Cleaner production at the Asian Development Bank

Journal of Cleaner Production 11 (2003) 639–649www.cleanerproduction.net

Cleaner production at the Asian Development Bank

J.W. Evans∗, B. HamnerAsian Development Bank, Environmental Division, P.O. Box 789, Metro Manilla0980, Philippines

Received 28 August 2001

Abstract

The Asian Development Bank (ADB) recognizes that protecting Asia’s environmental quality will require significant decreasesin the intensity of resource use and pollution. This requires a focus on consumption, production and distribution of goods andservices as the foundation of environmentally sustainable economic development. Cleaner Production (CP) is the strategy used byADB to affect intensities of resource use and pollution generation. CP includes many tools for many different areas, but they allinclude a foundation of life cycle management and risk reduction. CP began in ADB as a technical approach to improve theenvironmental performance of projects. It has evolved into a broad program that seeks to integrate preventive environmental manage-ment and technology into national and regional policies and sustainable development strategies. Experience has shown that CP ispromoted primarily by changes in behaviors, not technologies. The challenge for the ADB is to help its Developing MemberCountries bring CP concepts into national development policy, governance, technology development and information exchange,and private sector investment. Promoting CP in new industrial investment in Asia, particularly by small- and medium-sizedenterprises (SMEs), and promoting the adoption of CP principles as development policy in DMCs will be major goals of the ADB. 2002 Published by Elsevier Science Ltd.

Keywords: Cleaner production; Pollution prevention; Asian Development Bank; Asian and pacific region; Developing countries; Lessons learned

1. Introduction

The Asian Development Bank (ADB) is committedto the protection of the environment in its DevelopingMember Countries (DMCs) in particular and in theworld in general because the future of Asia’s environ-ment will affect the globe. ADB has actively includedenvironmental protection among its development pri-orities since the early 1980s. The initial focus was onthe refinement of environmental impact assessment andthe development of guidelines, management informationsystems, and review procedures in its operationsthroughout the 1980s. A gradual shift to grant assistancefor environmental institutional and capacity building inthe DMCs occurred between the 1980s and the early1990s. Environment-oriented projects started to appearin ADB’s pipeline of investment projects in 1991. Bythe mid-1990s, ADB moved towards promoting sectoralpolicies on environment and institutional reforms and

∗ Corresponding author. Tel.:+63-632-6883; fax:+63-636-2195.E-mail address: [email protected] (J.W. Evans).

0959-6526/03/$ - see front matter 2002 Published by Elsevier Science Ltd.doi:10.1016/S0959-6526(02)00112-9

essential elements of good governance that are neededfor sustainable development. Environmental protectionwas included as one of ADB’s five strategic develop-ment objectives.

From 1991 to 1999, environmental projects consti-tuted an average of 13% of the ADB’s total annual pub-lic sector lending volume. The proportion of lendingdevoted to environment has increased steadily andreached a total of about $7 billion in 2000. There hasbeen a gradual decrease in the proportion of environ-mental lending oriented to agriculture and naturalresources, and an increase in lending for environmentalinfrastructure, pollution management and policy reform.To date, ADB has provided technical assistance (TA)grant funding in 35 DMCs amounting to $200 millionfor environmental capacity building.

At the beginning of the 21st century, the ADB hasestablished that its primary mission is to reduce povertyin Asia. The framework for poverty reduction includesthree main components of (1) pro-poor, sustainableeconomic growth; (2) social development; and (3) goodgovernance. The framework is supported by three cross-cutting themes: private sector participation, regional col-

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laboration, and environmental sustainability. Thesethemes are inseparable from all policies and programsfor sustainable development, by the ADB or anynational government.

2. Investing in cleaner production

During the 1980s, many developing countries promul-gated environmental protection standards based on emis-sion limits and restrictions on some chemical use. Lackof political will, financial resources and legal capacityto enforce standards, and the mistaken belief thatenvironmental protection was an obstacle to economicdevelopment, meant that the command-and-controlapproach has not significantly succeeded in reducingpollution in most developing countries [1].

In the early 1990s, organizations such as UNEP,UNIDO and the World Environment Center werespreading the concepts of pollution prevention and cle-aner production (CP) to responsive environmentalagencies in the ADB DMCs. The US Agency for Inter-national Development initiated the ASEAN Environ-mental Improvement Project, whose objective was topromote CP in Southeast Asia through demonstrationprojects and policy analysis. Similarly, a number ofbilaterally funded demonstration projects were under-taken in factories in several countries. Such bilateralgrant assistance has been instrumental in helping spreadthe message that CP was an exciting alternative to thecommand-and-control model of pollution management[2].

ADB funding of CP projects started only in the late1980s. Since then, there has been a significant increasein terms of both number of projects and volume of lend-ing for CP related projects. However, total lending vol-ume to date, which is about $3.2 billion, is only 5% oftotal lending volume by the end of 1998. Of the $3.2billion, nearly 50% was loaned to PRC. India follows,taking about 22%, while Indonesia and the Philippinesshare about 9% each, Thailand shares about 7% andMalaysia is last taking about 3% [3].

ADB-funded CP projects listed in Table 1 utilized dif-ferent preventive measures. Several of these focused onenergy conservation by changing the fuel source, otherson modification of existing processes, recovery of reus-able materials, equipment retrofitting or rehabilitationand use of clean technology. Industries covered by theseprojects include thermal power plants, leather tanning,fertilizer, cement and metallurgical industries, pulp andpaper mills, and energy supply projects. Some projectsincluded credit line components to provide access tofunds for small- and medium-scale industries. Anotherproject aimed at strengthening research and development(R&D) capacity in the field of automated manufacturingand advanced materials, developing a core of well-

trained manpower and establishing an information sys-tem.

The ADB recognized that it would be valuable for aregional version of the Opportunity Assessment modelto be promoted. In 1995, the ADB published its guidancemanual, Industrial Pollution Prevention. This manualprovides step-by-step guidance for industrial facilities toreview their operations and pollution, conduct a system-atic opportunity assessment, and evaluate potential CPsolutions. It remains a valuable tool for larger industrialfacilities that face environmental challenges [4].

The ADB also recognized that it needed internal guid-ance on promotion of pollution prevention and CP. In1995 the Environment Division produced the internalpaper, A Pollution Prevention Program for the AsianDevelopment Bank. This paper made the case for CP asa complementary strategy to pollution control andexplored many aspects of CP, including the use of mar-ket-based instruments (MBIs), matching CP activities tolocal capacities, lessons from developed country experi-ence, and Asian examples of CP in action. The analysisshowed that, until 1995, pollution prevention projectsfunded by the ADB were piece-meal and showed lackof interrelation with succeeding or previous projectsfunded by ADB or by other funding agencies. In somecases, ADB assistance had ‘ leap-frogged’ immediatelyto direct provision of investments for retrofitting orupgrading of firms using clean or energy efficient tech-nology in a subsector of an industry, instead of focusinginitially on awareness promotion, the establishment ofthe required institutional, regulatory and legal frame-work and information systems, and promotion and build-ing of technical capacity. A strategic approach wasadopted beginning with an evaluation of the capacity ofdeveloping countries to take advantage of the potentialoffered by clean technologies and a framework for intro-ducing pollution prevention in DMCs. A Pollution Pre-vention Program for the Asian Development Bank’smost important function was helping ADB staff clarifythe key point that successful promotion of CP dependson systematic and strategic capacity-building inter-ventions, not on simple demonstrations that CP can helpcompanies reduce pollution. It also provided a valuablereference work for ADB staff to learn about the widerange of approaches to promoting CP [5].

2.1. Supporting adoption of CP in DMCS

2.1.1. Peoples’ Republic of ChinaBy 1997, ADB had made 12 loans to the Peoples’

Republic of China (PRC) totaling over $1.5 billion forindustrial process restructuring and urban environmentalimprovement projects, including water supply, cleanenergy wastewater treatment, industrial relocation, andpollution abatement. Industrial sectors included chlor-alkali, fertilizer, cement, steel and non-ferrous metals,

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Table 1Examples of ADB-funded loan projects and technical assistance (TA) with cleaner production objectives/components

Country Project Title Amount (US$’M)

Bangladesh Energy Conservation in the Industrial Sector TA 0.60India Environmental Management at the State Level—Financing Cleaner 0.57

Production TAEnergy Conservation and Environmental Improvement Project 147.00Industrial Energy Efficiency Project 150.00Renewable Energy Development 100.00

Indonesia Improving Environmental Performance of Small and Medium 0.50Enterprises by Promoting Cleaner Production TAIndustrial Technology and Human Resources Development 80.00Industrial Technology Development and Management 53.00Promotion of Clean Technology TA 3.50

Malaysia Industrial Energy Conservation and Environmental Improvement 107.00PR China Qingdao Environment Improvement 103.00

Tangshan and Chengde Environmental Improvement 140.00Study on Clean Coal Integrated Gasification Combined Cycle 0.50Technology TABeijing Environmental Improvement 157.00Establishing a Center for the Transfer of Environmentally Sound 0.55Technology TAQitaihe Thermal Energy and Environmental Improvement 165.00Second Industrial Energy Efficiency and Environment Improvement 178.00Anhui Environmental Improvement 1400Xian-Xianyang Environment 156.00

Philippines Metro Manila Air Quality Improvement 300.00Promotion of Cleaner Production TA 1.20

Sri Lanka Integrating Cleaner Production into Industrial Development TA 0.80Thailand Samut Prakarn Cleaner Production and Industrial Efficiency 10.00

Strengthening National Financing and Cost Recovery Policies for the 0.60Wastewater Management Sector TA

Regional Technical Assistance Promotion of Market-Based Instruments for Environmental 0.60Management TAPromotion of Cleaner Production Policies and Practices in Selected 0.60DMCs TAPromotion of Renewable Energy, Energy Efficiency and Greenhouse 5.00Gas Abatement TA

Source: Asian Development Bank

construction materials, organic chemicals and plastics.In addition to project-specific loans, the ADB providedthe PRC with more than 50 TA grants totaling more than$24 million to support capacity building and thestrengthening of environmental management. ADB sup-ported the establishment of the China Center forEnvironmental Sound Technology Transfer, an infor-mation-sharing network.

PRC authorities are enthusiastic about CP and are try-ing to promote its spread. However, inadequacy in coor-dination among relevant agencies is a key obstacle tothe success of environmental projects because CP pro-jects are often multidisciplinary in nature and require ahigh level of cooperation among government agencies[6]. In order to address such challenges, PRC requestedthat ADB make a long-term commitment to support CPdevelopment. In September 1998, ADB approved its first

cluster TA,1 Promotion of Clean Technology in PRC.The broad objectives for helping the PRC promote CPare:

1. to develop policy and regulatory frameworks thatfacilitate the introduction and adoption of CP in acost-effective manner;

1 ADB experience with capacity building TA showed that projectsneed to be designed so they ‘evolve’ , with later TA components beingdesigned around the outcomes and experience of earlier componentsand need to be targeted within specific sectors to focus the resourcesand respond to unique requirements. To strengthen the impact of TA,ADB adopted a cluster TA approach. The components of a cluster TAare defined jointly with the recipient DMC, together with benchmarkperformance indicators and long-term development goals.


2. to build the capacity of the relevant governmentalagencies for improving environmental management;

3. to finance a portion of environmental investments,including CP development.

The TA cluster consists of six subprojects, namely,

(i) policies for promotion of clean technology;(ii) national network for clean technology transfer;(iii) legislative support for clean technology;(iv) clean technology development;(v) environmental management for clean technologies in

township and village enterprises (TVEs);(vi) financing mechanism for clean technologies in

TVEs.

Each subproject has its own executing agency. Theproject total financing requirement is estimated at $4.4million, of which $3.5 million is a grant from the ADB[7]. The structure of this project demonstrates the stra-tegic approach to CP promotion. It lays the fundamentalgroundwork of policy. Then information sharing is pro-moted, to provide the background and examples neededto create functional legislation. The legislation providesthe drivers and direction for clean technology develop-ment. Then implementation must be addressed, and inChina as in most countries the biggest challenge for CPis TVEs. They must be educated and motivated toexplore CP, and helped to finance the opportunitiesthey find.

The sequence of components is crucial, and verydeliberately differs from many other development pro-grams in that it puts off enterprise-level assistance untillate in the overall project. The size and growth of PRCmake it obvious that only policy-based reforms can mot-ivate enough CP in enough TVEs to make any differenceto pollution levels. Although many TVEs are pollutingseriously right now, assistance must be patient enoughto create drivers that will motivate TVEs to try CP ontheir own and sustain their efforts. Without this,enterprise-level assistance is not cost-effective or likelyto have any significant impact. A very major outcome,at least in part attributable to this approach to providingTA, is the adoption in June 2002 by the 9th NationalPeople’s Congress of the PRC of the Law on PromotingCP [8].

2.1.2. IndiaAnother recent example of the cluster approach to CP

promotion by the ADB comes from India. The Environ-ment Action Program of the government of Indiaspecifically includes promotion of clean technology fol-lowing these steps:

� strengthen institutions for research and technologydevelopment for raw material upgrading; improving

the performance of conventional materials; and pro-moting energy substitution, conservation, andenvironmental sustainability;

� launch a technology mission on CP to coordinateactivities for promoting cleaner technologies throughgovernment policies, R&D institutions, industryassociations, financial institutions, and regulatoryagencies;

� formulate industry-specific task forces to select dem-onstration and development projects;

� identify cleaner technologies developed in researchlaboratories and industrial units in India and abroadand facilitate their transfer and adoption;

� establish centers for cleaner technologies to developa centralized database and to provide information toindustries;

� build capacity for environmental audits to preventpollution;

� build indigenous engineering capacity for the adop-tion, adaptation, and improvement of imported tech-nology;

� formulate standards for waste discharge per unit ofraw material;

� formulate legal and economic measures to ensureadoption of clean technologies.

The ADB has been assisting the government of Indiawith environmental management for many years. TheTA cluster for environmental management at the statelevel in India is designed to help meet the CP objectivesof the Environmental Action Program of India. The prin-cipal objective of the TA is to improve environmentalmanagement in the states and territories of India that aredirectly responsible for implementing and enforcing thenational environmental policies. Other objectives of theTA include providing alternative solutions and programsfor industry to comply with the environmental standardsother than end-of-pipe technologies; strengtheningcooperation and information exchange among the statesin monitoring and enforcing the environmental laws andregulations, and strengthening the local human resourcebase to provide expertise to all aspects of environmen-tal management.

To meet the objective of upgrading environmentalmanagement capacity at the state level in India, fivecomponent TAs are integrated under the cluster. Thefifth component will be a case study that examines theimpact of the previous four components. The fivecomponents are:

(i) promotion and assessment of environmentallysound projects;

(ii) establishing an Environmental Management Insti-tute;

(iii) adapting environmental management policies andstrategies to the state level;


(iv) financing CP;(v) Integrated Environmental Management Case Study

in Calcutta.

The project was awarded in early 2001 and is nowbeing implemented. As with the PRC TA cluster for CP,the enterprise-level assistance is scheduled after thefoundation of policy and regulation to promote CP hasbeen established at the state level in India [9].

2.1.3. ThailandTwelve regional environmental offices have been

established to cover all regions of Thailand. The geo-graphic coverage of each regional office includes 5–7provinces. The primary task of the regional offices is toprovide coordination and advice to local government onnatural resources and environmental management, pol-lution control, formulation of Provincial Action Plans forEnvironmental Quality Management, environmentalquality monitoring and auditing, and assessment of thestate of natural resources and environmental quality inthe region. Regional offices also propose the designationof pollution protection and controlled areas, promoteinformation dissemination and public relations, and pro-vide environmental information services. The smallstaffs of these offices have lacked adequate training tocarry out their complex roles, and the project is designedto build their capacity to do so. It will also provide speci-alized capacity building on the promotion of CP at theregional and local levels.

With financial support from ADB, the government hasestablished the Center for Transfer of Cleaner Tech-nology under the Department of Environmental QualityPromotion (DEQP) of the Ministry of Science, Tech-nology and Environment (MOSTE). The major responsi-bility of the Center is to enhance the capacity of Thail-and’s industrial sectors and government agencies todevelop, transfer, assimilate and apply cleaner tech-nology. The project will strengthen the capacity of theCenter to:

� access, evaluate and disseminate information on cle-aner technology;

� monitor and manage the international trends of CP;� assist regional offices in establishing human resources

and skills to promote CP;� develop a network to integrate public and private

resources to disseminate CP [10].

2.1.4. Sri LankaADB provided a TA to support integrating CP into

Industrial Development in Sri Lanka. The primary objec-tive was to assist the responsible government and privatesector institutions to formulate policy and a supportingstrategy to integrate CP practices into industrial develop-ment and an action plan to encourage industries to

employ CP practices. The TA showed clearly that SriLanka’s economic growth would be enhanced by a cleargovernment policy to seek industrial growth through theapplication of CP systems and responsibilities leadingto greater competitiveness in international markets andreduced waste. A policy dialog focused on all ministries,departments and agencies concerned with the productionand distribution of energy, the management of stateindustries, labor policies and the regulation of the econ-omic, social or environmental practices of industry.Immediate and long-term policy actions were rec-ommended and are currently under consideration by thegovernment [11].

2.1.5. IndonesiaIn Indonesia emerging environmental management

standards in the international market are being found tobe a constraint to SME exports to countries whereenvironmental awareness is reflected in consumer prefer-ences. For example, straw-bag exports to Japan havebeen rejected due to the use of certain dyes and textileproducts were rejected by European importers due to notmeeting eco-labeling requirements. SME textile, wood,and silver products are recognized as products that maylose export markets due to environmental requirements.Existing government policies to address environmentalmanagement concerns related to manufacturing have notbeen in favor of SME activities. The end-of-pipe treat-ment policy is not practical and affordable for SMEs.The government’s CP policy, adopted in 1997, focuseson assisting large industries. However, lack of capacityto adopt CP has hindered SMEs from implementing CP.The Indonesian CP Action Plan recognizes this short-coming, and identifies the promotion of CP in SMEs asone of its priorities [12].

In order to address this challenge Indonesia requestedADB to provide CP TA as an integral element of ADB’sprogram to support assist recovery of the SME sector.ADB approved a TA for Improving the EnvironmentalPerformance of Small and Medium Enterprises by Pro-moting CP in 2002. The TA aims to assist the govern-ment in minimizing environmental problems associatedwith SME development, and increasing SME pro-ductivity through systematic CP implementation. Theimmediate objective is to assist the government in facilit-ating SMEs, particularly those in casting and electroplat-ing industries, to improve their environmental perform-ance by reducing pollution and conserving resources,and at the same time, improve their productivity andworking environment through CP. To institutionalize theefforts to promote CP in SME operations, several keyplayers—SMEs, SME associations, business develop-ment services and local government agencies— areinvolved. Developing and institutionalizing a system topromote CP in a sustainable manner at the local level isan important objective [13].


2.2. Integrating CP in environmental infrastructure

Massive environmental infrastructure investments aretaking place around Asia, although they fall short ofmeeting the region’s needs. Projects include water andenergy supply, wastewater collection and treatment,solid waste collection, recycling, sanitary landfills, andhazardous waste treatment. All of these are highly appro-priate for the application of CP as a demand-side man-agement strategy. CP reduces the demand on resourcesand infrastructure, and has potential to make it morecost-effective. For example, in Thailand, Samut Prakarnis the most heavily industrialized and polluted province.In 1993, the Thai Government declared the province asa ‘pollution control zone’ , to arrange for urgent and spe-cial development assistance to be focused in this area.In 1995, ADB provided a loan of $150 million to assistthe government in undertaking the Samut Prakarn Was-tewater Management Project. The project has adopted anintegrated approach that tackles wastewater pollutionboth at the source and final treatment points, rep-resenting a significant attempt to proactively minimizewastewater pollution. First, the project is helping indus-tries to adopt pollution prevention practices and improveon-site management. So far, over 250 industries havecommitted to participate in the Cleaner Production forIndustrial Efficiency (CPIE) program. The CPIE isaimed at reducing wastewater generation, energy use,and pollutant loads by 20%. Secondly, a polluter-paysprinciple has been adopted to provide industry withincentives to reduce pollution while sustaining a viableoperation. Industry will bear 80% of the costs of treatingwastewater; the remaining 20% will be split betweencommercial and residential beneficiaries. Thirdly, theproject provides support for revisions to environmentalregulations to control industrial discharges. Takentogether, these initiatives represent a significant attemptto proactively minimize wastewater pollution [14].

The CPIE program represents an important strategyfor CP promotion that can be replicated in other coun-tries that are investing in urban environmental infrastruc-ture. The cost of CP programs in infrastructure projectsis miniscule compared to the overall project cost. Forexample, the total cost of the Samut Prakarn WastewaterManagement Project in 1998 was $687 million. The costof the CPIE program is less than $15 million. Yet it isexpected to have economic benefits that greatly exceedits cost because it will make long-term improvementsin resource use and pollution generation in hundreds offirms [15].

2.3. Integrating CP in SME investments

CP is also being promoted in SME investment. TheADB makes equity investments for SME developmentfunds in several DMCs as a part of the ADB’s strategy

to assist crisis-affected economies with investment in theprivate sector. Where possible, adoption of CP by recipi-ents is a funding criterion. An example is a $25 millionequity investment in the Thailand Small- and Medium-size Enterprises Investment and Restructuring Fund(SIRF). The fund— which has a target size of US$100million— will invest in promising small- and medium-sized enterprises (SMEs) that are in need of expansioncapital. The Thai SIRF may enter into a cooperativearrangement with one or more organizations that special-ize in clean technology situations. The fund managersare considering a plan to use the existing CP TA networkin Thailand, which has worked with many hundreds ofSMEs, to identify promising SMEs to approach aboutinvestment needs. They realize that SMEs that areactively pursuing CP have unusually strong and vision-ary management that pays close attention to all aspectsof production. These are good indicators of future busi-ness performance (although no guarantee) and increasethe chances that the SIRF’s investment will pay off suc-cessfully [16].

3. Promoting CP regionally in Asia

ADB is acting beyond national strategies to promoteCP. The Regional Environmental Technical Assistance(RETA) for the Promotion of CP Policies and Practicesin Selected DMC was initiated in 1998. The goal of thisproject was to accelerate in Asia the development ofnational policies and action plans for the adoption of CP.To achieve this goal the RETA directly assisted five par-ticipating Asian nations (Philippines, Indonesia, Viet-nam, India and Thailand) to develop the policy frame-work, integrated action plans and institutionalcapabilities they need for rapid and efficient adoptionof CP.

The RETA also sought to achieve an impact broaderthan in the directly participating countries by supportingtraining on subjects such as policy development, CPplanning and emerging areas for CP applications to alarger audience of Asian nations, used the experience ofparticipating countries to develop generic guidelines fornational policy development and strategic planning, andbuilt mechanisms to facilitate regional networking,cooperation and coordination among assistance agenciesand other interested parties in Asia. It included a studyof CP financing around the world and development of amechanism for improving the financing of CP in Asia.

The RETA concluded in February 2000 with a work-shop at which the participating countries presented theirnational CP action plans. The workshop was held con-currently with the third Asia Pacific Roundtable on CP.The workshop summarized the lessons learned by theADB about how to promote CP in Asia at the turn ofthe millennium [17].


4. Lessons learned

Much of the enormous collective effort to reduceindustrial pollution and to promote CP in Asia hasfocused on one or more of an array of specific initiatives,from MBIs to industry associations, from greening thesupply chain to access to financing, and on to a long listof worthwhile but relatively narrowly focused solutions.Most programs have failed to work from a holistic viewof the problem, and to choose their initiatives strategi-cally to achieve a broad and clearly articulated goal. Thechallenge is to change the behavior of decision-makersin the many lines of endeavor that have an environmentalimpact, in industry, services, and government. In orderto do so one must alter the conditions in which theymake their decisions, including the array of rewards andthe penalties they confront and the technical and mana-gerial resources that are available to them. Only froma holistic perspective can one hope to choose the mosteffective set of initiatives from the limited availableresources.

Programs to promote CP have particularly failed toaddress the underlying policy and integrated planningneeded to produce synergy among resources and achievethe rapid spread of CP. Much more could have beenaccomplished in the last decade toward establishing CPand thereby sustainable development if the developingcountries would have taken action on some difficult andpolitically sensitive issues of public policy and nationalplanning, with strong support from donors. Whereverpublic policy and MBIs have been part of the program,they have been regarded as secondary to information,training and demonstration. Without the underlying poli-cies and planning which could create forces for changeand focus and orchestrate the available resources, therehas been little hope for the rapid adoption of CP.

To bring about the intensive and extensive change inbehavior needed to make both present and impendinginvestment in Asia sustainable, developing countriesmust implement a number of interrelated reforms. Fore-most among these is integration and rationalization ofpolicy across sectors, especially environmental policyvs. those for industrial development, energy develop-ment, and investment promotion. Sector governmentagencies must develop the institutional capabilities tobetter understand the requirements of sustainable devel-opment and of CP and use this understanding to collab-orate with each other and with the many private sectorstakeholders to achieve their common interests innational strategic planning for CP.

CP promotion must be based on four foundations foraction. First, CP must be recognized and promoted as abehavior, not a technical solution. CP requires thinkingabout the life cycle of consumption, production and dis-tribution, and using the results of the analysis in designand operation. This behavior of looking beyond the

immediate necessities of the project must be promotedas good management, risk reduction, social responsi-bility and competitive advantage.

Secondly, CP implementation must be voluntary.Since it is a behavior, all CP solutions are by definitionunique to the situation and the participants. No regulat-ory agency has the capacity to prescribe CP solutionsfor more than a fraction of the potential applications.There is really no way to enforce long-term planningand ‘beyond the box’ thinking. And since CP is by itsnature voluntary, it is best encouraged by positive, ratherthan negative, drivers. This means building demand inbusiness and society for CP solutions by suppliers andproducers, and ensuring that good CP performance isrewarded. Although CP can and does save firms money,most business managers are much more interested ingenerating revenues than in cutting costs. This is trueeven when it can be demonstrated that more bottom-lineprofits can be guaranteed from cost savings than frommarketing to generate new customers. When businessmanagers see that CP results in more sales, they will acton it.

Thirdly, CP promotion must be strategic. Piece-meal,ad hoc promotional efforts, in particular the demon-stration projects of which many donors and agencies areso fond, are no longer reasonably cost-effective. Thereis no longer any need to prove that CP can improve theperformance of firms and projects in Asia. Now the needis to translate this fact into policies and projects thatmatch the capacity of target economies and stakeholders,follow a sequence that builds demand and capacitybefore getting into technical solutions, and use sector-and place-based approaches to focus resources formaximum leverage.

Finally, CP promotion must be collaborative. Thereare many stakeholders for CP. All will need to partici-pate to overcome the sheer inertia of resistance tochange. Centers of excellence for CP are important, butnot as a solution. Instead, CP centers should focus oncatalyzing behavior change in other stakeholders,especially policy makers and community leaders, whocan create the demand for CP improvements. CP centerscan also help coordinate and share information amongCP initiatives [2].

The ADB’s experience with CP shows that the tacticalsolutions will differ by country. However, the underlyingpremises of the approach should not differ significantly,and the strategy for each country should thereforeinclude the following elements:

� Establish a dialog of public and private sector stake-holders to identify broad national goals, policy objec-tives and a national plan for CP

� Formulate public policies that will promote achieve-ment of those goals.

� Integrate policies across sectors.


� Accelerate adoption of CP principles in sectorsbeyond industry (e.g. tourism, local government,transportation, financial institutions, energy, etc.).

� Monitor progress by an independent body, rep-resenting the public and private sectors.

� Use the leverage of the general educational systemand the media to create widespread understanding ofthe impact of industrial pollution on human health andthe environment and of sound business options to pre-vent that impact through CP.

� Give special attention to the use of MBIs and tomechanisms of public reward for good performanceand censure for poor performance.

� Invite participation of the international donors andlenders in the planning process and encourage com-munication and collaboration among them to mostefficiently accomplish the elements of the plan.

� Stress development of national resources to avoiddependence on external aid; for example, promotelending by local financial institutions to SMEs forinvestments for CP.

� Give special attention to the forces affecting the appli-cation of CP in new investments (e.g. investmentincentives), as they will with time shape the future ofCP in an industrializing nation more than any otherfactor.

� Focus TA and facilitation to the needs of SMEs, suchas simplified approaches to environmental manage-ment and CP, and assistance in preparation of pro-posals to access local financing.

� Promote networking for exchange of operational andtechnical information, especially among relevantAsian experiences.

Certain elements that can also apply across nationalboundaries include:

� Networking among all stakeholders for exchange ofoperational and technical information, especiallyamong relevant Asian experiences.

� Networking among external donors and lenders andother concerned international organizations to pro-mote communication of objectives, actions and con-cerns, and to achieve coordination to avoid dupli-cation of programs and collaboration to gain synergyin their actions.

� Facilitation of local lending to SMEs through a multi-national loan guarantee facility supported by a ProjectDevelopment Facility that helps evaluate and pack-age projects.

� Development of international investment fundsfocused on encouraging local investment in andmanufacture of cleaner technologies.

� Development of broad guidelines and training pro-grams, such as for the development of a national inte-grated policy framework or a national action plan, or

for the application of concepts such as industrial ecol-ogy.

5. Focus on the future

As globalization and free trade continue to expand,production of the goods purchased and used indeveloped countries will continue shifting to Asia.Asia’s share of global output, which was roughly 10%in 1950 and 30% in 1995, is expected to reach 55–60%by 2025. Gross national product per capita in Asia hasgrown at an average annual rate of 5.5% over the past 30years. If the same rate of growth applies to the number offactories in Asia, there will be 380% more factories inAsia in 2025 than exist in 2000. Meanwhile, existingfactories will be replacing their production technologiesto remain competitive. The technology choices made inthese new investments will directly affect the intensityof pollution in Asia.

The focus on new investment is critical and requires asignificant change in the strategies of most CP promotionorganizations. More than fifty international organiza-tions, national donors and non-profit organization pro-mote CP in Asia. Many demonstration projects haveshown that Asian firms can and do achieve these benefitswhen they implement CP programs or follow CP prin-ciples. But the vast majority of effort to promote CPhas been focused on reducing the pollution from existingproduction. This is often necessary, especially when pol-lution from specific factories is causing serious localimpacts and pollution control technologies are notaffordable. But it is not strategic. Most of the productiontechnologies targeted by CP programs will be replacedanyway within a decade or two because of competitiveforces. The strategic objective of CP must be to influencethe design of the new incoming technologies so they arevastly more resource-efficient.

While this seems daunting, it should be rememberedthat CP is by far the most effective when it is appliedin the design stage of investment. This is when life cycleanalysis and technology networking can identify innov-ative CP solutions and their benefits can be evaluatedon a proforma basis. For example, by incorporating CPprinciples during the design of a factory, it may be poss-ible to eliminate the planned use of toxic chemicals, torecycle wastes and emissions in closed-loop systems,recover energy from waste heat, and greatly reduce theneed for pollution control systems or even avoid thementirely [14].

6. Local government and community organizationsare the key

How can CP in new investment be promoted? First itmust be recognized that national governments have very


little influence over the quality of new investment.National Boards of Investment have some influence oversignificant foreign direct investment in their countries.But investment boards have no review at all over thevast majority of investment, which is made by indigen-ous SMEs that are starting or upgrading production.

But local governments do have great influence overSMEs. They issue local operating permits, have com-munities that live around the SMEs, and are directlyinfluenced by SME pollution. In the Philippines, forexample, all companies in a municipality are required tohave a current Mayor’s Operating Permit. This is gener-ally a token requirement necessary for local taxation pur-poses; it is not typically used to impose conditions onbusinesses. However, there is no reason why a mayorcould not impose various CP conditions on issuance ofa permit. For example, if a polluting factory wishes toexpand production significantly, the mayor’s office couldrequire that a CP assessment be conducted by a reputableindependent organization, and the factory managementmust demonstrate that it has fully considered their CPoptions. Often this will help reduce pollution signifi-cantly, since the factory is already in the mode of newinvestment and it can finance CP improvements that arecost-effective along with the rest of the project.

It is vital to recognize that local governments benefittremendously from the application of CP. They areresponsible for providing key services such as water sup-ply and waste removal to the local population. In somecases they also provide electricity. CP dramaticallyincreases the efficiency of these services, so the sameamount of water or energy or waste removal serves amuch larger population. For local governments, this canhave tremendous impacts on their budgets. In the Philip-pines, local governments spend as much as 20% of theirtotal budgets on garbage removal and disposal. CP prac-tices can dramatically reduce the waste generated byretail and manufacturing firms, thus reducing the volumeof waste that the local governments must manage andsaving them huge sums of money. For local govern-ments, CP is a strategy for least-cost provision of urbanenvironmental services.

Local governments are the most important channelsfor influencing the adoption of CP in new investment,but they need help. First, they often need the stimulusthat local non-government organizations and communitygroups can most effectively provide. Secondly, they arenot experts in CP themselves so must turn to advisoryorganizations. There has been a great increase in thenumber of CP promotion organizations in Asia. Mostcountries now have CP centers that can provide adviceand new investment review. Local governments can tapthese centers for expertise and use their regulatory pow-ers to ensure that CP is at least seriously considered innew investment design [14,18].

The ADB has already recognized the importance of

local government influence over CP adoption in its TAsto promote CP. All these culminate with the expressionof national policy in terms of local governmentimplementation and local community action. The ADBalso embraces community development and social sup-port systems as fundamental to its mission to reduce pov-erty. National policy is needed to create the system con-ditions that enable CP, but it is local policy andgovernance that ensure implementation.

7. Financing CP

The ADB is a financial as well as a development insti-tution, and is committed to successful strategies to inte-grate CP into financial systems and markets. ADB recog-nizes that implementing CP solutions will often requireadditional capital, and obtaining this capital is a majorchallenge, particularly for SMEs.

The ADB recently conducted a global study offinancing mechanisms to promote CP. The study foundthat there is no shortage of capital financing availablefor CP improvements. In Malaysia, for example, over abillion US dollars are available on preferred terms forSMEs seeking technology upgrades that can promoteCP. Large amounts of debt and equity capital are avail-able around the world to support CP. The main obstaclesamong SMEs to availing of this financing are lack ofcollateral and inadequate preparation of financing pro-posals.

In its study of CP financing, the ADB found that themost successful mechanism for improving SME accessto capital for CP financing is loan guarantees. Theseovercome the basic barrier to debt financing caused bylack of collateral or, in the case of entrepreneurs, a suc-cessful operating history. Loan guarantees are parti-cularly cost-effective when used to support CP invest-ments, because CP investments tend to be inherentlyprofitable since they increase resource efficiency anddecrease pollution control costs.

To link CP to loan guarantees, local governments canwork with CP TA programs. For example, a financialinstitution such as ADB can establish a loan guaranteeprogram that is implemented through a local bank. Thelocal government can collaborate with the local bank tomarket the program to SMEs, and can use its regulatoryauthority as a particularly potent marketing channel.Environmental inspectors can inform regulated busi-nesses of the availability and terms of the guarantee pro-gram. When a business expresses interest in financing,it can be directed to a local CP TA organization that canhelp it evaluate its CP options and prepare proposals forfinancing. The business and the CP organization canapproach the bank together to apply for a loan and theloan guarantee.

Such an approach overcomes the most significant bar-


riers to CP adoption and financing. The local governmentpromotes CP because it is in its financial and politicalinterest to do so. Local officials know which businessesare the most polluting and in need of CP assistance, andalso know who is planning to expand or build a newfactory that can benefit from CP design. Local CP assist-ance organizations can provide the technical resourcesneeded to find CP solutions and prepare financing pro-posals. Development institutions can support loanguarantees that mobilize locally available capital, soSMEs can obtain the funds they need for CP improve-ments [16].

8. Conclusion

CP has been proven as an approach to dramaticallyreduce the pollution intensity of production, consump-tion and distribution of goods. This is vitally importantto the environmental and economic future of Asia, whichwill increasingly dominate the global production ofgoods in the 21st Century. CP must be incorporated intothe policies and programs managing Asia’s develop-ment.

The ADB has recognized that it has a major responsi-bility and opportunity to promote CP in Asia. CP is achi-eved through changes in behaviors that can be supportedby development strategies such as sector- and region-specific clustering of CP promotion projects. The ADB’sapproach to CP promotion has evolved from technicalimprovement to broad promotion of CP in all aspects ofnational development policy with a focus on integratingeconomic and environmental improvements to alleviatepoverty.

Hard lessons have been learned. The concept of CPhas confused stakeholders when it has been promotedas an activity rather than an outcome of the integratedapplication of sound development strategies. While dem-onstration projects have proven that CP works in Asia,they have not left behind self-sustaining mechanisms topromote CP. While industry and the public are benefici-aries of CP, they have not developed the demand for CPthat drives supply of CP goods and services. CP financ-ing mechanisms that provide funds directly to firms haveinstead been dominated by pollution control investmentsand by a few productivity investments that could just aswell have been financed by more traditional mech-anisms.

The ADB has incorporated these lessons into newapproaches to promote CP in Asia. While national-levelpolicy reform and CP integration remain vitallyimportant, it is local government that is the real ‘payingcustomer’ for CP and that has the greatest capacity topromote it. Supporting CP capacity in local governmentreaches the largest number of targets and directly sup-ports local programs for poverty alleviation and environ-

mental improvement. ADB’s cluster approach to CP pro-motion allows for national, local and sector-specificdevelopment of CP programs and strategies.

ADB continues to focus on integrating CP conceptsinto mainstream policy frameworks instead of treatingCP as an end in itself. This is vital to creating motivatedstakeholders and to reducing confusion about what CPis really about, namely, behaviors that lead to more eco-efficient outcomes that are always unique to the needsof affected stakeholders.

ADB will use its capacities as a financial institution tohelp create positive incentives that reward CP behaviors.These may include offering loan guarantees for CPfinancing, incorporating CP principles into equity invest-ments, development of MBIs that encourage CP as acomplementary precursor to pollution control, and mobi-lization of existing capital resources for strategic projectsthat promote CP.

The greatest challenge will be influencing new invest-ment, particularly among SMEs, to incorporate CP prin-ciples. Asia will soon dominate the world’s industrialproduction. Retrofitting factories will not work; CP mustbe brought into new investment at the earliest stages ofdesign. New approaches must be developed to find andwork with intervention points so investors and designerscan learn about CP methods and resources, and rewardedfor their positive efforts to incorporate CP principles.

References

[1] ADB. Asian environmental outlook. Philippines(Manila): AsianDevelopment Bank; 2001.

[2] ADB, UNEP, UNIDO, USAEP. Guidelines for policy integrationand strategic and action planning for the achievement of cleanerproduction; 2002.

[3] ADB. Environment program of the Asian development bank;2000.

[4] ADB. Industrial pollution prevention; 1995.[5] ADB. A pollution prevention program for the Asian development

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[7] ADB. Technical assistance cluster No. 3079. Promotion of cleantechnology in PRC; 1998.

[8] Shi H. Law on promoting cleaner production. Policy Digest2002;4(3) Centre for Environmentally Sound Technology Trans-fer.

[9] ADB. TA cluster for environmental management at the state levelin India; 2000.

[10] ADB. TA for strengthening regional environment centers in Thai-land; 2000.

[11] IRG. Integrating cleaner production into industrial developmentin Sri Lanka. Asian development bank TA 3624 draft final report;June 2002.

[12] Indonesian action plan to promote CP. Final report of ADB TA5840-REG. Promotion of cleaner production policies and prac-tices in selected developing member countries; 2001.

[13] ADB. Technical assistance for improving the environmental per-


formance of small and medium enterprises by promoting cleanerproduction; 2002.

[14] Evans JW, Stevenson R. Industry and the environment in asia:obstacles to change and a regional strategy for rapid adoption.Asian Environment Outlook series. Manila, Philippines: AsianDevelopment Bank, 2001.

[15] Zats M. Personal correspondence on the cleaner production forsustainable development component of the Samut Prakarn waste-water management program; 2002.

[16] Hamner B. Financing cleaner production. Philippines: (Manila):Asian Development Bank, in press.

[17] ADB. Regional technical assistance for promotion of cleaner pro-duction policies and practices in selected developing membercountries. Various project reports from 1998 to 2001.

[18] Zarsky L. From bystanders to collaborators: new roles for civilsociety in urban-industrial environmental governance. AsianEnvironmental Outlook series. Manila, Philippines: Asian Devel-opment Bank, 2001.

Documents

Cleaner production at the Asian Development Bank