Analysing the value of the networks in the INES and Fairfield projects, using the concept of Institutional capacity.

In this blog I want to analyse 'industrial symbiosis' that can take place between several industries that are agglomerated near each other. The industrial symbiosis process can be divided into several sub-processes that need to have a positive outcome in order to make industrial symbiosis fruitful. One of the most important social theory that forms an import sub-process, is the theory called 'institutional capacity', in which the amount of co-working and knowledge sharing is analysed and therefore forms an important framework for analysing industrial symbiosis. In this theory, I will mainly focus on the concepts called agglomeration and the social network concept. The concept of agglomeration looks at the amount of clustering of industries in order to reach a form of symbiosis. The concept called social network looks at the mental relationships that occurs because of this agglomeration.
To make those abstract theories more vivid, I want to link my analysis to the INES project (Harbour of Rotterdam) and Fairfield project (eco-industrial park).

The eco-industrial park Kalundborg can be seen as the best example where industrial symbiosis took place. Industrial symbiosis can be defined as: “engaging traditionally separate industries in a collective approach to competitive advantage involving physical exchange of materials, energy, water, and by-products. The keys to industrial symbiosis are collaboration and the synergistic possibilities offered by geographic proximity” (Chertow, 2007, p. 12). 
It is evident that this symbiosis will lead to more welfare. However, in practice it is risky to decide to be inter-dependent on each other.  For example, Kalundborg actually realized this symbiosis after 25 years. So a fully implemented symbiosis will take a certain time period. 

Boons & Spekkink (2012) state that a core insight in the analysis of industrial symbiosis is that technical and economic feasibility of production processes are not sufficient enough conditions for industrial symbiosis to occur. Boons & Spekkink (2012) mention that businesses have to cooperate and that trust to engage in exchanges and in each other is more essential for the occurrence of industrial symbiosis, which is the main focus of the social network theory. This means that inter-dependency must be affirmed and should not be seen as a risk. Otherwise the industrial symbiosis will not occur. So there will be no symbiosis if there is no inter-dependency and trust in relationships.

For industrial symbiosis to occur the following five factors are relevant (Boons & Howard-Grenville, 2009): 

Note that the agglomeration and social network concepts are connoting in

1) the need for a learning process and a strategic vision;
2) issues related to the diversity of involved actors and its consequences for connectance and interdependency;
3) the requirement of trust and ways to foster it;
4) the presence of anchor tenants or coordinating bodies and the roles they can play in providing information, education and as a platform for communication;
5) the presence of an enabling context, which may be defined in terms of policies, regulations and other institutions but also in much broader terms such as cultural, structural, spatial and temporal embeddedness

From the above mentions factors the concept called ‘institutional capacity’ can be formed. This institutional capacity is highly related to the quality of the relationships between the inter-dependent businesses who share a property.

According to Boons & Spekkink (2012), the concept of ‘institutional capacity’ can be divided into three parts:

- Relational capacity is the ability of businesses to let a network of relationships that are based on trust and mutual understanding, emerge. The relational capacity enables businesses to work together in risk full transactions that would otherwise be too costly when there are no strong relationships and mutual trust. The opportunities of individual businesses will rise because of the relationships that are kept strong and are built on trust and responsibility (Boons & Spekkink, 2012).

- Knowledge capacity is the ability to acquire and use information that enables businesses and other related stakeholders to exchange resources, et cetera, in such a way that ecological impact is reduced (Boons & Spekkink, 2012).

- Mobilization capacity is the capacity of the stakeholders – e.g. the businesses- to activate relevant firms and other parties to develop symbiotic linkage (Boons & Spekkink, 2012).

With the above mentioned definition of ‘institutional capacity’, the division into the three inherent capacities and the five factors that are relevant according to Boons & Spekkink (2012), the INES and Fairfield projects can be analysed on the amount of industrial symbiosis that has or has not occurred.

Heeres, Vermeulen, & de Walle (2004) give an overview of initiatives that lacked or performed industrial symbiosis. From this overview the INES project in Rotterdam (Industrial Ecosystem project) is used as one of the two cases, because of the high industrial symbiosis that has occurred. The other case is the Fairfield Ecological industrial park in Fairfield. This case is used because of the lack of industrial symbiosis, mentioned by Heeres, et al. (2004). It is important to note that Heeres, et al. (2004) are not taking the institutional capacity aspect into account. I use this article for the sake of the arguments and information that it provides on industrial symbiosis.

The conclusion on the industrial symbiosis of the INES project and Fairfield project.
(Source Heeres, et al., 2004)

INES project.

Institutional capacity of the INES project:

The outcomes of the article of Heeres, et al. (2004) states that the INES project has:
- Active participation of companies
- Active participation of environmental management network
- Active participation of Europoort Employers’ Association

Relational capacity:

Heeres, et al. (2004) state that the well willingness of the businesses on a property forms the underlying basic criterion for the realization of industrial symbiosis. If businesses are not interested or if they stay passive, no relationships and dynamics will occur (Heeres, et al., 2004, p. 993).
When looked at the relational capacity it can be concluded that the businesses of the INES project fulfil the relational capacity. The active participation of companies which leads to an inter-dependent relationship that is based on trust, will give rise to advantages for the different businesses that are connected to the INES project. By doing this the companies are more linked to each other and the base for industrial symbiosis is made; relationships and trust is the most important part of inter-linkages.

Knowledge capacity:

When looked at the knowledge capacity it can be concluded that the environmental management network & the Europoort Employers’ Association, who provide a platform for communication, information sharing and education and is linked to the different businesses (Heeres, et al., 2004, p. 993) has a strong benefit for the knowledge capacity in the INES project. The environmental management network & the Europoort Employers’ Association mediate the knowledge sharing and form easy access to it for each linked business. This capacity gives rise to broadening of the industrial symbiosis. Mainly because of the fact that more information will lead to the possibility of more innovative solutions and processes.

Mobilization capacity:

When looked at the mobilization capacity it can be concluded that the active participation of all of the stakeholders, fulfil the criterion for the mobilization capacity. The fact that the businesses are working together shows the fruitful mobilization capacity of the INES project.

The overall conclusion is that the INES project has a high institutional capacity because of the interest of the businesses that are linked to the INES project. Their trust and well willingness to work together and the knowledge capacity that is fulfilled by the platforms that are linked to the INES project, makes the INES project a fruitful example of high industrial symbiosis via institutional capacity.

The Fairfield project.


Institutional capacity of Fairfield.

Heeres, et al. (2004) state that the factors that caused lack of industrial symbiosis are:
- The Baltimore and state politics.
- Lack of company interest.
- Absence of an entrepreneurs association that represents all Fairfield industries.

Relational capacity:

The businesses on the Fairfield industrial park are not interested in the industrial symbiosis because of the economic risks that arise with it. Heeres, et al. (2004) state the majority of the companies are also not well willing because of their distrust towards the local government. Their point is that the focus of the local government is on creating jobs by linking businesses to each other on the industrial park. (Heeres, et al., 2004, p. 993). The businesses actually want a focus on the economic symbiosis. This leads to distrust and not to building relationships and a cooperation between businesses. Therefore the conclusion will be that the Fairfield lacks a vast amount of relational capacity. The businesses are not interested in each other right now, due to the focus of the local politics. The thoughts that there will be economic risks and the distrust of the businesses will lead to a low relational capacity.

Knowledge capacity:

The knowledge capacity emerges when knowledge is shared, discussed and uses by the linked businesses (Boons & Spekkink, 2012). In the INES project a platform was created by the environmental management network and the Europoort Employers’ Association. This platform led to a fruitful growth of industrial symbiosis. As it is shown in the article of Heeres, et al., there is no platform or linkage between the businesses. Therefore Fairfield also lacks of knowledge capacity. This at the end negatively influences the industrial symbiosis. The conclusion then will be that the absence of an entrepreneurs association that represents all Fairfield industries and the therefore the absence of a platform which functions as a medium, will lead to negative knowledge capacity, and in the end to a lack on industrial symbiosis.

Mobilization capacity.

Because there is no mobilization, due to the lack on interested businesses and stakeholders, the mobilaziton capacity will not grow. The companies stay passive because of the distrust in companies and the absence of relationships.

It can therefore be concluded that the Fairfield industrial park has the disadvantage that the companies are not interested and that there is no motivator or ‘mobilazator’ in the linkages between the companies. This leads to a less efficient knowledge capacity and also no mobilization capacity will emerge. Also the absence of a network of relationships between the businesses shows that the lack of institutional capacity leads to a failure in industrial symbiosis. 

References:

Boons, F.A. and Howard-Grenville, J. (2009). The social embeddedness of industrial ecology. Cheltenham: Edward Elgar

Boons, F. and Spekkink, W. (2012), Levels of Institutional Capacity and Actor Expectations about Industrial Symbiosis. Journal of Industrial Ecology, 16: 61–69

Chertow, M. R. (2007), “Uncovering” Industrial Symbiosis. Journal of Industrial Ecology, 11: 11–30.

Heeres, R.R., Vermeulen, W.J.V. and de Walle, F.B. (2004), Eco-industrial park initiatives in the USA and the Netherlands: first lessons. Journal of Cleaner Productio,12: 985-995.

Nokia and the Chinese supplier.

Although the Chinese supplier and Nokia are two companies that act on their own, with their own protocols, policy measures, business ethos and different governments in which they live, they are dependent on each other to sustain. Their overall business and ethos may be radically different, however, they need to find a way to work with each other, So they need to communicate. Nokia needs the supplier in China, and the Chinese supplier needs Nokia to ‘supply’ parts of electronic devices; they are inter-dependent.

This makes their relationship interesting. Because, in which way are the two different companies looking at their relationship? And how are they managing the relationship that they have in such a way that it is financially interesting for their own sake?

If we look closely at the situation, we can state that Nokia is a western company that acts according to the measurements that are applied in the EU. So its business ethos underlines the discourse that is dominant in the west. Which means that certain concepts are seen as correct and others as illegitimate. Think about child abuse and working spaces, for example. So, Nokia is embedded in the west regarding its physical location, its mindset and the policies that are applied for that location.

The Chinese company however, has a total different approach on certain subjects and acts with its own business ethos, et cetera. We can see in the documentary that the Chinese supplier only focuses on efficiency and financial benefits by degrading every single step in the business to a chain. People are seen as a medium in the chain, which neglects the rights and wishes of the personnel.

The problems and contradictions arise when both the companies are trying to talk about the same subject. They need to talk about the same subject, for example about the chains in the supply, but this may lead to differences in believes and norms. However as mentioned before, the companies need each other, so they need to find a way to work for a legitimate business.

What happened?

The situation in the documentary is that Nokia’s ethics committee goes to the Chinese supplier and specifies the things that they want to see when they are there. Things like the motivation of the personnel and the location of goods.
What basically happens is that Nokia goes to China and tells them in which way to do its business. The question is if this is something that is logical to ask? Is it even possible to expect from a company that looks for its own way to achieve financial benefits by searching for creative bookkeeping in its own country, et cetera, to act as they do in the west?

At the end of the documentary the two companies come together and Nokia tells the Chinese supplier how to act and what to change in their business. The Chinese company promises to do and tells that they want to change their way of doing business so that it looks more like a western company, with westerns standards. Nokia tells them that Nokia needs to show the western stakeholders that they are acting sustainably and therefore need sustainable supply chains. The Chinese supplier tells Nokia that they are supporting this and are promising that they are going to work on it.

What I thought is interesting is that the promises are only showing that the situation will gradually change to a better situation, but not that the Chinese supplier will change everything radically. There were no contracts what so ever that made the promises valid.

Why not?

I think that it is because only a positive change and a positive image of Nokia are needed and interesting for its position as a producer of electronic devices. When the media shows that Nokia is investing in better working places in China and this can be underlined by telling that the committee went to China and the promises are made, then Nokia is safe. But is there actually changing something radically? Does the Chinese supplier changed is business ethos radically? I don’t think so and neither do I think that it is needed. When the ‘green’ image for Nokia occurs, then everything is fine. By only looking at gradual changes, the relationship between Nokia and the supplier will kept vivid. So at the end everything will be ok. 

The question is: who has more power in the relationship? Who is more dependant? I think that Nokia has more power in the relationship and can ask more from the supplier then the supplier. Nokia can chose between more suppliers then the supplier can chose from companies that sell electronic devices. I think that the committee is kind and soft in its approach of the supplier. They tell the supplier what to do, but are not stating the consequences. This will only lead to shifting the problems to other parts of the business and changing things gradually.

If I had to decide what to do, then I would use certain protocols and policies that need to be evaluate every month, like ISO 14000 protocols. This will make Nokia’s sustainability criteria more fruitful, because it can be checked by institutions – think about NGO’s such as Greenpeace - and so the power on the Chinese supplier can be more decentralized and convincing. 

References:

Balmes, T. (Director). (2004). A Decent Factory [Margot films]. Finland: Helsinki