corporate environmental objectives – but the changes also helped reduce operation and maintenance costs.<sup>4</sup> Firms producing for GVCs that need pollution-abatement technologies should note, furthermore, that market competition gives suppliers of such technologies a strong stake in creating value for their customers. Since the 1990s, environmental regulation has relied more and more on market instruments (such as tradable permits) instead of command-and-control mechanisms. Initially, this trend led to a crisis in the EGS industry because clean-tech suppliers could no longer assume that regulation would always force polluters to use pre-identified abatement goods and services. Some trade associations and consultants then recommended working at preventing polluting emissions instead of just delivering end-of-pipe remedies. This, they said, would lead to a reassessment of a customer’s whole operations, revealing new ways to enhance its competitiveness. **_By helping out their clients in the competitive game, clean-tech suppliers would make them prosper and create the conditions for their own expansion._** Box 1 presents three illustrative cases of this.

Such a new mindset suggests that pollution abatement suppliers have switched from a ‘goods logic’ to a _‘service logic,’_ meaning that they now place their clients’ core activities at the heart of the transaction. Grönroos (2010, p. 2) defines the two logics as follows: According to a traditional manufacturing approach, following what could be labeled a _goods logic_ , the supplier, for example producing and selling a production machine, would concentrate on how well the machine fits the customer’s production process – on what can be called _operational efficiency_ . (...) It remains the responsibility of the customer to make sure that it can make effective use of the resource so that value can be created out of the resource purchased.

A service business, i.e. a firm that has adopted a _service logic_ , would take a much further-reaching responsibility for a customer’s everyday practices and how they ultimately support the customer’s business. (...) The core customer process (e.g. a production process) is supported by the core of the supplier’s market offering (e.g. a production machine), whereas the customer’s business is supported by the entire extended offering, including the machine and support to other customer processes important to the business.

**_A key challenge now is to sustain this frame of mind._** As the previous paragraph suggests, regulators will play a key role here.

# **<u>Box 1.</u>** <u>Three cases of polluter-abater value-creating relationship</u>

> <mark>● A commercial bakery in California,</mark> _<mark>Gold Coast Baking</mark>_ <mark>of Santa Ana, wanted an emission abatement system that would make its new production line comply with VOC emission regulations. The company then asked its abatement supplier to build a catalytic oxidizer as</mark> _<mark>an integral component</mark>_ <mark>of the new bakery oven. The unique design – incorporated as part of the operation process, not as an end-of-pipe</mark>

> 4 This example and those presented in Box 1 are extracted from the case studies conducted by the Institute of Clean Air Companies (ICAC), a nonprofit U.S. association of firms working in the control and monitoring of stationary-source air pollution.

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