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Investments and risks for sustainable development Lector univ.dr. Cristian Silviu BANACU

Dedication

Cuprinsul crii:

Chapter 1 Introduction in investments theory and practice for sustainable development 1.1 The concept of investment 1.1.1 Investments definition 1.1.2 The concept of efficiency and effectiveness of investments 1.1.3 Investments for sustainable development and the new economy 1.2 Investing in product eco-design 1.3 Investing in sustainable production. The evolution of the sustainable production concept 1.3.1 Technical and economical demands for investing in production systems 1.3.2 Good examples of sustainable development models. The Dutch approach 1.4 Review the literature 1.5 The aim of the investment course on sustainable development bases 1.6 Summary and recapitulation

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Chapter 2 Measures to support investments in sustainable production 2.1 Introduction 2.2 Technical measures 2.2.1 Technical-time measures 2.2.2 Utilization 2.3 Technical 2.3.1 Technical efficiency 2.3.2 Real machine capability 2.3.3 Technical Productivity 2.4 The Transformation Factor 2.5 Economical measures 2.5.1 Productivity as an economic measure 2.5.2 The value of technology 2.6 Ecological measures 2.6.1 Measures for ecosystems and land use 2.6.2 Measures for assessment of forests and pastures levels 2.6.3 Measures that take into account the biological diversity 2.6.4 Measures for water resources assessment 2.6.5 Atmosphere pollution and its effects on climate changes 2.6.6 Raw materials and energy resources 2.7 Technical-Economical measures 2.7.1 Quality as a technical-economical measure 2.7.2 Quality as a technical-economical-ecological measure 2.7.3 Flexibility as a technical-economical measure 2.8 Complex measures 2.8.1 The Transformation Factor as a complex technical, economical and ecological measure

2.8.2 The economical assessment of the investment in production processes by using the Transformation Factor 2.8.3 The ecological assessment of the investment in production processes by using the transformation factor 2.9 The technological-economical-ecological measures: The Sustainability Factor 2.10 Benchmarking values for Sustainable Production Systems of different industries 2.11 Conclusions

Chapter 3 Investments in sustainable products, the life-cycle approach 3.1 The life-cycle assessment for products and processes; a technical, economical, ecological overview 3.2 Life-Cycle Technical Analyses (LCTA) 3.2.1 Life-Cycle Technical Analyses (LCTA) for products 3.2.2 Life-Cycle Technical Analyses for production processes



3.3 Methodology of assessment of life cycle process

Chapter 4 The product life cycle costing a tool for feasible eco-products investments 4.1 Life-Cycle Economical Assessment (LCEcA) 4.2 The product life-cycle environmental assessment 4.3 Product life-cycle human social impact assessment 4.4 Conclusions

Chapter 5 Investments in sustainable production for housing; designing the methodology for implementation 5.1 Introduction 5.2 Sustainable industrial production for housing; The concepts and definitions 5.3 Market influences on housing industry 5.4 The house as a product 5.5 Processes for housing; needed conditions for sustainability 5.6 Production management for housing 5.6.1 Actors of the housing industry 5.7 Building a methodology for Sustainable Housing Production 5.7.1 The background 5.7.2 The life-cycle analyse for housing 5.8 The recycling-housing technologies between demolishing and deconstructing 5.9 The feasibility analyse of production processes for housing 5.10 Conclusions

Chapter 6 Types of investments for sustainable development 6.1 Introduction 6.2 Project investments 6.3 Project definition 6.4 The necessity of programs and project investments 6. 5 The programs 6.6 Program classification 6.7 The programs system approach 6.8 Projects 6.8.1 The project system 6.8.2 Project documentation sub-system 6.8.3 The project investments result sub-system 6.9 Tipology and structure of project investment 6.10 The project management of investments 6.10.1 The project scope 6.10.2 The project objectives



6.10.3 Field criteria 6.10.4 Cost criteria 6.10.5 Time criteria 6.10.6 Quality criteria 6.11 The marketing mix of investment projects 6.11.1 The project as a product 6.11.2 The projects market 6.11.3 Project price 6.11.4 Promotion and publicity for projects 6.12 Conclusions

Chapter 7 The time factor in investments 7.1 The influence of time on investments 7.2 The discounting technique 7.2.1 The calculus of discounting indicators 7.2.2 The reference moments for discounting

Chapter 8 Bank indicators for feasibility studies and business plans 8.1 The role of national and international financial institutions in Romania s economic transition and integration in European Union 8.2 Methodologies for investment project evaluation of international and national financial institutions (I.B.R.D, E.B.R.D.) 8.3 Feasibility studies and business plans structure and characteristics 8 .3.1 Opportunity studies 8.3.2 Pre-feasibility studies 8.3.3 Feasibility studies 8.3.4 The evaluation report 8.4 Economic and financial analyses for the feasibility studies and business plans 8.4.1 The investment costs assessment 8.4.2 The analyse based on centers of cost 8.5 Financial analyse of investment projects 8.6 Bank indicators to assess the feasibility of project 8.7 Conclusions 8.8 Themes to be solved by the students

Chapter 9 Risk and uncertainty analyse for investment projects 9.1 The necessity of risk and uncertainty analyses 9.2 Economic criteria to analyse uncertainty and risks for investment projects 9.3 Sensivity analyse 9.4 Forecasting methods for investment projects



9.5 Conclusions 9.6 Themes for students

Chapter 10 Instruments to assist decision making for investment projects 10.1 Introduction 10.2 The CSB graph 10.3 Computer Expert System for CSB 10.4 Conclusions 10.5 Bibliography

Chapter 11 Investments in research and development (R&D) projects for sustainable development 11.1 The importance of investments in research and development projects 11.2 Indicators for feasibility analyses in research and development activities

Annex 1 Union policy on environment and sustainable investments Annex 2 Factors used in investment projects Annex 3 Indicators

Bibliography

Cuprinsul studiilor de caz: Chapter 12 Study case for sustainable investment project selection


Dedication I dedicate this book to Professor Ph.D. Ion Vasilescu and also to the Academy of Economic Studies of Bucharest, to Magister Professor Ph.D. Peter SCHMID from University of Technology Eindhoven (The Netherlands), to Professor Ph.D. Fernando BRANCO from Instituto Superior Tcnico, Lisbon, Portugal.

Acknowledgement The book was published with the support of the Academy of Economic Studies of Bucharest and with the information and knowledge acquired during my doctoral stages in the Netherlands (at TUE in 1995). I want to thank to the institutions that supported my grants which made possible the concepting and the publishing of this book. I thank to: The Academy of Economic Studies of Bucharest, Romania NUFFIC (The Dutch Organization for University International Relationships) An important support also came from the CNCIS Programme Celula de info-video-comunicare pentru nvmntul la distan (director lector dr Cristian Silviu BNACU) and Sinergetica sistemelor tehnico-economice, (director prof. univ. Ion VASILESCU).

The author Bucharest 24.06.2004

Chapter 1

Introduction in investments theory and practice

for sustainable development

The concept of investment Investments definition The concept of efficiency and effectiveness of investments Investments for sustainable development and the new economy Investing in product eco-design Investing in sustainable production. The evolution of the

sustainable production concept Technical and economical demands for investing in production

systems Good examples of sustainable development models. The Dutch

approach Review the literature The aim of the investment course on sustainable development bases Summary and recapitulation

1.1 The concept of investment In every day life we very often hear a word: investment related to someones intention to do something. For instance, it is usually for someone to say: Ill make an investment by buying a property or a car. Others say: my investments are my kids, their education and achievements. The Public administrations managers and leaders are talking about investments into infrastructure development or sustainble investments. The capital marketsbrokers are also talking about investments. The question is: The investments have the same semantics for all the people mentioned above? The answer might be yes and no as well. The yes stands for the fact that the investments must bring a certain benefit either economic, called profit, or other benefits (environmental, social, technical etc.).

Investments and risks for sustainable development It means that only the spendings in assets (tangibles or intangibles) or services which are able to generate profits or other benefits could be considered investments. From this point of view, the properties (lands and buildings) are considered investments only if they are a support for production or services activities on profit bases (incomes is greater than spendings) or if they are for rent, bringing an income greater than spendings. The no stands for the idea that we dont consider our house or car as an investment. These are spendings for our living needs or for the improvement of our life standard. Our car or house becomes an investment if it brings an income (car used as taxi, house and land for rent etc.). Other aspects about investments are related with the intangibility characteristics. A good example are the investments in education or professional specialization. For example, the parents and the society through public support system invest in the education of their sons and daughters as your parents did for you, with the hope that the youth will bring more knowledge and skills for their professions. The government and the public administration are making investments in order to develop the infrastructure or environmental rehabilitation that will support future economic activities. In the case of education, health, environment and infrastructure the investment are not judged from the economic profit point of view but from the benefits brought by time. For instance, having better educated and well skilled individuals a society could develop faster. A better transportation infrastructure (roads, highways, ports, airports, bridges etc) that usually is the subject of public investments represents the support for other economic profitable activities within economy as production, trade, tourism etc. Investments in health are beneficial for the general state of population health knowing that healthy people are productive and have a low impact on public health insurance budget. So, we could give a definition for investment as it follows: 1.1.1 Investments definition Investments are a present spending for a future gain either profit or other benefits (ecological, social, technical, skills etc.) as mentioned before. As a conclusion we relate the investments with the future in all that it concerns. Therefore, we well use a new approach different from the classic one in which only the economic profit prevails as a basic indicator. The new approach is to relate

Introduction in investments theory and practice for sustainable development investments with the sustainable eco-development concept and the new economy based on the information society concept. That means to care about future and to adapt to the change and to make the investments sustainable. This is not a fashion, it is a reality that already is present in well developed countries. The European developed countries, as the Netherlands, Sweden, Germany, Great Britain, France, Norway, Danmark, Finland, Austria, Belgium, Portugal, Spain, etc. or other great economic powers as USA, Canada, Japan, Australia, or transition economies as China, Russia, Romania etc. are investing in their own economies on sustainable development basis and putting the foundation for a new economy based on information technology. The non-classical approach, based on sustainable investments and new economy, is necessary for Romania on its access to European Union economic integration. 1.1.2 The concept of efficiency and effectiveness of investments The efficiency as a word is well known, too. It is coming from the latin word efficere that means to do well what are you doing, at time and with optimum consume of resources either human, material or financial. If we deal with the economic efficiency of investments that means to put in balance efforts (financial, human, technical etc.) with effects (gains as turnover, profit, production, services, products, impact on enviroment etc.). For example, an investment in a building is efficient if the time of completing and the return on investment(ROI) is fullfiled at the desired time without any timedelays and resources overconsumptions.

1EFFORTSEFFECTSe = where e = efficiency coefficient

The efficiency coefficient e help us to select a variant of a project investment from others taking as a base the ratio effects/ efforts there were seen as profit/ costs, for instance, or products made / optimum quantity consumed resources. Effectiveness is coming also from the latin word efficacere and means to do the right thing, to do with the lowest consumption of resources either uman, material, technical or financial. In a practical way it means that an investment is effective if it is the most adequate for the purpose involved and it is done with the lowest (or optimum) consumption of resources. For example, an investment in a building is effective if the desired utility is fullfiled and the consumption of resources during using is the most appropriate. 1.1.3 Investments for sustainable development and the new economy The concept of sustainable development has emerged in the seventies due to the general concern about the global environment, as a result of pollution and an increasing usage of sources for raw materials and energy.

Investments and risks for sustainable development Sustainability means the rearrangement of technological, scientific, environmental, economic and social resources in such a way that the resulting heterogeneous system can be maintained in a state of temporal and spatial equilibrium (Brand, 1988), while a Sustainable Development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland,1987). As a result of the definitions of a sustainable development, a sustainable production can be defined as an industrial activity resulting products that meet the needs and wishes of the present society without compromising the ability of future generations to meet their needs and wishes. As a consequence of this definition, a sustainable production will minimize the pollution of the global environment as well as the use of natural sources of raw materials and energy. A possible way to reach these requirements is by a continuos improvement of industrial activities with respect to: - reduction of energy usage of non-renewable energy sources, - usage of recovered goods, parts and materials from discarded goods, - sustainable product quality. A sustainable production implies that all phases of the product are viewed with respect to the requirements, from the exploitation of raw material and energy sources until the recovery of materials, see figure 1.1. In the chain, the different industrial activities can be distinguished: - exploration of raw material and energy sources, - transformation of raw materials into materials, - product design, - transformation of materials into products, - recovery of goods, parts and materials. To arrive at sustainability for the complete chain, each activity of the chain should be sustainable. That means that three main activities of the chain have to be optimised: product design, transformation and recovery. The product design determines the material and energy usage of a product during his entire life cycle and the percentage of recovery. During the transformation activity, material and energy usage is depicted by the used processes and systems, while this activity determines the product quality too. During recovery, the quantity and quality of recovered goods, parts and materials are determined by the processes and systems.

Introduction in investments theory and practice for sustainable development

INPUT OUTPUT

Material-production

Fabrication ofend-products

Selling &Distribution Use

Waste-processing

Waste & Emissions

REUSE & RECYCLING

Reuse during the production time stage Reuse in the end-product lyfe cycle phase

Reuse afterend-product life cycle phase

Raw materials& Energy

Research & Development of product and process

Figure 1.1 The various phases of a product Product and production belongs to each other and are coupled on the technology: product-technology-production. Innovations are obtained by new technological opportunities while demand is dictated by the market. Because of the given relation, the choice of the technology is very important, not only technically but also economically, ecologically and socially. This is summarised in table 1.1 which gives a product / technology matrix, divided to the aspect: known, new, unknown.

Table 1.1 Product / Technology matrix technology product

known new unknown

known 1 3 production process

new 2 4 development unknown product

development product development

research

Manufacturing a known product with a known technology (section 1) does not give risks but the lowest profit rates. Production of new products, which means products which have not been manufactured before, is more difficult. If these new products are manufactured by

Investments and risks for sustainable development means of a known technology the risks can be overseen. Examples can be found in the automotive industry and all other branches of industry where product innovation is applied. Mostly it concerns product redesign and not a totally new product. In order to improve the efficiency of production process, new technologies are used to manufacture a known product. This strategy is applied to reduce the costs (less energy, less waste, less labour, less pollution). Besides, the effectivity can be improved by means of a higher product quality. For instance, an industrial automation results in a better quality because of a better process control. Manufacturing of new products by a new technology will give high risks. An example is the manufacturing of mega-chips. To arrive at a sustainable product, mostly the product has to be redesigned, as this phase depicts the material usage and environmental load during the entire life cycle. The technology is known as a sustainable production requires a continuos improvement of efficiency and effectivity. For a company, the reduction of materials and energy by applying sustainable production techniques may result in decreasing production costs and indirect costs as a consequence of the avoidance of a polluting production and low quality products and processes. Furthermore, the company will be more competitive because the market will demand for sustainable products in future. In the next sections, known technologies are described to arrive at a sustainable product design and a sustainable production. Furthermore, ways are given to introduce the sustainable production concept in the industry. But before the introduction, the market demand for sustainable products and the society demand for a sustainable production is indicated. 1.2 Investing in product eco-design The product design is important for all activities in the chain in order to create an integral chain control with respect to a sustainable development. Almost all limitations are the result of the product design. A product eco-design can be defined by: - the development of products where, in the design decisions, an integral chain

control is weighted equally compared to more traditional quantities, like economics, quality, functionality, aesthetics, ergonomics, innovation, and image, in such a way, that the potential influence of the products upon the environment and the material and energy sources is reduced significantly (derived from the definition of an environmental friendly design by Brezet et al., 1994).

Introduction in investments theory and practice for sustainable development To create a sustainable investment, the choice of the materials and the way the product structure has been composed, are very important. Therefore the following activities should have a high priority for the product eco-design:

minimal usage of virgin materials, minimal energy consumption during the production and usage periods, usage of materials which can be recovered easily, eco-design with easy to divide materials, easily disassembled or dismantled oriented product design, eco-design so that parts and the product have long life cycles.

The aim is to have the requirements with respect to sustainability from the beginning of the design phase, using concurrent engineering and concurrent economics: a systematic eco-design of products and the processes needed for their production, where all elements of the product life cycle are considered by a multidisciplinary designers team, from the concept until the disposal phase, including quality, costs, planning, productibility, users demand, maintenance and environmental requirements (Constance, 1992). New views like the environmental requirements can be handled systematically in the design phase, e.g. by applying QFD (Quality Function Deployment) to translate the market demands into a design of a green product. 1.3 Investing in sustainable production. The evolution of sustainable production

concept The purpose of production, at least idealistically, is to enrich society through the production of functionally desirable, aesthetically pleasing, environmentally safe, economically affordable, highly reliable, top-quality products. These noble objectives are often conflicting for economic reasons. Since the first use of machine tools there has been a gradual trend towards making machines more efficient by combining operations and by transferring more skill to machines. Technical development has made it possible to attain high productivity rates which are essential for any society willing to enjoy high living standards. Until the sixties, all that was produced, was sold, because of the seller's market. Although the price was important to increase the market share, the pressure to the prices was not extremely as the profits in that time show. However, as the seller could choose more and more between various producers, the price became an important weapon.

Investments and risks for sustainable development In the past, it was tried to obtain an efficient organisation in order to have a higher production output. But now the price pressure requires an efficient organisation in order to reduce the cost price. To be competitive, management focused on reorganisations and transferring the production to low wages countries. At the beginning of the seventies, the buyer became aware of the quality of the product. As a part of the industry, and especially in Japan, offered products with a high quality for low relatively low prices, together with efficiency, quality became an important aspect to stay competitive. At the end of the seventies, the seller's market changed into a buyer's market. Therefore the battle for the attention of the buyer became more difficult. Especially Japanese firms increased their product assortment and shortened the life time of a product. The buyer liked the choice he could make now and showed this in buying this kind of products. So, besides being efficient and producing with a high quality, product assortment, delivery time and the look of a product became very important. This all resulted in a tremendous time pressure: companies had to introduce faster new products to the market, so that the development times has to be reduced, while the products had to be delivered faster. So the company had to be flexible too. To fulfil the requirements, the companies have introduced cost awareness, quality programms and techniques to become more flexible. This should be handled as a continuos process of improving. The cost awareness implies that e.g. material waste is avoided, the quality programm state care that defect products are avoided while flexibility results in avoiding of time waste. This all means that at the end of the continuos improvements, a state of sustainable internal production is obtained. It is obvious, that these improvement processes are related directly to the design of the products. On the shop floor, the improvements in costs, quality and flexibility can be measured by using the Transformation Factor (de Ron, 1994). This factor reflects the deviation of the production system from the ideal situation. It is related directly to the activities of the shop floor as it is expressed in terms which are familiar to the shop floor and the operational departments. Furthermore, the transformation factor should be clear to management as well as relevant. Maskell (1989), suggests that new performance measures should be introduced beacause the known measures can not be used satisfactorily. He mentions some characteristics for these measures which are fulfilled by the transformation factor.

Introduction in investments theory and practice for sustainable development 1.3.1 Technical and economical demands for investing in production systems A type of technology is used to process the raw materials, other types are used in the production stage resulting in final product. For that reason the technology puts together materials, technological equipment and machinery, human experience and methods of organisation. The chain by which raw materials are transformed into final product is called a production system and consists of three essential parts: input, process and output. (see figure 1.2).

Production system

Input Process Output

Consumer demandMaterialMoneyEnergyHuman resourcesEducation

DesignProductionManagement

Consumer goodsCapital goodsSatisfaction and qualityCost effectiveness

Figure 1.2 Parts of a production system (after Ad de Ron, 1994) A sustainable production system, is a production system that will have less impact to the environment, it's end products as well, being characterized by: (1) reduction of energy usage from non-renewable sources, (2) closing the production chain by introducing recovery of the goods, parts and materials, (3) increasing the sustainable product quality (de Ron, 1994). To transform an existing production system into sustainable one some of the next strategy could be followed: Total Excluding Strategy: characterizes the situation in which either it gives no

market demand for the product, or the product doesn't fulfil the sustainability requirements;this means that there are no economical-ecological reasons to maintain it.

Reconverting Strategy: characterises the situation in which it gives to a market demand for the products, or the products don't fulfil the sustainability requirements and (the product) could be replaced on the market, with other

Investments and risks for sustainable development

types of products resulting from other types of technologies; in the mean time the technical facilities (machinery, equipment etc.) could be used in remodelling the process (in a sustainable way) for other (sustainable) end-products with other segment market destination.

Reconfiguration Strategy: characterises the situation in which it gives a market demand for the product at affordable price, but the product doesn't fulfil the sustainability requirements, or the technological chain is not sustainable itself and there are not enough investment funds to finance the total replacing with a new one;

Total Replacing Strategy: characterises the situation in which already exists a market demand for the products, and because these are not sustainable, and the technology to produce them is not sustainable as well but there are enough money to buy another to fulfil the sustainability requirements.

In figure 1.3 are presented the alternative strategies.

SUSTAINABLE PRODUCTIONSYSTEMS

MARKET DEMAND FORSUSTAINABLE PRODUCTS

THE CARE FOR ENVIRONMENT

TOTAL EXCLUDING RECONVERTING RECONFIGURATION REPLACING

EXISTING PRODUCTION PROCESS SYSTEMS

Figure 1.3 Making sustainable the production systems through investments

This strategies could be used with success, especially in the Middle and Eastern European Countries in the process of integration in the European Union, because of the characteristic conditions of the transient period from centralised state economy to market economy that made possible deep transformations in the economies of these countries. The economic transient period is characterised by the transfer of

Introduction in investments theory and practice for sustainable development the property of production systems from state owned to the private and public owners. Managerial and technical changes are taking place in the production systems in order to adapt to market demands. The situation is different from case to case and it requests an adequate analyse because the production systems of Middle and Eastern Europe have specific different problems (some have to be improved, other to be replaced, other to disappear- depending on the requested level of technological quality and on the usage degree). The overused and old equipment and technologies which are still running couldn't be replace "over the night", because of the lack of investment funds, and socio-economical aspects, therefore a new type of strategy of renewal is requested to combine self-improvement and technology modernisation. That means that self-adaptability, experience and creativity of the people employed in firms to become important resources for self development on a sustainable way. The factors which have to be considered are: 1) Training and education at all levels to stimulate and encourage quality in

working processes; 2) Flexible organisation; 3) Creativity stimulation; 4) Private initiative stimulation (state laws and firm's policy levels); 4) Industrial property (patents, brands, design, author's rights and obligations for

individuals and firms); 5) New sources of (local, foreign) investments based on mutual advantage; 6) Partnership with much-experienced firms (local or foreign) based on mutual

advantage; 7) Environmental moral behaviour stimulation based on the assumption that the

end products are personal but the environment belongs to all not just to present but also for the future generation (future generation responsibility behaviour);

8) Encouraging the traditional local experience (if is feasible); 9) Encouraging the use / reuse of local materials and energy. 1.3.2 Good examples of sustainable development models. The Dutch approach Following the Brundtland Report (1987), the DutchNational Environmental Policy Plan' was adopted by the government and the parliament (in 1989). In the plan three elements are central: 1) Integrated chain control: closing the raw material cycles. 2) Energy reduction: energy saving, increase of the energy efficency and using

durable energy sources. 3) Quality improvement: in order to increase the material life time.

Investments and risks for sustainable development The objectives are a large reduction of emissions and energy consumption, and the use of non-renewable raw materials by means of material recovery. On the short-term, the environmental mess should be cleaned up as soon as possible, requesting for new environmental technologies with specific aims and functions. A number of such technologies to reduce emissions to water and air already exists or could be developed in the short-term. On the medium-term, it is expected that within 5-15 years most end-of-pipe and curative technologies have been installed, and that products will be redesigned in an environmental - friendly way. The technological developments go on, and it is expected that new technologies, new products, new processes will be developed in the mean time, which, however, may create new sources of environmental pollution. Thus a second objective for the technology policy is to influence the development of new technologies in such a way that new technologies products, and processes do not create new environmental problems,but reduce further the impact of older technologies. One of the problems to be solved is how to influence technological development in such a way that adverse affects do not occur in the future. This is a well-known question for technology assessment. New concepts like ' Comprehensive Life Cycle management ' which reefers to the management techniques (towards use of energy, leakage losses, organisation, finance and logistics) and ' Life Cycle Assesment', (the Comprehensive Life Cycle Management and Life Cycle Assesment - LCA, technical methodes that analyse, quantify and take measures about the environmental consequences of a product on a scientific and systematic basis through it's entire life-cycle: from extraction of raw materials, production, use, disposal and the transportation between those phases)(B. Mazijn,1992), the ' Cascade ' (the concept of using the potential properties of a product or resource in various subsequant stages) (Hans van Weenen, 1992) and new type of exploration, the so called 'Environment-Oriented Technology exploration' ( a scientific way of research made to show how to explore the environment while taking environmental objectives as a focal point) (P.J. Vergragt, L.Jansen 1992), are investigated in order to be applied in practice. The short-term and the medium-term investigations and instruments take the present situation as a starting point, so the present policies seem to be evolutionary that means they continue to adapt incrementally improving most of the present technology. Thus paradigm shifts and fundamentally changes in technological systems do not appear in this type of policy making.

Introduction in investments theory and practice for sustainable development The long-term Dutch strategy for environmental policy settled in 1990 by the Dutch Commission for Long-Term Environmental Policy proposes ten radical changes from a radical change in recognition to a radical change in dialogue. They put the bases for the"Sustainable Technological Development programm -(STD)" that present the sustainability criteria for the year 2040. STD establish that: "Technology can never be more than a tool, an instrument among others; the type of technology that will be developed is very much dependent on the structural and cultural conditions that prevail in society". The programm underlines the fact that the core of the problem is not to consider the technology as a major part for the solution of environmental problems or propagating technology as a "panacea", but the most important is that the potential of technology should be exploited to a maximum. STD, states also that the eco-capacity of the earth has already been exceeded and taking into account that the global population will grow by a factor 2-3 in the next 50 years, the eco-capacity of the earth will be exceeded by a factor of 10-50 if the efficiency of the technology with respect to the environment remains roughly the same. Therefore to fulfil the future needs of humans new technologies are necessary and they are not to be developed earlier than 50 years from now. As the time is pressing we have to start it now. To investigate new developments can be used the backcasting method, where a picture of a most likely future situation is created as a starting point, to think about the (technical) means which are necessary to reach this state. Several steps have to be followed: 1) Creating a social support for the challenge to technology developers. 2) Problem of definitions for the development of new technologies i.e

transportation, housing etc, as well as the level of systems (transportation systems, housing system, etc), as well as the level of products (vehicles, houses) or utilities (motor, component parts of the houses, heating installations for housing, energy, materials etc.).

3) Problem chosen for being elaborated. 4) Creating demonstration projects (to set examples in housing, transportation,

food/, clothing and recreation, generally known having a large social impact) in which a new approach or technology will be developed that must lead to a communicative design which means a design that fulfils, not just its functions, but also, sustainability and easy communicability to other technology developers and the public.

5) Setting the social conditions in which sustainable technology function. 6) Techno-economical feasibility study of sustainable technologies. 7) The people gain trust in technology.

Investments and risks for sustainable development The aims of STD programm are: - To illustrate the possibilities; - To indicate the barriers; - To stimulate a broader discussion; - To motivate technology developers. The Dutch government presented in 1991 a document 'Technology and the Environment', following the National Environmental Policy Plan. In this document the strategies for a technology policy for the environment, was presented. However, it appeared that by this policy, in the long-term the goals of sustainability, could not be reached. Either consumption would have to be reduced drastically, or drastical changes in technological trajectories and systems would have to be achieved. (Philip J.Vergragt, Leo Jansen 1992). Therefore, a new technology program, has been presented by Philip J. Vergragt and Leo Jansen. The programm starts by the assumption that it takes decades to develop completely new technological systems. In order to fulfil sustainability criteria in 2040, i.e. on a time scale of 50 years, research will be started to investigate the possibilities of new technologies or technical systems that fulfil human needs and at the same time fulfil the requirements of sustainability, it has to be studied as well as, the interaction between new technologies and society. Furthermore, the programm states that the role of technology in solving the environmental problems, is often ambiguous, because, the introduction of 'clean' or 'cleaner' technologies is not enough. Structural and cultural changes are necessary to reduce production and consumption in society. As the technology reflects the norms and values of the society, it is important to"give the highest priority to the introduction of changes in social norms and values with regard to the environment, e.g. to work on changing life styles and changing economic structures. The contribution of technology is necessary, but not sufficient, and work on the 'cleaning up' of technology in interaction with culture and structure is as essential as working on norms and values". (Ph.J Vergragt, Leo Jansen 1992).

Introduction in investments theory and practice for sustainable development

BACKCASTING

ConstructionTransportationManufacturingAgriculture

ShelterMovementClothingFeeding

Supply

Demand

Culture

Technology

Structure

Activities Needs

Less energy

Close materials cycles

Avoid Environ-mental Risk

1990 2040

Look backwards from the future and work ahead

Demand for technology to fulfil needs at many fold Environmental Efficency

Fig 1.4 The model of the Dutch Programme" Sustainable Technological Development (STD)" (adapted from Design for Environment 1992)

Summarising STD, results as:

Technology alone will not give sustainable development. Conditions for technology development will have to be changed. Cultural & structural changes will be necessary to support sustainable

technology. Environmental efficiency of technology will have to increase factor 20. Illustrative processes to illustrate potentialities of technology. 1.4 Review the literature The literature in the field of sustainability, sustainable development, sustainable industrial production deals with various aspects concerning the triangle man- technology-environment, starting with philosophical assumptions and finishing with economic, social, technical, political, environmental previews, analyses and study cases. These appeared and developed as a political and scientific world reaction to now-a-days problems related to technology and human society development and the capacity of the earth to face this in the context of pollution degree rising and raw materials and energy scarcing. Many books, research paper works and scientific articles give brief conceptual definitions of sustainability, sustainable development and sustainable industrial production, try to find or impose models (mathematical, phisical, economical, social, etc.) in order to give a solution to the up-mentioned problems.

Investments and risks for sustainable development Jeroen C.J.M. van den Bergh (1991) presented a "study that deals with long term, dynamic models that offer insight into global and regional dimensions of Sustainable Economic Development (SD). The book consists of three parts. First, the conceptual background of the study is outlined, thereby emphasizing economic and regional development, ecological processes, and ethical concern for environment and future generations. In the second part these elements are integrated in dynamic models of development. A general material balance, multi-sectorial model is designed for linking development with natural environment. It is based on a description of two-way economic-environmental interactions. Subsequently, this model is extended to represent an open system by taking cross-boundary flows and external influences into account. In the third part, an attempt is made to operationalize SD models in two case studies (for the Netherlands and Greece)". The Dutch Committeee for Long Term Environmental Policy (1991), by the book "Towards a sustainable future" exemplifies the search for a new social order, an order in which the economic development and environmental protection are considered interdependent. The four main elements of this search are: (1) signs of hope, towards a sustainable future, (2) transformations which are needed to reach this future, (3) philosophical and methodological reflections; and (4) the necessary changes in the basic institutions of society. The central conclusion is that is important to establish a green strategy aimed at sustainability. As the committee states, " There is no certainty and no statistical probability for a sustainable future, but at least there is a chance". The US National Academy of Engineering (1989) published a study called "Technology and Environment" dealing with concepts as " paradox of technology" meaning it can be both the source of environmental damage and our best hope for repairing such damage today and avoiding it in the future(J.H.Ausubel, R.A.Frosch, R.Herman), "industrial ecology as an industrial metabolism" examining the totality or pattern of relations between economic activity and the environment (Robert U. Ayres, R.A. Frosch and Gallopoulos, 1989) and the "dematerialization" characterising the decline over time in weight of the materials used in industrial end products, or in the "embedded energy" of the products with the effect that less material could translate into smaller quantities of waste generating both production and consumption. In his doctoral thesis, H.J.M.de Vries (1989) "Sustainable Resource Use, an enquiry into modelling and planning" make a brief analyse of the concepts of sustainability and the sustainable development. He gives a formal definition of the modelling relation of the resource dynamics and make study cases from ecology, economy and social sciences using optimal control theory, catastrophe theory and non-linear dynamics.

Introduction in investments theory and practice for sustainable development In "Sustainable Development", Michael Redclift (1989) argues that "if the work of the World Commision on Environment and Development (Brundtland Commission 1987) is to be taken seriously we need to redirect the development process itself, to give greater emphasis to indigenous knowledge and experience and to take effective political action on behalf of the environment". In Economics, Growth and Sustainable Environments (D.Collard, D.Pearce, D.Ulph 1990) the sustainability user cost concept is introduced. They show that sustainability could imply the use of environmental services at rates which can hold over very long time periods and, in theory, indefinitely, but put the question of the quality of the survival. 1.5 The aim of the investment course on sustainable development bases The aim of the investment course is to underline the importance of [re]designing or choosing the adequate technology of the future, the ways to reach to sustainability level in industrial production systems in the specific transient-economic conditions of Romania, taking as an example, housing industry investments. It is assumed the idea that developing sustainable systems in Romania, housing industry could be an exemple model, one has to start from the existing conditions (cultural, social, technical, economical) and using creativity and innovation to give a new value to the work taking into account quality, flexibility and continuos improvement of the production systems. Production development could solve social-economical problems as unemployment or inflation. It is necessary to underline the difference between the concept of growth and the concept of development. "Growth and development are not the same thing. Growth can take place with or without development, and development can take place with or without growth. Growth is an increase in size or number and occurs in organisms without choice. Development is a process in which an individual (firm, society, nation) increases his [her] ability and desires and those of others. It is an increase in capacity and potential, not an increase in attainment. It is more a matter of motivation, knowledge, understanding, and wisdom than it is of wealth. It has less to do with how much one has than with how much one can do with whatever one has. Development is the potentiality for improvement, not the actual improvement of the quality of life or the standards of living".(R.L.Ackoff 1981). This mention have to be made for understanding the fact that the way of reaching to sustainability in industry of Romania ( housing industry, for example), is not necessary the growth but is necessary the sustainable development. The rise not in size but in quality.

Investments and risks for sustainable development I've mentioned that in order to avoid the confusion which existed during centralised economy period when growth means development and vice-versa. Therefore the sustainable industrial development of Romanian economy could be realized with existing economical and technical means but using more efficient the resources involved ( human resources, technology and money). . Romanian firms could become more economical and technical feasible, more competitive, if, following an appropriate strategy of inducing sustainability in their production process and technologies develop themselves. This could have benefit results for the whole Romanian economy, because it is well known that the industrial production influences all other economic branches, as constructions, agriculture, production of industrial and domestic goods, transportation, energy, trade etc. 1.6 Summary and recapitulation Investments are a present spending for a future gain either profit or other benefits (ecological, social, technical, skils etc.) as were mentioned before. As a conclusion we relate the investments with the future in all that it concerns. Therefore, well use a new approach different from the classic one in which only the economic profit prevails as a basic indicator. The new approach is to relate investments with the sustainable eco-development concept and the new economy based on information society concept. Sustainable Development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland,1987). For future investments purposes, to arrive at a sustainable eco-product, mostly the product has to be redesigned as this phase depicts the material usage and environmental load during the entire life cycle. The technology is known as a sustainable production requires a continuos improvement of efficiency and effectiveness. Technology alone will not give sustainable development: Conditions for technology development will have to be changed. Cultural & structural changes will be necessary to support sustainable

technology. Environmental efficiency of technology will have to increase factor 20. Illustrative processes to illustrate potentialities of technology.

Introduction in investments theory and practice for sustainable development Practical assignments Answer the following questions. 1. What means investments? 2. What means efficient investments? 3. Could you exemplify an efficient investment ? 4. What is the sense of the sustainable development concept ? 5. Which is the relationship between investments, development, sustainability,

production and services. References and homework documentary readings 1. Read the Sustainable Development of Romania Strategy 2000-2020. 2. Read the AGENDA 21 Document of Rio 92 Conference for Development and

environment. 3. Read the law of Environment nr 137/ 1995. 4. Read the laws for stimulate investments. 5. Identify a problem from the real world concerning the necessity of sustainable

investments. 6. Write a report or article for students magazine concerning these aspects. 7. Exemplify the applying knowledge aquired at this course in everyday life. 8. Make a proposal for a sustainable investment for a company in Romania.

Chapter 2

Measures to support investments in sustainable production

Introduction Technical measures Technical-time measures Utilisation Technical Technical efficiency Real machine capability Technical Productivity The Transformation Factor Economical measures Productivity as an economic measure The value of technology Ecological measures Measures for ecosystems and land use Measures for assessment of forests and pastures levels Measures that take into account the biological diversity Measures for water resources assessment Atmosphere pollution and its effects on climate changes Raw materials and energy resources Technical-Economical measures Quality as a technical-economical measure Quality as a technical-economical-ecological measure Flexibility as a technical-economical measure Complex measures The Transformation Factor as a complex technical, economical and

ecological measure The economical assessment of the investment in production

processes by using the Transformation Factor The ecological assessment of the investment in production processes

by using the transformation factor The technological-economical-ecological measures: The

Sustainability Factor Benchmarking values for Sustainable Production Systems of

different industries Conclusions

Measures to support investments in sustainable production 2.1 Introduction In Chapter 1 it was mentioned that each branch of activities must become sustainable at its turn to reach to the level of General Sustainability of an Economy. Production plays an important role in this process. The need for a sustainable production is obvious in many activities. Therefore, appropriate measures to evaluate production systems, in actual economical and environmental circumstances, are necessary. Traditionally, measures to evaluate the performance of production systems have been classified in technical measures and economical measures. These performance measures are used in the evaluation of production systems. Also the use of ecological (environmental) measures is proposed. In some cases, these measures can't cover the evaluations especially concerning new demands of society as: environment preservation, quality products, energy and raw materials savings, flexibility according to market demand. Therefore, new classes of measures as technical-economical measures, technical-ecological measures, economical-ecological measures and technical-economical-ecological measures are demanded in order to assess properly the complex problem of sustainability. The Transformation Factor (Ad de Ron, 1994) seems to be a sollution in a multi-disciplinary assessment of sustainable production systems. In this chapter, the possibility of applying such measures is taken into consideration. 2.2 Technical measures The technical measures which describe the performance of production systems are related with factors such as: time, effectiveness, utilization, efficiency and capability. 2.2.1 Technical-time measures Refering to periods that occurs during operations: these are: - the considered period (the time interval that the production system is observed); - the available period (the sum of various time intervals established by technical,

legal and industrial regulations); - the operational period (the part from available period characterised by planned

or previously known interruptions); - the production period (the sum of remaining time intervals from the operational

period, considering machinery starting, stopping, cleaning etc.); - the effective production period (the sum of all time intervals during which

production really occurs).

Investments and risks for sustainable development The effective production period could be influenced by downtimes due to mechanical malfunction of one or more machinery from the production systems, downtimes caused by defective raw materials (quality, quantity etc.), downtimes caused by operator error (inattention, negligence or insuficient training), down times caused by rejects of the processes. In order to assess the performance of the machine from a production process, an analysis to underlines the downtimes corresponding to each category (mechanical malfunction, defective raw materials, operator error and rejects) could be done using the total downtime audit. The time apparently available for production with machine "i" regarding these downtimes can be expressed by:

T T T T T Tae i p i me i rm i or i rj i, , , , , ,( )= + + + (2.1)

where Tae,j = apparent effective production period Tp,i = production period Tme,i = sum of all downtimes due to mechanical malfunctions Trm,i = sum of all downtimes due to defective raw materials Tor,i = sum of all downtimes due to operator errors Trj,i = sum of all downtimes due to rejects subscript "i" means that the

time intervals are related to the i-th machine; Technical effectiveness The effectiveness of the i-th machine could be expressed (de Ron 1994) as:

EQ Q Q Q Q

Qist i me i rm i or i rj i

st i

= + + +, , , , ,,

( ) (2.2)

where Ei = effectiveness of i-th machine Qst,i = standard production volume Qme,i = production loss due to mechanical malfunction Qrm,i = production loss due to defective raw material Qor,i = production loss due to operator errors Qrj,i = production loss due to rejects As the relation 2-2 underlines, the effectiveness of the i-th machine depends of the production loss due to various downtimes. The shorting till eliminating the downtimes will influence positively the production volume. Meanwhile, the production rate should be known and constant.

Measures to support investments in sustainable production 2.2.2 Utilisation The utilisation Ui of the i-th machine given by Florentin and Omachonu (1989, 1991), and analysed by de Ron (1994), is presented under the following form:

UTTi

e i

ae i

= ,,

(2.3)

where Te,i = effective production period, Tae,i = apparent effective production period. The performance of machine number "i" is defined by the authors (Florentin, Omachanu, De Ron) as being:

P Ui i= (2.4)

where = TT

ae i

p i

,

,

(2.5)

The performance for N machines (the machine performance centre) is expressed by:

PN

PN

UN

TTmpc ii

N

i ii

Ne i

p ii

N

= = == = = 1 1 1

1 1 1

( ) ( ),,

(2.6) This relation (2.6) underlines the fact that the machine performance represents the fraction of the production period during which effective production occurs. It has the disadvantage that the disqualified products are not represented, nor the impact of the production over environment. 2.3 Technical 2.3.1 Technical efficiency Two types of measures characterise the machine performance (after Wilts, 1993): the operational efficiency (OE) and the production efficiency (PE), as follows:

OE TT

e

o

= (2.7) where: Te= effective production period To= operational period, and

PE TT

e

p

= (2.8)

Investments and risks for sustainable development where: Te= effective production period

Tp= production period

However, some remarks have to be made: efficiency, as a measure, characterize both production systems from cyclic and non-cyclic processes (i.e. cyclic plant production systems and non-cyclic construction works). The difference is that: if in the case of production plants, manufacturing cycle efficiency is the principal measure, in the building works, the construction machinery cycle efficiency is the principal measure.

Therefore, the Manufacturing Cycle Efficiency (MCE) described by Fogarty and Hoffmann (1993) , which characterizes the plant on-flow processes, is expressed by the following expression:

MCET N T

T N T T T Ts o n

s o q w m

= + + + + +, (2.9)

where: Ts = set-up time N = number of parts To,n = operation time per part Tw = wait time Tm = movement time of the materials during fabrication process

In the case of building machinery, the Production Cycle Efficiency is characterized by the relation:

PCE TT T T T

s

s o n w m

= + + +, (2.10)

where: Ts = set-up time To,n = operation time per part Tw = wait time Tm = movement time of the construction machinery from one place to

another The difference between the 'on flow' production process which characterize mass production of comodities and 'in situ' construction works which characterize the building industry, rely on the fact that if on 'on flow' industrial processes the machinery are fixed and the materials (to be processed)are in movement, for the construction works the machinery are in movement and the materials are fixed. Could be underlined the fact, that, the building industry has both 'on flow' production processes (to make the component parts of the houses), and 'in situ' works to prepare the place and assemble the component parts in order to construct the building.

Measures to support investments in sustainable production In the specific case of housing production, as the cyclic (for component parts production) and non-cyclic processes (for in-situ building works), are coexistent, the 'Total Manufacturing (Production) Efficiency' will be represented by the sum between (2-9) and (2-10).

TPE MCE PCE= + (2.11) 2.3.2 Real machine capability It is a measure introduced by Barbiroli (1989, 1992), analysed by de Ron (1994) and is expressed as follows:

Q Q E TT

Q Qrmc rs est

st r st= = ( ), (2.12)

where = =T TT

TT

o cs

o

e

o

represents the time ratio, (2.13)

and, To = operation period of the machine Tcs = period due to considered stoppages (unforseen breakdowns,

adjustments) Te = effective production period and Qrs = reduced production volume because of lower speed (idling, brief

stoppages etc.)

Q T QTrs

o st

st

= (2.14)

and E = effectiveness (mentioned in 2.2) The disadvantage of this mesure is that, is not very specific according to defined standard quantities, and therefore the possibilities of applying it are limited. 2.3.3 Technical Productivity In the technical literature, one can find definitions and assumptions about productivity, which shows different points of view, related to specific domains as technical and economical fields. In general, the productivity is expresed by a ratio between two factors from which, one is time.

Investments and risks for sustainable development In the case of technical productivity, the ratio is between quantity of work and the time to succed it as it shows the relation of Bardescu, Zafiu and Bnacu (1982, 1984, 1992):

P QT

k kteh wc

ii

n

jj

m

== =

1 1

i = 1...n j = 1...m (2.15)

P QT

k kteh wc

ii

n

jj

m

== = 60 1 1 for Tc expressed in minutes,

P QT

k kteh wc

ii

n

jj

m

== = 3600 1 1 for Tc expressed in seconds

where Qw = Quantity of work expressed in units of numbers, lengths surfaces, volumes, masses.

Tc = The total cycle duration (for manufacturing in process industries, for assembling in constructions, machinery cycle times etc.) expressed in time units (seconds, minutes, hours)

T t t t t tc kk

r

r= = + + + +=

11 2 3 , (2.16)

t1,t2,t3...tn being production times

k k k k kii

n

n= =

11 2 3 (2.17)

technical coefficients which quantify the production technical conditions (state of equipments, technical parameters of the machinery, material capability, work environment conditions etc), usually taking values between 0 and 1

k k k k kjj

m

m= =

11 2 3 (2.18)

organizational coefficients which quantify the organizational conditions (level of qualification of the personnel, level of organization of the plant, access to materials and energy etc.) The coefficients are established by measurements done by research groups. The formula (2.15) has the advantage that could be applied as well for production cycles, as a whole, as for individual machinery, during production processes. However, it has the disadvantages that quality and flexibility in production are not considered and the effects of the production over environment, reflected in recyclability and reusing of materials has, are also not considered.

Measures to support investments in sustainable production Therefore, new measures must be considered, and one of them is the 'Transformation Factor'. 2.4 The Transformation Factor A new measure of the technical performance was introduced by de Ron (1995). It reflects the fraction of the maximum qualified production volume achieved in the considered period and shows the capability of the production systems to became technically efficient. De Ron starts from the assumption that the law of conservation of matter could be applyied to the production systems which are considered by him to be linear systems, (figure 2.1) with an input flow (raw materials, energy, labour, capital) and a resulting output flow (products and wastes).

INPUT

-material,-energy,-labour,-capital

PROCESS OUTPUT

-qualified productsmaterialflow

-disqualified products,-waste,-emissions

productflow

-manufacturing,-assembling

Figure 2.1 A model for considered production systems (adapted from de Ron, 1994) Therefore, considering M (t) as the mass accumulated in the system, Fm,in the material input flow and Fm, out (t) the product output flow, and using the well known equation from physics, relation (2.19),

( ) ( ) ( )tFtF

dttdM

outminm ., = (2.19), to simulate the production systems, one should observ that if considering ( ) ( ) ( )tFtFtF dmqmoutm ,,, += (2.20) in which Fm,q = flow of qualified products, and Fm,d = flow of disqualified products, waste and emissions,

and taking into account the period 'T', will results


( ) ( ) ( ) ( )[ ]dttFtFtFtdM T dmqminmT =0

,,,0

(2.21)

Rewriting the equation (2.21),

( ) ( ) ( )[ ] ( )tMdttFtFdttF T dmqmT inm ++=0

,,0

, (2.22),

De Ron (1994) consider that, in a long term, a stable system can not have any inventory accumulation. Therefore, he considers the period T as being so large that the storage term can be neglected (a structural or long-term storage is not considered). So, the equation (2.22) becomes:

( ) ( ) =T

dm

T

inm

T

qm dttFdtFdttF0

,0

,0

, (2.23)

If we take into account the effective production period Te, equation (2.23) becomes:

( ) ( ) = Te dmTe inmT qm dttFdtFdttF0

,0

,0

, (2.24)

De Ron (1994) starts with the assumption of an ideal situation, that all the input flow is transformed completely into qualified products during the considered period T, so,

( )( )

( )[ ] 11limlim0

,

0,

=+=

tdttF

dttF

TT

qmm

T

inm

T (2.25)

where:

=T

qmmT

T

inmTdttFdttF

0,

0, )(lim)(lim (2.26)

As we consider Te the effective production period as being a fraction of total production period T the equation (2.26) will become:

( ) =e

e

e T

dmT

T

qmmT

T

qmTdttFdttFdttF

0,

0,

0, lim)(lim)(lim (2.27)

Measures to support investments in sustainable production Integration of all terms of the equation (2.27) gives: , , ,F T F T F Tm q m qm e m d e = (2.28) By this equation, de Ron (1994) proved that, the maximum output flow of qualified products, the otput flow of disqualified products and the effective production period are independent variables. The superscript ^ indicates the average value, defined by :

( )

= T

qmTqmdttF

TF

0,,

1lim (2.29)

where, the period T is presumed to be known. De Ron (1994) shows also that the effectiveness of the production system is given by the ratio of the average real output flow of qualified products and the average maximum output flow of qualified products:

EF F

FFF

m qm m d

m qm

m q

m qm

= =

, ,

,

,

,

where ( )1,0E (2.30) The equation (2.30) underlines the fact that the fraction of disqualified products influences the effectiveness, so the effectiveness can be used as a measure for the quality of production systems. By using the effectiveness, the transformation factor TF could be obtained:

TT

EdttF

dttFTF eT

qmm

T

qm

)(

)(

0,

0,

=

=

(2.31)

or TF E= (2.32) where is the ratio between the average effective production period and the considered period T:

= TT

e (2.33)

Investments and risks for sustainable development The transformation factor is related directly to the activities of the shop floor as is expressed in terms which are familiar to the shop floor and the operational departments: the effective production period, that means the period that production really occurs and the effectiveness, the percentage of qualified products. The transformation factor is a new performance measure, directly related with the production strategy from quality-flexibility-recyclability point of view. We could consider it as a measure of sustainability of the production systems. The area of application of the transformation factor theory could be enlarged, due mainly to its interdisciplinary character (technology-economy, technology-environment, economy-ecology, technology-economy-ecology). The way of application will be presented further in this study. 2.5 Economical measures The economical measures which describe the performance of production systems are related with factors as: costs, profits, economical productivity, economical efficiency. 2.5.1 Productivity as an economic measure The Organization for European Economic Co-operation (O.E.E.C 1950) defined productivity as the quotient obtained by dividing output (number, quantity of products) by one of the factors of production (capital, labour, machinery systems and equipments, raw materials and energy) with consideration to production-costs and labour-time costs. Craig and Harris (1973) define the economic productivity as being the ratio

P RC C C Cec

t

c r m

= + + +1 (2.34)

where: Pec = total productivity C1 = labour costs during a considered period Cc = capital costs during a considered period Cr = raw material and purchased parts costs during a considered

period Cm = other miscellaneous goods and services costs during a considered

period Rt = total output during the considered period

Measures to support investments in sustainable production If total productivity index is less-equal than 1.0 the firm breaks even. A total productivity index larger than 1.0 means that the company is making a profit.

If profit is included in the output it means that a productivity index using this output is not an independent measure, because profit directly influences productivity, which means that activities which are not a result of production may increase or reduce the productivity.

The main disadvantages of using productivity as an economic measure (in the actual form) are related to the leak of concordance between productivity and other factors as quality, flexibility or environment preservation.

Few tempts has been carried out by Craig and Harris (1973), and developed by Son (1987), following the issues: - productivity measures must be improved to properly account for the

characteristics of flexible manufacturing systems and to predict and estimate future manufacturing activities,

- quality and flexibility should be considered in measuring overall manufacturing performance,

- relationship between productivity, quality and flexibility need to be examined, - current capital budgeting procedures need to be expanded to incorporate the

benefits of improved quality, flexibility and productivity achieved from investments in new manufacturing technologies.

Therefore, the ideea of finding new integral performance measures, which are able to take into consideration the technical assessment with economical audit was advanced by Son (1987).

Son (1987) showed that factors as productivity, quality and flexibility must be interrelated each other in a single measure.

Integral Performance Measure

Productivity Quality Flexibility

LabourCapitalMaterialOverhead

ProcessProduct

EquipmentProductProcessMarket, consumer, demand

Figure 2.2 The integral performance measure combines the total productivity,

the total quality and the total flexibility (adapted from De Ron, 1994)

Investments and risks for sustainable development 2.5.2 The value of technology Tipping, Zeffren and Fusfeld (1995) show the important role of continous innovation for production processes. They propose a model called "The Technology Value Pyramid-TVP" that provide the foundations, links to strategy and financial outcomes for the production companies. Tipping, Zeffren and Fusfeld have identified five managerial factors: 1. Value Creation (VC) - Demonstrates the value of R&D activities to the

positioning, profitability and growth of the corporation and to the creation of shareholder value.

2. Portofolio Assessment (PA).- Communicates the total R&D program arrayed across various dimensions of interest, including time horizon, level of risk, core competency exploitation, and new/old business. This allows optimization of the total program for the corporation's benefit.

3. Integration With Business (IWB) - Indicates the degree of integration, the commitmrnt of the business to the R&D processes and programs, teamwork, and ability to exploit technology across the organization.

4. Asset Value of Technology (AVT) - Indicates the strength and vitality of the firm's technology (e.g. proprietary assets, know-how, people etc.) and the potential of the industrial organization to create future value for the firm.

5. Practice of R&D Processes To Support Innovation (PRD) - Indicates the efficiency and effectiveness of R&D processes in producing useful output for the firm. The processes include project management practices, idea generation, communication, and other "best practices" in managing R&D.

The recognition of TVP factors, together with an assembled menu of measures, allows the model to be used to track the contribution to innovation performance at different levels of the TVP. The TVP model can be used to track the performance both prospectively and retrospectively to diagnose weaknesses in the production chains. and to plan for improvement in the firms. The various stakeholders have different interests and perspectives on the innovation process and these are accomodated by the TVP model and the menu of measures. The economic and financial measures are presented in Annex 1. 2.6 Ecological measures The ecological measures to quantify the impact of products and industrial processes to the environment, cover issues as ecosystems and land use, forests and pastures, biological diversity, water pollution, atmosphere pollution and its effects on climate changings, raw materials and energy exausting.

Measures to support investments in sustainable production 2.6.1 Measures for ecosystems and land use The change in productivity of production plants or the demand for efficient storage of production raw materials or products, as well as the needed land for processes disposal purposes, could ask for an efficient use of land. Therefore, measurements over production, must include measures as: current and natural primary production, percentage change in land use (in %), number of jobs per hectare, estimated land production (anual production and value of products produced

related to land-use production surfaces), measures of emissions and changes in use intensity (net emissions species used

and years of use), impact of land use (production emissions relationship in specific cases from

urban/rural areas, using as an indicator equivalent people using fossil fuels). Also, land use potential could be characterized by ratio of potential productive land to population and by cost and benefits resulted from landfilling rehabilitation works. 2.6.2 Measures for assessment of forests and pastures levels It is well known that many industrial activities are using in one way or the other wood (both for product purposes and for process purposes). It is used with success in housing industry, at the production of many items as: panels, frames, furnishings.The wood presents the advantage of being a regenerative resource and have a high potential of recyclability. Although it needs a certain regeneration period (depending on the species) to be exploited. Therefore it must be exploited rationally, to no make no disturbances in the eco-system. In any feasibility analysis, sustainable production must be implemented< some elements are necessary to be known about from the point of wiew of the place of exploitation (country, bioregion, region). These elements are: percentage cover of vegetation (type of forest, surface area of dense and open

forests), percentage decrease of forests (deforestation of dense and open forests, annual

deforestation), earnings from forests (reforestation in dense and open forests, annual

reforestation), percentage change in forest surface area (annual deforestation and reforestation,

ratio of deforestation and reforestation),

Investments and risks for sustainable development production of forests (relationship between the wood production and human

population growth/need, wood production per capita/time (year, month)), forest potential (ratio of wood reserves and population, wood reserves per capita

and per hectare), cover of vegetation (change in surface area of pastures in % and its influence in

meat production in %), present and future economic value (ratio of surface area and export value,

currency per hectare). 2.6.3 Measures that take into account the biological diversity The actual and future production systems must take into consideration the impact of its activities and products on biological ecosystem. Therefore, have to be considered, elements as: number of protected areas (ratio of protected areas to total, % of protected

areas), risk of species disappearance (relationship of habitat and species disappearence,

index of species disappearance), investment in protection (relationship of investment and surface area, risk

currencies per 1000 hectares), decrease in number of species (% threatened animal species and % threatened

plant species), present and future economic value (protected value of production) taking into

account the ecotaxes, profitability of investment (current net value), taking into account the ecotaxes. 2.6.4 Measures for water resources assessment Water is the most indispensable resource, both for life and for human (production) activities. However, the degree of pollution increased dramatically in the last 50 years, so a great attention must be taken, in order to limitate and decrease this trend. Therefore, every production plant have to reconsider its position concerning water usage. For every decision itself, must be considered elements as: distribution of water use (ratio of total resources to industry, % of water

extraction per capita, % of water recyclied-reused in industrial processes), processes and product impact on water quality (renewable water resources per

capita),

related to the fesability of production processes made by the firm

Measures to support investments in sustainable production fresh water reserves (ratio of total water to population). 2.6.5 Atmosphere pollution and its effects on climate changes If the profit for an industry is local or at least regional, the pollution effects are global. The emmisions into atmosphere produced by various activities from industry are a result of using of non-adequate technologies and machinery to process materials. The emissions of greenhouse gases could be quantified using descriptors as: increase in emissions through change in land use, ratio of current and accumulated emissions, incidence of natural disasters and indicators as: emissions of CO2 Eq. carbon total and per capita, current and accumulated emissions of CO2 per capita, population affected and economic losses-acid rains etc. 2.6.6 Raw materials and energy resources When designing products or processes, one should take care about the availability of the constituent materials used in the processes to make the products to be easy recyclied. In this way, a part of input materials will be reused during the process. From the economical point of view, it is a problem of efficiency and costs. From the ecological point of view is a matter of the power of regeneration of raw materials and energy and of the reciclability potential of the product. The measures to quantify the power of reciclability of the products are: - percentage constituent recyclable materials/total materials [%] , - percentage embadded energy to make the product/embadded energy to recycle the

products [%] . The measures to quantify the power of regeneration for raw materials and energy are related to the ratio between the life-cycle time of the product/required regeneration time of constituent raw materials, and the ratio life-cycle time of the product / required regeneration time of embadded [part] energy. 2.7 Technical-Economical measures 2.7.1 Quality as a technical-economical measure "Lets make things better" it's the advertising slogan which characterize the Philips products. There are few words that tells a lot about what the phillosophy of quality

Investments and risks for sustainable development means and how could be applied into practice. It means in fact the permanent need of the society for improved products towards quality. The measure for quality indicates the degree of perfection in making products. The quality products are characterized by long-lasting use in various conditions (in daily use, climate/weather changing conditions etc.), without a complicated maintenance, with a proper design according to the customers taste, and having a environmental friendly behaviour (easy recyclable and reusing).The quality products are made by quality materials, that means that the embedded raw materials, processed materials and energy, are used with maximum efficiency. Sons (1987) defines the product quality as the degree of excellence of finished products, expressed in terms of failure costs that indicate loss due to failure or finished products to meet quality standards by both the company and its customers:

QP RC

t

f

= (2.35) where: Qp = product quality Cf = the failure costs during the considered period The product quality is usually obtained, by processes quality. Son (1987) defines process quality as the ability of processes to make qualified products with a small prevention costs:

QS RC

t

p

= (2.36) where: Qs = process quality Rt = total output in money-value during the considered period Cp = prevention costs during the considered period We call processes quality, the quality achieved by the production technologies (machinery, equipments, control systems), placed in the most efficient technical, economical and environmental way on production chains or 'in situ works' (i.e. industrial on-flow processes or building works and shipyards) and using the most adequate teqhniques, quality control and organization methods. The processes quality is characterized by: the quality of management, the quality of the labour (good level of qualification of the people-it depends on

the case-from the shop floor or construction yard), good technical organization of the plant or construction yard, the quality logistics for raw materials and energy used in the process,

Measures to support investments in sustainable production the adequate machinery and equipments (with a good technical condition and

following the quality production standards and regulations requirements), the quality control systems during all production stages (measurement control

devices and methodes), the quality informatic systems (accurate data bases, expert systems, software,

hardware support) for production processes, the quality communications systems to provide fast and accurate connections

with suppliers and customers (telematics technologies could become a viable sollution in the perspective future).

An observation has to be made: Son (1987) shows (as it was previously presented), that are two different types of quality measures: process quality and product quality. Therefore, he defines the total quality QT for the considered period as:

1 1 1

QT QS QP= + or QT R

C Ct

p f

= + (2.37) We say that, in fact, are four different types of quality measures to be considered: process quality, product quality, environment-friendly product quality and environment-friendly process quality. 2.7.2 Quality as a technical-economical-ecological measure The environment-friendly product and process quality represent the ability of the product and production processes to be well-recepted by the environment. The items as: recycling-ability (recyclability) and reuse-ability (reuseability) of the products must be considered as key factors of quality. According to the new legal regulations towards environment preservation, the producers have the obligation to receive from the customers the products made by them (after the life-cycle of the products expired) and recycle them. Therefore, the costs of recycling of the products must be included in the initial design costs of the products. The costs of recycling influence the level of quality too, because the standards of quality must be achieved without affecting the environment. So, the quality of the design for both product and technology, become crucial for the quality of the product and also for the quality of the process. The environment-friendly product quality is the degree of a product to be reused (parts of it), or recycled, expressed in terms of recycling costs and environment preservation costs, to meet all quality standards for customer, company and environment care.


QP RC C C Cenv

lt

dis rec ire env

= + + + (2.38)

where: QPenv = Product quality towards environment preservation, Rt = Total output in money-value during the product life time

period, Cenv = environmental costs (costs for environmental preservation

i.e. environmental improvement works to limitate or avoid the disposal effects on water, soil, air),

Cdis = costs of dismatling operations of the products. Crec = recycling costs of the product, Cire = needed costs for improvements in order to reuse products or

parts of it, products or parts without life-cycle expired which could be reused for other life-cycle product(s) in which:

C c Cire pii

n

m= +=

1 (2.39)

and

c c c c cpii

n

p p p pn= = + + + +

11 2 3 (2.40)

where: cpi = the costs of the spare parts to be added to the reused parts

in order to make them technically performant, i = 1...n number of parts to be added to reused parts, Cm = manufacturing costs for transforming the reused parts from

expired life-time products, into technically performant parts for a new life-cycle product.

The environment-friendly process quality represents the capacity of the process to make qualified products, taking into account the production process imp

investments and risks for sustainable development_curs ase

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