# EUR-Lex - 52013SC0111 - EN

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# 52013SC0111

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Building the Single Market for Green Products: Facilitating better information on the environmental performance of products and organisations /* SWD/2013/0111 final */**

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Impact
Assessment Report for the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT AND THE COUNCIL

Building
the Single Market for Green Products:

Facilitating
better information on the environmental performance of products and organisations

Contents

1.     Introduction. 5

2.     Procedural Issues and
Consultation of Interested Parties. 6

2.1.    Inter-Service Group. 6

2.2.    Consultations. 7

2.2.1.     Consultation with the EU
Member States. 7

2.2.2.     Public Consultation. 7

2.2.3.     Ad hoc Consultations. 7

2.2.4.     Expert Studies. 7

2.3.    Impact Assessment Board. 7

3.     Problem definition, Baseline
scenario and Subsidiarity. 8

3.1.    Background – Life Cycle
Assessment (LCA) and the methodological context 8

3.1.1.     Methodological landscape and
the role of LCA.. 8

3.1.2.     How methodologies to assess
environmental performance are currently used. 9

3.1.3.     On-going methodology
development in the Commission. 11

3.2.    Problem definition. 12

3.2.1.     The underlying issue: the
proliferation of methodologies is hampering the functioning of the market of
green products  12

3.2.2.     The scope and scale of the
problem.. 13

3.3.    How will the problem evolve?
(Baseline scenario) 18

3.3.1.     Proliferation of
methodologies. 19

3.3.2.     The inapplicability of the
principle of mutual recognition. 21

3.3.3.     Expected effects on
environmental and economic performance. 23

3.4.    Who is affected and how?. 24

3.5.    Subsidiarity, necessity and
EU value added. 25

4.     Objectives. 26

4.1.    Specific objectives. 26

4.2.    Operational objectives. 26

4.3.    Consistency with other EU
policies. 27

5.     Policy Options. 27

5.1.    Option 1. Baseline scenario –
no policy change. 27

5.2.    Option 2. A new mandatory
product policy framework. 27

5.3.    Option 3. A mandatory
Organisation Environmental Footprint reporting framework..... 28

5.4.    Option 4. Integration of the
methodologies for the environmental footprint of products (PEF) and
organisations (OEF) in relevant policy instruments. 29

5.5.    Option 5. Recommending the
application of PEF and OEF on a voluntary basis. 29

6.     Analysis of Impacts and
Comparison of Options. 31

6.1.    General remarks and
methodology. 31

6.2.    Analysis of impacts. 32

6.2.1.     New mandatory product policy
framework (Option 2) 32

6.2.2.     Mandatory OEF reporting
framework (Option 3) 34

6.2.3.     Integration of PEF and OEF
methodologies in relevant policy instruments  (Option 4) 36

6.2.4.     Recommending the application
of PEF and OEF on a voluntary basis (Option 5)... 38

6.3.    Comparison of policy options
related to environmental performance of products. 40

6.4.    Comparison of policy options
related to environmental performance of organisations.... 42

6.5.    Comparison of options
according to efficiency, effectiveness and coherence. 42

6.6.    The preferred option. 44

7.     Monitoring and Evaluation. 45

Glossary

CAP – Common Agricultural Policy

CRR – Centre for Retail Research

CSR – Corporate Social Responsibility

CWP – Commission Work Programme

DEFRA – UK Department for Environment, Food and Rural Affairs

EAP – Environment Action Programme

EESC – European Economic and Social Committee

ELCD database – European Reference Life Cycle Database

EMAS – Eco-Management and Audit Scheme

ETS – Emissions Trading System

GHG emissions – Green House Gas emissions

GPP – Green Public Procurement

GRI – Global Reporting Initiative

HANPP – Human appropriation of net primary production

IA – Impact Assessment

IAG – Impact Assessment Guidelines

ICT – Information & Communication Technologies

ILCD – International Reference Life Cycle Data System

JRC – European Commission's Joint Research Centre

LCA – Life Cycle Assessment

LCC – Life Cycle Costing

MED – Europe in the Mediterranean programme

MS – Member State

OEF – Organisation Environmental Footprint

OEFSR – Organisation Environmental Footprint Sectoral Rules

PA – Public Authorities

PEF – Product Environmental Footprint

PEFCR – Product Environmental Footprint Category Rules

REACH – Registration, Evaluation and Authorisation and Restriction
of Chemicals

RERM – Resource Efficiency Road Map

SCP – Sustainable Consumption and Production

SCP/SIP AP – Sustainable Consumption and Production and Sustainable
Industrial Policy Action Plan

SME – Small and Medium Enterprises

SRI – Sustainable and Responsible Investment

UCPD – Unfair Commercial Practice Directive

WBCSD – World Business Council for Sustainable Development

WTP – Willingness to Pay

1. 
Introduction

There is growing pressure on companies to
demonstrate that the way in which they are producing is environmentally
friendly, both at the level of individual products and as organisations. Information
on environmental performance is used for the management of supply chains,
ensuring that businesses are resource efficient. At the same time, it serves to
show how "green" a product or an organisation is, because consumers increasingly
want to be able to better understand the environmental impacts associated with
their consumption.

However, the provision of this information
in a transparent and reliable way is complicated by the fact that a wide range
of different methodologies for the assessment of the environmental footprint of
products and organisations have been developed. These have their own features,
rules, and scope, and are applied at national, European and/or international
level to differing extents. The fact that there is no single accepted
methodology has contributed to a situation where there is distrust (by
consumers and by business alike) of environmental claims, both those attached
to products and those included in companies environmental reports. In addition,
the multiple government and private sector schemes increase costs for businesses,
especially penalising those active in several Member States or internationally
because the technical requirements differ in each scheme, thus generating
hurdles in cross-border operations.

This Impact Assessment report will
accompany the adoption by the Commission of a package of measures to contribute
to building the Single Market for Green Products. This package is the first
part of a two-step process.

In the first phase, the Commission will
take the measures emerging out of this report to reduce the ambiguity of what a
green product/organisation is and pave the way towards more reliable comparability
of the environmental performance of products and organisations.

The Commission will do this by introducing two
robust but relatively simple methodologies for assessing the life-cycle
environmental performance of products and organisations. The Commission will
recommend Member States and the private sector to use them on a voluntary basis
for both business to business and business to consumer transactions. The
Commission will also collaborate with industry and other relevant stakeholders on
the development of performance benchmarks for products and organisations in a
range of priority product categories and sectors.

After three years of applying the
methodologies on a voluntary basis, the Commission will evaluate progress
before deciding on any second phase. As part of this it will assess whether the
methodologies, product and sector performance benchmarks, and incentives can be
further integrated in a wider range of regulatory instruments and will produce
appropriate proposals, as indicated in the Commission proposal for a new EU
Environmental Action Programme to 2020[1]. Some
analysis is provided of this more ambitious perspective already in this Impact
Assessment report, but a new impact assessment will accompany any future
proposals.

This report demonstrates that providing
more reliable information on whether production and consumption is green will be
beneficial for companies and households, and the environment. This will allow
in the medium term a higher uptake of green products[2] and of
greener practices by companies in the EU market. This would not only contribute
to reducing the global environmental impacts of EU consumption but also provide
some opportunities for economic growth and job creation. Green products are
often based on innovative technologies and are results of advanced production
processes and optimised supply chains. Thus, policies that stimulate the uptake
of green products can bring important additional economic benefits – they can
create new markets, foster innovation, and make companies more competitive and
less reliant on scarce and costly resources.

This response also builds on the existing EU sustainable
consumption and production policy (SCP), which aims to stimulate consumers'
demand for more sustainable goods and production technologies and to improve
the environmental performance of products[3]. After a few years of
implementation, the policy has achieved some success, but its shortcomings are
also evident. The mid-term evaluation[4] published in September 2011 confirmed the
need to develop common procedures and tools for the calculation of the
environmental impacts of products using a life cycle[5]
perspective.

In September 2011, the Commission's
Resource Efficiency Roadmap (RERM) recognised that "changing the
consumption patterns of private and public purchasers (the consumption
side) will help drive resource efficiency and can also frequently generate
direct net cost savings. In turn it can help increase demand for more resource
efficient services and products” (the production and product side). The
RERM also stressed that "the internal market and market based instruments
have an important role in setting the framework for markets to reward greener
products and greener companies". The package of measures emerging out
of this report will contribute to that larger agenda.

2. 
Procedural Issues and Consultation of Interested
Parties
2.1. 
Inter-Service Group

The Interservice Group for the SCP/SIP
Action Plan, co-chaired by DG ENV and DG ENTR also functioned as the Impact Assessment
Steering Group of this initiative. The Steering Group has met to-date 5 times
in total to discuss the results of the public consultation and various versions
of this report. The group includes: DG AGRI, CLIMA, CNECT, COMP, DEVCO, EAC,
ECFIN, EEA, ELARG, EMPL, ENER, ENTR, ENV, ESTAT, JRC IPTS, JRC IES, JUST, MARE,
MARKT, MOVE, REGIO, RTD, SANCO, SG, SJ, TAXUD, TRADE.

2.2. 
Consultations
2.2.1. 
Consultation with the EU Member States

Since the beginning of the preparatory process,
the Commission has met 5 times with Member States, informing them on the
SCP/SIP Action Plan review as well as on the proposal for an initiative on the
Single Market for Green Products. The broad majority of Member States have
consistently stressed that they see the need for an EU-coordinated approach in
this matter.

2.2.2. 
Public Consultation

The present report was preceded by a public
consultation launched on 11 January 2012 via the EUROPA website in order to
gather comments and suggestions from stakeholders and citizens concerned. The
consultation ran until 3 April 2012. 398 responses to the online consultation
and more than 50 position papers were received. A clear indication emerged,
urging the Commission to pursue a higher level of synergy and complementarity
between EU SCP regulatory instruments and policy measures. A summary of the
responses is available in Annex 7 together with the list of the position papers
received.

2.2.3. 
Ad hoc Consultations

Meetings were held internally and
externally with key stakeholders, in order to build a vision and identify the
right objectives and the necessary tools as early as October 2010.

The methodology for the assessment of the environmental
footprint for products and organisations was discussed in detail during a
workshop that took place in Brussels on 29-30 November 2011, gathering some 130
key stakeholders[6]. Also stakeholders not attending the meeting were given the
possibility to send comments and questions which were then discussed during the
meeting.

2.2.4. 
Expert Studies

The analysis builds on the results of the evaluation study of the 2008 SCP/SIP Action Plan and is further
supported by four other studies[7]. The studies provided input to the analysis
of problems and of the economic, social, and environmental impacts of the different
options considered.

2.3. 
Impact Assessment Board

The draft IA report
and its summary were submitted to the Board on 10 October 2012 and discussed at
the Board meeting of 7 November 2012. The Board in its opinion of 9 November
2012 on the draft IA asked for significant improvements to the report, namely to
better describe the problem and its underlying causes; to better demonstrate
the need for and proportionality of EU action; to provide a clearer
intervention logic; to better describe, assess, and compare the policy options
and their packaging; and to identify more clearly the resulting impacts.

A resubmitted version of the IA report
integrated considerable changes and additional analysis. Additional information
and concrete evidence about the key failures has been included, together with an
updated baseline scenario, the projected evolution of the methodologies
landscape in Europe, and more details on the existing national schemes in Member
States. Furthermore, the comparison of the options was made more concrete and
comprehensive, while the underlying assumptions have been clearly presented,
together with a clearer intervention logic and concretely defined objectives.
Also comments received by various stakeholders have been integrated throughout
the text as appropriate.

The Board re-examined the new IA report and
issued a new opinion on 22 February 2013. Following this opinion, the current
version of the IA sets out more concretely the need for action and the
value-added of an EU led proposal, explains better what will be the evolution
if proliferation of schemes will be continued in EU or at international level,
stresses the impacts to business of this proliferation, discusses the mutual
recognition of schemes as a possible solution and demonstrates better the need
for two environmental footprint methods at EU level. The information about the
different options examined in this IA report as well as their comparison has
been further elaborated, while appropriate studies and sources have been
identified throughout the report.

3. 
Problem definition, Baseline
scenario and Subsidiarity
3.1. 
Background – Life Cycle Assessment (LCA)[8] and the methodological context
3.1.1. 
Methodological landscape and the role of LCA

There are many different methodologies
currently used for measuring environmental performance, whether of products or
organisations. Typically, methodologies vary between each other, leading to
materially different results. Furthermore, due to the flexibility (methodological
choices left to the discretion of the user) built into most of the
methodologies, even results obtained using the same methodology are usually not
comparable.

Methodologies for measuring environmental
performance of products and organisations can be grouped into two main
categories:

· 
Measuring environmental performance through
direct impacts (i.e. impacts directly attributable to the product/organisation,
such as for instance the hazardous waste resulting from production). Within
these methodologies, some cover a single environment impact (e.g. Scope 1 of
the GHG Protocol[9], covering greenhouse gases; or the Forest Stewardship Council
Certification[10]), while others cover several environmental impacts (e.g. EMAS Key
Performance Indicators[11]; several indicators under the Global Reporting Initiative[12]).

· 
Measuring environmental performance through
direct and indirect impacts (i.e. including impacts in other phases of the life
cycle, e.g. extraction, logistics, use, end of life – Life Cycle Assessment).
Within these methodologies, some cover a single environmental impact (e.g. analysis
based on the GHG Protocol; CDP Water[13]; PAS
2050[14]), while others cover several environmental impacts (e.g. Life Cycle
Assessment Studies based on ISO 14040-44[15]; ILCD[16]; the EU Ecolabel[17]).

Depending on the goal of carrying out the
assessment, all approaches have their value in improving environmental
performance. However, in terms of completeness and relevance, carrying out an
analysis that encompasses all relevant life cycle phases and all relevant
environmental impacts for a product or organisation provides for the most
complete analysis and points to targeted improvement opportunities. It also
avoids falling into the risk of improving a single environmental indicator
while worsening others. For example, in the case of an energy-using product,
where only energy use is measured, improvements in energy efficiency might go
hand in hand with an increase in the amount of materials needed to produce the
appliance – with all the environmental impacts associated to extraction of
materials or resource depletion that the producer will not be aware of.

Currently there is only limited
coordination internationally regarding methodologies. Examples for coordination
initiatives include guidance for the development of product category rules,
coordination in the framework of the International Standards Organisation
(ISO), and efforts to approximate carbon footprint methodologies through the
Carbon Disclosure Standards Board[18]. Despite
these initiatives, methodologies remain highly variable.

The gap in the existing methodologies based
on multi-criteria LCA is that many technical issues are still left open, and
several choices are available for calculations. Due to this flexibility, it is
currently not possible to compare the performances of two competing products or
two companies active in the same sector[19], which
is of fundamental importance to allow informed choices for consumers and businesses
alike.

3.1.2. 
How methodologies to assess environmental
performance are currently used

Environmental considerations are
increasingly mainstreamed and relevant for marketing strategies, managing
supply chains, and as an element of consideration for investors. As a result a
growing number of companies and public bodies are using different methodologies
to assess the environmental impact of the products they develop or buy. As shown
above, some of these methodologies are LCA-based, while others cover only direct
impacts.

Industries are more and more using LCA as a
green sourcing tool, which is a way to improve their overall performance along
the value chain. Some big industries (e.g. Emerson in the electronic sector or
Nike in the apparel one) are already using LCA-based methodologies to identify
and select the best performing suppliers, especially with reference to SMEs. In
some cases, companies are proactively searching for materials that will
contribute to the environmental performance of their products or projects
through their entire life cycle.

In the retail sector there is a clear shift
towards mandatory sourcing programs. Historically, most retailers worked in
voluntary supply chain partnerships with key suppliers to promote and procure
more sustainably sourced products, like seafood or paper products. However,
almost half of the retailer supply chain programs now evaluate a product’s
sustainability performance as part of a buying decision, which indicates that
sustainability is no longer a voluntary partnership proposition but a growing
retailer requirement[20]. Indeed, retailers with hundreds of billion euro in purchasing
power already now consider a product’s environmental performance as part of their
decisions as to whether put it on sale. Most large retailers have at least one
sustainability supply chain program and the world’s three largest retailers –
Walmart, Carrefour, and Tesco – all have one or more programs in place to
source greener consumer goods for their shelves.

Governments also use such information, as a
way of practising Green Public Procurement (GPP)[21]. Often
also private green procurement is done in line with recommended GPP criteria
(e.g. the EU GPP criteria, but also national criteria). These criteria are
usually developed by taking into account existing LCAs. Those, however, vary in
detail and quality and often, public authorities are only using criteria
concentrating on one, or on a small number of specific environmental aspects of
the product having a high importance for the public authority. One example is
the energy consumption of a product in the use phase due to its financial
implications. Aspects related to the production phase of the life cycle are
often not tackled in the GPP criteria, due to limited data on these and a lack
of means of verification. In the development and revision of EU GPP criteria
the current intention is to consider existing LCAs (often those that were
conducted for the EU Ecolabel criteria of the same product group) in order to
identify those relevant environmental aspects that need to be addressed.

Consumers are targeted with several types
of "green" marketing information, including labels and environmental
declarations. Many of these are based on some forms of life cycle
methodologies, but often are either not done in consistent ways, are not
verifiable and/or only focus on a single issue (being it carbon, water,
sustainable sourcing, etc.). There is though not a one-to-one relationship
between methodologies and labels. Without a specific legislation aiming at avoiding
the proliferation of labels, even the existence of a single methodology would
not imply per se a reduction in the number of environmental labels
currently co-existing on the market (more than 400 hundred worldwide[22] and this number is rapidly growing). What a common methodology
would bring in terms of communication to consumers would be a more level
playing field between competitors and more assurance in terms of credibility
and verifiability of the information provided.

Increasingly, investors also want to know
that companies they have targeted have responsible, sustainable, long-term
business approaches. Market interest in non-financial (e.g., Environmental,
Social, and Governance) information is growing. Institutional investors and
stock exchanges, for example, request increased sustainability reporting from
listed companies, and environmental indices have been established such as the
Dow Jones Sustainability Index[23]. As an example of such interest, the Carbon Disclosure Project[24] was developed in response to investor demand for a system for firms
to measure and report greenhouse gas emissions and climate change strategies as
a tool to set reduction targets and individual goals. Whilst most of the
currently used assessment approaches are not LCA based, there is a growing
trend among multi-nationals and big producers to use more and more Life Cycle
Management principles in their strategic management.

3.1.3. 
On-going methodology development in the
Commission

Against this background, since 2010 the
EU's Joint Research Centre has been developing the Product Environmental
Footprint (PEF) and Organisation Environmental Footprint (OEF) methods
(umbrella methods)[25]. Both PEF and OEF are LCA-based
methodologies to identify and quantify the most relevant environmental impacts
of products (good and services alike) or a product and service portfolio
(organisation). They build on existing approaches and international standards[26], even if using LCA for organisation-level assessment represents a
relatively novel approach.

Before considering developing a new
methodology, the Commission carried out an in-depth analysis of the most widely
applied methodologies[27], [28]. The objective of this analysis was to assess if the existing
methodologies are "good enough" to achieve a number of policy
objectives, such as: improvement of resource efficiency along the value chain;
definition of environmental performance benchmarking; improvement of design for
environment; reproducibility of results; and comparison of environmental
performances. The analysis[29] indicated that none of the existing methodologies could be used as
such, and a need to "fill some methodological gaps".

One important new feature of both
methodologies developed by the Commission is that they enable the possibility
of comparing the environmental performance of products and organisations. In
2011-12 the two methodologies have been submitted to a road-testing by
volunteering companies[30]. The views of business were generally positive about the approach
even if there are some improvements needed. In particular, the road-testing
showed that the methodologies are well suited to address the complexity of
production processes and supply chains, helping to strike a balance between
information need and relevance of information. They also allow streamlined
environmental reporting and business-to-consumer information. The road testing confirmed
that the environmental footprint methodologies are more comprehensive than
alternative approaches currently used. While this approach can be practically
implemented on real products and organisations, the road test pointed out that
the full-scale implementability of such an approach will require further work,
especially regarding data availability and development of tailored requirements
for product groups and sectors.

The PEF and OEF methodologies are now
mature enough to be used for tracking the environmental performance of a
product and an organisation through time, or to provide information for product
or process optimisation. Further developments are however necessary to reach
the full potential of both methodologies. These include the development of
product group-specific Product Environmental Footprint Category Rules (PEFCRs)
and sector-specific Organisation Environmental Footprint Sector Rules (OEFSRs)[31] for priority product groups and sectors including benchmarks;
improved availability of good quality life cycle data; setting-up a
verification system which is cost-effective; and normalisation and weighting
system. The Communication originating from this impact assessment will explain
how to move from the first phase of road-testing to a more widespread piloting
and development phase of the methodologies that would result in increasing the
user-friendliness of PEF and OEF.

3.2. 
Problem definition
3.2.1. 
The underlying issue: the proliferation of
methodologies is hampering the functioning of the market
of green products

Many methodologies are available and used
to assess and communicate the environmental footprints of products and
organisations[32].
Their number is rapidly increasing leading to a proliferation
of national[33]
and private sector initiatives[34].
Companies are in principle free to choose which one to apply, but are also
often required to use a particular one either by a national administration or
by clients downstream in the supply chain. If a firm supplies several other
firms, then it may be asked to supply environmental information in multiple
ways implying the use of multiple methodologies. At the same time, there is no
natural coalescence around a single specific methodology.

A good illustration of this underlying
driver is the wave of methodological developments leading to a continuous
appearance of new – similar but slightly different – LCA-based methodologies,
both in Europe and internationally. For example, if today a company would like
to make a product carbon footprint study, it might choose among a long list of
methodologies, such as the following: PAS 2050 , BP X30-323, ISO 14040-44, ISO
14025, ISO 14067 (once the standard will be adopted), WRI GHG Protocol, and
many more[35].
For analysis at company level, 80 leading methodologies and initiatives were
identified according to which GHG reporting could be carried out[36].
However, even looking at the same product or organisation, these methodologies
would deliver different results, because they are based on different models and
use different methodological assumptions. As explained in the following
paragraphs this “diversity” represents a serious problem both for those who
commit the studies (usually industries) and for the users of the results (other
companies along the value chain, consumers, investors, procurers, policy
makers, insurers or any other stakeholder interested in the results of such
studies). The ensuing confusion is an obstacle to the take-up of more
resource efficient products both by consumers and businesses, and leads to
missed opportunities (see section 3.2.2).

Indeed, there are numerous voices
from industry calling for a harmonisation of methods to assess the
environmental performance of products in order to create a level playing
field, reduce costs, and prevent free riding. Respondents
to the public consultation considered the lack of consistency as one of the
most important barriers to the display and benchmarking environmental
performance (72.5% agreement), alongside lack of time or expertise (76.4%), and
insufficient market reward for good environmental performance (70%). When asked
about the drivers of the barriers, multiple initiatives in the EU (70.8%) and
multiple ways of reporting (76.3%) received high agreement from stakeholders.

Regarding the consumer angle, 89% of
citizens responding declared that they prefer buying products that have a lower
environmental impact; and the same percentage declare that it is important to
know the environmental impact of what they buy. Thus, the need for reliable
information for consumers is re-confirmed.

3.2.2. 
The scope and scale of the problem

The proliferation of methodologies leads to
a number of related problems: additional costs for business; reduced
opportunities cross border trading of green products; lack of clarity for
consumer choices; and missed opportunities for resource efficiency.

The analysis provided in this report tends
to focus on the EU context, but markets and supply chains are globalised,
therefore most of the problems highlighted in this chapter are common to
companies and consumers also outside the EU.

a) Additional costs for
businesses

The co-existence of different methodologies
implies a direct increase of costs for those who want to assess and communicate
the environmental footprints of their products or organisations. The increase
of costs is due to: (1) increase in training costs to be able to cope with the
requirements of the different methodologies; (2) increase in costs related to
gathering of different information; (3) different labelling requirements; (4)
different verification requirements. Information needs are multiplied not only
with reference to data under the direct responsibility of the company
interested in calculating the environmental performance of their product, but
also (sometimes mainly) with reference to the information needed from their
suppliers. Indeed suppliers are more and more faced with requests coming from
their customers asking for the same information (e.g. their carbon footprint)
but to be calculated in different ways or different information altogether (for
the same product some customers may ask their supply chain for carbon footprint
alone, while other may ask information on carbon footprint plus lifetime
emission to air, or material consumption, etc.). Costs stemming from
duplication of efforts are particularly felt in sectors where most impacts stem
from the supply chain. For example, PUMA has stated that 94% of the
environmental impacts of its products occur along the supply chain[37].

Concrete examples of how the current
situation generates additional cost to business include:

· 
A leading company in the electronics sector has
requested a single LCA methodology to be used by all its more than 20,000 suppliers.
Those suppliers generally have other clients, which require providing similar
information, but based on a different methodology. Reporting the same data in
different formats clearly represents a cost for these suppliers – a cost that
could be avoided if a single methodology would be applied in the Single Market
and would be increasingly accepted internationally.

· 
Many international companies are part of several
sustainability indices (e.g. Dow Jones Sustainability Index, Stoxx Global ESG
Leaders, FTSE4Good) and need to reply to several questionnaires on their
sustainability performance, all with different contents. These companies have
expressed in several occasion that this is an unnecessary cost for them, a cost
that could be reduced by having a single reference for measuring the environmental
performance.

b) Reduced opportunities for cross
border trading of green products

Given the lack of a commonly agreed
definition of green products, it is difficult to substantiate the scale of
intra-EU and extra-EU trade that is affected by this issue. However, according
to a recent Eurobarometer, around 1.2 million SMEs are engaged in intra-EU
trade, and 1 million of them in extra-EU trade in green markets[38]. On the demand side,
surveys suggest that 90% of consumers buy green products at least sometimes, of
which export products would have a share. Overall, there is clearly
considerable trade in green products, and this is likely to be increasing.

However, the proliferation of methodologies
may hinder this positive trend, reducing the opportunity of cross border
trading of green products. Companies may want to trade across borders, but find
that the requirements related to the environmental information for the products
they intend to sell change across those borders. Increasingly, different
environmental information is requested by national governments in the case of
public procurement, reporting or labelling requirements, or by private
initiatives, for instance by a retailer to let the product be displayed in stores.

The following scenario could become the
normal (but inefficient) way to market green products in Europe: a Spanish
company wishing to market its green product in UK, France, Italy, and
Switzerland will soon need to apply for several national schemes, even if it is
not required to do so in Spain. In France, it will have to carry out an
environmental assessment in line with the French official methodology (BP
X30-323); in the UK it will have to apply the PAS 2050 or the WRI GHG Protocol;
in Switzerland, it will have to comply with the Swiss approach (currently under
development); in Italy it will be asked to join the governmentally recognised
Italian scheme, and will have to carry out yet another analysis. The same
Spanish company may also be asked to develop an Environmental Product
Declaration (EPD) based on ISO 14025, to find out after some months that that
is not enough, because there are different competing EPD systems around the
world and, even if they are all based on ISO 14025, each have its own
specificities so that in the end results are again not comparable and therefore
more difficult to communicate. Assuming a €4,000 – 10,000 cost for a study[39],
the company will have to multiply this cost for each market it intends to
enter.

In this scenario, the Spanish company would
incur a cost of up to €20,000 – 50,000 per product to be able to compete based
on environmental performance in 5 European markets. In practice, this is an
upper estimate: costs would be lower as some data could be reused so it is not
100% additional requirements each time. On the other hand, this cost estimate
does not include the costs for the verification of the information which could
be different for each scheme.

According to EU Law, Members States enjoy a high degree of flexibility in the
preparation, adoption and application of their national technical regulations,
such as for instance a scheme to calculate and communicate environmental
performance. However, the regulatory flexibility is limited by the requirement
that technical regulations are not prepared, adopted or applied with a view to,
or with the effect of, creating unnecessary obstacles to trade. Unnecessary obstacles to trade make it more
difficult for companies to compete across European borders, due to the following reasons:

· 
Loss of economies of scale: if a firm must
adjust its production facilities to comply with diverse technical requirements
in individual markets, production costs per unit are likely to increase. This
imposes a handicap particularly on SMEs.

· 
Conformity assessment procedures: compliance
with technical regulations generally needs to be demonstrated. This may be done
through testing, certification or inspection by laboratories or certification
bodies. If this needs to be done in a different way in each individual market a
company may be discouraged to enter, thus losing business opportunities.

· 
Information and adjustment costs: these costs have
been analysed in the previous paragraph. Looking at it through the level
playing field lens, it is important to stress here that exporters are normally
at a disadvantage vis-à-vis domestic firms, in terms of adjustments costs, if
confronted with new regulations.

c) Lack of clarity for consumer choices

When buying a product, the most important
aspects for consumers are quality (67% thinks it is very important) and price
(47%), followed by the product's impact on the environment (34%)[40].
This is normal consumer behaviour: people place value on different attributes
of a product. However, consumers have very poor information on what is
genuinely 'green'. Without providing this information in a trusted way,
purchasing decisions are distorted and many consumers end up not buying green
products despite their declared intention to do so.
This has been shown by a Eurobarometer survey: while 75% respondents of the
poll say they are ready to buy environmentally friendly products, only 17% had actually
done so in the month before the survey[41].
The reasons for this vary, but include both a lack of
trust on the environmental information provided by producers or/and retailers[42]
and the limited offer of green products.

Currently, the environmental performances
of products are not communicated in a way that is comparable and thus limit the
ability to make informed choices. At the same time, the number of green claims is growing[43],
even if they are becoming more superficial and vague in their use of
terminology. This further deteriorates consumer trust: 39% of consumers say
business claims about the environment are not accurate[44]. People tend to distrust green claims, both those attached to
products and those included in companies' Corporate
Social Responsibility (CSR) or other environmental
reports[45].
This situation penalises those companies who have been
investing a lot in improving their performances and greening their business
models. The perception is that companies are competing on the basis of their
claims rather than on the basis of the underlying environmental performance.

d) Missed opportunities for resource
efficiency

While many companies have traditionally
focused on their internal operations for cost reduction initiatives, this alone
may not address the significant savings opportunities for a company along its upstream
and downstream supply chain[46].
By tackling this situation head on, companies can reduce
their costs (see Box 1 below). The more proactive
companies have understood the large margins for further efficiency gains along
their supply chain and in order to exploit that they are more and more using life
cycle management approaches[47].
Those who are using life cycle approaches to improve their resource efficiency
can also enjoy other benefits, like a better return on
investment, develop new markets, improved corporate image, better customer
loyalty, a better understanding of the risks across their full supply chain, and
better product differentiation.

More green products being sold on the
market and more organisations getting greener would contribute to achieving the
objectives of the Resource Efficiency flagship and the EU 2020 Strategy. Although environmental reporting per se does not mean
performance improvement, many of the companies measuring performance set up
targets and actions. For instance, out of 405 corporations responding to the
Climate Disclosure Project, 82% set and disclose reduction targets. Most of the
reductions reported are a result of emissions reduction activities (40%)[48].

Box 1 – Examples for the potential of green solutions to save costs - Life
Cycle Approaches in progressive companies

Life Cycle Approaches have been used for
years in many companies, first as performance tracking tools for internal uses
only, then as an integral part of high-level decision making. Companies using
them have considerably improved their resource efficiency (and reduced production
costs), spurred innovation by improving the environmental features of products,
raised stakeholders' awareness, gained new markets, and optimised their product
lines by eliminating products with poor environmental performance. Below some
exemplary cases:

Xerox saves hundreds of millions of US$ each year through
its remanufacturing and recycling programs. Easy disassembly, durability,
reuse, and recycling are incorporated into product design, so that parts of
almost all old machines can be refurbished and reused in new ones[49].
For example, in 2009 US$ 400 million (85% of its net income) were saved by
designing for and using remanufactured parts, thus eliminating 42% of its
production lines and 42% of carbon from equipment production[50].

Wal-mart is increasingly integrating sustainability into its
strategic thinking. For instance, it plans to reduce packaging by 5% by 2013,
with an expected net saving of US$ 3.4 billion. If Wall-Mart extended packaging
reductions to its entire supply chain, a saving of US$ 11 billion could be
achieved. Moreover, some suppliers saved up to 71% of their energy bills by
implementing the Wall-Mart environmental footprint approach. Wall-Mart's also
states that through implementation of LCA results, detergents producers in US
saved over 1.8 Mm3 of water, 43000 tons of plastics, 57000 tons of cardboard,
and several millions of US$ in transportation costs over 3 years[51].

Bloomberg began looking at sustainability as a business issue 5
years ago, by integrating sustainability information into business
decision-making for its clients. In the past 3 years has initiated over 300
sustainability projects in 24 countries. It has avoided about 83000 metric tons
of CO2-eq since 2008, the equivalent of emissions from burning 410
railcars of coal. Considering that every US$1 spent on sustainability saves
US$2 in operating costs Bloomberg's sustainability efforts have resulted in
over US$25 million in net savings since 2008[52].

By implementing Life Cycle Management
principles, 3M has saved over 1.2 billion US$ over 30 years. In 2007,
for example, 3M had a total of 438 environmental projects running, reporting a
total of 51 million kg of pollution prevented, as well as a reduction of 2.5
million tons of CO2-eq greenhouse gases[53].

Philips uses Life Cycle Assessment as an eco-innovation tool
to develop their green products. From 2007 to 2010 they increased their sales
of green products of about 50% (from 20% to 38% of total sales). During the
same period they reduced the carbon footprint of their products by about 18%[54].

Unilever is actively using Life Cycle based tools to measure
greenhouse gases emissions, waste production, embedded water and water use for
about 1600 food, home, and personal care products sold in 14 countries[55].
According to Unilever, implementing life cycle tools is key to stay
competitive: consumers expect it, retailers require it, it fuels innovation, it
helps developing new markets, and it saves money[56].

The examples above illustrate the
significant cost (and resource) saving potential that can be realised with the
application of Life Cycle management and Assessment. In the absence of a
wide-scale application of similar tools, only forerunners can benefit from
these opportunities.

The incentive to develop new green
technologies is negatively affected by the fact that consumers or public
administrations do not buy green products as much as they would if they had
full information available, and that investors are therefore not freeing funds
for environmental investments to the full potential or are not considering
adequately environmental risks. This reduction in potential market share together
with the need for an upfront investment to deploy green solutions in an
organisation tends to discourage the management (especially in SMEs) from making
the organisation greener. The low take up of green products has repercussions
on the take-up of eco-innovation as well.

Innovation in the area of clean
technologies is very uneven across the EU and European companies feel the
pressure of the increased global competition[57].
This puts at risk the competitive edge of EU eco-industries, which are still
leading globally and are growing. Indeed, green technologies have been
identified as a possible source of growth in the Industrial Policy Update[58]. In 2010, the global market
for eco-industries was estimated at roughly 1.15 trillion euro a year but it is
expected to reach around 2 trillion euro a year by 2020.[59] The EU has a strong export
position vis-à-vis nearly all of the world's largest economies. EU companies'
share in the worlds' eco-industry market is significant (30% of water
management, 35% of sustainable mobility, 40% of green power generation, 50% of
waste management and recycling, 10% of material and resource efficiency[60]);
and EU SMEs are participating actively in the internationalisation of green
markets.

PROBLEM
TREE

3.3. 
How will the problem evolve? (Baseline
scenario)

The baseline
scenario is linked to the on-going implementation of the existing policy
instruments introduced or strengthened by the SCP/SIP Action Plan. The Action
Plan follows a tripartite structure, with the different policy instruments
addressing respectively production (i.e. EMAS), products (i.e. Ecodesign,
Energy label, the EU Ecolabel, Energy Star, and GPP) and consumption (i.e. Retail
Forum).

The time horizon of our baseline analysis
is from 2011 (latest data available) to 2015. At that time, it is foreseen that
some key SCP policy instruments will be reviewed (i.e. Ecodesign, Energy
Labelling, EU Ecolabel, and EMAS). The potential changes to these instruments
are not considered in the baseline below.

3.3.1. 
Proliferation of methodologies

Developments at EU level

It is expected that the Commission will
propose an initiative on disclosure of non-financial information, by
strengthening the existing obligation under the Accounting Directives. The
initiative aims at increasing the quantity and quality of social,
environmental, and governance information disclosed by large companies and
groups. However, it will not propose a detailed methodology for reporting this
information, nor specify what elements of environmental performance need to be
reported on. Without further intervention on these aspects, the reliability,
comparability, relevance, and completeness of the environmental information would
fall short of stakeholders' needs, particularly investors, which are expected
to become progressively more sensitive to environmental risks because of
increasing resource scarcity and resource prices and an improving understanding
of sustainability risks. This is demonstrated by the growing interest in
corporate sustainability: in the latest UN Global Compact/Accenture CEO study
(2010), 93% of the 766 CEO participants worldwide, declared sustainability as
an “important” or “very important” factor for their organizations’ future
success. In fact, 81% stated that sustainability issues are now fully embedded
into the strategy and operations of their organizations.

Although appetite for information would
continue to increase, the lack of standardised, reliable information will
impede big leaps in considering resource/environment risks systematically. Without
further EU intervention, claims and reports would continue to vary in ambition (i.e.
quality of information and scope) and would not allow any sort of comparison
or benchmarking. For example, a recent report found that 94 companies
used 585 different indicators in environmental reports. Of the indicators
disclosed, 22% were used by more than 3 corporations; 55% were used only once;
16% were used twice; and 7% were used three times[61].

The number of methods and initiatives is
expected to increase. Only in the area of carbon measurement, studies carried
out by the Commission identified 62 leading initiatives and methods on product
carbon footprinting and 80 on carbon reporting (status in 2010)[62]. Taking into account these
numbers, and considering the increasing interest of private initiatives and
policymakers, we estimate that in the next 5 years 5-10 new initiatives would
appear. Without further EU intervention prioritising methodological
approximation and the reduction of the proliferation in methods, it is likely
that these new methods will continue to vary, develop independently, and render
the footprinting landscape even more complex.

As regards the lack of clarity for
consumers, although there is no EU legislation specifically harmonising green
claims and marketing, the EU has regulated the use of claims either directly by
including norms in specific legislation regulating different types of
performance for products, or indirectly by setting general rules for preventing misleading
claims, leaving to national market or competition authorities the task to
interpret and enforce them[63]. In the context of the implementation of the Unfair Commercial
Practice Directive (UCDP), the Commission has issued a specific guidance to
promote the use of clear, accurate and relevant environmental claims in
marketing and advertising[64].
It is expected that the Commission will support an
adequate and uniform enforcement in Member States and further elaborate on the
UCPD guidance by improving the definitions of green products, green production,
and green organisation; by complementing it with more examples/cases of
misleading green claims emerging from national jurisprudence; and by recommending
best practices based on a life cycle approach and adequate methodologies.

However, the lack of a reliable method that
consumers trust would remain unsolved. Given the
expected persistence of the proliferation of methods and initiatives, and the persevering
incomparability of information, consumers will continue to face increasing and
confusing flow of environmental information. Ultimately,
this will lead the consumers to further lose confidence in environmental labels
and claims.

Developments at Member States level

Without additional EU intervention, the
current tendency of governments to issue policies regarding environmental
performance information is expected to continue and reinforce. France will
consolidate its approach for environmental labelling and reporting under the
Grenelle II[65];
the UK set up a Product Sustainability Forum and is about to introduce
mandatory GHG reporting for listed companies, and further initiatives might
gradually appear on the medium-long term; Italy recently started a pilot
project on products carbon footprinting. Several Member States have
developed or are developing national guidance on environmental claims (UK, France, Ireland, and Denmark) and this tends to become the rule. These initiatives are
expected to have diverging objectives and scope and (slightly) different
methods on which they rely upon. Given the Commission efforts to set up
coordination between Member States on this issue, some degree of convergence is
expected, but it will take time and will lead to additional costs.

Development at international level
(governments-driven)

Internationally, the situation is similar
to what is happening at Member States level: Switzerland will present in 2013 a
legislation introducing multi-criteria life cycle assessment for products and
its communication to consumers. Japan, Korea, Australia, and Canada are also using LCA approaches in policy making. For example, the Ministry for Economic
Development, Innovation and Exportation in Quebec is investing $24 million in a
pilot programme to set up a Carbon Footprinting Scheme. The US Federal Trade
Commission has just updated and published new "Green Guides" to help
marketers in making non-deceptive green claims and US EPA is developing a
guidance document on how to develop Product Category Rules. At global level,
the International Chamber of Commerce (ICC) has published in 2011 a Framework for Responsible Environmental Marketing Communications.

Private sector initiatives

As environmental performance is
increasingly perceived as a competitiveness factor, leading private sector
initiatives will continue their activities and new initiatives will appear. For
example, the Sustainability Consortium is one of the biggest recent initiatives
related to products[66];
the Carbon Disclosure Project recently introduced new initiatives related to
other environmental aspects such as water and supply chain management;
single-impact initiatives such as Water Footprint, or single resource-related
initiatives (e.g. forests, green energy labelling), and initiatives focussed on
a single sector (e.g. AISE Charter for Sustainable Cleaning, the Higg Index
developed by the Sustainable Apparel Coalition, BIO Hotels, the CANSO
Environmental Voluntary Code of Practice for Air Navigation Service Providers)
will continue to appear[67].
Investors will also increasingly require sustainability data through different
individual questionnaires for the purposes of setting up or maintaining
sustainability indices, something that big retailers like Wal-Mart and
Carrefour are already doing. Their interest is growing: e.g. the investors'
base behind the Carbon Disclosure Project grew from 35 investors with assets of
4.5 trillion USD in 2003 to 655 investors with assets of 78 trillion USD. Already
in 2001, the OECD identified 145 codes of conduct concerning entirely or
partially environmental stewardship, of which 38% contained commitments for
environmentally friendly products and services, and 33% addressed the provision
of information so as to heighten community or consumer awareness[68].

All the initiatives listed above are taking
place independently. It can be expected that some sporadic methodological
approximation at EU and international level will still take place (especially
in the area of GHGs, e.g. through the Climate Disclosure Standards Board). However,
these developments would not solve the lack of harmonization:
they would not stop the current proliferation of inconsistent and
non-comparable labels and initiatives that inform (and/or further confuse)
consumers and other market actors on the environmental performance of products
and organisations. Furthermore, looking at existing and new standards, most of
them do not allow for direct comparability of results within a product group or
sector, and, without EU intervention, are not expected to do so in the future either.

The Commission has already initiated
consultation processes with relevant public and private international partners
in order to promote a continuous dialogue and build on best practices.

3.3.2. 
The inapplicability of
the principle of mutual recognition

In areas not subject to Community
harmonisation legislation (such as the assessment, calculation, and
communication of the environmental performance of products) the principle of
mutual recognition is in general the most established means of ensuring the
free movement of goods within the internal market. Mutual recognition derives
from the case-law of the Court of Justice of the European Union, and prescribes
that a product lawfully marketed in one Member State should be allowed to be
marketed in any other Member State, even when the product does not fully comply
with the technical rules of the Member State of destination. The principle of
mutual recognition without harmonisation of methodologies is a pragmatic and powerful
tool for economic integration, however, it does not seem to be applicable in
this context for the following reasons:

· 
As explained above, the methodologies applied in
certain Member States to calculate and communicate the environmental
performance of products have different scope and ambition, specific and
different rules in terms of criteria development and verification procedures,
etc. As a result, there is no possible equivalence between them, thus
undermining the very essence of the mutual recognition principle, which can
work only on the basis of a recognition of substantial equivalence between the
relevant national norms. To provide an example, it will not be possible to
grant green credentials to a UK t-shirt in France just because it is
"carbon neutral" (enough for the country of origin rules) when the
French authority will probably require the compliance with the standard BP
X30-323 asking to communicate the environmental performance at least for three
indicators (e.g. climate change, water, and resources).

· 
At present, only few Member States are applying
methodologies to calculate and communicate the environmental performance of
products, therefore the mutual recognition principle would not be of any help
for producers originating from Member States without any methodology and
conformity-assessment body. This means that they would be obliged either to face
additional costs to adapt their green products to the technical rules of other
Member States or refrain from marketing them in those Member States as green
products.

· 
Private initiatives are outside the scope of
mutual recognition. In order to be able to compete based on environmental
performance, companies are de facto obliged to join different private
initiatives on different markets, based on different methodologies.

· 
Mutual recognition is a powerful instrument to
enhance the free movement of goods; however it is also a controversial one
because -contrary to harmonisation- it may lead to the competition between
national regulatory systems, compared to the uniform application of a single
rule/methodology. This competition may generate sub-optimal results, because a
producer could "shop" for the least scientifically robust methodology
in a Member State and through mutual recognition gain "green credentials"
across the Single Market for its product, thus gaining an unfair competitive
advantage compared to producers applying more rigorous and complete
methodologies. This would also further aggravate the risk of misleading
consumers on what constitutes a genuine green product.

· 
Mutual recognition will not solve the issue of
the homogenous communication of quantified environmental performance of
products, which is a crucial element for their comparability. The success of
the energy label for white goods can explain the terms of the problem: a single
method for the visualisation of the energy efficiency classes across the EU has
made it possible for consumers to get familiar with just one scaling system,
thus increasing its recognisability and popularity. At the same time, it has
simplified EU-wide compliance for producers. The mutual recognition of
different national methods to communicate the quantified environmental
performance of products will further augment the diversity of environmental
labels and the confusion of consumers. In addition, mutual recognition would
not remove hurdles to cross border trading: even without legal requirements, exporters
will need to use the national communication methods familiar to national
consumers in order not to be disadvantaged vis-à-vis local producers.

Mutual recognition at international level is
configured differently. It is not a consolidated principle like in EU law, and
it normally takes the shape of Mutual Recognition Agreements (MRAs), which are
bilateral agreements with key trading partners, such as USA, Japan, Australia, etc. MRAs have the objective of promoting trade in goods between the EU and
third countries by facilitating market access and providing easier access to
conformity assessment procedures across the whole
territory of the parties to all products covered by the agreements. Despite the on-going work on international approximation of
methodologies mentioned above, at present there is no indication that under the
baseline scenario negotiations will start covering the issue of assessment,
calculation, and communication of the environmental performance of products and
organisations in any existing (or foreseen) MRAs.

3.3.3. 
Expected effects on environmental and economic
performance

Effects on environmental performance

Without further EU intervention,
environmental improvements will be limited by several factors. One is lack of
reliable information on the most important improvement opportunities along the
life cycle. Although existing voluntary instruments such as EMAS and the EU
Ecolabel are driving direct and indirect environmental performance improvement
for organisations and products, their effects are limited: only 4500
organisations have EMAS registrations[69],
and the EU Ecolabel is aimed only at best performing products in 28 product
categories[70].
Furthermore, under EMAS the measurement of indirect impacts are encouraged, but
there is limited guidance on how to do it. The EMAS Sectoral Reference
Documents are helpful in this context but they will only become available for a
limited number of sectors (11 in total) and reach only enterprises that are
improving their impacts in the framework of a management system.

The mandatory Ecodesign and Energy
labelling instruments are effective in influencing (respectively)
manufacturers/importers and consumers behaviour, but such instruments only
cover a limited number of "energy-related products" and so far have
concentrated mainly on improving energy performance in the use phase only, thus
their effect is limited. In addition, the current legal framework for the
Energy labelling does not allow considering life cycle impacts but it only
takes account of those emerging during the use phase.

Effects on economic performance

At international level, without EU efforts
to trigger more international cooperation and more acceptance of the EU
methodological approach, EU companies active internationally will face an
increasingly complex (and thus costly) set of requirements regarding measuring
and communicating environmental performance. The situation is similar in case
of private initiatives: without the impetus of EU action driving convergence,
incoherent and uncoordinated initiatives will weaken the effect of reputational
advantages and increase costs for companies wishing to compete based on
environmental performance.

Thus, without further EU intervention, costs
and burdens described in the problem definition that companies face due to the
proliferation of methodologies and their difficulties to prove the
environmental performance of their products or their company across borders
will persist and worsen. Additionally, with the emergence of new approaches and
policies in this area, they will face a more complex business environment both
within the EU and internationally– but also fiercer competition threatening EU
industry's leading positions in green markets.

In a recent survey[71] more than 1/3 of 250 business
executives said that they could not keep up with consumer demand for
sustainable products and services and 62% declared that sustainable investments
were motivated by consumer expectations for green products. The trends to
expect due to these realities are more embedding of sustainability in design
processes, investing in research and creating a more resource-efficient supply
chain – trends that are not expected to set off on time in Europe without EU
intervention.

3.4. 
Who is affected and how?

Producers
are affected by the lack of rewards to invest in green solutions or supply
products based on resource efficiency and life cycle considerations, thus
having less opportunity to benefit from competitive advantages based on
environmental grounds. This affects frontrunners in particular[72]. They are also affected by
rapidly increasing burden from different national/private sector schemes. As resources
become scarce and prices become increasingly volatile (e.g. rare earth minerals),
unprepared and less resilient companies may equally suffer, causing knock-on
impacts on the economy.

SME: The SMEs
active on green markets (which represent 26% of all SMEs)[73] are particularly affected by
the confusing array of methods and labels to demonstrate the environmental
performance of their products. Also as parts of international supply chains, SMEs
are already increasingly requested to provide environmental performance data,
based on different sets of indicators. They are equally affected by increasing
private and public requirements, within the EU and from third countries, with
inconsistencies, for environmental information and/or to be accepted as
suppliers.

Companies and other organisations in
general have limited information on which to
benchmark their environmental performance, for making meaningful decisions
relating to supply chain risks, market opportunities, and internal investment
priorities.

Investors, financial institutions and
intermediaries are impacted by the lack of clear,
reliable and comparable information on the environmental performance of
organisations, potentially leading to inefficient allocation of capital. The
limited capacity to take material environmental risks into consideration also
has potential important impacts on their profitability.

Public authorities are affected by a lack of reliable information on the environmental
performance of products, and also by the occasional absence of adequate
guidance on how to incorporate environmental considerations into public
procurement procedures. EU GPP criteria and guidance can partially, but not
fully, bridge this gap.

Policymakers/Member States may be disadvantaged by having insufficient information on the
direct and indirect environmental impacts of products available and
organisations operating in their country, which is impeding them to define
environmental policies and support measures more effectively. At the same time
they are under growing pressure from progressive business and environmental
NGOs to develop environmental information schemes, often having to duplicate
efforts for data and methodology provision.

Consumers
often get confused by the quantity and diversity of environmental
claims/labels, and by too many “green” corporate communications. This concerns
especially the 66% of consumers that sometimes buy green products and the 8%
that systematically buys them[74].
Consumers also suffer from the absence of adequate guidance on how to
incorporate environmental considerations into their purchasing decisions even
though it has been clearly proved in different Eurobarometer surveys that
environmental considerations are important for EU citizens. Last, but not
least, consumers suffer from the lack of availability of affordable green
products, which is the consequence of unexploited economies of scale and
efficiency.

3.5. 
Subsidiarity,
necessity and EU value added

As described above Member States have recently
started to introduce their own national requirements to sort out problems they
face in their national markets. Furthermore, business players are moving
actively to the development of methodologies and schemes. The situation is
similar internationally, with the appearance of new initiatives related to Life
Cycle Assessment (e.g. Sustainability Consortium, the Japanese Ecoleaf,
eco-label schemes in Japan, South Korea, China, Taiwan, Thailand, Singapore and Chile[75]).

The proliferation of methodologies, the
related difficulties and the increased costs described in section 3.2.2 calls
for co-ordinated EU action, as they directly affect the smooth functioning of
the Single Market. If the EU chooses to intervene at a later stage,
companies will have had to comply with several methodologies already, bearing
the cost of compliance; national administrations will have had to build their
policy implementation structures – costs that could have been foregone through
earlier EU action. Thus action at EU level is justified and the time is
now.

Member States create their own schemes to
resolve problems in national markets, to the detriment of the Single Market
functionality. The development of methodologies and
data at Member States level risks resulting in inefficiency, additional costs,
and potential inconsistencies. These developments would
also not provide investors and financiers holding portfolios across EU the
necessary information to judge whether a company‘s strategy adequately takes
into account the risks and challenges associated with their environmental
impacts, or if production is sustainable.

Furthermore, companies trading across
borders also face requirements in international green markets, and it is not
efficient for Member States to pursue international harmonisation on a
bilateral basis.

Realising the limitations resulting from a
no co-ordinated approach and from a lack of a common methodology, the Member
States -in the framework of the Council- have repeatedly requested the
Commission to intervene on the proliferation of methodologies in this area[76].

Businesses perceive the request for
environmental performance information from their stakeholders and consumers.
Accordingly, they set up their own schemes to meet this demand. This behaviour contributed
to the proliferation of methodologies and initiatives on the market presented
in the problem definition. Although businesses feel the need for harmonisation,
their power to effect this is limited, and will certainly not lead to a level
of harmonisation that allows the comparability of environmental performance[77].

Responding to the public consultation, the
majority of stakeholders confirmed that there is a problem with multiple
initiatives, methodologies and multiple ways of reporting the results. Taken
together, 76% of all those who responded to this question were in agreement or
strong agreement. Private companies and industry were the strongest advocates
of this problem. Recognising that the EU is best placed to resolve this
problem, many companies and associations are asking the Commission to take action
on this. In 2010 AIM, the European Brands Association grouping 1800 companies
of all sizes with members in 22 countries sent a letter to the Commission
asking for a harmonised approach for footprinting at EU level.

The EU is ideally placed to promote
harmonisation of methodologies across the Single Market, relying on experiences
of Member States and private initiatives in this area and in discussion with
the stakeholders. It is also in a unique position to pool together Member State good practices in producing two common methodologies and to provide the
necessary support for their further testing, development, and implementation.
The EU can bring an important value added, as further co-ordination would bring
significant cost savings for governments and the private sector. All these will
be originated from a single, EU-wide, coherent scheme associated to increased
availability of good quality environmental performance data[78].

In addition, centralised and co-ordinated
action by the EU is likely to carry more weight in international discussions on
the harmonisation of methodologies and disclosure of information compared to
individual calls by Member States. With a range of methodologies applied across
the Single Market, the EU will have difficulty to argue for international
approximation of approaches and methodologies – whilst with a common system to
rely on, the EU can start using its leverage now to simplify the complex
international context in this area.

4. 
Objectives

The general objective of the EU
action is to improve the availability of reliable information on the environmental
performance of products and organisations.

4.1. 
Specific objectives

Promote the use of a common methodology to
assess and communicate the environmental performance of products and organisations.

4.2. 
Operational objectives

The above specific objective can be broken
down into operational ones as follows:

Table 1 - Operational objectives

Specific objective || Operational objectives

Promote the use of a common methodology to assess and communicate the environmental performance of products and organisations || 1.1 Launch two methodologies that are relatively simple to use, but also robust, one for the measurement of the environmental performance of products and one for the measurement of the environmental performance of organisations

1.2 Encourage the take-up of the methodologies in Member States and by private actors

1.3 Develop product and sector specific environmental footprint category rules through an open, transparent, multi-stakeholder process

Indicators to measure the fulfilment of
these objectives are presented in chapter 7 on monitoring and evaluation.

4.3. 
Consistency with other EU policies

A number of EU policies are already in
place directly or indirectly aiming at the reduction of negative environmental
impacts resulting from consumption and production, which have strong links with
this initiative: Europe 2020 Flagship Initiatives on Resource Efficiency and
Innovation Union; Consumer Agenda; Unfair Commercial Practices Directive;
Single Market Act; Small Business Act; Proposal for reform of the public
procurement directives; Proposal for the disclosure of non-financial information
by companies (in preparation); Industrial Policy Update; the Commission
proposal for a 7th EAP. A more detailed explanation of the links is
provided in Annex 4.

5. 
Policy Options
5.1. 
Option 1. Baseline scenario – no policy change

The Baseline scenario has been presented in
section 3.3, above.

5.2. 
Option 2. A new mandatory product policy framework

A new EU legal framework for sustainable
products will replace and consolidate the existing product-related policy instruments
included in the 2008 SCP/SIP Action Plan (such as for instance Ecodesign and
Ecolabel). In practice, this would generate a stronger consistency between
requirements concerning product-related environmental performance, by using common evidence to improve coordination in standard setting[79]; by establishing a single,
streamlined (and less costly) “criteria setting” process for the same product
categories[80];
and by applying a single process for developing and approving the requirements
for the same product categories as well as homogeneous testing and verification
methods.

The new legal framework would introduce requirements
concerning product environmental performance, including setting minimum market access requirements. This would be done by integrating
PEF and Product Environmental Footprint Category Rules (PEFCRs) into the
approach currently used for developing implementing measures under the
Ecodesign Directive. It will also identify environmental performance benchmarks
for each product group and link the benchmarks to environmental performance
classes, similarly to the approach used for the energy labels categories.

The new legislative framework instrument
will progressively cover all priority products based on their overall
environmental performance and will focus on the most important environmental
impacts (i.e. beyond energy) relevant for each product, setting also criteria for
resource efficiency (e.g. recyclability, reusability, durability, recoverability,
upgradeability, etc.). It would also cover conformity assessments and market
surveillance activities, to make sure that the requirements are properly
implemented to avoid free riding.

Priority product groups would be defined using
criteria such as potential environmental impact (assessed through extended
input-output analysis and process-based LCAs); household expenditure and
consumption data based on Eurostat; production figures and market penetration
of product groups within the EU and its Member States; willingness of
stakeholders to contribute; and availability of high quality data[81].

5.3. 
Option 3. A mandatory Organisation Environmental Footprint
reporting framework

Under this option the use of the OEF
methodology will be obligatory for large organisations in priority sectors for
reporting/information provision purposes.

In order to prompt continuous improvement,
the requirement will be associated with incentives for use and benchmarking. In
collaboration with stakeholders the Commission will develop over time OEF
sector rules (OEFSR)[82], increasing the consistency of their environmental reporting and
also, to some extent, the comparability of their overall environmental
performance. Thus, it will be possible for an organisation to provide OEF-based
information with the purpose of communicating its environmental performance and
showing progress over the years; but in order to participate in benchmarking or
sector-based league tables, an organisation will have to report on the basis of
the established sector rules (the sector-specific OEFSR).

The new legislative instrument will
progressively be applied to priority sectors identified
on the basis of the significance of potential environmental impacts (assessed through extended input-output analysis and process-based
LCAs); production figures and market penetration of sectors within the EU and
its Member States; willingness of stakeholders to contribute; and availability
of high quality data. OEFSRs will have to be developed
for each of those priority sectors.

In order to avoid duplication of effort,
OEFSRs will give guidance on how to use OEFSR-based mandatory reporting in
conjunction with other reporting requirements stemming from EU legislation.
Furthermore, interplay with relevant EU voluntary tools such as the EU EMAS
system would be defined in order to avoid having to report based on different
methodologies and to ensure coherence of published environmental information[83].

The policy will enable incentives at EU
and/or Member State level to improve performance or to reward good performance,
based on reliable, quantified information provided through the OEF and OEFSRs. A
dialogue on incentive frameworks will be established with Member States to improve
approaches to incentives and avoid environmentally harmful subsidies.

5.4. 
Option 4. Integration of the methodologies for the environmental footprint of
products (PEF) and organisations (OEF) in relevant policy instruments

Under this option the PEF and OEF methodologies
are integrated in existing voluntary and mandatory policy instruments where
relevant and technically implementable[84].
For instance:

· 
Product Environmental Footprint (PEF) and
Organisation Environmental Footprint (OEF) would be immediately used in
instruments such as Ecolabel, GPP and EMAS for informing the
criteria-development process[85]
and the creation of Sectoral Reference Documents[86] for determining relevant environmental impacts and life cycle-based
key performance indicators.

· 
Sectoral rules would be developed to apply OEF/OEFSRs
to relevant sectors falling under the Industrial Emissions Directive to widen
requirements and reporting on additional environmental aspects.

· 
The European Pollutant Release and Transfer
Register (Regulation 166/2006) would be modified to integrate information based
on OEF and its elements on a voluntary or obligatory basis.

Under this option it would also be
necessary to establish a set of incentives, both by the public and private
sector, that would reward companies and reinforce the positive effect on
environmental performance improvements[87].

5.5. 
Option 5. Recommending the application of PEF and OEF on a voluntary basis

A Commission Recommendation will be
addressed to Member States to recommend that whenever a Member State intends to introduce a voluntary scheme or requirements related to the measurement,
verification, reporting, benchmarking, and communication of the environmental
performance of products and organisations, it should apply the PEF and OEF
methodologies respectively[88].

The Recommendation will be addressed to
business as well. It will recommend using PEF and OEF methodologies in the
calculation of the environmental footprint of products or the overall footprint
of the organisation (company) whenever the producer or the organisation decides
to undertake such a calculation. It would also invite the financial community
(investors, insurers, banks) to use environmental performance information based
on the application of OEF and/or OEFSRs in assessing environmental risks. In
return, the recommendation will invite Member State to recognise any
information or claim based on both methodologies as valid for the national
scheme or the requirements they intend to introduce at national level.

The legal basis for a Commission
Recommendation is Art. 292 of the Treaty on the Functioning of the European
Union, which states that "The Commission, and the European Central Bank in
the specific cases provided for in the Treaties, shall adopt recommendations".
The Recommendation is considered to be a suitable tool because it is addressed
to both public and private stakeholders and it provides an EU status to both
methodologies. This will make it easier for the Commission to continue the
international dialogue on approximation of existing methodologies.

As part of this policy option the Commission
will continue developing the methodologies to allow for all potential areas of
application. A three-year testing starting from 2013 will be organised in order
to pilot the development of the first Product Environmental Footprint Rules
(PEFCRs) and Organisation Environmental Footprint Sector Rules (OEFSRs). The
pilot will also give the opportunity to test different approaches (e.g. test
different communication channels for product environmental performance
information to final consumers; different verification systems; cooperation in
the supply chain; practical testing of the interplay with EMAS; in case of
Member State participation, including PEFCRs/ OEFSRs in their incentive system;
use of electronic tools in the development of the rules).

The use of meaningful incentives to
stimulate performance improvement[89],
reward forerunners, and facilitate the purchase of green products would also be
recommended to Member States and relevant private actors. The recommendation
will suggest that the selection of products and organisations entitled to
incentives is based on the full or partial application of PEF/PEFCRs and
OEF/OEFSRs. In addition to the Recommendation, a coordination mechanism will be
set up by the Commission to enable exchanges between Member States on best practices, effectiveness of incentives, and potential areas of coordination. A
dialogue will be initiated with the financial community promoting the use of
environmental performance information in financial decisions.

Identically as in the case of option 4, PEF
and OEF would be used in Ecolabel, GPP and EMAS for informing the
criteria-development process[90]
and the creation of Sectoral Reference Documents[91] for determining relevant environmental impacts and life cycle-based
key performance indicators.

This option will include work at the international
level to promote the approximation of methodologies and discussions with
private initiatives on the acceptance of the methodologies.

The Recommendation tool, the coordination mechanism
with Member States, 3rd country governments, and private
initiatives, as well as the resulting incentives are all measures that would
encourage the take-up of the methodologies.

The table below presents the relationship between objectives and
policy options:

Table 3 – Intervention logic: relationship
between problems, objectives and policy options

Problem – underlying issue || Specific objective || Operational objective || Relevant policy option

Proliferation of methodologies to assess and communicate the environmental performance of products and organisations || Promote the use of a common methodology to assess and communicate the environmental performance of products and organisations || 1.1. Launch two methodologies that are relatively simple to use, but also robust, one for the measurement of the environmental performance of products and one  for the measurement of the environmental performance of organisations || Options 2, 3, 4 and 5

1.2. Encourage the take-up of the methodologies in Member States and by private actors || Options 2, 3, 4 and 5

1.3. Develop product and sector specific environmental footprint category rules through an open, transparent, multi-stakeholder process || Options 2, 3, 4 and 5

6. 
Analysis of Impacts and Comparison of Options
6.1. 
General remarks and methodology

This chapter assesses and compares the
economic, social, and environmental impacts of the policy options described in
the previous chapter in relation to the baseline scenario.

The two comparison tables are organised
according to options that are mutually exclusive. One table compares options
related to products, the other to organisations.

A comprehensive analysis of the impacts is
provided to help understand the tables. Impacts are scored as +++: very
positive; ++: positive; +: slightly positive; 0: neutral; -: slightly negative;
--: negative; and ---: very negative.

Distributional impacts were taken into
consideration by analysing the capacity of different Member States and regions, and of different market actors (SMEs included) to take up similar
initiatives. It is expected that countries and regions entirely covered by the
Convergence objective under Regional Policy (Bulgaria, Estonia, Latvia, Lithuania, Malta, Poland, Romania and Slovenia) have less capacity for take-up or
implementation of such initiatives. The situation would be similar for regions
covered by the same objective[92]. To complete the picture, Member States where
indicators on the number of ISO 14001 certifications, EMAS registered
organisations, EU Ecolabel licenses, the number of environmental infringement
cases per million inhabitants, and the strength of transposition of EU law are weaker,
would have more difficulty in complying with or taking up the initiatives. According
to this analysis, the following countries are in the top ten on more than one
indicator: Austria, Denmark, France, Germany, Greece, Hungary, Italy, the Netherlands, Spain, Sweden and the UK[93]. It is
expected that the capacity of these Member States would be stronger to
implement the new initiative. Effective distributional
impacts would be monitored, and mitigation measures devised in the future[94], if necessary.

Costs were calculated using cost data
stemming from the testing of the PEF and OEF methodologies, available data on
similar initiatives and methods, and by applying the Standard Cost Model[95]. It is important to note that
scores related to operational cost consider both implementation costs and cost
reductions ensuing from simplifications or from increased resource efficiency.

For assessing impacts on SMEs, the analysis
took into consideration the recent Eurobarometer on SMEs and resource
efficiency and studies. An SME test was completed based on the findings[96]. In assessing the benefits
arising from using Life Cycle Assessment, we have collected anecdotal evidence
from company sustainability reports. To assess the potential uptake of PEF and
OEF, available data from similar schemes was collected and analysed.

6.2. 
Analysis of impacts

Below we provide a synthesis of the
analysis of economic, social and environmental impacts. The detailed analysis
of all factors considered (functioning of the internal market and competition,
competitiveness, trade and investment flows, operating costs & conduct of
business, impact on SMEs, administrative burden on businesses, burden for
public administrations & simplification potential, innovation &
research, consumers & households, employment and labour markets, social
inclusion and protection of particular groups, public health and overall
environmental impact) are described in detail in Annex 1.

6.2.1. 
New mandatory product policy framework (Option 2)

Economic
Impacts (neutral, 0)

The mandatory approach would enhance the
functioning of the Single Market by providing a single reference framework and
a fully level playing field for cross-border trade. The impact on costs for the
public administration would be negative due to the need to increase market
surveillance activities. This option would provide incentives for innovation
through enhanced competition based on environmental performance covering a wide
range of products, and would thus trigger more investment in green products.

The integration and better co-ordination
obtained through a comprehensive “framework instrument” can decrease the costs
of companies on, for instance, technical consultancies, or cost of compliance
and also production costs. Based on in-house research
and assuming that an LCA database is already available for use, the cost per
product could be reduced to €1,500 for a simple assessment with a limited
number of environmental indicators (3-5) and to €4000 -€10,000 per product
group for a more in-depth LCA. It is expected that for any requirement that
relates to communicating environmental performance information to final
consumers, a maximum of 3-4 indicators would be used[97]. This
cost would be additional for companies that don't measure the environmental performance
of their products, while it would represent a reduction of costs for those that
already measure it and face the issue of having to apply different
methodologies.

As companies not currently measuring their
environmental performance of their products would be required to do so, there
would be additional operating costs. Moreover, as the methodologies would not
have benefited from being fully piloted and refined, this option would probably
also lead to higher operating costs overall with the quick expansion of scope
of application and so results in neutral economic impact overall.

SMEs active in green markets would have
similar economic opportunities to their large counterparts, whilst for SMEs in
supply chains a single reference methodology represents a simplification
respectively to the current situation, where environmental information is
requested from them based on different methodologies. Even if benefits exceed
the cost, SMEs might perceive initial cost of implementing a more in-depth
approach (€4,000 – 10,000) as high. Costs per product would be higher initially
under this scenario, while the additional methodological developments and tools
are not fully completed. Again, the lack of a piloting before widespread
mandatory application risks increases in costs that could otherwise be avoided.
Therefore, support measures are important elements under this option.

The two main positive impacts on consumers
will be directly linked to the increased availability of green products on the
market and on the decreased level of overlapping information and potential
confusion deriving from the various product-related claims, label and
certification schemes currently operating on the market. Effects on prices of
green products cannot be determined at this stage because depend on the demand
elasticity.

Social
Impacts (slightly positive, +)

This policy option will contribute to the
growth in green jobs through the increased demand for the products of
eco-industries both in EU and internationally. The bulk of potential for new
jobs lies in the growing market for products with green features, for which no
employment figures are available. Marginal job increase is expected in the
field of LCA experts and consultancy services.

The wider availability of information would
provide access to green products for a wider array of social groups, simply by
enabling green choices among the baskets usually bought. Only indirect effects are expected for public health through the
overall improvement of the environmental performance of products. Social
impacts are maximised under this option due to its mandatory nature, however,
on the whole, they are often indirect, and therefore not very strong.

Environmental
Impacts (very positive, +++)

This option will have a positive impact
particularly related to the stimuli that will be provided to producers and
consumers towards more the supply and demand of green products. The choice of
gathering all the requirements concerning the design and the environmental
performance of products in a unique “framework instrument” should provide
producers with effective incentives to further develop green products. These
effects can result in a general increase of the green products’ market shares,
with a consequent improvement of the environmental performance.

Moreover, by developing a unique “framework instrument” on
sustainable products, the Commission could ensure that the issues connected
with resource efficiency, and in particular with material resource efficiency
(e.g. recyclability, reusability, recoverability, upgradeability) are
considered more carefully, in a synergetic and mutually consistent way when
setting the requirements of SCP instruments, boosting resource efficiency in a
more effective way.

Stakeholders' opinion

The setting up of a new legal framework
instrument for sustainable products is not widely supported by stakeholders.
Two options were considered in the consultation:

1. A new legal framework instrument in substitution to the
existing product-related policy measures (i.e. Ecodesign, Energy Label, EU
Ecolabel, Organic Label, GPP). This option was considered not effective by the
38% of respondents (and slightly effective by the 10%).

2. 
A new legal framework instrument complementing
and integrating the existing EU SCP regulatory instruments. This option was
considered even less positive than the previous one (46% of respondents states
that this option is not effective at all).

The two options are quite positively
considered by citizens (66% and 52%, respectively), but not by organisations
(business and NGOs) (i.e. only 23% of organisations believes that introducing a
new “package” substituting and integrating the existing EU SCP regulatory
instruments would be effective). SMEs emphasise that imposing mandatory
requirements would create significant cost and burden for SMEs.

6.2.2. 
Mandatory OEF reporting framework (Option 3)

Economic
Impacts (neutral, 0)

The mandatory application of a single
methodology for measuring, reporting and benchmarking environmental performance
for relevant impact categories would obtain the maximum of level playing field
and fair competition on the single market, including for trading partners;
provide simplification potential in the area of environmental reporting both
for users and for public administrations (by rendering national schemes
superfluous); and the maximum effect on inducing more innovation related to
processes and supply chains, creating a critical mass of companies competing
based on environmental performance and taking steps to improve it.

By measuring environmental performance
throughout the supply chain, organisations can exploit efficiency opportunities
and reduce cost risks[98] in a targeted way (considering where in the life cycle and what
kind of impacts are the most important), increasing their competitiveness. The allocation
of capital is improved through the availability of data to integrate
environmental risks into investment decisions.

During the pilot tests, with the use of
only the OEF umbrella methodology, this average cost was estimated at €30,190.
It is expected that due to organisational learning and by using OEFSRs, with
the improvement of access to and availability of data and with the development
of tools provided by public administrations, industrial associations and the
market, this cost would be at least halved starting from 2014[99]. It is however not possible to estimate the exact cost due to lack
of data and the novel nature of the OEF approach. This cost would be additional
for companies that don't measure their performance, and would represent a
reduction of costs for those that do and face the issue of having to apply
different methodologies.

As companies not currently measuring their
environmental performance would be required to do so, there would be additional
operating costs. Moreover, as the methodologies would not have benefited from
being fully piloted and refined, this option would probably also lead to higher
operating costs overall with the quick expansion of scope of application and so
results in neutral economic impact overall.

For public administrations, additional
costs would arise regarding enforcement of the scheme (e.g. compliance checks,
verification structures).

SMEs active in green markets would have
similar economic opportunities to their large counterparts, whilst for SMEs in
supply chains a single reference methodology represents a simplification
respectively to the current situation, where environmental information is
requested from them based on different methodologies. However, even if benefits
exceed the cost, SMEs might perceive the initial cost of implementing an OEF
exercise (estimated c.a. €3,200 - €109,000, see also Annex 11) as high.
Therefore, support measures are important elements under this option.

This option does not directly impact
consumers.

Social
Impacts (slightly positive +)

This option will contribute to an increased
request for the products of eco-industries both in EU and internationally, thus
contributing to the growth in green jobs as well. The bulk of potential for new
jobs lies in the growing market for products with green features, for which no
employment figures are available. Marginal job increase is expected in the
field of LCA experts and consultancy services.

Only indirect effects are expected for
public health through the overall improvement of the environmental performance
of organisations. The policy option is neutral for social inclusion and the
protection of particular groups. Social impacts are maximised under this option
due to its mandatory nature, however, on the whole, they are often indirect,
and therefore not very strong.

Environmental
Impacts (very positive, +++)

The OEF methodology ensures that all
relevant environmental impact categories for an organisation are taken into
account, avoiding trade-offs between important environmental impacts. It adopts
a life cycle approach, ensuring that the environmental performances throughout
the value chain are taken into consideration, thus discouraging the shifting of
environmental burdens along the value chain and directing efforts in a targeted
way to most important environmental impacts and most important life cycle
stages[100].

Through a mandatory implementation in large
companies, and improvements triggered throughout the supply chain (including in
SMEs active in the EU and suppliers and consumers in 3rd countries),
the environmental improvement potential of this option is maximised.

Stakeholders'
opinion

The stakeholder consultation presented two options that reflect on
such an instrument.

Regarding the introduction of a mandatory
instrument for larger organisations in priority sectors most stakeholders
reacted negatively (43%). However, opinions were split, as 33% of respondents
were either in strong agreement or agreement with this option. The strongest
agreement was expressed by public bodies (78%), followed by NGOs (64%) and the
general public (61%). The strongest opponents were industry associations (92%)
and private companies (76%).

Regarding the introduction of a mandatory instrument for larger
organisations in all sectors, disagreement was stronger (53%). 37% of
respondents expressed agreement. The split between the different stakeholder
groups is similar to the previous question. Strongest agreement was expressed
by the general public (74%), followed by public bodies (73%) and NGOs (72%).
Industrial associations disagreed the most (88%), followed by private companies
(76%).

6.2.3. 
Integration of PEF and OEF methodologies in
relevant policy instruments 
(Option 4)

Economic
Impacts (neutral, 0)

A single basis integrated into existing
instruments for measuring and reporting environmental performance of products
and organisations would simplify the framework, reduce administrative costs
related to applying these instruments simultaneously both for companies and
public administrations, provide for a more uniform application of these
instruments across the Single Market and provide a more level playing field for
competition.

By measuring environmental performance
throughout the supply chain, organisations can exploit efficiency opportunities
and reduce cost risks[101] in a targeted way (considering where in the life cycle and what
kind of impacts are the most important) and represent a move towards better
allocation of capital through the availability of data to integrate
environmental risks into investment decisions.

The average cost for the use of the OEF
methodology is estimated at €30,190 for the first application. It is expected
that through organisational learning and by using OEFSRs and PEFCRs, with the
improvement of access to and availability of data, and with the development of
tools provided by public administrations, industrial associations and the
market, this cost would be at least halved starting from 2014 for sectors and
product groups where these developments take place[102].

Based on in-house research and assuming
that an LCA database is already available for use, the cost per product could
be reduced to €1,500 for a simple assessment with a limited number of
environmental indicators (3-5) and to €4000 -€10,000 per product group for a
more in-depth LCA. The type of analysis to be implemented depends on the instrument
into which PEF is integrated. It is expected that for any requirement that
relates to communicating environmental performance information to final
consumers, a maximum of 3-4 indicators would be used[103].

In the case of voluntary instruments,
companies have the flexibility to decide on whether to incur these costs; in
the case of mandatory instruments, changes will affect only companies falling
under the existing instruments. Operating costs will probably be higher at the
beginning as the methodologies will not have undergone piloting and there would
be no readily available PEFCR/OEFSR. In the medium-long-term, when instruments
are fully aligned, simplification and cost savings due to the single underlying
method would be maximised.

Impacts on SMEs greatly depend on the
instrument into which PEF or OEF are integrated, thus they need to be assessed
when carrying out impact assessments for the individual instruments. Regarding
the amount of costs per application, these are the same as presented in Option
2 and 3, but the scope of their incurrence varies according to the voluntary or
mandatory nature of the instrument.

Impacts on innovation are similarly varying
in intensity, depending on whether there is a critical mass of companies using
PEF and OEF leading to a sufficiently strong reputational driver and
competition based on environmental performance to trigger more innovation and
take-up of green technologies.

Consumers and households would benefit from
the availability of more reliable environmental information to take informed
purchasing decisions. There is some evidence that shows that products with
improved environmental performance are not necessarily priced higher than other
products with the same functionality and characteristics, due to the cost savings
achieved and through economies of scale[104].

Social
Impacts (slightly positive, +)

Through increased request for the products
of eco-industries both in EU and internationally that this option would
reinforce, this policy option will contribute to the growth in green jobs. The
bulk of potential for new jobs lies in the growing market for products with
green features, for which no employment figures are available. Marginal job
increase is expected in the field of LCA experts and consultancy services.

Only indirect effects are expected for
public health through the overall improvement of the environmental performance
of organisations. The option would improve access to green products for a wider
array of social groups.

The intensity of social impacts would depend
on the instruments wherein PEF or OEF is integrated.

Environmental
Impacts (positive, ++)

The added value in tackling environmental
impacts based on PEF and OEF would need to be assessed individually when
revising the relevant instruments. The OEF and PEF methodologies ensure that
all relevant environmental impact categories for an organisation or product are
taken into account, avoiding trade-offs between important environmental impacts.
They adopt a life cycle approach, ensuring that the performance throughout the
value chain is taken into consideration, thus discouraging the shifting of
environmental burdens along the value chain and directing efforts in a targeted
way to most important environmental impacts and most important life cycle
stages[105].

These elements would enhance improvement
opportunities across several instruments. In the case of the voluntary
instrument EMAS, which already encourages taking direct and indirect aspects
into account, OEFSRs can support the creation of Sectoral Reference Documents
by indicating relevant environmental impacts in a sector and can help define
relevant indicators. It also has potential of being used as a reporting
instrument for the environmental statement. These elements would enhance
improvement opportunities across several instruments.

The situation is similar for product
instruments such as Ecolabel, GPP and Ecodesign: PEF and PEFCRs can be included
in the criteria development process, thus enhancing the environmental potential
of the initiatives. Depending on the nature of the instrument, implementation
might be diverse, with diverse environmental improvement potential, thus the
potential is difficult to gauge exactly.

Stakeholders'
opinion

When asked about the option of
"integrating the PEF methodology into the EU SCP regulatory instruments
and policy measures", stakeholders expressed split opinions (32% expressed
agreement, 33% was undecided, 35% disagreed). Most disagreement was expressed
by industrial associations (55%) and private companies (44%), with also an
important share of undecided responses (32% and 27% respectively). Public
bodies gave support to this option (63%), whilst NGOs were mostly undecided
(79%).

Stakeholders were split on the option of
"expansion and/or strengthening of existing policy instruments" under
the OEF section of the questionnaire (question 4.9). 31.4% of respondents
strongly agreed or agreed; 24.7% were undecided; 44% disagreed or strongly
disagreed (19.3%). Most disagreement was expressed by industry associations including
SME associations (79%) and private companies (53%), whilst public bodies (75%)
and the general public (71%) expressed more agreement. NGOs were mostly
undecided (54%).

6.2.4. 
Recommending the application of PEF and OEF on
a voluntary basis (Option 5)

Economic Impacts
(slightly positive, +)

The Recommendation tool reinforces the
effect on reducing the proliferation of methodologies and levelling the playing
field on the Single Market by promoting the use of the common methodologies in Member States and organisations. However, due to the voluntary nature of this "soft
law" instrument, certain positive effects are expected to be limited compared
to the mandatory options and depend greatly on Member State and private sector
take-up. This holds true also for positive impacts on innovation: it depends on whether there is a critical mass of companies using
PEF and OEF leading to a sufficiently strong reputational driver and
competition based on environmental performance to trigger more innovation and
take-up of green technologies.

By measuring environmental performance
throughout the supply chain, organisations can exploit efficiency opportunities
and reduce cost risks[106] in a targeted way (considering where in the life cycle and what
kind of impacts are the most important), increasing their competitiveness. There
is a potential to improve the allocation of capital through the availability of
data to integrate environmental risks into investment decisions. The impact on
trade would be positive due to a wider use of a single methodology on the
Single Market and through the efforts of international cooperation.

The amount of costs for companies is the
same as with Option 3. However, due to the voluntary nature of the initiative,
companies would only assume costs and burdens if they see a good reason to do
so. Companies that may find it difficult to apply such methodologies would be
able to benefit from the widespread piloting and build-up of experience in
their application. Overall, the impact is considered slightly positive.

Impacts on SMEs depend on the take-up of
the methodologies in Member States and by private initiatives. Due to the
voluntary nature of the option, SMEs can benefit from the flexibility of
adhering or not to the initiative. This is particularly important for those
SMEs that are selling on national markets only and are therefore less in need
of demonstrating their environmental performance (87%[107]). In
this case, Member States take-up and the nature of the Member State measure will define impacts on SMEs.

Public Administrations would have the
flexibility of inserting the use of the methodologies into their policy mix
according to their priorities and readiness. This flexibility might be
particularly important for Member States that have developed less capacity in the
environmental area.

Consumers and households would benefit from
the availability of more reliable environmental information to take informed
purchasing decisions. There is some evidence that shows that products with
improved environmental performance are not necessarily priced higher than other
products with the same functionality and characteristics, due to the cost
savings achieved and through economies of scale.[108] The
OEF component wouldn't have any direct impact on consumers.

Moreover, consumers will be directly
involved during the pilots. Several communication vehicles (labels, QR codes,
website information, etc.) will be tested with consumers through the
collaboration of producers and retailers, analysing the amount and type of
environmental information consumers will consider necessary during their buying
and the impact played by information available on their consumption habits.

Social
Impacts (slightly positive +)

This policy option will contribute to the
growth in green jobs through the increased demand for the products of
eco-industries both in EU and internationally. The bulk of potential for new
jobs lies in the growing market for products with green features, for which no
employment figures are available. Marginal job increase is expected in the
field of LCA experts and consultancy services.

Only indirect effects are expected for
public health through the overall improvement of the environmental performance
of organisations. The option would improve access to green products for a wider
array of social groups.

The intensity of social impacts would
depend on the take-up of PEF and OEF in Member States and companies, and it is
likely that at least in the first years of implementation, it would be positive,
but marginal.

Environmental
Impacts (positive, ++)

According to the UK impact assessment on
company reporting, a newly reporting organisation which has started to monitor
its energy related CO2 emissions will experience a 2% reduction in
energy related CO2 emissions[109]. For
PEF, it is estimated that up to 5% - 30% reductions in environmental impacts
could be generally achieved for products. The actual reductions would depend on
individual products and would vary depending on environmental impact category.
Tools such as PEF will contribute to achieving these reduction potentials, but
it is doubtful that PEF is able to achieve the full potential on its own.

The OEF and PEF methodologies ensure that all relevant environmental
impact categories for an organisation or product are taken into account, avoiding
trade-offs between important environmental impacts. They adopt a life cycle
approach, ensuring that the performance throughout the value chain is taken
into consideration, thus discouraging the shifting of environmental burdens
along the value chain and directing efforts in a targeted way to most important
environmental impacts and most important life cycle stages[110]. Although it is not possible to quantify the benefits, it can be
safely assumed that greater improvements on a wider range of environmental
indicators and throughout the value chain would occur. The intensity of these
improvements is limited by the voluntary nature of the instrument.

Stakeholders'
opinion

In the OEF section of the questionnaire,
stakeholders provided the second highest agreement to the option for a
"recommendation to Member States to use the common methodology for
initiative related to the measurement, reporting, benchmarking or incentivising
environmental performance" (41% strongly agree or agree). However, responses
were split: 34% of respondents either strongly disagreed or disagreed. The
stakeholder groups most favourable to this option include the general public
(65%) and private companies (54%). Industrial associations were either
undecided (39%) or disagreeing (37%). There was no clear indication from public
bodies, with respondents split between the different categories.

In the PEF section of the questionnaire the question closest to this
option is "voluntary scheme on communication and benchmarking of product
environmental performance based on the PEF methodology". In general, all
stakeholders were favourable to this option, except NGOs which were split (50%
disagreement). Support from public bodies was highest (50%), followed by
industrial and trade associations (46%), private companies (41%) and citizens
(41%).

6.3. 
Comparison of policy options related to environmental
performance of products

For the purposes of comparison and in order
to create groups of options that are mutually exclusive, the policy options
presented above are clustered according to whether they relate to the
environmental performance of products or of organisations:

Table 2 - Grouping of policy options

Grouping || Mutually exclusive policy options

Policy options related to the environmental performance of products || Option 2 – New mandatory product policy framework

Option 4 – Integration of PEF and OEF into relevant policy instruments

Option 5 – Recommending the application of PEF and OEF on a voluntary basis

Policy options related to the environmental performance of organisations || Option 3 – A mandatory OEF reporting framework

Option 4 – Integration of PEF and OEF into relevant policy instruments

Option 5 – Recommending the application of PEF and OEF on a voluntary basis

Table 4 – Comparison of impacts of options
related to the environmental performance of products

Policy option Impact category || 2. A new mandatory product policy framework || 4. Integration of PEF and OEF in relevant policy instruments || 5. Recommending the application of PEF and OEF on a voluntary basis

Functioning of the internal market and competition || +++ || ++ || ++

Competitiveness, trade and investment flows || ++ || ++ || +

Operating costs and conduct of business || - || 0 || +

Impact on SMEs || - || 0 || +

Administrative burdens on businesses || + || 0 || 0

Burden for public administrations and simplification potential || - || + || +

Innovation and research || ++ || ++ || ++

Consumers and households || + || + || +

Overall economic impact || 0 || 0 || +

Employment and labour markets || ++ || ++ || ++

Social inclusion and protection of particular groups || + || 0 || 0

Public health || + || + || +

Overall social impact || + || + || +

Overall environmental impact || +++ || ++ || ++

6.4. 
Comparison of policy options related to
environmental performance of organisations

Table 5 –
Comparison of impacts of options related to the environmental performance of
products

Policy option Impact category || 3. Mandatory OEF reporting framework || 4. Integration of PEF and OEF in relevant policy instruments || 5. Recommending the application of PEF and OEF on a voluntary basis

Functioning of the internal market and competition || +++ || ++ || ++

Competitiveness, trade and investment flows || ++ || ++ || +

Operating costs and conduct of business || - || 0 || +

Impact on SMEs || - || 0 || +

Administrative burdens on businesses || - || 0 || 0

Burden for public administrations and simplification potential || - || + || +

Innovation and research || ++ || ++ || ++

Consumers and households || 0 || + || +

Overall economic impact || 0 || 0 || +

Employment and labour markets || ++ || ++ || ++

Social inclusion and protection of particular groups || 0 || 0 || 0

Public health || + || + || +

Overall social impact || + || + || +

Overall environmental impact || +++ || ++ || ++

6.5. 
Comparison of options according to efficiency,
effectiveness and coherence

The scoring system used for the comparing
tables 4 and 5 helps in the assessing the relative strength of alternative
options in each impact category considered, but it does not provide the
relative weight of each impact category. Therefore, the analysis is
complemented by Table 6, which compares the options in terms of their
effectiveness, efficiency and coherence[111].
This shows that although mandatory options (2 & 3) contribute to reaching
the objectives and are also associated to the biggest potential for
environmental improvement, they are also associated with higher initial costs
for business and public authorities, making them less attractive in current
times of economic crisis. Previous experiences in law-making in the EU has
shown that the adaptation and transaction costs for business and public
administration are less important when the introduction of a legislative
instrument has been preceded by its voluntary application. On the basis of the
analysis carried out in this report, this appears to be the case also for
option 2 and 3, which could become more cost-effective after a piloting
application of PEF and OEF as proposed under option 5.

Option 1 would only marginally contribute
to reaching the objectives and would fall short on environmental and resource
efficiency improvements as well. The performance of Option 4 is variable,
depending on the instrument where PEF and OEF are integrated. Although the
potential for environmental improvements and reaching the objectives is strong
on the long term, initially, it would generate higher costs, and in some cases,
even duplication of costs. Option 5 represents the best balance between
reaching objectives, the level of costs, and the expected environmental
benefits, although the benefits are limited by the voluntary approach and
depend on take-up.

Table 6 –
Evaluation of the options in terms of effectiveness, efficiency and coherence

Option || Effectiveness (scale: neutral, moderate, medium, strong) || Efficiency (scale: neutral, low, medium, high) || Coherence (scale: neutral, moderate, high, very high)

1 – Baseline scenario || Neutral/ moderate contribution to the achievement of objectives || No additional resources needed (neutral) || Some relevant EU objectives regarding resource efficiency not met; moderate environmental and social benefits.

2 – New mandatory product policy framework || Strong contribution to the achievement of objectives || Overall medium to high costs for public authorities and companies. Potential cost savings due to a single framework for companies and public administrations currently using a methodology; higher costs for those currently not using a methodology || Relevant EU objectives regarding resource efficiency met; very high environmental benefits; moderate social benefits.

3 – A mandatory OEF reporting framework || Strong contribution to the achievement of objectives || Overall medium to high costs for companies and public authorities. Potential cost savings due to the use of a single methodology for companies and public administrations currently using a methodology; higher costs for those currently not using a methodology || Relevant EU objectives regarding resource efficiency met; very high environmental benefits, moderate social benefits.

4 – Integration of PEF and OEF into relevant policy instruments || Medium to strong contribution towards the achievement of objectives, depending on the instrument in which methodologies are integrated || Low costs for  public administrations depending on the instrument used; some duplication of costs for companies while different frameworks co-exist; important costs savings on the longer term due to the use of a single methodology || Potential to meet relevant EU objectives regarding resource efficiency on the longer term; moderate to high environmental benefits depending on the instrument used; moderate social benefits

5 – Recommending the application of PEF and OEF on a voluntary basis || Medium to strong contribution to the achievement of objectives depending on take-up; some loss of effectiveness due to the voluntary nature of the instrument || Overall moderate costs for companies and public authorities. Due to the voluntary nature of the instrument, actors will choose to join if they see benefits to doing so. || Potential to meet relevant EU objectives regarding resource efficiency depending on take-up; high environmental benefits, moderate social benefits.

6.6. 
The preferred option

The preferred option is 5
"Recommending the application of PEF and OEF on a voluntary basis"
for the following reasons:

· 
It scores positively on all relevant aspects
compared to the baseline scenario and overall it scores better than the
alternative options in Tables 3 and 4.

· 
It represents the best balance between reaching
objectives, the level of costs, and the expected environmental benefits,
although the benefits are limited by the voluntary approach.

· 
A voluntary application allows for gradual
further development[112]
of the PEF and OEF methodology in a piloting process involving a wide range of
stakeholders to reach full potential in the following years (e.g. through a
mandatory application or through wide take-up);

· 
Consumers would also be involved in order to
understand what information suits their needs best and whether environmental
performance information provided based on PEF provides the reliability and
comparability to take informed purchasing decisions. This policy option makes
it possible to gather and analyse this information and reduce consumer confusion
and increase consumer trust in environmental information in the medium –
long-term.

· 
Due to its voluntary nature, this option gives
flexibility to organisations and Member States to decide on the use of the
methodology.

· 
It enables exploiting important efficiency
opportunities both from an economic (identification of cost saving
opportunities throughout the value chain; cost reductions for companies trading
cross-border in the EU) and environmental (exploitation of performance
improvement opportunities throughout the value chain, concentrating on the most
important environmental impacts and life cycle stages, reputational pressure to
improve environmental performance) point of view.

· 
The effects of this option depend on the take-up
of the recommendation by Member States and other market actors. Taking a very
conservative estimation based on data from similar schemes, it is assumed that
an annual take up rate of between 5% and 10% can be reached both for PEF and
OEF. In the beginning (and up to 2015), the take-up would be lower (under 1%)
due to the time needed for building awareness of the methodologies and its
voluntary nature. The uptake rate is expected to grow further with the
availability of PEFCRs and OEFSRs, as high as 10%. These are conservative
estimates that don't take into account the potential uptake of PEF and OEF by
existing private initiatives[113],
the effect of incentives, and of tools simplifying the application of the
methodologies.

· 
Despite some significant benefits across the
three pillars, Options 2 and 3 would entail higher costs at the current level
of development of the methodologies. Furthermore, there is a risk that
stakeholder ownership would be lower, affecting the acceptance and
effectiveness of the instrument.

· 
In general, all stakeholders were favourable to
the introduction of a voluntary scheme based on a PEF methodology, except NGOs
(50% in disagreement). Support from public bodies was highest (50%), followed
by industrial and trade associations (46%), private companies and citizens
(both at 41%). Stakeholder opinion was divided on integrating the PEF
methodology into the EU SCP regulatory instruments and policy measures and
mostly unfavourable to a new mandatory measure (60% disagreement).

· 
Stakeholders provided the second highest
agreement to the option for a "recommendation to Member States to use the
common methodology for initiative related to the measurement, reporting,
benchmarking or incentivising environmental performance" (41% strongly
agree or agree). The stakeholder groups most favourable to this option include
the general public (65%) and private companies (54%). Industrial associations
were either undecided (39%) or disagreeing (37%). The most favoured option was
the promotion of the common methodology on a voluntary basis (44% in
agreement). The majority was in disagreement with policy options related to
mandatory tools in priority (43%) or all sectors (52.8%) and to the integration
of OEF into existing mandatory instruments (44%)

7. 
Monitoring and Evaluation

This chapter presents possible progress
indicators and monitoring and evaluation arrangements to check the correct
implementation of the preferred option. The presentation of the indicators is organised
in a table showing also the operational objectives that the indicators measure.
The monitoring of all indicators will start after the adoption of the policy,
planned for the 1st quarter of 2013 and will be monitored annually.
Deviations from this pattern are marked in the table.

Table 7 –
Indicators for monitoring and their relationship to objectives

Indicator || Relevant objective

methodological milestones

Normalisation[114] (one-off indicator, marking year of fulfilment) || 1.1, 1.3

Improved availability of good quality data (results of capacity building and coordination processes internationally, qualitative assessment of EU data availability – public/private) || 1.1, 1.2, 1.3

Pilots and product-group specific and sector-specific rules

Number of stakeholders participating in the PEFCR and OEFSR process and the testing by type of stakeholder || 1.3

Number of PEFCRs developed/ year || 1.2, 1.3

Number of OEFSRs developed/year || 1.2, 1.3

Analysis of consumer reactions to environmental performance information based on PEF (one-off analysis at termination of testing) || 1.3

Costs and benefits of PEF and OEF (one-off analysis at termination of testing) || 1.2, 1.3

Take-up of methodologies in the Member States and private initiatives

Number of initiatives taking up OEF and PEF per Member State || 1.2

Number of private initiatives taking up OEF and PEF || 1.2

Nature of initiatives (e.g. reporting, labelling, basis for providing incentives) using PEF/OEF || 1.2

Screening against the Recommendation requirements (fulfilled, not fulfilled, partially fulfilled) || 1.1, 1.2

Number of organisations/ products reporting/ communicating based on PEF/OEF || 1.2

Market share/ turnover of products communicating PEF information || 1.2

Number of organisations/products reporting/communicating improvements in environmental performance based on PEF/OEF || 1.2, 1.3

Number of Member States participating in the coordination set up by the Commission || 1.2

Incentives based on OEF (type, number, for financial incentives: amounts involved; if applicable, environmentally harmful subsidies avoided) || 1.1, 1.2

Use of OEF to avoid Environmentally Harmful Subsidies in EU funding/ financing (description of use) || 1.1, 1.2

Number of investors and amount of assets represented in the dialogue with the financial community || 1.2

Operators in the financial community using OEF data for decision-making (e.g. integration into questionnaires – number of questionnaires requiring OEF-based data; assets covered by OEF-based data) || 1.2

Use of OEF data in sustainability indices (stock indices including only sustainable companies based on investors' questionnaires and data provided by companies) || 1.2

An overall review of the policies
introduced by the policy initiative subject to the present Impact Assessment is
foreseen by 2015, in correspondence with the review of some key SCP policy
instruments. This initiative is also closely linked to the 7th Environmental
Action Programme (7th EAP)[115]:
it constitutes the first of a two-step approach, in which policy instruments
are first implemented in the short term (until 2015) on a voluntary basis. At
this time the merits of this voluntary approach will be reviewed to assess the
possible additional benefits of a second step including mandatory requirements.

[1]        The 7th EAP. See http://ec.europa.eu/environment/newprg/index.htm.

[2]        Green products are those that have
less of an impact on the environment or are less detrimental to human health
that traditional equivalents. Green products might, fro instance, be formed or
part-formed from recycled components, be manufactured in a more energy-efficient
way, or be supplied to the market with less packaging (or all three).

[3]        Sustainable
Consumption and Production and Sustainable Industrial Policy (SCP/SIP) Action
Plan. COM/2008/0397 final of
25/6/2008.

[4]
       ECORYS, Mid-term
Evaluation of the Sustainable Consumption and Production and Sustainable
Industrial Policy Action Plan, Final Report, September 2011. See
Annex 5.

[5]        The life cycle of a product includes all activities carried
out to produce it, thus includes design, resource extraction, production,
distribution, use, and end of
life. Life cycle impacts cover all potential environmental impacts arising
during the life cycle of a product.

[6]        The
participants to the meeting acknowledged the importance of the work done by the
Commission, highlighting the potential benefits that this initiative could have
in the EU but also at
international level. Several companies participating invited the Commission to
keep the high level of ambition but also to address a number of technical
difficulties that the draft Product Environmental Footprint (PEF) and
Organisation Environmental Footprint (OEF) methodologies discussed at that time
were not addressing in an appropriate way. These comments, together with the
outcomes of the pilot test and the public consultation have been taken duly into account when drafting the following
versions of both methodologies. The video of the meeting and the slides
presented are available at: http://ec.europa.eu/environment/eussd/corporate_footprint.htm

[7]        "Support for the Impact Assessment of the review of
the 2008 SCP/SIP Action Plan" conducted by AEA; "Support for the Impact Assessment study of the review of
GPP", conducted by AEA;
"Support for the Impact Assessment of a new proposal on the measurement of
the environmental performance of products", conducted by IVM; and "Support the Impact Assessment of a new proposal on
improving the environmental performance of organisations" conducted by
AEA.

[8]        A life-cycle assessment (LCA) is a
technique to assess environmental impacts associated with all the stages of a
product's life from-cradle-to-grave (i.e., from raw material extraction through
materials processing, manufacture, distribution, use, repair and maintenance,
and disposal or recycling).

[9]        http://www.ghgprotocol.org/. Scope 1
refers to direct greenhouse gas (GHG) emissions from sources that are owned or
controlled by the company; Scope 2 accounts for GHG emissions from the
generation of purchased electricity consumed by the company; Scope 3 covers all
other indirect emissions (impacts in the supply chain and during use phase)

[10]       http://ic.fsc.org/

[11]       See Annex IV of Regulation
(EC) No 1221/2009 on the voluntary participation by organisations in a EU
eco-management and audit scheme (EMAS). Although EMAS suggests taking into
consideration both direct and indirect impacts, core indicators focus on direct
impacts only. Sector-specific guidance is given regarding indirect impacts in
Sector Reference Documents.

[12]       https://www.globalreporting.org/Pages/default.aspx

[13]       https://www.cdproject.net/water

[14]       PAS 2050:2011
Specification for the assessment of the life cycle greenhouse gas emissions of
goods and services, British Standards Institute

[15]       ISO 14044:2006 Environmental
management -- Life cycle assessment -- Requirements and guidelines

[16]       International Reference
Life Cycle Database Handbook, JRC

[17]       The preparatory study, which forms
the basis for defining the criteria, is based on a LCA approach. www.ecolabel.eu

[18]       http://www.cdsb.net/

[19]       Analysis of
Existing Environmental Footprint Methodologies for Products and Organizations:
Recommendations, Rationale, and Alignment, JRC 2010.

[20]       Five Winds
International, Retail: Stocking the shelves with Green, 2010.

[21]       More than
50% of public authorities in the EU include "some kind of environmental
criteria" in the tendering procedures for the ten product groups examined
with high environmental relevance. Monitoring
of the uptake of GPP in the EU, DG ENV/CEPS,
2012

[22]       http://www.ecolabelindex.com/

[23]       http://www.sustainability-index.com/

[24]       https://www.cdproject.net/en-US/Pages/HomePage.aspx

[25]       See Annex 9 for a more complete description of PEF and OEF
features. More information about the preparatory work carried out by JRC IES is
available at: http://ec.europa.eu/environment/eussd/product_footprint.htm
for PEF and http://ec.europa.eu/environment/eussd/corporate_footprint.htm
for OEF.

[26]       Analysis of
Existing Environmental Footprint Methodologies for Products and Organisations:
Recommendations, Rationale, and Alignment, JRC, 2011.

[27]       For products the methodologies
assessed were: ISO 14044 (Environmental management -- Life cycle assessment --
Requirements and guidelines), ISO 14067 (carbon footprint of product), ILCD
(International Reference Life Cycle Data System), Ecological footprint, Product
and Supply Chain Standards Greenhouse Gas Protocol (WRI/ WBCSD), French
Environmental Footprint (BPX 30-323), UK’s Product Carbon footprint (PAS 2050),
ISO 14025 (Environmental Product Declarations).

[28]       For organisations the methodologies
assessed were: ISO 14064 (Greenhouse gases -- Part 1, 2 and 3), ISO/WD TR 14069
(GHG - Quantification and reporting of GHG emissions for organisations), ILCD
(International Reference Life Cycle Data System), Corporate Accounting and
Reporting Standards Greenhouse Gas Protocol from WRI/ WBCSD, Bilan Carbon,
DEFRA - Carbon Disclosure Project (CDP), CDP water, Global Reporting Initiative
(GRI).

[29]       The full report is available at: http://ec.europa.eu/environment/eussd/pdf/Deliverable.pdf

[30]       The methodologies were tested for 10
products (agriculture, retail, construction, chemicals, ICT, food,
manufacturing - footwear, televisions, paper), and 10 organisations (retail,
food, energy production, water supply, feed, public sector, ICT, mining,
chemicals and paper manufacturing). See Annex 9 for details.

[31]       Product Environmental Footprint
Category Rules are a set of tailored methodological specifications and instructions
to be applied for a specific product group. Organisation Environmental
Footprint Sectoral Rules are a set of tailored methodological specifications
and instructions to be applied for a specific sector. See Annex 9

[32]       See a list of the most important (diverging) initiatives on
the assessment of the environmental footprint of product and organisations in
Annexes 17, 18 and 19.

[33]       E.g. France is currently evaluating a pilot programme on
product environmental labelling. Since 2008, private companies have been
invited to participate in the programme to demonstrate and test concrete
example of multi-criteria environmental labelling . A preliminary evaluation of
agri-food products show that 75% of the companies involved in the pilot
programme intend to continue with environmental labelling and about 64% are in
favour of a EU harmonised approach. (http://www.developpement-durable.gouv.fr/IMG/pdf/LPS125.pdf)
Other initiatives exist in the UK, Switzerland, internationally in Japan,
Australia and Canada. See Annex 19 for more details

[34]       E.g. the Sustainability Consortium, Envifood Protocol, GHG
Product Protocol, different labels and standards (carbon footprint, LCA, water
footprint); Carbon Disclosure Project, sustainability indices, Global Reporting
Initiative, etc. See Annexes 18 and 19 for more details.

[35]       A detailed comparative analysis of
the most relevant methodologies currently used has been carried out by JRC IES
and is available at: http://ec.europa.eu/environment/eussd/pdf/Deliverable.pdf

[36]      Company
GHG emissions reporting - a study on methods and initiatives (2010)

[37]       For a detailed assessment on the importance of indirect
impacts, see Annex 16.

[38]       Flash Eurobarometer 342, SMEs, resource
efficiency and the green markets, 2012.

[39]       See Annex 10 for a more detailed assessment of costs.

[40]       Eurobarometer Europeans’
attitudes towards the issue of sustainable consumption and production,
2009

[41]       Eurobarometer Attitudes of
European citizens towards the environment, 2008.

[42]       A survey conducted by OECD on 10.000
households shows that prices and trusted information are important factors to
move consumers towards more environmentally friendly purchasing decisions. OECD
(2011), Greening Household Behaviour: the Role of Public Policy.

[43]       The
Flash
Eurobarometer 332 of 2012 showed that 1/3
of EU consumers
encountered misleading information about the environmental impacts
of a product. See Annex
3.1 for more evidence.

[44]       2011 GFK Green Gauge Report. See also Annex 3.

[45]       The
second Eurobarometer survey on the Attitudes of European citizens towards environment (2011) showed
a decline of respondents
thinking
that labels on products allow
the identification of those
environmentally friendly (47% compared to 52%, scored
in 2008).
In addition, a the Flash
Eurobarometer 256 on Europeans' attitude towards SCP (2009) showed
that only 6% of EU citizens said they
completely trust producers’ claims about their products’ environmental
performance, while twice as many respondents (13%) answered that they do not
trust such claims at all.

[46]       Deloitte
2011, Deloitte: The High Profit Supply Chain – A Resource Focused Approach.

[47]       For a list of studies supporting this statement, please
consult Annex 21.

[48]       Business
Resilience in an uncertain, resource-constrained world, CDP Global 500
Climate Change Report 2012

[49]       Forstater and Raynard (2002), Corporate Social
Responsibility; Implications for SMEs in Developing Countries, UNIDO, Vienna.
Available at http://www.unido.org/userfiles/BethkeK/csr.pdf

[50]       http://www3.weforum.org/docs/IP/CO/WEF_CO_ScalingSustainableConsumptionResourceEfficiency_Report_2012.pdf.

[51]       Wal-Mart (2011) Sustainability Report.

[52]       See http://cdn.gotraffic.net/career_videos/Bloomberg-GRI.pdf.

[53]       Life Cycle
Management: How business uses it to decrease footprint, create opportunities
and make value chains more sustainable”, UNEP/SETAC 2009.

[54]       Philips was
recognized as a leader in carbon disclosure and carbon performance by the
Carbon Disclosure Project (CDP) 2010 Global 500 report. The CDP collects
emissions data from over 3,000 organisations in 60 countries. Philips received
a score of 94 (out of 100) for carbon disclosure results and was awarded an ‘A’
for its overall carbon performance, making it a company with “both higher
degrees of maturity in their climate change initiatives and achievement of
their objectives” according to the CDP. See http://www.annualreport2010.philips.com/content_ar-2010/proofpoints/improve_footprint.asp.

[55]       http://www.unilever.com/sustainable-living.

[56]       Greening
the Economy through life cycle thinking, UNEP
2012.

[57]       Denmark, Sweden and Finland score among the highest globally in
clean technologies but so do important competitors such as the US. China and India are already
scoring higher than the Netherlands, Austria, Belgium, France and Spain. See Global Cleantech
Innovation Index 2012 report, CleanTech Group and WWF.

[58]       COM(2012) 582 final, A
Stronger European Industry for Growth and Economic Recovery - Industrial Policy
Communication Update

[59]       The number of
jobs depending on the Environment and Resource Efficiency, DG
ENV/Ecorys 2012

[60]       Roland Berger, ‘Innovative environmental growth markets from
a company perspective’, 2007.

[61]       An analysis of indicators
disclosed in corporate sustainability reports, Laurence Clement Roca and
Cory Searcy, 2012, Journal of Cleaner Production

[62]       Product Carbon Footprinting – a
study on methodologies and initiatives, (2010); Company GHG emissions
reporting - a study on methods and initiatives (2010)

[63]       This has been done, for example, with Regulation (EC)
834/2007 on organic products, Directive 2010/30/EU on labelling for energy-related
products, Directive 1999/94/EC on information of fuel
consumption, and Directive 2003/54/EC on common rules for the electricity
market. These laws provide for specific rules which take precedence over the
broader provisions of the Directive 2005/29/EC on unfair commercial practices
(UCPD), which covers misleading green claims in general
and Directive 2006/114/EC on misleading and
comparative advertising.

[64]       Guidelines for the Assessment of Environmental Claims, see http://ec.europa.eu/consumers/cons_safe/news/green/guidelines_en.pdf.

[65]       http://www.legrenelle-environnement.fr/-Loi-Grenelle-2-.html

[66]       http://www.sustainabilityconsortium.org/

[67]       See more detailed examples of schemes in annexes 18 and 19.

[68]       http://www.oecd.org/industry/internationalinvestment/corporateresponsibility/1922656.pdf

[69]       http://ec.europa.eu/environment/emas/register/

[70]       www.ecolabel.eu

[71]       Long-Term
Growth, Short-Term Differentiation and Profits from Sustainable Products and
Services, a survey of business executives in the U.K., U.S., Japan,
Germany, France, China, Brazil and India, Accenture, 2012.

[72]       According to the 2012 WBCSD report Changing
Pace: "In the
current financial context, greener technologies and sustainable, inclusive
business solutions are at a disadvantage when tested for short term returns.
Their business case will not happen at scale and speed unless governments
introduce measures to lower their barriers of entry and raise the costs, or
remove the license to operate stranded assets and harmful practices. Markets
are merely man made. Changing Pace is about innovating better rules for
markets, and overcoming mindsets and dilemmas about shared authority and
leadership. Governments and business must pull vigorously in unison to boost
sustainable business solutions with smart policy solutions". To overcome this baseline scenario
the WBCSD report includes the "Green Growth Policy Accelerator" which among others includes: "Norms, standards, and codes of conduct scale up proven solutions
with a low set-up cost for governments who want to rapidly close the gap with
their goals. Frontrunners, who have developed and pioneered the solutions, are
rewarded with lower barriers of entry and risks. International compatibility
must be developed to facilitate trade. Compliance must be supported by
verification and the capacity to deal with laggards and infringers".

[73]       Flash Eurobarometer 342, SMEs, resource
efficiency and the green markets, 2012

[74]       http://economists-pick-research.hktdc.com/business-news/article/Economic-Forum/Green-trends-in-the-EU-and-business-implications/ef/en/1/1X000000/1X074E5P.htm

[75]       PCF World Forum News (2010)
International Developments in Product Carbon Footprinting and Carbon Labelling

[76]       Council Conclusions on the Sustainable
Production and Consumption Action Plan 4 December 2008, Council Conclusions
on Sustainable
materials management and sustainable production and consumption, December
2010.

[77]       See a more detailed description in
section 3.3 (How will the problem evolve?)

[78]       Interesting to note that the UK and French schemes already
make strong cross-reference to EU developments and Italy foresees a strong link as well. MS appear to be calling for a harmonised EC-level guidance/support on the assessment
of the environmental footprint. See also the Council
conclusions of 20 December 2010 inviting the Commission
"to develop a common methodology on the quantitative assessment of
environmental impacts of products, throughout their life-cycle".

[79]       The
criteria for the EU product-related policy instruments are usually set on the basis of technical and market
evidence that is collected by way of specific preparatory studies. If this
evidence is univocal for all the EU SCP instruments, assumptions on
environmental and economic/competitive effects of new criteria are the same and
the result can be a higher level of homogeneity.

[80]       If the
criteria are set as a result of a single process for different “uses”, taking
into account the different objectives of the EU product-related
policy instruments, a stronger consistency can ensured (e.g.: in defining the thresholds for Ecolabel and Energy label).

[81]       This is an indicative list of
criteria that would be further refined and enriched during the implementation
phase. Existing and new studies would be used, and an open dialogue with key
stakeholders would provide further input.

[82]       Organisation Environmental Footprint Sectoral Rules are a
set of tailored methodological specifications and instructions to be applied
for a specific sector. See Annex 9

[83]       The
requirements would include rules regarding the measurement, benchmarking, and reporting of environmental
performance.

[84]       The option for integration and the
technical implementability would need to be assessed in detail on a case by
case basis. See Annex 9 for more information about the methodological developments needed
to fully implement PEF and OEF in existing policy instruments.

[85]       http://ec.europa.eu/environment/ecolabel/products-groups-and-criteria.html

[86]       http://susproc.jrc.ec.europa.eu/activities/emas/index.html

[87]       For more details on incentives, see
Annex 20 and Annex 14.

[88]       E.g. in case of national scheme or requirements related to
non-financial reporting or promoting the use of environmental performance
indicators in risk assessments in investment, the reference methodology would
be OEF, coupled with OEFSRs.

[89]       E.g. fiscal incentives for consumers
to purchase environmentally friendly products that exist in many Member States or reputational incentives such as the Japanese Top Runner system for
electronic products.

[90]       http://ec.europa.eu/environment/ecolabel/products-groups-and-criteria.html

[91]       http://susproc.jrc.ec.europa.eu/activities/emas/index.html

[92]       http://ec.europa.eu/regional_policy/how/coverage/index_en.cfm

[93]       The
ISO Survey, ISO, 2004; EMAS
statistics, 30/06/2012; Eurostat Ecolabel data, 2010; http://ec.europa.eu/environment/legal/law/statistics.htm

[94]       See Annex 1 for the detailed results.

[95]       See Annexes 10 and 11.

[96]       See Annex 2.

[97]             Different options for communicating environmental information for
products, BioIS/ DG Environment, 2012

[98]             Recent
analysis suggests that a 10% increase in the price of commodities such as oil,
coal, wheat and cotton corresponds to a 13% impact on earnings before interest,
tax, depreciation and amortisation. Most of these risks stem from the supply chain
(More
with Less: Scaling Sustainable Consumption and Resource Efficiency, World
Economic Forum, 2012)

[99]             For example, it is estimated that data collection and
validation typically absorbs 70-80% of the cost of the study. By improving on
this aspect only, very significant cost reductions would be obtained (Frans
Berkhout, Rupert Howe: The adoption of life-cycle approaches by industry:
patterns and impacts, Resources, Conservation and Recycling 20 (1997) 71-94

[100]            See Annex 16

[101]            Recent
analysis suggests that a 10% increase in the price of commodities such as oil,
coal, wheat and cotton corresponds to a 13% impact on earnings before interest,
tax, depreciation and amortisation. Most of these risks stem from the supply
chain (More
with Less: Scaling Sustainable Consumption and Resource Efficiency, World
Economic Forum, 2012)

[102]            For
example, it is estimated that data collection and validation typically absorbs
70-80% of the cost of the study. By improving on this aspect only, very
significant cost reductions would be obtained (Frans Berkhout, Rupert Howe: The
adoption of life-cycle approaches by industry: patterns and impacts, Resources,
Conservation and Recycling 20 (1997) 71-94

[103]            Different options for communicating environmental information for
products, BioIS/ DG Environment, 2012

[104]            University of Cambridge and
Cranfield University (2009) Towards a sustainable industrial system

[105]            It
can potentially cover 14 impact categories (climate change; ozone depletion;
human toxicity - cancer effects; human toxicity - non-cancer effects;
particulate matter/respiratory inorganics; ionising radiation; photochemical
ozone formation; acidification; eutrophication – terrestrial; eutrophication –
aquatic; ecotoxicity -  freshwater aquatic; land use; resource depletion -
water; resource depletion – mineral and fossil fuel). Thus, it has the
potential to direct improvements in the impact categories relevant for the
given organisation, sector or product group. See Annex 16

[106]            Recent
analysis suggests that a 10% increase in the price of commodities such as oil,
coal, wheat and cotton corresponds to a 13% impact on earnings before interest,
tax, depreciation and amortisation. Most of these risks stem from the supply
chain (More
with Less: Scaling Sustainable Consumption and Resource Efficiency, World
Economic Forum, 2012)

[107]            Flash Eurobarometer 342 SMEs, resource efficiency and the green markets, 2012

[108]            University of Cambridge and
Cranfield University (2009) Towards a sustainable industrial system

[109]            Final
impact assessment, DEFRA, 2012; The
costs and benefits of mandatory greenhouse gas reporting. Adelphi’s independent analysis of the Defra Impact
Assessment.

[110]            See Annex 16

[111]     Effectiveness is defined as the extent
to which options achieve the objectives; Efficiency is defined as the extent to
which objectives can be achieved in a cost-effective manner; coherence is
defined as the extent to which options are coherent with the objectives of EU
policy and are likely to limit trade-offs across environmental, social, and economic
domains.

[112]     See detailed information about
developments needed in Annex 9.

[113]     For instance, the response rate to the
Carbon Disclosure Projects’ questionnaire, sent out to the 500 largest
enterprises on behalf of 551 investors with $71 trillion of assets was 81% in
2011. The success of the scheme is largely due to investor pressure to respond.
See CDP Global 500 Report
2011: Accelerating
Low Carbon Growth

[114]     See Annex 9 for explanation.

[115]     The adoption of the 7th EAP
is planned for autumn 2012. The Impact Assessment Board approved the impact
assessment on its meeting of 18 July 2012 through written procedure.