Product stewardship

Until recently, producers in our society assumed little or no responsibility for their products after they had been consumed. Although consumers had limited direct control over the design of products available on the market, they generally were considered to be the generators of all wastes from the consumption and disposal of these products. As a result, producers had little reason to consider redesigning their products or packaging to address waste management issues and their associated costs.

The concept of product stewardship is gaining considerable popularity with governments attempting to resolve society’s increasing waste management problems. Product stewardship is based on the principle that holding producers responsible for the costs of the post-consumer processing and disposal of their products and associated packaging will provide them with the necessary incentive to redesign their products for greater durability and to minimize the packaging and waste associated with their consumption. In the product stewardship model, the waste management costs of a product are internalized and reflected in its price to the consumer. Generally speaking, producers with lower waste management costs will enjoy a competitive cost advantage over producers with higher waste management costs.

There are several methods of implementing a product stewardship system. For example, producers or distributors could be required to accept the return of their products once these have reached the end of their useful life. Alternatively, a variable unit charge could be applied to each product sold by the producer to cover the future costs of collecting and processing the products once they have been used.

One well-known example of product stewardship is the "Green Dot" system introduced in Germany in 1990. The system involves a ‘return to sender” policy for packaging in which the producer of the goods is wholly responsible for their collection and processing costs. Alternatively, producers are charged a royalty for the use of a green dot logo on their products to indicate that they are participating in a cooperative waste management system known as Duale System Deutschland (DSD). The royalty charge is determined on the basis of the costs associated with the collection and processing of the products. The German system also bans the incineration, export and landfilling of wastes collected in the system. A proposal exists to have the current system extended to automobiles, batteries and microelectronics.

Product stewardship models in which individual organizations and industrial sectors set up their own collection and reuse/recycling systems are not entirely new. For example, many jurisdictions, such as Ontario, have had some form of deposit/return mechanism for soft drink or beer bottles and cans for years. Initiatives to develop and implement product stewardship systems further are taking place in both the public and private sectors.

Environmental risk management

Risk may be defined as “the probability or likelihood that an adverse outcome will be caused by an action or condition. In the context of waste, the action or condition of concern usually can be associated with exposure to a chemical or physical component of the waste. Risk is inherent in the activities of every organization, regardless of its goals, strategy, size or structure. Each organization therefore first must decide how much risk it - and its stakeholders - are willing to accept and thereafter take the steps needed to ensure that its risk exposure does not exceed these levels.

Risk management is the process of identifying an organization’s available options for mitigating unacceptable risks, evaluating the cost-effectiveness of each option and selecting the preferred course of action for achieving the desired risk reduction. Selecting a course of action also may involve considering factors that are not easily quantifiable, such as potential benefits to society and the possibility of litigation. Effective risk management should reduce actual risk in a cost-effective manner.

In order to manage its risks effectively, an organization must perform a risk assessment to understand its current risk exposure. Risk assessment is the process of determining the adverse effects that may result from an organization’s products, processes and activities. It includes an evaluation of effects that may occur, the probable occurrence of these effects and the potential consequences of each to humans, wildlife and the environment.

Many organizations lack sufficient resources to address all the environmental concerns that should be addressed adequately. They therefore will need to prioritize these concerns. In addition, when the increasing number of environmental matters that require attention and the increasingly comprehensive regulation of these are considered, the practices of effective risk assessment and management become very significant to an organization’s environmental decision-making processes.

Environmental audits

One of the most significant recent developments in waste management is the widespread acceptance and use of the environmental audit. An environmental audit often is more broadly used in the context of an overall environmental management system of which waste management is one component. In this context, the audit generally consists of a systematic, objective evaluation of the environmental effects relating to a property, facility, process or activity.

In spite of the increased use of the audit as a waste management tool, relatively little standardization or coordination has taken place amongst the various disciplines carrying out the audits and jurisdictions regulating them as to the exact definition of an audit, the scope and tasks that comprise an audit and the circumstances in which it is required.

For example, the Canadian federal government published an Enforcement and Compliance policy in 1988 to accompany the proclamation of the Canadian Environmental Protection Act that defines environmental audits as:

"...internal evaluations by companies and government agencies, to verify their compliance with legal requirements as well as their own internal policies and standards. They are conducted by companies, government agencies and others on a voluntary basis, and are carried out by either outside consultants or employees of the company or facility from outside the work unit being audited. Audits can identify compliance problems, weaknesses in management systems, or areas of risk. Their findings are documented in a written report."

In 1994, the Canadian Standards Association defined an environmental audit as:

"a systematic process of objectively obtaining and evaluating evidence regarding a verifiable assertion about an environmental matter, to ascertain the degree of correspondence between the assertion and established criteria, and then communicating the results to the client. A verifiable assertion is a declaration or statement about a specific subject matter which is supported by documented factual data." The terms "audit," "review’ and ‘assessment" are used rather loosely to refer to numerous types of assessments of the environmental effects of an organization’s activities. However, to chartered accountants and other financial professionals, the term ‘audit" is a strictly defined term that is not interchangeable with the terms "review" and "assessment," each of which denotes a different (and respectively increasingly diminished) level of assurance. For these experts, auditing is a systematic examination involving analyses, tests and confirmations of procedures and practices that enables the auditor to verify the fairness of a financial statement or compliance with legal requirements, corporate policies and accepted standards. To qualify as an audit, this examination must follow generally accepted accounting standards (GAAS) and other professional guidelines.

Initially, very few organizations carried out environmental audits. Now the environmental audit is widely considered to be perhaps the most practical tool for assessing the environmental well-being of a facility, process, activity or site. An environmental audit, in some form or another, is performed by many organizations whose activities give rise to environmental concerns.

An environmental audit may be undertaken to identify all environmental areas of concern to an organization, or it may focus on one particular issue, such as waste management. Increasingly, organizations are carrying out environmental audits to achieve the following:

• assess compliance with environmental legislation
• verify the performance of environmental control equipment
• assess the adequacy and effectiveness of resources, programs and personnel
• identify existing and potential environmental problems
• protect the organizations’ stakeholders such as owners, managers and employees from potential environmental liabilities
• enhance or safeguard the organizations’ environmental reputations
• prioritize capital expenditure requirements for environmental control systems.

Despite the broad potential application of environmental audits, for tile purposes of this discussion audits can be divided into three general categories: compliance audits, risk audits and management system audits. Compliance audits attempt to determine whether a particular aspect of an organization’s operations meets all applicable legal and regulatory environmental requirements, such as statutes, regulations, standards, criteria, policies, guidelines, bylaws and permits. Risk audits assess tile probability of potential adverse effects posed by an organization’s operations to its employees, the local community, the environment or other stakeholders. Management system audits are used to review an organization’s environmental management system or some component of this system. A comprehensive environmental audit may include all three audit types. In the context of waste management, there are four principal reasons for organizations to perform environmental audits. These are:
· increased public awareness of waste management issues
· increased regulatory requirements for waste management
· increased penalties and liabilities for organizations failing to comply with the regulatory requirements
· potential for costs savings as a result of improved waste management practices.

Integrated waste management

"Integrated waste management" is the process of using a variety of waste management practices at the same time so as to minimize an organization’s adverse effects on human health and the environment. In the integrated waste management approach, a hierarchy of waste management options is established based on their environmental effects. Activities at each level of the hierarchy may take place concurrently and should complement each other without compromising the preferential order.

In Ontario, the government has advocated an integrated waste management approach to municipal solid waste for a number of years. For example, many municipalities in the province have developed waste management plans outlining comprehensive strategies for managing different waste streams, identifying diversion targets, setting strategies for meeting these targets and detailing the operational steps required to implement these strategies. These plans also have addressed the collection of waste and the operation of facilities for waste diversion and disposal. The Ontario government is moving as well to mandate integrated waste management approaches to waste generated by organizations in the ICI sectors.

The "3Rs" hierarchy

Many integrated approaches to waste management are based on the "3Rs" hierarchy of reduce, use and recycle. Other approaches are based on a ‘4Rs" hierarchy which includes recover at the bottom of this hierarchy. Some environmental groups argue that refuse should be included at the top of a "5Rs" hierarchy; consumers simply should refuse to purchase items that are not essential, or that will contribute excessively to waste. Other groups promoting product redesign as the optimal means of minimizing waste include rethink the top of their hierarchy.

Pollution prevention

Pollution prevention, or "P2" as it is often referred to, is based on the belief that the most sustainable way to manage waste is to prevent its generation from the outset. A widely accepted general definition of pollution prevention is "the use of processes, practices, or materials and energy that avoid or minimize the creation of pollutants and wastes."

Traditionally, waste regulations and environmental controls used an "end-of-pipe" approach to managing waste, addressing the issue of waste management only after tile waste had been generated. Pollution prevention represents a complete shift from this philosophy and focuses on the equipment, technology, processes, procedures, products and materials responsible for generating the waste in the first instance. Pollution prevention involves examining the entire process of contaminant generation, from raw materials used through to emissions to various media, including air, water and land and aims to reduce the generation of waste over the entire life cycle of a product.

Governments have begun to implement pollution prevention programs whose goal is to have organizations in targeted industry sectors voluntarily commit to eliminating or reducing the generation of certain wastes. For example, the European Union’s Integrated Prevention and Pollution Control directive seeks to prevent or minimize emissions of harmful substances. In 1990 the United States Congress enacted the Pollution Prevention Act of 1990 which declared pollution prevention to be a national policy. In Canada, the federal government has created a National Office of Pollution Prevention and a pollution prevention strategy that combines legislative, voluntary and economic instruments to encourage pollution prevention and efficiency over end-of-pipe controls and remediation of pollution. Several provinces, including Ontario, also have implemented pollution prevention policies and programs.

Following the integrated ‘pollution prevention" approach to waste management rather than applying end-of-pipe pollution controls can yield significant economic benefits for an organization. One well-known example illustrating the potential savings achievable from sustainable resource and waste management is that of the 3M Company in St. Paul, Minnesota. In the late 1970s and early 1980s, 3M reformulated its products and redesigned its processes to eliminate, on an annual basis, more than 90,000 tonnes of air pollutants, 10,000 tonnes of water pollutants, 1,000 million gallons of wastewater and 150,000 tonnes of solid wastes. These changes saved the company approximately $200 million, of which sixty percent represented annual operating and maintenance costs.

Accounting for environmental costs

One of the most promising developments in the achievement of effective waste management is the emergence of accounting methodologies to determine the true costs of generating waste. In the past, a number of barriers existed to prevent the widespread adoption of a sustainable approach to waste management. For example, the structure of an organization and its management philosophy sometimes hindered the adoption of such an approach and prevented any projects supporting it from being included in the capital budgeting process. As well, inadequate and inaccurate methods of cost accounting and profitability analysis often discriminated against the implementation of sustainable waste management practices.

The economic benefits of effective waste management frequently have been overlooked or misunderstood by society’s decision-makers. In traditional accounting systems, waste-related costs, such as waste disposal tipping fees, usually were treated as "overhead" costs. These costs could not be allocated easily to a particular product, process or activity and therefore the economics of waste-generating activities and processes were not well-understood. To complicate matters further, the benefits resulting from sustainable waste management practices often were intangible and difficult to quantify accurately.

Several accounting approaches have been developed to remove some of the economic biases against effective and sustainable waste management. These approaches generally attempt to charge to each product the full environmental costs of its production and use. For example, activity-based costing is one method that seeks to minimize the use of non-specific "overhead" costs by requiring both direct and indirect environmental costs to be allocated fairly to the products and processes generating them. Total cost assessment (TCA) is another method for improving the capital budgeting process by including all environmental costs and risks. To accomplish this, TCA extends the time horizon to address both long-term benefits and short-term costs. Life-cycle costing is another approach that identifies and considers the environmental costs associated with a product throughout its life cycle, including resource extraction, manufacture, transportation, use, maintenance and disposal. Finally, risk analysis enables an organization to determine which waste management efforts may be most worthwhile due to their substantial reduction of the organization’s risks and potential liabilities, despite an apparent increase in costs.

A number of initiatives have been undertaken to determine the environmental costs of waste generation more accurately. Although many of these initiatives have been voluntary, governments are starting to require organizations to account for their environmental costs. For example, the state of Washington requires all facilities using hazardous substances or generating hazardous waste to identify the total costs associated with their hazardous substance use and waste generation, management and disposal. These waste generators must describe the accounting systems used and include liability, compliance and oversight as components of their accounting systems.

Related initiatives and standards

Literally hundreds of resources, including initiatives, standards and research publications, played a role in the development of this document. A number of these resources are standards that attempt to intergrate what often are very different management approaches, by pulling together and developing their common elements to design systems that can be integrated effectively into the general management policies of an organization. Several of these standards and initiatives are particularly important, as they have made a significant contribution to the evolution of the concept of an environmental management system upon which the waste management system is based. In general, they reflect a systemic shift from an “end-of-pipe” approach and evaluation to process and systems management with system audits.

Five of the most significant standards and initiatives for these guidelines are summarized below:
- ISO standards
- EC Eco-Management and Auditing Scheme
- BS 7750, Specification for Environmental Management Systems
- CSA guidelines
- CICA initiatives