promotion of cleaner production investments: international experience

Journal of Cleaner Production 11 (2003) 619–628www.cleanerproduction.net

Promotion of cleaner production investments: internationalexperience

J.K. Staniskis∗, Z. StasiskieneThe Institute of Environmental Engineering, Kaunas University of Technology, K. Donelaicio 20, LT-3000 Kaunas, Lithuania

Received 27 August 2001; accepted 7 July 2002

Abstract

Cleaner Production (CP) should be an essential part of any comprehensive environmental management system at an enterpriseor national level. In many cases the adoption of CP improvements can reduce or even eliminate the need for end-of-pipe investmentsand therefore can have both environmental and economic benefits. Experience shows, that often companies having identified cost-effective and technically-feasible CP options, may still not be able to make necessary CP investment to realise the financial benefitsand environmental advantages. Financing of CP projects varies among countries and types of the projects. Domestic and internationalefforts to strengthen environmental financing still face a number of serious obstacles, many of which are related to profoundeconomic, political and social problems. The detailed evaluation of revolving fund establishment possibilities based on personalexperience of the authors in Lithuania, Zimbabwe and Vietnam is presented in the paper. 2002 Elsevier Science Ltd. All rights reserved.

1. Introduction

Over the last two decades, the environmental issueshave exerted an increasing influence on economic valuesand protection of environment has become an importantgoal for governments, industries, social groups and indi-viduals.

Cleaner Production (CP) is recognised and provenstrategy for improving efficient use of natural resourcesand minimising waste, pollution and risks at the sourcewhere they are generated. CP is an essential part of anycomprehensive environmental management system at anenterprise or national level. Significant reductions in pol-lution loads can often be obtained at a little cost andefficient use of resources and reduction of pollution inindustrial production are clearly preferable to reliance onend-of-pipe treatment. In many cases, adoption of CPimprovements can reduce or even eliminate need forend-of-pipe investments. Therefore can CP is associatedwith both environmental and economic benefits. Despiteits conceptual simplicity it took until late 1980, for CP

∗ Corresponding author. Tel.:+370-7-300760/300763; fax:+370-7-209372.

E-mail addresses: [email protected] (J.K. Staniskis);[email protected] (Z. Stasiskiene).

0959-6526/03/$ - see front matter 2002 Elsevier Science Ltd. All rights reserved.doi:10.1016/S0959-6526(02)00104-X

to become recognised as a valuable approach for achiev-ing dual objectives of environmental improvement andindustrial development. Cleaner Production is beingincreasingly recognised as an essential route towardssustainable development.

In 1993, the Task Force of Environmental Action Pro-gramme (EAP) was established by the EnvironmentalMinisters to facilitate implementation of EAP in Centraland Eastern Europe. Potential CP opportunities andbenefits seemed particularly large in this region. There-fore, in 1995, EAP Task Force established the objectiveof achieving a “basic capacity level” (BCL) in CleanerProduction in Central and Eastern European countries by1998. BCL was defined as follows:

—an active core of CP advisors and trainers;—a set of demonstration projects;—one or more functioning CP centres;—training materials available in local language; and—CP principles included in university curricula.

A very important assumption of the BCL concept isthat economic approach for CP cannot be effective untilthe basic capacity level is achieved, because of the fol-lowing reasons:

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—little demand from industry for CP implementation;and—very little assistance available from national CPexperts.

Experience shows, that often companies having ident-ified cost–effective and technically feasible CP options,may still not be able to make necessary CP investment torealise financial benefits and environmental advantages.Financing of CP projects varies among countries andtype of the projects. In some countries they have beenfinanced by enterprises with support from environmentalfunds, in other—companies invest their own sources,which varied from 20 to 100%, depending on the specificproject, at the third—CP developed projects are usuallyfinanced by industry or other sources available to com-panies.

Investments in CP can have attractive economic bene-fits due to reduction of input costs for materials, energyand water and reduced expenditures related to wastetreatment and disposal. Several international organis-ations, banks and donors have initiated and implementedprojects to facilitate introduction of CP investments. Butthese domestic and international efforts to strengthenenvironmental financing still face a number of seriousobstacles, many of which are related to profound econ-omic, political and social problems. The obstacles tofinance CP investments could be described under twomajor groups:

� On the demand side, enterprises have insufficientexperience in preparing real CP project, which is sys-tematically evaluated from environmental, economi-cal and technical point of view and to prepare motiv-ating applications for the project financing. Lack ofknowledge in CP auditing and assessment, evaluatingfinancial aspects of the project efficiency and invest-ments often blocks implementation of CP projects.Even when capital exists, CP is one among a rangeof investment options.

� On the supply side, there are obstacles in capital mar-kets: banks are weak in environmental due diligence,there is a lack of systematic environmental expertiseand risk assessment and loan rates are unattractive toenterprises. Additionally, costly administrativerequirements result in international financial insti-tutions establishing loan thresholds, which are some-times significantly higher than costs of CP invest-ments; it is difficult to receive financing for smallprojects. Generally, there is little experience withimplementation of economically viable CP projects.

Furthermore, an effective financing system requiresenvironmental strategies with clear goals and priorities.There is a need for training and education in preventiveenvironmental management and financing, especially at

local level. In many countries, capacity for preparingfinancially and environmentally sound projects shouldbe increased.

2. Evaluation of cleaner production financingpossibilities

A detailed evaluation of revolving fund establishmentpossibilities based on personal experience of the authorsin Lithuania, Zimbabwe and Vietnam is presented inthis section.

2.1. Lithuania

Until 1998, environmental progress in Lithuania hasmostly relied on a philosophy of pollution control.Efforts to reduce industrial pollution mostly werefocused on developing environmental institutions andlegal frameworks largely by establishing command andcontrol regulations. However, formal regulation by itselfhas not proven to be very effective in reducing industrialpollution. Therefore, there was a need to focus on tools,which could make industry to take action and stimulatesimproving environmental performance.

In Lithuania, CP methodology was introduced in1993. Twelve CP programmes (three CP programmeswere integrated with implementation of EnvironmentalManagement Systems (EMS)) have been implementedin different economic sectors. 119 companies, rep-resenting 15 branches of industry, participated there(Fig. 1). The projects developed in CP programmes,covered all main environmental areas: reduction of waterpollution, emissions to the atmosphere, solid waste, andeffective use of water and energy resources [2].

The most successful programme was Lithuanian–Norwegian CP training programme, where NorwegianCP methodology developed in collaboration with WorldCleaner Production Society [12] was efficiently adaptedto the needs of Lithuanian industry. The programme

Fig. 1. Participation of Lithuanian industrial companies in CP pro-grammes by industrial branches.

621J.K. Staniskis, Z. Stasiskiene / Journal of Cleaner Production 11 (2003) 619–628

started in 1996. Until 2001, five “schools” were perfor-med. 56 Lithuanian industrial companies participated inthe programme and 626 Cleaner Production proposals(269 of them “good housekeeping” measures with noor minor investments) have been generated. Companiesimplemented 126 of the proposals during the programmeusing their own funds. Economical results show thataverage pay-back period of all CP projects developedduring the programme is shorter than 2 years.

Summaries of the projects developed during the pro-gramme presented to Lithuanian Ministry of Environ-ment as case studies and to promote wider applicationof CP concept in the country. In 1998, the Pollution Pre-vention Centre (PPC) at the Institute of EnvironmentalEngineering (APINI) and Association of EngineeringEcology of Confederation of Lithuanian Industrialistsdeveloped National Action programme for the Develop-ment of Cleaner Production and Ecological Industry.

Experience shows that use of CP must be promotedin different levels: company, region, national, etc. At theregional level this means conducting more strategicenvironmental assessments: analysis of CP policyenvironmental implication and programme impact forthe given region. Therefore the Fifth Lithuanian–Norwegian “school” were conducted using regional prin-ciples with an attempt to evaluate impact of CP conceptimplementation on improvement of environmental situ-ation and Industrial Environmental Compliance culturedevelopment in Klaipeda region. Regional CP develop-ment created incentives for development of industrialmetabolism in Lithuania helping minimize negativeimpact on environment and improving competitivenessof Lithuanian companies; also effectively and in econ-omic profitable way mitigates or even eliminates actuallocal environmental problems [9,10].

Training on financial engineering was performed dur-ing the Lithuanian–Norwegian CP programme. The maingoals of this activity were the following:

—to develop a sense for distributional implications ofdifferent financing choices,—observe ways in which cleaner production can providealternatives and supplements to financing,—to develop a greater appreciation for benefits ofregional and other inter-local approaches,—to make economic analysis of CP investments usinga range of techniques, including investment appraisal,investment analysis (pay-back period, present value,internal rate of return), records of past economic per-formance (balance sheet, loss and profit account, manu-facturing accounts) and ratio analysis (Du Pont economi-cal model) [8].

Environmental costs have been rising steadily inLithuania in the last decade. Initially, these costs did notseem to have a major impact on activities of companies.

Therefore, most companies ignored many of the direct,indirect or less tangible environmental costs in theirinvestment decisions.

Additionally, project developers were trained in busi-ness planning and how to develop economically feasibleCP investment projects. 117 experienced CP expertshave been awarded with International CP Expert Cer-tificates [1].

Financing constrains are often mentioned as majorbarrier for wider application of CP in Lithuania andexperience shows that in small, traditional business orinflexible state owned enterprises it is fundamental prob-lem for CP project implementation [2].

To solve this problem Nordic Environment FinanceCorporation (NEFCO) established a special RevolvingFund to finance CP investments. The fund has consider-able catalytic effects for promotion of CP financing.NEFCO revolving facility for cleaner production invest-ments started activities in Lithuania at the beginning of1998. The main objective to the facility is to finance onfavourable term’s implementation of high-priority cle-aner production investments with rapid payback thatyield environmental and economical benefits (“win–winprojects” ). The investments should be commerciallyviable with an identifiable and secure stream of earningsthat is to be used to repay the loan. The basis for provid-ing a loan is the cash flow of CP investment and abilityof the enterprise to repay the loan over agreed period.

It is commonly accepted that establishment of suchtype of special purpose funds for CP investmentsencompass most of the activities currently undertaken byor with the support of, international community toenhance CP investments in developing countries.Although these strategies are commonly accepted, itshould be also pointed out that effectiveness of thesestrategies still need to be improved, in particular on thebasis of evaluation of their practical application in vari-ous projects in different developing countries. It shouldbe stressed that NEFCO revolving facility is a uniqueand very successfully operating credit line in Lithuania,which already approved investments for 30 CP projectsin 26 Lithuanian companies.

Environmental appraisal of CP project is focussed onthe following considerations:

—location of the project with respect to populationcentres, sensitive local land uses, and existing levels andsources of pollution;—pollution category (air, surface water, groundwater,hazardous waste, and other);—scale of the pollution impact;—effect associated with the pollution including possibletoxicity to human health, possible impact on climatechange, and damage to natural ecosystems and habitat.

Technical appraisal of the project is focused on inter-


alia, ensuring that the project is technically feasible,technical solution is cost effective, and that no experi-mental technologies are being applied; confirming thatenvironmental and economic benefits are achievable;establishing that time scales are reasonable; and con-firming that procurement approach is acceptable and thatprice estimates are realistic [6,7].

The Pollution Prevention Centre at (APINI) plays acrucial role in CP projects identification, evaluation,implementation and reporting:

—prepares a loan application on behalf of the applicant,including assistance in calculation of costs savings andenvironmental benefits;—assists NEFCO in communication with the applicantand preparation of loan documentation, project descrip-tion and reporting requirements;—prepares of project progress and completion reports tobe presented as a part of borrower’s disbursementrequest;—assists in project monitoring and supervision includingsupervision of procurement and project implementationprogress as compare to budgets and implementation planas well as project objectives.

In May 1998–March 2001, CP projects from 29 Lithu-anian companies have been presented for NEFCO evalu-ation. The project covered the following sectors:

Electronic-electromechanical industry 6Food industry 3Chemical industry 4Textile industry 6Metal processing industry 5Municipal services 1Furniture production industry 3Wood processing industry 1

CP projects presented for NEFCO evaluation coveredthe following areas:

Efficient use of energy resources 19 CP projectsAir pollution reduction 7 CP projectsReduction of waste amount 2 CP projectsReduction of water consumption 1 CP project

Soft loans have been provided for 24 of presented pro-posals, 12 of these projects have been alreadyimplemented (five CP projects operate more than 1year).

NEFCO Revolving Facility is closely related withLithuanian–Norwegian CP programme: all projectspresented to NEFCO evaluation were developed in

accordance to CP assessment methodology used in theprogramme [6, 11].

In Lithuania, BCL was achieved in 1998, mainlythrough Lithuanian–Norwegian CP programmes. In theprogrammes the capacity of local consultancy was builtand gradually the training activities were taken over andconducted with the minimum of support from abroad:

—more than 100 CP experts have been trained;—more than 80 CP case studies have been prepared andpresented to Lithuanian Ministry of Environment;—more than 150 CP proposals generated during the pro-gramme have been implemented;—24 CP projects requiring higher investments have beenprovided with soft loans (up to 200000 EUR) fromNordic Environmental Finance Corporation (NEFCO);—Pollution Prevention Centre at APINI plays crucialrole in CP training for companies, representatives ofgovernmental and financial institutions; conducting CPassessments in companies and CP project development,including preparation of CP investment project and per-forming the all necessary calculations related to a com-pany’s economical “health” . All APINI staff is Englishspeaking, therefore effective communication betweencompanies and financing institutions, and experts fromabroad it is fully ensured;—material on CP assessment, project development, andcapital budgeting is available in Lithuanian language;—CP courses are delivered by APINI experts for under-graduate, MSc and PhD students at Kaunas Universityof Technology.

It can be concluded that BCL built in Lithuaniaensures continuous improvement of environmental andeconomical situation in Lithuanian industrial companies,stimulates CP promotion in different economical sectors(industry, agriculture and transport) as well as in polit-ical level (government, Lithuanian Ministries ofEnvironment and Economy, municipalities, regionalenvironmental departments) [4].

2.2. Zimbabwe

Economy of the country depends heavily on agricul-ture and processing, export of agricultural products. Theimportance of industry is currently growing, because thecountry is in the process of implementing major econ-omic reform programmes.

Majority of industrial sectors consist of small andmedium sized companies. Traders with very limited fin-ancial and technical resources have set up many of suchcompanies. The facilities are often poorly designed; con-structed and outdated equipment is used.

Sustainable development strategy was developed inZimbabwe and specific drivers for industry sector werethe following:


—strengthening of the institutional framework forimplementation and enforcement of environmental poli-cies;—re-alignment of environmental policies throughenvironmental framework act and national environmen-tal plan. Although environmental policy at present doesnot specifically promote CP, the key problem appearsnot to be the lack of CP focus, but rather the large gapbetween environmental policies and their actual enforce-ment tin the country due to the lack of institutionalcapacity, tools and policies for inspections and enforce-ments.

Zimbabwe is experienced with fostering the uptake ofCleaner Production concept at national level. UNIDO –UNEP national Cleaner Production Centre was estab-lished in the country in 1995. The following CP andrelated projects have been implemented:

—industrial energy conservation project implementedwith financial support from Swedish International Devel-opment agency (SIDA) (food processing, textile, metalprocessing, glass and cement industries);—sector specific projects implemented in tanning and-leather processing industry with financial support fromUNIDO [3,5].

Qualified experts have been trained and around 20demonstration projects have been implemented duringthe programmes. Denmark International DevelopmentAgency (DANIDA) has implemented some technicalassistance projects with in plant demonstrations in Zim-babwe, which were focused on industrial productivityand/or energy conservation. However, none of CP pro-grammes was aimed at CP follow-up system develop-ment, i.e. gradual involvement of national institutions,organisations and experts in CP promotion, building orstrengthening technical and institutional capacitythrough awareness building, training or policy advice.

As a part of UNEP initiative, a project “Strategies andmechanisms for Promoting Cleaner Production Invest-ments” was executed. Experts from the Institute ofEnvironmental Engineering (APINI), Lithuania wereresponsible for all issues related to CP investment pro-ject development in participating companies. Systemsapproach was used for CP investment project develop-ment, i.e. the systematic identification, evaluation andimplementation of CP opportunities.

Systems approach generally consists of three separ-ated, but interrelated components:

—method—tool for identification of CP options;—procedure—organise necessary CP activities in a com-pany;—guidance and supervision—to guide, inform andstimulate project team on a company level.

CP assessments have been conducted in 10 industrialcompanies: metal processing companies, 4; food indus-try, 2; tanneries, 2; mining, 1; chemical industry, 1. Intotal 78 proposals have been generated (50 from theseproposals were “good housekeeping” or low costmeasures).

There is a technological element, which is importantin all CP investment proposals. Technological capacityis the ability of producers to identify product opport-unities, to source, install and operate the right equipmentand to have knowledge and technical experience toimplement changes in the production processes. Thesecomplex factors were vital in determining the success orfailure of a project and it is this field of capacity buildingthat generates clear synergies between financial and non-financial services.

To provide the companies with ability to evaluate thefinancial viability of CP project and whole company’sactivities, the course in financial engineering wasincluded in the training programme. The training enabledcompany to perform successful analysis of decisionmaking process and procedures in companies in termsof prioritisation of alternate investment options. It wasmapped how investment selection regularly takes place,and how this process can be changed in favour of CPinvestments. 11 CP investment projects have beendeveloped:

reduction of water pollution 5energy saving 3reduction of solid waste amount 2reduction of water consumption 1

The average investment range of these projects wasUS$95 500 and average payback period of 2.1 years.Five CP investment project have been financed as a partof DANIDA supportive project implemented incooperation with Scientific and Industrial ResearchCentre. Financing was provided for the following pro-jects:

water pollution reduction 2 projectsreduction of solid waste amount 2 projectsreduction of water consumption 1 projects

At the end of the project, Local Capacity for CPfinancing was built (five local CP experts, 21 local fin-ancial analysts and representatives of 10 companies havebeen trained).

Financial institutions and other related parties in Zim-babwe complained of a shortage of good investment pro-posals. However experience of APINI experts shows,


that the main problem is lack of well presented proposals(in bankable form). Therefore, it should be stressed thatCP Investment Project development methodology pro-posed by APINI in country, where CP training pro-gramme does not exist at the time being, appeared to bevery effective and from CP demand side—Zimbabweancompanies are keen to ensure sustainable development,but the lack of professionally developed projects, casestudies and training activities on CP significantlydecelerates the process. At the same time ZimbabweNCPC position was not strong enough in stimulating andbuilding capacity for CP, CP promotion and strengthen-ing relations with companies. This lead to difficulties inraising necessary funds for making investments in rec-ommended economically and technically feasible CPmeasures.

The credit offer from financial institutions in Zim-babwe is in general not favourable for any type of capitalinvestment in industry (in terms of interest rate, loanceiling, repayment terms and collateral requirements).Therefore, borrowing investment capital from commer-cial financial institutions is very expensive, and it makesCP investment proposals not financially viable. Further-more, the lack of conductive policy frameworks for Cle-aner Production, as well as uncertainties associated withthe economic reforms taking place, can be referred to aspotential constrains for the financing of CP investments.

2.3. Vietnam

As in Zimbabwe, the economy of the country heavilydepends on agriculture and the processing export of agri-cultural products. The country performs most profoundeconomic reforms and is undergoing transition from acentrally planned to a market economy. The presentreforms in economy and society in combination with theexpected continued growth and modernisation of theindustry sector offer a critical challenge for promotingCP, i.e. new investments in industrial plant and infra-structure are likely to take place in the near future andprovided that urgent action is taken to put CP on indus-try’s agenda, it is possible to integrate CP right from thestart into these new industrial establishments [3,5].

In Vietnam, a significant number of large industrialcompanies exist and most are state owned. The level oforganisation of the industry sector is comparatively highfor the larger companies and lags behind for the smalland medium sized companies. However, a growing num-ber of small and medium sized companies succeed inimproving its operations and exporting its products [3].

The industrial competitiveness is generally low in thecountry. Related thereto, environmental burden causedby industry is comparatively severe: sub-optimaloperating practices, poor operation and maintenancestatus of equipment, sub-optimal design and selection ofequipment and general ignorance of environmental

issues, all contribute to comparatively high losses ofinput materials, water and energy in the production pro-cesses, and the discharge of significant amounts of was-tewater, solid waste and air pollutants. Furthermore, gen-eral awareness on harmful substances is low, and thereis a high possibility of uncontrolled releases of theseharmful substances to the environment. Therefore, it isevident that the CP approach is well suited to addressthese deficiencies and achieve both financial andenvironmental benefits in comparatively short term.

Environmental policy was developed by Ministry ofScience, Technology and Environment. The followingobjectives for industry sector have been set:

—promotion of EMAS/ISO 14001 environmental man-agement systems (as part of industrial policies);—general intention to frame the environmental rehabili-tation of industry in privatisation process ant other indus-try modernisation efforts.

In Vietnam capacity for promoting CP in industry wasbuilt, particularly, in the framework of the regional Net-work on Industrial Environmental Management (NIEM)in pulp and paper industry, coordinated by the UNEPregional Office for Asia and Pacific. The UNIDO–UNEPNCPC was established in 1998. The following CP andrelated projects have been implemented in Vietnam:

—Pollution Control Survey in Ho Chi Minh City(UNIDO/Swedish International Development agency(SIDA)).—Several technical assistance projects for private sectordevelopment (EU funded), which may indirectly encour-age CP by pursuing industrial competitiveness, productquality and energy conservation.—15 in plant demonstration projects implemented byVietnam CPC (funded by the Swiss Government) todemonstrate how cleaner production can be implementedin the industries in Vietnam, and to provide hands-ontraining in CP of industry personnel.

Vietnam also participates in the UNEP project “Stra-tegies and mechanisms for Promoting Cleaner Pro-duction Investments” . The same experts from the Insti-tute of Environmental Engineering (Lithuania) wereresponsible for all issues related to CP investment pro-ject development in eight industrial Vietnamese compa-nies, which participated in the project (three textile com-panies, three pulp and paper production companies, twofood-processing companies). The course in financialengineering was also delivered.

Developed projects covered the following environ-mental area:

air pollution reduction 1water pollution reduction 1


energy savings 4water savings 2

It should be stressed that initial CP investmentdemand was in place and the input of companies indevelopment and presentation of CP projects was suf-ficient. However, some shortcomings have been alsoidentified:

—different background and understanding of processes,different interpretation of requirements and priorities,lack of English language skills (especially in CP projectidentification and feasibility studies) of the CP expertswas a significant obstacle to work in a team effectively;—there was a comparatively long time period betweenthe first CP assessments performed in Vietnam compa-nies and training on CP investment—many companieslost their interest in further development and implemen-tation of CP projects. As a result, Vietnam NCPC hadproblems in motivating and collecting companies for theCP Investment promotion programme;

As to financing of CP investment projects, bank loansin Vietnam are considered unattractive due to high inter-est rates and unattractive terms. Most companies requirelow interest, long-term loans for environmental projects.Furthermore the procedure for borrowing money fromcommercial banks in Vietnam is considered by manycompanies to be complicated and costly.

New environmental directives, which were issuedrecently by Vietnamese government specifically, ident-ified the adoption of CP as a way of strengtheningenvironmental protection in the process of nationalindustrialisation and modernisation. The directives stipu-late that CP adoption must be encouraged through tax-ation and credit policies and that funding of environmen-tal protection should almost become “ institutionalised” .This can reinforce the positive economic relationshipbetween attracting foreign direct investments for stimul-ating industrial growth and using national resourcesmore efficiently.

3. Lessons learnt

Industry is taking on more environmental responsi-bility by implementing better technologies and improvedmanagement systems. Currently, leading companies areactive in the field of CP and demand for higher invest-ments is increasing.

Generally, investments in CP are economically attract-ive. However, financing even small investments withlow payback period can be difficult. These projects arenot implemented due to lack of capital, poorly developed

banking system, lack of appropriate financing mech-anisms, and lack of knowledge, technology risks andmanagement unwillingness to borrow money.

In every country where CP concept was introduced,the progress depends on many different factors (some ofthem are closely related to national law system require-ments, level of country economy development and etc.)and on shifts in their configuration that take place overtime. After detailed CP projects analysis in Lithuania,Zimbabwe and Vietnam, it could be concluded, that mostenvironmental issues are not explicitly taken intoaccount were people have not basic understanding orpractice in CP project development and implementation.Therefore, the environmental impacts and their econ-omic consequences are often underestimated. The factthat some environmental issues are and others are nottaken into account leads to confusion and misinfor-mation.

From CP promotion in different countries the follow-ing lessons have been learned:

—“ training the trainers” or company experts is anefficient approach. Until 2001, more than 100 CP expertshave been trained in Lithuania. Most of them are veryactive in further CP projects development in their com-panies, regions or even on national level.—means and incentives for implementing CP projectsshould be available—in Lithuania the unique “NEFCO–APINI credit line” started activities in 1998 during theSecond Lithuanian–Norwegian CP school and this wasvery important incentive for CP, CP and EMS inte-gration development in the country. Therefore, Lithuan-ian experience was used as good starting point to dis-seminate results and to convince senior managers inenterprises of the benefits of CP activities in other coun-tries (CEES, Zimbabwe, Vietnam and other) and to fin-ancial institutions to develop similar credit schemes forenvironmental projects.—in shifting the emphasis towards CP options, two waysof influencing the capital budgeting process at the com-pany level can be considered:

� developing and promoting the use of improved man-agement accounting systems, techniques and prac-tices, which facilitate a reasonable inclusion ofenvironmental costs and benefits and favour the par-ticipation of various departments and managementlevels in the decision-making process;

� promoting the use of different hurdle rates forapproval of CP projects.

—it is very important to train CP experts and industryrepresentatives to evaluate systematically economicaland managerial CP activities in companies (in additionproviding technological solutions or recommendations).This leads for motivated and economically feasible CPproject development and the environmental impact of the


project is evaluated on micro- and macro-economicallevels (see Fig. 2).—CP Centres should play a crucial role in CP promotionactivities: they should concentrate on their core functionsof dissemination of information, education, training andcommunication between companies, governmental andfinancial institutions; CP experts should have soundunderstanding of technological and economic issues andbasic knowledge of English. This will ensure sus-tainability of CP centre and efficiency in CP projectdevelopment and implementation. Even sharing thesestudies and learning from the analysis of each other isfar from systematic. Therefore, CP concept developmentand investment demand analysis should be coordinatedby NCPC, which should have a strong position and auth-ority as well as over the government and industry. Atraining process, again led by the NCPC, could belaunched within the country on national and regional lev-els. Such process, involving the private sector, thegovernmental institutions and international organisationswould provide a basis to define the national CP invest-ment promotion strategy. It should be stressed that atthis stage, the real and effective BCL should created inthe country.—there is a general need for training materials inlocal languages.—further efforts are needed to integrate environmentalmanagement principles more systematically into univer-sity curriculum, both in engineering and inbusiness/economic courses.—to start establishment of regional soft loan CP invest-ment financing facility and gradually to transfer it to theconditions of ordinary loans; NEFCO–APINI CP invest-ment financing example is a unique positive experiencein this regard and should be disseminated much broaderthrough UNEP–UNIDO, OECD networks (see Table 1).

When BCL for CP is created, the country should des-ignate its own national development strategy, based on

Fig. 2. Areas of developed CP investment projects.

needs and experience as well as national and inter-national. It should be stressed that two types of activi-ties—political (efforts to reform tax policies, use of mar-ket based instruments, regulatory policy, education andother tools that motivates decision makers to select CPfrom available choices) and—industry based (specificenvironmental projects, technical assistance and directfinancing environmentally sound projects in industry andorganisations) should be integrated in order to:

—strengthen support for CP among policy-makers;—promote the use of a wider range of policy instruments(promoting CP);—emphasise regional and local “ownership” of CP pro-grammes;—promote implementation of environmental manage-ment systems;—establish and strengthen financing mechanisms to pro-vide investment capital at affordable rates, andstrengthen capacity in preparation of financially viableenvironmental projects;—develop methodologies to assess the impact of CP pro-grammes, particularly in economic and environmentalterms.

Fig. 2 shows that most of developed CP investmentprojects are in the area of energy saving. Energy sectoris important for industries in all three analysed countries.The main reason for this is growing prices of energyresources. Price of water, taxes for emissions, etc. alsopromote investments in CP. Therefore, it can be con-cluded that the main drivers for CP project developmentare economic incentives.

On the other hand, financial service sector has thepower to direct financial resources towards projects orcompanies that have demonstrated good environmentalperformance. A growing number of managers in the sec-tor are aware of the need to systematically evaluate theenvironmental risk associated with their decisions.


Table 1Success factors for CP implementation: comparison of results in Lithuania, Zimbabwe and Vietnam

Factor Lithuania Zimbabwe Vietnam

Poor Satis. Good Poor Satis. Good Poor Satis. Good

1. Basic Capacity Level on CP:—an active core of CP advisors and trainers; × × ×—a set of CP case studies, demonstration × × ×projects;—a functioning CP Centre or Centres; × × ×—training materials in local language × × ×—CP principles included in university curricula × × ×2. Basic Capacity Level on Financial Engineering:—an active core of experts; × × ×—training materials in local language × × ×—case studies:� developed × × ×� implemented × × no3. Financing facilities—internal × no ×—external × × no

Satis.=satisfactory.

Therefore, financial sector has one of the key roles in CPpromotion. Environmental risks vary from one financialactivity to another. Most of such risks are linked to nega-tive impacts on a company’s financial results of factorssuch as financial liability, the need to comply withstricter regulations, the impact of accidental releases, orloss of market share due to a bad environmental image.Finally, the responsibility for financing projects with sig-nificant environmental impacts can affect the image offinancial institutions.

It can be concluded that environmental performancemeasured through the adoption of CP measures, isincreasingly regarded as an indicator of business health.Good environmental management reflects good manage-ment in general. To the extent that financial institutionsshare this perception, pressure on firms to adopt cleanerproduction processes will be much greater. There is alsoa good indicator for financial institution to avoid busi-ness that may face costs associated with environmentalliability.

From the investment demand side, a company, whichparticipated in systematically performed CP training(including capital budgeting, analysis of past economicperformance, risk and sensitivity analysis of CP project),will be able to develop economically feasible projectswith comparatively short pay back period and with verysmall or eliminated environmental risk.

The key aspects of the long, knowledge-intensive pro-cess of integrating environment with rapid economicaldevelopment are the following:

—understanding the environment and the processes thataffect it by identifying the sources of environmental

degradation, its consequences, and the costs of reducingit, as the foundation for effective policy;—developing indicators of environmental performancethat policy makers at the local, regional and nationallevel can use;—using environmental information to improve both pub-lic regulation and private decision making;—managing environmental knowledge by building thecapacity to gather and disseminate knowledge, improv-ing private sector environmental management and broad-ening public policy models to include environmentalvariables.

Effective development requires partnership amongdifferent levels of government, private sector, donorgroups and civil society. The major challenge inimplementing the proposed approach of CP investmentpromotion is the country’s ability and willingness todevelop and implement its own national strategy—thiswill increase effectiveness of possible external assistanceand efficiency of the support it provides, i.e. the supportto BCL should be increased. National governments needto provide guidance, which agencies and organisationshave to coordinate efforts to remove bottlenecks todevelopment.

References

[1] Staniskis J, Stasiskiene Z, Kliopova I, Kildisas V. Capacity build-ing programme in cleaner production in Lithuania. Kaunas Tech-nological, 1999.

[2] Stasiskiene Z. Evaluation of cleaner production development


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