life cycle management as a tool for managing corporate risks · diffusion of lcm in the countries...

Life Cycle Management as a tool for Managing Corporate Risks

Sangwon Suh1,2, Junghan Bae1, Mike Wietecki1

1 University of Minnesota2 University of Leiden

Content• Introduction: IE lab• Background and Objectives• Survey on LCM practices• A strategy for diffusing LCM in S. Korea• Concluding remarks

Introduction: IE lab• Multidisciplinary research team from

– Natural Resources Science and Management– Civil and Environmental Engineering– Applied Economics– Water Resources Science

• Resources (10 members)– 1 Postdoctoral Associate / 2 Research Associates– 3 PhD students / 2 MS students– 2 Senior visiting scholars

• Research area – LCA / LCM– Material Stocks and Flow / Resources Productivity– Analytical tools / Database development

Background• Discussion forum with major industries in S. Korea

– consumer electronics– Semiconductor– LCD – automakers.

• EHS teams and LCA practitioners recognize– The needs of LCM.– Difficulties in adopting LCM into business practices.

• Ministry of Industry of S. Korean– Identify obstacles and opportunities for diffusion of LCM

Objectives• Survey LCM practices of leading companies.

– Companies in S. Korea and other countries• Identify key strategies

– Accelerate penetration of LCM among S. Korean industries.

• Dissemination / communication of the findings – Industry stakeholders– Government

Survey• About 30 companies practicing LCM are

interviewed by phone or questionnaire.– Mining and primary material processing– Chemical processing– Electronics and medical devices– Automakers– Semiconductor– Retail trade

Survey questions and results

Survey questions and results

Survey questions and results

– LCM report for newly introduced products.– Engineering system or Enterprise Resources Planning

(ERP) tools.– Participation of CEO’s team to Product Stewardship

team.– Through Key Performance Indicator (KPI).

Survey questions and results

– But most companies expressed the difficulty to quantify the positive economic benefits by exercising LCM.

Survey summary• Major motivation to adopt LCM was to minimize risks

associated with product’s environmental performance.• EHS and product development departments are the main

operational organs of LCM.• An array of regulations and regulatory measures is

addressed using LCM.

• Interviews with S. Korean industries– Top management understands Quality Control and 6 Sigma rather

well, while some expressed the difficulties in communicating LC terms with the top management.

– Some also reported lack of cooperation from product development side.

Strategy for S. Korea• Communication with the top management

– Interpretation of LCM as a tool for corporate risk management.– Develop business cases over LCM

• Minimizing the burden of introducing new measures– Assimilating LCM into the routine, product development process

(LCM/PLM).– Using existing business functioning as much possible.

• Make the most use of internal and external reporting opportunities and quantitative KPIs.– Sustainability reporting / GRI / Corporate Environmental Reporting– Stakeholder communication / Internal routing chain

• Full LCA can’t be a requirement for LCM.

Risk Management and LCM• Promoting Life Cycle Thinking

– Corporate risks spans across the entire life-cycle of a product.

– LCM is a tool for identifying and reducing corporate risks across products’ LC

Raw material Primary processProductionDistribution

UseDisposal

Recycling

R i s k s R i s k s

Risk = OpportunitiesRisk = Opportunities

Corporate Value and risk management

Source: Arthur D. Little, The Business Case for Corporate Citizenship (2002)

• Tangible assets from the accounting book

• Intangible assets- Corporate Image- Brand value- Stakeholder relationship

Total Corporate Value

Total Corporate Value

83%83%

17%17%

29%29%

71%71%Regulatory compliance

Relationship with env. NGOs

Env. lawsuit

Supply chain

Media relationship

Investor relations

Env. Management

Env. Health & Safety

1981198120022002

Business case 1: Company “S” Play station (Upstream supply-chain)Business case 1: Company “S” Play station (Upstream supply-chain)

1.3 million Sony PS importedTo the Netherlands in 2001• Cadmium > 100mg/kg • Quarantined and Sony lost

600 million dollar

Business case 2: Pacific Gas and Electric (production phase)

• Chromium hexavalent: 600 plaintiff won 300 million $ in 1996.

• Film, Erin Brockovich brought Julia Roberts a Academy award in 2000.

Business case 3: Teflon of company “D” (Use phase)

• When heated Teflon produces C8, a material that poses “substantial risk of injury to health or the environment.” under TSCA.

• EPA and DuPont settled a 300 million penalty.

Business case 4: Electronic Wastes (End of life phase)

Concluding remarks• With the increasing importance of international trade,

diffusion of LCM in the countries other than Europe, Japan and North America is essential.

• LCM as a totally new management paradigm will have less chance of success in those countries.

• Alliance with the closely related operating processes and management paradigms is crucial.

• Here we suggest interpreting LCM as a tool for corporate risk management and embedding it within the product development / stewardship operation.

• Developing business cases currently on-going, and your inputs will be greatly welcomed!

Thanks!Contact Information:

Sangwon Suh Assistant ProfessorUniversity of Minnesota E-mail: sangwon@umn.eduTel: 612-624-5307