Innovations in Measurement for Sustainable Production in Latin America
There are multiple conceptualization and business planning tools, such as the popular Canvas, which helps organize elements in the value proposition of products and/or services with a cost and income structure, among other features. There are also various accounting methods to measure the value of production and how much businesses add value at each stage of the goods and services production chain. In addition, the capacity of production systems in business activity is traditionally measured based on Total Factor Productivity (TFP). TFP estimates efficiency in the combination of labor, land, capital, etc., to obtain a product level. To this end, all these factors must have a market price for their valuation.
However, these traditional calculations of productive activity do not consider the so-called environmental liabilities generated by the activity itself. Nor does it take into account the consumption of environmental services that contribute to the sustainability of the activity. Against this backdrop, IICA-FAO-ECLAC highlight the importance of expanding this measurement under the concept of Total Resource Productivity (TRP), which does incorporate measurements of the economic values of the environmental goods and services consumed in the process. In this measurement, non-market valuation methods are used (shadow prices, abatement costs, among others).
As a broader alternative for the analysis of these costs, Green Total Factor Productivity (GTFP) incorporates all of the above and adds CO2 emissions, which allows considering also the impact of emissions on the environment as part of the equation. This more integrating method of evaluating the efficiency of production and business processes could determine that a productive sector has a high TFP, but that could abate in the medium and long term if it has negative environmental impacts and/or consumes environmental services at a high rate.
Under this approach, business model design tools are also being innovated in order to incorporate the environmental sustainability component. For example, the Ecocanvas of N. Cerantola, based on Circular Economy, includes an analysis of the Life Cycle of products, breaking down which resources are irrecoverable in manufacturing, whether there are recoverable biomaterials, if it anticipates a landfill or waste incineration phase, reverse logistics, etc. thus facilitating a ecodesign-based business conceptualization.
Another case is the Moonfish Circular Business Model of Delft University, for small and medium-sized companies that seek to create “sustainable value,” carrying out a circularity analysis of their processes. This model also expands the Canvas, reorganizing the flows of resources and activities in processes that reincorporate materials, return products for maintenance and repair, and recycling or others.
With the purpose of consolidating itself as the Green Bank of Latin America and the Caribbean through its various operations, CAF will promote the innovation of business models in the private sector of its member countries. These innovations require financing for technology roll-out, development of new materials and products, among others, that development banks seek to fast-track. Of course, measuring the impact of this transformation is highly relevant for decision-making related to sustainability and the development of markets under the new environmental determinants.
