When small is not beautiful

Smaller firms contribute 60 – 70% of industrial pollution. But efforts to get them to embrace cleaner technologies are meeting resistance, reports David Fowler

Environmental issues, you might expect, would by now be firmly on industry’s agenda. The Rio summit five years ago, initiatives such as the ISO14000 standards for environmental management, the creation of the Environment Agency, greater public awareness and PR disasters such as the Brent Spar, have surely all conspired to make clean technology a priority across industry.

But this is far from the case. Take-up of cleaner, less polluting processes across industry remains slow. Small businesses in particular are confused by the range of technology on offer.

Improved uptake of cleaner technology would provide the stable home base the technology providers need to attack the world market, expected to be worth $600bn by 2000, and challenge the dominance of Germany, the US and Japan. And, used effectively, cleaner technologies are not a cost but can improve profits and give firms which adopt them a competitive advantage.

But this is not happening. There is widespread recognition of the problem, but little consensus on the solution.

Some argue that stiffer regulation will create the market stimulus the environmental technology industry seeks. Noel Morrin, director of the National Environmental Technology Centre, part of AEA Technology, says the problems are more deep rooted, and favours some form of independent guidance to help small firms in particular assess the technology on offer. Other organisations working with small businesses put their faith in improved management systems.

`The world is littered with environmental technology, usually in the wrong place, the wrong hands, and with the wrong approach,’ says Morrin. Technology providers are mostly small companies trying to sell to other small companies. `There is enormous confusion in the marketplace.’

There are three approaches to improving polluting processes, he says. First, end-of-pipe solutions. These are driven by regulation and tackle the problem by adding equipment at the end of the process to remove a pollutant, or convert it into a more easily disposed of form.

Second are zero discharge processes. Such a process is not necessarily cleaner: it merely means that pollutants do not cross the site boundary into the rest of the world. Firms may stockpile waste on site; pharmaceutical companies commonly have their own landfill sites within the plant boundary.

Third is clean technology in which the process is improved, or replaced by a new, more efficient process. Large global companies have generally embraced this approach as an investment which pays off, and are developing new technologies for themselves, says Morrin. They realise that whereas end-of-pipe solutions are a cost, cleaner technology improves the process by converting more of the input materials into the finished product and less into waste. The result is a step change in efficiency, improving profits.

Examples in recent years include improvements to ICI’s Billingham plant which produces ammonia for nitrogen based fertilisers. The technology was licensed to fertiliser manufacturers. And the paper and printing industry has made great strides in recent years in its fibre process-ing, moving to oxygen rather than chlorine-based bleaches, and to vegetable-based inks which do not leave behind organic solvents when the paper is de-inked during recycling.

But smaller firms are less likely to embrace such ideas than large ones, says Morrin. And though the likes of Shell, BP and ICI own large point sources of pollution, smaller firms, with their vastly greater numbers, contribute overall 60-70% of industrial pollution.

What is inhibiting small firms’ uptake of cleaner technology? First, Morrin argues, confusion in the market. There is little independent advice available, but an array of potential solutions. Concepts used by the Environment Agency, best practicable environmental option (BPEO) and best available technology not entailing excessive cost (Batneec) are judged on the merits of each case.

Regulations do not specify individual technologies. `Firms like ICI and BP have the infrastructure to cope with this,’ says Morrin. `But if I’m a small company in the West Midlands, who will give me advice about what a Batneec solution is?’

Then there is an inbuilt reluctance to be first. Companies want proven technology and have an aversion to the new. Cleaner technology suppliers are often new firms selling new products in a new market, a far from ideal situation.

Not only do small companies in general not have the resources to assess technological solutions, many have not identified the problem, Morrin continues. `They have no strategic management. A survey by Barclays of 1,000 smaller companies showed that, for most, strategic planning looked no further than next week’s wages. It’s not even a business issue in many cases.’

And, as the Environmental Industries Commission, the lobby group for the technology providers, has eloquently argued, this means the UK lacks a strong environmental technology industry, leaving Germany, Japan and the US to dominate. The EIC identifies stronger regulation as the factor underpinning development of the technology these companies now export.

Morrin rejects this analysis as `plausible but bunkum’. German industry is highly regulated and German society more amenable to rules, he argues. And German excellence in environmental technology could be due to excellent engineering.

And while US industry is highly regulated environmentally, few solutions developed for the home market have been exported.

Japan’s regulatory regime is actually `flimsy’. Its excellence in environmental technology derives from the realisation by its powerful trade and industry ministry, MITI, that the environment would be an important export growth market. It instructed key Japanese firms to invest 25% of their pre-tax profits in environmental technology, raising £500m.

What is the way forward? The first step, says Morrin, is to recognise that this is primarily a management issue. `In the first place companies should look at their management systems.’ This is where the greatest gains for the least investment can be found through low-cost strategies such as waste minimisation.

Only then should retro-fitted end-of-pipe kit be considered and then, eventually, cleaner technology.

Financial incentives are also needed to take the perceived risk out of environmental investment.

Finally, small companies `are struggling to understand what technology exists,’ says Morrin. Some independent arbiter is needed to provide independent assessments of new technology on offer.

Ruth Hillary, researcher at Imperial College’s centre for environmental technology, disagrees. She says small firms have tended to adapt existing technology and do not even want to consider cleaner technology if they have something in place that works.

She cites a firm making moulded rubber sealing rings used by the nuclear industry. Excess rubber left by the moulding process had to be removed by abrasion, and the firm had developed a system to do this. The rings were put in a small, cheap cement mixer with fine granite gravel and water and rotated. Over 15 hours the excess rubber was removed. Environmentally this is wasteful: water is continually lost and has to be topped up, and energy use is inefficient.

The firm knew there was an alternative: a closed centrifuge which used considerably less water and did the job in 15 minutes. But it cost £20,000, and the firm decided it was not worth it.

Nor does Hillary favour the `independent assessments’ approach. `Small business managers are not convinced by them. They are more likely to be convinced by their peers.’

Ken Davies, national programmes director of Groundwork, a charity which works with small businesses on environmental matters, endorses this view. `Advisory services have hardly been a commercial proposition.’ Local peer group leadership has proved more effective. In the six local business environment associations Groundwork is involved with, managers who have tried out new technology act as local champions and share their experience.

Hillary believes the basic problem is that the clean technology market is supply-led. What is needed is a demand-led approach. This could be achieved through a management system approach based on ISO14000 or the EU Eco-management and audit scheme, Emas, which has not so far had much take-up in the UK. These standards include a requirement for continuous improvement in performance; if companies were persuaded of the merits of the systems, demand for the technology would follow.

A problem is that many small businesses consider ISO14000 too unwieldy and costly to comply with. But a solution may be at hand.

Groundwork is piloting a scheme, in consultation with the Federation of Small Businesses, which sees ISO14000 as a process rather than something you either have or do not have. For many small firms, full accreditation may be too expensive. The new scheme would aim to get companies to embrace the principles of continuous improvement and to start to work towards ISO14000. Even if they never achieved accreditation, they would know they were moving in the right direction, says Davies.