Rethinking product stewardship as an essential business strategy

The following is a guest post from Helen Lewis, author of new book Product Stewardship in Action: The Business Case for Life-Cycle Thinking.

Product stewardship, also referred to as extended producer responsibility (EPR) is the idea that everyone involved in the manufacture, distribution or consumption of a product shares responsibility for the environmental and social impacts of that product over its life cycle.

When Thomas Lindhqvist originally conceived the idea of EPR, he envisaged a broad range of initiatives to achieve product-related goals[1]. In practice, its implementation has tended to focus on laws that make producers responsible for the costs of recycling. These have had only limited success in promoting design for environment or more sustainable supply chains.

A more sophisticated understanding of product life-cycles and the potential trade-offs between different environmental impacts (for example between material and energy consumption and recyclability) is prompting government policy makers and companies to look for more integrated approaches to policy and practice. The most recent iteration is the idea of a ‘circular economy’, which neatly accommodates product stewardship through its emphasis on dematerialisation and zero waste [2, 3].

Despite its continuing relevance to corporate sustainability there has been very little critical analysis of product stewardship from a business perspective. For example:

• Why should producers take responsibility for the environmental and social impacts of their products, many of which are outside their direct control?
• What drives individual companies to implement product stewardship initiatives?
• How can product stewardship help to create business value?

These three questions represent different ways of looking at the business case for product stewardship. Is it a social obligation, a stakeholder management issue, a source of competitive advantage, or all three?

Product stewardship as an ethical or social obligation

Discourses on product stewardship and producer responsibility suggest that companies have a moral or social responsibility to address the environmental and social impacts of their products. But what is this based on?

From a business perspective product stewardship can be justified on the basis of ‘corporate social responsibility’ (CSR): the principle that companies have obligations to society that go beyond legal compliance. Many early writers on CSR tried to define the scope and limitations of these responsibilities [4]. Economic rationalists, for example, argued that the only social responsibility of a corporation is to maximise profits for shareholders within the constraints of the law [5].

Others took a broader view, arguing that the business institution as a whole, as well as individual companies, will only survive if they operate in accordance with social values and expectations. This view is embodied in ‘legitimacy theory’, the idea that in order to operate successfully, corporations have to work within the bounds of socially acceptable behaviour[6].

The issues that companies are expected to address voluntarily change over time. By the 1970s corporate responsibilities had shifted from social issues external to the corporation, such as poverty, to those more directly linked to a business’s operation, such as pollution. Product waste and recycling became government priorities in the 1980s, although the perception that these were also corporate responsibilities only became widespread towards the end of the twentieth century.

Product stewardship as a stakeholder management strategy

These broad notions of corporate social responsibility help to explain the public interest in product stewardship but are less useful when applied to the behaviour of individual firms. Porter and Kramer argue that the use of moral arguments to support CSR (i.e., that companies have a duty to be good corporate citizens) is not very helpful [7]. It fails to recognize the complex choices that companies have to make when balancing competing values, interests and costs.

The ‘license to operate’ principle is more pragmatic because it provides a way for a business to identify the social issues that matter to its stakeholders. This idea recognises that every company needs ‘tacit or explicit permission from governments, communities and numerous other stakeholders to do business’ [7].

There is an extensive literature on ‘stakeholder theory’ that helps to clarify to whom a business is responsible [4]. It reduces the abstract idea of ‘society’ to the stakeholders who are related to the firm’s interests, operations and actions. From this perspective, product stewardship is driven by the concerns of stakeholders. Consumers, for example, may change their purchasing choices based on product recyclability or a company’s reputation for responsible environmental management. Product manufacturers may de-select suppliers that fail to meet their environmental standards.

In summary, stakeholder theory helps to explain some of the business drivers for product stewardship by linking it to the expectations of stakeholders, particularly those who are critical to commercial success. However, it continues to frame corporate social responsibility as a response to external demands. This ignores the potential for companies to address social problems more strategically as a source of competitive advantage.

Product stewardship as a source of competitive advantage

Porter and Kramer argue that most businesses take a reactive approach to CSR that fails to connect with corporate strategy [7]. In their view this represents a tremendous lost opportunity. Instead they advocate a strategic approach to CSR based on ‘shared value’: the principle that companies should choose strategies that create a meaningful benefit for society while adding to the company’s bottom line. By looking at every business decision through a shared value lens, companies can unlock new sources of productivity growth [8]. Excess packaging, for example, is a cost to business and the environment. By reducing the amount of packaging and improving efficiencies in distribution companies can save money in packaging and transport while reducing greenhouse gas emissions and solid waste.

There is no conclusive empirical research on links between product stewardship and competitive advantage. However, there are numerous case studies that demonstrate the potential business benefits. Interface, for example, has reduced the environmental impacts of its carpet tiles through dematerialisation (lightweighting), use of post-consumer recycled content and product take-back and recycling initiatives. These strategies have contributed to a steady increase in market share [9].

A proactive approach to product stewardship looks for business opportunities that respond to increasing resource scarcity, consumer demand for more sustainable products, and other social and environmental trends. It builds new capabilities in business to identify and reduce environmental and social impacts of products through product innovation, multi-stakeholder collaborations and new business models.
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In my book, Product Stewardship in Action, I explore these ideas through case studies and interviews with practitioners. I build on these different perspectives on product stewardship—as a social responsibility, a response to stakeholder expectations, and a source of competitive advantage—to provide a structured and systematic framework for action by organisations in the product supply chain.

Helen Lewis is the author Product Stewardship in Action: The Business Case for Life-Cycle Thinking. Click here to order your copy now.

 

1. Lindhqvist, T., Extended Producer Responsibility in Cleaner Production (Doctoral dissertation), in The International Institute for Industrial Environmental Economics. 2000, Lund University: Lund, Sweden.
2. European Commission, Towards a circular economy: a zero waste programme for Europe. 2014: Brussels, Belgium.
3. Ellen Macarthur Foundation, Towards the circular economy. 2014, Prepared in collaboration with the World Economic Forum and McKinsey & Company.
4. Wood, D., Corporate social performance revisited. Academy of Management Review, 1991. 16(4): pp. 691-718.
5. Friedman, M., The social responsibility of business is to increase its profit. New York Times Magazine, 1970.
6. O’Donovan, G., Environmental disclosures in the annual report: extending the applicability and predictive power of legitimacy theory. Accounting, Auditing & Accountability Journal, 2002. 15(3): pp. 344-71.
7. Porter, M. and M. Kramer, Strategy and society: the link between competitive advantage and corporate social responsibility. Harvard Business Review, 2006. 2006(December ): Reprint pp. 1-16.
8. Porter, M. and M. Kramer The big idea: creating shared value. Harvard Business Review, 2011 (January-February), https://hbr.org/2011/01/the-big-idea-creating-shared-value.
9. Hensler, C.D., Shrinking footprint: a result of design influenced by life cycle assessment. Journal of Industrial Ecology, 2014. 18(5): p. 663-669.

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