Note on E/E terminology

Gjalt Huppes & Masanobu Ishikawa

There is a wide variety of terminology developing referring to eco-efficiency, depending on application, the background of the researchers, and possibly even on views on how to treat negative signs. Also, there may be autonomous divergence, as subgroups in the discourse do not refer to each other. As a result, the term eco-efficiency is used in different ways and other terms are used overlapping with these meanings, like environmental cost-effectiveness and environmental productivity. We try to bring some order, distinguishing between the formal definition and the specific content given to the variables in involved. We focus on the formal definition here. The content given to cost and value, as economic categories, has been widely standardised in accounting conventions, see the publications lists of ISAR (International Standards of Accounting and Reporting) and ideally fit into the framework of national accounting as actively standardized under UN coordination in the SNA (System of National Accounts, SNA 2002). However, when analyzing the eco-efficiency of a new technology or product, accounting frameworks may miss essential effect mechanisms and hence cannot be the last word. For the environmental part no such detailed standards exists, with a great variety of theoretical and practical approaches existing in parallel at best, but often overlapping. ISO14042 gives a few guidelines only. Work by SETAC now incorporated into UNEP (ee UNEP-SETAC LCI) is more detailed but has not yet led to broad acceptance of specific methods. Though of prime importance for the eco-efficiency discussion, we will not endeavor into this subject here. Here, we assume a complex situation in which environmental aspects of decisions cannot covered by just a single environmental intervention, like emission of CO2 or Sox, but relate to more environmental interventions and these in turn to more effects mechanisms following, like climate change, acidification and summer smog formation, and these in turn to areas of protection like human helth, ecological health and human welfare. So, more encompassing concepts are required for representing the environmental part of eco-efficiency, which have not yet been filled in in an encompassing and broadly accepted way.

Starting point for the formal definition of eco-efficiency is the general definition of WBCSD (1992) which goes back to Schaltegger and Sturm (1989), describing eco-efficiency as a ratio between two elements: environmental impact, to be reduced, and value of production, to be increased. The value of production lies in the products produced, comprising both goods or services. Two equivalent variants are used, the ratio of value to environmental impact (e.g. WBCSD) and environmental impact to value (e.g. United Nations ISAR 2004), one being the exact inverse of the other. Next to the maximum value creation with minimum environmental impact, there is the analysis of dedicated environmental improvements. The focus then shifts from the creation of value to the reduction of cost for the environmental improvements investigated. The signs of both numerator and denominator then reverse, or the variables are defined in opposite direction. This distinction between the analysis of value creation and the analysis of environmental improvements can be combined with the inversion options. It seems wisest to make eco-efficiency an overarching general concept, with variants residing under this umbrella. There then are four basic variants of eco-efficiency resulting, environmental productivity; environmental intensity of production; environmental improvement cost; and environmental cost-effectiveness. See the table below.

In actual applications, there often is not a full system being analysed but a difference analysis between options is made, with positive and negative results depending on which situation is taken as a reference. E.g. a win-win situation resulting from technological improvement, described as a difference with the current - or not improved future - situation, the denominator of 'environmental productivity' becomes negative as then does the ratio itself. Similarly, some environmental improvements may not entail cost but reduce cost as by creating additional value. Then the 'environmental cost-effectiveness', becomes negative. Making separate categories also for these cases would lead to a confusingly high number of terms, as for each of the four basic options the sign may change, of the numerator, of the denominator, or of both. If really discerning all these situations, sixteen options would results. The reason for discerning them is that the principle of 'higher (or lower) is better', does not hold any longer with a sign change, also not when taking absolute values. It seems better to treat such situations in a practical way on a case by case basis. Such special cases may easily be subsumed under either of the four basic variants of eco-efficiency.

Next to these four basic eco-efficiency terms and concepts, there are similar concepts, with similar meaning, like energy productivity, (primary or total) resource productivity, capital productivity and labour productivity, with each one having the corresponding intensity as an inverse. A further group of terms relates to technology discourse, where there is an input-output efficiency referring to the same variable occurring both as an input and as an output, with efficiency being the complement of the loss factor. Examples are resource efficiency, in kg/kg, and energy efficiency, in Joules/Joule. The eco-efficiency terms, alas, are not in line with this technology oriented terminology. In eco-efficiency, the environmental impacts and the economic impacts both relate mainly to outputs of the activities involved in production, consumption and disposal management. Of course such input-output concepts might be subsumed under the eco-efficiency umbrella, leading to additional types.

The base terminology as proposed here deviates from the ones used in most eco-efficiency publications, by being more encompassing and by having two levels of generality. It has the advantage that is clarifies formal meaning while leaving specific content open to a next level of more detailed discussion. We hope that this terminology proposal will allow for easier communication. We know of course that a consensus on terminology requires a broader social endeavour, involving the several fora involved. This paper is one input into this broader process.