Background and Context

The Philippine-German Cooperation Program Private Sector Promotion (PSP SMEDSEP), a joint undertaking of the Department of Trade and Industry (DTI) Regional Operations and Development Group (RODG) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), which was concluded in December 2012, assisted the Philippine Government in improving the frame conditions for private sector development. As one of its initiatives in its final phase, the Program supported DTI to address the growing concern among micro, small and medium enterprises on the effects of climate change by introducing the concept of green economy—the pursuit of economic growth and development while preventing costly environmental degradation, climate change, biodiversity loss and unsustainable use of natural resources—into the MSME Development Plan 2011 to 2016. It promotes a green economy strategy founded on the five pillars of mitigation, adaptation, competitiveness, green jobs and preserving or even improving nature’s capital.

ProGED and the green growth concept

When pursuing Green Economic Development policy makers attempt to address the following five pillars and their foundation

  • Mitigation: reduce GHG emissions, thereby contributing to mitigating impacts of disasters which affect individuals and businesses.
  • Adaptation: assist individuals and businesses to adapt to changes caused by climate variations and severe weather conditions as well as long term changes in sectoral trends caused by them.
  • Competitiveness: improve the long term competitiveness of companies by helping them develop and implement sustainable / green business strategies.
  • Green jobs: make use of growth opportunities and market potentials that arise from investments into mitigation and adaptation as well as new products and services needed in a green economy.
  • Nature’s capital: maintain or even restore nature’s capital (ecosystems, biodiversity, natural resources) through recognizing their true value for both companies and the society.

Environmental Hotspots and Greening Strategies

The greening of a value chain starts with the identification of environmental hotspots to estimate resource intensity of the different functions of the value chain. These “hotspots” are the impacts created by a business on the environment due to their activities. Hotspots include water use, water pollution, energy use, fuel consumption, air pollution, GHG emission, material consumption, biodiversity, land erosion, and land pollution. The pilot activities of the project focused its interventions on six work packages or strategies to address different “hotspots,” which emerged as having the greatest potential to support the enterprises in generating savings and promoting long term sustainability while minimizing environmental impacts in the tourism sector. In the replication areas where the approach was applied to other priority sectors of DTI, the strategy of material efficiency was added. These are defined as follows

  • Energy efficiency is a way of managing and restraining the growth of energy consumption where the goal is to maintain or increase the delivery of service/production for the same energy input. The Philippines has the highest power rates in Southeast Asia, at US$0.22 per kwh compared to Thailand who is second at US$0.10 (USAID Study, 2011). Therefore, improving the efficiency of power consumption while at the same time employing demand management strategies can contribute greatly to reducing the operating costs of Philippine enterprises.
  • Water efficiency is the accomplishment of a function, task, process or result with the minimal amount of water feasible. Water resources in the Philippines include rainfall, inland freshwater (rivers, lakes, and groundwater), and marine. Only over a third of the country’s river systems are classified as potential sources of public water supply, while 58 percent of groundwater sampled is contaminated with coliform and requires treatment. The water situation is further aggravated by the discharge of domestic and industrial wastewater and agricultural runoff that has caused extensive pollution of these water bodies, estimated to cost the Philippine government more that PhP67 billion annually in adverse impacts12. While current water supply is sufficient, a 1998 Study of the National Water Resources Board showed that by 2025, large portions of Luzon (Regions I, II, 11, IV, V) and Region VII in the Visayas will be experiencing a water deficit. Efforts to harvest rainwater and to improve water efficiency coupled with proper treatment of wastewater can ensure that ample supply is available for future generations.
  • Waste management pertains to the use of appropriate methods for the collection, removal, processing and disposal of materials considered waste. It is expected that the amount of waste generated in the Philippines will increase from 1.3 billion tons a year in 2011 to 2.2 billion tons/ year by 2025 due to increasing populations and per capita level income (2011 World Bank). Of this amount, it is estimated that only a third is diverted to sanitary landfills, the rest of which is not disposed appropriately, thereby leading to a host of other concerns–flooding, groundwater contamination and others. It is therefore critical for localities to adopt an integrated solid waste management program that will follow the four principles of refuse, reduce, reuse and recycle.
  • Supply chain management is the oversight of materials, services, information and finances as they move in a process from supplier to manufacturer to wholesaler to retailer and finally to the consumer. The tourism value chain encompasses an extensive array of producers and service providers that require corresponding raw materials to produce or deliver their service. Encouraging suppliers to “green” their operations will have a very positive “snowball” effect in the value chain, resulting in reduced carbon emissions, lower energy consumption, minimized use of chemicals and more efficient use of raw materials, among others. At the same time, encouraging businesses to source raw materials locally also has positive impacts in the environment because it reduces the need to transport goods over long distances.
  • A transport management system is a subset of supply chain management with a focus on transport. Such systems facilitate interactions between and order management system and the warehouse of distribution center, with the primary objective of maximizing efficiency and reducing fuel consumption. Transport plays a critical role in the Philippine economy owing to its archipelagic structure. However, vehicles are also among the largest contributors to air pollution, the public utility vehicles (PUV) in particular, because the engines installed are older models and have inefficient emission systems (DENR EMB 2011 Air Quality Status Report). Looking for ways to minimize transport trips and alternative modes of transportation will not only be beneficial to the country’s air quality in general, but will also reduce the company’s fuel consumption.
  • Material efficiency in industrial production focuses on the amount of a particular material needed to produce and particular product. Material efficiency is strongly co-related with waste management because less materials used translates to less waste. Introducing changes in the production process, design of a product, or even exploring alternative materials can contribute to a firm’s efforts to enhance the value of their product.