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2 Background and Literature Review
2.1 Context of Corporations and Products
Corporations are among the main actors which can profoundly infl uence sustainability through their products and services that span across different locations
through their supply chains and markets. There are broadly fi ve forces requiring
corporations to improve their sustainability performance more than ever before.
These are megatrends (environmental, social, demographic), regulatory pressure,
stakeholder pressure, supply chain risks and competitive pressures (Manda 2014 ).
The developments underlying the megatrends are population growth and rising
disposable income, increasing urbanization, growing share of elderly population,
climate change, water scarcity, bio-diversity loss, resource scarcity, poverty and
inequity (UN 2012 ; GSSD 2014 ; WWF 2012 ; UN DES 2013 ; Rockstrom et al.
2009 ). The regulations on corporate and product sustainability, emission standards
and trading schemes are growing in many countries and regions (e.g. the USA, EU,
China and India) (US-EPA 2014 ; World bank 2014 ; EC 2014 ; EDF and IETA 2013 ).
The number and activity of global NGOs targeting the working standards among
suppliers and the pollution they are causing is increasing year by year (O’Rourke
2005 ; Economist 2014 ; Jun 2014 ). Consequently, the interest of investors in sustainability aspects of corporations is growing. Companies are trying to reduce risks,
reduce costs of scarce resources, and develop new products that can improve their
sustainability performance and provide competitive advantage in the market.
Despite these pressures, managers in companies are still pressed to deliver value,
and their performance is measured on how well they deliver the value. Therefore,
managers often face the challenge of addressing stakeholder concerns in day-to-day
business while simultaneously improving value and thereby fi nancial performance
of companies (Hart and Milstein 2003 ).
2.2 Opportunities for Sustainable Value Creation
It was found that the improved environmental and social performance of companies can have a positive impact on the fi nancial performance through reduced costs,
improved revenues, and avoidance of risks (Epstein 1996 ; Eccles et al. 2012 ; Hart
and Milstein 2003 ). For example, process improvements could lower energy and
water usage and save operational costs (Worrell et al. 2003 ); and improved raw
material utilization not only decreases raw materials costs but also reduces costs
for handling and disposal of waste while simultaneously reducing the environmental footprint. There are several risks that can be avoided by sustainability performance improvements (Koplin et al. 2007 ). Increased scarcity of raw inputs such as
water can lead to disruption of operations, i.e. lost production activity, which will
impact the revenue earning capacity. Companies have to increasingly pay higher
11 Sustainable Value Creation with Life Cycle Management
2 Background and Literature Review
2.1 Context of Corporations and Products
Corporations are among the main actors which can profoundly infl uence sustainability through their products and services that span across different locations
through their supply chains and markets. There are broadly fi ve forces requiring
corporations to improve their sustainability performance more than ever before.
These are megatrends (environmental, social, demographic), regulatory pressure,
stakeholder pressure, supply chain risks and competitive pressures (Manda 2014 ).
The developments underlying the megatrends are population growth and rising
disposable income, increasing urbanization, growing share of elderly population,
climate change, water scarcity, bio-diversity loss, resource scarcity, poverty and
inequity (UN 2012 ; GSSD 2014 ; WWF 2012 ; UN DES 2013 ; Rockstrom et al.
2009 ). The regulations on corporate and product sustainability, emission standards
and trading schemes are growing in many countries and regions (e.g. the USA, EU,
China and India) (US-EPA 2014 ; World bank 2014 ; EC 2014 ; EDF and IETA 2013 ).
The number and activity of global NGOs targeting the working standards among
suppliers and the pollution they are causing is increasing year by year (O’Rourke
2005 ; Economist 2014 ; Jun 2014 ). Consequently, the interest of investors in sustainability aspects of corporations is growing. Companies are trying to reduce risks,
reduce costs of scarce resources, and develop new products that can improve their
sustainability performance and provide competitive advantage in the market.
Despite these pressures, managers in companies are still pressed to deliver value,
and their performance is measured on how well they deliver the value. Therefore,
managers often face the challenge of addressing stakeholder concerns in day-to-day
business while simultaneously improving value and thereby fi nancial performance
of companies (Hart and Milstein 2003 ).
2.2 Opportunities for Sustainable Value Creation
It was found that the improved environmental and social performance of companies can have a positive impact on the fi nancial performance through reduced costs,
improved revenues, and avoidance of risks (Epstein 1996 ; Eccles et al. 2012 ; Hart
and Milstein 2003 ). For example, process improvements could lower energy and
water usage and save operational costs (Worrell et al. 2003 ); and improved raw
material utilization not only decreases raw materials costs but also reduces costs
for handling and disposal of waste while simultaneously reducing the environmental footprint. There are several risks that can be avoided by sustainability performance improvements (Koplin et al. 2007 ). Increased scarcity of raw inputs such as
water can lead to disruption of operations, i.e. lost production activity, which will
impact the revenue earning capacity. Companies have to increasingly pay higher
11 Sustainable Value Creation with Life Cycle Management