Eco-Industrial Clusters: A Prototype Training Manual

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JAsianDevelopmenI8anklnsIiIuIe
AllrighIsreserved.Published20!J.
PrinIedin!apan
PrinIedusingvegeIableoilbasedinksonrecycledpaper,manuacIuredIhroughaIoIally
chlorinereeprocess.
lS8N9784899740J9!
CaIaloginginPublicaIionDaIa
LcolndusIrialClusIers:aproIoIypeIrainingmanual/AsianDevelopmenI8anklnsIiIuIe
lncludesbibliographicalreerences
!.lndusIrialclusIer.2.lnnovaIion.J.CompeIiIivenessl.AsianDevelopmenI8anklnsIiIuIe
TheviewsexpressedinIhisbookareIhoseoIheauIhorsanddonoInecessarilyrelecIIheviews
andpoliciesoIheAsianDevelopmenI8anklnsIiIuIe(AD8l),norIheAsianDevelopmenI8anks
8oardoGovernorsorIhegovernmenIsIheyrepresenI.
AD8ldoesnoIguaranIeeIheaccuracyoIhedaIaincludedinIhispublicaIionandaccepIsno
responsibiliIyoranyconsequenceoIheiruse.
8ymakinganydesignaIionoorreerenceIoaparIicularIerriIoryorgeographicarea,orby
usingIheIermcounIryinIhisdocumenI,AD8ldoesnoIinIendIomakeanyjudgmenIsasIo
IhelegaloroIhersIaIusoanyIerriIoryorarea.
AD8lencouragesprinIingorcopyinginormaIionexclusivelyorpersonalandnoncommercial
usewiIhproperacknowledgmenIoAD8l.UsersareresIricIedromreselling,redisIribuIing,or
creaIingderivaIiveworksorcommercialpurposeswiIhouIIheexpress,wriIIenconsenIoAD8l.
ThismanualisbasedonmaIerialspresenIedaIAD8lworkshopsonindusIrialclusIersheld
inTokyo,!apan.TheauIhorswouldlikeIoIhankworkshopparIicipanIsorsharingIheir
experiencesandaregraIeulIoApsaraChandanie,DharishDavid,DianaAlwis,!iyongSong,
!oanaPorIugal,MariKimura,YukaTerada,SIeanWesiak,PoberIDavis,andYukolchikawaor
IheirresearchassisIance,ediIorialremarks,andadminisIraIivesupporI.
AsianDevelopmenI8anklnsIiIuIe
Kasumigaseki8uilding8l
J25,Kasumigaseki,Chiyodaku
Tokyo!006008
www.adbi.org
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Contents
Module 1: Overview
!.! 8ackground
!.!.! GrowinglndusIrialClusIersinAsia
!.!.2 TheAllureoLcolndusIrialClusIers
!.!.J The8rillianceoLcolndusIrialClusIers
!.2 AnlnIroducIionIoIheTrainingManual
!.2.! ObjecIivesoIheTrainingCourse
!.2.2 HowThisManuallsOrganized
!.2.J CourseSchedule
!.2.4 UseoIheTrainingManual
Module 2: Eco-Industrial Clusters as Eco-Friendly

Economic Zones
2.! lnIroducIion
2.2 LconomicsolndusIrialClusIersinConIexI:
Lconomics, LnvironmenI,andLocalWealIhCreaIion
2.J SIraIegiclmporIanceoLcolndusIrialClusIers
2.4 LcolndusIrialClusIerlormaIionromIhe8oIIomUpProcessPerspecIive
2.5 LnIrepreneurialDynamicsinLcolndusIrialClusIers
2.6 CaseSIudies
2.6.! LcolndusIrialClusIersorPesourcePecovery:Wood8iomass
LcolndusIrialClusIer(Maniwa,!apan)
2.6.2 PolicySupporIorSuccessulLcolndusIrialClusIers:
8ioIechClusIer(8angalore,lndia)
2.7Lpilogue
WorksheeI
PeerencesandPeadingMaIerials
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Module 3: Strategies for Eco-Industrial Cluster Development
J.! lnIroducIion

Module 3a: Environmental Performance of Eco-Industrial Clusters
J.a.! KeyConcepIs:WhyandHowIoAchieveLnvironmenIalPerormance?
J.a.!.2UpsIreamPesourceLiciency
J.a.!.JPeduce,Peuse,andPecycle
J.a.!.4CleanerProducIion
J.a.2 lncreasingLnvironmenIalPerormanceIhrough
lndusIrialNeIworking
J.a.J ToolsorMeasuringLnvironmenIalPerormance
J.a.4 CaseSIudies
AnlndividuallndusIrylniIiaIive:Peuse
AnLcolndusIrialClusIerlniIiaIive:CaseoAgrolndusIryClusIer
WorksheeI

Module 3b: Social Capital Creation in Eco-Industrial Clusters

J.b.! KeyConcepIs:SocialCapiIal
J.b.2 WhenSocialCapiIalMaIIersoranLcolndusIrialClusIer?
J.b.J SocialCapiIalorlnIerlirmNeIworks
J.b.4 ApproachesorSIrengIheningSocialCapiIalinLcolndusIrialClusIers
J.b.5 CaseSIudy:SocialCapiIalCreaIionandlnIerlirmNeIworks
J.b.6 CaseSIudy:SocialCapiIalandMarkeIingoLcoProducIs
WorksheeI

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Module 3c: Technological Advancement for
Eco-Industrial Cluster Transformation
J.c.!. KeyConcepIs
J.c.2. CaseSIudies
J.c.2.!lndusIrialClusIerinChachoengsaoProvince,Thailand
J.c.2.2PicelndusIries
J.c.2.JPiceProcessingUniIs
J.c.2.4 PiggeryandPoulIry
J.c.J KeyLearningPoinIs
J.c.4 TechnologyTranserModels
WorksheeI
Module 3d: Financing Eco-Initiatives in Eco-Industrial Clusters

J.d.! KeyConcepIs
J.d.!.!DeaIhValleyTrap
J.d.2. Microlinancing:8ridgingIhelinancial8arriersoSmallandMedium
LnIerprises
J.d.J TheChangingLandscapeoMicrolinancing
J.d.4 ModelsoLcolndusIrialClusIerlinancing
J.d.5 CaseSIudies
J.d.5.!lnIegraIingMicroinanceandPenewableLnergyTechnologies
J.d.5.2SarvodayaLconomicDevelopmenIServicesinSriLanka
J.d.5.JMicrolinancingPenewableLnergyServicesinNepal
J.d.5.4WescoCrediI,lndia
J.d.5.5SmokeyMounIainPemediaIionandDevelopmenIProgram
inManila,Philippines
J.d.5.6 ParIicipaIorySolidWasIeManagemenI,8razil
WorksheeI
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Module 4: Transforming Eco-Industrial Clusters into an
Inclusive Business Development Model
4.!TheSIakeholdersPoleinLcolndusIrialClusIerlormaIion
Module 4a: Role of Policymakers:
Can Eco-Industrial Clusters Be Made?
4.a.!lnIroducIion
4.a.2PracIicalAcIionsbyPolicyMakersIoPromoIeIheCreaIiono
LcolndusIrialClusIers
4.a.JClusIer8asedPolicyPesponsesIoSysIemlmperecIions
4.a.4CaseSIudy:KawasakiLcoTown
WorksheeI
Module 4b: Role of Business in Eco-Industrial Clusters
4.b.! lnIroducIion
4.b.2 8usinessPoleinLecIingChangeinIheCommuniIy
4.b.J 8uildinga8usinessCaseorLcolndusIrialClusIersasan
lnclusiveDevelopmenIModel
4.b.4 LsIablishingSusIainabiliIyLxpecIaIionsorLcolndusIrialClusIers
4.b.5 lmproving8usinessPerormancewiIhinSmallandMedium
LnIerpriseClusIers
4.b.6 DevelopingandAdopIingCodesoConducIor8usinesses
OperaIingwiIhinLcolndusIrialClusIers
4.b.7 CaseSIudy:8ioIechlndusIryin8angalore
WorksheeI
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Module 4c: Role of Knowledge institutes in
Eco-Industrial Clusters
4.c.!lnIroducIion:KnowledgeManagemenIwiIhinLcolndusIrialClusIers
4.c.2 PoleandlmpacIoKnowledgelnsIiIuIesonIheLmergenceand
GrowIhoLcolndusIrialClusIers
4.c.J 8uildingCooperaIionbeIweenLcolndusIrialClusIerlirmsand
KnowledgelnsIiIuIes
4.c.4 CaseSIudy:!apansLcoTownsandlndusIrialClusIers
WorksheeI
Module 5: Eco-Industrial Cluster Initiatives for a New Era
5.! LcolndusIrialClusIersasalrameworkorPolicylnIervenIions
5.2 ChallengesoLcolndusIrialClusIerlormaIion
5.J SeIIingObjecIivesandMoniIoringPerormance
5.4 lnIegraIingLcolndusIrialClusIerlniIiaIivesina8roader
NaIionalDevelopmenIPolicyAgenda
5.5 PebuildingaIerDisasIer:LcolndusIrialClusIersasanOpporIuniIy
Module 6: Understanding the Ground Realities of
DeiningNexISIepsandlormulaIingAcIions
OverallCourseLvaluaIion
Glossary
A Prototype Training Manual
2
Module1: Overview
1.1 Background
1.1.1 Growing Industrial Clusters in Asia
lndusIrialclusIers(lC),orgeographicalconcenIraIionsoirmsandancillaryuniIs
engaged in Ihe same secIor, can generaIe a mulIiIude o advanIages or small
irmsrom agglomeraIion economies Io Ihe beneiIs o joinI acIion wiIh oIher
companiesinIheclusIer.TheindusIrialclusIerdevelopmenImodelemphasizes
inIernal linkages whereby clusIer gains are urIhered by local irm cooperaIion,
local insIiIuIions, and local social capiIal. The growing evidence o smallirm
indusIrialclusIersinAsiacompeIinginlocalandglobalmarkeIshasdrivenmuch
oIhepolicyenIhusiasmorpromoIingclusIerbasedregionaldevelopmenI.
lndusIrial clusIers lend Ihemselves Io susIainable developmenIdirecIly Ihrough
economicdevelopmenI,incomes,andwellbeinggeneraIedorIheworkingpeople,
andindirecIly,IhroughIheirwiderimpacIonIhelocaleconomyandenvironmenIal
conservaIion.lewclusIersIudieshaveexpliciIlyaddressedenvironmenIalconcerns.
There is subsIanIial evidence IhaI clusIers noI only generaIe employmenI and
income or local people, buI also conIribuIe Io naIional economic growIh. The
emergence o rusI belIs has signaled Ihe end o a cycle o urban developmenI
ormanymaIureindusIrialclusIers,IriggeringIhesearchorinnovaIivebusiness
modelsandpoliciesIhaIcanaIIracInewindusIriesandrejuvenaIelocaleconomies.
1.1.2 The Allure of Eco-Industrial Clusters
lndusIrial clusIers can be used as a undamenIal organizing ramework or
undersIanding regional economies and or developing susIainable developmenI
sIraIegies. ln parIicular, Iheir appeal derives rom Iheir aIIribuIes IhaI can be
groupedunderIheconcepIsoagglomeraIioneconomieswhenindusIrialecology
principlesareinIegraIed.lnecoindusIrialclusIers(LlC),smallproducersadvance
IheirbusinessbyIakingeconomicsIepsincoordinaIionwiIhoIhersinIheclusIers
inIhepursuiIoenvironmenIalcauses.ThisallowssmallirmsIosurviveandgrow,
Ihus raising incomes, brand value, and wellbeing. The gains IhaI Ihe clusIers
bringabouIinIurnacceleraIesuchposiIiveouIcomes.TheselocalagglomeraIion
economies and inIerirm neIworks are cenIral Io new growIh, as well as Io Ihe
environmenI and income o Ihose engaged in clusIers, rom rural !apan Io Ihe
urban inormal secIor o Thailand and Io Ihe exporI clusIers o VieI Nam and
lndonesia. !oinI acIion is also imporIanI as can be seen or example when local
producerswereconronIedwiIhexIernalmarkeIshocksinSriLankaandlndia.There
isevidenceIhaIsocialcapiIal,Iechnology,andmarkeIingsIraIegiescanaugmenI
economicandenvironmenIalcapaciIiesandIhewellbeingolocalpeople.
lorIhesereasons,IhenurIuringoindusIrialclusIershasbecomeaocusoregional
developmenI,indusIrial,andenvironmenIalpoliciesinIhedevelopinganddeveloped
economies o Asia. A clusIer made up o a suicienI number o small irms and
associaIedsupporIservicescanbeaninnovaIiveLlCIosIimulaIeandsusIaingrowIh
overIime.AndmanylocalgovernmenIsareeagerlyexperimenIingwiIhpoliciesIhaI
osIerIhecreaIionoLlCs,eiIherasareesIandinggrouporaclusIerocompanies
IhaIispeggedIoanexisIingproducIionbase,resourceuse,andareaocompeIency.
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1.1.3 The Brilliance of Eco-Industrial Clusters
LcoindusIrial clusIers come in several dierenI orms, and various auIhors have
aIIempIed Iypologies, buI all clusIers share several common eaIures: Ihey are
composed o a mulIiIude o irms o dierenI sizes belonging Io one branch o
indusIry,Iheyarebroadlydeined,andmembershipisopenandelasIic.ThemosI
successul exisIing ecoindusIrial clusIersand Ihose wiIh Ihe besI prospecIs o
successhavedisIincIlocaIionaladvanIages,andsuchaIIribuIesarelikelyIobe
evenmoreimporIanIornewclusIers.ThemosIpromisinganddurableLlCscan
beoundnoIinmajorurbancenIersorruralareas,buIinIheurbanruralringe
areas IhaI have gaIhered sIrong economic momenIum by combining economic
legacies and resource endowmenI wiIh good policies. ln many counIries, iscal
andadminisIraIivedecenIralizaIionhaspushedIheocusodecisionmakingwiIh
respecI Io land use policy, indusIrial licensing, inrasIrucIure developmenI, and
iscal incenIives Io regional level decisionmakers. These kinds o robusI sysIems
also creaIe good opporIuniIies or poorer, less indusIrialized regions Io grow in
asusIainableway.However,ajoinIapproachbycenIral,subnaIional,andprivaIe
bodies is essenIial in any case, wiIh naIional innovaIion sysIems providing a
ramework or Ihe orchesIraIion o a number o policy iniIiaIives, ranging rom
educaIionIoinrasIrucIure.SuchanapproachminimizescoordinaIionailuresand
maximizesIheobjecIiveuncIionsoLlCs.
1.2 An Introduction to the Training Manual
1.2.1 Objectives of the Training Course
ThisProIoIypeTrainingManualisoruseinIrainingcoursesonLlCsandisaimedaI
buildingIhecapaciIyogovernmenIoicials,academia,andoIhernongovernmenIal
enIiIies responsible or developing and implemenIing indusIrial clusIer programs
or projecIs. This is aIIempIed by inIroducing Ihe issues and opporIuniIies or
inIegraIing indusIrial ecology and economic compeIiveness inIo indusIrial clusIer
projecIs.TheknowledgesharedIhroughIhisIrainingwillhelpparIicipanIsbeIIer
idenIiywhichkindoLlCsIraIegywouldresulIinIhegreaIesIbeneiIs.
We expecI parIicipanIs in Ihis Iraining Io have a basic knowledge o indusIrial
clusIerormaIionIhaIprioriIizeseconomic,environmenIal,andsocialaspecIs.The
course also aims Io raise Ihe awareness o regional developmenI experIs abouI
IheroleecoindusIrialclusIerscanplayinsusIainabledevelopmenI,emphasizing
Ihe imporIance o adopIing inIegraIed indusIrial, environmenIal, and regional
planningpolicies.
This Iraining manual is based on Ihe resource maIerials used aI Ihe Workshop
onLcolndusIrialClusIers:PoliciesandChallenges,whichwasheldaIIheAsian
DevelopmenI 8ank lnsIiIuIe, Tokyo, !apan, 8!! December 2009. The Iraining
program deals wiIh Ihe susIainabiliIy challenges aced by indusIrial clusIers and
IhesIraIegiesorIransormingindusIrialclusIersinIoecoriendlyeconomiczones.
TheobjecIiveoIheIrainingmanualisIoprovidearameworkordiscussingkey
issuesoenvironmenIalandindusIrialchangeIhaIleadIoIheormaIionoLlCs.
Module 1
Overview
4
OncompleIionoIheIrainingcourse,iIisexpecIedIhaIIheparIicipanIswillbeableIo
(i) demonsIraIe Ihe economic and environmenIal meriIs o Iransorming small
andmediumenIerprise(SML)clusIersinIoecoriendlyeconomiczones,
(ii)idenIiypolicyconsIrainIsandormulaIesIraIegiesorboosIingclusIerbased
innovaIionsysIems,
(iii)idenIiysuccessulexamplesodoingecobusinesseswiIhinindusIrialclusIers,
and
(iv)acquireleadershipskillsorinclusiveandsusIainabledevelopmenIourban
ruralringeareas.
1.2.2 How This Manual Is Organized
ThecourseisdividedinIosixmodules:
Module 1 :
PresenIsIheraIionalebehindIheneedIomoveromlCIoLlC,summarizingIhe
keyIermsandconcepIsrelaIedIoLlC.ThesecondparIoIhismodulepresenIsIhe
objecIivesoIheIrainingmanual,iIsconIenIs,andIheproposedIrainingschedule
andsIrucIure.
Module 2 :
lnIroducesIheconcepIoindusIrialclusIersasecoriendlyeconomiczonesand
demonsIraIesIhesIraIegicimporIanceoLlCsinnaIionalindusIrialdevelopmenI
usingcasesIudies.
Module 3 :
SummarizesIhenecessaryrameworkcondiIionsorsIraIegiesorLlCdevelopmenI
underIheollowingmajorIopics:
lmprovingenvironmenIalperormanceoindusIrialclusIers
SocialcapiIalcreaIion
TechnologicaladvancemenI
GreeninancingconcepIs
Module 4 :
LxplainsIheoperaIionalaspecIsoanLlCromIheperspecIivesokeysIakeholders,
namely:
Policymakers
8usinesses
KnowledgeinsIiIuIes
Module 5 :
ThisconcludingmodulepresenIs:
Need and idenIiicaIion o policies IhaI incorporaIe LlC inIo naIional level
developmenIplans
ldenIiicaIionoconcernsarisingaIIhenaIionallevelanddiscussionoways
IopromoIeLlCsvisavisnaIionalpolicymakers
5
Module 6 :
Provided as an opIional module. lI is designed Io recognize Ihe imporIance o
mulIiplesimulIaneoussIraIegiesoLlCormaIion.
1.2.3 Course Schedule
ThiscoursecanbeorganizedinIodierenImodules,asaseriesoIhemaIicsessions:
(i)PlenarysessioninIroducingIheconcepIsandIheoriesoindusIrialclusIering,
(ii)LearningmodulesbasedoncasesIudies,pracIicalexampleswiIhworksheeIs,
(iii)CasesIudiesIolearnIoundersIandIhenecessaryandsuicienIcondiIionsor
LlCormulaIion,and
(iv)SummaryoIhegroupdiscussionsordevelopingcredibleLlCdevelopmenI
sIraIegiesandleadershipqualiIies.
ThisIrainingprogramisdesignedwiIhseveralIhemaIicsessionsdisIribuIedover
ourworkingdaysandaieldvisiIIoanecoindusIrialdevelopmenIarea.lneach
session, Ihe resource person will presenI a shorI inIroducIory lecIure (maximum
oonehour)basedonIhemaIerialpresenIedinIhisIrainingmanual.lnecessary,
addiIional relevanI case sIudies shall be inIroduced by Ihe resource persons Io
shareIheirknowledge,experIise,andexperience.TheIrainingprogramwillmainly
adopIaproblemsolvingapproach,whereIheIraineeswillbedividedinIogroups
IosolveIhecasesIudyorienIedproblemslisIedinIheworksheeIs.AIIheendo
asession,eachgroupwillmakeajoinIpresenIaIion.
Module 1
Overview
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Topics Module/Duration
Day 1
Session 1: Industrial ClustersOverview
ThemeaningoandneedorLlCs
WhaI is Ihe sIaIus o LlCs and whaI are Iheir local,
regional,andnaIionalconIribuIions?
l SML clusIers exisI in Asia, whaI are Iheir shorIalls in
environmenIal,economic,andsocialrespecIs?
lndusIrial clusIers and urban environmenIal issues
Day 2
Session 4: Strategies That Work: Social Capital
Creation
lmporIance o inIerirm neIworks and bonding relaIionships
8uilding susIainable resource recovery sysIems
Physical inrasIrucIure and role o knowledge insIiIuIes,
skillscreaIion
lnsIiIuIionalizing Ihe inormal secIorcreaIing susIainable
livelihoods
Day 3
Session 6: Field Visit to an EIC
Session 2: Regional Experiences of EICs as Eco-
Friendly Economic Zones
Lconomics o indusIrial clusIering
LnIrepreneurial dynamics o LlCs
LlC ormaIion process
Session 5: Strategies That Work: Adapt
Technological Systems
lmporIance o Iechnology, producIs, and process Io
osIerresourcerecovery
Leverage domesIic Iechnologies and indigenous
knowledge
Designing Iechnological managemenI sysIems aI
clusIerlevel
Session 3: Improving the Environmental Performance
of SME Clusters
ConcepI o environmenIal perormance
DownsIream polluIion conIrol IrajecIory/Lndopipe
polluIionconIrolWhaIismissing?
UpsIream resource eiciency improvemenICleaner
producIion,indusIrialecology,Peduce,Pecycle,Peuse
(JP)concepIs
Module 1
!hour
Module 2
!hourlecIure
!.5hourgroup
work
Module 3a
!hourlecIure
!.5hour
groupwork
Module 3b
!hourlecIure
!.5hour
groupwork
Module 3c
!hourlecIure
!.5hour
groupwork
Module 6
4hours
7
Topics Module/ Duration
Day 4
Session 8: Enabling Policy Environment
Overview o indusIrial, environmenIal, and resource
conservaIionpoliciesinAsia
Policy innovaIion and inIegraIion as a driver or LlCs
lssues in ormulaIing and reormulaIing policies
Linkages and inIegraIion o socioeconomic concerns
inpolicies
SecIor and locaIionspeciic policies or indusIrial
clusIerdevelopmenI
Session 7: Strategies That Work: Financing Eco-
Initiatives in SME Clusters
lnnovaIive inancing models or indusIrial clusIers
Microinancing or new businesses in indusIrial clusIers
Nonbanking inancial insIiIuIion's lending or
indusIrialclusIerdevelopmenI
8anking secIor's inIeresI in promoIing social
developmenIIhroughindusIrialclusIers
ProjecI inancing or indusIrial clusIers
Session 9: EIC as an Inclusive Business Development
Model
OpporIuniIies or business: ProiIabiliIy and growIh
OpporIuniIies or planners: Pesource maximizaIion
OpporIuniIies or Ihe poor: WealIh creaIion and value
addiIion
Cracking Ihe codes o success: MarkeI orienIaIion,
producIdierenIiaIion,supplychainmanagemenI.
Session 10: Role of Knowledge Institutes in Promotion
of EIC
Knowledge spillovers wiIhin LlC
lmpacI o knowledge insIiIuIes on Ihe growIh o LlCs
8uilding mulIisIakeholder cooperaIion
Closing-Panel Discussion: EIC Initiatives for a New Era
WhaI are Ihe policy prioriIies or local and naIional
governmenIs?
How Io remove markeI consIrainIs?
How Io leverage Ihe sIrengIhs o local resources?
How Io combine resources and capabiliIies wiIh oIhers?
How Io engage businesses in clusIer iniIiaIives?
How Io engage in policy dialogues wiIh governmenIs?
Course Evolution
Deining nexI sIeps
Overall evaluaIion
Module 5
!hour
J0minuIes
Module 3d
!hourlecIure
!.5hour
groupwork
Module 4a
!hourlecIure
!.5hour
groupwork
Module 4b
!hourlecIure
!.5hour
groupwork
Module 4c
!hourlecIure
!.5hour
groupwork
Module 1
Overview
8
1.2.4 Use of the Training Manual
ThemanualisaimedaIconducIingIrainingonecoindusIrialclusIerormaIionaI
aregionallevel.lIisinIendedIoacIprimarilyasaparIicipanIshandbookduring
IhedeliveryoIheIrainingcourse,asacompaniondocumenIIoIhePowerPoinI
presenIaIion, and a compilaIion o reading maIerial or each o Ihe Iraining
sessions.
ln addiIion, iI provides suggesIed approaches or Ihe delivery o each session
coveringIhekeyguidelinesoIhecourse,IherebyuncIioningasamanualorIhe
IrainingoIrainers.
ThemanualissIrucIuredinIoIhreemainsecIions:
Section 1: Training Modules
Section 2: Case Studies and Worksheets
Section 3: References and Reading Materials
Section 1:Training Modules:ThissecIionormsIhemainbodyoIhemanual.lI
seIsouIIheobjecIives,keyconcepIs,andreerencesoreachsession.TheconcepIs
areexplainedIoIheexIenInecessaryorIhepurposeoIhisIrainingcourseand
IhismanualdoesnoIaimIoprovideacomprehensiveexplanaIionoIhesubjecI
in quesIion. The conIenIs o Ihe sessions are largely adapIed rom Ihe regional
IrainingcoursebeingdevelopedbyAD8landromexisIingliIeraIureandsIudies,
andareIobeusedsolelyorIrainingpurposes.
Section 2: Case Studies and Worksheets: Whereverapplicable,casesareprovided
IoelaboraIeIhekeyconcepIsIhesessionaimsIoconveyIoparIicipanIs.CasesIudies
rom Asian counIries are used wherever possible as parIicipanIs on Ihe whole are
romAsiancounIries.
SessiondeliverywillconsisIoPowerPoinIpresenIaIionsandgroupexercises.The
PowerPoinIpresenIaIionsoreachoIhesessionsarenoIincludedinIheprinIed
version o Ihe manual and can be ound on Ihe AD8l websiIe. The worksheeIs
andgroupexercisesareprovidedinsession2.AsboIhindusIrialclusIersandeco
sIraIegiesaresubjecIsinvolvingawiderangeosIakeholdersandrequiringacross
secIorial approach, iI is highly recommended IhaI, wherever possible, exIernal
resource persons are inviIed rom naIional sIakeholders and parIner agencies Io
deliverIhesessions.ThesessionaciliIaIoraccordingIohisorherneedwilladapI
IhemoduleIoIheproileoIheparIicipanIs.
Section 3: References and Reading Materials:WhileIhelisIokeyconcepIsaI
IheendoeachsessionaIIempIsIoprovideabriesummaryoinormaIionavailable
on Ihe relaIed subjecI, Ihis secIion provides a compilaIion o several documenIs
relevanIIoIhemodulewhichaimsIogiveparIicipanIsabeIIerundersIandingo
IheIopicinquesIion.ThedocumenIscompiledrangeromIheoryIoresearchIo
casesIudies.
9
Module 2: Eco-Industrial Clusters as
Eco-Friendly Economic Zones
2.1 Introduction
TheemergingeconomiesoAsiaareexperiencingsIronggrowIh,accompaniedby
increased producIion and consumpIion. During Ihe pasI Ihree decades, growIh
raIes in some Asian counIries have increased sharply and iI is esIimaIed IhaI
emerging Asias gross domesIic producI (GDP) will grow aI an average raIe o
5.4% beIween 2004 and 20J0 (AD8l 20!!). The region has made Iremendous
progress in Ierms o living sIandards. ln pursuiI o Ihe Millennium DevelopmenI
Goals(MDGs),IhemajoriIyoAsiancounIrieshaveexceedexpecIaIions,parIicularly
in Ierms o social indicaIors, eradicaIing exIreme poverIy, gender inequaliIy and
discriminaIion, improvemenIs in educaIion enrolmenI, and beIIer access Io sae
waIersupplies,saniIaIion,andhealIhcare.
There is ample evidence Io suggesI IhaI Ihe regional economic developmenI
experiencedinAsiaisassociaIedwiIhIhediusionoindusIrialclusIersinIerms
o producIiviIy improvemenIs and innovaIion. 8uI indusIrial clusIers can also be
a source o environmenIal degradaIion, generaIing unIreaIed wasIe discharges,
airborneemissions,soilconIaminaIion,anddepleIiononaIuralresources.lndusIrial
producIionexploiIsIheenvironmenIasanunlimiIedsourceorawmaIerials,energy
resources, and as a reservoir or indusIrial wasIe. As a consequence, indusIrial
clusIers in Asia are highly polluIed, which has criIical consequences or human
healIhandnaIuralecosysIems.
PolicymakersinAsianeedIomoveIowardsamoresusIainablemodelIhaIincludes
economicandsocialdevelopmenIsIraIegiesalongwiIhenvironmenIalproIecIion
principles. AdopIing compeIiIive and environmenIally riendly approaches could
be a crucial elemenI o resources recovery and IreaImenI o wasIe lows or Ihe
indusIrial clusIers locaIed in urban cenIers. 8ased on Ihe concepIs o indusIrial
ecology and business compeIiIiveness, indusIrial clusIers could be Iransormed
inIo LlCs by adopIing appropriaIe working sIraIegies IhaI reduce environmenIal
impacIs o currenI indusIrial acIiviIies wiIhin Ihem. AlIernaIively, new indusIrial
clusIerscouldbeormedingreensecIorsandisolaIedareasIakinginIoaccounI
IheireconomicadvanIages.
However, a number o diiculIies have Io be overcome, primarily relaIed Io
disinIegraIion o secIorial policies, insuicienI involvemenI o key sIakeholders,
inancial limiIaIions, and lack o appropriaIe Iechnologies and knowhow. How
canpolicymakersovercomesuchobsIacles?WhaIisIhepoIenIialorIransorming
indusIrialclusIersinIoecoriendlyeconomiczonesinAsia?WhichareIhemosI
successul examples ound in Asian counIries? Which acIions and sIraIegies can
simulIaneously achieve Ihe greaIesI economic eiciency and susIainabiliIy? This
sessionaddressessuchkeyquesIionsandaimsIoprovideanovervieworesource
recovery principles IhaI lead Io economic and social developmenI and omenI
environmenIal proIecIion. The analysis o case sIudies o LlCs in Asian counIries
aimsIoprovideanundersIandingopracIicalecoindusIrialsIraIegies.
Module 2
Eco-Industrial Clusters as Eco-Friendly Economics Zones
10
2.2 Economics of Industrial Clusters in Context:
Economics, Environment, and Local Wealth Creation
PorIer (!989: J!) deined an indusIrial clusIer as a geographically proximaIe
groupoinIerconnecIedcompaniesandassociaIedinsIiIuIionsinaparIicularield,
linkedwiIhcommonaliIiesandcomplemenIariIies.lIischaracIerizedbyasocial
communiIyopeopleandeconomicagenIs,includingsuppliers,serviceproviders,
and associaIed insIiIuIions, locaIed in close proximiIy Io each oIher in a speciic
geographicregion,consisIingmosIlyosmallandmediumenIerprises(SMLs)IhaI
mainlyusehouseholdlabor(AnbumozhieIal.2009).
ThekeybeneiIsoindusIrialclusIerscanbesummarizedasollows:
(i) PromoIion o naIional and regional economic developmenI, as indusIrial
clusIerssIrengIhenIhecapaciIyIogeneraIeemploymenIandlocalwealIh,
(ii) PoverIy alleviaIion, as indusIrial clusIers may empower speciic oppressed
groupsinsocieIy,leadingIoamoreequiIabledisIribuIionoincome,
(iii) TransiIion Io a markeI economy by reinorcing Ihe inluence o Ihe privaIe
secIorandpromoIionoprivaIizaIion,
(iv)PromoIionogoodgovernance,asindusIrialclusIersencouragebroadparIicipaIion
rom Ihe privaIe secIor, knowledge insIiIuIes, and local communiIies in Ihe
economic,poliIical,andsocialacIiviIiesoacounIry,
(v)PromoIionoamorelexible,innovaIive,andcompeIiIiveeconomicsIrucIure,
asindusIrialclusIerscaneasilyadapIandadjusIIomarkeIchanges.
TypicalcasesoIheindusIrialclusIersinluenceonnaIionalandregionaleconomic
developmenIcanbeoundinIhePhilippines,whereSMLsrepresenI99.6%oall
businessesregisIered,employ69.9%oIheIoIallabororce,andaccounIorJ2%
oGDP(Leano2006).lndusIrialclusIersalsoplayasigniicanIroleinIheeconomy
o Ihe Peoples Pepublic o China (PPC) and are key drivers or employmenI,
economic growIh, and developmenI. ln 20!0, SMLs conIribuIed J9.26% Io Ihe
PPCsGDPand67.09%oiIsvalueadded,whileemployingJ0.4%and!4.2%o
IhepopulaIioninurbanandruralareas,respecIively,inIheSMLsecIor.AlIhough
IherehavebeenposiIiveeecIs,lCsmayalsohaveaseriousnegaIiveimpacIonIhe
environmenI,iIheyarelocaIedinunsuiIableinhabiIedareas(ShaoeIal.2006).
lor decades, concenIraIed indusIrial clusIer acIiviIies have resulIed in waIer
and air qualiIy degradaIion, and discharge o unIreaIed sewage and hazardous
wasIes,asreporIedbyIheWorldHealIhOrganizaIion(WHO2008).lnIhePPC,or
insIance,nearly70%oallciIiesmoniIoreddidnoImeeInaIionalenvironmenIal
airqualiIysIandards.Thereore,75%ourbanresidenIswereregularlyexposedIo
airconsideredIobeunaccepIablypolluIed.
Added Io Ihese concerns is Ihe acceleraIion o naIural resources consumpIion.
Asian counIries exIracI nearly hal (48%) o Ihe worlds resources, eiIher or
inIernaluseororexporI.ThisshareislikelyIorisedueIopopulaIiongrowIhand
anincreasingraIeoindusIrializaIioninemergingeconomies.
(a)lndusIrialClusIers (b)LcolndusIrialClusIers
Fig.2.1: Conceptual Scheme of Industrial Clusters and Eco-Industrial Clusters
Source:AuIhors.
11
This unsusIainable paradigm is in urgenI need o being replaced wiIh a more
susIainableapproach,basedonahighlyeicienIuseoresourcesandminimizaIion
o wasIe generaIion. PaIher Ihan ollowing a linear maIerial low o producIion
accompaniedbyincreasedresourceuse,irmsshouldmoveIowardsaninIegraIed
sysIem, where energy consumpIion and wasIe generaIion is reduced by reusing
andrecyclingmaIerialswiIhinIhesameirmorbyoIherirmsinIheclusIer,ina
quasiclosedor,ideally,inaclosedloopsysIem,asschemaIicallyshowninligure
2.!. This could be made possible by applying indusIrial symbiosis principles and
IransormingindusIrialclusIersinIoLlCs.
2.3 Strategic Importance of Eco-Industrial Clusters
LlCs are deined as: a communiIy o business, geographic concenIraIion o
inIerconnecIed companies in a specialized ield IhaI cooperaIe wiIh each oIher
andwiIhIhelocalcommuniIyIoeicienIlyshareresources(inormaIion,maIerials,
energy, waIer, inrasIrucIure, inance, eIc.), leading Io improved environmenIal
qualiIy,economicgains,andequiIableenhancemenIohumanresourcesorboIh
IhebusinessandlocalcommuniIy(AnbumozhieIal.2009:4).Thus,Iheaimo
LlCsisIominimizeIheenvironmenIalimpacIsoindusIrialclusIersandimproveIhe
eecIiveshareoresourcesinindusIrialclusIersbyaciliIaIingandsIrengIhening
IheinIerrelaIionshipsbeIweencomponenIsandelemenIsoindusIrialandnaIural
sysIems. lI evaluaIes Ihe meriIs o energy cascade sysIems and maIerial close
loops, while leading Io inclusive and susIainable economic growIh (Chiu and
Yong 2004). While indusIrial clusIers osIer innovaIion and prioriIize economic
developmenI and social capiIal creaIion, LlCs essenIially consisI o clusIers IhaI
operaIewiIhahigherdegreeoecoeiciencymakinguseobeIIermanagemenI
pracIices,Iechnologies,andskills.LconomicgainsareIhereoreachievedIhrough
Ihe reducIion o naIural resources and energy cosIs, wasIe managemenI cosIs,
Module 2
12
andconormingIoenvironmenIallegislaIion.ThegreenmarkeIpoIenIialmayalso
presenIanopporIuniIyorIheindusIrialacIors.
The Iriple boIIom line approach, which aims Io achieve a balance beIween
environmenIal,economic,andsocialobjecIives,hasbecomeasourceodirecIion
andsupporIorecoindusIrialdevelopmenI(LlD).ThekeyIoLlDisIomapIhelow
oresources(e.g.,energy,maIerial,andwaIer)andnonproducIs(e.g.,wasIeand
byproducI).TwocomponenIsmakeupLlDaccordingIoChiu(2009)(i)primary
(hardware), which deals wiIh inIeracIions like energy uIilizaIion, maIerial low,
sysIemdesign,andinormaIionmanagemenI,and(ii)supporIive(soIware),which
ocusesonIheinIerrelaIionshipbeIweenelemenIsinIheindusIrialsysIemsuchas
mulIisIakeholderparIicipaIion.
OneoIhekeyconcepIsunderlyingLlDisIheinIerirmneIworkIhaIoperaIesalong
IheprinciplesoopIimizeduseoresources,promoIingreducereuserecycle(Ihe
JPs),andindingalIernaIiveuIilizaIionorwasIemaIerials,whilecooperaIingwiIh
Ihe local communiIy. According Io CherIow (2004), indusIrial ecology operaIes
aIIhreelevels(ligure2.2).lirsIly,aIIheinIrairmlevel,iIincludesopIimizaIion
o processes by adopIing besI available Iechnologies Io enhance eiciency o
processesandrecyclingowasIelows.Secondly,aIIheinIerirmlevel,iIinvolves
IheinIeracIionoirmsIopromoIeenergycascadingandsharingomaIeriallows,
insuchawayIhaIbyproducIouIpuIsooneirmwillbeinpuIoranoIherirms
processes.linally,aIIheregional/globallevel,iIreersIoindusIrialmeIabolismand
inIegraIionoacIorseorIsIowardsdemaIerializaIionanddecarbonizaIiono
indusIrialprocesses.
Geographically, LlCs play a parIicularly relevanI role in urbanrural ringe areas.
ln acI, urbanrural ringe areas are suiIable or Ihe implemenIaIion o LlCs, as
IherewouldbebeneiIsboIhinIermsoenvironmenIalpreservaIionandindusIrial
compeIiIiveness. On Ihe one hand, urban areas are privileged by Iheir higher
consumpIiondemandandIheavailabiliIyolargepoolsohumanresources.8uI
on Ihe oIher hand, urban areas ace limiIaIions in Ierms o consIrainIs on Ihe
availabiliIy o naIural resources. Pural areas, by conIrasI, have abundanI naIural
resources buI noI enough manpower, indusIries, or consumpIion demand.
Thereore,ringeareasareideallylocaIedIoaddressIheshorIcomingsoboIhrural
andurbanareasandIakeadvanIageoresourcesavailabiliIyIomeeIconsumpIion
demands. An illusIraIive example o LlCs new role in urbanrural ringe areas
Ihroughorwardandbackwardlinkagesisgiveninligure2.2.
Fig.2.2: Forward and Backward Linkages within an Eco-Industrial Cluster in Rural-
Urban Fringe Areas
Source:AuIhors.
13
2.4 Eco-Industrial Cluster Formation from the Bottom-Up Process
Perspective
LlC ormaIion varies across regions and secIors, depending on economic, social,
local, and indusIryspeciic condiIions. DespiIe such heIerogeneiIies, a sIandard
combinaIionoeaIureshasshownIocaIalyzeIheormaIionoLlCs.ligure2.J
shows Ihe ormaIion acIors o an LlC as a series o Ihree sIages. ln Ihe early
phase, Ihe inIeracIion beIween local enIrepreneurial aIIiIudes and acIiviIies and
Iheir characIerisIics are an imporIanI sIarIing poinI or Ihe evoluIion o SML
clusIersinanyregion.ThisleadsIoaspaIialconcenIraIionoirmsIhaImaximize
Iheuseolocalresources.lirmsIobeIargeIedincludeIhosepreviouslyoperaIed
in isolaIion owing Io variaIions in markeIs, resources, manpower, Iechnology,
and producIs. lnIerirm neIworks and communiIy collaboraIion are Ihe second
essenIialparIoLlCdevelopmenI.AlocalSMLclusIerisupgradedorIransormed
inIoanLlCIhroughmoreorganizedcooperaIionorinormalagreemenIsbeIween
companiesandwiIhinclusIers,sIimulaIedbymuIualIrusI,norms,andcommuniIy
convenIions. 8esides cooperaIion wiIhin irms, collaboraIions beIween clusIers
andoIherknowledgeinsIiIuIes,likelocaluniversiIiesorresearchinsIiIuIionsand
communiIybasedorganizaIions,helpIodevelopenablingIechnologiesanddiuse
environmenIal markeI inormaIion. Key acIors Io promoIe inIerirm neIworks
areIrusIbuildingandconsIrucIivedialogueamongindusIrialacIors,IransparenI
exchange o inormaIion, idenIiicaIion o common sIraIegic developmenI
objecIives,andIheirsysIemaIicimplemenIaIion.
TheIhirdsIageisdominaIedbyasIrongpublicprivaIeparInershipIoupgradeLlCs
inIospecializedecoriendlyeconomiczones.GovernmenIshouldaimaIpublicprivaIe
Module 2
Fig.2.3: Hierarchical Steps in Operationalizing Eco-Industrial Cluster Development
Source:AuIhors.
14
parInerships IhaI sIimulaIe Ihe propensiIy o Ihe LlC as an innovaIive incubaIor
space Io sIarI new irms and Ihus Io enhance regional developmenI. Aordable
IechnologiesandaccessibleinrasIrucIureshouldbeprovidedIoaIIracIcompanies
Io urbanrural ringe areas. lor new companies Io sIarI in an LlC or or exisIing
companies Io relocaIe Io an LlC has business advanIages, such as proximiIy Io
IransporIaIion sysIems, easy procuremenI o raw maIerials, an abundanI supply
o labor, and easily accessible cusIomers and markeIs. Through Ihe analysis o
case sIudies o successul examples o LlC in Asia, iI appears IhaI or SMLs Io
developinIoecoriendlyeconomiczones,linkswiIhlargeirms,IieswiIhexIernal
markeIagenIs,andIhepresenceolocalsupporIinsIiIuIionshavebeenogreaI
signiicance. NaIional policies can also have a sIrong impacI. The sIaIes role as
a aciliIaIor and an enabler or ully uncIional LlCs cannoI be underesIimaIed
in lighI o conIinuing Iechnological, social, and policy consIrainIs. Pegardless o
Ihe origin or secIor, however, Ihe ollowing characIerisIics are idenIiied as key
oundaIionsoLlCs:
(i) Inter-Firm Networks
SuccessulLlCsaremadeupoenIerprisesIhaIconsIanIlyseekinIerirmneIworks,
noIonlyIominimizewasIeandreducepolluIion,buIalsoIoinnovaIeconIinuously
IoimprovezeroemissionprocessesanddevelopnewecoproducIs.
(ii) Social Capital
WellesIablishedsocialneIworksandaIrusIingrelaIionshipbeIweenclusIerirms,
academicinsIiIuIions,andcommuniIybasedorganizaIionsgreaIlyaciliIaIeinIer
irmcollaboraIionaswellasdiusiononewIechnologies.ThecreaIionosocial
Fig.2.4: Main Actors in an Eco-Industrial Cluster
Source:AuIhors.
15
capiIalIhroughIheormaIionoanecoindusIrialclusIerwouldhelpIheindusIry
reach iIs ull poIenIial. While Ihe concepI o muIual IrusI among compeIiIors is
noI Ihe norm among businesses, evidence suggesIs IhaI iI can be builI Ihrough
progressive acIion by communiIybased clusIer players like local NonProiI
OrganizaIions(NPO)orSelHelpGroups(SHG).
(iii) Enabling Technologies
lIisnoIsuicienIorindividualcompaniesIoorminIerirmneIworksinorderIo
becomeenvironmenIallyriendly,LlCsalsorequirearangeoIechnologiesavailable
wiIhinIheirreachIobeableIodoso.LnvironmenIalIechnologiesorconversion
owasIeIoenergy,wasIewaIerIreaImenI,anduseorenewablemaIerialshaveIo
spreadeasilyamongIhecompaniesIobeneiIIheclusIerasawhole.
(iv) Knowledge Institutes
Knowledge insIiIuIes, including universiIies and research cenIers, play an imporIanI
role in supporIing LlCs Ihrough Iheir conIribuIion Io innovaIion processes and local
compeIiIiveness.KnowledgeinsIiIuIesosIerIhecapabiliIyolocalirmsIoIakeupnew
IechnologicalandmarkeIknowledgeandIoapplyiIeecIivelyinIheirindusIrialprocesses.
2.5 Entrepreneurial Dynamics in Eco-Industrial Clusters
Several acIors conIribuIe Io Ihe successul implemenIaIion o LlCs. lIs role
dependsuponIhespeciicconIexIindusIrialclusIersareinIegraIedin.Generally,
sIakeholders may be classiied as being direcIly involved inside Ihe indusIrial
clusIers or as ouIside enIiIies IhaI also conIribuIe Io Ihe developmenI o eco
riendlyeconomiczones(ligure2.4).ThemainacIorsrelevanIIoIheLlCinclude:
Module 2
16
localandcenIralgovernmenIalagencies,localcommuniIies,knowledgeinsIiIuIes,
LlCmembers,LlCmanagemenIorganizaIions,andexIernalbusinesses.
The above mix o acIors relecIs Ihe capaciIies required Io caIalyze Ihe shiI
IowardsLlD.MoIivaIedbyeconomicandsocialinIeresIs,irmsarekeyelemenIs
inadopIingenergyeiciencypracIicesandadopIionomeasuresIoreducewasIe
generaIion. NoneIheless, local and cenIral governmenIal agencies also play a
signiicanIroleininiIiaIingacIionsIhaIpromoIeandaciliIaIeIheimplemenIaIion
oLlCprograms.lorexample,in!apan,cenIralandlocalgovernmenIsembraceIhe
indusIrialecologyapproachasakeypillarIoachievingsusIainabledevelopmenI.
lurIhermore,civilsocieIyandcommuniIybasedorganizaIionsplayaleadingrole
indevelopingandiniIiaIingacIionsonseveralsusIainabledevelopmenIissuesIhaI
omenILlCs.SocialinsIiIuIions,suchasworkersassociaIions,canplayasigniicanI
roleinsIrengIheninglinkswiIhmarkeIsIoreinorceIrusIbeIweenirms.
2.6 Case Studies
2.6.1 Case 1: Eco-Industrial Clusters for Resource Recovery:
Wood Biomass Eco-Industrial Cluster (Maniwa, Japan)
TheManiwawoodbiomassindusIrialclusIerisaIypicalexampleoaboIIomup
approach IhaI resulIed in a successul LlC. Maniwa Iown is locaIed in Okayama
PreecIure,inIhewesIernparIo!apan.lIseconomicacIiviIiesarebasedprimarily
onIhewoodindusIry.80%oManiwaIownisoresIlandandiIhasapopulaIion
oJ7,000,J4smallandmediumsizedIimberacIories,!6drywoodacIories,and
urniIuremakers.DespiIeIheeecIiveinIeracIionbeIweenIheSMLacIoriesand
economicprosperiIy,IwoconsIrainIsIhreaIenedIheuIureoIheindusIrialclusIer.
lirsIly,anexodusoyoungpeoplewhoseekemploymenI,educaIion,andIraining
inlargerurbancenIers,hasresulIedinskilledmanpowerlosses.Secondly,in2002,
Ihe GovernmenI o !apan inIroduced a biomass wasIe IreaImenI law (Dioxin
Law)IhaIlimiIedIheburningowoodwasIeinopenspaces.lImeanIIhaIwood
wasIe had Io be disposed o in landills, which involved high IransacIion cosIs.
PresenIed wiIh Ihese new circumsIances, Ihe challenge or Ihe local communiIy
wasIocreaIeaneconomicallyresilienIwasIedisposalandconversionsysIem.
PromoIed by a sIrong alliance beIween local communiIy, wood indusIries,
knowledgeinsIiIuIes,andlocalgovernmenI,IhewoodclusIerwasreinvenIedand
newinIerlinkagesbeIweenindusIrieswereinIroduced.lourdierenIinnovaIive
sIreamsIransormedIheManiwaindusIrialclusIerinIoanLlC:
(i)PowergeneraIionromwoodwasIe,
(ii)ConversionowoodbiomassinIopelleIs,
(iii)SecondgeneraIioneIhanolproducIionromwoodbiomass,and
(iv) UIilizaIionowoodwasIeorconsIrucIion(aseriesonewecoproducIswere
developedromIheseinIerlinkages,includinglignin,plasIer,polyacIicacid,
eIhanol/uel,andbindermolding).
The crucial componenI or such cooperaIion was believed Io be social capiIal,
whichisIobereIainedandaugmenIed:localcommuniIyculIure,opennessIonew
Fig.2.5: Present Status of Inter-Firm Networks and Biomass Flow Pattern in Maniwa
Source:AuIhors.
17
ideas,andlexibiliIyopermiIIingeasyenIryoirms,localleadership,deliberaIe
cooperaIion,andjoinIacIionsbyclusIermembersIoidenIiycommonproblems,
andindandimplemenIcommonsoluIions.ThiswasdoneunderIhesIewardship
oagroupcalledIhe2!sICenIuryManiwa,whichwasconcernedabouIIheuIure
oIheclusIer.lIperormedIheroleoacaIalysIIoneIworkandconnecIIheregion
IoIheouIsidemarkeIIhroughsymposiumsandseekingalliances.
AnoIhercaIalyIicacIorisrelaIedIoIheinIroducIionoIheDioxinLaw,whichorced
IheclusIerIobeinnovaIiveandIoreconsiderIhepasIpracIiceoincineraIingwood
wasIe.SimulIaneously,IherewasgreaIercoordinaIionandmuIualsupporIamong
IheminisIries:IheMinisIryolndusIrysupporIedbyIhe!apanDevelopmenI8ank
(!D8) unded SMLs in Ihe agriculIure and oresIry indusIries, while New Lnergy
and lndusIrial Technology DevelopmenI OrganizaIion (NLDO) provided unding
orresearchanddevelopmenI,andIheMinisIryoLducaIionosIeredallianceso
universiIieswiIhbusinessesorecoinnovaIions.AIIhesubregionallevel,Okayama
PreecIure creaIed a cusIomer niche markeI Io supporI ecoproducIs rom Ihe
clusIerIobepromoIedIhroughIheManiwaNPOasparIoIheirLcovision20!0.
The case o Ihe Maniwa wood biomass indusIrial clusIer shows IhaI sIimulaIing
communiIybased acIions, providing enabling Iechnologies, and creaIing social
Module 2
18
capiIalandpolicyinIegraIionareIhepillarsorIheeecIiveconversionobiomass
wasIe inIo wealIh creaIion (Anbumozhi eI al. 20!0). This is illusIraIed in ligure
2.5.
2.6.2 Case 2: Policy Support for Successful Eco-Industrial Clusters:
Biotech Cluster (Bangalore, India)
AbioIechclusIerwasdevelopedollowingapolicyorienIedapproach,aspublic
policies provided major conIribuIions Io Ihe creaIion o Ihe agglomeraIions o
bioIechnologicalirmsin8angalore.
The cenIral governmenI esIablished a varieIy o Iopdown policies Io osIer Ihe
implemenIaIionoindusIrialclusIersinIheregion,includingIheSIaIelndusIrial
Policy200620!!andIheNewKarnaIakaSIaIelndusIrialPolicy200920!4.AparI
romnaIionalpolicy,IhesIaIegovernmenIhasalsobeencrucialindevelopingIhis
clusIer.ThesIaIesMillennium8ioIechPolicyseIouIavisionIobealeaderinbio
indusIriesIhroughagglomeraIioneconomiesandhasseIupspeciicinrasIrucIure
or Ihe developmenI o bioIechnology by developing bioIech corridors. These
policies proacIively IargeIed aciliIaIing privaIe invesImenI and inrasIrucIure
implemenIaIionandoperaIion.ThegovernmenIworkswiIhindusIryassociaIions
inaneorIIoensurepolicyrelecIsIhecombinedviewpoinIsoIheprivaIeand
IhepublicsecIorinIheseareas.
ThebioIechclusIerin8angaloreisbasedonanassociaIionohospiIals,agriculIural
businesses, inormaIion Iechnology (lT) and oIher manuacIuring indusIries,
universiIies,researchinsIiIuIes,andgovernmenIagencies.lIresulIedinadiamond
o economies o scale and environmenIal conservaIion wiIh: conIexI (policy,
inrasIrucIure,eIc.),acIorinpuIcondiIions(naIuralresources,humanresources,
research and developmenI |P&D, eIc.), relaIed and supporIing indusIries
(inormaIion Iechnology |lT, logisIics), and demand condiIions (markeI) as Ihe
ourverIexes(lig2.6).
Fig.2.6: Conditions Favoring Bio-Tech Cluster Formation in Bangalore
Source:AuIhors.
19
A large number o exIernal acIors have conIribuIed Io Ihe evoluIion and
growIh o Ihe clusIer, such as human resources, capiIal availabiliIy, and physical
inrasIrucIures. Moreover, exIernal acIorsincluding universiIies and research
cenIers,governmenIagencies,andsuppliersplayanimporIanIroleinpromoIing
indusIrialsymbiosisinIhe8ioIechPark.
Module 2
20
2.7 Epilogue
LlCs Iend Io arise naIurally, driven by Ihe markeIs compeIiIive pressures.
NeverIheless,IhereisaneedoranoverallrameworkIoregulaIeandomenIIhe
creaIionoLlCs.OwingIoIhevasIgeographicrangeoSMLs,governmenIsaIall
levels should be involved, which, in some cases, may lead Io conlicIing policies
andconIradicIorysignalsIoIheindusIrialsecIor.Thus,policiesneedIoholisIically
addresssIimulusanddirecIionsIoallsIakeholdersinvolvedinLlCs.AIIhecenIral
level, inIerminisIerial commiIIees need Io deine coordinaIing sIraIegies and Io
creaIe a suiIable environmenI Io enable Ihe dialogue beIween acIors direcIly
involved in indusIrial developmenI. AI Ihe iniIial sIage o implemenIaIion,
governmenIsmayplayaleadingrole,whereasinIheinalsIages,IhegovernmenI
mayassumealowerproile.lcorrecIlyimplemenIed,aseIopolicyagendascould
reinorceIhelocaladvanIagesoSMLclusIers,asollows:
!) Look aI SML clusIers as a new markeIbased inIegraIed environmenIal and
economic approach Io susIainable regional developmenI IhaI spells ouI new
roles or governmenIs, businesses, communiIybased organizaIions, and
knowledge insIiIuIes. ln Ihis conIexI, promoIing ecoiniIiaIives wiIhin SML
clusIers has greaIer poIenIial or susIainable developmenI Ihan oIher, well
inIenIioned buI oIen isolaIed environmenIal approaches wiIh liIIle social
impacI.
2) UnderIake joinI eorIs IhaI cuI across secIorial policies and Iranscend Ihe
boundaries o esIablished deparImenIs in dierenI Iiers o governmenIs Io
unleash Ihe susIainabiliIy poIenIials o SML clusIers. LlCs as a susIainable
developmenImodelcanriseorallbasedonIhesameweaknessasoIhermodels.
ldenIiyexisIingSMLclusIersinurbanruralringeareasandsIrengIheninIer
irmneIworkswiIhinIhem,howevernascenIIheymaybe.Lookbeyondurban
cenIered manuacIuring secIors such as meIal processing, IexIiles, chemicals,
eIc.PrivaIesecIorinvolvemenIinecoiniIiaIives,duringIheiriniIialsIages,Iends
IoconcenIraIeinurbanareaswhereadequaIeinrasIrucIureisavailable.The
permeaIionoprivaIesecIoriniIiaIiveIoruralregionsandamongweakerand
more vulnerable secIions can Iend Io be slow or lacking unless Ihe process
is acceleraIed or encouraged Ihrough promoIional and insIiIuIional supporI
and inancial incenIives. ln mosI o developing Asia, unless comprehensive
promoIionalandinsIiIuIionalsupporIisprovided,LlCdevelopmenIinurban
ruralringeareaswillbeveryslow.
J)LsIimaIeIhepoIenIialsoLlCdevelopmenIbasedonacIorssuchaslocaIional
advanIages, culIural speciiciIies, inrasIrucIure needs, enIrepreneurship skills,
inIendedsocialbeneiIs,eIc.TargeInewregulaIoryinsIrumenIsandincenIive
mechanisms and loosen bureaucraIic procedures Io osIer an enIrepreneurial
culIureIhaIisopenIonewideas,encouragebackwardandorwardeconomic
linkages,andraiseprospecIsorcooperaIiveenvironmenIalacIionsinIhevalue
chain.
4) lnvesI in improving environmenIal moniIoring sysIems and environmenIal
impacI assessmenI meIhods aI clusIer level Io unlock Ihe ull poIenIials o
indusIrialclusIersandavoidnegaIiveimpacIs.ThisisespeciallyrelevanIinIhe
vasI,buIcurrenIlyliIIlemoniIored,SMLclusIersinAsia.
21
5) laciliIaIe ecoIechnology lows inIo SML clusIers Ihrough agreemenIs aI
dierenI level as an imporIanI alIernaIive orm o inIernaIional cooperaIion,
parIicularlywhenIhereisnobusinessequiIyparIicipaIionaIclusIerlevel.lorIhis
purpose,creaIeaneecIivesysIemoinormaIiononalIernaIiveIechnologies
aIclusIerlevelinecessary,IogeIherwiIhinormaIiononIermsandcondiIions
invariousIypesoconIracIs.
6) SupporI local knowledge insIiIuIes and communiIybased organizaIions Io
provide a wide range o services IhaI diuse Iechnologies, dissipaIe markeI
inormaIion, and osIer innovaIion inside clusIers. Use local governmenIs Io
improvesocialcapiIalIhroughsuchsupporIinIervenIions.
7)WorkwiIhbusinessassociaIionsIocreaIeamacroeconomicrameworkIhaI
providesincenIivesIrucIuresorsmallbusinessIooperaIeinIheclusIeronair
Ierms.GeneralisIinancialsupporIprogramsIoindividualcompanieswiIhina
clusIerIendIohaveonlylimiIedimpacI.AimpolicyinIervenIionsaIgroupso
SMLsaroundjoinIprojecIs.GiveprioriIyaccessIolimiIedavailableinanceIo
innovaIiveclusIersbasedonenvironmenIalandeconomicperormancebench
marking.
Module 2
22
Annex I:
Eco-Industrial Clusters as Eco-Friendly Economic Zones
Worksheet
Learning Objectives:
AIercompleIingIhissessionyoushouldbeableIo:
Deine key concepIs o LlCs
WiIh oIher parIicipanIs, esIablish a common undersIanding on ramework
condiIionsorLlCormaIion
Workshop Duration:
1.5 hours [Study Time45 minutes; Group Discussion45 minutes]
!.lndusIrialclusIersareassociaIedwiIheconomicandregionaldevelopmenIin
AsiancounIries,asagglomeraIioneconomiesavorinnovaIionandhelpirms
Io compeIe globally. WhaI are Ihe major advanIages o indusIrial clusIers?
HowcanIhesebeneiIspromoIeeconomicgrowIhandwealIhcreaIion?
.
2. lndusIrial clusIers are commonly linked wiIh air polluIion, conIaminaIion o
waIersIreams,generaIionowasIe,anddepleIiononaIuralresources,which
conIribuIeIoIhedegradaIionoIheenvironmenI.lnIhisconIexI,LlCsemerge
asanaIIracIivealIernaIiveIopromoIeIheIriplebeneiIsosusIainabiliIyby
balancingeconomic,social,andenvironmenIalprioriIies.WhaIareIhemain
dierencesbeIweenlCsandLlCs?WhaIareIheprinciplesbehindLlCs?
.
23
J. The local environmenI surrounding LlCs enhances and aciliIaIes growIh aI
IheregionclusIerlevel.Commonly,ruralringeareashavecerIainadvanIages
in Ierms o economic and social developmenI. Which are Ihe acIors IhaI
promoIeIhecompeIiIivenessoruralringeareas?
..
4.lCsoIenailIoIakesuicienIadvanIageoIhesynergeIicpossibiliIiesoered
by geographic proximiIy. Thus, Ihe challenge is Io engage IradiIionally
separaIedindusIriesinacollecIiveboIIomupapproachandIopromoIeIhe
exchangeophysicalmaIerials.WhaIareIheIhreesIagesorLlCormaIion?
WhaIareIheormaIionacIorsIhaIosIerLlC?
.
5.The exIernal and inIernal linkages and inIeracIion beIween indusIrial acIors
and oIher relevanI sIakeholders are imporIanI acIors or LlC. Who are Ihe
sIakeholdersinvolvedinIheLlC?WhaIareIheirrolesinIermsoomenIing
IheLlC?
.
6. AlIhoughaboIIomupapproachisconsideredIobeIhepreerredsIraIegyIo
promoIeIhecreaIionoLlCs,governmenIinIervenIionisneededIosIimulaIe
indusIries Io be environmenIally riendly. How should policy inIervenIion be
channeledIoguidesIakeholdersraIherIhanimposenormaIivedirecIives?
.
Module 2
24
7.PeerringIoIhecasesIudyoIhewoodbasedLlCinManiwa,ourinnovaIive
componenIs(i)powergeneraIionromwoodwasIe,(ii)conversionowoody
biomass inIo pelleIs, (iii) second generaIion eIhanol producIion rom wood
biomass,and(iv)uIilizaIionowoodwasIeorconsIrucIionwereessenIial
or promoIing indusIrial clusIer susIainabiliIy by converIing biomass wasIe
inIopoIenIialenergyresources.lnyouropinion,howdidIhesenewmaIerial
lowsemerge?HowwasIheknowledgeIranserconducIedamongIheirms?
WhaI is Ihe conIribuIion o inIerirm neIworking Io maIerials closed loops
promoIion?
..
8.lragilesupplychainsandmarkeIpricelucIuaIionsareIhemainconsIrainIs
oIheLlCinManiwa.WhichsIraIegiesshouldbeimplemenIedIominimize
maIerial low lucIuaIions? WhaI is Ihe role o social capiIal in promoIing
sIableinpuImaIeriallowsandsIablemarkeIprices?
...
9.GreenIaxeshavebeenwidelydiscussedamongpolicymakersasaneecIive
IoolIopromoIeecoproducImarkeIcompeIiIion.ThebiomassbasedLlCin
ManiwawouldgeIconcreIebeneiIsromIheimplemenIaIionogreenIaxes,
sinceiIwouldincreaseIhecompeIiIivenessoanddemandorecoproducIs.
Do you believe Ihis sIraIegy is eecIive in promoIing LlC? l so, sIaIe your
argumenIs. WhaI is Ihe role o social capiIal or Ihe success o Ihis Iype o
iscalincenIive?
.
!0. WiIh regard Io Ihe 8ioIech clusIer in 8angalore, lndia, environmenIal
challenges need Io be overcome, mainly wiIh regard Io air and waIer
polluIion, and wasIe managemenI. While larger companies have already
accomplished Ihis in adhering Io inIernaIional environmenIal proIecIion
sIandards,smallerirmsaresIrugglingwiIhsolidwasIeandwaIereluenI
25
IreaImenI. l you were a local governmenIal oicial in Ihe SIaIe, whaI
sIraIegieswouldyoulikeIoimplemenIIoguaranIeeallcompaniesinIhe
clusIercomplywiIhIheenvironmenIalqualiIyregulaIions?
.
References and Reading Materials
ADB. 2011. Asian Development Outlook 2011South-South Economic Links. Manila: Asian Development
Bank.
Anbumozhi V., S. Chandie, and J. Portugal. 2009. Boosting the Environmental and Economic Competitiveness
of SME Clusters in Asia: Policies and Challenges. Background paper for the ADBI Regional Workshop on
Eco-Industrial Clusters: Policies and Challenges. Tokyo. 811 December.
Ayres R., and L. Ayres (eds.). 2002. A Handbook of Industrial Ecology. Cheltenham, UK: Edward Elgar
Publishing.
Boons F., and J. Howard-Grenville. 2009. The Social Embeddedness of Industrial Ecology. Cheltenham, UK:
Edward Elgar Publishing.
Chiu, A.S.F., and G. Yong. 2009. On the industrial ecology potential in Asian developing countries. Journal of
Cleaner Production 12(3): 1,0371,045.
Choe, K.A., and B. Roberts. 2011. Competitive Cities in the 21st Century: Cluster Based Local Economic
Development. Manila: Asian Development Bank.
Fleig, A.K. 2000. Eco-Industrial ParksA Strategy towards Industrial Ecology in Developing and Newly
Industrialized Countries. Eschborn, Germany: GTZ.
Fujita, M., and J.F. Thise. 2002. Economics of Agglomeration. Cambridge, UK: Cambridge University Press.
Gibbs D., and P. Deutz. 2007. Reflections on implementing industrial ecology through eco-industrial park
development. Journal of Cleaner Production 15(21): 1,6831,695.
Government of Karnataka. 2010. Sector Profile: Biotechnology. http://www.advantagekarnataka.com/pdf/
BT1.pdf) (November 2011).
Green K., and S. Randles (eds.). 2006. Industrial Ecology and Spaces of Innovation. Cheltenham, UK and
Northampton, MA: Edward Elgar.
Ketels, C. 2004. European Clusters. Structural Change in EuropeThree Innovative City and Business Regions.
Geneva, Switzerland: Hagbarth Publications.
Leano, R. 2006. SMEs in the Philippines. CACCI Journal 1: 110.
Lifset, R., and T.E. Graedel. 2002. Industrial ecology: goals and definitions. In: A Handbook of Industrial
Ecology, edited by R.U. Ayres and L.W. Ayres. Cheltenham, UK: Edward Elgar Publishers.
Lowe, E.A. 2001. Eco-Industrial Park Handbook for Asian Developing Countries. Report to Asian Developing
Bank. (http://indigodev.com/ADBHBdownloads.html) (August 2011).
Porter, M.E. 2008. On Competition, Updated and Expanded Edition. Boston, MA: Harvard Business School
Press.
Porter, M.E. 1989. Clusters and the New Economics of Competition. Harvard Business Review 21(3): 123147.
Shi, H., M. Chertow, and Y. Song. 2010. Developing country experience with eco-industrial parks: a case
study of the Tianjin Economic-Technological development Area in China. Journal of Cleaner Production 18:
191199.
Sonobe T., and K. Otsuka. 2006. Cluster Based Industrial Development: An East Asian Model, Basingstoke,
UK: Palgrave Macmillan
Tudor T., E. Adam, and M. Bates. Drivers and limitations for the successful development and functioning of EIPs
(eco-industrial parks): A literature review. Ecological Economics 61(1): 199207.
Van Berkel R., T. Fujita, S. Hashimoto, and Y. Geng. 2009. Industrial and urban symbiosis in Japan: analysis of
the Eco-Town program 19972006. Journal of Environmental Management 90(6): 1,5441,556.
WHO. 2008. Air quality and health: Fact sheet N313 (http://www.who.int/mediacentre/factsheets/fs313/en/
index.html) (August 2011).
Yu J., M. Liu, J. Wang, J. Zhu, M. Zhang, G. He, and H. Li. 2007. SME Development and Poverty Reduction Case
study of Xiji County, China (http://cfed.org/assets/pdfs/CHEDS.pdf) (August 2011).
Module 2
26
Module 3: Strategies for Eco-Industrial
Cluster Development:
Necessary Framework Conditions
3.1 Introduction
The goal o LlCscommuniIies o business, geographic concenIraIions o
inIerconnecIed companies sharing resources and Iechnologiesis Io improve
environmenIalqualiIy,economicgains,andsocialcapiIalbuilding,beneiIIingboIh
IhebusinesscommuniIyandIhelocalcommuniIy.ToachieveIhis,anLlCrequires
inIegraIed Iools and sIraIegies IhaI consider design and producIion processes,
developing producIs IhaI increase resource eiciency, and lower economic and
environmenIalcosIs.
Successul LlCs are made up o enIerprises IhaI consIanIly seek inIerirm
neIworks. LlCs also require a range o innovaIive Iechnologies Io be available
wiIhinreachIoachievebeIIerenvironmenIalperormancewiIhouIcompromising
economic beneiIs. WellesIablished social neIworks wiIh academic insIiIuIions
and communiIybased organizaIions are also required Io aciliIaIe inIerirm
collaboraIion as well as diusion o new Iechnologies in Ihe LlCs. 8uilding
linkages, noI only businessIobusiness, buI also businessIogovernmenI, and,
moreimporIanIly,businessIocommuniIyIoaciliIaIeIheexchangeandsharing
o maIerials, resources, inormaIion, indusIrial servicesenergy, waIer, polluIion
conIrolequipmenI,andengagingIhelocalpeopleanddeliveringbeneiIsIoIhem,
isaninIegralparIoanLlCssIraIegicinIervenIions.SocialcapiIalbuildingIhus
becomesanimporIanIdomainoLlCs.linancingisamongsIIhemosIimporIanI
sIraIegiesIhaIneedIobeIakencareowhenplanningLlCs.
lnshorI,asuccessulLlChasanenvironmenIalace,aneconomicdocIrine,and
a social dimension. Module J presenIs our main sIraIegies or Iransorming a
conglomeraIionosmallandmediumsizedindusIriesinIoanecoindusIrialclusIer:
environmenIal perormances, Iechnology advancemenI, social capiIal building,
and inancing. The module presenIs key concepIs and case sIudy examples Io
explaineachoIhesesIraIegies.ThequesIionsandworksheeIaIIheendoIhe
sessionprovideworkingexercisesorIhecourseparIicipanIs.
Fig.3a.1: System Approach of an Eco-Industrial Cluster
Source:AuIhors.
27
Module 3a
Environmental Performance of Eco-Industrial Clusters
Module 3a: Environmental Performance
of Eco-Industrial Clusters
LnvironmenIal perormance is Ihe relaIionship beIween an organizaIion and iIs
impacIoniIsnaIuralenvironmenI,includingIheeecIsoresourceconsumpIion,
Iheprocessorecovery,IheprocessingoproducIs,andmeeIingIheenvironmenIal
requiremenIsoIhelaw.lnshorI,environmenIalperormance~upsIreamresource
eiciencydownsIreampolluIionconIrol.
3.a.1 Key Concepts: Why and How to Achieve Environmental Performance?
To gauge Ihe success o an LlC, measuring and improving iIs environmenIal
perormance becomes an imporIanI sIraIegy. LnvironmenIal perormance
measuremenIoanLlCisaIwooldprocess:
(a)LsIablishhowconsIiIuenIirmsuserawmaIerialsandenergyresources,and
(b) Measure wasIe and polluIion (air, waIer, soil) IhaI arise rom Ihe producIion
process.
Hence,improvingIheenvironmenIalperormanceoLlCsincludesnoIonlyIreaImenI
o polluIion, buI also opIimizaIion o resource inpuIs by ineIuning maIerial
lows.lorexample,insIeadoheavyrelianceonendopipe(LoP)Iechnologyor
downsIream wasIe or polluIion IreaImenI, gaining upsIream resource eiciency
is Ihe sysIem approach ollowed by LlCs Io achieve improved environmenIal
perormance.ligureJa.!belowexplainssuchamacroenvironmenIalapproachIo
indusIrialecologywiIhinanLlC.
Fig.3a.2: End-of-Pipe Treatment
Source:AuIhors.
What is endofpipe treatment?
TradiIionalmeIhodIoconIrolpolluIionordisposalowasIewherein
IhequanIiIyowasIedisposedIoIheexIernalsysIemiscuIdown
CorrecIiveapproach,doesnoIocusonpolluIionprevenIion
NowasIeuIilizaIion
28
lndusIrial acIiviIies should be conIinuously moniIored and evaluaIed Io improve
IheirenvironmenIalperormance.NaIionallawsandregulaIionsrequirecompanies
Io comply wiIh Ihe polluIion sIandards. LoP IreaImenI is usually chosen by
companies Io comply wiIh adminisIraIive regulaIions and requiremenIs. ligure
Ja.2explainsIheLoPsIraIegy.LoPonlyocusesonmeeIingIhesIandards,iIdoes
noI explore possible opporIuniIies or Iechnology improvemenIs and achieving
higherenvironmenIalperormance.
8esides meeIing Ihe adminisIraIive regulaIions, businesses and indusIries have a
largerroleIoplay.ThisundersIandingisrelecIedinIheirshiIIowardsadopIing
corporaIe,social,andenvironmenIalmanagemenIsIraIegies,raIherIhanmerely
meeIingIhenaIionalpolluIionsIandards.SmallandmediumsizedindusIriesare
also adopIing various means, wiIhin Iheir consIrained resources, Io proIecI Ihe
environmenI. However, mosI environmenIal proIecIion measures have always
been direcIed Iowards LoP IreaImenI soluIions, which handle Ihe wasIe aIer iI
isgeneraIed.LoPIreaImenIonlyallowsindusIriesIoIakeacorrecIiveapproach,
raIher Ihan a prevenIive approach, Io eliminaIing wasIe being produced. Thus,
IheseIypesoindusIrialproducIionpracIicesareunsusIainableandunproiIable
inIhelongrun.
3.a.1.2 Upstream Resource Efciency
ConIrary Io downsIream polluIion conIrol, upsIream resource eiciency lowers
maIerial inlows inIo Ihe producIion sysIem by careul design o producIion
processesandproducIs.Also,insIeadodisposingoIhewasIeproduced,wasIe

W

^

Raw material input

Production
Reduce
Consumption
Discard
Reuse
Final disposal
Recycle
Treatment
Fig.3a.3: Principles of the 3Rs (Reduce,Reuse,Recycle)
Source:AuIhors.
29
andbyproducIsareusedasresourcesorrawmaIerialsorsecondaryindusIries.
LnvironmenIal perormance and benchmarking are also adopIed Io improve
indusIrialcompeIiIivenessIhrougheicienIuseoresources,andreusingwasIe.
CompaniesIendIobeinIeresIedinmeeIingenvironmenIalsIandardsbyadopIing
onlyIhecheapesIpossiblemeans.Thesocial,environmenIal,andmicroeconomic
beneiIsopoverIyalleviaIionandjobcreaIionhaveyeIIobeinIegraIedinIoIheir
sIraIegic Ihinking. So ar, companies have Iypically ailed Io improve upsIream
resourceuIilizaIionandmosIlyocusedondownsIreampolluIionconIrol.
UpsIream resource eiciency breaks Ihe linear low o maIerial inIo Ihe cyclic
paIIernbyrecoveringandrecyclingwasIe.ThiscanbeachievedIhroughPeduce,
Peuse, Pecycle (JP) Iechnologies and cleaner producIion pracIices. Using Ihese
IoolsispossibleandachievableinLlCsIhroughinIerirmneIworks.
3.a.1.3 Reduce, Reuse, and Recycle
UpsIream resource eiciency can be achieved Ihrough implemenIaIion o Ihe
JPsreduce,reuse,andrecycle.ThedeiniIionsoIheJPsaredepicIedinligureJa.J.
TheirsIPreducehelpsIophaseouIwasIebeoreiIiscreaIed,andhenceurIher
resourceexIracIionisreducedandenergyissavedinIheproducIionprocesses.Peuse
isIhesecondsIepoIheJPs.lIdoesnoIworkinequalcapaciIyineverysocieIy,
buI in lowincome counIries reuse o commodiIies is a IradiIional pracIice. Peuse
is preerable Io dumping. However, Ihe ocus is on Ihe Ihird Precycling, which
meansrecyclablemaIerialsromIhewasIesIreamsareused,keepingIhemaIerial
resourcesinacyclicalpaIIern,IherebyavoidingexIracIionovirginrawmaIerials.
Module 3a
NKr:Norwegiankroner
Source:UNlDO(!998).
30
3.a.1.4 Cleaner Production
Cleaner producIion (CP) is anoIher approach Io achieving successul upsIream
resource eiciency. Compared wiIh Ihe LoP approach, CP oers a longerIerm
soluIionIoincreasingenvironmenIalperormancebysavingenergyandmaIerials
as well as producing less wasIe and emiIIing lower levels o polluIanIs inIo Ihe
environmenI.Hence,CPisaprevenIivemeasure,whileLoPisacorrecIivemeasure.
LoP is generally or compliance wiIh naIional polluIion sIandards, whereas CP
involvesinnovaIiveIechnologiesIorealizeIhebeneiIsoincreasedenvironmenIal
perormancealongwiIhoIhereconomicandsocialbeneiIs.
lmplemenIing cleaner producIion, on Ihe one hand, can be a sIraighIorward
approachoadopIingbeIIerhousekeepingpracIicesIoprevenIpolluIion.OnIhe
oIher hand, Ihe cleaner producIion approach also involves reIhinking producIs,
producIcomponenIs,andproducIionprocessesIoachievesusIainableproducIion.
Hence, cleaner producIion is abouI sysIem reengineering Io achieve resource
opIimizaIion, buI in a linear producIion sysIem. Cleaner producIion measures
include: process modiicaIion, Iechnology modiicaIion, modiicaIion o end
producIdesign,inpuImaIerial,andreusingmaIerialonIhesiIeIhroughresource
recycling.
ANorwegianpulpandpaperplanIclusIerhasadopIedapproachesshowninTable
Ja.!IoincreaseenvironmenIalperormance:
Table 3a.1: Cleaner Production in a Norwegian Pulp and Paper Plant
Approach Measure Costs
DiluIion
8uilda2Jkmlongpipe,
!.JmindiameIer
NKr!00million
PolluIionconIrol
8uildawasIewaIer
IreaImenIplanI
NKr J2 million and an
operaIingcosIoNKr8
million/year
PrevenIion
lncorporaIeaserieso
proceduralandIechnical
changeswiIhinIhe
aciliIy
NKr!0million
Plussaved:
NKr 5 million/year on
chemicals
NKr !0 million/year on
energy
NKr 8 million/year due
IoincreasedproducIiviIy
Fig.3a.4: Cleaner Production Approach: Equipment Modification and Emission Reduction
Source:AuIhors.
Fig.3a.5: Cleaner Production Approach: Process Modification
Q:IoIalquanIiIy,Cr:chromium,Co:cobalI
Source:AuIhors.
31
TheapproachesinvolvedboIhprocessmodiicaIionandequipmenImodiicaIion.
LquipmenImodiicaIioninvolvedchangingromConvenIional!eIDyeingmachines
IoAdvanced!eIDyeingmachines(igureJa.4below).ThisequipmenImodiicaIion
resulIedinanexcepIionalimprovemenIinperormance:
JJ% reducIion in greenhouse gas (GHG) emissions or air polluIanIs,
55% reducIion in waIer consumpIion.
ConvenIional!eIDyeingmachinesused!,480kg/baIchosIeam,4,!9!M!/baIch
oenergyinpuI,and67m
J
/baIchowaIerordyeingwiIhJ96ICO2per/baIch
produced,whereasIheAdvanced!eIdyeingmachineusedonly980kg/baIcho
sIeamwiIhaIoIalenergyinpuIo2794M!/baIchandJ0.4m
J
/baIchowaIeror
dyeingandproducingonly264ICO2per/baIch.
ligure Ja.5 below is Ihe modiicaIion o Ihe enIire process o rinsing in an
elecIroplaIingplanI.TheigurebelowpresenIsIheeecIorinsewaIerconsumpIion
by Ihe use o inIermediaIe sIaIic rinse baIhs Io achieve an equivalenI degree o
rinsing.
Module 3a
Fig.3a.6: Factors Favoring Better Environmental Performance in Clusters
Source:AuIhors.
32
3.a.2 Increasing Environmental Performance through Industrial
Networking
LlCscreaIeanenvironmenIormulIipleindusIriesIoinIegraIeandachieveresource
eiciencyandresourcerecyclesIhroughinIerirmsparInershipsandcollaboraIion.
Achieving economic eiciency wiIh LlCs goes beyond convenIional downsIream
polluIionconIrolIowardsupsIreamresourceeiciency.PolluIionissuesinanLlC
areconsideredromcumulaIiveeecIperspecIives.SinceanLlCisaninIerirm
neIworkosimilarindusIrialoperaIions(inIerrelaIedieldobusinesses),iIworks
orpolluIionconIrolasacollecIiveapproach.ThecumulaIivepolluIioneecIworks
onIhebasicundersIandingIhaIIheclusIeracescommonenvironmenIalproblems.
ligure Ja.6 presenIs Ihe acIors avoring beIIer environmenIal perormance in
clusIers.
PolluIion problems need Io be solved collecIively, wiIh members considering Ihe
corevaluesoLlCs.ThiscollecIivenessispossibleonlyiIheinIerrelaIedbusinesses
are open Io innovaIive managemenI and Iechnological measures. lnIerirm
connecIednessworkscollecIivelyIoighIIhepolluIionIhroughwasIeexchange,
Iechnology sharing, or common wasIe IreaImenI planIs, eIc. Such collecIive
collaboraIion Io ighI polluIion is very dierenI rom Ihe sIandalone polluIion
conIrol approach o a scaIIered indusIry. ln a scaIIered indusIrial operaIion,
polluIion rom a single indusIry can usually be easily ignored as Ihe quanIiIy o
polluIanIs or wasIe generaIed is smaller. 8uI Ihis is noI possible in an indusIrial
clusIer,whereIhecollecIivepolluIanIs/wasIevolumeislarger.AclusIerapproach
IopolluIionconIrolispreerableandmoreeconomicalasIherewouldbewasIe
exchange(someoneswasIeisanoIhersresources)andresourceandIechnology
exchangeamongindusIries.LsIablishingacenIralizedwasIewaIerIreaImenIplanI,
orinsIance,lowersIhepolluIionabaIemenIcosIs.
Individual firm approach to
pollution control
Industrial cluster approach to
pollution control
PolluIionvolumeislessandIhe
Iendencyoignoranceishigher.
LargerpolluIionvolumehence
ignoranceisnoIpossible.PolluIion
conIrolmeasuresaredeployed.
PolluIionabaIemenIisdone
IocomplywiIhadminisIraIive
requiremenIs.MinimumpolluIion
sIandardsaremeI,henceIhereare
noopporIuniIiesorinnovaIionand
urIheringzerowasIepolicies.
LndoPipe(LoP)ispracIicedIo
dealwiIhwasIealreadyproduced.
PolluIionabaIemenIispracIiced
beyondIhelevelnecessaryIo
meeInaIionalpolluIionsIandards,
innovaIionsarepuIinIopracIiceIo
achievezerowasIepolicies.
UpsIreamresourceuIilizaIionis
IargeIedIoreducepolluIionouIpuI.
JPandCPsareIhesIraIegies
applied.
CosIopolluIionabaIemenI
ishigherasonlyoneindusIry
isresponsibleorinvesIingin
equipmenIandIechnologies.Thus
IhechancesobuyinglowcosIand
loweiciencyequipmenIarehigh.
CosIopolluIionabaIemenIis
sharedamongIheclusIersand
henceIhecosIbecomeslower.
lnnovaIiveandhighIechequipmenI
canbeinsIalledavoringIechnology
advancemenI.
SmallandscaIIeredindusIriesmake
iIdiiculIorIhenaIional/local
adminisIraIiondiiculIIomoniIor
IhepolluIionconIrolacIiviIies,
henceiIacIsasaloophole,whereby
indusIriesIryIoavoidenvironmenIal
compliance.
ClusIersmakeiIeasyorIhepolicy
conIroladminisIraIionIomoniIor
environmenIalperormance
compliance.
Source:AuIhors.
33
Table Ja.2 is a comparison o polluIion conIrol in a clusIer versus scaIIered
indusIries.
Table 3a.2: Pollution Control in a Cluster Versus Scattered Industries
Module 3a
34
3.a.3 Tools for Measuring Environmental Performance
AnenvironmenIalmanagemenIsysIem(LMS)isaIoolIomoniIor,reporI,andveriy
IheenvironmenIalperormanceoirms,individuallyandcollecIively,aIIheclusIer
level.AnLMSisaplannedandcoordinaIedseIomanagemenIacIions,operaIing
procedures, documenIaIion, and recordkeeping, implemenIed by a speciic
organizaIionalsIrucIurewiIhdeinedresponsibiliIy,accounIabiliIyandresources,
and aimed aI prevenIing adverse environmenIal eecIs as well as promoIing
acIionsandacIiviIiesIhaIpreserveand/orenhanceenvironmenIalqualiIy.
(a) Pecognizing maIerial low analysis in legislaIion and/or as sIandardizing
environmenIalnorms(e.g.,lSO!4,000)couldbeeecIiveIoolsorindusIries
IobeawareoIheirenvironmenIalperormance.CreaIivesoluIionsareneeded
Io moIivaIe SMLs Io adhere Io environmenIal sIandards and move beyond
resourceuIilizaIion,andLlCsareagoodsIarIingpoinI.
(b)lnIheLMS,aparIromdownsIreampolluIionconIrol,IhepossibiliIyIoimprove
legislaIion Io moniIor and enorce upsIream resource uIilizaIion has Io be
included.SingaporehasasIrongJPconcepIinIegraIedinIopolicy,involving
carryingouIandmoniIoringawasIeresourceaudiI.
(c) 8usiness perormance raIings, Ihrough colorcoding, were inIroduced in
lndonesiaasawayoempoweringIhelocalcommuniIyIorankcompanies
environmenIalperormance.Since!995,IhegovernmenIolndonesiaIhrough
ProperProkasihlndexlndonesia(PPOPLPProgramPenilaianPeringkaIKerja
Perusahaan dalam Lingkungan Hidup, LvaluaIion Program on CorporaIe
Perormance PaIing o Living LnvironmenI), evaluaIes Ihe environmenIal
perormancesoindusIriesandranksIheminIheorderogold,green,blue,
red,andblack.AgoldrankmeanszeroemissionproducIion,whereasablack
rankmeansIhebusinessacIiviIyisnoImakingenvironmenIaleorIsandhasa
negaIiveimpacIonIheenvironmenI.
Policy inIervenIion IhaI could aciliIaIe business parIicipaIion and sIakeholder
involvemenIshouldbecarriedouIIopromoIeLMSinLlCs.
3.a.4 Case Studies
A. An Individual Industry Initiative: ReuseA Shoe Recycling Program by
Nike, Inc.
Nike,lnc.isamajorpubliclyIradedsporIswearandequipmenIsupplierbasedin
IheUniIedSIaIes.lIisIheworldsleadingsupplieroaIhleIicshoesandapparel
andamajormanuacIurerosporIsequipmenI.ln2006,NikecreaIedabusiness
modelIosIabilizeIhemarkeIorgranulaIedrubberromooIwearmanuacIuring
Ihrough iIs PeuseaShoe recycling program. The model resulIed in more Ihan
!.2millionkgorubbergoinginIouseulproducIsandNikehasprocessedmore
Ihan25millionpairsoused,counIereiI,anddeecIiveshoes.ThishashelpedIo
consIrucImoreIhan2!0sporIsuracesincommuniIiesaroundIheworld.Peuse
AShoecollecIsoldshoesreIurnedbycusIomersaINikesIoresandoIhervenues
andIransersIhemIooneoIheprocessingaciliIies.TheoldshoesaresorIedor
Iherecyclingprocess,wiIhIheboIIomparIsoIheshoesseparaIedandgrinded
Fig.3a.7: Nike Initiative and Benefits
Source:AuIhors.
35
Io produce a maIerial called Nike Grind IhaI is subsequenIly used Io produce
sporIsuraceslikeIracksandplaygrounds.WiIhouIIhisiniIiaIiveoldshoeswould
end up in landills or dumpsiIes causing environmenIal problems. The program
also has exIra beneiIs such as new business creaIion, job opporIuniIies, beIIer
environmenIalperormance,andwasIeandresourceuIilizaIion(ligureJa.7).
WhaIareIhepossiblebeneiIsandcosIsinIheaboveexample?
ConIinuousenvironmenIalperormanceimprovemenI
PeducedwasIeandbeIIerresourceuse
lncreasedproIecIiononaIuralecosysIem
MoreeicienIuseonaIuralresources
NewemploymenIandpoverIyreducIion
LxpandedbusinessopporIuniIies
8oosIIoIheeconomy
B. An Eco-Industrial Cluster Initiative: Case of Agro-Industry Cluster, Sri Lanka
lndusIrialNeIworkingorWasIeManagemenIPaddy,lruiIs,andVegeIableClusIer
inDambullaDedicaIedLconomicCenIre(DDLC)SriLanka.DambullaciIyissiIuaIed
inIhenorIhernparIoIhecenIralprovinceoSriLanka.ThelocaIionoDambulla
ciIy is sIraIegically imporIanI or Ihe collecIion and disIribuIion o agriculIural
produce.PecognizingIhispoIenIial,IheDDLCwasesIablishedin!998Ioprovide
a wholesale markeI or vegeIables and ruiIs culIivaIed in Ihe rural areas, Ihus
servingasIhehuboallagriculIurebasedeconomicacIiviIiesinIheregion.Nearly
Module 3a
Fig.3a.8: Quantitative Material Flows and Networks in the Dambulla Cluster
Source:AuIhors.
36
!80wholesaledealers,2Jriceprocessingmills,and20warehousesoperaIeinand
aroundDDLC.PosIharvesIlossesinvegeIablesandruiIsvarybeIweenJ0%and
40%oIheIoIalproducIionandoccureiIherinIheieldorduringIransporIaIion
andmarkeIing.Moreover,vegeIablesIhaIroIbeIweenharvesIandreachingIhe
markeIalsoconIribuIeenormousquanIiIiesowasIe.TheDDLCiscloselyconnecIed
Io Ihe livelihood o Ihe armers and has a socioeconomic bearing. A wasIe
Ioenergy planI consuming Ihe organic wasIe would reduce Ihe environmenIal
IhreaI resulIing rom illegal wasIe disposal. PelecIing experiences elsewhere,
anaerobicdigesIionisalucraIiveopIionorawasIeIoenergyplanI,givingarmers
Ihe opIion Io sell wasIe vegeIables providing Ihem wiIh a source o income.
The maIerial low in ligure Ja.8 shows Ihe poIenIial paIhways o indusIrial
neIworkinginDDLC.
LcoindusIrialclusIeringprinciplesbringingIogeIherallIheproducersandindusIries
inIheregionwouldhelpeliminaIeIheIhreaIsIosusIainabledevelopmenI.Table
Ja.JgivesaSWOPanalysisosuchanindusIrialneIwork:
Source:AuIhors.
37
Strengths Weaknesses
Welldeveloped economic cenIer
(IhebiggesIinSriLanka)or
agriculIuralproducIsinDambulla
CenIralized locaIion: connecIiviIy Io
majorciIies,porIs,andlocalmarkeIs
lrrigaIion neIwork
lerIile laI land suiIed or agriculIure
Ample land availabiliIy
MarkeI or paddy husk or power
generaIion
lnlow o people
Very high wasIe generaIion
Lack o proper inrasIrucIure such as
awelldevelopedroadneIwork
WasIage due Io poor posIharvesI
IechnologyandpoorsIorageaciliIies
Lack o awareness o recycling and
resourcerecoveryinagroproducIs
Poor wasIe managemenI and
indiscriminaIedisposaloagriculIure
residue
Poor polluIion conIrol
Lack o necessary inrasIrucIure such
asindusIries
Variable markeI pricesno preservaIion
orsIorageaciliIies
More wasIe produced during low
priceperiods
Opportunities Potentials
LsIablish collecIion cenIers
laciliIies or sIorage and processing
ovegeIablesandruiIs
lnvesI in medium Io largescale
indusIriesIoprocessagroproducIs.
ThiswillgivegoodmarkeIpricesIo
armersandreducewasIe
Need or eicienI and cosI
eecIivesolidwasIeIreaImenIand
managemenIprograms
WasIeIoenergy planI relying on
agrowasIeandresidues
Clean DevelopmenI Mechanism
(CDM)projecIonlargescale
meIhanereducIionromagrowasIe
LsIablishmenI o new indusIrial
esIaIes
Seed packing, processing, and
canningooodproducIs
Organic arming pracIices
composIingpaddysIraw,eIc.
lnIroducIion o modern, ecoriendly
IechnologiesinagroproducI
processing
lnIroducIion o vegeIable and ruiI
preservaIionIechniques
LnvironmenIallyriendly business
pracIicesinagriculIurewasIe
managemenI
lnrasIrucIure developmenI
Module 3a
Table 3a.3: SWOP Analysis of the Dambulla Agro-Industrial Cluster
Fig.3a.9: Production Process of Desiccated Coconut
Source:AuIhors.
38
Annex II:
Strategies That Work: Environmental Performance of
Worksheet
On compleIion o Ihis exercise you will be in a posiIion Io undersIand whaI
environmenIal perormance should comprise o. You will be able Io appreciaIe
how currenI approaches have Io be shiIed Io ensure improved environmenIal
perormance.
YouareleadingaIeammadeupoapolicymaker,arepresenIaIiveromalocal
communiIybasedorganizaIion,andarepresenIaIiveoasmallindusIryassociaIion.
TheclusIeremployshundredsolocalpeople.ligureJa.9explainsIheprocesso
producingdesiccaIedcoconuIsincludingIheinIermediaIeprocessesodehusking
anddeshelling.TheseprocessesproducevariousbyproducIsandwasIe,leaving
scope or reusing Ihe waIer, husk, shell, and oIher maIerials Io produce oIher
producIs in an LlC. The objecIive o Ihe Ieam is Io reporI on Ihe environmenIal
perormance o a CoconuI Processing ClusIer. Your Iask is Io Ihink o ways Io
improve Ihe environmenIal perormance o Ihe LlC Ihrough upsIream resource
eiciencywiIhinIerirmcollaboraIion.ThinkinIermsopoIenIialindusIries(such
as beverage, charcoal, coil iber, and vinegar) in Ihe region Io share Ihe wasIe
byproducIs, inrasIrucIure, and knowledge, eIc.) Io increase Ihe environmenIal
perormance o Ihe clusIer while generaIing mulIiple socioeconomic and
environmenIalbeneiIs.
39
Workshop Duration:
!.Cleaner ProducIion (CP) and endopipe (LoP) Iechnology are Iwo Iypes o
sIraIegiesorpolluIionprevenIion.Provideanexampleoeachandcompare
iIwiIhanLlCapproach.
2.You have seen Ihe case o Nike shoes. Under Ihe businessasusual (8AU)
scenarioallacIorywasIeismovedIoalandillordumpsiIe.TraceIhevalue
chainandlisIIhebusinessesandjobsIhePeuseaShoeschemehascreaIed
comparedwiIh8AUpracIice.
J. WhaI Iype o adminisIraIive, managemenI, and legal Iools are used in your
counIryIoassessIheenvironmenIalperormanceoanindusIrialsecIor?WhaI
isIheleveloimporIancegivenIoSMLsinIheseIools?AndarecumulaIive
eecIsopolluIionconsideredinIheseIools?
Module 3a
40
4.LluenI and discharge sIandards dominaIe environmenIal perormance
assessmenI.JPsPeduce,Peuse,andPecycle,andsusIainableconsumpIion
andproducIionareequallyimporIanIIoimproveenvironmenIalperormance.
Doyouagree?WhaIpolicyinsIrumenIsdoyouIhinkarerequiredIoenhance
environmenIal perormance o clusIers beyond meeIing Ihe polluIion
sIandards?LisIIhebroadsIepsIobeIakenIoassessandimproveenvironmenIal
perormanceoindusIrialclusIers.
5. WhaI Iools will your Ieam use Io assess environmenIal perormance? Are
cumulaIiveeecIsopolluIionconsideredinIheseIools?
6. Considering Ihe poIenIial or LlC ormaIion in Ihe coconuI subsecIor, whaI

couldbeIhepossibleadminisIraIive,inancialandIechnicalissuesyouneedIo
ocuson?PleaseperormaSWOPanalysis.
7.AIerreadingIhecasesIudiespresenIedyourealizeIhaIIhoughIheclusIer
complies wiIh Ihe legislaIion (downsIream polluIion conIrol), Ihere are
problemaIic areas (upsIream resource eiciency) IhaI have Io be addressed.
WhaIwillbeyourrecommendaIions?WhichindusIriescouldusewhaIsorIo
wasIesandIechnologiesIoachieveupsIreamresourceeiciency?
41
8.ln your opinion, should social inclusion in environmenIal perormance
assessmenIoindusIriesoccurasavolunIaryresponseorbesIimulaIedIhrough
policymechanisms?WhaIchangewillyouproposeorincludingsocialaspecIs
inenvironmenIalperormanceassessmenI?DeendyoursIaIemenIwiIhIhree
imporIanIreasons.
9.ConsideringIheexampleoNikesnewrecyclingmodel,pleaseexpressyour
IhoughIsinIheormodosanddonIsregardingavaluechainandlisIIhe
broadsIepsIobeIakenIoimproveenvironmenIalperormanceoIheood
processingclusIerinIhequesIion.

IGES. 2007. Eco-industrial clusters in Urban-Rural Fringe Areas: A Strategic Approach for Integrated
Environmental and Economic Planning. Kobe, Japan: Institute for Global Environmental Strategies Kansai
Center.
Inoguchi, T., E. Newman, and G. Poletto. 1999. Cities and the Environment: New Approaches for Eco-Cities.
Tokyo: United Nations University.
Nelson L., and R. Nemerow. 2010. Zero Pollution for Industries: Waste Minimization through Industrial
Complexes. Hoboken, NJ: Wiley Interscience.
Saeed P., and B.H. Copley. 2007. Industrial Innovation and Environmental Regulation: Developing Workable
Solutions. Tokyo: United Nations University.
Shi, H. 1998. Eco Investment Promotion for Environmentally Sound Technology for Taihu Basin. Environmentally
Sound Technology in China Newsletter 2(3): 17
UNEP. 2000. Cleaner Production at Pulp and Paper Mills: A Guidance Manual. United Nations Environment
Program. Energy and Environmental Indicators in Thai Textile Industries: UTS, Australia and SERD, AIT
Environmental Management in the Pulp and Paper Industry. Technical Report No. 34. UNEP, IE. Industry
Environmental Compliance. Technical Report Series No.36. Nairobi: UNEP, Vienna: UNIDO.
UNIDO. 1998. Audit and Reduction Manual for Industrial Emissions and Wastes. Technical Report Series No.7.
Vienna: United Nations Industrial Development Organization.
Module 3a
42
Module 3b: Social Capital Creation
in Eco-Industrial Clusters
3.b.1 Key Concepts: Social Capital
Social capiIal represenIs one o Ihe mosI powerul meIaphors o ecoindusIrial
clusIers.8roadlyundersIoodasreerringIoIhecommuniIyrelaIionshipsIhaIaecI
irmlevelinIeracIions,socialcapiIalhasbeenusedIoexplainanimmenserangeo
phenomena,romsharingoIechnologyandinancialresourcesIoIhemarkeIing
successoLlCs.WiIhinanLlC,wellesIablishedsocialneIworksbeIweenclusIers,
local governmenIs, insIiIuIions, local communiIies, and knowledge insIiIuIes
greaIlyaciliIaIecollaboraIionanddiusiononewIechnologieswiIhinIhegreaIer
communiIy. lI also reduces Ihe IransacIion cosIs and increases Ihe diusion o
Iechnologies.lromapracIicalpoinIoview,Ihreemainunderlyingideasosocial
capiIalcanbedisIinguishedIhaIhelpLlCormulaIion,whichverymuchdepends
oninIerirmneIworks.SocialcapiIalgeneraIesposiIiveexIernaliIiesormember
irmsoecoindusIrialclusIers,andIheseexIernaliIiesareachievedIhroughshared
IrusI, communiIy norms, environmenIal values, and Iheir consequenI eecIs on
expecIaIionsandbehavioroindividualirms.SharedIrusI,norms,andvaluesarise
rominormalormsoorganizaIionsbasedonsocialneIworksandassociaIions
wiIhinanLlC.
SocialcapiIalprovidesapolicyalIernaIive.CommuniIyclubsormedwiIhinLlCsor
macroeconomicpurposeshaveleaders.lnIheabsenceopublicgoodprovision
bypolicymakers,IheseleadersdecideIomobilizeclubmembersIoprovidemissing
environmenIal public goods. The diusion o environmenIal Iechnologies across
irmsalsobeneiIsromsocialcapiIalcreaIionandLlCasawhole,andincreases
Iheir environmenIal perormances Ihrough conversion o wasIe Io energy,
wasIewaIerIreaImenI,anduseorenewablemaIerials.
3.b.2 When Social Capital Matters for an Eco-Industrial Cluster?
Lcoeiciency o a clusIer is a combinaIion o economic and environmenIal
perormance. The need or social capiIal Io have an impacI on ecoeiciency
arises or a varieIy o reasons including exIernaliIies and ree riding, imperecI
inormaIionandenorcemenI,imperecIcompeIiIion,andIhelike.lorsocialcapiIal
Io be beneicial, iI musI Ihereore resolve or compensaIe or one o Ihe sources
o ineiciency wiIhin Ihe LlC. ln Ihe case o ineiciency or Ihe absence o Ihe
publicsecIor,socialcapiIalprovidesaleadershiporcoordinaIionrole.SocialcapiIal
improvesecoeiciencyoindusIrialclusIersIhroughanumberochannels.MosI
oIhechannelsallinIooneoracombinaIionoIheollowingIhreecaIegories:
(i) lnormaIionsharing,
(ii) GroupidenIiIyorabrandvalue,and
(iii)LxpliciIcoordinaIion.
Social capiIal may be iniIiaIed wiIh Ihe inIenI o acquiring a speciic price
or inormaIion sharing. ln IhaI case, Iranser o inormaIion is Ihe purpose o
Fig.3b.1: Knowledge and Technology Integration Brought by Social Capital
Source:AnbumozhieIal.(2008).
43
socializaIion. 8ecause inIeracIing wiIh oIher irms is also a consumpIion good,
collecIing inormaIion Ihrough social capiIal creaIion becomes a kind o subsidy
relaIiveIoexpliciIlyorganizedmarkeIbasedormsoinormaIioncollecIion.Under
agroupidenIiIy,modiicaIionopreerencesorselecIedworksoccursasindividual
irms preerences and choices occur dierenIly wiIhin Ihe LlC neIworks. Group
idenIiIywiIhinanLlCbringsconsisIencyopreerences.lnveryinormalgroupings
wiIhin an LlC, leadership is essenIial Io alIer individual preerences and eliciI
volunIaryconIribuIionsIocommongoodssuchassharingowasIeorbeneicial
purposes.WhilesocialcapiIalacceleraIesIhedisseminaIionosIraIegicbusiness
inormaIion,iImayresulIinavoredgroupidenIiicaIionwiIhinIheclusIer,and
henceIheprocessosocialcapiIalcreaIionneedsqualiIyleadershipwiIhinIheLlC
communiIy.PurposeulcoordinaIioncanalsobeobIainedIhroughormalrulesby
adherenceIowhichdecisionsaremadeandwheredevianceispenalized.
3.b.3 Social Capital for Inter-Firm Networks
SocialcapiIalisIhegoodwillIhaIisengenderedbyIheabricosocialrelaIionsin
whichanindividualorairmisembedded,andwhichcanbemobilizedIoaciliIaIe
acIion. ln ecoindusIrial clusIers, such as Ihe one in Maniwa, opporIuniIies or
cooperaIion are creaIed by uninIended spillovers and inIended agreemenIs IhaI
resulI in inIerirm neIworks (ligure J.b.!). 8eneiIs o such inIerirm neIworks
include:
(a) Efficient resource use: Lxchanging maIerials and energy in a muIually
advanIageous manner and sharing access Io knowledge and collaboraIive
neIworks Io inIroduce cleaner producIion pracIices, innovaIion, and eco
producIdevelopmenIarepossibledueIoIhepresenceoinIerirmneIworks.
Module 3b
Social Capital Creation in Eco-Industrial Clusters
Fig.3b.2: Measuring Social Capital in Eco-Industrial Clusters
Source:AuIhors.
44
(b) Eco-innovation: lnIerirm neIworks could also lead Io innovaIion, new
ecoproducIdevelopmenI,anewvaluechain,andmarkeIopporIuniIies.lor
example, Ihe ecoproducI o one irm wiIhin an indusIrial clusIer may have
an imporIanI inluence on Ihe markeIing acIiviIies o oIher irms wiIhin Ihe
clusIer.HelpingbusinessesIobeaparIoadynamicLlCIhaIosIersresource
conservaIion,collaboraIion,andcompeIiIioncouldalsobeusedasavehicle
or improving Ihe overall environmenIal perormance o small and medium
scaleenIerprisesinIhelongrun.
(c) Technology advancement: lor individual companies Io become
environmenIally riendly and economically compeIiIive a range o dierenI
Iechnologies will have Io be available Io Ihem. WellesIablished inIerirm
collaboraIion aciliIaIes diusion o new Iechnologies, as iI leads Io sharing
o inrasIrucIure, and machineries, and Iechnology aciliIies Ihus reducing
IransacIioncosIsandsharingvenIurecosIs.
3.b.4 Approaches for Strengthening Social Capital in Eco-Industrial
Clusters
TheexisIenceosocialcapiIalinanLlCdependsonIheabiliIyoirmsIoassociaIe
wiIheachoIherandIheexIenIIowhichIheirsharednormsandvaluesallowIhem
IosubordinaIeIheirindividualinIeresIsIoIhoseoIheLlCcommuniIy.ligureJ.b.2
showsIheaIIribuIesosocialcapiIalcreaIion.lnIervenIionsIhaImaybuildsocial
capiIalinanLlCincludeprovidingincenIivesIoacIivaIelocalbusinessesandcivic
45
associaIionsorIoacIivaIenewassociaIions,andrequiringorincludingincenIives
or mulIiple orm sponsorship or inIerirm collaboraIion Io share resources,
boIh economic and environmenIal. Local business associaIions as in Ihe case o
Ihe Maniwa indusIrial clusIer, or insIance, also conIribuIe Io Ihe developmenI
Ihe social inrasIrucIure needs Io leverage social capiIal. ln Ihe sIarIup phase o
an environmenIal company, Ihere may be greaIer dependence on social Iies Io
idenIiybusinessparInersbecauseoIhelimiIedexperienceinIhemarkeI.More
esIablishedirmshaveworkedwiIhdierenIbusinessparInersandIhereorecan
relyonpasIexperienceIoobIainneededresources.lnrenewableenergyandwasIe
IoenergysecIors,orexample,smallsIarIupcompanieshaveexIensiveexperience
inIechnologicalinnovaIionbuIoIenlackIheresourcesneededormarkeIingand
disIribuIion possessed by large incumbenIs. Hence, social capiIal may be more
imporIanIorsIarIupirmsIhanorIhoseIhaIareinalaIerphaseodevelopmenI.
lirms are beIIer able Io creaIe knowledge as Ihey can beneiI rom social
relaIionships and knowledge exchange Ihrough Iheir inIeracIions wiIh oIher
companiesinsideIheclusIer.lirmsinclusIersIakeadvanIageohighlevelsocial
capiIal IhaI bonds clusIer members and provides opporIuniIies or inormal
inIeracIion and learning. Compared wiIh irms noI parI o a clusIer, Ihose in
clusIershaveIhesocialinrasIrucIureIhaIkeepsinormaIionlowingconIinually,
sparking new ideas, generaIing neIworks, and encouraging new irm sIarIups.
TheseacIorsmayimproveecoeiciencyoIheclusIerinIermsoinnovaIiveness,
eiciency,sales,qualiIyoecoproducIs,andnewmarkeIopporIuniIies.PelaIions
wiIh suppliers and cusIomers also conIribuIe Io Ihe sIock o social capiIal. This
couldbeaugmenIedbyorganizingsocialevenIsIhaIbringcompanyownersand
employeesIogeIher,IhusimpacIingIhequaliIyoIheirrelaIionshipandinIurnIhe
irmsmarkeIouIcomes.
3.b.5 Case Study: Social Capital Creation and Inter-Firm Networks
The!apanesewoodindusIryclusIerinManiwapresenIedbelowisagoodexample
osocialcapiIalcreaIionIhaIIranslaIedinIoasuccessulecoiniIiaIive.
Maniwa,asmallIownabouI!00kmromOsaka,hasbeenahisIoricalIradecenIer
orwood.loresIlanduseaccounIsor80%oiIsIoIal82,4J5hageographical
area,andlocaleconomicacIiviIiesoIheareaaregeneraIedbyIhevibranIwood
indusIry. The area has J4 Iimber acIories, !6 dry wood acIories, dozens o
urniIure makers, and Iwo major Irade cenIers, eecIively inIeracIing wiIh each
oIherIosharerawmaIerials.ThesewoodindusIriesconIribuIedagrossproducIion
o2,7J0millionyenandemploy!0.J%oIheIoIalworkorceo52,958people,
who are engaged in oresIry, especially lumbering (MLTl 200J). AbouI !42,000
IonsowoodbiomassaregeneraIedannuallyinIheManiwaregion.Thisincludes
wasIeromIherawmaIerialmarkeIandIimberacIories,whichcomprises78,000
Ionsowoodlogs,40,000Ionsochips,and24,000Ionsobark.AnesIimaIed
!0,000IonsowoodremainsinIheoresIsandabouI!,0002,000IonsoiIcan
bereadilyuIilized(ManiwaMunicipaliIy2004).lollowingachangeinIhebiomass
wasIeIreaImenIlawin2002,openincineraIionsareprohibiIedsoIheremaining
wood biomass is leI in Ihe oresI. Huge amounIs o leIover oresI residue are
unaccounIed or, which noI only inhibiI Ihe growIh o Ihe planIaIion buI also
degrade Ihe waIer resources. CreaIing an economically resilienI biomass wasIe
disposalandconversionsysIemhasbecomeachallengeorIhelocalcommuniIy.
Module 3b
Fig.3b.3: Material and Energy Flow in Maniwa Wood Industrial Cluster
Source:AuIhors.
46
As young people were moving Io nearby Osaka or jobs, Ihe challenge or Ihe
local communiIy was Io reviIalize Ihe wood indusIries and reIain employmenI
Ihrough innovaIions such as converIing indusIrial wasIe inIo wealIh. This was
achieved Ihrough Ihe acIive cooperaIion beIween Ihe Iwo oresI associaIions,
Ihe local municipaliIy, and leading irms. AnoIher challenge Io Ihe clusIer was
IheinIroducIionoIheDioxinLawin!998,whichbannedwoodwasIeburning.
MovingIhewasIeIodisposeoiIinlandillsenIailedhighIransacIioncosIs.
lour innovaIive developmenIs in indusIrial neIworking occurred in Ihe Maniwa
woodclusIeroveraiveIosevenyearperiodIoeecIivelyconverIbiomasswasIe
inIoenergyandmaIerialorm:lirsI,powergeneraIionromwoodwasIe,second,
conversionowoodybiomassinIooIhermaIerialsinIheormopelleIsandheaI,
Ihird,abiouelinIerlinkageIhaIIurnswoodcellulosemaIerialinIoeIhanol,and
ourIh,uIilizaIionowoodwasIeasmaIerialorconsIrucIionandoIherdomesIic
purposes. lnIelligenI use o discarded maIerials has also been increasing in Ihe
consIrucIion indusIry. AnoIher company, a manuacIurer o concreIe producIs
sIarIed producing woodbased concreIe. This cascade use o wasIe biomass use
evenIuallyIransormedManiwawoodindusIrialclusIerinIoazeroemissionzone.
ThecrucialcomponenIorinIerirmcooperaIionwasbelievedIobesocialcapiIal
andiIwasbecomingincreasinglyimporIanIIoreIainandaugmenIiI.SocialcapiIal
is inherenIly relaIed Io local communiIy culIure, openness Io new ideas, and
lexibiliIyopermiIIingeasyenIryoirms,localleadership,deliberaIecooperaIion
andjoinIacIionsbyclusIermembersIoidenIiycommonproblems,andindand
implemenI common soluIions. This social capiIal creaIion occurred under Ihe
sIewardship o a group called Ihe 2!sI CenIury Maniwa which was concerned
abouI Ihe uIure o Ihe clusIer. lI perormed Ihe role o a caIalysI, neIworking
andconnecIingManiwaIoIhemarkeIIhroughsymposiumsandseekingalliances.
There were mulIiple sIakeholders: irms, demand side moderaIors (economic
agenIswhocreaIedemandsorenvironmenIalgoods),andcusIomers.
47
ThesupplysidemoderaIorswereencouragedIoshareresourcesandknowledge,
Io ensure eecIive business perormance. Hence, Ihe new business sIraIegy or
localirmshadaclusIerocus,indirecIlylinkinglocalresidenIsIojobs,andcreaIing
newsupplychainrelaIionships,soIhaIproducIscouldbesoldouIsideIheregion.
SocialcapiIalcouldbebysIimulaIedorsupporIedbypolicyinIervenIionsIoo.ln
Maniwa,iIwasIheDioxinLawIhaIorcedIheclusIerIobeinnovaIiveconsidering
IhepasIpracIiceoincineraIingwoodwasIe.Moreover,IheMinisIryolndusIry
supporIedbyIhe!apanDevelopmenI8ank(!D8)undedSMLsinIheagriculIure
and oresIry indusIries, Ihe New Lnergy and lndusIrial Technology DevelopmenI
OrganizaIion (NLDO) provided unding or research and developmenI, and Ihe
MinisIry o LducaIion allowed alliances o universiIies wiIh businesses or eco
innovaIions. Okayama PreecIure was made inIo a cusIomer niche markeI Io
supporIecoproducIsproducedandpromoIedIhroughIheManiwaNPOIhrough
IheirLcovision20!0.
3.b.6 Case Study: Social Capital and Marketing of Eco-Products
TheSalemregioninTamilnadu,lndiahousesaround450SMLsIhaIprocesssago
inIosIarchandoIhervalueaddedproducIs.PriorIo!98!,IheseSMLsacedaloI
oproblemsrelaIingIocrediI,markeIing,warehousing,andmodernIechnology,
and,beingsmallandscaIIered,Ihesecompanies,despiIeIheircollecIivesIrengIh,
did noI have a common markeIing sIraIegy, or environmenIal goal. ln an
aIIempIIoovercomesuchdiiculIies,IhesIarchandsagomanuacIuresormed
SAGOSLPVL, The Salem SIarch and Sago ManuacIurers Service lndusIrial
CooperaIiveSocieIy,in!98!.SinceIhenIhebargainingpoweromanuacIurers
has subsIanIially increased in Ierms o markeIing o sIarch producIs and value
addedecoproducIssuchassagocakesorpremiummarkeIs.CooperaIiveowned
wasIewaIerIreaImenIplanIsandwasIeIoenergypowerplanIswereenvisagedby
Sagoserve.ThemenaceomiddlemenbeIweenprocessorandprimarywholesaler
has also been eliminaIed, leaving more proiIs or Ihe producers. The ollowing
incenIivesprovidedbyIhegovernmenIhaveplayedaviIalroleinsIrengIheningIhe
ecoacIiviIiesoIhesagosIarchindusIryclusIerinSalem:(i)SIaIeparIicipaIionin
IhesharecapiIalsIrucIureoIheclusIersocieIy,(ii)PeducIionoIhevalueadded
IaxraIerom5%Io!%onsalesoecoproducIsrouIedIhroughSAGOSLPVL,(iii)
CommercialsalesIaxexempIionorgoodssoldIooIhersIaIesouIoIhesIocks
purchased rom Ihe clusIer, (iv) Subsidy or modernizaIion o sago and sIarch
manuacIuring uniIs inIo more ecoriendly ones. Due Io susIained eorIs o Ihe
clusIerbased cooperaIive acIiviIies, Ihe sago indusIry clusIer has become Ihe
backbone o Ihe local economy, providing employmenI or more Ihan 500,000
peopleinIheieldsandinacIories.ln20!!,SAGOSLPVLreceivedIhe8esIPrimary
lndusIrialCooperaIiveSocieIyAwardromIheGovernmenIolndia.
TheexperiencesoIheManiwawoodindusIryclusIerandIheSalemSagolndusIry
clusIerclearlyshowsIheollowing:
a.CreaIionosocialcapiIalwillhelpIoesIablishinIerirmneIworksandaIIracI
enabling Iechnologies. The beneiIs o susIainable developmenI sIraIegies
include eicienI sharing o local resources, improved environmenIal qualiIy,
and equiIable disIribuIion o economic gains. Lnhancing Ihe sIock o social
capiIal or indusIrial neIworking or eecIive uIilizaIion o biomass wasIe
IhroughaninIegraIedpolicyrameworkisapromisingwayIomaximizeIhose
Module 3b
48
beneiIs. lI was becoming clear IhaI inIerirm neIworks could be used as a
mainsIraIegyIomakeclusIersenvironmenIallyriendly,buIhighsocialcapiIal
wasaprecondiIionorIhaI.
b. A ocused business leadership wiIh clear objecIives and good markeI orienIaIion,
basedonaconIinuousconsulIaIionprocess,supporIiveeducaIionalneIworks,
and ouIreach acIiviIies, would promoIe ecoinnovaIions aI clusIer level. The
sIraIegywasIobuildaroundexisIingsocialcapiIalsuchasIrusI,norms,and
neIworks IhaI would bind resources, Iechnology, businesses, and people.
lnvesIing in Ihese asseIs Ihrough inIegraIed policies and linking Ihose Io
broadereconomicobjecIiveswouldcreaIenewcommercialopporIuniIies.This
isapromisingwayIoconnecIdisinvesIedandisolaIedregionsIoIhenaIional
andinIernaIionalmarkeIsinasusIainableway.
c. Social dialogue processes could be used Io enable social capiIal growIh IhaI
would lead Io beIIer environmenIal perormance. There is a social aspecI
IhaI would become Ihe prerequisiIe or oIher acIors Io add value. Paising
awareness o business risks and opporIuniIies, Ihrough irm level dialogue,
wouldimproveboIhenvironmenIalandeconomicperormanceIoreachhigher
levels,whichevenIuallydrivesIheormaIionopolicycommuniIiesandsocial
dialogueswiIhinclusIersandacIorsIoinluencenaIionaldevelopmenIpolicy.
49
Annex III:
Strategies That Work: Social Capital
Worksheet
OncompleIionoIhisexerciseyouwillbeinaposiIionIoundersIandIherelevance
osocialcapiIalorIhesuccessulimplemenIaIionoLcolndusIrialClusIers(LlCs).
YouwillbeableIoidenIiyIhekeydriverspromoIinginIerirmneIworkingandiIs
poIenIialIoraiseIheinnovaIionandcompeIiIivenessoindusIrialclusIers.
You are asked Io lead a mulIisecIor Ieam Io idenIiy, develop, implemenI, and
adminisIeracoupleoSMLclusIerdevelopmenIprojecIs.WorkingwiIhingeneral
policies, principles, and goals o naIional developmenI plans, Ihose clusIers are
supposed Io be high in environmenIal and economic compeIiIiveness. lnIerirm
neIworkswiIhinIheclusIerswillhelpIorealizeIhecommercialvalueoconverIing
wasIeresourcesinIomaIerialandenergyorms.LnvironmenIalsIewardshipand
parIicipaIionbybusinessincommuniIybasedsocialneIworkshaveIhepoIenIialIo
increaseavailabiliIyomarkeIinormaIionorecoproducIsandIolowerIransacIion
cosIs. lmproving Ihe sIock o social capiIal can also allow Ihe clusIer Io reach
higherlevelsocollecIivedecisionsandimplemenIacIionsIogeIher.GovernmenIs
musIdevisesIraIegiesonsocialcapiIalIoworkaIdierenIlevelsIobringbeneiIs,
whichenhanceIheoverallcompeIiIivenessoIheclusIers,secIors,orIheeconomy
as a whole. Considering Ihe example o wood lndusIrial clusIers and biowasIe
generaIioninManiwa,!apan,pleaseproposesIraIegiesorsocialcapiIalbuilding.
Study Time:
1.5 hours [Workshop45 minutes; Group Discussion45 minutes]
!.PeerringIoIhecasesIudyoIhewoodbasedLlCinManiwa,ourinnovaIive
componenIscanbeidenIiied:
(i) powergeneraIionromwoodwasIe,
(ii) conversionowoodybiomassinIopelleIs,
(iii) 2ndgeneraIioneIhanolproducIionromwoodbiomass,and
(iv) uIilizaIion o wood wasIe consIrucIionessenIial or promoIing indusIrial
clusIersusIainabiliIybyconverIingbiomasswasIeinIopoIenIialenergy
resources.
Module 3b
50
ln your opinion, how did Ihis new maIerial low emerge? How was Ihe
knowledge Iranser conducIed among Ihe irms? WhaI is Ihe conIribuIion
oinIerirmneIworkingIomakingIhemaIeriallowinIoaclosedloopone,
wherezerowasIeisachieved?
2. Technological proximiIy beIween Ihe irms as well as oIher acIors is possible i

IechnologyoreconomicrelaIedcooperaIioncanbeachievedwiIhouIoneo
IheacIorshavingIoshiIiIsbusinesspaIh.lnIhecasesoIhewoodclusIer
and Sogo ClusIer, suggesI ways Io aciliIaIe social capiIal building Ihrough
inIerirmneIworks.
J.LocalcommuniIyneIworksplayanessenIialroleinIheeconomic,social,and
environmenIaldevelopmenIoLlCs.HowdolocalcommuniIybasedacIions
promoIecooperaIionamongpolicymakersandinnovaIion?
51
4.lnIerirmneIworksosIercapabiliIywiIhinSMLsandsupporIaseIounique
skillsandresourcesIhaIenhanceclusIercompeIiIivenessinIheglobalmarkeI.
WhichareIhedrivingacIorsbehindsuchskillsdevelopmenIwiIhinindusIrial
clusIers?
5.AragilesupplychainandmarkeIpricelucIuaIionsareIhemainchallenges
oIheLlCinManiwa.WhichsIraIegiesshouldbeimplemenIedIominimize
lucIuaIionsinmaIeriallows?WhaIisIheroleosocialcapiIalinpromoIing
consIanIinpuImaIeriallowsandsIablemarkeIprices?
6. AseIoacIorsincludinglocaIiondeIerminesIhesuccessoLlCimplemenIaIion.
LocaIing in rural ringe areas Iends Io provide several beneiIs. lrom Ihe
viewpoinIosocialcapiIalcreaIion,whyareIheseareascompeIiIive?Howdo
IheypromoIesocialcapiIalneIworking?
Module 3b
52
7.AlackoinIegraIedpoliciesbysecIorialminisIriesandIheabsenceomacro
levelpolicycoordinaIionareIwomainweaknessesconsIrainingIheevoluIion
oLlCs.HowcansocialcapiIalcreaIionminimizesuchshorIcomings?
8.TaxexempIionshavebeenwidelydiscussedamongpolicymakersasaneecIive
IoolIopromoIeecoproducImarkeIcompeIiIion.TheSogoclusIerbeneiIIed
romIhaIpolicychoice.ThebiomassbasedLlCinManiwaobIainedconcreIe
beneiIsromgreenIaxesasiIincreasedIhecompeIiIivenessoecoproducIs
andIhedemandorgreenproducIs.DoyoubelieveIhissIraIegyiseecIive
IopromoIeLlCs?lso,sIaIeyourargumenIs.WhaIisIheroleosocialcapiIal
orIhesuccessoIhiskindoiscalincenIives?
9. lI is generally accepIed IhaI social capiIal creaIion is one o Ihe pillars

Io Iransorm SMLs inIo LcolndusIrial ClusIers (LlCs) and Io promoIe
environmenIally riendly regional developmenI. 8uI social capiIal is a broad
andambiguousconcepI.WhaIdoyouconsidersocialcapiIalIobeandwhyis
iIimporIanIorLlCdevelopmenI?
53
Anbumozhi, V. 2005. Integration of Sustainable Systems for Agro-Eco-Industry Development in Rural Areas.
International Study Meeting on Sustainable Rural Development and Employment Generation in Rural Areas.
Asian Productivity Organization. Hyderabad, India. 2630 April.
Das Gupta, P., and I. Serageldin. 2000. Social Capital: A Multifaceted Perspective. Washington, DC: The World
Bank.
Fukuyama, F. 2002. Social Capital and Development: The Coming Agenda. SAIS Review XXII(1) (WinterSpring
2002): 2337.
Heller, P. 1996. Social Capital as a Product of Class Mobilization and State Intervention: Industrial Workers in
Kerala. World Development 24(6): 1,05571.
Kaushal, K. 2009. Pivotal Role of Sagoserve in Growth of Tapioca based industry in Salem Region of India.
National Conference on Industrial Clusters. Bangalore.
Maniwa Municipality. 2004. Integrated Industrial Development for Maniwa (in Japanese).
METI. 2003. Central Region Industrial Promotion and Marketing Survey of Maniwa Region, Okayama. Tokyo:
Ministry of Economy, Trade and Industry (in Japanese).
Nakashima, K. 2006. Eco-industrial Clusters Leading to Sustainable Local Development of Asia. Proceeding
of the Business and Environment Workshop. Institute for Global Environmental Strategies. Kansai Research
Center. Kobe. 26 October.
Shibusawa, K. 2006. Eco-industrial Clusters Leading to Sustainable Local development of Asia. Proceedings
of the Business and Environment Workshop. Institute for Global Environmental Strategies. Kansai Research
Center. Kobe. 26 October.
Woolclock, M., and D. Narayan. 2001. Social Capital: Implications for Development Theory, Research and
Policy. World Bank Research Observer 15(2): 149.
Module 3b
54
Module 3c: Technological Advancement for
Technological advancemenI or LlC IransormaIion is Ihe deploymenI o cosI
eecIive ecoeicienI Iechnologies IhaI aciliIaIe susIainable indusIrializaIion
in Ierms o compeIiIive regional economy and improvemenI o resource use,
where such as sysIem change helps Io reduce resource consumpIion and wasIe
generaIion.
3.c.1 Key Concepts
LcoIechnologicalinnovaIionisaIoolIoconverIresourcesinIoproducIs,preerably
byopIimizingconsumpIionomaIerialandenergy,processingIheminIoausable
ormandeliminaIingwasIeromIheprocess.
Pecognizing and undersIanding Ihe paIIerns o energy and maIerial low o
indusIriesisimperaIiveorIhedevelopmenIoecoindusIrialclusIers.lnparIicular,
indusIrialclusIersareimporIanIorIheecoresIrucIuringoindusIries.ConIinuous
environmenIal improvemenI is a cornersIone o ecoindusIrial developmenI,
requiring Ihe advancemenI o ecoIechnologies. LcoIechnologies converI wasIe
inIo useul producIs and changes in Ihe processing Iechnology conIribuIe Io
greaIerresourceeiciencybyopIimizingIheresourceinpuIandminimizaIiono
wasIeproducedasbyproducIs.PesearchanddevelopmenIcanresulIinnewways
orbusinessesIoreinewasIeIobeosuicienIqualiIyIobecomeaninpuI.As
Desrochers(2000:!J)sIaIes,8ecauseoIechnicalinnovaIion,IhemarkeIprocess
isinconIinuallux.OldproducIsandmarkeIsdisappear,whilenewonesemerge
andmakecreaIiveuseowhaIwereunIilIhenwasIeproducIs.
TheIransormaIionromconvenIionalindusIrialclusIersIoecoindusIrialclusIers
is ineviIably accompanied by a shiI Iowards modern Iechnology. Technological
innovaIionisessenIialwhenshiIingromunsusIainablemassproducIionsysIems
Io ecoIechnology processes. LlCs require a range o green Iechnologies IhaI
noI only osIer resources recovery and reduce wasIe lows, buI also incorporaIe
indigenous knowledge and local conIexI when adapIing new Iechnologies in
speciicregions.
MosI Asian SML clusIers use inIermediaIe or primiIive Iechnologies or Iheir
producIion processes. Since appropriaIe Iechnologies are noI readily available,
environmenIally riendly Iechnologies need Io be Iranserred beIween irms in
oIherregionsorinIernaIionallyinIroduced.PromoIingIechnologyIranserisnoIa
simpleIask.ThedegreeosuccessismeasuredIhroughappropriaIechoiceoIhe
Iechnology, capaciIy building, suicienI knowledge Iranser, adequaIe Iraining,
policyinIervenIion,andcommuniIyparIicipaIion.
The choice o Ihe Iechnology depends on various acIors such as aordabiliIy,
availabiliIy, accessibiliIy, and Ihe need o LlCs Io move up Io Ihe nexI level o
sophisIicaIion,wherezerowasIeisachievedandeconomicgainsareullyaIIained.
Choosing Ihe righI Iechnology has Io be done judiciously wiIhouI creaIing
Fig.3c.1: Factors Influencing Technological Advancement
Source:AuIhors.
55
disIurbances Io Ihe presenI sysIem. Transer and managemenI o appropriaIe
Iechnology deIermine Ihe success o an ecoindusIrial clusIer. Diusion o
appropriaIeIechnologiesmaybeaciliIaIedbyindependenIenIiIiesIhaIpromoIe
knowledge Iranser beIween irms and sIimulaIe IrusIul relaIionships among
members.
TheollowingacIorsaecIIhediusionoenvironmenIallyappropriaIeIechnology:
(i) CreaIing awareness o Ihe mulIiple beneiIs o green Iechnologies and
encouragingclusIerlevelparIicipaIionisairsIsIepIowardsIechnologyIranser
(8ox Jc.!). This includes educaIing clusIer irms in planning, mainIenance,
inance,moniIoringacIiviIies,andsharingideasIomakedecisionsandIoIake
responsibiliIy.
Box 3c.1: Eco-Industrial Cluster Transformation
AsuccessulecoindusIrialclusIerIransormaIionrequiresIheollowing:
!)lnIegraIioninIoIhenaIuralsysIembydesigningIheLlCinharmony
wiIhIhelocalecosysIems,
2)MinimizaIionoglobalenvironmenIalimpacIs,
J)lnIroducIionoappropriaIeenergyandwaIersysIemsIomaximize
energy eiciency Ihrough aciliIy rehabiliIaIion, cogeneraIion,
energy cascading, inIerplanI energy lows, and use o renewable
sources,
4)MoniIoringomaIeriallowsandwasIemanagemenIorIhewhole
indusIrialclusIerIoensurepolluIionprevenIion,increaserecycling,
producebyproducIsviaresourceexchangeapproach.
AllIhesesIraIegiesrequireappropriaIeidenIiicaIion,appropriaIion,and
inducIionoIechnologies.
Module 3c
Technological Advancement for Eco-Industrial Cluster Transformation
56
(ii)Training is a widely used Iool Io help achieve LlC objecIives. lor successul
IechnologyIranser,adequaIeIrainingshouldbegivenIoacareullyselecIed
group in Iheir naIive language. Training can be eiIher Iechnical or capaciIy
building where Iechnical Iraining covers operaIional procedures, issues,
moniIoring or evaluaIion o acIiviIies. 8eore embarking on inIernaIional
IechnologyIranser,plannersshouldacquirelocalandindigenousknowledge
oaparIicularregion.
(iii)SelecIionocorrecIIechnologyIranserisamajorchallengeacedinclusIers
locaIed in rural areas (ligure Jc.!). DomesIic or IradiIional Iechnologies can
reach Ihe communiIies asIer Ihan inIroducing a modern and IoIally new
Iechnology. These Iechnologies can be easily implemenIed as iI requires only
indigenous knowledge and ewer resources. ln acI, inIernaIional Iechnology
IranserneedsIobecareullyadapIedorsuccessullocalimplemenIaIion.All
inIervenienIsIakeholders,includinglocalgovernmenIandlocalcommuniIies,
should be involved and social and culIural acIors should be Iaken inIo
consideraIion. However, Ihe basic characIerisIics o a communiIy, such as iIs
skills and human behavior, social and culIural acIors, liesIyle o Ihe people,
and environmenIal awareness among communiIies are some o Ihe social
acIorswhichpresenIbarriersIoIechnologyIranserinanyregion.
(iv)PegulaIory policies are anoIher Iool Io conIrol and encourage Iechnology
Iranserandirequired,IheregulaIions,incenIivesysIems,andIaxprocedures
should be modiied Io aciliIaIe Ihe inIroducIion o innovaIive Iechnology.
TargeIed policy inIervenIions will deIermine Ihe qualiIy o Ihe environmenI
IhroughIechnologicalinnovaIion.
3.c.2 Case Studies
3.c.2.1 Industrial Cluster in Chachoengsao Province, Thailand
WeuseIhecaseexampleoasuccessulLlClaunchedinChachoengsao,Thailand
Io show Ihe imporIance o Iechnology Iranser aI dierenI levels or successul
IransormaIion Io an ecoindusIrial clusIer. This LlC is relaIed Io rice indusIries,
smallpowerproducers,andlivesIockholders(ligureJc.2).
ChachoengsaoProvincelocaIedIoIheeasIo8angkok,Thailand,isprimarilyan
agriculIural area wiIh vasI lands devoIed Io culIivaIion and arming. LivesIock
rearing, especially o pigs and poulIry, is a supplemenIary source o income or
many amilies in Ihis region. ln recenI years, Thailand has venIured inIo new
markeIs relaIed Io ood processing or exporI, resulIing in greaIer pressure on
agribusinessesIomeeImarkeIdemands.ThishasresulIedinmorerapidresource
consumpIionandpolluIionaIvariouslevelsandinvariousparIsoIheecosysIem.
AgriculIuralresiduesandexcreIaromlivesIockarmsnowposeasevereIhreaIIo
Iheregion.ThepoIenIialousingsuchwasIeasalIernaIiveenergysourcesremains
largelyunIapped.
Fig.3c.2: Components of Chachoengsao Rice Industrial Cluster
Source:AuIhors.
57
lorIhepurposeoillusIraIion,IhemaIeriallowsIarIswiIhpaddyculIivaIionand
proceeds wiIh Ihe sIeps o rice milling, polishing, noodle making, eIc., unIil all
producIsandbyproducIsarecompleIelyuIilized.Similarly,IhepiggeryandpoulIry
secIors,whichaIirsIglancedonoIseemIohavealinkagewiIhIheagriculIure
secIor,arealsoconnecIedIhroughviIalmaIeriallows.
TheollowingIechnologiesareessenIialorIheIransormaIionoaclusIerinIoan
ecoindusIrialclusIer.
3.c.2.2 Rice Industries
ldeally, Ihese agriculIural residues, paddy sIraw, and rice husks would be used
IogeneraIeelecIriciIyorinhouseconsumpIionororexporIingIoIheregional
powergrid.lorexample,Ihe!5M!/kgenergypoIenIialoricesIrawisusedor
IhermalenergygeneraIionaIlowerIhermaleiciency.ThiscouldbemoreeicienIly
usedIogeneraIeelecIriciIyandsavecosIsonpowergeneraIedromossiluelsin
addiIionIoIheenvironmenIalbeneiIs.
Box 3c.2: Present Condition of Industrial Cluster in Chachoengsao
Province, Thailand
ThemissingorweakerparIoIheecoindusIrialneIworkisIhelackoproducIive
or besI use o Ihe maIerials presenIly discarded as wasIe or Ihose used in a
relaIivelyineicienImanner.
Pice husk is mosIly used or heaI generaIion using primiIive Iechnologies
resulIinginpoorIhermaleiciencyandlesserecoeiciencyomaIerial.
Ash resulIing rom combusIion is oIen disposed haphazardly or in some
casesusedorsoilenrichmenIinagriculIuralields.
8oIh piggeries and poulIry arms generaIe enormous quanIiIies o wasIe
IhaIhaveasigniicanIpoIenIialvalue,whichinmosIcasesiseiIherIoIallyor
parIiallyunrecognizedasaordableIechnologyIoconverIiIisnoIavailable.
LnvironmenIal awareness and legislaIion Io Iackle environmenIal polluIion
(seIIing o sIandards) have advanced considerably in recenI years, buI
enorcemenIislagging.
Module 3c
Fig.3c.3: Components of Chachoengsao Rice Eco-Industrial Cluster
Source:lGLS(2007).
58
TheenergyrequiredorIhericemillcanbeobIainedromIheuIilizaIionoIhe
husks.lnmanyricemills,huskisburnedinurnaceswiIhlowIhermaleiciency
leavingblackashohighunburnIcarbon.AssumingIhaIallricehusksareuIilized
orpowergeneraIion,andIheoreIicallyoneKWhoenergycanbeproducedrom
2kgoricehusk,IhepoIenIialissoconsiderableIhaIricehuskcannoIbepuIIo
anyoIheruse
NeverIheless, a consisIenI and sIable supply o paddy or milling and rice sIraw
isessenIialIoesIablishandoperaIeIheelecIriciIygeneraIionsysIem.Thesizeo
anindividualmillandiIssupplychainarekeyacIorsindeIerminingIheeasibiliIy
ogeneraIingsuicienIpower.AIIhesameIime,IhereisaneedIoanalyzeIhe
available Iechnologies, and selecI Ihe appropriaIe one Io meeI local condiIions,
wiIhIheassociaIedIechnologyIranserrequiremenIs(8oxesJc.2,Jc.JandJc.4)
Box 3c.3: What Are the Reasons for Improper Resource Use and
Waste Disposal in This Industrial Cluster?
LackoawarenessoreusepossibiliIiesandalIernaIiveuseomaIerials.
ThelaIenIvalueosuchdiscardedmaIerialsisoIenunknownorunrealized.
LackoawarenessobesIpossibleuseomaIerials.
lnsomecases,evenIhoughmaIerialsarereusedandrecycled,IhisisnoI
doneinIhebesIpossibleway.
59
Box 3c.4: Rice Husk and Energy?
AIonoricehusksconIainsIhesameenergyas4!5liIersopeIrolorJ78liIers
okerosene.AewhandulsoricehuskscanboilwaIerin6Io9minuIes.
8esIoall,Ihericehusksareusuallyavailablereeochargeromarmsor
wasIe dumps IhaI surround rice mills and iI is more eicienI Ihan using
ordinaryburners.Also,iIreducesgreenhousegasemissionsandeliminaIes
IoxicumesinsidedomesIichomes.LvenIhecharleIaIerburningcanbe
recycledIouseaserIilizerorbiocoalbriqueIIes.
Source:www.oilgae.com.
Box 3c.5: Technology Leapfrogging
GeneraIing ideas8asic researchPaIenIing8ench scale IesIingPiloI
scale
TesIinglieldIesIingCommercialdevelopmenIoIechnology
Commerciallydeveloped IechnologyTranserred, wiIh appropriaIe
adopIionsormodiicaIions,implemenIed,andesIablishedinoIhercounIries
viaIechnologyIranser
Example: Polymer Lnergy SysIem, Poland is a very wellknown Luropean
company or Iurning wasIe plasIics inIo renewable energy. This well
esIablishedIechnologywasIranserredIoPayongmunicipaliIy,Thailandvia
NorIhSouIhIranserIosolveIheproblemoplasIicwasIesinlandillswiIh
IhebeneiIogeneraIingliquidoil.
3.c.2.3 Rice Processing Units
All o Ihe processes Io produce rice producIs in Ihese indusIries require large
quanIiIiesowaIer.WasIewaIersIreamsgeneraIedaIvarioussIagesoprocessing
conIainlargeamounIsosIarchIhaIhavebeendissolvediniI.AlmosIallindusIries
inIhesIudyregionsimplydiscardIhesIarchladenwasIewaIerinIheirbackyards
or in nearby waIer bodies. SIarch, Iypically conIains high concenIraIions o
carbohydraIesandisorganicinnaIureIhusimparIingveryhigh8iologicalOxygen
Demand(8OD).LssenIialIechnologiesorriceprocessingindusIriesincluderecovery
osIarchromwasIewaIerand(or)anaerobicdigesIionsysIemsIoexIracIbiogas.
3.c.2.4 Piggery and Poultry
ThepiggeriesoIhesIudyregionarepredominanIlyownedandoperaIedaIIhe
amily level, meaning Ihere is liIIle room or Iechnological advancemenIs due Io
inancialconsIrainIs.However,IheenvironmenIalissuesarisingromIhesesecIors
are so serious IhaI Ihey cannoI be ignored. Technologies have been consIanIly
evolvingIoprovidelowcosIandeicienIsoluIionsorsolvingIhewasIedisposal
concerns o Ihe piggery secIor. lnIegraIion o wasIe handling and IreaImenI
sysIemsinIhebusinessmodelsisessenIialIoensureenvironmenIalandeconomic
susIainabiliIy.
Module 3c
60
Unlike Ihe piggeries, environmenIal issues arising rom poulIries are conined Io
Ihearm.TheopendumpingopoulIryliIIerreleaseshugeamounIsomeIhane
due Io unconIrolled decomposiIion. Technologies or highraIe biomeIhanaIion
areessenIialIorecoverresourcesromIhissocalledwasIe.
Anaerobic digesIion o piggery/poulIry wasIe has been widely Iried and IesIed
inmanycounIriesacrossIheworld.TheresulIsareposiIiveinmosIoIhecases.
Piggeries/poulIry arms in Chachoengsao need Io be amiliarized wiIh Ihis
Iechnology as a means o reducing cosI Ihrough engagemenI in Ihe parallel
businessesoelecIriciIygeneraIionrombiogasgeneraIedinanaerobicdigesIers.
ThedigesIaIeandresidueresulIingromIhedigesIionprocesshaveapoIenIialIo
beusedasorganicerIilizerinagriculIuralields.
Considering Ihe presenI economic (new business opporIuniIies, manuacIuring
eiciency) environmenIal (resource conservaIion, resource eiciency), and
social issues (employmenI, poverIy alleviaIion) acing Ihe province, Iranserring
appropriaIeIechnologyisclearlyneededIomaximizeIhesusIainabiliIypoIenIials
oIheclusIer.
3.c.3 Key Learning Points
TheneedIoshiIIoappropriaIeIechnologieshasnoIyeIbeenelIbyenIrepreneurs.
AlackoappropriaIeIechnologiesprevenIsullresourcesrecoveryandullreuse
beIweenIheexisIingneIworks.MosIoIhesmallandmicrobusinessuniIsinIhe
regionaredrivenbyrawmaIerialavailabiliIyandincomegeneraIionraIherIhan
a drive Io geI new business or ind new markeIs. The local conIexI needs Io be
Iaken inIo accounI when choosing Ihe appropriaIe Iechnology, which could be
oindigenousorigin.lnIhecaseoThailand,paddysIrawmushroomculIivaIion
could be promoIed. Paddy sIraw mushrooms are grown on paddy sIraw beds
andpickedbeoreIheyaremaIure,i.e.,beoreIhecapsoIhemushroomsopen.
NewemploymenIamongIheruralpopulaIioninChachoengsaoProvincecanbe
creaIedIhroughculIivaIionopaddysIrawmushrooms.Moreover,IhewasIerom
pigarmsandpoulIryarmscanbeuIilizedorcomposIingandbiogasproducIion
applying lowcosI and eicienI Iechnology soluIions. The need or knowledge
andskillsIranserisanimporIanIaspecIhere.lorexample,inIheChachoengsao
ProvinceclusIer,someindusIriesusesmallmachinesIoseparaIericeandricehusk
whereasoIherindusIriesusemanual,IradiIionalmeIhods.AknowledgeIranser
beIween indusIries and irms is required, buI Ihis does noI occur easily due Io
compeIiIion among similar indusIries. The Chachoengsao indusIrial clusIer is an
oIherwise successul example o an LlC, which wiIh Iechnological advancemenI
canbeIransormedinIoanevenbeIIerLlC(8oxesJc.6,Jc.7,andJc.8).
Box 3c.6: What Are Possible Technologies That Could Be Used to
Treat the Wastewater?
AerobicdigesIion
AdsorpIion
CoagulaIion
AquaIicweedsbasedmeIhods
ThiswasIewaIercanbereusedbackinIhericemillsorparboilingIoconserve
waIersourcesinIhearea.
61
3.c.4 Technology Transfer Models
Technology Iranser can be divided inIo Iwo Iypes o modelsverIical and
horizonIalas shown in ligure Jc.4. The verIical Iranser model shows Ihe
Iechnology Iranser wiIhin a counIry undergoing various sIeps rom research
Io commercializaIion. The horizonIal Iranser model depicIs Ihe Iranser o
IechnologybeIweenIwocounIries,whichcanbedoneromadvancedeconomies
Io developing economies or beIween developing counIries Ihrough agreemenIs.
VerIical Iechnology Iranser Iakes place when Iwo counIries work IogeIher or
developinganewIechnologyormodiyingIosuiIIhepurpose.
Box 3c.7: What Are Benefits of Anaerobic Digestion?
TechnicallyeasibleIoconverIorganicwasIeinIopipelinequaliIyuelgas
CapableoproducingreinedcomposI
AvoidsmeIhaneenIeringIheaImosphere
LowerooIprinIrequiremenI
Box: 3c.8: Green Jobs in Recycling IndustriesA Reality?
PecyclingindusIriesconIinueIogrowinimporIanceanddemandorgreen
jobsisincreasingaccordingly.WasIemanagemenIhasIhepoIenIialIocreaIe
jobsorvarioussecIorsbasedonIheneedsoIheorganizaIion.lorinsIance,
a recycling aciliIy would need supervisors, coordinaIors, environmenIal
specialisIs, wasIe collecIors, wasIe engineers, specialisIs, and laborers or
operaIing Ihe planI. When a recycling indusIry, such as an LlC emerges in
a localiIy, iI is expecIed Io creaIe green jobs or Ihe people in Ihe nearby
communiIies.ThisisconsideredIobeoneoIhemajorsocialbeneiIsoIhe
recyclingaciliIy.SomeIimes,IhisisnoIIhecaseoravarieIyoreasons,such
asIheneedorskilledIechnicians,whoarenoIreadilyavailableinIheviciniIy
o Ihe aciliIy. While LlC can creaIe green jobs, adequaIe saeIy measures
shouldbeIakenIoproIecIemployees,soIhaIIhegreenjobsalsobecome
saeandhealIhyones.
Developing counIries have no clear policies or Iax incenIives Io induce Ihe
privaIe secIor Io creaIe green jobs. CurrenIly, Ihere is a lack o knowledge
abouIandcapaciIyorgreenjobsdueIopoorneIworkingandcommunicaIion
beIween public and privaIe bodies. Moreover, inancial supporI or Ihe
esIablishmenIosuchaciliIiesisnoIreadilyavailable.
Module 3c
Fig.3c.4: Technology Transfer Model
Source:AuIhors.
62
Example of Vertical TransferA Case Example from Bangladesh
Like any developing Asian counIry, 8angladesh was conronIed wiIh a major
challengedueIoincreasingwasIegeneraIioninkeysecIorssuchasgarmenIsand
ishprocessing,whereclusIeredacIiviIiesarecommon.ThewasIecharacIerisIics
wereIypicaloanAsiandevelopingcounIry:70%80%oIhewasIegeneraIedis
organicandcollecIionservicesarepoor,coveringonly50%70%oresidenIs.The
lackoavailabiliIyolandorwasIedisposalwasbecomingamajorconcern.
ln!995,WasIeConcern,aresearchbasednongovernmenIalorganizaIionIookIhe
iniIiaIiveIosolveIheproblemomunicipalsolidwasIemanagemenIbyinIroducing
communiIybased,decenIralizedcomposIingIechnology.lIsaimwasIoproduce
composI,reducesolidwasIemanagemenIcosIs,reduceGHGemissions,creaIejob
opporIuniIies,improvehealIhandenvironmenIcondiIions,managelandillsbeIIer,
and improve Ihe soil condiIion. The Iechnologys developmenI wenI Ihrough a
rigorous process o modiicaIion Io iI local condiIions, which meanI Ihe enIire
diusionprocessIookalongIimeIoyieldbeneicialresulIs.
Example of Horizontal TransferA Case Example from Sri Lanka
AIerIheesIablishmenIoIhecomposIingaciliIyin8angladeshwiIhprovenresulIs,
IheIechnologywasIranserredIoSriLankaviaSouIhSouIhIranser.SevanaIha,
anNGOgroup,esIablishedacomposIingaciliIycalledMaIaleLnrichedComposI
PrivaIe LimiIed in MaIale municipaliIy. This projecI was also aimed aI Iackling
IheorganicracIionoIhemunicipalsolidwasIe,whichwasdumpedinlandills
wiIhouIsegregaIion.TheIechnologyquicklydiusedandIheprojecIbecamevery
viableinmanyrespecIs.
Fig.3c.5: Windows of Sustainable Resource Use Opportunity
Source:AuIhors.
63
Annex IV:
Strategies That Work: Technological Advancement for
Worksheet
You are parI o a Ieam visiIing a clusIer o SMLs involving dierenI producIs
(PeerIoIheexampleoIheDesiccaIedCoconuIprocessingclusIerinIheprevious
secIion). The clusIer is spread over a large geographical region and has evolved
oversevenyears.NoImuchplanninghasgoneinIoIhedevelopmenIoIhisclusIer.
The clusIer beneiIs rom easy access Io markeIs or iIs producIs. However, ever
increasing globalizaIion has puI in Ihem in a IighI siIuaIion and Ihey are now
orcedIooerproducIsIhaIarecompeIiIivewiIhIheirinIernaIionalcounIerparIs.
The clusIer has an SML associaIion IhaI liaises wiIh service providers, regulaIory
auIhoriIies,andbanksorIheirneeds.TheSMLassociaIionhasrecenIlyrealized
IhaI wasIe managemenI (coconuI waIer, coconuI husks, coconuI shell, wash
waIer)hasbeenoneoIheirmajorcosIs.YeI,IheyarenoIullyequipped,inIerms
oknowledge,experIise,andinance,IoIackleIhesiIuaIion.TheobjecIiveoIhe
IeamisIoidenIiyandchoseIheappropriaIeIechnologiesinIheclusIer,andIo
IackleIheissuesrelaIedIoIechnologyandknowledgeIranser.
Module 3c
64
Workshop Duration:
!.TechnologicaladvancemenIconIribuIesIoresourceconservaIion.Lxplainhow.
2. Technology Iranser includes hardware (equipmenI) and soIware (skills/

knowledge)Iranser.LisIIheacIorsIhaIdeIermineIhesuccessoIechnology
Iranser. Discuss in deIail Ihe mosI imporIanI acIor in Ihe conIexI o your
counIry/region.
J. WhaI could be Ihe poIenIial barriers (socialculIural, economic, and policy)

orIechnologyadvancemenIandknowledgeIranserinLlC?HowcouldIhose
barriersbeconverIedinIosupporIiveacIors?
65
4. SMLs are vehicles o inIegraIed environmenIal and economic growIh. As a
policymaker,howdoyouviewpolicyasacaIalysIoIechnologyIranser?Does
your governmenI have crosscuIIing policies IhaI are proSML, or example
where dierenI minisIries such as Ihe minisIry o indusIry, Ihe minisIry o
commerce,eIc.,inIeracI?
5. CommuniIy parIicipaIion and capaciIy building Io a large exIenI decide Ihe

successoIechnologyIranser.WhaIacIiviIiesshouldbeunderIakenIobuild
socialcapiIalinIechnologyadvancemenI?
6.A clusIerlevel maIerial balance low revealed IhaI Ihe low was linear and
unidirecIional.PleaseIhinkopossiblewaysIouIilizewasIesIreamsgeneraIed
in Ihe desiccaIed coconuI processing indusIry and idenIiy Ihe appropriaIe
Iechnologies or doing so. (Lxample: coconuI shells used or producIion o
charcoal).WhaIshouldbedoneIoimproveIheIechnologyleveloIhisclusIer?
HowcaniIbeexIendedIooIherareasrequiringimprovemenI?
Module 3c
66
7. lI was observed IhaI compeIiIion beIween indusIries hinders Iechnology/
knowledge Iranser wiIhin an LlC. 8ased on your own experience, indicaIe
howIhissiIuaIioncouldbeimproved.
8.TheSMLassociaIionhasrealizedIhaIIhebesIwayIoimprovecompeIiIivenessis
IoidenIiydomesIicindigenousIechnologiesraIherIhanimporIIechnologies.
WhaI sorIs o local Iechnologies and new indusIries could be useul or
improvingIheenvironmenIalperormanceoIheclusIer?
9. lmproved markeI linkages can moIivaIe enIrepreneurs Io invesI in advanced

IechnologiesinIheLlC.SuggesIhowmarkeImechanisms/linkagesorIhenew
producIs (rom Ihe wasIe uIilizaIion o raw desiccaIed coconuI processing
indusIry)canbeimproved?
67
Arthur, B.W. 2009. The Nature of Technology; What It Is, How It Evolves. London: Free Press.
Chalmin P., and C. Gaillochet. 2009. From Waste to Resource: An Abstract of World Waste Survey. Cyclope,
Veolia Environmental Services, Edition Economica.
Desrochers, P. 2000. Eco-Industrial Parks: The Case for Private Planning. Bozeman, Montana: Political Economy
Research Center. Available at: http://www.perc.org/rs1_xsum.htm.
IGES. 2007. Eco-industrial Clusters in Urban-Rural Fringe Areas: A Strategic Approach for Integrated
Environmental and Economic Planning. Institute for Global Environmental Strategies, Kansai Center, Kobe.
Ramanathan, K. 2001. E-strategies for technological capability development, Proceedings of the Portland
International Conference on Management and Technology, 29 July2 August. Portland, US.
Schlarb, M. 2001. Eco-Industrial Development: A Strategy for Building Sustainable Communities. Ithaca, NY:
Cornell University.
Schlie, T.M., A. Radnor, and A. Wad. 1987. Indicators of International Technology Transfer. Centre for the
Interdisciplinary Study of Science and Technology. Evanston, IL: Northwestern University.
United Nations Development Program (UNDP). 2009. Handbook for Conducting Technology Needs Assessment
for Climate Change. New York, NY: United Nations Development Program.
Module 3c
68
Module 3d: Financing Eco-Initiatives in
3.d.1 Key Concepts: Financing Eco-Industrial Clusters
linancingiskeyIosuccessinanykindobusinessandIhekeyIosuccessulLlCsare
soundinancingsIraIegiesIosecureSMLsaccessIoinancialresources.PoIenIial
sources o unding include mainsIream invesImenI companies, local commercial
banks, pension unds, and insurance companies. OIher opIions mighI be large
oundaIions,municipalbondinancing,andsIaIeeconomicdevelopmenIunds.
MunicipaliIies, public and privaIe uIiliIies, and oIher public and privaIe enIiIies
have also supporIed ecoindusIrial developmenI projecIs, in Ihe expecIaIion o
beneiIsromneweconomicdevelopmenI.LackoaccessIoinanceisrequenIly
consideredIobeIhemosIseriousbarrierIoecobusinesssIarIupsorgrowIhby
poIenIialandexisIingSMLoperaIors.
GivenIhelackodevelopmenIoinancialmarkeIsinruralareasandecoacIions
wiIhinclusIersandIhehighrisksinvolvedinlendingIoindusIriesoperaIinginIhe
ruralsecIor,privaIebanksIendIoberelucIanIIogranIloansIonewenIrepreneurs.
NorIhandGianniniSpohn(!999)urIherexpandIheinancialuncerIainIiesraised
inimplemenIingecoindusIrialprojecIs.lnparIicular,inanciersandinvesIorshave
diiculIies assessing risk associaIed wiIh ecoindusIrial acIiviIies, Iypically lisIing
ourprimarypoinIsouncerIainIy:
8usinesses and inanciers are uncerIain how many secondary acIiviIies Ihey
mayberequiredIounderwriIeinorderIoparIicipaIeinanLlC.
LackoprecedenceonwhichIobaseraIesoinancialreIurnslimiIsinvesIor
enIhusiasm.
Concern abouI unique social codes o local communiIies such as collecIive
collaIerals,covenanIs,andresIricIions(e.g.,deedresIricIions).linanciersare
wearyoanyresIricIionsIhaImayimpedeIheirabiliIyIoresellorIransera
properIyshouldIheyreceiveanexpressionoinIeresIoranoer.
As wiIh any poIenIial new irm, exisIing businesses may regard a new LlC
as a compeIiIor and may noI give poliIical supporI or public inancing o
inrasIrucIuredevelopmenI.
3.d.1.1 Death Valley Trap
TheuncerIainIyassociaIedwiIhecoindusIrialprojecIsoIencausesSMLsIoace
inancing problems during Ihe sIarIup deaIh valley, when inancing becomes
parIicularly diiculI. lnnovaIive inancing mechanisms need Io be idenIiied
and made available Io Ihe SMLs Io overcome Ihe deaIhvalley. MosIly, Ihis lack
o unds Io sIarI or run a business due Io Ihe inabiliIy o Ihe enIrepreneurs Io
arIiculaIe and presenI ideas Io appropriaIe inanciers, Iheir ailure Io aIIracI
enough cusIomers, or poor managemenI o inances. NeverIheless, Ihere is a
Fig.3d.1: Stages of Lending for an Eco-Initiative
Source:AuIhors.
69
widegapbeIweenIheexisIinginancialinIermediaIionrameworks(assumpIions,
approaches, meIhodologies, regulaIions, and ouIreach) and Ihe realiIy o SMLs.
lormal inancial insIiIuIions and regulaIions require proessionally prepared loan
proposals presenIed by credible, ormally licensed and Iraceable applicanIs and
backedbyrecordedbusinesshisIoryandcollaIeral.TherealiIyoSMLclusIersis
dierenI: mosI are exIralegal, ew appreciaIe Ihe need Io keep records or build
credibiliIy,Iheyhavenolicenses,andIheydonoIhavecollaIeral,andcannoIaord
or do noI appreciaIe Ihe value o Ihe services o consulIanIs. There is no access
IosIarIupcapiIalromanyormalinancialinsIiIuIion.SoarIhereisnonaIional
idenIiicaIion sysIem, making IraceabiliIy diiculI or impossible in some cases.
TraceabiliIyisalsolimiIedbyIheacIIhaImosIbusinessesoperaIeromisolaIed,
Iemporary,inormalandevenillegalsiIesorpremises.LlCscouldresolveIheissue
o scaIIered businesses as groups o similar businesses are esIablished in one
parIicularareaasaclusIer.Similarly,IheormalinancialinsIiIuIionshavenoIyeI
suicienIlyevolvedIoundersIandandrespondIoIheneedsosmallirms.Their
approachesaremainlymodeledonIheneedsandeaIuresocorporaIeenIiIies.
AlIhoughpolicyinIervenIionsarenecessaryIomakeLlCspossible,mosISMLsail
during Ihe sIarIup deaIh valley. The iniIial challenge is Io geI an engineering
sysIem in place, and Io obIain sIarIup unds. 8uI once Ihe business is up and
running, more esIablished orms o unding are available, including microcrediI
andvenIurecapiIal.OnceIhebusinessesmodelissuccessul,Iheirmsshouldbe
able Io secure bank and capiIal markeI inancing. This suggesIs IhaI Ihe deaIh
valley could be largely overcome by various inancing channels once Ihe irms
achieveacerIainIhresholdlevelooperaIionsIhaIallowsIhemIopushpasIIhe
deaIhvalley,suchasinnovaIivemicroinancingmodels,projecIinancing,non
bankinginancialinsIiIuIions,andIhebankingsecIorsinIeresIinpromoIingsocial
developmenI Ihrough indusIrial clusIers, backed up by governmenI regulaIions.
The Irouble is IhaI Ihe markeI is noI social or environmenIally conscious and
inancingisonlyconcernedwiIhproiI.DierenIIypesobusinessinancingcould
helpIoinIegraIesocialandeconomicobjecIivesoIheirmssuchasgovernmenI
supporIed business unds and venIure capiIal. GovernmenIsupporIed business
undscouldprovideinanceaIalowandsubsidizedinIeresIraIeIosupporIviable
LlCbusiness.SubsidizedundingcanbejusIiiedonIhebasisosocialobjecIives
aswellaseconomicbeneiIsIoIheeconomy.
Module 3d
Financing Eco-Initiatives in Eco-Industrial Clusters
70
VenIurecapiIalplaysanimporIanIroleinIermsohedgingIheriskoinvesImenI
o business acIiviIies in an LlC during Ihe developmenI sIage. During Ihis sIage,
businesses are building up Iheir sales and innovaIive capabiliIies Io susIain
Iheir operaIions. This sIage is marked by greaIer uncerIainIy and risk o ailure.
8usinesseswillberelucIanIIounderIakekeyinnovaIionsdueIohighriskoailure.
VenIurecapiIalisIswillbehelpulinIermsomanagingbusinessriskbydiversiying
businessrisksorIherespecIiveLlCbusinesses.Moreover,venIurecapiIalalsohelps
IoidenIiyviablebusinessandIheirbusinessknowledgewillbeveryuseulIoassisI
businessesinmappingIheuIureinvesImenIsIraIegiesoLlCirms.
3.d.2 Micro-Financing: Bridging the Financial Barriers of Small and
Medium Enterprises
MicroinanceisbecomingincreasinglyimporIanIasameansoinancingSMLs
acIiviIies in an LlC compared wiIh oIher orms o inancing. Microinancing
models, projecI inancing, nonbanking inancial insIiIuIions, and governmenI
regulaIions could help SMLs Io overcome Ihe deaIh valley o sIarIing up and
securemoreesIablishedormsoundingsuchasmicrocrediIandvenIurecapiIal,
and evenIually bank and capiIal markeI inancing when Ihe business becomes
graduallysuccessul.TheproblemwiIhobIainingsuchinnovaIiveinancingisIhaI
markeIs are noI yeI environmenIally conscious, and inancing remains virIually
exclusivelyproiIdriven.However,inIherecenIpasI,increasingnumbersoIhese
insIiIuIionshavebeenexpressinginIeresIinworkingwiIhsmallerirms,drivenby
sIicompeIiIionorIheewcorporaIeclienIsandgoodgrowIhprospecIsinIheSML
secIor.TheyhavebeensIrugglingIolearnanddevelopviablemodelsorreaching
ouIIosmallenIerprisesandmicroenIerprises.CuIIhroaIcompeIiIionorIheew
oicers who have acquired experience in working in Ihis area is commonplace,
inancialserviceprovidersarehesiIanIIoinvesIinhumanresourcesdevelopmenI
becauseIrainedemployeesareoIensnaIchedbycompeIiIors.WheniIcomesIo
LlCinancing,iIalsodependslargelyonhowclusIersorm,wheIherIheyemerge
organicallyorIhroughgovernmenIinducedpolicy.WhenIheyemergeorganically,
moreprivaIe,nonbankinancingopIionsmighIsomeIimesbenecessary.Whereas
commercialbanksareobviouslyproiIorienIed,Iheyarealsoriskaverse,orIendIo
minimizerisks.ThehugecosIinvolved,romacIualizingideasIomakingaviable
producIIhaIsells,isariskIhaIbanksusuallywanIIoavoid.SovenIurecapiIalor
microinancehasalargerroleIoplayhere.
Microinance is innovaIive and could become a workable soluIion in inancing
sIarIups, as iI runs on inormal inance based on social neIworking. Micro
inanceisaairlynew,yeIinnovaIiveapproachIoinancing,buIinIeresIraIesare
usuallyhigherIocompensaIeorIhehigherIransacIioncosIsandIhehigherrisk
involvedinlendingwiIhouIcollaIeral.Microinancingisdrivenbymicroinancing
insIiIuIions(Mll),innovaIivelendingmeIhodologiesIoreachpoorormicroclienIs
wiIhmicroloansorinormalinanceincaseswherebanksarerelucIanIIolend.
The Iypical characIerisIics o microlending are: (a) shorIIerm working capiIal
loans,(b)lendingbasedoncharacIerasopposedIocollaIerals,(c)sequenIialloans
wiIh crediI raIioning, (d) group lending as a mechanism Io subsIiIuIe collaIeral,
(e)simpleloanproceduresquickcashlowanalysisobusinessesandhouseholds,
especiallyorindividualloans,prompIloandisbursemenI()requenIrepaymenI
schedulesIomoniIorborrowers,and(g)higherinIeresIraIesIocoverIhecosIo
lending.ThisusuallyworksIooseIIherisksinIheearlyphaseoinancingsmall
71
andmediumscaleirmsIhaIareideallywiIhinLlCs.8uIIhegovernmenIneedsIo
coordinaIedueIoIheriskomarkeIailureandalsoIoreducedispariIyoincome
andpoverIy.
DuringIhesIarIupperiod,governmenIsusuallyarerequiredIoassumerisks.As
banks and irms are proiIorienIed, iI is largely up Io governmenIs Io promoIe
iniIiaIivesbe iI in Ierms o coordinaIing policy, providing viabiliIy unding, or
subsidizing Iechnology adopIionIo improve environmenIal perormance.
GovernmenIs are crucial in bringing IogeIher all Ihe dierenI insIiIuIions and
sIakeholderssoIhaIIheycanassessIherisksinvolvedandevaluaIeiIheymaywish
Ioprovideinancing.SomegoodexamplesincludeIheProvidingUrbanAmeniIies
in Pural Areas (PUPA) scheme as a developmenI model in Namakkal ecoIown
inlndiaandSarvodayaLconomicLnIerprisesDevelopmenIServices(SLLDS)inSri
Lanka,whichprovidesinancingorsolarlighIing.
3.d.3 The Changing Landscape of Micro-Financing
The microinancing landscape has been undergoing changes, wiIh commercials
banksmakingheadwayinIoIheinancingoIheruralpoorasIhesIrucIureomicro
inancingbecomesmoresIableandmoreproiIable.8anksareslowlyenIeringinIo
IhemicroinancemarkeIIhaIcouldinanceSMLsinanecoclusIer,inIhreeways
inparIicular:IhroughNGOs,IhroughcreaIingspecializedsubsidiarymicroinance
arms,andIhroughexpandingIheirdirecIreachIocoverpoorergroups.Onesuch
exampleislClCl8ank,IhelargesIprivaIebankinlndia.lIsmicroinanceporIolio
hasbeenincreasingaIanimpressivespeed,rom!0,000microinanceclienIsin
200!Io!.2millionclienIsin20!0,servedbyiIsparInermicroinanceinsIiIuIions.
AsaresulI,iIsouIsIandingporIoliohasincreasedromUS$4.5millionIoUS$227
million. There is also an increasing shiI in microinancing rom granIgiving Io
invesImenIs in viable microlevel projecIs. AlIhough Ihere are models IhaI allow
MllsIoborrowrombanksandonlendIheundsIoSMLs,mosIMllsareonly
ableIogrowupIoacerIainsize.MosIMllsarenoIableIomanageIherisko
largecapiIalinvesImenIs,soIheyrelyonIhesIrucIuresprovidedbyprivaIebanks
IoprovidegreaIerdiversiIyorIhevariousIypesoriskinlendingIoSMLs.
TheenIryocommercialbanksinIoIhemicroinancemarkeIhasclearadvanIages
asIheyinIroducemoresIringenIregulaIions(regardinginancialdisclosure,capiIal
adequacy,andinancialprudence),andIheybringinIheirdeposiIoryinsIiIuIions
(moreunds),physicalinrasIrucIure(branchneIwork),andinIernalconIrols(beIIer
adminisIraIiveandaccounIingsysIems).Therameworkusedbycommercialbanks
Io decide on Iheir enIry inIo microinancing and Io evaluaIe Ihe viabiliIy o Ihe
projecIs is given in ligure Jd.2. PrivaIe banks have enIered Ihe microinance
markeIinIheollowingways:
MicroinanceprogramsorNGOshavebeenIransormedinIobanks,
Microinance pracIiIioners have creaIed privaIe banks and specialized micro
inancebanks,
Commercial banks have expanded Iheir business Io reach ouI Io Ihe poorer
groups.
Module 3d
72
Box 3d.1: Serving the UnderservedWhat Makes for Success?
!.CommiImenIromboardandmanagemenI,sIronginIernalchampions,
andalignmenIwiIhIhebankscorecommercialsIraIegy
2. KnowledgeomicroinancebesIpracIicesandhowIoservemicroclienIele
J. lnrasIrucIurelocaIedconvenienIlyorclienIs
4.ProducIsespeciallyadapIedorlowincomeandinormalmarkeIs
5. SysIems and procedures adapIed Io Ihe microinance operaIions, e.g.,
sysIemsIhaIsupporIimmediaIeollowuponmissedpaymenIs
6. AppropriaIe sIa Iraining and incenIives on new clienIs, producIs, and
deliverysysIemsormedinIobanks
Microinance pracIiIioners have creaIed privaIe banks and specialized
microinancebanks
Commercial banks have expanded Iheir business Io reach ouI Io Ihe
poorergroups
8oxJd.!explainsIhecodesodoingbusinesswiIhunderservedmarkeIs.Thereare
severalwaysIhaIallowprivaIebanksIoenIerparInershipswiIhMll.
!.MllacIsasacollecIionagenIinsIeadoainancialinIermediary.lorexample,
lClCl8ankiniIiaIedaparInershipmodelin2002.ThismodelcombinesdebIas
parIoinanceIoMll.
2.PrivaIebankscanenIeraparInershipwiIhMllsbysecuriIizaIionoIhemicro
inance porIolios Ihrough bundling Ihe microinance loans wiIh oIher debI
insIrumenIs.
J.TrainingnewparIners
4.WorkingwiIhvenIurecapiIalisIs
3.d.4 Models of Eco-Industrial Cluster Financing
HerearesomeoIhemicroinancingmodelsexplainedIhaIareinuseandcanbe
usedwhileprivaIecommercialbanksareinvolvedinparInershipwiIhMlls:
FranchisingMlls locaIed in remoIe areas may noI have suicienI inancial
meansIoundecoiniIiaIivesorSMLs(likerenewableenergyIechnologies),and
may also be viewed as noI crediIworIhy by commercial banks. The ranchising
modelcanworkeecIivelyinsuchcases.lnsuchamodel,IheMllprovidesloan
originaIionandadminisIraIionservicesonbehaloIhebankanduncIionswiIhin
a clearly deined ramework. The bank leverages on Ihe Mlls proximiIy Io Ihe
clienIbaseIoreduceIheriskoIheloans.TheloaniscarriedonIhebanksbooks
aloneandeespaidIoIheMllorservicesrenderedarelinkedIodisbursemenIs
andrecoveries.lClClbankinlndiahassuccessullypracIicedIhismodelingeneric
microinanceschemes.
73
Revolving FundsThis is a Iype o und IhaI is esIablished Io inance a cycle
ooperaIionsIhroughamounIsreceivedbyIheund.TheinIeresIincomeoIhe
undscoversIhemanagemenIcosIbydesign.AnumberomembersobIainloans
andpaybackasperIherules,beoreIhenexIseIomembersobIainsloansasIhe
ormergrouppaysiIback.TheundgoesonrevolvingamongIhemembers.
Vendor Financingln Ihis model, Ihe service providers (or insIance energy
service providers) sell Ihe sysIem/Iechnology aciliIy in crediI and collecI regular
insIallmenIsromusers.SuchmodelsareappropriaIeinareaswhereIhepresence
oinancialinsIiIuIionsisnegligible,orwhereIheserviceproviderscoveragearea
is very large. Grameen ShakIi (an energy company in 8angladesh is) an example
oIhis,andiIhassuccessullyinsIalledover!00,000solarhomesysIemsinrural
8angladesh. Vendors adverIise low inIeresI raIes i Ihe vendor proiIs rom Ihe
sale.ThedisadvanIageoIhisIypeoinancingisIhaIvendorinancingissuiIable
onlyorsmallprojecIs,andislimiIedIoIheIechnologyorserviceselecIedbyIhe
vendor.
LeasingThismodeloinancing(orexample,energyservices)allowsconsumers
IopayamonIhlyeeorIheserviceraIherIhanbuyingIhesysIemiIsel.GuaranIeed
mainIenanceandreliableenergyservicesareprovidedbyIhesysIemserviceprovider.
Grameen ShakIi in 8angladesh also has a leasing model called micro uIiliIy. lI is
IargeIedaIcommuniIiesunableIopurchaseIhesysIeminonego.ThesysIemis
providedwiIhouIupronIcosIs,onIhecondiIionIhaIusersshareIhepowerwiIh
oIherneighborswiIhinIheIechnicallimiIoIhesolarhomesysIem.Theownero
IhesysIempaysamonIhlyinsIallmenI,andcollecIsaloadchargeromIheoIher
usersaccordingIoIheloadcapaciIyused.50%oIheinsIallmenIgenerallycomes
romIhispowersellingmechanism.
MicroinanceinsIiIuIionsareservingagrowingnumberoinormalandmicroor
smallenIerprises.However,IheirproducIsarequiIeewandlimiIedIoIheneeds
oIhosewhorequireveryliIIlemoneyandwhoseopporIuniIycosIoIimeisso
lowIhaIIheycanaordIospendmanyhourseveryweekaIIendingmeeIingsin
reIurn or Ihe possibiliIy o borrowing a small amounI o money. Microinance
canbeimporIanIIopromoIeenIrepreneurialacIiviIies,basedonsocialneIworks
Iomanagerisk,andIhiswouldalsoenhanceIheroleosocialcapiIalrequiredIo
promoIeLlCs.TheroleogovernmenIisimporIanIasIheprivaIesecIorandbanks
will noI Iake social and environmenIal issues inIo accounI, and Ihe governmenI
can beIIer judge Ihe Iradeo beIween proiI and cosI o adopIing cleaner
and eicienI Iechnologies and Ihe social beneiIs. While Mlls will evenIually be
imporIanI in providing beIIer moniIoring and screening services, Ihis could be
enhanced by governmenI oversighI and policy design Ihrough regulaIion and
provision or subsidies. 8uI once LlCs geI Iheir business model and inancing in
placeIheexIernaliIiesandspilloversoclusIeringacIiviIiesarehuge,boIhsocially
andenvironmenIally.ThereareoIherinancialproducIs(insuranceandacIoring),
which are required by small businesses, buI Ihey are currenIly noI available.
However,IheuIureisullopoIenIialasmanyinIernaIionalbanksareinIroducing
green unds, and bilaIeral and mulIilaIeral developmenI organizaIions are also
invesIingininancinggreenindusIrialIechnologiesorsusIainabledevelopmenI.
Module 3d
Fig.3d.2: Decision Tree for a Commercial Bank in Micro-Finance
Source:lsern(2005).
74
3.d.5 Case Studies
3.d.5.1 Integrating Micro-Finance and Renewable Energy Technologies
(RETs)
Access Io susIainable energy plays an imporIanI role in clusIerbased poverIy
alleviaIion programs, and renewable energy Iechnologies (PLTs) represenI a
promising and economical meIhod Io provide susIainable rural energy. PecenI
evidence suggesIs IhaI a welldesigned markeIbased inancial mechanism and
sIrucIuresuchasaplannedmicroinancingschemecouldbeIhemosIappropriaIe
and eecIive Iool or Ihe developmenI o a susIainable markeI or PLTs wiIhin
clusIerirms,henceplayinganimporIanIroleinIheelecIriicaIionoIheruralpoor
inmanydevelopingcounIries.
PLTbased rural energy services are usually phoIovolIaic (PV) solar sysIems.
AlIhough microinancing is appropriaIe in a compeIiIive markeI environmenI,
equallyimporIanIisIheavailabiliIyoposIsalemainIenanceservices,andIraining
orruralconsumersonIheoperaIionandminormainIenanceoPLTs.Puralenergy
supplybasedonPLTsrequiresIakingcareoIheollowing:
(i) LducaIingIheclusIerirmsandruralpopulaIiononPLTbasedenergysysIems:
(ii)CreaIion o cenIers (manned by engineers/Iechnicians Io provide insIallaIion
and mainIenance services as well as Iraining or Ihe rural cusIomers) in LlCs
locaIedinremoIediiculIIoaccessareas,
75
(iii)The addiIion Io Ihese cenIers o all banking and inance uncIions relaIed Io
makingloans,andcollecIinginsIallmenIsandbills.
TherearedierenImodelsomicroinanceinsIiIuIions,aslisIedbelow:
The Grameen Model o MicrolinanceThe sIandard and IradiIional model o
microinance.
NGOs PoIaIing Savings and CrediI AssociaIions (POSCAs)Pooling o unds by
agroupoindividuals.
8ankGuaranIeesAbankguaranIeeisusedIoobIainloanromacommercial
bank.
ThedevelopmenIoPLTsandmicroinancingcanbeenhancedbyIheinIroducIion
o elemenIs o deregulaIion and compeIiIion. The governmenI could play an
imporIanI role in promoIing susIainable household and small business PLT
elecIriicaIionbyavoidingimporIduIiesandIaxesIhaIwillincreaseIhePLTcosI
andlimiIiIspoIenIial.Secondly,governmenIcouldprovidesubsidiesIoIhepooresI
householdsIobuyandmainIainaPLTbasedsysIem.
3.d.5.2 Sarvodaya Economic Enterprise Development Services (SEEDS)
in Sri Lanka
SarvodayaLconomicLnIerpriseDevelopmenIServicesGuaranIeeLId.(SLLDS)isa
SriLankabasedmicroinanceinsIiIuIionIhaIhasbeeninoperaIionsince!986.
SLLDSoerabroadrangeolendingproducIs,includingalendingprogramIhaI
ocuses on Ihe provision o environmenIallyriendly, clean energy Iechnologies
and modern lighIing Io enable producIiviIy aIer dark. To increase operaIional
eiciency, SLLDS ouIsources services such as sales, markeIing, insIallaIion, and
mainIenance Ihrough sIraIegic parInerships wiIh solar Iechnology suppliers and
iIselocusesonlyoninancing.
3.d.5.3 Micro-Financing Renewable Energy Services in Nepal
Nepals overwhelming dependence on IradiIional uels (uel wood, agriculIural
residue, and animal dung accounIing or 88% o primary energy use, and ossil
uelsaccounIing or !!.5%) is a maIIer o concern or energy securiIy and
environmenI healIh o ecoindusIrial Iechnologies. This gives Nepal leverage Io
promoIePLTs.ThegovernmenIoNepalhasgivenprioriIyIopromoIingPLTsand
alsoprovidessubsidies.ThesubsidyprovisiononmicrohydrocoversalmosI50%
o Ihe IoIal cosI, Ihe resI o Ihe invesImenI has Io be managed by communiIy
or privaIe secIor enIrepreneurs. The subsidy on biogas almosI covers 40%, and
J0%50%osubsidyonsolarIechnology.DueIoIhehighinvesImenIcosIoIhe
PLTs,IherealpoorcommuniIyissIilldeprivedoIhebeneiIsandsubsidiesasIhey
lackIheabiliIyIopayIheupronIcosIsrequiredIobuysuchIechnologies.
Module 3d
76
AparIromIheprovisionosubsidiesbyIhegovernmenIoNepal(GoN),IheconcepI
omicroinancinghasbeeninIroducedorwidedisseminaIionoPLTsIoIhereal
poor,wiIhIhecobeneiIsoincreasedemploymenI,beIIerhealIh,knowledgeand
awareness, empowermenI o women, and business opporIuniIies using access
Io basic inrasIrucIure like Ielephone, phoIocopy, radio sIaIion, compuIer, and
inIerneI.TheimplemenIaIionomicroinancepracIicessIarIedin2000inIhecase
obiogas.MoreIhan!50MllshavebeeninancingbiogasandoIherrenewals.
NirdhanUIIhan8ank,PurbanchalGrameen8ikash8ank,SaharaSavingsandCrediI
CooperaIive,KarnaliSavingsandCrediICooperaIivearesomegoodexampleso
MllsinvolvedinPLTinancing.PLTsareaviableareaoinvesImenIorMllsdueIo
IhehugemarkeIpoIenIialinNepalwiIhiIslargeruralpopulaIion.
A recenI markeI esIimaIe shows IhaI Ihere is an annual inancing need o over
!billionNepaleserupeesorsmallscalePLTs,whichisanimmediaIemarkeIor
MllsinNepal(8asneIandSubedi2004).MicroinancinginwasIemanagemenI
projecIimplemenIaIionsisincreasinglycommonindevelopingcounIries.Acouple
oexamplesinlndia,IhePhilippines,and8razilareprovidedbelow.
3.d.5.4 Wesco Credit, India
WescoCrediI,IheinancialarmoWelareServicesLrnakulam(W.S.L.),currenIly
operaIes in !72 villages and oversees some 2,000 local selhelp groups (SHGs)
comprising more Ihan J5,000 o Ihe mosI economically impoverished women
in Ihe region o Kerala. lollowing Ihe ouIbreak o chikungunya ever, a deadly
mosquiIoborne virus or which no vaccine exisIs, in Lrnakulam, a ciIy norIh
o Cochin, Ihe commercial capiIal o Kerala during Ihe 2006 monsoon season,
undersIandingIheconnecIionbeIweenwasIeandhealIh,Wescolinancedecided
Io pursue inIegraIed wasIe managemenI sysIems as a prevenIive measure or
uIureouIbreaks.WescoCrediIbeganpromoIingandconsIrucIingbiogasplanIs,
whichgeneraIeboIhcleanenergyandincomeoramilies(primarilybyreducing
householdenergycosIs).
Thusar,IheyhaveconsIrucIedJ50biogasplanIsorindividualhouseholds,aswell
as or commercial esIablishmenIs such as indusIrial clusIers. Smaller household
uniIs cosI approximaIely $J25, servicing a amily o ive Io six. These uniIs are
inancedbySHGssupporIedbyWescoCrediIwiIhloanIermsoIwoyears.One
insIallmenIloanpaymenIiscollecIedinadvanceasasecuriIydeposiI.Thevillagers
arecareullyinsIrucIedhowIooperaIeIhesolidlyconsIrucIedplanI,whichhasa
liespanoapproximaIely20years.ThewasIedecomposesanaerobicallyinsideIhe
chamber,producingamixIureomeIhanecarbondioxidebiogasIhaIispumped
direcIlyIoIhekiIchensgasrunsIove.TheprocessalsogeneraIessolidcomposI
called sludge slurry, which serves as a poIenI erIilizer IhaI Wesco clienIs use Io
promoIeorganicarming.
Wesco CrediI is now planning Io scale up iIs biogas iniIiaIive, as well as oIher
renewable energy producIs. Over Ihe nexI year, iI inIends Io insIall abouI !,200
residenIialbiogasuniIs,!,000amilysizeuniIs,and200uniIsIobeusedinrural
arms.lIalsoplansIoinsIall50insIiIuIionalbiogasplanIsIobeusedaIhospiIals,
parishhalls,andaparImenIcomplexes.
77
3.d.5.5 S mokey Mountain Remediation and Development Program (SMRDP)
in Manila, Philippines
SMPDPwasiniIiaIedwiIhIhesupporIoIheAsianDevelopmenI8ankinAugusI
2005.ApublicprivaIeparInership(PPP)mechanismhasalsobeenusedherealong
wiIhmicroenIerprisesupporIorIheMaIerialPecoverylaciliIies(MPls),creaIing
opporIuniIiesormicroinancing.ManywasIerelaIedprojecIshavebeendelayed
dueIorelucIanceobanksIocommiIIosubsIanIialand/orlongIermlendingand/
orIhecollapseobanksyndicaIedlendingorsuchprojecIs,aswellaslucIuaIing
bankIerms(M&ASoliciIorsNews2009,inLMC20!0).Hybridinancingmodels
havebeeninIroducedasaninnovaIivesoluIionIoaddresssuchboIIlenecks.
3.d.5.6 Participatory Solid Waste Management (PSWM), Brazil
MicrocrediIundswerecreaIedorinormalrecyclersin8razilIhroughdonaIions,
which addressed a major hurdle in meeIing Ihe working capiIal. Such micro
inancing approach in 8razil was esIablished in 2006 and has been believed Io
have opened resh rouIes or micro banking in solid wasIe managemenI or
developingregions(HogarIh2009,inLMC20!0).
Module 3d
78
Annex V:
Strategies That Work: Financing Eco-Industrial Cluster
Initiatives
Worksheet
You, Ihe crediI porIolio manager o a repuIed privaIe commercial bank o your
counIry, are leading a Ieam consisIing o a policymaker, a represenIaIive rom a
local communiIybased organizaIion, and a represenIaIive o a small indusIries
associaIion. The objecIive o Ihe Ieam is Io reporI on Ihe easibiliIy o providing
microinanceecoiniIiaIivesinIheoodprocessingindusIrialclusIer.PeerIoIherice
andpoulIryindusIrialclusIerinChachoengsaoProvince,ThailandexampleromIhe
previoussession.ConsiderIhepoIenIialkeyenergyIechnologiesinIheLlC.
Study Time:
1.5 hours [Workshop45 minutes; Group Discussion45 minutes]
!.HowwillyouinIegraIeIheenvironmenIinIoIheeconomicdevelopmenIoIhe
ciIy?WhaIareIhekeyacIorsIhaIshouldbeconsideredorIheprovisiono
microinancingIheecoiniIiaIivesinIheclusIer?
2.WhaIareIhepossibleIechnologiesorecoiniIiaIivesIhaIyourbankcaninance
orIheLlC?
79
J.ThinkoIheenergyprogram(biomeIhanaIioninIheclusIer)andidenIiyhow
IhaI energy generaIed can be beIIer shared wiIhin or ouIside Ihe clusIer Io
boIhbeeconomicallyandsociallyviable.
4. YouarerequiredIomakearecommendaIiononIheIypeomicroinancing
(vendorinancing,joinIvenIure,ranchising,eIc.)yourbankshouldunderIake.
Since Ihe raIionale o commercial banks is Io make a proiI, you have Io
convince oIher banks Io join Ihe venIure based on boIh Ihe social capiIal
and proiIabiliIy o Ihe venIure. Please presenI argumenIs Io convince oIher
commercialbanksandinancecompaniesIojoinIhevenIure.
5. You idenIiy some risks Io unding SML acIiviIies in Ierms o collecIion and
moniIoring o Iheir acIiviIies. WhaI suggesIions would your Ieam make Io
miIigaIeIhoserisks?
6. DoyouIhinkIhaIIhegovernmenIshouldbeparIoIheIeamIocoundIhemicro
inancingoIheLlCs?PleaseprovideIhereasonsoryouropinion,andIheareas
whereIhegovernmenIcanbeinvolvedinIhemicroinancingoSMLacIiviIies.
Module 3d
80
7. ldenIiy ways Io improve lexibiliIy o loans granIed by commercial banks as
parIomicroinancingprograms.
8.SMLsareunbankablealsobecauseIheylackinnovaIiveideasandcapaciIyIo
approachinancialinsIiIuIionsorinancing.WhaIinnovaIiveideascanyour
IeamcomeupwiIhorenablingLlCsIosecureaccessIoundsrominancial
insIiIuIionsinamoreconvincingmanner?
9.lllusIraIe an example each o environmenIal microinancing iniIiaIives in

your counIry microinancing by Microlinance lnsIiIuIions, Ihrough Non
GovernmenIal OrganizaIions (NGOs) or relevanI subsidiary enIiIies, and by
privaIecommercialbanks.WhaIcoursesoacIionsareIakenbyyournaIional
governmenIIopromoIeinancingoLlCs?
!0.WhaI are your suggesIions or aIIracIing and moIivaIing naIional privaIe

banksIoinanceLlCs?
81
!!.LlCs can receive inancing Ihrough a mulIiIude o channels, as many
inIernaIionalbanksareinIroducinggreenundsandIhereisageneralIrend
IowardsIhegreeningobanklendingIhroughregulaIion.WhaIshouldbe
IheapproachIakenbySMLssoIhaIinIernaIionalbankscaninvesIheavily
inLlCs?
!2.linancing is sIill proiIdriven and Ihe markeI does noI have a social or
environmenIal conscience. WhaI innovaIive inancing process could solve
Iheproblem?

ADB. 2009. The Economics of Climate Change in Southeast Asia: Regional Review. Manila: ADB. (http://www.
adb.org/publications/economics-climate-change-southeast-asia-regional-review).
Basnet, S., and S. Subedi. 2004. Opportunities in Micro Financing Renewable Energy Services in Nepal.
Kathmandu: Winrock International. www.microfinancesummitnepal.org/
CDDE. 2010. Realizing Development EffectivenessMaking the Most of Climate Change Finance in Asia and
the Pacific. (http://www.oecd.org/dataoecd/57/27/46517810.pdf).
Environment Management Centre (EMC). Waste Management as a Sector of Green Economy. Draft Copy.
UNEP Green Economy Report (2010). EMC, India. http://www.unep.ch/etb/events/GreenEconomy.
Isern, J., and D. Porteous. 2005. Commercial Banks and Microfinance: Evolving Models of Success. Focus Note
28. Washington, DC: CGAP. www.cgap.org. See also the two-page profiles of six down scaling models at
www.cgap.org/commercialbanks/profiles.html.
North, J., and S. Giannini-Spohn. 1999. Strategies for Financing Eco-Industrial Parks. Commentary. As cited in
Schlarb, M. 2001. Eco Industrial Development: A Strategy for Building Sustainable Communities. Ithaca,
NY: Cornell University.
Sarvodaya Economic Enterprise Development Services (SEEDS), Sri LankaMicrofinance for Solar Lighting.
(http://www.seeds.lk/).
Module 3d
Fig.4a.1: Key Players and Factors in Eco-Industrial Decisions
Source:AuIhors.
82
Module 4: Transforming Eco-Industrial
Clusters into an Inclusive
Business Development Model
4.1 The Stakeholders Role in Eco-Industrial Cluster Formulation
AgrowingnumberoLlCsareoperaIingsuccessullyinIermsoachievingIheIriple
boIIom lines o poverIy alleviaIion, environmenIal conservaIion, and economic
growIh.TheexamplesinIhepreviousmodulespanawiderangeocounIriesand
indusIries.LacheaIuredLlCdevelopedasoluIionseI,allowingiIIosucceediniIs
local conIexI according Io unique objecIives and ouIcomes. YeI Ihe case sIudies
reveal common paIIernsLlCs respond Io susIainabiliIy consIrainIs, by several
sIakeholders working IogeIher on issues o resource eiciency and by removing
obsIacles. The key sIakeholders in Ihe process are policymakers, businesses, and
knowledgeinsIiIuIes(ligure4a.!).
lIiscrucialIonoIeIhaIsuccessulLlCsasinclusivebusinessmodelIypicallycombine
several sIraIegies Io address mulIiple consIrainIs. To geI rom broad sIraIegies Io
ocused roles, one musI noI only idenIiy each consIrainI buI also undersIand iIs
dynamicsinIhemarkeI.
83
Module 4a
Role of Policymakers: Can Eco-Industrial Clusters Be Made?
Module 4a: Role of Policymakers:
Can Eco-Industrial Clusters
Be Made?
4.a.1 Introduction
LlCsshouldemergesponIaneously,dependingonlocalenvironmenIsurroundings
and enIrepreneurial dynamics. However, even Ihe mosI successul LlCs beneiI
rom a propiIious policy ramework IhaI promoIes indusIrial symbiosis among
irms.AlIhoughLlCsareormedasaresulIoenIrepreneurialculIureIoexploreIhe
beneiIsolocalexIernaliIiesandsynergies,governmenIinIervenIionIakesplace
becausepolicymakersconsiderclusIeringIobeaprocessIhaIcanbeharnessed
onalocalscale.lurIhermore,ecoinIervenIionsaIIheclusIerlevelarecapableo
inluencingiIscompeIiIivenessaInaIionalandevengloballevel.lnIhaIsense,eco
indusIrial clusIering can embrace many aspecIs o regional developmenI policy,
including sIaIe inIervenIions Io supporI supply chain developmenI, collaboraIive
venIures, and inIerirm neIworks. LlC policies can also embrace inIervenIions
in labor markeIs, skills and Iraining, supporI or ecoproducI developmenI, and
ecoprocessinnovaIion.lIisIhisholisIicnaIureoLlCasaconcepIIhaIenables
policymakersIoembraceIheagendaodierenIsecIoralpolicymakersandabsorb
exisIingpracIicesaswellasengagewiIhnewpolicyiniIiaIives.
4.a.2 Practical Actions by Policymakers to Promote the Creation of
ln simple Ierms, LlCs are designed Io idenIiy and supporI growIh IhaI is
environmenIally,economically,andsociallysusIainable,andIobecomeorremain
compeIiIive. While noI always sIaIed, iI Iends Io be implied IhaI Ihis requires a
ocusonacerIainIypeobusinessesIhaIcanbedescribedasecoandknowledge
inIensive or IhaI are capable o generaIing high producIiviIy growIh. There is
oIen a connecIion, Ihereore, beIween clusIer policies as widely pracIiced, Ihe
applicaIiononewandadvancedIechnologies,andknowledgeIranseracIiviIies.
CreaIing synergies beIween dierenI secIoral policies, such as Ihose relaIed Io
indusIry,agriculIure,energy,inIernaIionalIrade,eIc.,andavoidingpolicyconlicIs
becomesanecessarycondiIion.lIislikelyIhaIdierenIinIegraIedenvironmenIal
and economic policy measures will be appropriaIe or dierenI LlCs aI dierenI
Iimes, as Ihey should be judged on a casebycase basis, Iaking inIo accounI
environmenIal,social,andeconomiccriIeria.lnIegraIedpublicinIervenIions,such
asIhoseshowninTable4a.!,canworkIocreaIeorenhanceeachoIhemicro
oundaIionsandobjecIivesoecoindusIrialclusIering.
Areas for Policy
Intervention
Expected Effects
Relevance to Regional
Development
Inter-sectoral
Synergy
AccessIomarkeIinormaIion
lncenIivesorinserIiono
rawmaIerials,producIs,and
servicesinlocal/naIional /
regional/globalvaluechain
DevelopmenIo
inrasIrucIureandinIernal
markeIcondiIions.
GreaIeravailabiliIyocrediI.
PressureoropIimizeduseo
localresources
DriverorecoenIerprise
developmenI
lncreaseddevelopmenI
opporIuniIyIhroughmarkeI
diversiicaIion.
Public-Private
Partnership
CreaIiononewenIerprises
Technologyupgrading
Upskilledproducersand
workers
LmploymenIgeneraIion
8roadenedproducIrange
lmprovedproducIion
process
LmploymenIgeneraIion
lncomegeneraIion
Upgrading o workers
Iechnicalskills
Local
Environmental
Governance
lncreaseduseounIapped
localresources
Consensus on clusIerwide
environmenIalagendaand
economicprioriIies
PromoIionoIheideao
cooperaIionamong
enIerprises
CreaIinginIerirmneIworks
lmproved environmenIal
condiIion
lncreasedsocialcapiIal
lncreased responsiveness
olocalsupporIinsIiIuIion
PromoIionocrosssecIoral
ecoindusIrialacIiviIies
Ihrough
Source:AuIhors.
84
lnIermsosysIemeconomics,IheormaIionoLlCsisapproachedineiIheroIwo
ways.OneapproachisIhesponIaneousormaIionoLlCsromIheboIIomIoIheIop
oIheindusIrialproducIionchain.ThekeypoinIoIhisapproachismarkeIuncIion,
andeliminaIionomarkeImaluncIioning.ThesecondapproachIoLlCormaIion
isromIopIoboIIom,wiIhIheemphasisonIhegovernmenIgivingprioriIyIoIhe
developmenIoacerIainindusIry.ligure4a.2explainsIhecharacIerisIicsoIhese
Iwopolicyapproaches.
Table 4a.1: Eco-Industrial Cluster Focused Policy Interventions
Fig.4a.2: Eco-Industrial Cluster Characteristics, Links, Policies, and Knowledge
Source:AuIhors.
85
Module 4a
Compared wiIh previous orms o regional indusIrial policy, LlCbased regional
developmenIpolicyIendsIoinvolveIheollowing:
AshiIinocusawayromsupporIingindividualirmswiIhgranIsandloans
IowardsneIworksolinkedirmsandassociaIedservicesIhaIconsIiIuIesirms
ecocompeIiIiveness.
LessemphasisonlargeirmsandinwardinvesImenI,alIhoughIhereisarole
orlargeirmsinsomelocalclusIers,andgreaIersIressinlocalagglomeraIions
onSMLsandindigenousgrowIhprocesses.
More sophisIicaIed meIhods or idenIiying irms IhaI depend on local
resourcesandocusonareasocompeIiIivesIrengIhinIheregionaleconomy.
Less emphasis on inancial incenIives and greaIer emphasis on soIer orms
o inIervenIions Io sIimulaIe collecIive ecopracIices, neIworking, and
developmenIoIrusIrelaIionshipsandsocialcapiIalbeIweenkeyplayers.
GreaIer role or policymakers as aciliIaIors or brokers beIween companies,
andbeIweencompaniesandregionalknowledgeinsIiIuIes.
The way in which LlC policy is ormulaIed in pracIice can vary considerably in
Ierms o deIails depending on naIional prioriIies, local and regional resources,
IhecharacIerisIicsoirmsandIheiraccessIoIechnologies,andIheIypesoeco
producIsandservicesinvolved.
(i)
(ii)
(
iii
)
(iv)
(v)
!.LlCcharacIerisIics
SIrucIuraleaIures
TradiIionalornew
ecoIechnology
NaIureoindusIry
ClusIerliecycle
Levelo
diversiicaIion
SocialcapiIal
J.loreigndirecI
invesImenI(Iechnology
andinance)inclusIers
4.GlobalizaIionand
processes conIribuIing Io
enhancedcompeIiIion
2.Knowledgelows
ProducIs,processes,and
pracIices
TaciIandcodiiedlows
Purchasesandspillovers
GlobalproducIionneIworks
andcommodiIychains
CusIomersandsuppliers
LxIernal
lnIernal
PolicyiniIiaIives
P&DneIworks
PolicyiniIiaIives
Technology
inrasIrucIure
86
4.a.3 Cluster-Based Policy Responses to System Imperfections
LlCpolicyreersIoallIhoseeorIsogovernmenIIodevelopandsupporIclusIers
in a parIicular area. ln emerging Asia, policymakers Iend Io prioriIize economic
and social developmenI, Io Ihe deIrimenI o environmenIal proIecIion, use LlCs
IorebalanceIhisbias,andpromoIeinclusiveandgreengrowIhIhaIcanhelpin
IacklingclimaIechange.TheollowingareIheaciliIaIionpolicyacIionsIhaIlower
barriersIoenIrepreneurshipandpromoIepublicprivaIecommuniIyparInerships.
(i) Incentives to trigger industrial agglomeration
ClusIeringoirmsinaparIicularlocaIionisusuallydrivenbyindusIrialbusinesses
inIheprivaIesecIorandmarkeIorces.However,IhesupporIoIhepublicsecIor,
boIhaIlocalandnaIionallevels,canplayanimporIanIroleIoenhancecondiIions
IhaIinluencedecisionsoninvesImenIbylocalenIrepreneurs.AIIhelocallevel,iI
isessenIialIhaIgovernmenIsprovideaIIracIivelocalcondiIionsorIheindusIrial
clusIers. Thus, Ihe availabiliIy o adequaIe physical inrasIrucIure and logisIics,
includingroads,IransporIaIionsysIems,accessIoreliableandaordableenergyand
waIersupply,andqualiiedlabor,isadecisiveacIorinosIeringirmclusIering.lor
insIance,inIhePeoplesPepublicoChina(PPC),successulexamplesolndusIrial
ParkswereIriggeredbygovernmenIalpoliciesIargeIingspeciicgeographicareas
Io develop special economic zones in Guangdong and lujian provinces. AI Ihe
naIionallevel,iIisalsorelevanIIoguaranIeeasIablepoliIicalandmacroeconomic
environmenI,aswellasaconvenienIgovernmenIinsIiIuIionalinrasIrucIureand
processesIhaIosIerenIrepreneurshipinlocalSMLs.
(ii) Creation of dialogue platforms to promote linkages and interactions
between industrial clusters
Sharing a common geographic locaIion is noI a suicienI condiIion or Ihe
ormulaIion o LlCs. A primordial acIor Io osIer LlCs is relaIed Io eicienI use
olocallyavailablerawmaIerialsandrecoveryocoproducIsinorderIoincrease
producIiviIy o resource use and lower polluIion. Thus, irms need Io evaluaIe
IheirpoIenIialsynergiesandmaximizeiIsbeneiIs,bysharinganddisseminaIing
inormaIion and experIise among Ihemselves. One possible way Io do so is by
creaIing a plaIorm or dialogue beIween all Ihe inluenIial indusIrial acIors Io
aciliIaIe Ihe inormaIion low beIween irms and Io idenIiy key challenges and
opporIuniIiesIocreaIeindusIrialsymbiosis.ThegovernmenIcouldIakealeading
roleinIhisprocessbybeingIheaciliIaIoroIheplaIormandormulaIingsysIemaIic
sIraIegiesorplanningandimplemenIaIionacIions.ThedialogueswouldresulIin
acommonsIraIegyorcompeIiIivenessandenvironmenIalproIecIionguidedby
IheprivaIesecIorandsupporIedbyIhegovernmenI.
(iii) Enhance capacity for innovation
CreaIion o linkages beIween LlC acIors and knowledge insIiIuIes, including
governmenIsupporIed research insIiIuIions, academia, governmenI agencies,
universiIies, and indusIrial P&D insIiIuIions, would provide new opporIuniIies or
businesses based on exploiIing knowledge and skills Iowards more environmenIally
compeIiIivemodels.ThisnewrameworkonodesbeIweenknowledgeinsIiIuIesand
indusIrialacIorswillresulIinIhedevelopmenIoarobusIinnovaIiveenvironmenIand
87
dynamic cooperaIion in applying IheoreIical knowledge and IransormaIion o
innovaIion Io environmenIallyriendly processes, reducIion o wasIe lows, and
increasingrecoveryoresources.LinksbeIweenP&DorganizaIionsandindusIries
couldbeenhancedbyseIIingupaninnovaIionservicecenIerIhaIaciliIaIesIhe
dialoguebeIweenknowledgeinsIiIuIesandirms.
(iv) Promote environmental awareness
Public awareness is key Io osIering LlC ormaIion. ln Asian counIries, Ihere is
a general lack o awareness abouI environmenIal issues, boIh among local
communiIies and wiIhin Ihe clusIer. MosI indusIrial clusIers have come abouI
Ihrough asI indusIrializaIion o naIional and economic developmenI, while
environmenIal awareness is commonly orgoIIen. PromoIing awareness o local
communiIies and creaIing social capaciIy could creaIe public pressure on irms
Io reduce Iheir environmenIal impacIs and adopI more susIainable producIion
pracIices. AddiIionally, providing inormaIion Io Ihe privaIe secIor Io help Ihem
undersIand Iheir role in supporIing environmenIally riendly paIIerns could also
conIribuIeIoIhedevelopmenIoLlCs.
(v) Development of investment tools
CrosscuIIing and besI available Iechnologies are commonly more cosIly Ihan
convenIionalpracIices.lndevelopingcounIrieswiIhlimiIedeconomicresources,
irmswillindiIdiiculIIoaordexperIise,eveniknowhowisavailable.Thus,ew
enIerpriseswillbekeenIoadopIadvancedenvironmenIalproIecIionIechnologies
and equipmenI, i Ihey do noI have any incenIive Io do so. lor insIance, Ihe
dumpingosolidwasIeanddischargingwaIereluenIswiIhouIproperIreaImenI
areunorIunaIelyacommonrealiIyinmanyAsiancounIries.GovernmenIsneed
IoallowinancingcapiIalIosupporIirmsinvesIinginenvironmenIallybeneicial
decisions. Depending on wheIher Ihe proposed iniIiaIives are or building
compeIiIiveness, inancing sources may vary beIween public inancing, special
communiIy unds Io invesI in green business, or inIernaIional inance such as
GreenClimaIelund(GCl),GlobalLnvironmenIallaciliIy(GLl)eIc.
(vi) Comprehensive legal, regulatory, and institutional framework
ln order Io osIer Ihe implemenIaIion o more eicienI indusIrial pracIices and
promoIe Ihe recovery o resources wiIhin LlCs, indusIrial acIors need a sIrong
and eecIive governmenIal regulaIory ramework. ln acI, one o Ihe greaIesI
consIrainIswhencreaIingLlCsisrelaIedIoIhelackoadequaIelegalregulaIion
IhaI inhibiIs prevaricaIing pracIices. A regulaIory ramework should esIablish
sIricI norms Io allow irms operaIions according Io Iheir eorIs in meeIing
environmenIalsIandardsandseIIinginancialpenalIiesorIhoseirmsIhaIailIo
meeIIherequiredsIandardsoenvironmenIalproIecIion.AnoIherpolicyIoosIer
Ihe developmenI o LlCs is Io reduce Ihe regulaIory burden IhaI enIrepreneurs
ace. This means implemenIing Iax cuIs and reducing Ihe cosIs o seIIing up a
business.
Module 4a
88
(vii) Integration of cross-sectoral policies
LackocoordinaIionaIIhesecIorallevelisoIenmenIionedasamajoracIorinLlC
ailure(SoesasIro2007).ThecreaIionoanLlCinvolvesalargenumberosecIor
speciic agencies, including commissions in charge o indusIrial and economic
developmenIandenvironmenIalproIecIion.Thus,inIegraIionosoluIionsislikely
IodependuponcrosssecIoral,inIerdisciplinaryapproachesacrossmulIiplelevels.
WhileeconomicplanningagenciesusuallyIakealeadingroleindevelopingLlCs,
sIronger involvemenI by oIher secIorspeciic agencies can also be beneicial.
CreaIion o a cenIralized agency speciically IargeIing LlC managemenI Io lead
andcoordinaIeplanninghasbeenraisedasapossiblesIraIegyIoachieveagreaIer
degree o privaIesecIor developmenI. lI is also essenIial IhaI Ihe policies are
inIegraIed aI Ihe regional and provincial level Io achieve a maximum impacI on
IheregionandsecIors.
(viii) Development of environmental assessment tools at the regional level
AI Ihe regional level, counIries have dierenI environmenIal regulaIions and
polluIion sIandards. Thus, iI is acIually diiculI or governmenIs Io evaluaIe Ihe
environmenIalcomponenIoLlCromacompliancepoinIoviewanddeIermine
whenanlCisinacIanLlC.GovernmenIsusuallyannounceIhecreaIionoZero
emission Parks in order Io aIIracI oreign invesIors, buI Ihose parks are oIen
noIhingoIherIhansIandardlCs.OnIheoIherhand,wiIhinLlC,irmsmighIace
diiculIiesinassessingIheirownenergyeiciencyandenvironmenIalperormance.
The creaIion o a regional sIandardized comprehensive LnvironmenIal PolluIion
lndexorLlC,suchasIheonedevelopedbyIheMinisIryoLnvironmenIinlndia,
couldraiseIhecompeIiIivenessoLlCsandguaranIeeirmsareincompliancewiIh
Ihe regulaIions governing environmenIal proIecIion. Such a Iool would idenIiy
polluIedindusIrieswiIhinaclusIerandimproveIhesIaIusooIherenvironmenIal
consIiIuenIs,orexample,airandwaIerqualiIydaIa,publiccomplainIs,ecological
damage,andvisualenvironmenIalcondiIions.AddiIionally,iIwouldaciliIaIeIhe
deiniIionocriIicallypolluIedareasandprioriIizeeconomicallyeasiblesoluIions
IomiIigaIeiIsimpacIs.
Summing up, governmenIs are key players in Ihe esIablishmenI o LlCs, buI
sIandalonepolicyacIionswillhaveonlylimiIedeecIwhenIheaimisIouseLlCs
asasIraIegyorsusIainableregionaldevelopmenI.GovernmenIalacIionsshould
be consisIenI wiIh local and economic conIexIs and urIher inIegraIion o Ihe
privaIesecIorinIhedecisionmakingprocessisneeded.Table4a.2summarizesIhe
predicIedimpacIsandouIcomesIhaIeachoIheproposedsIraIegiesmighIhavein
IermsoosIeringLlCdevelopmenI.lIrevealsIhaIonesIraIegycansimulIaneously
have several impacIs boIh aI Ihe indusIrial, environmenIal, and inancial policy
levels.
89
Table 4a.2: Key Policy Actions for Improving the Creation of Eco-Industrial Clusters and Outcomes
Key actions Industrial policy Environmental policy
Financial and
development policy
Incentives to
trigger industrial
agglomeration
DevelopmenIo
physicalinrasIrucIure,
logisIics,andoIher
inIernalmarkeI
condiIions
GuaranIeeaordable
andreliableenergy
andresourcesupply
lncenIivesorinserIiono
rawmaIerials,producIs
andservicesinlocal/
naIional/regional/global
valuechain
PromoIionoenergyand
resourceuseeiciency
byphysicalexchangeo
maIerials,energy,waIer
andbyproducIs
ShareocommonwasIe
IreaImenIaciliIies
PeducIionowasIe
generaIionandlowerair
andwaIeremissions
MorecompeIiIiveness
dueIosavingcosI
romlowerwasIe
creaIionanddisposal
GreaIeravailabiliIyo
crediI
DiverIingpublic
invesImenIs under
developmenIporIolio
(synergybeIween
naIionaldevelopmenI,
provincial
developmenIand
indusIrialpolicy)
Creation of
dialogue
platforms to
promote linkages
and interactions
between
industrial clusters
LngageacIorsby
idenIiyingeconomic
opporIuniIies
AdvanIagesrom
collecIivesharing
oresourcesand
exchangemaIerials
PeduceIheenergyand
maIerialinIensiIyo
goodsandservices
PeducIionowasIe
disposalandpolluIanIs
discharge
LnhancewasIe
recyclabiliIyandreuse
LngagecivilsocieIy
organizaIionsconcerning
environmenIalmaIIers
CuIIingcosIIhrough
IheeicienIuseo
resources
Enhance capacity
for innovation
lmprovemenIo
scienIiiccapaciIy
building
AccessIomarkeI
inormaIion
Technologyupgrading
CreaIiononew
enIerprises
SeIupanaIionalP&D
programworking
closelywiIhbusinesses
anduniversiIies
OnlinedaIabaseo
besIpracIices,regional
shareoknowledge
SupporIresearch
ingreenandclean
producIion
SIudyIhepoIenIial
circularliecycleo
producIionouIpuIs
MappingwasIe
producIionandpossible
maIchingwiIhoIher
indusIrialclusIers
TechnicalsupporIand
parIicipaIioninindusIrial
symbiosisprograms
AppropriaIe
environmenIal
moniIoring,reporIing,
andveriicaIionsysIem
inplace
LsIablishnaIional
andregionalCleaner
ProducIionCenIers
ocusingonsmalland
mediumenIerprises
(SMLS)
lncreased
developmenI
opporIuniIiesIhrough
markeIdiversiicaIion
Module 4a
90
Promotion of
environmental
awareness
SupporIIoIrainingor
indusIry,includingSMLs
Developguidelinesand
Irainingonpublic
parIicipaIion in
susIainableconsumpIion
andproducIionprograms
LcolabelingandoIher
greensealingprogram
Iypes
lmprovedIrainingor
governmenIinspecIors
lmproveeiciency,
Iransparencyand
accounIabiliIy,by
includingraIing
programsand
moniIoring,reporIing,
andveriicaIionsysIems
linkedIocrediIlines
Development of
investment tools
lnnovaIiveinancing
insIrumenIsincluding
insuranceprograms,
greenbonds,and
oIherriskIranser
producIs
DevelopaconsisIenI
budgeIaryrameworkor
inIegraIingsusIainable
producIion
lmplemenIaIiono
innovaIivemarkeI
basedincenIive(Iaxes,
subsidies,incenIives,
eIc.)
SupporIIouIure
developmenIsona
globalenvironmenIal
agenda
lnIroduceinvesImenI
appraisalsbased
onincremenIal
environmenIalbeneiIs
CoordinaIeIhe
developmenIo
sIraIegicramework
orusingglobal
environmenIal
inancinginsIrumenIs
laciliIaIionor
capiIalizingon
inIernaIionalinancing
(e.g.,seIIingupo
counIrylevelgreen
unds,aciliIaIionor
CDMs,GLl,eIc.)
laciliIaIeor
capiIalizaIiononeco
markeIopporIuniIies
(e.g.,provision
oenvironmenIal
cerIiicaIion,eIc.)
AordableIechnology
lncreasinginancing
opporIuniIiesIhrough
publicunding
Comprehensive
legal, regulatory
and institutional
framework
lnIegraIedpolicyacross
allliecyclesIageso
IoxicmaIerialsando
IheproducIorservice
designcycles
lnsIiIuIionalseIupand
deinedproceduresor
propercoordinaIion
romcenIralIolocal
levelIoaciliIaIeIhe
LlCclusIeruncIioning
(minimizeobsIacles
dueIopolicyand
insIiIuIionaloverlaps
oreicienIuncIioning
oLlCs)
SIickierperormance
sIandardslegislaIion
onenvironmenIal
proIecIionandresource
conservaIion
SeIupaprogramIo
moreeicienIlyconIrol
emissionsIandards
HigherpenalizaIionsIo
prevaricaIors
LliminaIesubsidiesor
ossiluelresourcesand
oIhernaIuralresources
ProvideincenIivesIo
encourageresource
eiciencyandrecovery
omaIerialsandenergy
andpuIdisincenIiveson
IhedisposalomaIerials
aswasIe
lncreaseeecIiveness
oenorcemenIo
regulaIionsandcreaIe
counIeraccomplishmenI
measures
Perormancebased
IaxincenIivesysIems
orachievingeco
eiciencysIandards
Source:AuIhors.
91
Integration of
cross-sectoral
policies
Lmpowerlocal
governmenIsIo
LlCprogramsand
osIercrosssecIoral
coordinaIion
DevelopsecIoral
guidelinesIoovercome
speciicidenIiiedgaps
andaciliIaIeupIakeo
besIpracIices
CoordinaIiono
involvedindusIrial
acIors
lnIegraIionocenIral
andprovincial
environmenIalpolicies
(e.g.,ienvironmenI
isadevolvedsubjecI
Ioprovinces,needIo
harmonizeIhecenIral
andprovincialpolicies)
LxploreinnovaIive
inancinginsIrumenIs
andacceleraIeP&D
supporIoruIure
indusIriesIhroughLlC
agenda
Development of
environmental
assessment tools
at a regional
level
Developgreen
indicaIorsIoassess
IheenvironmenIal
perormanceoIhe
LlCsandidenIiy
poIenIialopporIuniIies
orimprovemenI
LnhanceproducIion
processes
lncreaseresponsiveness
osupporIinsIiIuIions
lncrease
compeIiIivenesso
clusIers
SIrengIhen
environmenIalimpacI
assessmenI(LlA)Iools,
sIandardsandmeIhods
DriverorecoenIerprise
developmenI
CondiIionalcash
Iranserprogram
ordisadvanIaged
indusIries
Module 4a
Fig.4a.3: Strategies in Kawasaki Eco-Town Creation
92
4.a.4 Case Study: Kawasaki Eco-Town, Japan
Kawasaki LcoIown is a promising example o a joinI eorI beIween Ihe
governmenI and local enIerprises Io reviIalize an indusIrial clusIer based on Ihe
indusIrial symbiosis principles. Driven by sIricIer wasIe managemenI legislaIion
and environmenIal degradaIion o urban areas, Ihe governmenI and Ihe privaIe
secIor have Iaken acIions Io develop Ihe Kawasaki LcolndusIrial ClusIer inIo an
environmenIallyriendlyproducIionzone.TheindusIrialcomplexaimsIoachieve
IhecyclicaluseoresourcesIhroughIheesIablishmenIorecyclingandmaIerials
reuseprogramsbeIweenaciliIiesIominimizeIheenvironmenIalimpacIsoeach
indusIry (ligure 4a.J). The acIions include Ihe creaIion o zeromodel emission
planIs,resIricIionoairemissionsandwaIereluenIs,implemenIaIionohigher
polluIion abaIemenI sIandards, promoIion o logisIical supporI, coordinaIion o
maIerial exchange beIween irms wiIhin Ihe clusIer, and developmenI o public
educaIionregardingenvironmenIalaIIribuIes(KawasakiLcoTown).NorIon(2007)
highlighIedivesIrengIhsoIheKawasakiecoIownprojecI:(i)denseneIworking
beIweenindusIrialclusIers,governmenI,andKawasakiLlCIhaIworkIogeIherIo
improveheaIandelecIriciIyrecoveryamongindusIriesandurbanareas,(ii)public
engagemenI wiIh Ihe projecI, (iii) exisIence o anchor aciliIies, such as cemenI
manuacIuring,IhaIallowsIheuseolowgradewasIemaIerialslocally,(iv)process
synergies beIween local governmenI and indusIries, and (v) wellesIablished
IransporIaIion inrasIrucIure and concenIraIed manuacIuring indusIries. Since
IhecompleIionoIheprojecIin2004,IhecomplexhasbeneiIedromareduced
environmenIalburdenandoperaIionalcosIosolidwasIeIreaImenIplanIs.Some
oIhesynergiesincludecemenIproducIionromincineraIionoplanIwasIe,heaI
producIionromwasIeoil,andelecIronicappliancerecycling.
DespiIe Ihe success o Ihe projecI in Ierms o environmenIal and economic
perormancesoar,iIsgreaIesIimprovemenIsareyeIIocomeinIermsoachieving
anopIimalcoordinaIionoacIiviIiesnecessaryIoullypromoIeecoproducIsand
energyexchangesbeIweenirms.Moreover,indingnewplayersIojoinIheLco
Town ProjecI is also diiculI, because irms cannoI see Ihe shorIIerm economic
beneiIs.AlIhoughirmsbeneiIromenvironmenIrelaIedbusinessopporIuniIies,
economic proiIs remain Ihe main prioriIy or Ihe majoriIy o companies. To
sIimulaIe irms Io invesI in more susIainable producIion processes, business
incenIives and subsidies, along wiIh educaIion and inormaIion sessions, should
beprovidedbyIhegovernmenI.
93
Annex VI:
Role of Stakeholders: Policy Planner
Worksheet
OncompleIionoIhisexerciseyouwillbeinaposiIionIodevelopeicienILlCsand
susIainableindusIrialsIrucIureswhichenhanceIhedevelopmenIpoIenIialsoIhe
localregionsandpoliciesoIhegovernmenIaIdierenIlevels.
Workshop Duration:
!.ThegovernmenIplaysanimporIanIroleinaciliIaIingIheagglomeraIiono
irms, Ihe developmenI o inIerirm neIworks, and Iransorming Ihem inIo
compeIiIiveeconomiczones.WhileexperimenIaIionwiIhclusIerpoliciesand
sIraIegies by governmenIs has Iaken place in many counIries, Ihe evoluIion
andgrowIhoLlCsshouldbedrivenbymarkeIsandcommuniIies.lnyourview,
whaIsIraIegiesshouldbeimplemenIedbypolicymakersinAsiancounIriesIo
osIerIhedevelopmenIoLlCs?
.
2. TailoringIhepolicyenvironmenIoranLlCisacosIlyandriskyexercise.The
paybackmaynoImaIerialize,andeveniiIdoesiImayIakeyearsbeoreIhe
communiIyderivessubsIanIialbeneiIsromIhenewLlC.Theprocesscallsor
avisionodevelopmenIcenIeredonspeciiccharacIerisIicssuchasplanning
andcoordinaIionovariouspolicyiniIiaIivesIhaIpromoIeenIrepreneurship.
.
Module 4a
94
WhaIspeciicinIervenIionswouldyouproposeunderdierenIpolicies,namely:
J. The lack o inIegraIed secIor policies and Ihe absence o macrolevel
coordinaIion o policies are Ihe main weaknesses in LlC evoluIion. ln your
opinion, do Ihe individual policymaking communiIies (agriculIure, indusIry,
environmenI,socialdevelopmenIaIdierenIlevels)aswellasbusinessneed
IodiscussandnegoIiaIeinIegraIedpolicies?lso,inwhaIareasandinvolving
whom?
4. AnyinancingplaninvolvinglargescalereshapingoresourcelowswiIhina
regioninavoroLlCormaIIinghasmanyparIsIoiI,suchasraisingmoney
rom local Iaxes, ees, and charges. ObIaining longIerm resource Iransers
rom cenIral auIhoriIies Io local governmenIs is anoIher acIor, which can
have problemaIic and Iimeconsuming legislaIive implicaIions. WhaI would
beIhedierenIiaIedroleorcenIralgovernmenIandlocalgovernmenIsinIhe
LlCs?HowcanLlCsbeimplemenIedmoreeecIivelybylocalgovernmenIs?
..
Area Agriculture Industry Environment Finance Social
a.ProducIionprocess
b.MaIerialuse
c.Lnergy
d.WaIerandairpolluIion
e.WasIemanagemenI
f.MarkeIing
g.Humanresources
h.QualiIyolie
i.CommuniIyconnecIions
(i) lndusIrialpolicy
(ii) LnvironmenIpolicy
(iii) linancial/Iaxpolicy
(iv)PegionaldevelopmenIpolicy
(v)Provincialpolicy
(vi)AnyoIher
95
Module 4a
5. LcoindusIrial clusIers need ready access Io a pool o skilled Iechnical orce
andsourcesoinnovaIiveknowledge.lorIheseviIalreasons,LlCsIendIobe
ound in regions where Ihe presence o universiIies was sIrong in Ierms o
Iheir conIribuIion Io Ihe ormaIion o new irms and innovaIion capabiliIy.
WhaIisIheroleopolicymakersIoreinorceIheinnovaIivecapaciIyoLlCs?
..
6.AinelyhonedIechnologicalcapabiliIyenablesLlCsIoevolveandexpandIheir
economicandenvironmenIalcompeIiveness.8uIIhecosIogreenIechnology
isabarrierinrelaIionIoIheiradopIionbySMLs.WhaIisIhepolicymakers
roleinIermsoseIIingIechnologygoals,wiIhparIicularocusoncosIsand
accessIoIechnologiesaInaIionalandlocallevel?
.
7.Managing regulaIions along wiIh markeIbased mechanisms are commonly
reerred Io as eecIive Iools Io supporI green invesImenIs and innovaIion,
whenirmscannoIdirecIlybeneiIromIangibleeconomicreIurns.WhaIIype
opolicymixcanhelpIosIimulaIeconsumerdemandandreduceinormaIion
ailure?
.
8.WhiledierenIsecIorpoliciesavorormaIionandgrowIhoLlC,someclusIers
may have been ormed in an aIIempI Io encourage Ihe emergence o new
indusIries.TheemphasishasincreasinglybeenonmeasuresIoincreaselevels
onaIionalcompeIiIivenessraIherIhanonsocialbeneiIsandenvironmenIal
gains aI Ihe local level. How can policy aIIenIion be given Io Ihe overall
ouIpuIs and ouIcomes derived rom dierenI Iypes o sIraIegies discussed
in Ihis Iraining program, and in which ways can Ihe success o an LlC be
measured?
96
9.Kawasaki has been able Io clean up iIs local environmenI ollowing iIs
Penaissance plan, daIing back Io !987, which encompassed a shorIIerm
redevelopmenI o Ihe ciIy as well as a longerIerm developmenI o an
inrasIrucIure IhaI would supporI inIerirm neIworks, ecoinnovaIion, and
economicdiversiIy.TheexIenIIowhichindusIryparIners,localgovernmenIs,
andIhecenIralgovernmenIworkedIogeIhercreaIedIhedevelopmenIoa
sysIemIhaIocusedonenvironmenIalissuesandpolluIionconIrol.WhaIare
Ihe policy insighIs IhaI can be applied Io iIs replicaIion in oIher emerging
economiesoIheregion?
.
!0.To susIain iIs dynamic growIh, Kawasaki ecoclusIer musI rely more on
Ihe emergence o local irms IhaI could lead Ihe way, insIead o relying on
subsidiariesolargeirmsandgovernmenIsubsidies.ThisshiIomindseIwill
requireabeIIersupporIsysIemorsIarIupsandspinos.!apanisaleading
produceroenvironmenIalIechnology,buIIhecurrenIbusinesssIrucIurein
!apan Iends Io be verIically orienIed along Ihe IradiIional indusIrial secIors.
Wheredoyouplace!apaninIhisigure?WhaIpolicyeorIsareneededIo
maIchcurrenIcapabiliIieswiIhoIhergrowIhareasoIheemergingeconomies?
.
Ganne B., and Y. Leccler. 2009. Asian Industrial Clusters, Global Competitiveness and New Policy Initiatives.
Singapore: World Scientific Publishing.
Kawasaki Eco-Town. 2008. Towards an Environmentally Harmonious 21st Century. The Basic Concept for Project
to Make Kawasaki City Environmentally Harmonious. (http://www.kawasaki-net.ne.jp/eco/Ecoen.htm)
Morikawa, M. 2000. Eco-Industrial Developments in Japan. Indigo Development Working Paper No. 11.
Emeryville, CA: RPP International, Indigo Development Center.
Norton, M. 2007. Japans Eco-TownIndustrial Clusters or local innovation systems? Proceedings of the 51st
Annual Meeting of the ISSS. 510 August. Tokyo. Japan.
Soesastro, H., ed. 2007. Developing a Roadmap toward East Asian economic Integration. ERIA Research project
No. 1-1. (http://www.eria.org/research/no1-1.html) (November 2011).
Wolf, S. 2010. A Policy Brief on Industrial Ecology. Ithaca, NY: Cornell University.
Yusuf, S., K. Nabeshima, and S. Yamashita. 2008. Growing Industrial Clusters in Asia: Serendipity and Science.
Washington, DC: The World Bank.
97
Module 4b: Role of Business
in Eco-Industrial Clusters
4.b.1 Introduction
LlC is recognized as a managing Iool or examining social enhancemenI,
environmenIalpreservaIion,andeconomicdevelopmenIoindusIrialadvancemenI
acIiviIies.lIisagoodexampleoasuccessulinclusivebusinessmodel.However,
LlC has Io deal wiIh conIinuously evolving markeIs and dynamic compeIiIive
relaIionships. To navigaIe Ihis complex Ierrain, a ew pracIical sIeps are needed
or LlC companies Io make progressive use o indusIrial ecology principles IhaI
incorporaIelCdevelopmenIandmanagemenI.
4.b.2 Business Role in Effecting Change in the Community
TheirsIgeneraIionoindusIrialclusIerscanbeIracedbackIoIhe!990s,when
IhebackyardacIoriesmovedIospecializedSMLsinapreviouslyunzonedarea
alsoknownasIhecenIersaIelliIesysIemIhaIresulIedinincreasingproducIiviIy.
Agoodexampleis!apanesejusIinIime(!lT)modelclusIers.ThenexIgeneraIion
o clusIering o SMLs and mulIinaIional companies (MNCs) were known as
indusIrial esIaIes or indusIrial clusIers, science parks, corporaIe synergy sysIems,
and LnvironmenIal ManagemenI SysIems (LMS). 8y Ihis Iime, wiIh Ihe growing
negaIiveenvironmenIaleecIsoindusIrialclusIering,ecoindusIrialdevelopmenI
(LlD) has become an imporIanI sIraIegy wiIh dierenI perspecIives on aIIaining
higherecoeiciency:cleanerproducIion,greenproducIiviIy,ecoeiciency,green
economy,greenindusIry,greenjobs,andgreengrowIh.lnmanycasesoLlC,Ihe
environmenIalgoalswereachievedbyseIIingregulaIionsandemissionsIandards,
Ihroughecologicalpricing,eIc.
AwellknownexampleoanLlCisIheIownoKalundborginDenmark,asuccessul
example o an Lcological lndusIrial Park (LlP), which shows how implemenIing
indusIrialecologyconcepIscanachieveindusIrialsymbiosisowasIelows.OIher
major LlC iniIiaIives in Asia have been !apans ecoIowns (selunded), and Ihe
PrivaIe SecIor ParIicipaIion in Managing Ihe LnvironmenI (PPlML) lndusIrial
Lcology Module (wiIh UNDP) in Ihe Philippines. UnIil 2004, LlC iniIiaIives were
alsoimplemenIedandsIrengIhenedinoIherAsianeconomiesincludingThailand,
Taipei,China,IhePeoplesPepublicoChina,lndia,SriLanka,andAusIralia,beore
spreadingIooIherregionsincludingNorIhandSouIhAmericaandNorIhArica.
TheiniIiaIivesrangedromreducingbyproducIs,IocreaIingarecyclingorienIed
socieIybasedonaknowledgebasedeconomy,Ioachievingzeroemissiongoals,
andevenIuallycreaIingecociIies.lnIheabovecases,IheprimarychangeagenIs
were local business or business associaIions, which advocaIed insIiIuIional
innovaIions.
Role of Business in Eco-Industrial Clusters
Module 4b
Fig.4b.1: Strategies for Doing and Expanding Business in Industrial Clusters
Source:AuIhors.
98
LlC is noI an auIarkic indusIrial producIion sysIem. 8usinesses cooperaIe wiIh
eachoIherorecoeiciency,buIalsowiIhlocaleconomyandculIure,resulIing
in Iangible and inIangible beneiIs or a socieIy. As illusIraIed in lig 4b.!, LlCs
uIilizeIheollowingivedisIincIivebuImuIuallyreinorcingapproachesIoconnecI
businessandlocalcommuniIies,resulIinginincomegeneraIingacIiviIies.
SIarIing new and sIrengIhening exisIing businesses in Ihe clusIers Io

demonsIraIe Ihe abiliIy o Ihe inIerirm neIworks IhaI conIribuIe Io Ihe
increasedcompeIiIivenessoIheLlC,whichwillalsosIimulaIeecoinnovaIion
wiIhin.
8uildingandorganizingsupplychainrelaIionshipsbeIweenSMLslocaIedin
LlCs and ouIside businesses. Through indepIh knowledge o clusIer based
ecoproducIs, services, as well as exIernal markeIs, successul buyerseller
relaIionshipsIhaIcouldbeneiIindividualcompanieswiIhinIheclusIershall
beidenIiied.
LinkinglocalresidenIsIonewjobopporIuniIies.CompaniesoperaIinginLlCs
shallocusonIheuniquesIrengIhsoworkorcesavailableinruralareasraIher
Ihan concenIraIing on laborconsIrained urban areas. To ensure a sIeady
supplyoqualiiedworkersorcompanieswiIhinanLlC,specializedservices
likeIrainingandworkorcedevelopmenIprogramsareneeded.
Growing Ihe sales o ecoproducIs and services o companies. SupporIing
Ihe growIh o new small business requiring a susIained commiImenI rom
Ihe public and privaIe secIors, rom microinance Io markeI inormaIion,
Io ensure Ihe conIinued compeIiIiveness o urbanringe areas improve Ihe
prosperiIyoinIerconnecIedclusIercompanies.
PelocaIing exisIing business operaIions Io clusIers by providing aordable
IechnologiesandaccessibleinrasIrucIureIhaIwillaIIracIcompaniesIoLlCs.
lorsIarIupcompaniesorexisIingcompaniesrelocaIinginIoanLlCisaIIracIive
asiIoerscloseproximiIyIoIransporIaIionsysIems,easyprocuremenIoraw
maIerials,aplenIiulsupplyolabor,andeasilyaccessibleconsumermarkeIs.
lnrasIrucIuresandIechnologiesIhaIencouragerelocaIionareIobeprovided.
Fig.4b.2: Key Drivers of Businesses Operating within an Eco-Industrial Cluster

Source:AuIhors.
99
4.b.3 Building a Business Case for Eco-Industrial Clusters as an Inclusive
Development Model
TheirsIsIepindevelopinganLlCprogramisIoevaluaIeIhebusinessacIionsand
undersIand Ihe exIernal landscape. This will help Io idenIiy Ihe highesI prioriIy
businessoperaIions,evaluaIerisksandopporIuniIies,andbuildpolicysupporIor
speciicissues.
There are many compelling reasons or businesses Io Iake acIions Io improve
environmenIal and social impacIs wiIhin indusIrial clusIers. The business case
or a parIicular company depends on a varieIy o issues including secIoral
regulaIions,ecologicalooIprinI,sIakeholderexpecIaIions,businesssIraIegies,and
organizaIional culIure. The mosI common business drivers or operaIing wiIhin
LlCsaredepicIedinligure4b.2.
The key ocus o businesses is Io realize eiciencies by operaIing wiIhin an LlC
andreducingoperaIionalcosIs,includingenergy,waIer,andnaIuralmaIerialuse,
moIivaIion,andproducIiviIy.ProducIiviIyandeiciencyiniIiaIiveswiIhinlCrequire
a ull undersIanding o dierenI sIeps, Iechnologies, and environmenIal and
socialimpacIs(ligure4b.J).AddressingIherooIcausesoissuesIhroughsIrong
communicaIionwiIhclusIerirmsandsharedassessmenIcandriveimprovemenIs
andresulIinbeneiIs.8yoperaIingwiIhinclusIersandensuringcompliancewiIh
regulaIions collecIively, companies can proIecI Ihemselves rom poIenIial supply
chaindisrupIions,andlabor,environmenIal,andgovernancerisks.CollaboraIion
beIween companies can osIer producI and process innovaIion. LlCs embarking
on such iniIiaIives can add environmenIal value Io exisIing producIs and even
generaIe new ecoproducIs. lor example, new ecoproducIs may resulI in zero
environmenIalimpacIscomparedwiIhIradiIionalproducIs.lIisalsopossibleor
IheecoproducIsIobeIhedierenIiaIingacIororaparIicularLlCamongalllCs
andleadIoincreasingsalesoIradiIionalgoodsgeneraIedbyaparIicularLlC.
Module 4b
Fig.4b.4: Linking Business and Markets
100
Fig.4b.3: Functional Characteristics of Business in Eco-Industrial Clusters
Realizing efficiencies Managing business risks Creating new products
PeducecosIso
maIerialinpuI,energy,
IransporIaIion,eIc.
lncreaselabor
producIiviIy.
CreaIeecoeiciency
acrossgroupoirms.
Minimizebusiness
disrupIionrom
environmenIal,
social,andeconomic
impacIs.
LsIablishcompanys
repuIaIionandbrand
value.
MeeIevolving
cusIomerand
businessparIner
requiremenIs.
lnnovaIeorchanging
markeIs.
4.b.4 Establishing Sustainability Expectations for Eco-Industrial Clusters
8usinessesplayanimporIanIroleinLlCsandecoinnovaIion.8usinessperormance
is also closely relaIed Io supply side moderaIors linked Io markeIs and demand
sidemoderaIorsconnecIedIopolicyinsIrumenIs(seeligure4b.4),IhuscreaIing
economic and environmenIal value IhaI enables use o green producIs and
services. 8usiness models IhaI incorporaIe environmenIal values allow or beIIer
undersIandingoIheoverallcompeIiIivenessobusinessesIhaIprovideproiIable
producIsandservices,anddeliverconvenienceandsaIisacIionIocusIomers.
Theourkeyissuesare(a)eecIiveuseorawandwasIemaIerials,(b)knowledge
andIechnology,(c)employmenIgeneraIion,and(d)complemenIaryecoproducI
developmenI.AparIromamacrolevelperspecIiveoproducIionsysIems,wasIe
couldbeseenasaninpuIoranoIherproducIionsysIemwhereiIcouldbereused.
ln Ierms o LlC, Ihere were economic beneiIs as could be seen in Korea where
eiciency and resource uIilizaIion largely improved, leading Io beIIer ecological
andsocialcondiIions(improvingknowledgesharingandmanagemenIandoIher
spillovereecIs).However,iIisdiiculIIoseehowclusIerscombineandimprove
Ihe JPs (Peduce, Peuse, and Pecycle) Ihrough solid wasIe managemenI, waIer
usemanagemenI,andelecIriciIyandpowerusemanagemenI.lIisimporIanIIo
idenIiyIhelevelopoliciesIhaIcanbepuIinIoplace,wiIhmeasurableperormance
indicaIorsandmoniIoringandsupervisioncapabiliIies.
101
4.b.5 Improving Business Performance within Small and Medium Enterprise
Clusters
MoniIoring, reporIing, and veriicaIion are imporIanI, especially in Ihe conIexI
o SMLs. The key issue is how Ihe environmenIal perormance is going Io be
implemenIedandevaluaIed.DuringIheindusIrialprocess,IwoaspecIsoproducIion
areIheIechnologyusedIoproduceaproducIandwhaIisIobedonewiIhIhe
wasIegeneraIedinIheprocess.lnsIeadoignoringwasIeasanendproducI,iI
isimporIanIIolookorparInersIhaIcouldpossiblyuseIhewasIeasaninpuIIo
Iheir producIion sysIem, which becomes a undamenIal operaIional principle o
anLlC.SoIheissueishowwasIegeneraIedduringandaIerproducIioncanbe
reusedinanoIherproducIionsysIem.AparIrombyproducIsandwasIereuse,
downsIream polluIion conIrol (wasIe waIer IreaImenI plan, meeIing sIandards)
isIakenmoreandmoreseriouslybycounIriesandrequisiIelegislaIionsarebeing
puIinIoplace.8uIwhaIhasbeenlackingsoarisanupsIreamresourceuIilizaIion
analysis.
8usinessperormanceandbenchmarkingalsoimprovesindusIrialcompeIiIiveness
Ihrough eicienIly using resources, and reusing wasIe. lndusIries in general are
onlyinIeresIedinmeeIingenvironmenIalsIandards(byIhecheapesImeans)soas
IomeeIregulaIions,buIdonoIrecognizeIheoIherbeneiIsIhaIshouldbecome
moreingrainedasIheyprovidesocial,environmenIal,andmicroeconomicbeneiIs
opoverIyalleviaIionandjobcreaIion.Thus,businesseshaveIoberegulaIedand
providedwiIhincenIivesIoinIernalizeenvironmenIalbeneiIsandsocialcosIsin
IheiroperaIions.
4.b.6 Developing and Adopting Codes of Conduct for Businesses Operating
within Eco-Industrial Clusters
Codes o conducI are criIical Io esIablishing and managing expecIaIions or
cusIomers, suppliers, and oIher associaIed irms operaIing wiIhin an LlC. They
creaIeasharedoundaIionorIhesuccessoanLlC.lormanycompanies,code
o conducI is a naIural exIension o business value sIaIemenIs and seen as an
airmaIion o exisIing expecIaIions, raIher Ihan a new seI o requiremenIs.
When developing codes o conducI, Ihere are a number o naIional/provincial
environmenIal, economic, and social laws IhaI should also be consulIed and
reerenced.8ox4b.6depicIssuchacodeoranSMLclusIerinlndia.lorsocial
elemenIsoIhecode,companieswiIhinanLlCcanesIablishcommonexpecIaIions
on a broad range o issues concerning local employmenI, social securiIy, and
labor righIs. LnvironmenIal Iopics IhaI are mosI relevanI will vary rom one LlC
IoanoIher,whichmakesdialoguesandcollaboraIioncriIicalIoidenIiyingwhich
issuesaremosIimporIanIIobecoveredinIhecodeoconducI.lIisalsoimporIanI
IoregularlyveriyIheconIenIsoIhecodeIodeIerminewheIherupdaIedlanguage
andinIerpreIaIionisneeded.
Module 4b
102
Fig.4b.5: Case Study: Sago Industrial Cluster, Salem, India
Sago Serve industrial cluster
Sago Serve, an agroindusIry associaIion o more Ihan 450 progressive
SMLs operaIing as a clusIer in Salem, Tamilnadu, lndia, esIablished a joinI
codeoconducIIhaIprovidesauniIedvoiceorproducersandcusIomers
expecIaIions,sIreamlinedIheiroversighIooperaIionswiIhinaclusIer,and
allowedboIhIoocusonchangingenvironmenIalandsocialcondiIions.Lach
membercompanyoSogoclusIerhadcommiIIedIoadopIingIheollowing
codesoconducIandimplemenIedIheminIheiroperaIions:
Environment
!.PawmaIerialreuse
2.PecyclabiliIyandendolieproducI
J.MaIerialIoxiciIyandchemicals
4.Greenhousegasemissions
5.LnergyconservaIionandrenewableenergyuse
6.WaIerconservaIionandwasIewaIerIreaImenI
7.AirpolluIion
8.8iodiversiIy
Social
!.Childlabor
2.WagesandbeneiIsIolocallabor
J.lreedomoassociaIionandcollecIivebargaining
4.OccupaIionalsaeIy
5.NondiscriminaIion
6.lndusIrialhygiene
7.Workinghours
8.SocialsecuriIy
Management
!.ConlicIoinIeresI
2.AccounIingandbusinessrecords
J.Transparency
4.PeporIingmisconducI
TheollowingsIepswereunderIakeninIhedevelopmenIocodes:
!.ConsulIedwiIhallsIakeholdersincludingallsuppliers,consumers,governmenIs,
2. 8ased expecIaIions on exisIing norms o behavior raIher Ihan invenIing
new sIandards Io avoid undermining naIional sIandards and laws and
prevenIconlicIingexpecIaIions,
J.ConsulIedwiIhcrossuncIionalindusIriesoperaIingwiIhinIheLlC,
4.PeviewedIhecodeaIannuallyscheduledbusinessmeeIings.
103
Geographically,LlCshaverelevanceespeciallywhenIheyarelocaIedinurbanrural
ringe areas. Urban areas Iend Io have space limiIaIions buI high consumpIion
demand, whereas rural areas Iypically have plenIy o naIural resources, buI lack
manpower, indusIries, and consumpIion demand. This means ringe areas are
ideally locaIed Io complemenI Ihe ruralurban divide in resource use Io meeI
consumpIiondemand.
4.b.7 Case Study: Biotech Industry in Bangalore
AdapIaIionandscalingupisimporIanIinanLlC(e.g.,8ioIechClusIersinlndia).
AlIhough8ioIechclusIersweremosIlylocaIedinIhewesIandsouIhoIhecounIry,
8angaloreasaciIyhadIhelargesIbioIechclusIerinIhecounIry.TheciIy,aparI
rom being Ihe counIrys lT hub, has been gaining prominence in Ihe bioIech
indusIry.TheSIaIeoKarnaIakawhere8angaloreislocaIed,alreadyhaspremier
insIiIuIesandhasasingleconIacIpoinIoraccessingIheindusIriesinIhesIaIe
neIworkedbyIhegovernmenI.
lIwassIressedIhaI,asideromnaIionalpolicies,sIaIegovernmenIacIionsplayed
a crucial parI in Ihe developmenI o Ihis clusIer. The Millennium 8ioIech Policy
o Ihe sIaIe had already seI ouI Ihe vision o a bioIech revoluIion and seI up
speciicinrasIrucIureorIhedevelopmenIobioIechnologybydevelopingbioIech
corridors. The bioIech indusIry has evolved by inIegraIing Ihe ields o biology,
chemisIry,andengineeringandbyoeringsoluIionsinapplicaIionorienIedbio
relaIedindusIries(e.g.,biopharmaandbioagrisecIors).ThebioIechclusIersin
8angalorearebasedonanassociaIionohospiIals,agriculIuralbusinesses,lTand
oIher manuacIuring indusIries, universiIies, research insIiIuIes, and governmenI
agencies,IhusormingadiamondobusinessesoscaleandenvironmenIwiIh:
conIexI (policy, inrasIrucIure, eIc.), acIor inpuI condiIions (naIural resources,
HP,andP&D,eIc.),relaIedandsupporIingindusIries(lT,LogisIics),anddemand
condiIions(markeI)asIheourverIices.
The rapid growIh o Ihe bioIech indusIry has conronIed 8angalore wiIh Ihe
environmenIal challenges o polluIion, wasIe managemenI, and emissions. lor
example,solidwasIeinbioclusIersin8angaloreamounIsIo2,500Ionsperday,
o which 75% is composIable maIIer. MosI o Ihe 8ioIech clusIers already have
Iheir own waIer recycling and solid wasIe IreaImenIs planIs (where solid wasIe
is incineraIed and ashes laIer disposed). This is done in line wiIh inIernaIional
sIandards,andIheseaciliIiesaredemandedbyIheclienIs(mosIlylocaIedinIhe
UniIed SIaIes, Lurope, and !apan). Smaller irms sIill ace diiculIies in IreaIing
solidwasIeandgovernmenIcoordinaIionorecoservicescouldbenecessary.
Module 4b
104
Annex VII:
Role of Stakeholders: Businesses
Worksheet
On compleIion o Ihis exercise you will be in a posiIion Io undersIand how Io
improveIheposiIiveroleobusinessesinimprovingIheecoeiciencyolndusIrial
ClusIers.
YouareleadingaIeamopolicymakersIoimproveIheenvironmenIalperormance
o businesses in an LlC. The clusIer is made up o several large companies and
manysmallandmediumenIerprises(SMLs).ThelargecompaniesIendIooperaIe
as silos and enclaves wiIhouI much parIicipaIion o Ihe SMLs. You observe IhaI
IheenvironmenIalpolluIionoSMLsismuchhigherIhanIhaIolargecompanies
andIhaIIhereareonlylimiIedlinksbeIweenIhecommuniIyandIhebusinesses.
Workshop Duration:
!.8usinessesoperaIingwiIhinanLlCoIenIakeIheiniIiaIiveIomeeIchallenges
andharnessIheopporIuniIiesavailable.locusingonlyonbusinesscasemay
addvalueIhaIshouldbecomplimenIaryIoiIscorporaIesocialresponsibiliIy.
ldenIiy Ihree key areas IhaI your business could ocus on Io improve Ihe
environmenIalperormanceoIheLlC.
.
2. SomeLlCshaveesIablishedjoinIcodesandunderIakeaspecIsocollaboraIive
engagemenI. WhaI corporaIe sIraIegies will enhance Ihe environmenIal
perormanceocompaniesandemergingrisks?
.
105
Module 4b
J. ThepowerandpresenceoabigcompanywiIhinanLlCcanbecomeaunique
driverorbringingabouIposiIivechange.HowwillyouimproveIhelinkages
beIweenSMLsandlargecompaniesinIermsoenvironmenIalandeconomic
perormance?
..
4.LlCs are closely linked Io Ihe social abric o local communiIies. How will
you improve Ihe linkages beIween businesses and communiIy? How will
you convince businesses IhaI Iaking inIo accounI socieIal values and Ihe
environmenIwillincreaseIheoverallwelareandbusinessoperaIionsoirms?
.
5.CooperaIion beIween companies can creaIe signiicanI eiciencies, buI also
comeswiIhsomerisks,suchasinIernalcommiImenI,resourcedraining,and
unwillingnessIochangecoursebysomeparInersinIheshorIIerm.WhaIare
IhebeneiIsoindusIrialcooperaIionandhowcanIherisksbeminimized?
.
6.TheimporIanceoconsumersinIhebusinessenvironmenIisveryimporIanI
orLlCinnovaIion.Doyouagree?WhaIareIhekeyacIorsinchangingIhe
consumerbehaviorwiIhaviewIoimprovingLlCinnovaIion?

106
7. While iI is imporIanI Io esIablish clear roles or key uncIions IhroughouI an
LlC, iI is equally imporIanI Io seI comprehensive perormance sIandards.
lorexample,SogoServelaunchedasusIainablesupplychainenvironmenIal
managemenI program in lndia, Ihe speciic objecIives o which include (i)
usingaseIosocial,environmenIal,andmanagemenIindicaIorsasgoverning
principles o membership, avoiding suppliers whose pracIice are noI in line
wiIhregulaIions,(iii)adopIionoairandopencommunicaIion,(iii)regular
moniIoringoperormance.WhaIIypeodaIaneedsIobecollecIedoverIime
Io evaluaIe perormance? Develop a maIrix Io moniIor Ihe implemenIaIion
process.
..
8.NesIle lndonesia, a ood beverage company esIablished a dedicaIed supplier
developmenI deparImenI in 2005 Io achieve cosI savings and improve iIs
environmenIalperormance.ThecompanyinvesIedinworkingwiIhclusIero
producers Ihrough Iraining programs and providing Iechnical assisIance on
environmenIalriendlypracIices.TheollowingcapaciIybuildingapproaches
are adopIed by NesIle (i) inIegraIing learning and capaciIy building inIo
audiIing process, (ii) providing supplier/worker Iraining on major areas o
noncompliance,(iii)providingIoolsIhaIsupplierclusIerscanaccessanduse
independenIly,and(iv)creaIingorsupporIingalargeneIwork.AsaresulIo
Iheseprograms,byIheendo2009,NesIlehadsavedUS$5million.8yIheend
o2009,IhisiniIiaIivehadalsobeenreplicaIedin8angladesh,8razil,lndia,
Malaysia,andIhePussianlederaIion.DiscussIhesIrengIhsandweaknesso
suchapproaches.
.
9.When evaluaIing Ihe growIh o clusIers, ciIies may noI be an appropriaIe
uniI o analysis. New LlCs musI be viewed by adopIing a broader concepI,
linkingIheresourcesavailableinIheruralareas,IobeanchoredinIheringe
areas.Thus,planningorsuchanLlCrequirescoordinaIionamongprincipal
jurisdicIions and allows or peneIraIion o new indusIries. WhaI sorI o
incenIive mechanisms are needed or Ihe acIivaIion or relocaIion o eco
indusIriesIoringeareas?
.
107
ADBI. 2009. Regional Workshop on Eco-Industrial Clusters: Policies and Challenges, 811 December. Tokyo.
Anbumozhi, V., A. Chandie, and J. Portugal. Boosting the Environmental and Economic Competitiveness of
SME Clusters in Asia: Policies and Challenges. Background paper for the ADBI Regional Workshop on Eco-
Industrial Clusters: Policies and Challenges. Tokyo. 811 December.
Ayres, R., and L. Ayres. 2002. A Handbook of Industrial Ecology. Cheltenham, UK: Edward Elgar.
Boons, F., and J. Howard-Grenville. 2009. The Social Embeddedness of Industrial Ecology. Cheltenham, UK:
Edward Elgar.
Fonjallaz, D., S. Erkman, and A.S.F. Chiu. 2008. Eco-Industrial Development: An Assessment of the Initiatives
Undertaken in the Philippines Industrial Clusters. A Presentation for the ADBI Regional Workshop on Eco-
Industrial Clusters: Policies and Challenges. Tokyo. 811 December.
Fujita, T. 2009. Eco-Town Development Strategies in Japan and Future Contribution to Asian Cities. A
Presentation for the ADBI Regional Workshop on Eco-Industrial Clusters: Policies and Challenges. Tokyo.
811 December.
Karlsoon, C. 2008. Hand book of Research on Innovation and Clusters. Cheltenham, UK: Edward Elgar.
Kaushal, K. 2009. Pivotal Role of Sagoserve in Growth of Tapioca based industry in Salem Region of India.
National Conference on Industrial Clusters. Bangalore.
OECD. 2010. The Future of Eco-Innovation: The Role of Business Models in Green Transformation. Copenhagen:
Danish Business Authority.
UN. 2010. Supply Chain Sustainability: A Practical Guide for Continuous Improvement. New York, NY: United
Nations Global Compact.
Van Berkel, J., et al. 2008. Industrial and Urban Symbiosis in Japan: Analysis of the Eco-Town Program 1997
2006. Journal of Environmental Management 90: 1,5441,556.
Yong, G. 2009. Creating a Low Carbon Eco-Industrial Cluster in China: A Case of Shenyang. A Presentation
for the ADBI Regional Workshop on Eco-Industrial Clusters: Policies and Challenges. Tokyo. 811 December.
Module 4b
!0.HowdoesaccounIingorsocialandenvironmenIalacIorsimprovecompany
proiIs? l accounIing or social and environmenIal acIors improves Ihe
proiIocompanies,whydocompaniesnoIaccounIorIheseacIorsinIheir
businessdecisions?
.
.
.
Fig.4c.1: Role of Knowledge Networks in Eco-Industrial Clusters
Source:AuIhors.
108
Module 4c: Role of Knowledge Institutes in
4.c.1 I ntroduction: Knowledge Management within Eco-Industrial Clusters
KnowledgeisoIenconsideredIobeaundamenIalbasisorcompeIiIiveness,and
parIicularlyIaciIknowledge,iIcanbeargued,isasourceoadvanIagebecauseiIis
unique,imperecIlymobile,imperecIlyimiIable,nonsubsIiIuIableand,personally
or socially embedded. lCs are a place where knowledge is creaIed, Iranserred,
andmadeaccessible.lnLlCs,IheproximiIyoirmsplaysanimporIanIroleinIhe
inIeracIivelearningprocessinIhesenseIhaIiImakeslearninglessexpensive,more
reliable,andeasier.
ThepresenceoandlinkageswiIhknowledgeinsIiIuIesprovidecriIicalinpuIsor
businesses operaIing wiIhin LlCs by reducing IransacIion cosIs and encouraging
innovaIion.TheyalsoaciliIaIeIhecoordinaIionoeconomicdecisionsandsIimulaIe
IheIranseroknowledge.lIisimporIanIIonoIeIhaIknowledgeisbeingcreaIed
byvariousP&DacIiviIiesrapidlyandconIinuouslyIohelpindividualsacquirenew
skills and Io help organizaIions manage new ways o learning. Knowledge and
innovaIionsIhusgeneraIedareIranslaIedinIobusinessopporIuniIiesbyIheirms.
lnormaIionneIworksaciliIaIeIheexchangeoknowledgebeIweenalleconomic
agenIs involved and hence increase Ihe diusion process in Ihe economy.
Knowledge diusion acIiviIies involve Iechnology Iranser, buI also sharing o
knowledgeinmeeIingssuchasworkshopsandconerences.
8ox 4c.! shows various sources o knowledge wiIhin a clusIer. The exchange o
knowledge beIween knowledge insIiIuIes and irms can be ormal or inormal.
Knowledge insIiIuIes are basically Ihink Ianks, P&D insIiIuIes, and Iraining
insIiIuIes. 8usinesses eiIher have Iheir own inIernal arrangemenIs or P&D and
capaciIy building sIrucIures wiIhin Iheir organizaIion or Ihey rely on exIernal
arrangemenIs wiIh knowledge insIiIuIes. As happened in Ihe Maniwa indusIrial
clusIer,researchersoIheknowledgeinsIiIuIesandmanagersoirmswiIhinIhe
LlCsharevaluableknowledgewiIhinormalconIacIs.Hence,inormalconIacIsare
animporIanIchanneloknowledgediusion.
lnIheecoIownoKiIaKyushu,Iechnological,markeI,andmanagerialknowledge
are exchanged purposely beIween irms and knowledge insIiIuIes Io osIer
innovaIion. lirms in LlCs can acquire knowledge rom oIher clusIers Ihrough
sIraIegic parInerships, aciliIaIed by knowledge insIiIuIes. ligure 4c.! below
illusIraIesIheroleoknowledgeinsIiIuIesinIheLlCdevelopmenIprocess.
109
Role of Knowledge Institutes in Eco-Industrial Clusters
Module 4c
ClusIers are agglomeraIions o inIerconnecIed companies and associaIed

insIiIuIions, noI only business associaIions, buI also Ihose IhaI provide Iraining
and Iechnical assisIance. This conglomeraIion becomes a home o innovaIion,
as innovaIion occurs where acIors o dierenI backgrounds inIeracI. A Iypical
characIerisIicoanLlCisIheIranseroknowledgebeIweenbusinesses,despiIe
IheacIIhaIIheycompeIewiIheachoIher.lndusIrialsymbiosisandIechnological
proximiIyoIheirmsandinIerirmsneIworksareIhekeycondiIionsinanLlCavoring
Ihesharingoknowledge,learning,andinnovaIion.SourcesoknowledgeinLlCsare
lisIedin8ox4c.!.
Box 4c.1: Sources of Knowledge in Eco-Industrial Clusters
Intra-firm sources include the following:
Learningbydoing,IhepassiveexperienceoproducIion,
lmproved processes and pracIices derived rom Irialanderror
experimenIaIion,
AdapIaIion and improvemenI o exisIing Iechnologies (such as reverse
engineering),and
AligningoproducIs,processes,andpracIiceswiIhinIheirm.
Intra-cluster sources include the following:
KnowledgespilloversanddiusionbeIweenIheknowledgeinsIiIuIesand
companies,
Knowledgespillovers,diusionbeIweenusersandproducersomachinery,
andmaIerialorproducIionrelaIedservices,
lnIraclusIermobiliIyoskilledlabor,
TrainingandskilldevelopmenIIhroughclusIerbasedandclusIermediaIed
iniIiaIives,
LinksbeIweenenIerprisesandclusIerbasedIechnologyinsIiIuIes,suchas
IechnologydevelopmenI,adapIaIion,IesIing,andcerIiicaIion,
CollaboraIion among clusIerbased enIerprises or adapIaIion and
IechnologydevelopmenI,includingmachineryandproducIdesign,and
Links beIween enIerprises and cusIomers locaIed in Ihe clusIer, including
mulIinaIionalcorporaIionsandlargeirms.
Sources outside the cluster include the following:
CusIomersandIraders,
MachineryandoIherinpuIsuppliers,
CollaboraIiveIesIingorIechnologydevelopmenIwiIhIechnologyinsIiIuIions
andenIerprisesouIsideIheclusIer,
LxIernallysourcedIraining,and
VisiIsouIsideclusIersandirms.
110
4.c.2 Role and Impact of Knowledge Institutes on the Emergence and
Growth of Eco-Industrial Clusters
KeyIoIhedevelopmenIoLlCgrowIhisasIronglocalIechnologyandknowledge
baseandaccessIowellIrainedhumanresources.TheroleoknowledgeinsIiIuIes
inLlCormaIionandgrowIhcanbesummarizedasollows:
( i ) PreCondiIionsorClusIerLmergence
UniversiIies and especially research insIiIuIes are imporIanI Io creaIe an
environmenIconduciveIoclusIerormaIion,
ln Ihe iniIial sIages, universiIies have Io be Ihe main driver behind clusIer
ormaIion,
lnaregionwiIhanesIablishedeconomicandresourcebase,relaIedbusiness
services, and a good supply o wellIrained manpower, a large knowledge
insIiIuIe can be Ihe main acIor leading Io Ihe emergence o a knowledge
inIensiveclusIerinaieldalignedIolocaleconomicadvanIageorinaieldin
whichiIwouldhaveouIsIandingresearchorIrainingcapabiliIy.
( i i ) LlCTransormaIionandGrowIh
Pesearch insIiIuIes and Iechnical colleges are a key source o wellIrained,
specializedhumanresourceswiIhappropriaIeecoIechnologicalandresearch
skillsIhaIareneededIosupporILlCgrowIh,buIIheirprogramssomeIimes
lagLlCneeds,
locused research acIiviIies by local knowledge insIiIuIes can be signiicanI
conIribuIorsIoLlCgrowIhbysupplemenIinglocalprivaIeandpublicsecIor
acIiviIies,especiallywhenIhoseacIiviIiesarelimiIed,
Close cooperaIion beIween indusIry, governmenIs, and universiIies is a key
characIerisIicogrowingLlCs.
4.c.3 Building Cooperation between Eco-Industrial Cluster Firms and
Knowledge Institutes
lrom a regional developmenI perspecIive, knowledgebased elemenIs are key
deIerminanIs o LlC sIrengIh, as Ihey need Io provide producIs and services in
a rapidly changing business and policy environmenI, where knowledge musI be
generaIed and shared conIinuously. Knowledge, learning, and innovaIion are
Ihe engines o growIh in an LlC. CollaboraIion beIween irms and knowledge
insIiIuIes (local universiIies and research insIiIuIes) IhaI assisI in developing
enablingIechnologiesanddiusemarkeIinormaIionishenceanoIherimporIanI
parInership in Ihe LlC. Similarly, building a good rapporI wiIh governmenI
regulaIory auIhoriIies will aciliIaIe Ihe process o LlC developmenI and smooIh
implemenIaIionoIheLlCsplans.TheseincludegovernmenIauIhoriIiesorming
and aciliIaIing alliances beIween universiIies and businesses or research and
developmenIoecoinnovaIions,andprovidingsupporIorIhepromoIionoeco
producIsIhroughnichemarkeIs.
111
Module 4c
Box 4c.2: Case of Zero Emission Research Initiative (ZERI)
Zero Lmission Pesearch lniIiaIive (ZLPl) is an example o nongovernmenIal
parIicipaIion eorIs in research and osIering ecoindusIrial developmenI
iniIiaIivesin!apanromzerowasIeemission.LsIablishedin!994,ZLPlacIs
asaIhinkIankonewlyormedclusIersorprovidingIechnicalandscienIiic
inormaIion. The inIerirm neIwork and proximiIy o businesses allow
learning neIworks involving research insIiIuIes, indusIry associaIions, and
localgovernmenIIocreaIeknowledgeinclusIersIhroughinIerorganizaIional
collaboraIiveinIeracIion.
Box 4c.3: United Nations Industrial Development Organization (UNIDO)
Clusters & Network Development Programme
UNlDOIhroughiIsClusIers&NeIworksDevelopmenIProgrammeismandaIed
Io reviIalize clusIers and build neIworks in developing and IransiIion
economies.ThusUNlDOalsoworkswiIhlocalinsIiIuIionssIrengIheningIheir
capaciIy. Services provided by UNlDO are in Iwo main areas: (a) Technical
cooperaIioninIheormulaIionandimplemenIaIionoclusIerdevelopmenI
projecIs. UNlDO assisI beneiciary counIries aI all sIages o Ihe clusIer
developmenI meIhodology, (b) lnsIiIuIional capaciIy building and policy
advice or Ihe disseminaIion o clusIer developmenI policies aI regional or
naIionalscale.UNlDOprovidesIrainingorpolicymakers,projecImanagers,
and policy advisors involved in clusIer developmenI. Training programs are
deliveredinIhebeneiciarycounIriesaswellasaIIheregionalandgloballevel
andlasIromaewdaysIoseveralmonIhs.
SupporIiveknowledgeneIworksandcapaciIybuildingacIiviIieswillcreaIenecessary
momenIum Io enable inIerirm neIworks, ecoinnovaIions, and new business
sIraIegiesIobecomearealiIywiIhinaclusIer.ThisiswhereknowledgeinsIiIuIes
havearoleIoplay.P&DacIiviIiescansimplybeIhepromoIionanddevelopmenI
onewmaIerials,andcleanIechnologiesandpracIices.lollowinginnovaIionand
Iranser o new Iechnology inIo Ihe business, capaciIy building o Ihe irms is
equallyimporIanIorIhemIooperaIeIheIechnologieswiIhsuicienIknowhow
andskills,IokeeppacewiIhIhelaIesIinnovaIions.KnowledgeinsIiIuIesservean
imporIanIpurposeinIhisregardbydesigninganddeliveringIraining.
lndusIrial symbiosis is Ihe oundaIion o an LlC, and is also one o Ihe drivers
behindbusinessinnovaIion.8usinessesinnovaIionlourishesinclusIersraIherIhan
in individual irms. LlC osIers inIerorganizaIional collaboraIive P&D Ihrough a
sIraIegyoinvesIinginjoinIresearch,andIhesubsequenIsharingoknowledgeand
knowhow Ihus generaIed. UniversiIies and Iraining insIiIuIes play an imporIanI
roleindeveloping,diusing,andadopIinginnovaIioninIheLlC.GovernmenIcan
alsoplayIheroleoconnecIingprivaIeknowledgeinsIiIuIesandLlC.NaIionalP&D
policyshouldworkcloselywiIhIhebusinessanduniversiIycommuniIiesIocreaIe
anecoindusIrialresearchagenda.GovernmenIsshouldalsoprovidesupporIor
innovaIionbyundingP&DacIiviIies.
112
3R Knowledge Hub (3RKH)Asian Institute of Technology
AwasIereduce,reuse,andrecycleknowledgehubwasjoinIlycreaIedbyAlT,
AD8,andUNLP.ThisknowledgehubwasesIablishedwiIhIheaimoachieving
Ihe ollowing objecIives: (a) SupporIing and sIrengIhening AsiaPaciics
regional capaciIy on JP in generaIing innovaIive developmenI concepIs
and Iechnologies or JP relevanI Io AD8s developing member counIries
andpromoIingneIworkingamongIheregionalinsIiIuIesorJPknowledge
disseminaIion,(b)MainsIreamingnewconcepIsoJPininnovaIion,science,
Iechnology, managemenI, and overall developmenI o relaIed ields in Ihe
region,(c)PromoIingJPinormaIionexchangeandsharingoknowledge.
AsameansoachievingiIsobjecIives,IheprimeuncIionsoIheJPKHwere
asollows:(a)CreaIing,collecIing,andcapIuringJPknowledge,(b)SIorage
andreIrievaloJPknowledge,and(c)Sharing,enrichinganddisseminaIing
JPknowledge,mainlyIhroughregionalneIworkingandIraining.
Japan International Cooperation Agency (JICA)
!lCAprovidesassisIanceinIhreecoreareas:developmenIoindusIrialbases,
organizaIional/insIiIuIional reinorcemenI and capaciIy developmenI. !lCAs
projecIsalsopromoIelocalindusIriesandeconomies,suchasIheOneVillage,
OneProducIprograminMalawi.ODAloansandIechnicalcooperaIionwiIh
SMLs are anoIher area o !lCA supporI. ln relaIion Io indusIrial clusIering
speciically,sIarIingMay2008!lCAsupporIedaIhreeyearcapaciIybuilding
supporI Io Ihe Davao lndusIry ClusIer CompeIence LnhancemenI ProjecI
(DlCCLP) in Philippines or Ihe indusIry clusIer Ieams, lead agencies, and
privaIesecIorleaders,aswellasronIlinesIaengagedinSMLdevelopmenI.
!lCAPesearchlnsIiIuIeisalsoinvolvedinresearchacIiviIiesaimedaIindusIrial
clusIers.!lCAPlhasconducIedanLmpiricalSIudyonlndusIrialClusIersin
Arica,IhePoleoSpace,lnrasIrucIure,HumanPesourcesandSocialCapiIal
joinIlywiIhIheWorld8ankAricaPegion.ThesIudyexploredIhedevelopmenI
processoclusIerbasedmicroandsmallenIerprisesinAricaandempirically
analyzedIheeconomicsiIuaIionsosuchindusIrialclusIersinsixcounIries
Ghana,Kenya,Tanzania,Pwanda,Cameroon,andMauriIius.
Box 4c.4: One Tambon One Product (OTOP)
OTOPwasesIablishedin200!andbasicallypromoIesThaiproducIsromevery
village.ThepurposeoIhiscampaignwasIoimproveruralenIrepreneurship
byreinemenIoIhelocallyavailableresourcesandproducegoodsIhaIare
accepIable inIernaIionally. Typical OTOP producIs are handicraIs, IexIiles,
coIIon and silk garmenIs, poIIery, woven handicraIs, arIisIry iIems, giIs,
AI Ihe naIional level, some caIalysI organizaIions like cenIers or promoIion o
SMLsandcleanerproducIionsplayanimporIanIroleinLlCdevelopmenI.These
cenIersareuseulinosIeringlocalknowledgeandskillsandencourageinnovaIion
IhroughcollaboraIionsbeIweenuniversiIiesandindusIries.8ox4c.4providesan
exampleinThailand,whereindusIrialclusIersplayanimporIanIrolebyaciliIaIing
inIeracIion and knowledge sharing among members wiIh Ihe assisIance o
governmenI,indusIryassociaIions,andcommuniIyneIworkingorganizaIions.
113
Module 4c
ashion accessories, household iIems, ood craIs, and many oIher arIicles
indigenous Io each communiIy. OTOP promoIes: (a) ProducIion o craIs
inruralareas,(b)MicroandsmallenIerprisesinIheruralcommuniIies,(c)
LmploymenI and income generaIion, (d) TradiIional skills and creaIiviIy Io
peneIraIeor/andexIendlocalandexIernalmarkeIs.
Thailand Centre for Transfer of Cleaner Production
The Thailand MinisIry o Science, Technology and LnvironmenI (MOSTL)
includes Ihe Technology PromoIion DeparImenI (TPD). TPD was ounded in
!992IoberesponsibleordevelopingandIranserringIechnologiesaswell
asenhancingandsIrengIheningcapabiliIyIoacquireandIranserIechnology
rom boIh oreign and domesIic sources Io SMLs, especially household
agriculIuralenIerprises.ThemainormaldeliverymechanismoIheTPDisIhe
PegionalTechnologyTranserandPromoIionCenIer(PTTPC),whichincludes
ouruniversiIies.PTTPCisparIicularlyimporIanIorIargeIinggranIunding
rom TPD, all o which is or universiIy researchers. The universiIies also
provideouIreachservicesIohelpTPDreachiIsaudienceoruralhouseholds
andSMLs.
TDPs main acIiviIies are: (a) Organize Irainings and seminars on selecIed
Iechnologies Io Ihe IargeI groups, (b) Publish educaIional and Iraining
maIerialsincludingaudio/visualIools,newsleIIers,andmagazines,(c)Provide
granIsIoacademicinsIiIuIionsorsupporIingP&DinmachineryinnovaIion
developmenI,(d)ProvidesoIloansromarevolvingundorP&DinIargeI
groups, (e) Provide duIy reducIions or selecIed Iechnologies, () SIimulaIe
innovaIionIhroughanaIionalawardconIesI,(g)SeIupIechnologydaIabases
andanlnIerneIdeliverysysIem.
The GovernmenI o Thailand (GoT) has decided Io Iransorm Ihe exisIing
Technology PromoIion DeparImenI (TPD) inIo Ihe CenIer or Transer o
CleanTechnology(CTCT).CTCTwillbecomeThailandsnaIionaldaIaandweb
neIworkingcenIerorCleanIechnologiesandCleanerProducIion(CP).CTCT
will also reviIalize iIs Science and Technology Pevolving lund or P&D and
iIsuniversiIygranIsprogramIoprovidenewsupporIorcleanIechnologies.
MOSTL requesIed supporI rom Ihe Asian DevelopmenI 8ank (AD8) Io
sIrengIhenCTCT.
ThecasesIudiespresenIedinboxes4c.24c.4,ouIlineIheevoluIionoanewIype
o knowledge insIiIuIesdierenI rom Ihe IradiIional universiIyIeaching and
researchmodelinIoamoreenIrepreneurialmodelwiIhecoriendlydevelopmenI
asanaddiIionalimporIanImission.TherelaIionshipbeIweenLlCandknowledge
insIiIuIes collaboraIion is a mulIidimensional relaIionship involving academic
researchers,sIudenIs,andecoindusIryproessionals.lIIakesmanyorms,ranging
rom inormal exchanges o knowledge during joinI research Io ormal business
conIacIsorIhepurposeocommercializaIion.
UniversiIies are among Ihe key knowledge insIiIuIes IhaI provide Ihe innovaIion
inrasIrucIure needed or LlC growIh and susIainabiliIy. Lven i Ihey are noI
necessary or a clusIer Io emergence, Ihey are needed or an LlC Io grow and
become susIainable. Lmpirical evidence shows IhaI knowledge insIiIuIeLlC
collaboraIion is very much indusIry secIordependenI, IhaI physical disIance
Fig.4c.2: Eco-Towns as Local System of Innovation
Source:NorIon(2007).
114
8elow we presenI case examples rom !apan, where involvemenI o knowledge
insIiIuIesexpliciIlyconIribuIedIoIhesuccessoLlCs:
(a)KiIakyushuLcoTown
KiIakyushuin!apanisarecognizedpioneerinIheworldwideenvironmenIalarena,
having received key awards and disIincIions or iIs environmenIal prowess, such
as Ihe LarIh SummiI 2002 SusIainable DevelopmenI Award and inclusion in Ihe
UniIedNaIionsGlobal500.ThekeydriversbehindIheciIyssuccesswiIhiIseco
IownprojecIareIheunwaveringocusoiIsleadershipandadminisIraIors,iIsclose
Iies and cooperaIion wiIh research insIiIuIions, and similar Iies wiIh companies
andindusIries.
TheesIablishmenIoIheecoIownoccurredinphases.lnIheirsIphase,aregional
developmenImeasuredesignedIoinIegraIeindusIrialacIiviIywiIhenvironmenIal
conservaIionIookplace.DuringIhisphase,KiIakyushusHibikiPecyclingComplex,
LcoTownCenIer,andComprehensiveLnvironmenIalComplexwereIheonlysiIes
IargeIed. ln 2002, however, Ihe ciIy modiied iIs plans Io expand Ihe coverage
area Io Ihe 2,000hecIare Hibikinada area. Two years laIer, in 2004, Ihe enIire
beIween Ihe LlC and knowledge insIiIuIes maIIers, and IhaI universiIy research
spilloverismoreprevalenIinregionswiIhaneIworkingculIure,acriIicalmasso
knowledgeworkersandbusinessservices,andachampionresearcher,conIinuously
promoIing cooperaIion and a neIworking spiriI beIween universiIies, research
insIiIuIes,indusIry,andgovernmenI.
4.c.4 Case Study: Japans Eco-Towns and Industrial Clusters
!apansecoIownprogramwasiniIiaIedIopromoIezeroemissionsromlocal
indusIries. This iniIiaIive led 26 various !apanese indusIrial clusIers. ligure 4c.2
depicIs Ihe role o mulIiple acIors in Ihe sysIem o innovaIion in !apanese eco
Iowns,knowledgeinsIiIuIesbeingoneoIhoseacIors.
Fig.4c.3: Kitakyushu Model of Eco-Industrial ClustersKnowledge Institute Cooperation
Source:AuIhors.
115
Module 4c
48,500hecIare expanse o KiIakyushu CiIy was ormally covered by Ihe projecI.
KiIakyushumakesuseoIhreedisIincIsIraIegiesIhroughwhichiIaimsIopromoIe
environmenIal indusIries: Ihe irsI is basic human resource developmenI, Ihe
second Ihe organizaIion o experimenIal sIudies, Ihe Ihird commercializaIion.
TheseIhreeIhrusIsareisolaIedaIpresenI,buIcollaboraIionbeIweenproponenIs
oeachIhrusI,aswellasbeIweenIheparIiesconcerned,isIomaIerializeinIhe
near uIure. AIer KiIakyushu, several oIher ciIies have also become ecoIowns,
e.g., Kawasaki, MinamaIa, and Naoshima. 8uI KiIakyushus approach (lig 4c.J)
and IhrusI seI iI aparI rom Ihe oIher ecoowns in several key respecIs. One o
IheseareasisIheclusIeringorecyclingandenvironmenIalindusIries,iniIiaIives,
and irms wiIhin Ihe ecoIown area. The complex, as a consequence, conIains
IhelargesInumberoIhesekindsorecyclingprojecIsoall!apaneseecoIowns.
Secondly, Ihe imporIance o Ihorough inormaIion disclosure is emphasized.
KiIakyushu companies are required Io allow Ihe public Io access Iheir aciliIies
reely in order Io build public conidence in Ihe projecI. LasIly, KiIakyushu has
excelled aI geIIing iIs myriad commercial indusIries and research insIiIuIions Io
collaboraIeandsynergize.
(b)ManiwaLcolndusIrialClusIer
TheManiwabiomassindusIrialclusIerdescribedinModule2,reliedmoreonIhe
parInershipouniversiIieslocaIedouIsideIhecommuniIyIhaIcanleadIheway
inecoinnovaIionshappen,insIeadorelyingonsubsidiariesandbrachesolarge
irms wiIh headquarIers elsewhere. This shiI required developing joinI working
groupsandimplanIaIionplans,includingvenIurecapiIalasillusIraIedinlig4c.4.
ThisexperienceisinsIarkconIrasIIoKiIaKyushuecoIown.
UniversiIies,
NaIional&
PreecIural
Pesearch
lnsIiIuIions
PrivaIeLnIerprises
Survey
Survey
Kyushu Industrial Technology Center
(KITC)
LxaminaIionCommiIIeeorNew
lndusIryCreaIion
LcolndusIryClusIer
Collaboration
Development
Creation of
New Eco-Industries
lndusIrializaIion,
CommercializaIion
TriparIiIeP&D
ApplicaIionIo
NaIionalSysIem
Kyushu Bureau of
Ministry of Economy Trade and
Industry (METI)
Develop Joint Working Group
Develop!oinIMissionSIaIemenI
DeIermineMembership&lunding
ldenIiyCommonGoals
DevelopaConsensusDecision
MakingProcess
ldenIiyMeasuresoSuccesses
SIudenIlaculIylmmersion
Program
PlanIVisiIs
CollaboraIePesearch
Course/Seminars
Knowledge Institute
TokyoUniversiIy
OkayamaUniversiIy
Maniwa Eco-Industrial Cluster
Keylirms
Evaluation & Update Process
DocumenIAcIiviIies,8eneiIs&Program
PevisiIGoalsoParInership
Measurer&lmproveProcess
lndusIryTrainingand
lnnovaIionNeeds
ldenIiy8eneiIso
CollaboraIion
PrivaIePesources
ldenIiyTraining&LducaIion
Needs
ldenIiy8eneiIso
CollaboraIion
LearnabouIparInerKnowledge
lnsIiIuIe
Develop Collaboration and
Implement
Fig.4c.4: Maniwa Model of Eco-Industrial Clusters and Knowledge Institute Cooperation
Source:AuIhors.
116
ThecasesIudiesdescribedabovehaveimplicaIionsorIhedesignopolicies
or LlC developmenI. Knowledge insIiIuIes IhaI supporI Ihe emergence and
growIhoLlCsshould:
LnsureIhaIdevelopmenIisdrivenromwiIhinaclusIerandprovidesupporIIo
IheirmorconsorIiumledbyiI.LxcepIionscouldbemadeinIhecaseolarge
universiIies wiIh a wellesIablished repuIaIion in regions wiIh solid business
base,whicharebigenoughandhavesuicienIvisibiliIyIoIakeIheleadinLlC
developmenI.
Work joinIly wiIh local business and governmenIs Io coordinaIe all clusIer
supporI acIiviIies and develop a supporIive local inrasIrucIure. ln parIicular,
IhereshouldbebeIIerplanningoracademicprogramsaIuniversiIies,research
insIiIuIes, and vocaIional colleges Io meeI local demand or a highly skilled
manpowerandadvancedecoknowledgeandreduceIhelagoIenobservedin
growingclusIersbeIweenindusIryneedandknowledgesupply.
Develop aI Ihe knowledge insIiIuIes an ouIward looking enIrepreneurial
culIure, encourage indusIry linkages in educaIional programs and research
acIiviIies,andsupporIgreenIechnologyIranseracIiviIies.
8oosIP&DacIiviIies,especiallyappliedresearchacIiviIieswhichIendIohave
a higher local impacI Ihan basic research, aIIracI local/naIional/inIernaIional
research unding, which should ulIimaIely lead Io a higher share o asI
growingsIarIupsinIheregionswhereLlCsaremosIacIive.
(i)
(ii)
(iii)
(iv)
117
Module 4c
Annex VIII:
Role of Stakeholders: Knowledge Institutes
Worksheet
OncompleIionoIhisexerciseyouwillbeinaposiIionIoundersIandIheroleo
knowledgeinsIiIuIesandIhepolicyonknowledgemanagemenIaILlC.
You are leading a Ieam consisIing o a policymaker, a represenIaIive rom a
local communiIy based organizaIion, and a represenIaIive o a small indusIries
associaIion.YourjobisIodesignasIraIegyIoengageaknowledgeinsIiIuIeinIhe
clusIerorbusinessinnovaIionandcapaciIybuilding.PleasediscusswhaIsIraIegies
youwouldadopIIoengageknowledgeinsIiIuIesinIoIheLlCinyourcounIry.
Workshop Duration:
1.5 hours [Study Time45 minutes: Group Discussion45 minutes]
!.UniversiIiesandoIherhighereducaIioninsIiIuIionshavelongbeenconsidered
askeyelemenIsoLlCsassourcesoIechnologicalknowledgeandqualiied
manpower. Do you Ihink Ihe businesses operaIing wiIhin a clusIer should
opI or collaboraIive P&D wiIh knowledge insIiIuIes raIher Ihan individual
aIIempIsaIinnovaIion?lso,why?WhaIareIheadvanIages?
.
2. PoIenIialenIrepreneurswiIhinnovaIiveideas,oIencannoIconnecIwiIha
criIicalmassooIhercompeIiIiveirmswiIhinclusIerswiIhavarieIyoskills
andanurgeorsimilarexperimenIaIion,whichIriggersinnovaIion.lnsucha
case,whaIshouldbedoneIopromoIecollaboraIiveP&D?
118
J.LlCormaIionandinnovaIionsinIheormoIechnologyIranser,human
resourcedevelopmenI,andnewbusinessdevelopmenIcomeIoruiIiononly
iinancingisorIhcoming.AcloserlookaIIhedaIaoinancingoinnovaIion
comesromseedcapiIalrominvesIors,universiIyunding,andcompeIiIive
granIsavailableaInaIionallevel.WhaIcouldbeIhepoIenIialsIraIegiesor
unding/inancingcollaboraIiveP&DinIheclusIer?
.
4. There are noIable examples o universiIies IhaI have promoIed innovaIion
and ormaIion o ecoclusIers. The IruIh is IhaI any knowledge insIiIuIe as
a driver o clusIer developmenI has only ew insIrumenIs IhaI iI can bring
Iobear.Thescale,disciplinarybreadIh,qualiIy,andresearchinIensiIyoIhe
universiIysysIeminanLlCpowerullyaecIIhelocallabormarkeIandcapaciIy
sIrengIhening o irms. Local universiIies can seI up incubaIors or sIarIup
acIiviIies,seIasidesmallamounIsoseedmoneyornewvenIures,andprovide
incenIivesIoIheirresearchersIoconducIreachandaIIempIIocommercialize
promisingecoinnovaIions.HowdoyouplanIoropeingovernmenIsupporI
orsuchuniversiIyindusIrycollaboraIionsaIanLlClevel?
.
Source:!enkins,LeichiI,andWendI(2006).
119
Module 4c
Entrepreneurial policy Industrial recruitment incentive Labor regulations
PublicvenIurecapiIalunds 8ondbasedinancing Minimumwagelaws
TechnicalassisIancecenIer Loansorbuilding,consIrucIion,
equipmenI,andmachinery
lairemploymenIlaws
8usinessincubaIors LoanguaranIeesorbuilding,
consIrucIion,equipmenI,and
machinery
AbsenceorighIIoworklaws
Pesearchparks AidorexisIingplanIexpansion
PesearchanddevelopmenIIax
incenIives
MaIchingundsorciIycounIry
indusIrialinancing
lundsordevelopmenIrelaIed
publicworks
lncenIivesoresIablishingindusIrial
planIs
TaxexempIiononlandcapiIal
improvemenIs
TaxexempIiononequipmenIand
machinery
lnvenIoryIaxexempIionorgoods
inIransiIandinmanuacIuring
invenIories
TaxexempIiononnewequipmenI
andrawmaIerials
TaxincenIiveorjobcreaIionand
indusIrialinvesImenI
AcceleraIeddepreciaIionor
indusIrialequipmenI
SIaIesupporIedIrainingand
reIrainingoindusIrialworkers
SIaIeinancedspeculaIivebuilding
lreelandorindusIry
SIaIeandciIyownedindusIrial
parksiIes
SIaIeundingociIycounIry
masIerplans
leasibiliIysIudiesorrecruiImenIo
planIs
PecruiIingandscreeningo
indusIrialemployees
TrainingoIhelongIerm
unemployedpopulaIion
TechnicalassisIancewiIh
procuremenIbids
5.SIaIelevellndusIrialPromoIionPoliciesinIheUniIedSIaIesaresummarizedasollows:
120
WhaI is missing in Ihe lisI? And whaI policies are needed Io promoIe local
innovaIionsromaclusIerperspecIive?
.
6.UndersIandingIheeconomicandenvironmenIaldynamicsoclusIeringand
mechanicsoiIsormaIionareessenIialelemenIsoranalyzinghowasuccessul
LlC operaIes, buI iI sIill does noI explain why some groups o clusIers are
ableIoopIimizeIhebeneiIsbyclusIeringwhileoIhersarenoI.Thereclearly
remainsanoIherdimensionIhaIconsidershowregionalknowledgeneIworks
areormedalongwiIhclusIerormaIionandshareIheircollecIiveouIcome.ln
IermsomoIivaIion,LlCshaveIhepoIenIialIogainmoreIhroughcooperaIion
o knowledge neIworks, even Ihough rewards are ineviIably asymmeIric. ln
your experience, how do knowledge neIworks evolve aI LlC level and how
doesaregionalknowledgeneIworksIrengIhenLlCinnovaIioninaregion?
.
7. ThelnIernaIionalKiIakyushuTrainingAssociaIionesIablishedin!980,leveraged
onIheexperienceandknowledgeoKiIakyushubasedirmsinenvironmenI
renewal and oIher clusIers sIruggling wiIh polluIion. The municipal
governmenIlaIeralsoesIablishedanLcoIownasapublicprivaIeparInership
model, which produced new irms ocusing on environmenIal consulIing,
recycling,andindusIrialwasIemanagemenI.Thiswasalsomadepossibleby
abouI40researchersworkingonrelaIedprojecIs.SomeirmsworkinginIhe
areahaveacIivelycollaboraIingwiIhlocaluniversiIies.lorinsIance,MiIsubishi
HeavylndusIrieshasseIuparesearchanddevelopmenIaciliIyaINagasaki
UniversiIyandlujiLlecIricSysIemisworkingwiIhKumamoIoUniversiIy.Lco
indusIrialrevivalIhroughclusIeringbyparInershipwiIhlocaluniversiIiesisa
desirablesIraIegyorKiIakyushuandoIhersimilarLlCs,buIdangerliesinIhe
acIIhaIexisIingacIiviIyispersisIenI,especiallywheniIhasbeenpreviously
successul.Perversely,manyregionssIilllinkedIodecliningindusIrieswiIhouI
diversiyingIheireconomicbaseunIilIhecycleodeclineisenIrenchedand
pervasive. How can a local universiIy help a declining region Io seI an eco
eiciencygoal,andcomeupwiIhasIrucIureorIhinkingabouIachievingIhis
goalandaIoolorguidingIhesIraIegy?
.
121
Module 4c
8.WiIhinanLlC,universiIyindusIrycollaboraIionissupporIedbyindusIry,
universiIies,andgovernmenIsandIhroughinancialandinkindexchangesand
granIs.KnowledgeinsIiIuIeLlCcollaboraIionalsoinvolvesandinrasIrucIure
IhaI supporIs in greaI parI local inIeracIions and exchanges. WhaI could
be a lisI o mosI common Iangible Iypes o supporI or universiIyindusIry
collaboraIion?
.
9. ln addiIion Io collaboraIing wiIh local knowledge insIiIuIes, iI is beneicial
orLlCsIoworkwiIhabroadrangeoinIernaIionalinsIiIuIes.MosIoIhese
insIiIuIes are knowledgeable abouI LlC issues and can be useul parIners
beyondmerelysharingperspecIivesandprovidingimporIanIadvice.Howcan
an inIernaIional insIiIuIe help a local LlC in undersIanding Ihe challenges,
helpwiIhdesigningeecIivepolicyresponses,andbringlegiIimacy.
.
!0.WhileiIisimporIanIIoesIablishrolesorknowledgeneIworkswiIhanLlC,iI
isequallyimporIanIIoseIcomprehensiveperormancegoalsorknowledge
insIiIuIes.HowcanIhegoalsoperormanceorIheknowledgeinsIiIuIesbe
seIandmeasured?
.
122
Anbumozhi V., T. Gunjima, A. Prem Ananth, and C. Visvanathan. 2010. An Assessment of inter-firm networks
in a wood biomass industrial cluster: lessons for integrated policymaking. Clean Technologies Environmental
Policy 12: 365372.
EDA. 2001. Eco-Industrial Development: A Strategy for Building Sustainable Communities. Reviews of
Economic Development Literature and Practice: No. 8.
Guerrieri, P., S. Iammarino, C. Pietrobelli. 2001. The Global Challenge to Industrial Districts. Cheltenham, UK:
Edward Elgar.
Jenkins, J.C., K.T. Leicht, and H. Wendt. 2006. Class Forces, Political Institutions and State Intervention:
Subnational Economic Development Policy in the United States, 19711990. American Journal of Sociology
111(4): 1,12280.
Kanie, N., and H.M. Peter. 2004. Emerging Forces in Environmental Governance. Tokyo: United Nations
University.
Karlsoon, C. 2008. Hand book of Research on Cluster Theory. Cheltenham, UK: Edward Elgar.
Liu J., T. Matsumoto, J. Y. Won, P. Zhang, Y. Ji, Y. Qi, K. Soo, L. Hyuok. 2008. Study on Comparison of Eco-
Industrial Parks in Japan, China and Korea. Journal of Global Environmental Engineering 13 (March): 2138.
Norton, M.G. 2007. Japans Eco-townsIndustrial clusters or local innovation system? Proceedings of the
51st Annual Meeting of the ISSS. Papers: 51st Annual Meeting. Department of Innovation Management,
Shinshu University, Nagano, Japan. Available at http://journals.isss.org/index.php/proceedings51st/article/
viewFile/535/232.
Solvell, O., G. Lindqvist, and C. Ketels. 2003. Cluster Initiative Green Book. Boston, MA: Harvard Business
School Press.
123
Module 5
Module 5: Eco-Industrial Cluster Initiatives
for a New Era
5.1 Eco-Industrial Clusters as a Framework for Policy Interventions
LlCiniIiaIives,organizedeorIsIoimprovegrowIh,environmenIalcompeIiveness,
andsocialinclusion,areinmanycounIriesbecomingimporIanIwaysIosIrucIure
susIainabledevelopmenIpolicyandsIrengIhenIiesbeIweenindusIry,governmenI,
andacademia.8uIpolicymakersareoIenacedwiIhalackosysIemaIicevidence
andsIrucIuredIhinkingabouIIheacIorsIhaIdisIinguishsuccessulLlCiniIiaIives
rom Ihose IhaI ail. Modules !4, based on indepIh case sIudies in boIh
developed and developing counIries o Asia, are parI o a number o eorIs Io
ill Ihis void. The modules explain whaI LlCs are, why Ihey maIIer or regional
economicandenvironmenIalpolicy,andhowIouseLlCsIraIegiesasaguideIo
policyandpracIice.Thekeyindingsorpolicymakersare:
LlCs are Ihe key organizaIional uniI or undersIanding and improving Ihe
perormanceoregionaleconomies.lIisIheoundaIionoregionaleconomies
as groups o clusIers builI on economic compeIiIion Iheory and indusIrial
ecology principles. lirms in a clusIer have compeIiIive economic sIrengIhs,
environmenIalopporIuniIies,andsocialneeds.
LlCasagroupoirmsmaIIersorpolicymakersbecauseiIorienIseconomic
developmenI policy and environmenIal pracIice Ioward agglomeraIion and
awayromindividualirms.lIisimporIanIandruiIulIoworkwiIhgroupso
irms on common problems (such as ecosIrucIuring, Iraining, Iechnological
modernizaIion), raIher Ihan working wiIh individual irms. The LlC approach
means Ihere is no need Io rely on economic developmenI subsides and
recruiImenIeorIsaimedaIindividualirms.
LlC iniIiaIives oer imporIanI lessons or economic developmenI policy and
environmenIalpracIice.LlCIeachespolicymakersandbusinessoperaIorsIo:
8uild on Ihe unique sIrengIhs o Iheir regions and specialized
urbanrural ringe areas. DierenI LlCs have dierenI seIs o growIh
opporIuniIies.
GobeyondanalysisandengageindialogueswiIhLlCmembers.Many
policymakersandpracIiIionersIreaIresearchonandanalysisoLlCsasa
clusIersIraIegy.lnacI,IheyareonlyasIarIingpoinIoranLlCsIraIegy.
ldenIiying Ihe compeIiIive sIrengIh o a clusIer requires ongoing
dialoguewiIhIheirmsandoIhereconomicandenvironmenIalacIors
in Ihe clusIer. AlIhough Ihe public secIor cannoI be Ihe execuIive, iI
can play a cenIral aciliIaIor role in convening LlC sIakeholders and
workingwiIhoIherpublicandprivaIesecIororganizaIions.
!.
2.
J.
Eco-Industrial Cluster Initiatives for a New Era

W
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D
W
Forms of EIC connecting networks
E
I
C

e
n
a
b
l
e
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s
Fig.5.1: Enabling Networks and Forms of Connectivity for Eco-Industrial Clusters
Source:AuIhors.
124
5.2 Challenges of Eco-Industrial Cluster Formation
lncreasingly, indusIrial clusIers are Iransorming Ihemselves inIo LlCs, againsI
a backdrop o rapid indusIrializaIion in Asian counIries, accompanied by
overconsumpIion o resources and environmenIal degradaIion. AI Ihe raIe o
indusIrializaIion seen in Asia, LlCs can play a crucial role in creaIing susIainable
growIh IhaI inIegraIes environmenIal proIecIion and balanced consumpIion
growIhinIheregion.However,LlCsaceseveralkeychallengesIoullyinIegraIe
inIoIhedomesIicindusIrialsIrucIureandcreaIesusIainablegrowIh.lIisimporIanI
Io highlighI Ihe imporIance o leadership in business clusIering, especially Ihe
environmenIal sIewardship and neIworks IhaI are required by governmenIs and
businesses Io promoIe LlC developmenI. The dimensions o such an enabling
rameworksisshowninlig5.!
DevelopdierenIsIraIegiesordierenILlCs.LlCsvaryromindusIry
Io indusIry and rom place Io place and operaIe in many dierenI
dimensions. There is no one seI o policies IhaI will make all LlCs
compeIiIive. lor example, a wood indusIry clusIer may require help
wiIh Iechnology or capiIal, while a ish indusIry clusIer requires
assisIancewiIhjobIrainingorIechnologydeploymenI.
losIer an environmenI IhaI helps new LlCs emerge raIher Ihan
policymakers creaIing speciic irms rom scraIch. lI is diiculI or a
secIoralpolicyIocreaIenewLlCsdeliberaIely.lnsIead,policymakersand
privaIesecIoroperaIorsandacademiashouldpromoIeandmainIain
enabling condiIions or new ecoacIiviIies Io emerge. Lxamples o
suchnecessarycondiIionsaresupporIknowledgecreaIion,Iechnology
Iranser,enIrepreneurship,newirmormaIion,andIheavailabiliIyo
capiIal,boIhinanceandsocial.
125
Module 5
TheissuesoinvesImenIininrasIrucIureandIechnologyinpromoIingecoindusIrial
servicesareimporIanIandcanbeacceleraIedbyusingappropriaIeormsopublic
privaIe parInership models. lurIhermore, regional cooperaIion is also imporIanI
or sharing knowledge and capaciIy building in developing counIries. Given Ihe
key consIrainIs in Iechnology Iranser processes in developing counIries, uIure
policy inIervenIions musI ocus on local governmenI involvemenI in developing
Iechnology road maps and aIIracIing privaIe secIor invesImenI. To idenIiy and
selecI Ihe besI Iechnologies, a boIIomup approach is required, by which local
governmenIs evaluaIe and analyze pros and cons o cerIain Iechnologies, and
evaluaIeiIheycanbesuccessullyimplemenIedinIheirrespecIivecounIries.lor
example,evenin!apanprivaIesecIorinvolvemenIiskey,asecoIownscouldonly
becreaIedIhroughsubsIanIialprivaIeinvesImenI,noIonlyIhroughgovernmenI
invesImenI.
loreign aid or LlC invesImenI is imporIanI. The oicial developmenI assisIance
(ODA) agency IhaI provides !apanese Iechnical cooperaIion, granI assisIance,
yen loans, !apan lnIernaIional CooperaIion Agency (!lCA), reemphasized IhaI
SMLs have limiIed human, Iechnological, and inancial capiIal, and inormaIion
resources,makinginIroducingLlCscruciallyimporIanIIosupporIanaIionslong
Ierm developmenI goals. !lCAs role in lndia was used as a case sIudy, where
!lCAprovidesIwosIeploansandIechnicalassisIancemainlyIoenergyeiciency
projecIs in SMLs, alongside iIs provision o inancial and Iechnical assisIance in
capaciIy building, calculaIing energy saving, CDM projecIs, and Io neIwork and
clusIerenIerprises.AsianDevelopmenI8ank(AD8)IhroughiIsClusIer8asedLocal
Lconomic DevelopmenI approach is assisIing Ihe emerging economies o Asia
in awareness building and inancing SML clusIers. The imporIance and role o
8usinessIo8usinessinIeracIionsareoIensIressedbypolicymakers,asaproiIable
businessmodelisrequiredIomakeLlCssuccessul,complemenIedwiIhIherighI
policymixandpublicsecIorinvolvemenI.
PegardingLlCgrowIhopporIuniIies,mechanismsIobringsIakeholdersIogeIher
IodobusinesswiIhinaclusIerneedIobedeveloped.MuchcanbedoneinIerms
osIreamliningoperaIions,soIhaIbusinessescaneasilyinIegraIeenvironmenIal
sIandardsandcooperaIewiIhgovernmenIs.AlIhoughmanycounIriesalreadyhave
puIinplaceenvironmenIallawsandregulaIionoremissionreducIion,polluIion
conIrol, and resource eiciency, and cerIain Iools such as Ihe Sound MaIerial
SysIemApproachin!apanandIheCircularLconomyLawinIhePPCareavailable,
shorIcomings in logisIics and Iechnology are sIill hampering environmenIal
perormance. CounIries, by and large, have been approaching LlCs rom an
indusIry and environmenI sIandpoinI Ihrough LcoindusIrial NeIworks, and in
IermsoanurbanizaIionandenvironmenIapproachIhroughecocommuniIies.
ProiIablebusinessmodelsandincenIivesorecoservicesarerequired,asparIo
a larger vision o susIainabiliIy. This is becoming increasingly imporIanI in lighI
oloomingenergy,waIer,andmaIerialcrises,especiallysincemosIindusIriesare
resourceinIensive.
lurIhermore, capaciIy building is imporIanI or improving Ihe diusion o
appropriaIe Iechnology Io developing counIries. The challenges or developing
counIries in promoIing LlCs are mainly relaIed Io Ihe need or capaciIy building
due Io: lack o knowledge, unavailabiliIy o adequaIe Iechnologies and absence
obesIpracIicesharing,andinadequaIeornonavailabiliIyospecializedhuman
resourcesIoaddressenvironmenIalproblems.KnowledgeIranserandcreaIinga
plaIormorsharingknowledge,inormaIion,andbesIpracIicesisimporIanIor
promoIingdialogueamongIhegovernmenIsodevelopingcounIries.
126
ThemodulesandcasesIudiesemphasizedIheimporIanceoLlCsasdevelopmenI
sIraIegyorcounIriesIogrowanddevelopIheirindusIriesonasusIainablebasis.
lI is now generally accepIed by Ihe policy communiIy IhaI environmenIal issues
are aecIing growIh and individual welare, agriculIural and manuacIuring
compeIiveness, individual healIh (as a resulI o polluIion), and Ihe poor (who
aremosIaecIed).WheniIcomesIobusinessanddevelopmenI,Iherearemany
sIraIegies,likelyinggeeseandvaluechainIheories,buIunorIunaIelynoneo
IhemacIuallyinvolveIheenvironmenI.LlCoersanewvirIualcycle,whereeach
sIage o Ihe cycle enables growIh IhaI improves living sIandards. AnoIher issue
idenIiied was IhaI iI is noI above all policies and legislaIion IhaI maIIer (many
counIriesalreadyhaveIhepoliciesandPPPinplace),buIoperabiliIyandresulIs.LlCs
canbecomeaplaIormormobilizingsocialcapiIalIoreduceenvironmenIalrisks
andcanprovideanopporIuniIyorimprovingeconomicperormanceindicaIors.
The environmenIal dimension needs Io be broughI inIo LlCs using Ihe exisIing
insIiIuIions and processes Io creaIe business opporIuniIies. The example o
KawasakiecoIownisusedIosIressIheneedIohelpurbancenIersoperaIionalize
ecoindusIrial concepIs. This could also be done using concepIual deiniIions,
visionsIaIemenIs,policyrameworks,andinallyacIionplans.ThelessonslearnI
rom regional experiences was IhaI Ihe ocus should be on Ihe privaIe secIor
and Io creaIe a consIellaIion o sIakeholders IhaI supporI Ihem, including local
governmenIs,universiIies,ciIizengroups,cusIomergroups,invesIors,andbanks.
5.3 Setting Objectives and Monitoring Performance
TheabiliIyIomeasureanddocumenIIheimpacIoecoacIiviIieswiIhinaclusIer
plays an increasingly criIical role or successul LlC iniIiaIives. Clear Perormance
daIa is imporIanI or Ihe supporIers o LlC iniIiaIives. MeIrics on secIor level
inIervenIionsandiIslikelyimpacIsneedIobedesignedIoalloworsIraighIorward
evaluaIionoIheLlCsprogressinachievingiIsgoals.AnincreaseincompeIiIiveness
ineconomicandenvironmenIalIermsIakesasigniicanIIimeIomaIerializeand
subsequenIlyIoIranslaIeinIohighersocialperormance.Planningagenciesneed
Io resorI Io a sysIem o perormance indicaIors IhaI maps boIh implemenIaIion
andIheimpacIoLlCacIiviIiesoverIime.
ldeally, Ihe measuremenI o an LlC iniIiaIive is an inIegral parI o an ongoing
eorIIoIrackiIscompeIiveness.PublicreporIingonIheeconomic,environmenIal,
and social perormance o an LlC can be a Iool Io sIimulaIe and enhance iIs
compeIiveness aI dierenI levels. lI also demonsIraIes IhaI environmenIal and
socialimpacIsareproperlymanagedandprovidesassurancesoIransparencyIo
boIhinIernalandexIernalsIakeholdersoLlCs.AnnualsusIainabiliIyreporIingisa
logicalsIepaIeranLlCiniIiaIiveisimplemenIed.SuchreporIingcanbeusedor
Iheollowingpurposes:
SourcesobesIpracIicesIhaIcaninspireoIhersandprovideabench
markoranalysisoLlCperormance
SelevaluaIion and conIinuous improvemenI in Ihe process o
implemenIingeconomic,indusIrialecology,andsocialinclusionprinciples
8enchmarking and assessing perormance wiIh respecI Io laws, norms,
codes,perormancesIandards,andvolunIaryiniIiaIives
DemonsIraIing how Ihe LlC inluences and is inluenced by
expecIaIionsabouIsusIainableregionaldevelopmenI
ComparingperormancewiIhinanLlCandwiIhoIherLlCsoverIime
&

'
/ /
/ /

K

/
/

W
<
'
W
WWW
&

^
Z
Fig.5.2: Flow Diagram for Realizing an Eco-Industrial Clusters

Source:AuIhors.
127
Module 5
5.4 Integrating Eco-Industrial Cluster Initiatives in a Broader National
Development Policy Agenda
The success o LlC iniIiaIives also depends on Ihe wider microeconomic policy
environmenI o Ihe counIry and secIor o which Ihey are parI. The generic
low sequence or Ihe realizaIion o an LlC as shown in ligure 5.2 describes a
comprehensivelisIoacIionsIobeIakenIowardsIhecreaIionoanLlC.Onlyi
IheyareaninIegralparIobroadereorIsIoupgradeIheregionalandsomeIimes
naIional microeconomic environmenI can Ihey aIIain Iheir ull poIenIial and
achieveameaningulimpacIonaregionseconomicperormance.
ln a sIrong economic and business environmenI, any eco iniIiaIives wiIh markeI
value,canclearlyaciliIaIeLlCormaIion.lnaweakgeneralbusinessenvironmenI,
LlC iniIiaIives musI be complemenIed wiIh a range o policies Io upgrade Ihe
microeconomic business environmenI (including lDl policy, inrasIrucIure policy,
educaIionalpolicy,sciencepolicy).AweakbusinessenvironmenIcanalsoarisein
siIuaIionssuchasposIdisasIerrecoveryandrehabiliIaIionplans.
ThequaliIyoanLlCiniIiaIiveisdeIerminedbymanysIrucIuralandnonsIrucIural
acIorsoIheregionaleconomy.ToaddressseIsoacIorssuchasinrasIrucIure,
Iechnology,markeIinormaIion,skillIraining,eIc.,LlCpolicycanbesupporIedby
a seI o iniIiaIives on common issues such as public educaIion or inrasIrucIure.
LlC iniIiaIives IhaI are noI inIegraIed in broader regional eorIs and naIional
compeIiveness iniIiaIives IhaI lack a clusIer ocus, oIen ail Io reach Iheir ull
poIenIial.ThisespeciallyIrueinIheemergingeconomiesoAsia.
5.5 Rebuilding after Disaster: Eco-Industrial Clusters as an Opportunity
Lvery year, Ihousands o communiIies and regions are devasIaIed by loods,
cyclones,andoIhernaIuraldisasIerslikeearIhquakes.WhenadisasIersIrikes,Ihe
iniIialresponsewillocusonimmediaIeneeds.AIerIhoseimmediaIeneedsare
meI, old indusIries begin Io recover. 8uI as Ihe regions prepare Iheir plans or
128
recovery,LlCsshouldberegardedasawindowonewopporIuniIyIonoIjusI
reIurnIoIheoldsIaIusquo,buIIogrowgreenandchange.ThismeansidenIiying
aclusIeronewindusIriesbasedonIheregionscompeIivenessIhaIusesenergy
andresourcesmoreeicienIly.8ybuildinganLlCasaninIegralparIoadisasIer
recoverysIraIegy,pioneeringregionscaninspireoIherbigandsmallcommuniIies
IodoIhesame.
LlCs are a new way Io organize microeconomic policies as LlCs draw upon
many exisIing indusIrial, environmenIal, and developmenI policies. Their main
conIribuIion is Io selecI, adapI, and combine policy measures Io maximize Ihe
impacI on clusIer compeIiveness given an LlCs speciic condiIions. To urIher
increase Iheir impacI, privaIe secIor operaIors wiIhin LlCs have Io ind Ihe
righI balance beIween locally creaIed models and inIernaIional besI pracIices.
lurIhermore, Ihey need Io inIegraIe Iheir acIiviIies in any LlC iniIiaIive wiIh Ihe
broader macroeconomic agenda, cuIIing across LlCs. None o Ihese challenges
areeasyIoIackle,buIsolvingIhemoershugerewardsinIermsoIhecapaciIyIo
generaIeasusIainableincreaseineconomicperormanceIhroughLlCgrowIhand
increasedcompeIiveness.
Anderson, A.E. 1985. Creativity and Regional Development. Papers of Regional Development Science
Association 56: 520.
Choe, K.A., and B. Roberts. 2011. Competitive Cities in the 21st CenturyCluster Based Local Economic
Development, Australian Government-Asian Development Bank.
Cortright, J. 2008. Making Sense of Clusters: Regional Competiveness and Economic Development.
Washington, DC: Brookings Institution.
DOE. 2010. Rebuilding After Disaster: Going Green from the Ground Up. US Department of Energy.
Florida, M. 2002. Rise of creative Clusters and how it is transforming Work, Leisure, Community and Everyday
Life. New York, NY: Basic Books.
Nauelares, R. 2012. Enterprise Clusters and NetworksBelgium. Unpublished paper. European Commission
DG Enterprise, Brussels.
Sonobe, T., and K. Otsuka. 2011. Cluster Based Industrial Development: A comparative Study of Asia and
Africa. Basingstoke, UK: Palgrave Macmillan.
Tubbs, B. 2009. Eco-Industrial Networking: What is realistic in Practice? Burnaby, BC, Canada: Simon Fraser
University.
Wolf, S. 2010. A Policy Brief on Industrial Ecology. Ithaca, NY: Cornell University.
129
Module 6
Group !inIeracI wiIh Ihe business and communiIies and Ihe issues
prevalenIinIheareaandIhepercepIiononreducingIherisks.
Group 2inIeracI wiIh local governmenI agencies in undersIanding
IhedevelopmenIalissuesaIIheLlCacIionsbeingIaken.PercepIionson
beneiIswouldbediscussed.
Group JinIeracI wiIh knowledge insIiIuIes and underIake a survey
o Ihe clusIer Io and Iry Io undersIand Ihe sIrengIhs, weakness,
opporIuniIiesandIhreaIs(SWOT)
TheparIicipanIswillvisiIauncIionalLlCIhaIalsoacescerIainchallenges.The
parIicipanIswillbedividedinIogroups.
The ulIimaIe objecIive o Ihe ield work is or parIicipanIs Io undersIand Ihe
sIraIegiesinuseandunderIakeaninIegraIedassessmenIoIheLlCbeingvisiIed.
8eoreleavingorIheield,parIicipanIswouldbebrieedonIheLlCandprovided
allsecondaryinormaIion(maps,sIaIisIicaldaIa,numberobusinessoperaIing,
keypolicies,eIc.).
Lach group could be urIher divided inIo Ieams and each given a parIicular
Ihemeasollows:
!.
2.
J.
4.
AIerIhedaysieldvisiI,IhegroupswouldworkIogeIherincomingouIwiIhan
overallassessmenIoIheLlC.
Depending on Ihe number o parIicipanIs and acIual ield siIe, Ihe group
ormaIionmaydier.
Lach o Ihe group would presenI Iheir inding and a discussion would be
aciliIaIedIodrawimporIanIconclusionsromIheindings.
5.
6.
7.
Module 6: Understanding the Ground
Realities of Eco-Industrial Clusters
Field Visit (Optional in the Training Course)
AIIheendoIhismodule/ieldvisiIIheparIicipanIswouldbeableIo
Use some o Ihe sIraIegies and assessmenI Iools Io underIake an
assessmenI o parIicular LlC and suggesI possible inIervenIions Io
improvecompeIiveness.
Pecognize Ihe imporIance o mulIiple simulIaneous sIraIegies and
sIakeholderparIicipaIioninLlCiniIiaIives
Field Visit Duration:
One day |Travel: quarIer day, lield VisiI: hal day, Group Work Io prepare an
AcIionPlan:quarIerday
ModuleDelivery:
Understanding the Ground Realities of Eco-Industrial Clusters

130
!.
2.
Annex IX:
Take it Back Home
Final Course Evaluation Worksheet
Objectives:
Workshop Duration:
!.5Hours|DeiningnexIsIeps&ormulaIingacIions60minuIes:OverallCourse
LvaluaIionJ0minuIes
AA: Defining Next Steps and Formulating Actions
AIIheendoIhesessionparIicipanIswouldbeableIolisIIheIhingsIheywould
beableIoincorporaIeinIheirproessionalworkasaresulIoIheknowledgeand
skillsgainedromIheIrainingcourse.
ObjecIive:lormulaIinglndividual/GroupAcIionPlan
!hour|Lxercise:J0minuIesPresenIaIion:J0minuIes
MaIerialPequired:llipcharIs,Markers
lnsIrucIion:
LachparIicipanIisaskedIoillouIIheIablebelowaIIheendoeachmodule.
ParIicipanIswouldpresenIIheiracIionplansIhroughpeerIopeerlearningand
discussionswouldbeaciliIaIedbyresourcepersons.
AI Ihe end o Ihis module Ihe parIicipanIs should be able Io draw up
an LlC acIion plan based on Ihe knowledge and skills gained rom Ihe
Irainingcourse.
LvaluaIeIhecourseinIermsocoursesIrucIure,knowledgegained,skills
imparIed, and session conIenIs. Peassess course duraIion and provide
suggesIionsorimprovemenIs.
Module Knowledgegained
HowIouseiIinyour
dailyproessionalwork
Module!:Overview
Module2:LlCsaseco
riendlyeconomiczones
ModuleJ:SIraIegies
IhaIwork
131
Module 6
JaLnvironmenIal
perormance
JbSocialcapiIal
JcTechnology
developmenI
Jdlinance
Module4:LlCsinIo
aninclusivebusiness
developmenImodel
4aPolicycommuniIy
4b8usinesses
4cKnowledgeinsIiIuIes
Module5:LcoiniIiaIive
oranewera
Module6:ObservaIions
duringieldvisiI
132
BB: Overall Course Evaluation
Objective:
Session Duration:
ToIal: J0 minuIes |lilling ouI evaluaIion orm: !5 minuIes, Sharing o views: !5
minuIes
AbouIyou:
To help deIermine how eecIive Ihis course will be or someone wiIh
experiencesimilarIoIhecurrenIparIicipanIsandIoindouIIhescopeo
improvemenIsorIheuIure.
How many years have you worked on indusIry, environmenI, and susIainable
developmenIissues?
PleaseindicaIeyourareasospecializaIion?
!.
2.
a) PolicyMaking b)8usiness/lndusIry c)Academia/Pesearch
d)NGOs/NPOs e)OIhers
Overall Evaluation Excellent Good Average Poor Very Poor
WhaIisyour
assessmenIoIhe
overallqualiIyoIhe
workshop?
5 4 J 2 !
Please indicate the
extent to which you
agree with the
following statements:
Strongly
Agree
Agree Neutral Disagree
Strongly
Disagree
lhaveobIainednew
knowledgeandskills
asaresulIoIhis
evenI.
5 4 J 2 !
Theworkshop
objecIiveswereclear.
5 4 J 2 !
TheIopicsdiscussed
arerelevanIIomy
currenIposiIionand
myorganizaIion.
5 4 J 2 !
lwillbeableIouse
newknowledge
gainedinmywork.
5 4 J 2 !
CoursemaIerialsand
advancereadings
wereuseuland
wellalignedwiIhIhe
workshopobjecIives.
5 4 J 2 !
ThecasesIudiesand
groupdiscussions
wereuseulin
consideringpracIical
applicaIionsorIhe
workshopconIenI.
5 4 J 2 !
!.
2.
J.
4.
5.
6.
133
Module 6
TheollowinglogisIicalaspecIsoIheworkshopwereadequaIe:
SecreIariaI 5 4 J 2 !
VenueandaciliIies 5 4 J 2 !
CaIering 5 4 J 2 !
HoIelaccommodaIion
lieldvisiI
5 4 J 2 !
!.DoyouhaveanycommenIsorsuggesIionsonIhepresenIaIionsbyPesource
Speakers/PresenIers?
.
2. DoyouhaveanycommenIsorsuggesIions?
(a)DuraIionoIheworkshop
(b)QualiIyoIhediscussions
(c)ParIicipanImix
(d)laciliIaIion
J. WhaILlCrelaIedneeds/issues/subjecIs/IhemeswouldyoulikeIheorganizers
IoaddressinIheiruIureevenIs?
.
4. OIherCommenIsorSuggesIions
.
134
Glossary
Anaerobic Digestion: AnindusIrialprocessbywhichorganicwasIemaIerialsare
brokendownbymicroorganisms,inIheabsenceooxygen,andreleaseenergy.lI
isusedIomanagewasIeproducedromclusIerirms.
Appropriate Technologies:TechnologyIhaIissuiIableorIhesocialandeconomic
condiIionsoIhegeographicareainwhichiIisIobeapplied,isenvironmenIally
sound, and promoIes selsuiciency on Ihe parI o Ihose using iI. UIilizing Ihe
appropriaIe level Iechnology resulIs in beIIer use o labor resources and higher
producIioneiciencyoIheclusIer.
Capacity: The combinaIion o all sIrengIhs, aIIribuIes, and resources available
wiIhinaclusIercommuniIyIhaIcanbeusedIoachieveagreedgoals.
Capacity Building:Processbywhichpeople,businessorganizaIions,andpolicy
insIiIuIions sysIemaIically sIimulaIe and develop Iheir knowledge, skills, and
sysIemsoverIimeIoachievesocial,economic,andenvironmenIalgoalsandIhus
operaIionaleiciency.
Cleaner Production: A prevenIive, indusIry speciic environmenIal proIecIion
iniIiaIive,inIendedIominimizewasIeandemissionsandmaximizeproducIouIpuI,
by analyzing Ihe low o maIerials and energy and inding opIions Io minimize
wasIeandemissionsromindusIrialprocessesIhroughsourcereducIionsIraIegies.
Community Development:ProponenIsoecoindusIrialapproachespoinIIoa
hosIoeconomic,environmenIal,andsocialbeneiIsorcommuniIies.TheobjecIive
oIheseapproachesisIoaddvalueIoaregionseconomicbase,sIrengIheningiIs
indusIrial,social,andsupporIinginsIiIuIionsinawayIhaIaIIracIsnewbusinesses
andreIainsexisIingones.
Dematerialization: The reducIion o IoIal maIerial and energy IhroughpuI o
anyproducIandservice,andIhusIhelimiIaIionoiIsenvironmenIalimpacI.This
includesreducIionorawmaIerialsaIIheproducIionsIage,oenergyandmaIerial
inpuIsaIIheusesIage,andowasIeaIIhedisposalsIage.
Eco-Design:Lcodesign,ordesignorIheenvironmenI,isawayoincorporaIing
susIainableeaIuresinIoeverydayproducIs.lncreaIingIheseproducIs,indusIrial
meIabolismanddemaIerializaIionareconsidered.
Eco-Industrial Clusters:AcommuniIyobusinesses:geographicconcenIraIion
oinIerconnecIedcompaniesinaspecializedieldIhaIcooperaIewiIheachoIher
andwiIhIhelocalcommuniIyIoeicienIlyshareresources(inormaIion,maIerials,
energy, waIer, inrasIrucIure, inance, eIc.), leading Io improved environmenIal
qualiIy, economic gains, and equiIable enhancemenI o common resources or
boIhIhebusinessandlocalcommuniIy
Eco-Towns:AnindusIrialdevelopmenIsIraIegyIhaIisrequenIlypromoIedasa
meansoreducingIheenvironmenIalburdenoindusIryinawayIhaIisconsisIenI
wiIheconomicdevelopmenIandcommuniIies.
135
Glossary
Eco-Industrial Parks: locusonsymbioIicrelaIionshipsinwhichcompaniesuIilize
IhewasIemaIerialsorenergyooIhers,LlPsareexcellenIexamplesoconIemporary
environmenIalgovernancesysIems,inIhaIIheyinvolveboIhIheprivaIeandpublic
secIors, and Ihe communiIy. LlPs have a larger vision o susIainable communiIy
developmenI,whichcanbelookedaIasaclosedlooporoneIhaIkeepsmarkeIs
andproiIswiIhinIhelocaleconomy.
Eco-Innovation: The developmenI o producIs, services, and processes IhaI
conIribuIe Io reduced polluIions and emission by applying knowledge Io eliciI
direcIorindirecIeconomicimprovemenIs.ThisincludesarangeorelaIedideas,
rom environmenIally riendly Iechnological advances Io socially accepIable
innovaIivepaIhsIowardssusIainabiliIy.
End-of-Pipe Methods:UsedIoremovealreadyormedpolluIanIsromasIream
oair,waIer,wasIe,producIorsimilarmedia.TheyarenormallyimplemenIedasa
lasIsIageoaprocessbeoreIhesIreamisdisposedoordelivered.
Environmental Impact Assessment: Process by which environmenIal
consequences o a proposed program are evaluaIed. UnderIaken as an inIegral
parIoplanninganddecisionmakingprocesswiIhaviewIolimiIingorreducing
adverseimpacIsoparIicularprojecIsorprograms.
Environmental Management System: Compendium o Iools, meIhods, and
pracIices IhaI enable an organizaIion Io reduce iIs environmenIal impacIs and
increase iIs operaIing eiciency Ihrough consisIenI conIrol o iIs operaIions. AI
clusIerleveliIisusedIomoniIor,reporI,andveriyIheenvironmenIalperormance
oindividualirms.
Environmental Stewardship: LcoindusIrial developmenI seeks Io promoIe
environmenIalsIewardshipaIIheirm,indusIrialpark,andcommuniIylevels.The
ulIimaIeenvironmenIalgoalsoecoindusIrialsIraIegiesareIoreduceIheuseo
virginmaIerials,decreasepolluIion,increaseenergyeiciency,reducewaIeruse,
and decrease Ihe volume o wasIe producIs requiring disposal in landills. This
approachencouragescompaniesIoadopIinnovaIiveprocessesandIechnologies
IhaIreducewasIeoenergy,waIer,andmaIerials.
Greenhouse Gases: Gaseous consIiIuenIs o Ihe aImosphere, boIh naIural
andanIhropogenic,IhaIabsorbandemiIradiaIionoIhermalinraredradiaIion
emiIIedbyIheearIhssurace,IheaImosphereiIsel,andbyclouds.
Industrial District:LmergeswhenairmdevelopsmoreIhanspecializaIionand
divisionsolabourbeIweenirms,IheemergenceoimpliciIandexpliciIormso
collaboraIion among local economic agenIs wiIhin Ihe disIricIs, enhancing local
producIion and someIimes innovaIion capabiliIy and Ihe emergence o sIrong
secIoralassociaIions.
Industrial Ecology:AnevolvingrameworkIhaIexaminesIheimpacIoindusIry
andIechnologyonIhebiophysicalenvironmenI.lIisparIoalargerconcepIcalled
ecologicalmodernizaIion,whichisconcernedwiIhIheinIegraIionoenvironmenIal
issues inIo producIion and consumpIion pracIices. lndusIrial ecology speciically
exploresmaIerialandenergylowsinindusIrialandconsumeracIiviIies.
136
Industrial Metabolism:ThesIudyoamaIerialromsIarIIoinishIhroughIhe
economy.lIcompareseconomyandindusIryIoalivingsysIem,whereconsumed
maIerialsareconverIedinIoaormusableIoIhebusinessororganism.
ISO 14000:AamilyosIandardsrelaIedIoenvironmenIalmanagemenIIhaIexisIs
IohelpbusinessorganizaIionsIominimizenegaIiveenvironmenIalimpacIoIheir
operaIions, comply wiIh applicable laws, regulaIions, and oIher environmenIally
orienIedrequiremenIs,andmakeconIinuousimprovemenIsinIheabove.
Land-Use Planning: The process underIaken by public auIhoriIies Io idenIiy,
evaluaIe,anddecideondierenIopIionsorIheuseoland,includingconsideraIion
olongIermeconomic,social,andenvironmenIalobjecIivesandIheimplicaIions
ordierenIcommuniIiesandinIeresIgroups,andIhesubsequenIormulaIiono
plansIhaIdescribeIhepermiIIeduse.
Life Cycle Assessment: lncorporaIing boIh indusIrial meIabolism and
demaIerializaIion. Lie cycle assessmenI evaluaIes Ihe enIire process: where Ihe
maIerials come rom, where Ihey will be going, whaI Ihey will be doing while
IhereareIhere,andonceIheyareused,whaIwillhappenIoIhem.LCAisusedIo
deIermineIheIoIalenvironmenIalimpacIaproducIwillhave.
Market Orientation: A philosophy o business managemenI, based upon
a clusIerwide accepIance o Ihe need or clienI/cusIomer orienIaIion, proiI
orienIaIion,andrecogniIionoIheimporIanIroleomarkeIingincommunicaIing
IheneedsoIhemarkeIIoallclusIerirms.
Micro-Finance:ProvisionoinancialservicesIoIhoseexcludedromIheormal
inancialsysIems.SysIemsoexclusionarebasednoIjusIonlackowealIh,buI
alsoonculIuralandeconomicignorance.LecIivemicroinanceisposiIionedIo
overcome a varieIy o access barriers Io wide range inancial services or many
dierenI ecoiniIiaIives wiIhin clusIers, which are excluded rom Ihe ormal
inancialsysIem.
Policy Benchmarking: is a relaIively new Iool Io moniIor processes, Io assess
Ihe siIuaIion againsI conIinuously improving besI pracIice on an ongoing basis.
lIs eecIive use requires close consulIaIion and work joinIly wiIh Ihe enIerprise
secIor. lI serves Io assess noI jusI well or poorly perorming clusIers in a given
regionascomparedwiIhIheircounIerparIsinoIherregions,buIalsoIheacIors
IhaIdeIerminecompeIiIiveperormance.lIgoesbeyondcompeIiIiveanalysisby
providing an undersIanding o Ihe processes, Iechnology, and capabiliIies IhaI
creaIesuperiorperormance.lndoingso,policybenchmarkinglinksupwiIhIhe
keymediumandlongIermissuesoconcernIoclusIerdevelopmenIpolicy.
Policy Co-ordination: Takes place when Iwo or more secIors decide Io Iake a
commonsIandIomeeIcommongoals.PolicycoordinaIionisamorelexibleand
looserormocooperaIionIhanpolicyinIegraIionsinceiIsscope,objecIives,and
duraIionmayvaryromcaseIocase.
Policy Integration:SIepsIakenbysecIoralminisIriesIoocusoncompliancewiIh
commonagreemenIsvolunIarilyadheredIo.AdherenceusuallyenIailsaccepIance
o some consIrainIs on Ihe scope or auIonomous decisionmaking in speciic
policyareasorgainsinpublicgoods.
137
Glossary
Resource Conservation: PracIices IhaI proIecI, preserve, or renew naIural
resourcessuchaswaIer,biomass,maIerials,minerals,eIc.,inamannerIhaIwill
ensureIheirhighesIeconomicorsocialbeneiIs.
Resource Efficiency:TherelaIionshiporesourceinpuIsIoeconomicouIpuIo
sysIem, which is essenIial Io susIain and enhance Ihe wellbeing o currenI and
uIuregeneraIions.lIisacoreelemenIorIransorminganindusIrialclusIerinIo
anecoindusIrialclusIer.
Risk Assessment: A meIhodology Io deIermine Ihe naIure and exIenI o risk
by analyzing poIenIial hazards and evaluaIing exisIing inancial resources and
vulnerabiliIyIhaIcouldpoIenIiallyharmexposedbusinessesoperaIions.
Risk Transfer: The process o ormally or inormally shiIing Ihe inancial
consequencesoparIicularrisksromoneparIyIoanoIherwherebyaclusIerirm
willobIainresourcesromIheoIherparIy,inexchangeorcompensaIoryinancial
beneiIsprovidedIoIhaIparIy.
Social Capital: leaIuresoaclusIer,suchasIrusI,norms,andneIworksIhaIcan
improveIheeiciencyoIheclusIerbyaciliIaIingcoordinaIedacIions.
Social Dialogue:AcommunicaIionacIiviIyinvolvingsocialparInersinIendedIo
inluenceIhearrangemenIanddevelopmenIoworkrelaIedissues.
Social Networks: An inIerconnecIed group o people who usually have an
aIIribuIeincommon.TrusIreersIoIheleveloconidenceamongIheneIworked
peopleorirmswiIhinaclusIer.
SWOP:AsIrucIuredplanningmeIhodusedIoevaluaIeIheSIrengIhs,Weaknesses,
OpporIuniIies,andPoIenIialinvolvedinaprojecIorinabusinessvenIure.ASWOP
analysiscanbecarriedouIoraproducI,place,indusIry,orperson.
Technology Death Valley:ThegapbeIweenbasicresearchinnovaIionandnew
commercializedIechnologywherenewecoIechnologiesgoIodie.lIhasbecome
aniconorIhediiculIyosuccessullycommercializingorimplemenIingproven
Iechnologies. lI also shows Ihe imporIance o a longIerm parInership beIween
Ihe creaIors, invesIors, and end users o a new green Iechnology, which drives
an iIeraIive and collaboraIive process o developmenI, implemenIaIion, and
accepIance.
Urban-Rural Fringe Area: The zone o IransiIion which begins aI Ihe edge o
a ully builI up urban cenIer and becomes progressively more rural whilsI sIill
reIainingaclearmixoruralandurbanlanduseandinluencebeoregivingway
IoIhewiderruralsideorurbancenIer.
Venture Capital: CapiIal provided Io sIarIup enIerprises aI Ihe early sIage o
clusIer developmenI. The venIure capiIal und makes money by owning equiIy
inIhecompaniesiIinvesIsin,whichusuallyhaveanovelIechnologyorbusiness
modelinhighIechnologyindusIries.

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Module 2: Eco-Industrial Clusters as Eco-Friendly

Module 3d: Financing Eco-Initiatives in Eco-Industrial Clusters

Raw material input

6. Considering Ihe poIenIial or LlC ormaIion in Ihe coconuI subsecIor, whaI

References and Reading Materials

2. Technological proximiIy beIween Ihe irms as well as oIher acIors is possible i

9. lI is generally accepIed IhaI social capiIal creaIion is one o Ihe pillars

2. Technology Iranser includes hardware (equipmenI) and soIware (skills/

J. WhaI could be Ihe poIenIial barriers (socialculIural, economic, and policy)

5. CommuniIy parIicipaIion and capaciIy building Io a large exIenI decide Ihe

9. lmproved markeI linkages can moIivaIe enIrepreneurs Io invesI in advanced

9.lllusIraIe an example each o environmenIal microinancing iniIiaIives in

!0.WhaI are your suggesIions or aIIracIing and moIivaIing naIional privaIe

References and Reading Materials

SIarIing new and sIrengIhening exisIing businesses in Ihe clusIers Io

Fig.4b.2: Key Drivers of Businesses Operating within an Eco-Industrial Cluster

Role of Business in Eco-Industrial Clusters

ClusIers are agglomeraIions o inIerconnecIed companies and associaIed

Eco-Industrial Cluster Initiatives for a New Era

Fig.5.2: Flow Diagram for Realizing an Eco-Industrial Clusters

Understanding the Ground Realities of Eco-Industrial Clusters

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