EXECUTIVE SUMMARY

Background

The ability to gauge improvement in any endeavor is critically dependent on establishing valid methods of measuring performance. Tracking progress toward an established goal serves to influence behavior by providing continual feedback, and it requires reliable and consistent metrics. In response to regulation, competitive pressures, and the increasing demands of a wide range of stakeholders, many companies have begun investigating metrics that will improve their ability to assess environmental performance.

While many industries have significantly lessened the environmental impact of their operations over the past several decades, the majority of these improvements have been driven by the need to comply with federal or state laws. Accordingly, most measures of environmental performance are based on government reporting requirements (e.g., related to the release of regulated substances or the disposal of hazardous wastes). Recently, however, an increasing number of firms have begun to view environmental performance as an area of potential competitive advantage (Fischer and Schot, 1993; KPMG, 1997; KPMG Denmark, 1997a; Porter, 1991). As industry has begun to develop environmental goals that move beyond compliance, new methods of measuring and tracking improvement have been required (Ditz and Ranganathan, 1997; White and Zinkl, 1996).

To investigate the potential for advancement in the area of industrial environmental performance metrics, the National Academy of Engineering, at the request of the U.S. Agency for International Development's U.S.-Asia Environmental Partnership, undertook a study with the following objectives:



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--> EXECUTIVE SUMMARY Background The ability to gauge improvement in any endeavor is critically dependent on establishing valid methods of measuring performance. Tracking progress toward an established goal serves to influence behavior by providing continual feedback, and it requires reliable and consistent metrics. In response to regulation, competitive pressures, and the increasing demands of a wide range of stakeholders, many companies have begun investigating metrics that will improve their ability to assess environmental performance. While many industries have significantly lessened the environmental impact of their operations over the past several decades, the majority of these improvements have been driven by the need to comply with federal or state laws. Accordingly, most measures of environmental performance are based on government reporting requirements (e.g., related to the release of regulated substances or the disposal of hazardous wastes). Recently, however, an increasing number of firms have begun to view environmental performance as an area of potential competitive advantage (Fischer and Schot, 1993; KPMG, 1997; KPMG Denmark, 1997a; Porter, 1991). As industry has begun to develop environmental goals that move beyond compliance, new methods of measuring and tracking improvement have been required (Ditz and Ranganathan, 1997; White and Zinkl, 1996). To investigate the potential for advancement in the area of industrial environmental performance metrics, the National Academy of Engineering, at the request of the U.S. Agency for International Development's U.S.-Asia Environmental Partnership, undertook a study with the following objectives:

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--> to examine U.S. industrial experience in setting goals and measuring progress in environmental performance; to identify factors that have contributed, or will contribute, to improved industrial environmental performance in the United States; to assess the relative successes and shortcomings of current methods of measuring industrial environmental performance; and to recommend a set of industrial environmental performance metrics that define current best practices and identify directions for future improvement. This study differs from other efforts to investigate environmental metrics in two key aspects. First, it is an industry-centered analysis driven by a committee primarily composed of professionals with corporate and manufacturing experience. Second, in an attempt to provide more in-depth analysis rather than a general investigation, this effort focuses on only four major manufacturing industries: automotive, chemical, electronics, and pulp and paper. While many sectors are notably absent (e.g., services industry), the sectors examined in this study represent a significant portion of U.S. industrial capacity (12.6 percent of gross domestic product in 1995 [United States Bureau of the Census, 1997]). Operations within these industries combine to span the full spectrum of the product life cycle as well as a wide range of market niches (e.g., raw materials, component parts, finished consumer products). Some findings of this study may, therefore, be relevant to other industry sectors or even more broadly on a national level. Industry selection was also influenced by a given sector's relevance within nations of the Asia-Pacific Economic Cooperation, in keeping with the project's objective of disseminating U.S. best practices to these economies. Throughout the study process the committee noted a changing and more proactive attitude toward corporate environmental management within many companies. Most members of the committee held the view that companies will be expected to meet ever higher environmental standards in the future. However, there was also a feeling that if these standards continue to be developed and enforced through the same traditional and often adversarial process as in the past, both economic and environmental progress will suffer. While the committee was optimistic about the ability of improved metrics to provide opportunities for profit, there was also an understanding that more transparent measures could provide companies greater ability to communicate their voluntary environmental efforts, both to the public and to regulators. Observations, Trends and Challenges Environmental metrics are at the heart of how industry and its many stakeholders define environmental performance and determine whether progress is being made. This report documents how the use of environmental metrics has

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--> focused the attention of industry, public agencies, and a variety of other interested parties on a set of key areas of performance. All four U.S. industries in this study have integrated some metrics (Table E-1), especially for pollution releases and hazardous waste generation, into routine management decisions and external reporting. In addition, many U.S. firms track their consumption of energy, water, and some material resource inputs as a basic element of cost control. More recently, some firms have begun to make use of environmental performance measures to demonstrate to the public an increased commitment to environmental stewardship. The motivation for measuring and tracking environmental performance in these areas is relatively consistent across industries, with the drivers falling into three general categories: compliance with regulatory statutes, achievement or strengthening of competitive advantage, and improvement of corporate stewardship and reputation. Table E-1 Environmental Metrics Used in the Four Industry Sectors Metric Automotive Chemical Electronics Pulp and Paper Supply Chain E   E   Facility Centered         Pollutant releases C C C C Greenhouse gas emissions C C C   Material use C C E C Percent recycled material C C E C Energy use C C C C Water use C C C C Packaging C C C C Percent of land preserved   E   C Environmental incidence report C C C C Lost workdays/injuries C C C C Product Centered         Nongreenhouse gas emissions C       Greenhouse gas emissions C       Material use         Energy use C   C   Sustainability         Sustainable forestry       E NOTE: C = environmental metric in current use; E emerging environmental metric.

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--> Corporate attitudes toward environmental performance are evolving beyond a strict concern for compliance, as some firms have begun to realize substantial financial benefits as a result of improved environmental performance (Buzzelli, 1996, Popoff, 1993; 3M, 1998). The emergence of more comprehensive means of assessing corporate costs, as described by the principles of full-cost accounting, has demonstrated that current procedures often underrepresent the magnitude of environmental costs (Ditz et al., 1995; Epstein, 1996; Popoff, 1993; United States Environmental Protection Agency, 1995a, 1995b). Corporate environmental information is also being increasingly sought by commercial stakeholders (e.g., lenders, insurers, investors), particularly in response to concerns over liability. Finally, a growing number of companies are making use of environmental metrics as a tool to communicate improved environmental performance to local communities and regulatory bodies. With new knowledge and changing public expectations, fresh environmental challenges are arising that are not addressed by contemporary environmental metrics. Some firms are developing new metrics, creating tools to prioritize these indicators, and experimenting with more qualitative issues of human health and ecosystem impacts (Strang and Sage, forthcoming; Wright et al., 1998). A few have even begun to investigate the broader social dimensions of industrial activity (Davis, 1998). As can be seen in Table E-1, most metrics focus on environmental burdens and ecoefficiency concerns such as resource use, water pollution, air emissions, and waste disposal. Far fewer metrics link these burdens to actual impacts (e.g., increased incidence of disease, declining health of a water body). Measuring impacts, industrial or otherwise, presumes that one can reliably identify causal links with specific activities. Current tools to perform such analyses are crude. Ecosystem impacts, human health effects, habitat loss, and global climate change represent concerns for which new metrics are required. The need for improved metrics will become even more important as greater attention is given to the concept of sustainability, a term generally accepted as indicating movement beyond ecoefficiency to describe ''development that meets the needs of the present without compromising the ability of future generations to meet their own needs'' (World Commission on Environment and Development, 1987). Incorporating sustainability will require a much better understanding of the synergy of environmental effects and the impact of varying scale (both temporal and spatial) across ecosystems. In addition to identifying some of the technical shortcomings of current metrics, this report also underscores the dual role of environmental metrics as a tool to facilitate effective management and a critical element of public accountability. Many regulations impose a reporting burden on firms, and these reports require the use of certain metrics. Today, the value of environmental performance information is under threat because of the great number of different approaches for collecting and using such data (White and Zinkl, 1997; World

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--> Business Council for Sustainable Development, 1998). Because of this diversity, it is often difficult to develop sufficiently comparable information on environmental performance across a single company, let alone a whole sector or nation. This problem is compounded by international differences. Indeed, one of the most important challenges is to devise metrics that serve the specific needs of users while simultaneously contributing to greater comparability across firms, industries, and nations. There has been some movement toward more standardized metrics (much of this facilitated by government requirements), but lack of comparability among companies is still a significant barrier to progress (White and Zinkl, 1997). Lack of standardized metrics may also have contributed, at least in part, to the slow diffusion of best practices to small and medium-sized companies. At present, larger corporations are much more likely to investigate, develop, and use measures of environmental performance (Ehrenfeld and Howard, 1996; KPMG Denmark, 1997b). While larger companies have been on the forefront of implementing environmental metrics, the areas of the product life cycle under their direct influence often contribute only a fraction of the overall environmental impact imposed by their products. Some companies are now beginning to think about the degree of influence they can reasonably exert over life-cycle elements controlled by others, such as supply-chain firms, product users, and those concerned with end-of-life product disposition (Brown, 1998; Graedel and Allenby, 1998; Institute of Electrical and Electronics Engineers, 1997). The expansion of producer accountability over more of the product life cycle amounts to a first step beyond ecoefficiency toward more sustainable practices. Finally, as we gain a better understanding of the environmental performance of industry, attention is turning to other contributors to environmental "load." Public-sector enterprises such as federal facilities, while creating significant environmental burdens, are only now beginning to come under the same scrutiny to which industry has become accustomed (United States Congress, Office of Technology Assessment, 1989; United States Environmental Protection Agency, 1983). Large municipalities also are responsible for significant environmental impacts. Finally, it should be noted that industrial environmental metrics are now beginning to expand beyond manufacturing to the service sector, including such disparate industries as retail sales, distribution services, airlines, energy services, and health care (Chertow and Esty, 1997; Environmental Law Institute, 1998; Graedel, 1997). Presently, the lack of service-sector metrics makes it difficult even to begin to quantify the impacts of these businesses or their potential for environmental improvement. In summary, the committee has identified several challenges to the pursuit of a broader, more robust, and effective system of environmental metrics: improving standardization of metrics both within and across industry sectors;

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--> disseminating best practices more widely; applying metrics across the entire supply chain and product life cycle; developing new analytic tools (e.g., impacts vs. loads); and• addressing emerging environmental issues (e.g., ecosystem health, sustainability). A Framework for Action Over the past several decades, public concerns about risks to human and ecosystem health have driven individuals and organizations to act in a more environmentally conscious manner (Council on Environmental Quality, 1995; United States Environmental Protection Agency, 1992, 1996). The committee believes this trend will likely continue as scientific understanding of environmental systems improves and society's demands for environmental improvement persist. As public attitudes continue to "raise the bar" with respect to environmental performance, each economic sector (e.g., agriculture, industry, municipalities) will choose the methods most suited to meeting these challenges. If a particular sector's performance in the environmental arena is seen as inadequate and if social pressure is maintained, actions for meeting expectations will likely be prescribed. In the case of industry, past experiences with this prescriptive process have been viewed as particularly intrusive and inefficient. Limiting the imposition of new regulations will require skillfully harnessing performance improvements that have environmental or economic benefit while also formulating innovative strategies to efficiently address issues that lack financial incentives. The committee is convinced that environmental performance metrics will play an important role in these efforts, providing a valuable tool to industry as it strives to do its part to reduce the impact of human activities on the global environment. The committee observes that concerns over compliance have driven the majority of environmental performance improvements to date. More recently, the private sector has discovered there are real rewards for taking a more pro-active approach to protecting the environment. Individual companies and industry associations are becoming increasingly interested in, and capable of, contributing solutions to environmental challenges. As the private sector continues to demonstrate a greater capacity to drive environmental improvement, the government's role should begin to shift from that of a regulator to that of a facilitator. In the future, partnerships between government, industry, and citizen groups will likely yield more creative and efficient solutions to environmental problems. This is not to say that government should abdicate its leadership on environmental issues. Environmental quality is a "public good," and for this reason a significant, if perhaps declining, government role should be maintained. While acknowledging this, the committee emphasizes that better results and greater efficiency have generally been obtained from those companies that have voluntarily undertaken serious attempts at environmental improvement (Buzzelli, 1996).

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--> Establishing a Baseline: Best Practices Analysis of the metrics in use by the more progressive organizations engaged in this study yielded a number of similarities in terms of the types of measurements tracked (Table E-1). The committee feels that these environmental performance metrics, in their entirety, represent a broadly accepted set of "best practices." Best practices, however, are far from common. Therefore, some guidance should be provided to those organizations that have yet to establish a comprehensive framework of environmental metrics. RECOMMENDATION 1: Companies should investigate and implement to the greatest degree practicable environmental metrics representative of current best practices. Based on the four sector studies and the experience of its members, the committee urges firms to develop metrics in the 15 categories described in Table E-2. Table E-2 Recommended Categories for Environmental Performance Metrics in Manufacturing and Product Use Category Brief Description and Examples Manufacturing Related   Pollutant releases Includes: Air—Some data collected to meet regulatory reporting requirements (i.e., Toxic Release Inventory [TRI]). Separated into hazardous/nonhazardous. a Water—Some data collected to meet reporting requirements. Similar to above. Solid—Some data collected to meet reporting requirements. Similar to above. Materials use/efficiency Separated into hazardous/nonhazardous.a Energy use/efficiency Broken down by resource (e.g., petroleum, natural gas, coal, renewable). Some companies have also begun to assess in terms of global warming potential (e.g., CO2 equivalents). Water use/efficiency May track process water and cooling water separately. Greenhouse gas emissions Separated by gas (e.g., CO2, CH4, N2O). Can be expressed in CO2-warming-potential equivalents. Percent reuse/recycle/disposal Useful for assessing the use of individual process inputs as well as the final disposition of some intermediate products. Packaging Measured on either an absolute or per-product basis. Land use Separated into percent of land preserved, land developed, land restored, and inactive or abandoned developed land. Environmental incidents Classified by regulatory violations, fines, permit exceedances, accidents, etc. Health and safety Incidence of employee illness and injury and hours of training taken in safety, hazardous waste handling, etc.

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--> Category Brief Description and Examples Product-Use Related   Pollutant releases Includes: Air—Separated into hazardous/nonhazardousa (e.g., emission standards for automobiles). Water—Same as above (e.g., output water quality of a washing machine or dishwasher). Solid—Same as above (e.g., toner cartridge for printer or copier). Materials use/efficiency Materials required for product use (e.g., detergent in cleaning appliances, fluids in automobiles). Energy Use/efficiency Energy requirements for product use (e.g., corporate average fuel economy [CAFE] in auto industry, power use in electronic devices [U.S. Environmental Protection Agency's (EPA) Green Lights program], cooking efficiency [Electrolux]). Water use/efficiency Water requirements for product use (e.g., appliances, toilets). Greenhouse gas emissions Primarily a function of energy use. Can be expressed in terms of CO2 (or CO2 equivalents). End-of-life disposition Units or amounts of product reused, recycled, or disposed of (may be further separated by method of disposal). a All references to a hazardous/nonhazardous distinction are made with respect to existing regulatory definitions in the United States. NOTE: In many cases the usefulness of metrics will be enhanced by appropriate normalization (e.g., per unit product, per unit sales, per product use, per product lifetime). The categories listed in Table E-2 fulfill several requirements. First, reliable and relatively unambiguous measurements may be derived in each of these categories based on present knowledge and technology. Second, many of these categories relate directly to core business concerns (e.g., materials use, energy efficiency), regulatory requirements, or the maintenance of good relationships with the community or with regulators. Lastly, these metrics require information that is already collected by most companies as a matter of compliance, inventory, or waste management. That is not to say that resources will not be required to assemble the information into a usable form, but the means for obtaining many of these data is presently in place. While the relevance of individual categories may vary by industry (the paper industry will, for instance, have greater interest in land-use metrics than the electronics industry), most have broad applicability. Recommendation 1 provides guidance to the many companies that have yet to undertake a comprehensive program of environmental performance measurement, as well as a check for those companies with programs already in place. The committee feels that these categories collectively represent an instructive and broad assessment of the present state of an organization's environmental performance and one that may

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--> be reasonably achieved. Many further improvements to environmental performance measurement and reporting continue to be needed. However, the widespread implementation of these metrics will be a significant and meaningful first step. Goals for Improving Industrial Environmental Performances To assist industry efforts to improve environmental performance, the committee has identified five goals for enhancing the development and use of industrial environmental performance metrics. Each goal is accompanied by one or more specific recommendations. Goal 1: Adopt Quantitative Environmental Goals The establishment of quantitative goals provides a clear point of reference for developing and applying metrics. This is true at both the national and the corporate levels. Unless management and employees have a firm grasp of exactly what is expected of them and the criteria by which they will be evaluated, attention to environmental issues will be unfocused and motivation will wane. At the national level, setting quantitative goals has a dual benefit. First, such goals provide policy makers and government officials with clearly articulated objectives on which to focus throughout the sometimes convoluted political process. Second, industry benefits from a greater degree of certainty, especially when assessing regulatory expectations within the context of future planning activities. RECOMMENDATION 2: The U.S. government should strengthen its role in setting and reporting progress toward national environmental goals. The federal government has a singular role to play in bringing together the technical expertise to prioritize the myriad environmental issues of national concern and to periodically update these assessments. Previous exercises of this type have been attempted (e.g., President's Council on Sustainable Development), but rarely have they articulated an explicit ranking of environmental priorities or established quantitative benchmarks. RECOMMENDATION 3: Individual companies and industry sectors should set quantitative environmental goals and track and report their progress in meeting these goals. Individual companies and industry sectors should take the initiative in setting, tracking, and reporting on their progress in meeting quantitative environmental performance goals.

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--> Companies that set quantitative environmental goals and commit to tracking and reporting progress often realize rapid improvements in environmental performance. While national environmental goals may not always be directly applicable, related measures should be incorporated into corporate planning to the degree practicable. The committee recognizes that important issues associated with ecosystem health, biodiversity, and sustainability still largely defy attempts at quantification, although progress continues to be made in this area. Goal 2: Improve Methods of Ranking and Prioritizing Environmental Impacts Efforts must be undertaken to develop an acceptable system for prioritizing the issues of greatest environmental concern. Doing this will require moving from the measurement of environmental loads (e.g., air emissions, water emissions, resource use, land use) to the measurement of environmental impacts (e.g., human health impacts, ecosystem impacts). With such a system, goals and metrics can be established so that scarce public and private resources are directed toward reduction of environmental impacts in the most effective manner. Companies often invest in a variety of voluntary environmental initiatives. Some of these efforts result in cost-effective lowering of environmental impacts and some do not. Such a framework would be valuable to industry and government as they continually seek to reassess and update their environmental goals. (See Recommendations 2 and 3.) RECOMMENDATION 4: Develop categorization systems to prioritize and target opportunities for reducing environmental impact. The U.S. government should facilitate a process with academia, industry, state agencies, and nongovernmental organizations to develop improved methods of ranking, categorizing, and prioritizing the relative impact of industrial environmental loads. This process should begin by focusing on human health risks and extend to issues of ecosystem health and long-term sustainability as knowledge and understanding of environmental systems evolve. Present knowledge may not allow for explicit numeric scoring of all impacts under all circumstances, but the committee feels that sufficient knowledge does exist to begin to prioritize categories of environmental loads (e.g., air emissions, water emissions, resource use, land use) relative to one another. The need for prioritization applies both within and across respective categories. Within the category of hazardous emissions, a number of efforts have been undertaken to rank substances with respect to their impacts on human health. Emissions may, therefore, provide a useful starting point. Data collected under TRI, as well as hazardous waste generation and disposal data collected under the Resource Conservation and Recovery Act, may not fully

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--> represent a facility's environmental impact, but they do provide two of the only examples of consistent cross-industry metrics. Methodologies must also be designed to compare the relative environmental impacts of hazardous emissions against other categories of environmental loads, such as materials use, land use, or waste disposal. The committee believes that the absence of ranking systems lessens the value of environmental reporting. Because many of these topics are beyond the province of industrial research, government should assume a leadership role in bringing together industry leaders, academics, and public stakeholders to investigate metrics and goals that reflect cumulative and long-term environmental impacts. Goal 3: Improve the Comparability or Standardization of Metrics Corporate managers, local communities, and a host of other stakeholders desire greater uniformity in environmental metrics. Comparable metrics support better internal decision making; allow for benchmarking across industries; and provide much wanted information to investors, lenders, citizen groups, and others. Reporting standards will also help make credible to the public industry efforts to improve environmental performance. RECOMMENDATION 5: The U.S. government should facilitate a process of establishing consistent, standardized industrial environmental metrics through the involvement of experts from industry, nongovernmental organizations, and federal agencies. The absence of standard metrics impedes benchmarking and reduces the value of public reporting of environmental performance. While reporting of standardized metrics is voluntary, a company claiming to have reduced its environmental burden should be judged by objective criteria (not unlike the formal definitions of terms like "low fat" or "nonfat" recently instituted in the food-processing industry). It is also possible that peer pressure may begin to push companies to report environmental data as more of their competitors choose to do so. Developing a set of standard metrics is absolutely critical to establishing a pattern of continual improvement in industrial environmental stewardship. While government participation is prudent in any process that seeks to set national standards, industry should play an integral role in the development, implementation, and promotion of standardized environmental performance metrics. At the level of the individual facility or firm, senior business leaders need to work with environmental managers to encourage the adoption of, at a minimum, measures of ecoefficiency and toxic dispersion. The committee stresses that a company's selection of which metrics to use and report should remain voluntary, but organi-

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--> zations claiming improved environmental performance need to make their case on the basis of accepted standards. RECOMMENDATION 6: Promote standardized industrial environmental performance metrics in international forums. The world is becoming increasingly interconnected, and the environmental performance of a U.S. corporation is often judged by more than local or national standards. The same applies to foreign multinationals operating in the United States. Some method of comparing environmental performance across countries is required. The U.S. government can play an important role in promoting standardized metrics internationally. In today's global economy, corporate operations are not limited by national boundaries but depend on extensive global supplier chains and distribution networks. Standardized metrics, should they become globally accepted, will help level the playing field with respect to the environmental practices of companies operating under very different regulatory systems. Although establishing international industrial environmental performance standards will not be easy, efforts should be made to bring global attention to this issue. Goal 4: Expand the Development and Use of Metrics The time is right to expand the use of environmental performance metrics over more of the product life cycle and to disseminate knowledge of best practices to a wider audience. In recent years some of the largest manufacturers have been providing more-detailed quantitative information on the environmental dimensions of their operations. Environmental measures in the manufacturing stage are important, but attention must now shift to other life-cycle areas. One major challenge is encouraging the development of metrics within the manufacturer's supply chain. The committee recognizes there are limits to how deeply life-cycle attributes (and the supply chain) can reasonably be investigated. Still, it believes that the potential environmental benefits of viewing the product life cycle more holistically demand that the corporate boundaries of environmental performance metrics be enlarged. RECOMMENDATION 7: Industry should integrate environmental performance metrics more fully throughout the product life cycle. Few companies or industries control their product from cradle to grave, and many exercise direct influence over only a fraction of product life cycles. Industrial executives, managers, and engineers should begin to extend the application of environmental performance metrics both up (e.g., to account for product use

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--> and end of life) and down (e.g., to account for raw materials acquisition and processing) the supply chain. The committee recommends that companies and industrial sectors take the lead in more fully assessing the life-cycle impacts of their products. This process may include conducting surveys or studies in partnership with suppliers to determine which metrics are most useful and feasible. The committee believes that an invaluable contribution to this effort would be the establishment of a consistent, cost-effective methodology for approximating relative life-cycle impacts. A systems approach will be required, if suppliers, manufacturers, consumers, and those responsible for the final disposition of a product can reasonably assess their roles in lessening the overall environmental impact of their activities. Small and medium-sized enterprises could benefit from greater exposure to the more advanced environmental practices of larger corporations, as could other large firms that have been somewhat less progressive. While companies cannot be expected to release proprietary information or methods, greater efforts must be made to transfer to other levels of industry the corporate practices more common to large manufacturers. RECOMMENDATION 8: The U.S. government, acting in concert with industry, should gather and disseminate information on best practices in industrial environmental performance measurement. Improved efforts must be made to transfer the knowledge and technology of these methods across industries and sectors, particularly to small and medium-sized enterprises. Approaches to measuring and improving environmental performance are proliferating throughout the world. Some system needs to be devised that more effectively communicates these techniques to small and medium-sized companies, as well as to larger companies that have yet to develop environmental measures. The Internet allows for the creation of a widely accessible clearinghouse of environmental metrics information. An appropriate government agency (e.g., EPA, U.S. Department of Commerce) should engage expertise from the private and public sectors to assemble and periodically update an online library of industry-specific metrics and case studies. Other avenues of dissemination might include state agencies and industry associations. Goal 5: Develop Metrics that Keep Pace with New Understanding of Sustainability Society's understanding of and commitment to the concept of sustainability is increasing. As this interest grows, all sectors of the economy must begin to investigate methods of assessing and improving the sustainability of their activities. While many companies have made headway in the application of

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--> ecoefficiency metrics and programs, this represent only a first step toward sustainability. RECOMMENDATION 9: The U.S. government and industry should assure that adequate research attention is directed toward furthering understanding of the complex environmental interactions associated with sustainability. Industry's role will be driven primarily by competitive pressures as customers, investors, and regulators demand better environmental attributes from products and processes. Government's role will be to examine ways in which industrial operations and products affect the various aspects of sustainability. This may involve investigating the implications of long-term industrial activity on the environment, including such issues as materials flows and energy use. While the concept of sustainable development has widespread appeal, there is as yet no scientific consensus on a definition of the concept or indices by which it may be measured at the macro, or societal, level. Assessing a given industrial product, process, technology, or facility with regard to sustainability will require the development of systems approaches for which very few relationships have yet been developed. In addition, although attention to purely environmental issues is important, it should be noted that economic and social concerns are integral to the concept of sustainability. RECOMMENDATION 10: Conduct research on methods of integrating socioeconomic criteria into sustainability measures. Research is needed to help solve the analytic, relational, and informational challenges associated with sustainability. These challenges involve not only single-issue complexities (e.g., related to the environment) but also those relating multiple behaviors and impacts (e.g., economic-environmental, social-environmental) and varying scales (e.g., local, regional, global). Presently, it is difficult to directly relate a firm's contribution to many broad measures of economic and social status (e.g., per-capita income, average education level). Researchers must begin to examine methods of analysis and metrics that address society's ability to link environmental, economic, and social activities in a manner that can guide progress toward sustainability. These methods and metrics often reach far beyond industry's sphere of influence. Nonetheless, as a strong force within society, industry must begin to investigate its role in this process. The committee notes that current concepts and understanding of sustainability are incomplete.

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--> Conclusions With new knowledge and changing public expectations, fresh environmental challenges are arising that are not addressed by existing environmental metrics. Ecosystem impacts, human health effects, habitat loss, and global climate change are among a few of the emerging issues for which metrics are needed. To realize the full potential of environmental metrics will require changes in industry, in government, and at the community level. All of these sectors have important roles to play, not only in improving industrial practices but also in extending the lessons learned there to the vast array of other societal activities that impact the environment. Much work remains, but as society moves to achieve sustainable development, environmental metrics will provide a valuable tool for influencing decision making and driving innovation. References Brown, M. 1998. Working with suppliers to improve environmental performance. Paper presented at the National Academy of Engineering International Conference on Industrial Environmental Performance Metrics, November 1–4, 1998, Irvine, Calif. Buzzelli, D.T. 1996. The Next Industrial Frontier: Managing the Business of Environment in Asia and the Pacific. Presentation at the Asia Pacific Responsible Care Conference, Beijing, China, September 18–20, 1996. Chertow, M.R., and D.C. Esty. 1997. Environmental policy: The next generation. Issues in Science and Technology 14: 1. Council on Environmental Quality. 1995. 25th Anniversary Report of the Council on Environmental Quality (1994–1995). Available online at http://ceq.eh.doe.gov/reports/1994-95/rep_toc.htm. [February 12, 1999] Davis, J. 1998. Exploring sustainable development: The World Business Council on Sustainable Development Global Scenarios. Paper presented at the National Academy of Engineering International Conference on Industrial Environmental Performance Metrics, November 1–4, 1998, Irvine, Calif. Ditz, D., and J. Ranganathan. 1997. Measuring Up: Toward a Common Framework for Tracking Corporate Environmental Performance. Washington, D.C.: World Resources Institute. Ditz, D., J. Ranganathan, and R.D. Banks. 1995. Green Ledgers: Case Studies in Corporate Environmental Accounting. Washington, D.C.: World Resources Institute. Ehrenfeld, J., and J. Howard. 1996. Setting environmental goals: The view from industry. Pp. 281–325 in Linking Science and Technology to Society's Environmental Goals. Washington, D.C.: National Academy Press. Environmental Law Institute. 1998. Proceedings of the symposium, Impacts and Leverage: Environmental Management and the Service Sector, March 31, 1998, Washington, D.C. Epstein, M.J. 1996. Measuring Corporate Environmental Performance: Best Practices for Costing and Managing an Effective Environmental Strategy. Chicago: Irwin Professional Publishing. Fischer, K., and J. Schot. 1993. Environmental Strategies for Industries—International Perspectives on Research Needs and Policy Implications. Washington, D.C.: Island Press. Graedel, T.E. 1997. Life-cycle assessment in the service industries. Journal of Industrial Ecology 1(4):57–70. Graedel, T.E., and B.R. Allenby. 1998. Industrial Ecology and the Automobile. Upper Saddle River, N.J.: Prentice Hall.

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