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Decision making in Corporate Strategy–Use of recycled
plastics in Philips
Name- Sidharth Nanda
Student id- 11878223
Supervisor- Dr.Ileana de Bresser
Date of submission- Sept 28
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Executive Summary
This paper aims to present a solution to solve the technological challenges on the complex issue of changing colours in recycled plastics for Philips small domestic appliances products through the Driver Pressure State Impact Response (DPSIR) framework. This paper summarizes the output carried out in the research study in this project and provides information on the reason for DPSIR and extensive interviews conducted with various internal and external stakeholders who work in the area of plastic recycling.
Recycling is currently one of the most preferred solutions known to reduce the impacts and focusses on the most dynamic aspects of the plastics industry today. While Philips has been leading excellence in Consumer Delight and Sustainability, profitably, the company is now facing a challenge to move towards different colours for its various products to be made out of recycled plastics. The DPSIR management framework looks at the problem through a different lens so that it closes the loop of the end of life plastics that end up as pollutants. This shall also help in Philips reaching its Circular Economy ambitions.
Through this framework, a recommendation to develop a target towards 2025 ensuring management commitment is in place from business groups towards product development, engineering activities, ensuring technical resources are in place, and effective scouting of suppliers from the procurement team is put in place. The research was conducted inside the company, including detailed set of interviews with different business groups, design, innovation and procurement teams.I hope through my research a global momentum for a fundamental shift on plastics rethink could be worked out within Philips and helping achieve its recycling targets.
Keywords-Recycling, Plastics, Management,Domestic appliances,Decision making,
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Table of Contents
I. Introduction…... 4-10
II. Literature review………11-18
III.The Framework and Applications……….19-30
IV. Managerial recommendations…...31-32
V. Conclusion…...33
VI. List of tables, figures and charts…...34
VII. Appendix…...35-40
VIII. References…...41-42
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I.Introduction
Plastics are one of the most important materials used in today's society. They are cheap, light in weight, durable and that find their way in a wide range of applications. Plastics have facilitated improvements in safety, health, comfort, food supply and welfare and caused many positive developments. “Plastics have become the ubiquitous workhorse material of the modern economy: combining unrivalled functional properties with low cost, their use has increased twentyfold in the past half-century”.(Ellen Macarthur Foundation 2016, pg 16).
In contrast, the consumption of plastics has led to significant environmental problems as they are used around the world for making disposal items such as packaging or short-lived products that are discarded within a year. This is not sustainable due to the durability of plastics leading to waste generation in landfills and the natural environment. “While plastics and plastic packaging are an integral part of the global economy and deliver many benefits, their nature of being archetypically linear, take-make-dispose value chains entail significant economic and environmental drawbacks. It is only in the last few years that the true extent of these drawbacks has become clear”. (Ellen Macarthur Foundation 2016, p. 16).
Europe has initiated a transition from a linear towards a circular and resource efficient society and the unique features of plastics allow making a great contribution towards this societal transformation. Thanks to their versatility and their high resource efficiency, plastics have become a key material in strategic sectors such as packaging, building and construction, transportation, renewable energy, medical devices or even sports to mention a few. Moreover, plastics have enabled innovation in many other sectors allowing the development of products and solutions that could not exist today without these materials.
“Recycling is currently one of the most preferred solutions known to reduce the impacts and focusses on the most dynamic aspects of the plastics industry today.”(Hopewell, Dvorak, Kosior, 2009, p. 2115). The advantages of using recycled plastics are many
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including Cost savings, reduction in environmental impacts, complying and addressing the scarcity of materials. “Despite 40 years since the launch of the first recycling facilities, only 5% of the world’s plastic consumption is recycled. Yearly, more than 8 million tons of plastics find their way into our oceans, the equivalent of dumping one garbage truckload, full of plastics every minute”( Ellen Macarthur Foundation 2016, p.16 ).While businesses do want to avoid the impact, many times the problem seems to contradict the profit or customer needs. The below figure explains the gravity of the plastic waste generation and disposal situation to gauge the fact that recycling is a key element in environmental management.
Figure 1-Cumulative plastic waste generation and disposal -“Production, use, and
fate of all plastics ever made”( Geyer, Jambeck, Law 2017,p 3)
Figure 1- Cumulative plastic waste generation and disposal (in million metric tons). Solid lines show historical data from 1950 to 2015; dashed lines show projections of historical trends to 2050.
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Hence, it is quite clear from the figure that “without a well-designed and tailor-made management strategy for end-of-life plastics, humans are conducting a singular uncontrolled experiment on a global scale, in which billions of metric tons of material will accumulate across all major terrestrial and aquatic ecosystems on the planet.
“(Production, use, and the fate of all plastics ever made”( Geyer, Jambeck, Law 2017,p 3)
.
Moreover, various pros and cons of management of plastics and conversion into recycled plastics like dematerialization, waste management, technologies, materials recycling need to be taken into account for recycling.At Royal Philips, Recycling is an important element of the Circular Economy program and crucial in reaching its Circular Economy ambitions. Philips has decided to look at this problem differently and close this loop of the end of life plastics that end up as pollutants. “We want to improve people’s quality of life through meaningful innovation and we aim to achieve that by using our planet’s limited resources in a sustainable way. This calls for Philips to continuously work on the environmental performance of our products, which includes e-waste management, designing for recyclability and reuse amongst other factors”. (Source-Philips, 2014). Since 2013, Philips has been following a process of continuous improvement to use more and more recycled plastics. By 2013, the company had established a supply chain that applied recycled plastics in various small domestic appliances like vacuum cleaners and coffee machines.
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There are seven main polymers dominating the plastics market showcased in, the below figure:-
Figure 2- 7 polymers that dominate the plastics market- (Plastics Europe, Plastics the
fact, 2013)
The current focus of Philips is on the high-value polymers like PP, which will also be recycled in high volumes. As a result, the supply of materials is easy and makes the recycling process smoother. Currently, at Philips, the focus is on black colour parts for
manufacturing recycled plastics. And that’s where the main problem lies. “It is
expected that by end of next year we would have reached the maximum 4000 ton of what we can do with the current materials. To move beyond 4000 tons we need to expand into visual applications, which require new recycling technologies, etc.”(Eelco Smit, Sr. Director-Group Sustainability, Royal Philips).
The next step is to focus on non-visible and dark colour plastics. It has been seen that food contact parts, transparency in materials and plastics having complex mechanical properties are difficult to implement in recycled plastics. However, dark grey colours are easy to implement and limited visual parts of small domestic appliances products are
6.5%
12.0%
10.7%
17.5%
18.8%
7.4%
7.3%
19.8%
PET
PE-HD
PVC
PE-LD
PP
PS
Figure 2- The 7 main polymers, used extensively in the European Plastics market. PP is a common polymer used extensively in the market.
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easy as well. This causes a challenge where due to these restrictions moving towards different colours becomes a problem.“Innovations are needed in order to enable these high-value applications on a large scale.”( Gort, Gerrits, 2015, p 20).
Now having launched products in the small domestic appliances segment with a significant amount of recycled plastics from 13%- 53%, this project is going to see how we can overcome the challenges in the recycled plastics through management decision making. Big companies like Philips have many internal and external stakeholders for decision- making and so innovations need to have a solid acknowledgement from the design and business teams on how to solve the technological challenges in moving to different colours and high gloss parts for Philips small domestic appliances products.
This project shall explain the criteria for the decision-making, development of alternatives and implementation of the same via a managerial framework. Essentially a managerial framework in this context refers to the various steps which are designed to facilitate the smooth running and execution of the recycled plastics program to ensure that the overall objectives are met. This framework will take into consideration the current challenges like how to initiate, control, plan and execute and implement the recycled plastics program. The internal challenges in Philips are further supported by the external legislation requirements launched by the European Union. Legislation requirements are crucial for companies like Philips to adhere to as they provide significant aspect in fulfilling internal objectives like in recycled plastics.
The European Commission in March 2018 launched a voluntary pledging campaign to address industry and public authorities to increase the uptake in recycled plastics in new products placed on the EU market. The commission has adopted this strategy on plastics, which will protect the environment from plastic pollution while still fostering growth and innovation. In return, this strategy can turn this challenge into a positive agenda for the future of Europe. There is a strong business case for transforming the way products are designed, produced, used and recycled in the EU and by taking the lead in this transition, new investment opportunities and jobs could be created. This pledging campaign makes
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it more important for Philips to be ready to introduce recycled plastics in coloured and high gloss parts, as it does not want to see EU pushing legal requirements to use recycled plastics.
To overcome the above-mentioned challenges and problems, this paper seeks to address the issue of decision making in moving towards having freedom that is more creative in choice of colours for recycled plastics in the small domestic appliances segment. This decision-making is central to the idea of Philips achieving more green revenues and enhancing its reputation as Sustainable HealthTech Leader. Management frameworks are essential in laying down a systematic procedure of making a decision, which is of utmost importance for a company like Philips. This paper shall use the Driver Pressure State Impact Response framework. “Indicators of Sustainability( Dong, Hauschild, 2017 p. 699). This tool collectively seeks to support decision making regarding environmental issues like recycled plastics. “Sustainability is to meet the needs of the present without compromising the ability of future generations to meet their own needs. When a decision involving sustainability aspects needs to be made, it requires scientifically based information on sustainability.”(Dong, Hauschild 2017 p. 697).The DPSIR tool is a great way for Philips looking to enhance their decision making with more agility leading to greater authority and higher accountability.
Through this research project, managerial recommendations like implementing the 2025 roadmap for achieving the recycled plastics targets is of paramount importance. Also, this framework should encourage stakeholders to integrate recycling into the development of various corporate strategies. Expanding the market orientation focus from customers and competitors to a broader base of sustainability that includes all stakeholders should provide the opportunity to advance market performance.
The next part focusses on Literature review on different aspects like Sustainability, Philip’s practices in Sustainability, Environmental management in Philips, Recycled plastics, its advantages, Product design, current technological challenges in Philips, relationship between recycled plastics and colour variations and the management
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framework. Post that, the management framework is showcased with its various applications, the rationale of the tool and learnings from the tool. To conclude-specific, recommendations have been shared with the relevant manager with a roadmap to achieve the goals.
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II.Literature review
A.Sustainability
Any Sustainability assessment needs to take into account many factors like having a guiding vision, necessary considerations, scope of work involved, indicators prescribed and transparency to stakeholders. “Urgent and complex problems are challenging earth systems and humankind, and are arising as a consequence of nature and human-human interactions. There is an increasing concern, regarding the capability of the normal sciences, to tackle and provide reasonable and reliable solutions. Sustainability science needs to link science to actions, these mainly, being policies, planning, or products, need to be evaluated in order to define the degree of sustainability through sustainability assessment.”(Sala, Ciuffo, Nijkamp 2015, p. 315,317).To have a path for achieving ambitions for sustainable development care must be taken to include the concept of durability. “Sustainable development is a juxtaposition of two elements of major importance. The first terms ‘durable’ represents durability and sustainability, while the word ‘development’ aimed at expanding or construction the potentialities of bringing gradually to a fuller, greater, or better state.”(Duran, Gogan, Artene, Duran 2015 p, 807). Sustainable development in the context of corporate sustainability only works when it is brought into the limelight of a market-oriented framework. To give sustainability a market orientation could mean aiming at having sustainable development for products and services, which are marketable in nature.
B.Sustainability in Philips
In Philips, Corporate sustainability takes into account various requirements before entering the market. Sustainability as an aspect in the corporate framework involves having a significant footing in the company DNA, stakeholder involvement and performance management. “DNA is the independent construct in the model, capturing the essence of both the behavioural and cultural aspects of a market orientation and the fabric of the organization that tends toward sustainability. Stakeholder involvement serves as a moderating construct in the model. This analysis depicts the broad set of sustainability stakeholders while maintaining the underlying cultural and behavioural concerns of a market orientation”( Crittenden, Ferrel, Pinney 2010 p. 73,74) Now having this concern
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for the natural environment and sustainability has been a topic that has attracted a lot of interest both from academic scholars and corporate managers over the years. However, in this scenario, the corporate responsiveness towards environmental strategies holds paramount importance. The issue is more of interpretation and organizational context. “Managers from companies exhibiting proactive environmental strategies attended to information about the gains that could be made from a variety of initiatives and looked at for ways to build these into their strategic and operational decision-making processes.”(Sharma, Pablo, Vredenburg 1999 p. 100). Extensive research on the topic of stakeholder management and environmental management practices has been done and how these do work in an institutional framework.
C.Environmental management in Philips- Case of recycling
Firms like Philips adopted the environmental strategy of recycled plastics as it realized that this would be in their best interest to not only be proactive about their environmental management policy but also at the same time letting their stakeholders know that as a company they care for the ecological biodiversity. Historically if we look at Philips, its environmental performance has influenced both managers on how they perceive stakeholder pressures and how they respond to them. “The adoption of environmental management practices by firms varies therefore not only due to different levels of institutional pressures but also because of the organizational process that transforms objective pressures into perceived pressures”(Delmas, Toffel 2004 p. 210). Environmental strategies like recycling do involve stakeholder management and getting increasing support from various circles. “Two key economic drivers influence the viability of recycling. These are the price of the recycled polymer compared with virgin polymer and the cost of recycling compared with alternative forms of an acceptable proposal.”(Hopewell, Dvorak, Kosior 2009 p. 2122).
D.Recycling as a concept
Recycling is clearly one of the most efficient waste-management strategies used effectively to reduce environmental impacts and resource conservation. As we have seen that the consumption of plastics has been increasing over the past few years, recycling
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comes in with a sort of advantages of reducing environmental impacts and resource depletion. “Fundamentally, high levels of recycling, as with a reduction in use, reuse the and repair or re-manufacturing can allow for a given level of product service with lower material inputs than would otherwise be required. Recycling can, therefore, decrease energy and material usage per unit of output and so yield improved eco-efficiency.”(Hopewell, Dvorak, Kosior 2009 p 2116). There have been many underlying theories about how the usage of recycled plastics is advantageous and several reasons have been accounted for to make it a solid business case.
E. Advantages of recycled plastics
As globally, the demand for plastics increases so does the amount of plastic waste as well. This is particularly harmful, as most countries do not seem to have a proper plan of action in the disposal of plastic waste. It is a sad reality that most of the plastic waste ends up either in landfills or oceans severely impacting the ecological biodiversity. “Out of the 25.8 million tons of European post-consumer waste plastics that were collected through, official channels in 2014, 29.7% was recycled. The remaining waste was either incinerated for energy recovery (39.5%) or landfilled (30.8%)” (Plastics Europe, 2016). According to this data, “80% of post-consumer plastics waste that was recycled in 2014 came from packaging applications, which reached a recycling rate of 39.5%. Packaging, however, represents only about 40% of the EU28+NO/CH1 annual plastics demand, illustrating the significant untapped potential of recycling of non-packaging plastic products and components. ”(Vlogger 2017 p. 7). “Ä list of factors, which can serve as a motivation to use recycled plastics, is shown below:
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Figure 3- Advantages of recycled plastics –“Designing with recycled plastics” (Gort,
Gerrits 2015 p. 9)
However, one must not forget that “Once material enters into the waste stream, recycling is the process of using the recovered material to manufacture a new product” (Hopewell,
Figure 3- The figure shows a detailed explanation of the advantages of recycled plastics explaining the reasons to have a foray into this environmental management topic.
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Dvorak, Kosior 2009 p 2116). Other factors are taken into consideration as these significantly involve the results of the whole process. “There are additional issues associated with variations in the quantity and quality of supply compared with virgin plastics. Lack of information about the availability of recycled plastics, its quality and suitability for specific applications, can also act as a disincentive to use recycled material” (Hopewell, Dvorak, Kosior 2009 p. 2122). All these factors can set in motion the proposal for an effective recycling method. However, the process is not that smooth. There are some challenges as well. “Effective recycling of plastics waste is the next major challenge for the plastics recycling sector. The advantage is the ability to recycle a larger proportion of the plastic waste stream by expanding the post-consumer collection of plastic packaging to cover a wider variety of materials and packing types.
F.Product design and recycled plastics
Product design for recycling has strong potential to assist in such recycling efforts” (Hopewell, Dvorak, Kosior 2009 p. 2123). To influence the process of recycling in a corporate setting it also needs to be seen how much behavioural changes could be made to influence stakeholders from the plant manufacturing, design, innovation and marketing teams. Studies have shown that there is “a more extensive framework to predict recycling involvement in that important construct and helps in assessment of attitude-behavior relationship towards specific attitudes towards recycling and awareness of recycling benefits, subjective norms, personal norms, perceived behavior control, specific knowledge and perceived convenience could be associated with psychological personal values and general environmental awareness.”(Valle, Rebelo, Reis, Menezes 2005 p. 365).
G.Current technological challenges
As we have seen in all the academic studies here so far, recycling clearly wins as a key environmental strategy. In order to close the loop and help in the value chain, it needs to be established a reliable value chain partner to effectively streamline the process while keeping in mind the skills and aligning the interests of all stakeholders involved. Another next step is also to look into the different considerations in the manufacturing process and
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looking at the consumer's preferences. As was seen in the case of Philips they wanted to move into different colours for making small domestic appliances out of recycled plastics. This entails not only design but also manufacturing issues as well in the value chain. “For designers, it can be difficult to determine which guidelines for the recycling of plastic components need to be prioritized, as this heavily depends on the way the product is recovered at its end of life. Continuous advances in material recovery technologies mean that the products end of life scenario is subject to change and that what is considered good design practice today may not be the case in the future.”(Vlogger 2017 p. 7).
H. Challenges from a producer’s perspective
There are other challenges as well which can make companies like Philips to look into considerations to move into different colours. It is also the producer's responsibility to design end of life products so that their value can be retrieved in the near future. “During the manufacturing process, the characteristics of recycled plastics can cause several problems. If a material, for instance, has a strong odour caused by contact with organic waste it can be a reason for moulders to reject it. Moulders may also not be aware that, unlike virgin alternatives, certain recycled grades of materials such as ABS or HIPS require additional drying before they can be moulded. If this does not happen it can result in it defective parts. Wider ranges in viscosity between batches can cause more scrap to be generated during moulding, and necessitate more trial runs and adjustments of the moulding process (e.g. temperature, flow rate), which can slow down production”( Vlugter 2017 p. 7).
I. Recycled plastics and colour variations
There are also reasons, which can pose challenges to the process of recycled plastics. “Recycled plastics also tend to have a lower aesthetic quality than virgin alternatives, which can make it difficult to expand the use of recycled plastics to parts that are visible to the consumer. Common issues while working with recycled plastics are spray, flow lines and a lower scratch resistance. Colour is another important concern, as recycled plastics are generally only available in a limited number of colours. Since feed streams are likely to contain a mix of coloured scraps, it is particularly difficult to create recycled
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resins in lighter colours such as whites or light greys. Batch to batch variations in colour or colour variations between different sources can cause inconsistencies in the final product. It can also be challenging to achieve a high gloss on the finished product, which can limit the use of recycled material to applications with a matte finish.
Another issue is that resins are likely to contain slight traces of metallic particles that can cause small imperfections on the surface of a part, which can make it difficult to paint. Working with recycled resins can result in unique, yet minor aesthetic defects that can be unfamiliar to moulders. While these defects are not necessarily critical, they are often not accounted for in the appearance specifications of the part in question, which can cause moulders to needlessly discard parts that would otherwise be considered acceptable. Manufacturers need to be made aware by identifying and including these common (yet permissible) aesthetic defects in the appearance specifications of parts in which they are likely to cause issues. Being able to accommodate a significant amount of recycled material may also require a change in attitude towards such defects, especially when dealing with parts that are visible to the consumer. This means allowing certain minor imperfections that would immediately be rejected while working with a virgin alternative, simply because of quality expectations.”(Vlugter 2017 p. 8).
J. Management framework
To overcome the above-mentioned challenges and with a particular focus on colours as this is the most important criteria in moving towards more sustainable innovation, I propose the Driver Pressure State Impact Response framework which can not only solve these challenges but also help in making the recycling strategies more cohesive but sustainable as well. The DPSIR framework has its theoretical underpinnings through the decision-making on sustainable consumption and production, which requires scientific information on sustainability. In the case of Philips -“Corporate environmental management allows it to shape environmental competitive rules and thereby to reap first-mover advantages” (Peattie and Ratnayaka 1992). “Adopting environmental management usually forces firms to apply strict environmental standards to their green products or processes which can create high-entry barriers” (Barret, Chang 2011 p.362).
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I. Conclusion from Literature review
To conclude from the existing body of literature any assessment for Sustainability considerations should take into account clear linkage with science to actions with a strong plan and purpose proposing reasonable and reliable solutions. For Philips, Corporate Sustainability is in the company DNA and it strives forward to manage this scenario with stakeholder management. Recycling as a tool for environmental management has attracted a lot of attention from internal stakeholders as it benefits in saving costs, reducing carbon emissions and fulfilling legislation requirements. However, studies have shown that with the current technological challenges both from a producer’s perspective and with the choice of colours, it is important to adapt to new technologies for innovation. To solve this problem, the DPSIR framework is proposed, as it would help in decision-making for new strategies, which are more cohesive in nature. The current state of the existing body of literature under review is to justify the methodology and the managerial framework that would solve the problem statement in question. Looking forward, the managerial framework would be the guiding force for decision-making and ensuring management commitment for developing a plan of action for new development activities for recycled plastics.
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III.The Framework and applications
A. Introduction –Sustainability oriented innovation
Corporate Sustainability has rapidly risen through the ranks of executive-level decision making over the last few years. The rapid rise of urbanization, increasing consumption of natural resources, resource depletion have exerted increasing pressures on the environment. This has led to an imbalance in the ecological biodiversity leading to companies making Sustainability as one of their prime agenda. We have seen how plastics have not only solved human problems but also now have increased manifold to look into various options for its innovation. A few companies primarily in the consumer goods and healthcare segment to promote their circular economy ambitions have deployed recycled plastics as a concept and as an environmental strategy.
The advantages of the recycled plastics have been spoken about in depth in the literature review section and how it is a problem solver looking into long-term sustainable development. Recycled plastics can be looked at as sustainability-oriented innovation as well. “While sustainability was traditionally seen as a cost of doing business, sustainability-oriented innovation positions this as a business driver that can simultaneously improve performance and offer a source of competitive advantage.”(Kennedy, Whiteman, Ende, 2016, p. 712).
Research has shown that sustainability-oriented innovation can have issues like a high degree of complexity, stakeholder management, proper business case and uncertainty. Still “Sustainability oriented innovation continues to garner increasing attention as the answer to how firms may improve environmental and social performance while simultaneously finding a competitive advantage.”(Kennedy, Whiteman, Ende, 2016, p. 712). To look further down, on how innovation has been introduced in a company like Philips for sustainability, we need to look at how the company has been using this as a value driver. With the small domestic appliances segment for products like Senseo coffee machine, vacuum cleaner, it has made significant progress in using recycled plastics and supporting the cause for sustainable development. However, the most important case is the case for colours being used in the process and the different types of plastics being used as well. “So until now we have focused on the blacks and we have been successful.
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To grow more we need to focus on the colours and the gloss parts. Does the current management framework still do its job when we focus on these parts? Or is it time to also make changes to the managerial part as well?”(Eelco Smit, Senior Director, Group Sustainability).
B. Recycling process in Philips
The development process for recycled plastics can be laid down in the following steps:- 1. Create an overview of plastic consumption in the company
2. Focus on commonly used polymers. 3. Focus on non-visible and dark parts. 4. Identify and approach suppliers.
5. Determine the critical specifications for the product. 6. Use of recycled plastics in existing products.
7. Managerial design for recycled plastics being laid down. 8. Test moulds and components.
Current obstacles while using recycled plastics
Looking at the above-mentioned process, the following obstacles could be identified which could be looked at as well:-
1. Design DFX colour pallet being currently used.
2. How to prove batch-to-batch stability is still a challenge.
3. Food contact regulations for many parts hinders the use of recycled plastics in certain products like coffee machines.
4. Medical regulations also restrict the use of recycled plastics in certain products. 5. Transparency and tint acceptance needs to be accepted.
6. High gloss specifications.
7. Development budgets and capacity.
8. Recycling development cycles versus speed to market consumer products.
To have a comprehensive look at the various facets of the recycled plastics scenario in Philips, a SWOT analysis has been made to understand how the current management
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team act by using the DPSIR can tool in mind.
Figure 4- SWOT analysis of current recycled plastics scenario in Philips
From the above analysis, it can be explained that recycling is a proactive corporate environmental strategy and the simultaneous development of competitively valuable organizational capabilities. This also puts a bright picture of the company has it gains a competitive advantage in ways other than cost savings from environmental strategies. As this is a continuous innovation process, “Changes in technologies, processes, specifications, inputs, and products can stimulate the building up of internal capabilities and knowledge-based invisible assets. While environmental change provides an
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opportunity for a firm to be the first mover, the likelihood of a firm benefitting in a sustained manner from the first mover status will depend upon the development of these capabilities.”(Sharma, Vredenburg 1998 p. 741).
C. The Framework
In this project, we have learnt so far the nuances of recycled plastics, its use in Philips and the challenges it faces.I now introduce the Driver Pressure State Impact Response as a management framework to overcome the challenge being faced by Philips in exercising more creative freedom, especially for colours. The DPSIR tool was originally used as a gauging mechanism to compare and contrast different sustainability indicators like Life Cycle assessment, planetary boundaries and Sustainable Development Goals. “In order to support a comparison of the environmental indicators in LCA, PB and SDG’s, and to better understand the relationships between different environmental sustainability indicators in a different domain, the DPSIR tool is used.”(Dong, Hauschild, 2017 p. 698, 699). This tool will be used to solve the decision-making problem when using various colours for making products from recycled plastics.
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Figure 5 -Driver-Pressure State-Impact- Response management tool –“Indicators for
Environmental Sustainability (Dong, Gauschild 2017, p. 699)
In order to understand the tool, the dimensions also need to be explained for more clarification. It starts with the drivers, which talk about the reasons to get into recycled plastics. The drivers lead to human activities leading to increasing GHG emissions and internal pressure like the corporate recycling program. Consequently, the state of quality of plastics is challenged to look into other methods and the impact it would have to not meeting recycling targets. Ultimately, the response from legislation closes the loop in this tool. Using this would be critical to solving the lacuna of having more options for recycled plastics as the company suffers from various technological challenges explained in the introduction and literature review section. This is the core of the decision-making problem faced by Philips related to colours for recycled plastics. The tool will also help in making
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the recycling strategies more cohesive but sustainable as well.
D. Different dimensions of the tool A.Driver –
The main motive of this tool starts with the increase in plastic consumption over the years and how Philips rose to the challenge of making products made out of recycled plastics. It was also seen that changing models of consumption, changes in environmental legislation, moving from a transaction based relationship to a more customer-focused relationship with sustainability considerations were the main drivers for recycled plastics. Other reasons were- cost savings, reducing environmental impact in terms of CO2 emissions and customer requirements to have a preference towards green products “It is important to disrupt your business before someone else does. At Philips, we have started the process of fundamentally redesigning our business and our end-to-end value chains. We also need to define new business models, refine concepts of legal ownership and use adaptive logistics and financing strategies.”- (Frans Van Houten, CEO Royal Philips 2014, p. 7).
Phases in Philips recycling process
There have been various Phases in the Philips recycling process, which added also as a driver for this process. These are :-
1. Since 2013, Philips has been on continuous improvement cycles to use more and more recycled plastics.
2. In 2013, the Philips Performer (Vacuum cleaner) product was introduced as the company inherited an established supply chain that applied recycled plastics.
3. Through 2014-2015, Philips required new and different materials given the mechanical design, which was different, and most of this work came at neutral cost impact, as the savings from the lower price of recycled materials helped the company to offset costs in technical resources and tool modifications.
4. Philips worked over the years with plastic compound suppliers and identified a key CTQ test that would allow predicting the material passes the most critical quality requirements.
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5. Once the CTQ was established, recycled plastics was quickly expanded into Power Pro Ultimate Vacuum cleaner product and most of the recycled content is recycled PP, which is used in all black coloured, bottom housing parts and internal elements. 6. In 2016, Philips defined design rules to incorporate recycled plastics from day 1 of
production. The recycled plastics used in Performer Ultimate come from the recycling of old Philips Vacuum cleaners, which are reaching the end of life in the recycling streams across Europe.
7. As an added benefit, every ton of recycled plastics used helps in saving a ton of CO2 emissions.
B. Pressure
The pressure indicator explains the dimension of corporate recycling targets and increasing GHG emissions for Philips to be in the recycled plastics market. Internally, the company has set itself certain targets from different small domestic appliances products to be included in percentage terms. For 2020, the company set itself ambitious targets like 70% of turnover coming from Green solutions, 90% of operational waste recycled and 15% of turnover coming from circular economy solutions.
A Case in point- Philips Performer Ultimate is the first vacuum cleaner in a closed-loop recycling system. Not only is 36% of total plastics weight recycled, but 30% of the recycled plastics also come from old Philips vacuum cleaners collected via recycling schemes in Netherlands, Belgium and France. The growing use of recycled plastics over the years also points to the healthy setting of targets for recycling.
Over the years working in recycled plastics, Philips has realized that in order to achieve the targets and solve the design problem for change in colours, it needs to look at the issue in a more holistic manner.
C. State
The current state of recycled plastics bodes well as it is an easier indicator to regulate but its environmental reliance is more indirect. For the state of the supply chain to function efficiently, quality is an important element that applies to both materials and to processes.
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“The company also needs to assure that” (Vlugter, 2017, p. 18) 1. Material properties are stable between batches.
2. Good control of incoming material is ensured.
3. Good traceability of materials in the entire process is completed. 4. The stable and repeatable recycling process is adhered.
5. Processes are in place to ensure Compliance to Regulated Substance list (RSL) 6. Quality/Environmental management system is continuously improving
7. ISO 9001/14001 is necessary, extra certifications are a plus.
Possible suppliers need to be identified and considering looking at external certification such EuCertPlast to ensure a high-quality supply base.
D. Impact
While Driver, pressure and the state are indirect indicators for environmental targets that reflect the nuances of being easier to regulate, the impact indicator in the DPSIR tool reflects the consequences for not meeting the recycled targets and leading to higher cost of products in the market. “The lack of good understating on a cause-effect chain in these categories makes it difficult to judge how serious and urgent the problems are. For resources, especially, a fair judgement on the reserves and renewability is essential to define the impacts and thus impact indicators” (Dong, Hauschild, 2017 p. 699). Working in recycled plastics is a strategic choice as seen earlier in the paper it gives the company a competitive advantage as well. Philips has set itself internal targets like 70% of turnover coming from Green solutions, 90% of operational waste recycled and 15% of turnover coming from circular economy solutions.
E. Response
The response indicator reflects the need to adhere to recycled plastics owing to compliance or legislation from the EU. Also, the adherence to RoHS, REACH guidelines in terms of waste management. Studies have shown that there is an increasing relationship between the impacts of environmental regulations on the company’s industrial competitiveness. “In the context of environmental policies, competitiveness
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effects result from differences or asymmetries in regulatory stringency applied across entities that are competing in the same market. “For example, some firms may be regulated while others are exempt, some sectors may face stringent pollution standards than others, or environmental stringency may vary across jurisdictions, as is the case with climate change mitigation policies, where different regions are expected to take carbon mitigation action at different speeds under the United Nations Framework Convention on Climate Change Paris agreement” (Dechezlepretre, Sato, 2017 p. 185).
Legislative requirements
In a number of sectors, supplementary legislative requirements are present with which recycled plastics must comply. These are:-
1. REACH –Reach stands for Registration, Evaluation and Authorization of Chemicals.
This is a European legislation in the area of chemical substances. The legislation establishes plans for assessment of hazardous substances.
2. RoHS- Restriction of Hazardous substances is an environmental directive in the use
of certain hazardous substances like lead, cadmium, mercury and chrome in electrical and electronic equipment. “Old electrical devices may still contain these substances, therefore, must not be used in new applications. However, many recyclers are able to guarantee that their recycled plastics do not contain hazardous substances in quantities which are prohibited under RoHS.”(Gort, Gerrits, 2015, p. 31)
3. EU Strategy – The EU strategy is the foremost and most important when it comes to
global legislation on the use of recycled plastics in Philips and is the most important response indicator. The Commission has adopted a strategy on plastics, which will protect the environment from plastic pollution whilst fostering growth and innovation. 4. WEEE Directive- WEEE stands for Waste from Electric and Electronic Equipment
directive. The legislation states that the producers should pay for the collection, treatment and recovery of waste electrical equipment. Philips has been working on improving the Circular economy’s outer loop, recycling for a decade now. ““Philips supports the setup of recycling infrastructures together with industry partners, where we share a common strategy: creating sustainable financing schemes which
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guarantee the effective and environmentally sound collection and recycling of WEEE.”(Frans Van Houten, 2014 p. 8).
The rationale of the tool
As we see the key dimensions in the DPSIR tool, “on the environmental impact pathway, Driver and Pressure indicators are closer to the cause than State indicators, while Impact indicators come the last. The closer to the cause, the less uncertainty there is in the models but also the more ambiguous the relation is to the consequences in terms of environmental sustainability...”(Dong, Hauschild, 2017 p. 702).In this specific case, it needs to be seen which indicator is the most influencing one. The impact indicator looks to be the most significant one as lack of different products in the recycled plastics could hamper the internal targets for Philips as explained above in the impact segment. In order for internal stakeholders like design, procurement, engineering and domestic appliances business segment to arrive at a decision, the DPSIR tool is a fitting tool that can support decision making regarding choice of colours for exercising the more creative freedom to solve the technological challenge faced by Philips.
As this is the core of the managerial framework, the main problem of solving technological challenges happens with the choice of colours, for many years, the company has been using high gloss and deep black as a colour. The DPSIR tool could be used for more creative freedom in the choice of colours by better decision making. “If environmental standards are to foster the innovation offsets that arise from new technologies and approaches to production, they should adhere to principles like creating maximum opportunity for innovation, leaving the approach to innovation to industry and not the standards setting agency and the regulatory process should leave as little room as possible for uncertainty at every stage.”(Porter, Linde 1995 p. 110).
Looking at the various facets of the tool, it can easily be adapted to the decision-making problem that Philips is facing. In order to achieve responsible consumption, consumers need to be made aware more and more of the importance of recycled plastics. If the decision makers from different business units of the Domestic appliances segment of
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Philips can conclude that analyzing the cause and effect of state and impact from the DPSIR tool make more analogy, it will be easier to build on a foundation for more products to come out of recycled plastics.“Managers have now recognized the importance of stakeholder input and engagement and the potential impact on long-term corporate profitability. The consequences for businesses when they do not effectively consider the impacts of their activities on society are often substantial” (Epstein, Elkington, Leonard 2009, p. 7).
Case in further point is looking back at the history of another example of Philips using recycled plastics. “The use of recycled plastics is part of the larger programme within Philips, the eco-vision programme started from 2012. The objectives of Philips using recycled plastics are communicated externally. This means Philips is forced to work to actively working towards actually achieving these objectives, but it also means the outside world knows that Philips is using recycled plastics”. (Gort, Gerrits, 2015, p. 40).
Research has shown that when an organization wants to work on its decision-making using cross groups which demand points and views from a wide range of stakeholders, it naturally leads to better results.“Collaborative efforts such as this are not actually single-point decisions, but instead, comprise a series of decisions made over time by different groups as part of the end-to-end process. The challenge is not the decision themselves but rather the choreography needed to bring multiple parties together to provide the right input, at the right time, without breeding bureaucracy that slows down the process and can diminish the decision quality.”(Smet, Lackey, Weisss 2017 p.7).
Learnings from DPSIR tool to aid decision making for recycled plastics
1. Mapping out the decision-making process by this tool with a group of leaders and working with stakeholders, which makes it simple and clear. For this to bring into action, this needs to put the wheels in motion. “Effects to mitigate the impact of cognitive biases on decision making have rightly often focused on big bets. Lay out a simple, plain playbook for the process to define the calendar, cadence, handoffs and decisions.”(Smet, Lackey, Weisss 2017, p. 4, 9)
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2. Corporate environmental ethics has a big role to play for a company to achieve a competitive advantage. For Philips, via this paper, Green innovation can improve the performance of environmental management to satisfy the requirement of environmental regulations” (Chang, 2011 p. 362)
3. Environmental regulations covered under the response indicator of the DPSIR tool have a key role to play to influence decision makers for colour freedom for recycled plastics. “Cleaner technologies lead to higher productivity, input savings and innovations, which over a period of time offset regulatory costs and improve export performance and market share. “(Dechezlepretre, Sato 2017, p 187)
4. To be environmentally competitive in a growing market and keep establishing this relationship in a more sustainable manner it is imperative that innovation and environmental regulation go hand in hand.
5. Most of the environmental dimensions, macro organizational characteristics and performance are linked to one another. These dimensions have internal factors like strategic management, inertia and stakeholder management.
6. Making sustainability work via the use of recycled plastics leading to responsible consumption and fulfilling circular economy ambitions needs continuous motivation and learning from the drivers and impact of the DPSIR tool.
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IV Managerial Recommendations
Deriving the results out of the DPSIR tool, this framework should encourage stakeholders to integrate recycling into the development of various corporate strategies. Expanding the market orientation focus from customers and competitors to a broader base of sustainability that includes all stakeholders should provide the opportunity to advance market performance. Designing the managerial framework is the most important recommendation from the analysis so far. The value that this framework brings in the clear step by step process of how the design, domestic appliances business segment, procurement and engineering teams can see in aiding decision making for having more creative freedom for colours for more products to be made out of recycled plastics. The results and learnings from the tool illustrate the fact that decision-making needs to be made in a cross-functional way from different stakeholders mentioned in the previous sentence. “If we look at the current technologies, the maximum production could be around 4000 tons.”(Eelco Smit, Sr. Director, Group Sustainability- Royal Philips).New technologies to go beyond 4000 tons will become available but this will take time. There is a risk that development and product engineering will slow down activities as they wait for the new technologies to advance which causes delays in the program.
Following are the recommendations to break the paradigm:-
1. Developing a target towards 2025 that can function as a “north star” and provide clear direction towards the business. This target should be clear in terms of quantity per product from the small domestic appliances business segment. With a set target, a plan of action should be made with product engineering and design teams in breaking it down to yearly targets and constant review and feedback to the sustainability, design, procurement and engineering teams for any improvement.
2. Ensuring management commitment is on place from business to ensure development and product engineering activities. My recommendation would be to have the commitment from top to down in the business segment with adequate allocation of resources, capital and labour in order to meet the targets.
3. Ensuring technical resources are in place to support business groups with technical know-how. For products, which require high degree of design and innovation, the
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business group should be equipped with a strong and skilled pool of technical resources who are experts in the field of recycled plastics to eliminate waste and achieve LEAN in their production methods.
4. Ensuring clear commitment from procurement to scout for new suppliers required to meet the targets and at the same time working with those suppliers to improve technologies. Suppliers are the key to scout for new materials in different colours and due diligence must be done by the procurement team looking at their success rate, history, development and productivity.
5. Getting top management commitment and ensure 2025 targets are embedded in externally published company commitments. So far, Philips has been publishing its commitment towards recycled plastics in terms of percentage achieved via green revenues. However, going forward-externally clear targets for various products should be published through various channels as a reminder and motivation to ensure clear intentions. This would also help the company in staying ahead of its competitors and making a clear statement towards overall sustainability goals.
6. Creating regular reporting framework to ensure clear tracking of progress. Any new initiative is only successful if it is regularly tracked and presented to the top management for any follow-up actions like dashboards, metrics and KPI’s. This puts the onus on all stakeholders to keep moving towards the goal without any constant reminders.
7. Various channels of internal communication should be utilized to make employees aware of recycled plastics. This could be in the form of awareness programs, e-learning modules on recycled plastics and newsletters. This has a twin effect in sustainability awareness and improving company goodwill among the employees.
The 2025 technology roadmap has been developed internally in consultation and collaboration with the design, engineering and procurement team. The roadmap has been developed on a granular level such as product category so we can easily carve out categories from the pledge if a certain business is discontinued. It looks into different markets in EU and Asia with different levels of plastic like PP and ABS. The slides are shown in the appendix for more details.
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V Conclusion
In this paper, an analysis has been done to highlight the technological challenges faced by Philips to move into different colours and how a management framework can aid in the decision-making. To gain a more holistic understanding of the framework and for practical implementation, the 2025 roadmap has been created with the SWOT analysis to have a thorough picture of the entire scenario. This project examines available sustainability factors in the DPSIR tool. State and Impact have a similar purpose like Response as well. Nevertheless, all studies indicators of the DPSIR tool share a common focus on responsible consumption, regulatory framework, sustainable development and recycling market. Clearly, more research is needed to establish the cause-effect chain and provide more indicators in the future. Several recommendations have been given to choose the right indicator for decision-making. The maturity of the cause-effect chain for each indicator is different. The uncertainty associated with each indicator depends on the location of the indicator and the specific decision-making problem.
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VI List of Tables, Figures and Charts
Figure 1.Cumulative plastic waste generation and disposal
…...5
Figure 2. 7 polymers that dominate the plastics market
……….7
Figure 3. Advantages of recycled plastics
…...14
Figure 4.SWOT Analysis of current scenario of recycled plastics in Philips
…...21
Figure 5. Driver-Pressure-State-Impact-Response management tool
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VII Appendix
A .List of people contacted for the research study
Various interviews were conducted with the Procurement, Engineering and Domestic appliances business segment to collect data and opinions on how the current situation of recycled plastics is important for Philips The interviews also went in depth in making the situation more understandable about the relationship with the Sustainability team and adding depth to the whole process. Following were the interviewees:-
1. Eelco Smit – Senior Director, Group Sustainability and Company Supervisor 2. Mark Olof Dirksen- Functional Engineer
3. Fredric Delanoy- Procurement Director and Global Commodity Manager 4. Cristina Raboj- Senior Consumer Marketing Manager, Floor Care
5. Sen Kee Chen- Chief Engineer Product Development, Garment Care Innovation Product Dev.
6. David Schippers - Lead Engineer Product Development, Floorcare Innovation 7. Merjin Van de Sandt- Consumer Marketing Director Canisters, Floor Care
Consumer Marketing
8. Daniel Abbo- Business Leader Garment Care, Domestic Appliances
9. Hubert Petz- Development Engineer, Manufacturing Process Development Bart-Jan Zwart- Function Development Project Leader, Coffee
10. Sandy Spaan- Sr Consultant, FMG 11. Michel- Lead Engineer
B. Interview structure with the people contacted for the research study
Topic Sub-topics – example questions
Introduction research project
1. Introduction research project.
2. Explain the purpose of the research project, how the data will be used, how data will be treated (confidentiality). 3. Explain the interview structure -Takes +- 45 minutes
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4. General topics that will be discussed 5. Do you have questions so far?
Context
General introduction
Before we will focus on the partnership between your business group and Group Sustainability, we would like to start with a few general questions about your role within [organization].
1. Can you briefly explain your role within [organization]? 2. Next, we would like to discuss your experience regarding
the partnership between your business group and Group Sustainability
History of interactions
1. What is/was your role in the partnership between your business group and Group Sustainability?
2. How did you experience this role so far?
3. What were your first introduction to the business group and Group Sustainability partnership? -When? How did you experience this?
4. Which moments were according to you important in the development of the partnership? (Positive/Negative)
5. Did these moments result in more interaction between both organizations?-(e.g. media, rapports, meetings, contracts)
Motivations 1. What are the motive of the business group and Group Sustainability partnership?
2. Do you feel that the partnership currently lives up to this motive?
3. Why yes/no?
4. What is your personal motive to participate in this partnership? -Does the partnership currently live up to your expectations?
5. What is according to you the reason for [organization] to collaborate with [organization]?
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Mutual
reinforcement
1. Do you feel that this partnership result in achievements for organization that otherwise cannot be met?
Expectations 1. How do you see the future of the partnership?
2. What do you expect from this partnership in the future? 3. How do you foresee the role of [organization] in the future
of this partnership?
End 1. Room for questions and remarks.
2. Closing. Thank you
C. 2025-Tech-roadmap
Tech roadmap for PP plastic polymer for EU region
Figure 6- This figure shows the roadmap for PP Plastic polymer to be implemented in the EU region from 2018-2025.Respective suppliers on the right could be contacted for respective colours as shown above
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Tech roadmap for PP plastic polymer for the Asiatic region
Figure 7- This figure shows the roadmap for PP Plastic polymer to be implemented in the Asiatic region from 2018-2025.Respective suppliers on the right could be contacted for respective colours as shown above
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Tech roadmap for ABS, PS and PC-ABS plastic polymer for the EU region
Figure 8- This figure shows the roadmap for ABS, PS and PC-ABS Plastic polymer to be implemented in the EU region from 2018-2025.Respective suppliers on the right could be contacted for respective colours as shown above
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Different targets being set for different small domestic appliances products
Figure 9- This figure shows the potential targets being set for the small domestic appliances segment from 2018-2025.
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VIII. References
A. Dong, Hauschild, (2017), “Indicators of environmental sustainability”, Science Direct, p. 696-702
B. Gort, Gerrits, (2015), “Designing with recycled plastics”, Partners for Innovation, p.5-6, 9, 21-22, 30, 32,
C. Sharma, Vredenburg, (1998), “Proactive Corporate Environmental Strategy and the Development of Competitively Valuable Organizational Capabilities”, Strategic Management Journal, Vol.19, NO.8, p.729-753
D. Kennedy, Whiteman, Ende, “Radical Innovation for Sustainability: The Power of Strategy and Open Innovation”, Long Range Planning, p.712-725
E. Fisk, (1973), “Criteria for a theory of Responsible Consumption”, Journal of Marketing, Vol. 37, NO. 2, p.24-31
F. Epstein, Ekington, Leonard, (2015) “Making Sustainability Work: Best practices in managing and measuring Corporate Social, Environmental, and Economic Impacts”, p.19-32
G. Keats, Hitt, (1988) “A Causal Model of Linkages among Environmental Dimensions, Macro Organizational Characteristics and Performance”, The Academy of Management Journal, Vol 31, p.570-598
H. Rugman, Verbeke, (1998), “Corporate Strategies and Environmental Regulations: An Organizing Framework”, Strategic Management Journal, Vol.19, NO. 4, p.363-375 I. Porter, Linde, (1995), “Toward a New Corporation of the Environment- Competitive
Relationship”, the Journal of Economic Perspectives, Vol 9, No 4.p. 97-118
J. Clarkson, (1995), “A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance”, The Academy of Management Review, Vol 20, No. 1,p.92-117 K. Dechezlepretre, Sato, (2017), “The Impacts of Environmental Regulations on
Competitiveness”, Review of Environmental Economics and Policy, Vol 11, issue 2, p.183-206
L. Chang, (2011), “The Influence of Corporate Environmental Ethics on Competitive Advantage”, Journal of Business Ethics, Vol 104, No. 3,p.361-370
M. Smet, Lackey, Weiss (2017), “Untangling your organisation's decision making”, McKinsey Quarterly, p.1-15
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N. Vlugter, (2017), “Scaling Recycled Plastics across Industries”, CE100,p.6-19
O. Harzing, (2000), “An Empirical Analysis and Extension of the Bartlett and Ghoshal Typology of Multinational Companies”, Journal of International Business Studies, Vol, 31, No. 1, p.101-120
P. Hopewell, Dvorak, Kosior, (2009), “Plastics recycling: Challenges and opportunities”, Philosophical Transactions of the Royal Society, p.2115-2123
