****preventive & life cycle approach into company **
**   ****policy**
** ****appraisal of CP benefits and environmental costs **
**   ****into banks’ due diligence process**
** ****environmental agenda into “mainstream” business **
**   ****and economic policy**

**Notes:**
The long-term challenge for the world business community is to internalise externalities and mainstream prevention in normal costing and assessment practices

- Project:
- “Strategies and mechanisms for promoting CP investments in developing countries”,
- sponsored by Govt of Norway

** ****UNEP’s response**

**Notes:**
 UNEP’s response has two main pillars: a voluntary Financial Institutions Ininitiative with 170 signatory banks, and a trust-fund project funded by Norway

## Cleaner Production Financingproject elements

**Activities in five demonstration countries (Guatemala, Nicaragua, Tanzania, Vietnam, Zimbabwe)**
**Teach companies to make creditworthy CP loan applications**
**Show financial institutions and industrial authorities how to assess merits of CP investment proposals**
**Induce new initiatives such as credit lines, trust funds and policy changes**

**Notes:**
Business opportunities: this event is an important step for our Sustainable Consumption activities on business opportunities, identifying how business world-wide can benefit from emerging sustainable consumption agenda. We organise a whole series of roundtables in different parts of the world. The first meeting after this one in Europe, will be in Africa, 24-26 November 1999, Nairobi, Kenya. In April, 2000, we will be in Eastern Europe, after this we hope to organise similar meetings in Latin America and Asia/Pacific. 
LCA: we apply a life cycle approach to our activities for both sustainable consumption and production. A report on global use of LCA will be published this autumn.
Advertising: we are working with advertising industry to identify how we can work together in promoting sustainable consumption. More and more advertising agencies are willing to share their skills in selling the message to both the public and their business clients. There will be a session focusing on “social communication” in this forum.  
Green procurement: we will take part in the CDG conference on “Local procurement as an instrument for a sustainable economic development“, here in Berlin, early November, and we will open the conference with a speech on "Sustainable procurement as a tool to promote a sustainable economy". Moreover, we are part of the OECD steering committee meeting for their next "Public Purchasing report"
Youth: we are in most of our activities working with the new UNEP youth advisory council (YAC), some highly involved and clever young people, dedicated to sustainable development and willing to help UNEP to realise that. We have most recently initiated a project to identifying consumption patterns among youth in all parts of the world. 
       - Training & Networking: will be an important in the follow-up of the Berlin                                                           Business forum. 

## Cleaner Production Financinglessons learned

**Bring the language of demand and supply for finance closer**
**Improve accounting practices to reflect actual costs**
**Strengthen capacity of financial institutions, business schools, academia and media to understand benefits of prevention**
**Revolving funds and other targeted investment facilities should be encouraged to jump-start implemention of bankable investments especially in developing countries**
**Basic capacity level required at country, industry and company level**

**Notes:**
Business opportunities: this event is an important step for our Sustainable Consumption activities on business opportunities, identifying how business world-wide can benefit from emerging sustainable consumption agenda. We organise a whole series of roundtables in different parts of the world. The first meeting after this one in Europe, will be in Africa, 24-26 November 1999, Nairobi, Kenya. In April, 2000, we will be in Eastern Europe, after this we hope to organise similar meetings in Latin America and Asia/Pacific. 
LCA: we apply a life cycle approach to our activities for both sustainable consumption and production. A report on global use of LCA will be published this autumn.
Advertising: we are working with advertising industry to identify how we can work together in promoting sustainable consumption. More and more advertising agencies are willing to share their skills in selling the message to both the public and their business clients. There will be a session focusing on “social communication” in this forum.  
Green procurement: we will take part in the CDG conference on “Local procurement as an instrument for a sustainable economic development“, here in Berlin, early November, and we will open the conference with a speech on "Sustainable procurement as a tool to promote a sustainable economy". Moreover, we are part of the OECD steering committee meeting for their next "Public Purchasing report"
Youth: we are in most of our activities working with the new UNEP youth advisory council (YAC), some highly involved and clever young people, dedicated to sustainable development and willing to help UNEP to realise that. We have most recently initiated a project to identifying consumption patterns among youth in all parts of the world. 
       - Training & Networking: will be an important in the follow-up of the Berlin                                                           Business forum. 

## Cleaner Production Financingselected outputs (1)

**Study on Past Investment Practices (Nov. 2000)**
**Compendium of Stakeholders (CD-ROM in Oct. 2000, update in 2002)**
**Portfolio of CP***** *****loan applications, capacity built by training***** *****ca. 50 trainers and hundreds of investment decision makers in 5 countries (2001-2002)**
**Reports and workshops on innovative financing schemes (2002)**
**Publications (see next slide)**
**web site: http://www.financingCP.org**

**Notes:**
Business opportunities: this event is an important step for our Sustainable Consumption activities on business opportunities, identifying how business world-wide can benefit from emerging sustainable consumption agenda. We organise a whole series of roundtables in different parts of the world. The first meeting after this one in Europe, will be in Africa, 24-26 November 1999, Nairobi, Kenya. In April, 2000, we will be in Eastern Europe, after this we hope to organise similar meetings in Latin America and Asia/Pacific. 
LCA: we apply a life cycle approach to our activities for both sustainable consumption and production. A report on global use of LCA will be published this autumn.
Advertising: we are working with advertising industry to identify how we can work together in promoting sustainable consumption. More and more advertising agencies are willing to share their skills in selling the message to both the public and their business clients. There will be a session focusing on “social communication” in this forum.  
Green procurement: we will take part in the CDG conference on “Local procurement as an instrument for a sustainable economic development“, here in Berlin, early November, and we will open the conference with a speech on "Sustainable procurement as a tool to promote a sustainable economy". Moreover, we are part of the OECD steering committee meeting for their next "Public Purchasing report"
Youth: we are in most of our activities working with the new UNEP youth advisory council (YAC), some highly involved and clever young people, dedicated to sustainable development and willing to help UNEP to realise that. We have most recently initiated a project to identifying consumption patterns among youth in all parts of the world. 
       - Training & Networking: will be an important in the follow-up of the Berlin                                                           Business forum. 

## Cleaner Production Financingselected outputs (2)

**Booklet ‘Profiting from cleaner production: Journey to efficient resource management’**
**Executive awareness presentations for bankers, business and government (slides on CD-ROM)**
**Investment in cleaner production - Checklists for bankers, business and government**
**Training modules (see next slides) and Trainers’ Guide**

**Notes:**
Business opportunities: this event is an important step for our Sustainable Consumption activities on business opportunities, identifying how business world-wide can benefit from emerging sustainable consumption agenda. We organise a whole series of roundtables in different parts of the world. The first meeting after this one in Europe, will be in Africa, 24-26 November 1999, Nairobi, Kenya. In April, 2000, we will be in Eastern Europe, after this we hope to organise similar meetings in Latin America and Asia/Pacific. 
LCA: we apply a life cycle approach to our activities for both sustainable consumption and production. A report on global use of LCA will be published this autumn.
Advertising: we are working with advertising industry to identify how we can work together in promoting sustainable consumption. More and more advertising agencies are willing to share their skills in selling the message to both the public and their business clients. There will be a session focusing on “social communication” in this forum.  
Green procurement: we will take part in the CDG conference on “Local procurement as an instrument for a sustainable economic development“, here in Berlin, early November, and we will open the conference with a speech on "Sustainable procurement as a tool to promote a sustainable economy". Moreover, we are part of the OECD steering committee meeting for their next "Public Purchasing report"
Youth: we are in most of our activities working with the new UNEP youth advisory council (YAC), some highly involved and clever young people, dedicated to sustainable development and willing to help UNEP to realise that. We have most recently initiated a project to identifying consumption patterns among youth in all parts of the world. 
       - Training & Networking: will be an important in the follow-up of the Berlin                                                           Business forum. 

##  Cleaner Production Financing

**Training Programmes (1)**

**One-day introductory/awareness courses**
-   Introduction to CP concepts and practice
-   Introduction to capital budgeting and funding
-    of capital projects

**Notes:**
 All of these course will be delivered in English in Tanzania and Zibmabwe, in Vietnamese in Vietnam and in Spanis in Guatemala and Nicaragua

##  Cleaner Production Financing

**Training Programmes (2)**

**Two-day core skill programmes**
-   Profiting from Cleaner Production
-   Funding Cleaner Production Projects

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

## 7th International High-Level Seminar on Cleaner Production, Prague, Czech Republic, 29-30 April 2002

**Parallel session ‘Investing in sustainability’ - **
**main issues for discussion (1)**

-  **How can a company create added value by integrating sustainability into its strategic management processes?**
** ****How can proper costing and environmental management  accounting be used as a tool to promote CP investments?**
** ****Which market-based policies at national and local levels can particularly promote investments towards preventive solutions?**
** ****Does adoption of CP increase shareholder value of a company?**

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

## 7th International High-Level Seminar on Cleaner Production, Prague, Czech Republic, 29-30 April 2002

**Parallel session ‘Investing in sustainability’ - **
**main issues for discussion (2)**

** ****Which types of innovative financing schemes are particularly conducive to CP investments?**
** ****How to influence new investment, specially in SMEs, to incorporate CP principles?**
** ****How to build capacity in enterprises, service providers and financial institutions to integrate CP further?**

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

## 7th International High-Level Seminar on Cleaner Production, Prague, Czech Republic, 29-30 April 2002

**Parallel session ‘Investing in sustainability’ - **
**Resource persons**

** **Ms. Alya Kayal, Senior analyst in Social Reserach Dept, Calvert Group, USA (Chair)
-  Ms. Krystina Brice, Investment Officer, Private Sector Advisory Services, IFC (Introductory remarks)
-  Dr. Nguyen Duc Thang, Ministry of Planning and Investments, Vietnam
-  Mr. Edgar Bucaro, Executive Director, Genesis Empresarial Fundacion, Guatemala (micro-finance)
-  Mr. Christopher Bray, Head of Environmental Risk Management, Barclays Bank, UK
-  Ms. Rosie Chekenya, Consultant, ROSCAM Strategic Development, Zimbabwe

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

## 7th International High-Level Seminar on Cleaner Production, Prague, Czech Republic, 29-30 April 2002

**Parallel session ‘Investing in sustainability’ - **
**Main conclusions**

** **

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

##  Cleaner Production Financing

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

##  Cleaner Production Financing

**Notes:**
 Thesetwo courses could also be called ‘Cleaner Production as Profitable Investments’ and ‘Cleaner Production Investment Process’

** **

- Ari Huhtala
- Senior Programme Officer
- UNEP/DTIE
- 39-43 rue André Citroën
- F-75739 Paris Cedex 15, France
- Tel. + 33 1 44 37 14 31
- Fax + 33 1 44 37 14 74
- E-mail: ari.huhtala@unep.fr
**http://www.financingCP.org**

**For further information please contact:**

**Notes:**
 The project team enourages informal contacts and feedback.
 Do not hesitate to contact for more information and exchange of experiences.