1

2
Contents

Contents ............................................................................................................................................................... 2
Using this booklet ............................................................................................................................................... 4
1 The benefits of policy intervention for sustainable production ............................................................... 6
2 Policy instruments to support sustainable production in SMEs .............................................................. 8
2.1 Which policy instruments are available for the task? .............................................8
2.2 Success factors for effective policy intervention ....................................................10
3 Analysis of ten leading policy instruments for Energy and Resource Efficiency ................................ 12
3.1 Norms and Standards ...............................................................................................12
3.2 Environmental Taxes ...............................................................................................14
3.3 Subsidies ....................................................................................................................16
3.4 Environmental Financing ........................................................................................18
3.5 Research, Development and Demonstration (RD&D) ...........................................20
3.6 Voluntary Agreements .............................................................................................22
3.7 Technology Transfer ................................................................................................24
3.8 Networking ................................................................................................................26
3.9 Eco-Labelling ............................................................................................................28
3.10 Sustainability Reporting ........................................................................................29
4 Cases for application of the instruments as policy mixes ...................................................................... 31
4.1 Special Fund for Energy Efficiency in SMEs, Germany .......................................31
4.2 Energy Efficiency Network (Bransjenettverket), Norway ....................................33
4.3 Industrial Waste Minimization and Corporate Synergy System (IWM-CSS), Peoples
Republic of China ..............................................................................................................34
4.4 SME Program prescribed under the Energy Conservation Act, India ...............36
4.5 Torch Program sponsoring high-tech business incubators, Peoples Republic of China 37
4.6 The Voluntary Protection Program Guidelines, Taiwan/Republic of China ......39
5 What to learn - Conclusions and Recommendations .............................................................................. 42
5.1 Potential to adapt case study examples to the Pakistani context ..........................42
5.2 Recommendations for Pakistan based on the case studies ....................................42
5.3 Outlook to future activities ......................................................................................43

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6 Read more ................................................................................................................................................... 45
7 About the project ........................................................................................................................................ 47
7.1 The Switch programme ............................................................................................47
7.2 The SCI-Pak Project ................................................................................................47




4
Using this booklet

What can this booklet offer?
This booklet provides an overview of advantages and disadvantages of a variety of policy instruments that offer potential
to foster sustainable production. How different mixes of these instruments could be applied in European and Asian
countries, and the impact in these regions will also be described. The analysis and examples that follow are presented
as background information for a roundtable with policy makers that will be held in 2011 as part of the SCI-Pak project.
The goal of the roundtable is to improve existing policy and develop new interventions to support sustainable production.
This booklet is best used in the context of an Opportunity Analysis of the Policy Framework developed by the SCI-Pak
consortium.

Who should read this booklet?
This booklet provides relevant information for:
Policymakers responsible for shaping future policy making in Pakistan.
Representatives of public authorities responsible for implementing and monitoring existing policy.
Representatives of international organisations and donors working in Pakistan.
Policy makers in other countries facing similar challenges to those in Pakistan and for whom the ideas can serve
as an inspiration for action.

How should this booklet be read?
There are several ways to read this booklet:
To obtain a quick overview of policy instruments that can be used to support and implement sustainable
production in SMEs, go directly to section3.
To learn about examples of good practice, where effective mixes of these policy instruments have been applied,
go to section 4.
To learn about potential benefits of policy intervention for sustainable production and the main criteria to be taken
into consideration for successful implementation, read sections 1 and 2.





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How is this booklet structured?
Figure 1 below provides an overview of the structure of this booklet.

1. First, the booklet demonstrates reasons for policy intervention for sustainable production and why such
interventions can be beneficial for policy makers, companies and the country as a whole.
2. Second, the policy instruments that are most suited for fostering sustainable production are introduced. An
analytical framework is introduced that contains five criteria that can be used to describe strengths and
weaknesses of each instrument.
3. In the third section, the ten most relevant policy instruments are analysed in detail according to the criteria
illustrating the instruments that are best suited to a variety of circumstances, such as limited government budgets
or limited capacities of government and implementing agencies.
4. In the fourth section, five case studies from Europe and Asia are presented that show how mixes of policy
instruments have been applied in real life and the respective impact thus far. To analyse the impact of the policy
mixes, the framework above was applied.
5. Finally, conclusions are drawn and recommendations presented.




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1 The benefits of policy intervention for sustainable
production

The role of policy makers: Policy makers have a key role in steering the transformation process towards more
sustainable production. Governments all over the world have also started to realize the benefits arising from sustainable
production within companies located in their countries. In order to enable business to change production methods,
governments need to create a supportive framework for these activities. Different levels of success achieved through
various government interventions in support of sustainable production across the world illustrate the potential to learn
from the most successful cases and apply the knowledge gathered to other regions.
In most developing countries, large opportunities lie with the improvement of existing policy actions and addressing
additional issues (see Figure 1). As shown in box at bottom left below existing policy can have a larger impact over
relatively short time frames when implementation is improved. In a second, often more complex and lengthy step, new
policy instruments can be used to create a holistic policy mix with a significant beneficial impact.

Figure 1: The policy field. (Source: The Switch-Asia Programme: Towards a Set of Programme Impact Indicators.
Background paper, Draft Version, 8
th
October 2010, p 30.)

Benefits of policy intervention for sustainable production: Increased levels of sustainable production are beneficial
for policy makers and for the country as a whole. There are several linkages between resource and energy consumption
of companies, their production patterns and the outcomes of these processes on both the wealth and wellbeing of local
populations. Policy makers are in a key position to tap the opportunities of sustainable production by applying the right
mix of policy instruments. By seeking synergies between the needs of business and environmental goals, policy makers

7
can help improve the quality of life for local citizens while at the same time reducing costs and opening up new markets
for businesses.

Graphic on reasons to support sustainable production under an optimal policy framework include:
Reduced conflict over availability of energy and other resources and reduced need for imports and investments in
this field
Increased innovation for sustainable production leading to more knowledge and development which will increase
both productivity and welfare
Better competition on the international level and increased attractiveness for international investment and
cooperation
More skilled workers and potential for job creation
Reduced costs and environmental impacts from waste and pollution
Positive impacts for climate change and reduced risks to biodiversity


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2 Policy instruments to support sustainable production in
SMEs

2.1 Which policy instruments are available for the task?
Experience with different types of policy instruments: There is good experience with a wide range of policy
instruments that support sustainable production for SMEs. Policymakers can benefit from examining best cases an
experience from other countries. When carefully adapting an instrument to local circumstances and needs policy makers
can expect improved SME performance in terms of energy and raw material use, waste, productivity and
competitiveness.
Clusters of policy instruments: For ease of access the instruments are clustered under regulatory instruments,
economic instruments, research and education instruments, cooperation instruments and information instruments.

















Economic instruments

- Taxes (on resources and emissions) tax deductions for Energy
and Resource Efficiency technology etc.
- Fees and user charges (on water extraction etc.)
- Subsidies (credits and loans)
- Environmental financing
- Tradable certificates (e.g. as part of the CDM mechanism)
Regulatory instruments

- Norms and standards (minimum performance standards)
- Laws and regulations (with specific targets/requirements which
have to be reached by SMEs)

Research and education instruments
- Research, development and demonstration
- Education and training


9












Mixes of policy instruments: To address the complex aspects of sustainable production, more than just one policy
instrument is generally required to facilitate change. As illustrated onFigure 2, several policy instruments, such as
regulations and standards, voluntary agreements and education and research programmes need to work together in an
effective policy mix. The different approaches and the mixture of support and challenges for SMEs and people can make
the desired change happen.

Figure 2: New Policy Making Processes (Source: The Switch-Asia Programme: Towards a Set of Programme Impact
Indicators. Background paper, Draft Version, 8th October 2010, p 30.)

Cooperation instruments
- Voluntary agreements
- Technology transfer
- Networking

Information instruments
- Eco-labelling & certification
- Sustainability reporting
- Information services



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2.2 Success factors for effective policy intervention
Successful policy intervention: A successful policy intervention that supports sustainable production will reach its
goals within the planned time frame and at the lowest overall cost. This success depends on the following five factors
which form the basis of the analytical framework in this document
1
:



1. Policy effectiveness: Policy effectiveness effectively environmental or social effectiveness for the cases
described in this booklet describes the capacity of the instrument to have a positive effect on the defined goal.
This means, for example, the extent to which energy efficiency has increased over a given time frame as a result
of the policy intervention.



2. Economic efficiency: Economic efficiency considers the cost-benefit implications of policy instruments. It
describes whether the instrument provides the most cost-effective means of achieving the goal in absolute terms
or in terms of a given unit of production. A new standard on energy-efficiency for production machines could, for
example, be equally effective as a tax on electricity from an environmental standpoint. Nonetheless, the tax on
electricity may be a more cost-effective means of achieving the desired goal.



3. Budget impact: Policy interventions have very different impacts on government budgets. One instrument may
cost more than another to implement or administer (e.g. compliance monitoring efforts for regulatory instruments
can come with a cost). Other interventions can generate revenues, (e.g. energy or resource taxes). These direct
budget impacts need to be considered in the context of costs to establish, monitoring and enforce policy
interventions.



4. Ability to implement and enforce: Not all policy instruments are equally easy to implement and enforce.
Success depends on whether the government has the necessary means in terms of people and funds to
implement and enforce the chosen instrument. An emissions trading system, for example, can be a very
challenging task to implement in practice as it requires detailed information on emission levels, development of
complex trading systems and compliance monitoring. Challenges arise when conflicts arise between other policy

1
Adopted from UNEP (2006): Improving energy efficiency in industry in Asia A policy review.
Policy effectiveness
Budget impacts
Ability to implement and enforce
Economic efficiency

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objectives or interventions. Long-term effectiveness is secured if the instrument can be adjusted to changing
circumstances and conditions.



5. Support from stakeholders: The success of a given policy intervention will to a great extent depend on the
willingness of stakeholders like the government, public, industry and other key stakeholders to actively support
the intervention over time. If, for example, a business association supports the introduction of new energy
efficiency standards proposed by government by communicating the expected advantages of the new standard to
member companies and offering training opportunities to facilitate implementation, the goals of the intervention
will be far more likely to be achieved.


Support from stakeholders

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3 Analysis of ten leading policy instruments for Energy and
Resource Efficiency

In depth analysis of ten leading policy instruments: Against the background of the five factors for successful policy
intervention developed by UNEP, the ten leading policy instruments identified above are described and analysed in
detail. As an example for regulatory instruments, Norms and Standards are described. In the economic instruments
category, Environmental Taxes, Subsidies and Environmental Financing are analysed in detail. As part of research
and education instruments, Research, Development and Demonstration (RD&D) are explored. Three cooperation
instruments Voluntary Agreements, Technology Transfer and Networking are described. Finally, Eco-Labelling and
Sustainability Reporting are described as information instruments.
Each instrument is explored in terms of potential positive and negative aspects as well as environmental effectiveness,
economic efficiency, budget impact, ability to implement and enforce, and support from stakeholders.

3.1 Norms and Standards
Norms and standards are regulatory instruments adopted by government. Norms and standards are rules and targets
that are enforced by compliance procedures (control). The term Command and Control is also used to describe this
type of instruments. Norms and Standards include, among others, laws, directives, and technical guidance documents
that have a legally-binding nature. These instruments can be used to achieve numerous objectives including reducing
emissions and waste, increasing resource or energy efficiency, reducing the use of toxic substances and protecting eco-
systems. Moreover, they can also be applied to increase the application of certain technologies considered to be
beneficial for resource efficiency. Norms and standards can also be used to enforce the polluter-pays-principle, a policy
approach that aims to shift the costs and liabilities of pollution to the polluter, who is held responsible to address the
societal-damaging aspects of their activities (CSCP / GTZ, 2006).













13

































14
Works cited:
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr
Technische Zusammenarbeit (GTZ) GmbH, Berlin.
2) United Nations Environment Programme, 2006. Improving Energy Efficiency in Industry in Asia
- A Policy Review. UNEP UNEP/ROAP, Bangkok, pp. 8-14.


3.2 Environmental Taxes
Environmental taxes or eco-taxes are taxes that support environmental goals by changing the price of certain goods or
behaviours. These taxes can be imposed on businesses, consumers or any other organisation. Enforcement can create
both positive environmental and revenue effects for government. The environmental effect is associated with
internalisation of environmental costs (getting the price right) which provides incentives for producers and consumers to
adopt more environmentally favourable behaviours and actions. The revenue effect arises from additional governmental
income through new tax. Proposals to implement eco-taxes are often accompanied by reductions in other taxes or
recycling of revenues to support environmental objectives, sometimes referred to as tax shifting (CSCP / GTZ, 2006).






















15




























Works cited:
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr
Technische Zusammenarbeit (GTZ) GmbH, Berlin.
2) United Nations Environment Programme, 2006. Improving Energy Efficiency in Industry in Asia
- A Policy Review. UNEP UNEP/ROAP, Bangkok, pp. 8-14.

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3.3 Subsidies
Governmental agencies can provide financial support to private enterprises for resource efficient production and
services. This support can be provided in two ways:
1) Direct subsidies: Enterprises can receive direct financial grants or credits to partly cover their investment in
resource efficient technology
2) Indirect subsidies such as (i) differentiated tax rates or tax exemptions (ii) provision of goods like power or
water and services below real (i.e. market) prices
Subsidies can be used to either promote innovation or to facilitate the adaptation to new legal conditions (norms and
standards) or to preserve environmentally sound structures and production processes (CSCP / GTZ, 2006).

























17


































18
Works cited
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr
Technische Zusammenarbeit (GTZ) GmbH, Berlin.
2) United Nations Environment Programme, 2006. Improving Energy Efficiency in Industry in Asia
- A Policy Review. UNEP UNEP/ROAP, Bangkok, pp. 8-14.
3.4 Environmental Financing
Environmental financing is an instrument that is used to promote environmentally beneficial investments. These
programs are usually funded through credit lines from donor agencies or government programs to provide necessary
financial resources for environmental investments. Environmental financing is made available for:
1) improving existing but polluting or inefficient facilities
2) financing new or pilot projects if they meet significantly stricter environmental standards
3) new or existing facilities where new technologies are being adopted where there is sufficient risk to deter private
investors (CSCP / GTZ, 2006).


























19



























Works cited:
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbH, Berlin.
2) Satu Lhteenoja, Nora Brggemann, Burcu Tuncer, 2010. A Guide for Civil Society Organisations.
CSCP, Wuppertal. Retrieved from http://www.action-town.eu.


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3.5 Research, Development and Demonstration (RD&D)
Research and Development (R&D) is a systematic process that creates or increases the stock of knowledge and applies
this knowledge to produce new products and processes. R&D activities range from basic research, applied research and
experimental development carried out by governmental departments, universities, research institutions, private
companies and non-governmental organizations. This provides the basic knowledge for the development and application
of new technologies and process innovations (CSCP / GTZ, 2006).
R&D efforts need to be backed up by systematic efforts to demonstrate how the new resource efficient technologies and
processes perform in practice. Demonstration is an integrating effort to assemble and exemplify a new capability based
on innovative technology in real-time operations at a scale that displays the effectiveness and performance of the new
innovative processes and solutions. Government has a key responsibility in building national technological capacities on
resource efficiency through RD&D activities. To foster resource efficiency it has been becoming increasingly necessary
that a wide range of organizations including public and private sectors collaborate on RD&D activities (even across
national boundaries) rather than managing them individually.
























21

























Works cited:
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbH, Berlin.
2) Satu Lhteenoja, Nora Brggemann, Burcu Tuncer, 2010. A Guide for Civil Society Organisations. CSCP,
Wuppertal Retrieved from http://www.action-town.eu.


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3.6 Voluntary Agreements
Voluntary agreements aim to encourage single firms, groups of companies or industrial sectors to improve resource
efficiency and environmental performance beyond existing environmental legislation and regulations.
Types of voluntary agreements:
1) Independent initiatives of business and/or industry;
2) Interaction between public authorities and business/industry;
3) Agreement between private parties and public bodies or stakeholder groups such as local communities and/or non-
governmental or environmental groups.
Under voluntary agreements participating parties set their own targets and often conduct their own monitoring and
reporting. By committing to a voluntary agreement, the parties are expected to stop a race to the bottom and to raise
the bar towards continuous improvement in environmental performance. Further, voluntary agreements facilitate the
formulation of policies that address environmental aspects beyond mere legal compliance with legislation. Voluntary
agreements are important instruments to stimulate the environmental dialogue in favour of achieving sustainable
consumption and production (CSCP / GTZ, 2006).






















23

































24
Works cited
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr
Technische Zusammenarbeit (GTZ) GmbH, Berlin.
2) United Nations Environment Programme, 2006. Improving Energy Efficiency in Industry in Asia
- A Policy Review. UNEP UNEP/ROAP, Bangkok, pp. 8-14.



3.7 Technology Transfer
Technology transfer is a process of facilitating access to new technologies, knowledge, methods of production, new
ways of manufacturing and related skills among governments and supplier/developers of new technology. Cooperation
for technology transfer takes place among the holders of environmentally sound technology, their counterparts in
recipient countries who wish to apply the technology within their businesses and brokers who have expertise in making
the technology suitable for use in new situations and circumstances.
In recent years, many development agencies have supported the transfer of resource-efficient technologies from
industrialized countries to developing countries. Various modalities are exercised to transfer technology including
licensing agreements or the establishment of joint ventures and partnerships to share both the risks and premium of
diffusing new technologies in the market.
Governments can lead the process of technology transfer to support the acquisition of resource-efficient technologies by
local enterprises. Investments needed to support technology transfer depend upon the nature of technology and the
required implementation/technical capabilities in domestic business (CSCP / GTZ, 2006).




















25






































26


Works cited:
1) CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr Technische Zusammenarbeit
(GTZ) GmbH, Berlin.
2) Satu Lhteenoja, Nora Brggemann, Burcu Tuncer, 2010. A Guide for Civil Society Organisations. CSCP, Wuppertal
Retrieved from http://www.action-town.eu.
3) Wuppertal Institute for Climate, Environment, Energy, SERI, CSCP, 2009. Eco-innovation - putting the EU on the path to
a resource and energy efficient economy: Study and briefing notes. Retrieved from http://www.scp-
centre.org/fileadmin/content/files/publications/ITRE-Eco-Innovation-09.pdf.

3.8 Networking
Energy and Resource Efficiency (E&RE) Networks are defined as collaboration initiatives among organizations pursuing
similar sustainability objectives. These networks aim to enhance resource efficiency within SMEs by facilitating capacity
building, technology innovation and access to finance.
Such networks can be instrumental in creating opportunities for capacity building among SMEs and encouraging a broad
adoption of measures that increase energy and resource efficiency (E&RE). Training courses and workshops offered by
such networks can greatly contribute to the creation of capacity of E&RE within SMEs. External coaches and experts
which would otherwise be too costly to hire for a single company can be brought to the whole network. Capacity building
addresses processes within the production phase, but also activities to improve the use of products.
To address the issue of technology innovation, networks support SMEs to see and understand which technologies are
needed and are available or beneficial to develop. By bringing experts and different stakeholders from inside and outside
the network together, technology innovation can be fostered. With high levels of cooperation, networks themselves can
develop important technologies for E&RE. By establishing a coordinated division of labour, partners can focus on their
core activities and increase overall efficiency. Products can be optimised by jointly developing new designs and new
value adding models.
Networks can also support SMEs to gain access to finance. By providing information on financial services that are
available to SMEs, networks can help overcome a significant barrier. In addition, networks can provide help and advice
in meeting the criteria of financial institutions, which would otherwise be too challenging for SMEs. Finally, networks can
establish a direct link between financial institutions and SMEs and create trust and cooperation (CSCP, 2010).
Works cited:
CSCP, 2010. Best Practice Collection on SCP Networks, CSCP, Wuppertal.








27





































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3.9 Eco-Labelling
The Eco-labels identify products that meet prescribed or defined environmental criteria. Such labels can stimulate competition
in the industrial sector in the development, design and production of goods that are favourable in terms of their impact on the
environment. The labels can be positive or negative in nature. Positive labels indicate a superior environmental performance
of a product or life cycle stage. An example of negative labels is a hazard-warning label.
The aim of eco-labels is to stimulate both supply and demand of environmentally preferable products. This results in
minimizing product related environmental impacts and thereby increasing resource efficiency through environmentally
conscious innovation. On the supply side, eco-labels stimulate business to produce and sell green products. In this way these
businesses can project an image of being greener and more environmentally friendly than their counterparts, which helps to
secure market share. On the demand side, these labels guide consumers in their purchase by informing them about the
environmental aspects of products (CSCP / GTZ, 2006).






























29
Works cited:
CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr Technische Zusammenarbeit
(GTZ) GmbH, Berlin.

3.10 Sustainability Reporting
Sustainability reporting is an instrument for communicating an organizations non-financial performance to the public. This is
also referred to as triple-bottom-line reporting. Through sustainability reporting an organization can communicate its
management policies, activities and results of activities on environmental, social and economic aspects. This tool can be
applied to all types of organizations such as companies and public authorities to share the outcomes of their actions towards
sustainable development over a specific period of time (for example an accounting year) to stakeholders and the public.
Usually the step of information disclosure offers benefits to organizations that aim to operate in a more sustainable manner.
To cater to strong pressure from customers, business partners, investors and the wider community, sustainability reporting
helps organizations to identify intangible risks and opportunities connected to their operations through measurement and
management (CSCP / GTZ, 2006).






















30
































Works cited:
CSCP / GTZ, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ)
GmbH, Berlin.

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4 Cases for application of the instruments as
policy mixes
From policy instruments to policy mixes: The last chapter demonstrated the ten most relevant policy instruments for
sustainable production and presented an analysis of strengths and weaknesses with respect to environmental
effectiveness, economic efficiency, budget impact, ability to implement and enforce, and support from stakeholders. As
previously stated, successful policy intervention usually contains a mix of different mutually supporting instruments. To
demonstrate how these mixes work, this chapter illustrates six case studies from Europe and Asia where effective policy
mixes have been applied to foster sustainable production.
The analytical framework from above is applied to the presented cases, which address different aspects of sustainable
production. To give a better overview of the most relevant areas for intervention, the SCI-Pak project has clustered the
interventions as:
The first area: The first area of intervention addresses the production phase with the highest potential for improvements
in terms of energy and resource efficiency and social aspects. For the textile and tannery sector, based on a hot spot
analyses of SMEs in both sectors, these policy priorities are:
2

Increasing efficiency in raw material and water consumption and decreasing waste and wastewater discharges
Increasing energy efficiency
Increasing worker health and safety
The second area: The second priority intervention area addresses SME abilities to improve production in favour of
sustainable production. The SCI-Pak project identified the following three priority areas:
Increasing SME capacities
Increasing technology innovation and transfer
Increasing SME access to finance


4.1 Special Fund for Energy Efficiency in SMEs, Germany
Policy Priorities: 1) Increasing SME energy efficiency, 2) Increasing SME access to finance
Established: 2008. The program is still in operation
Implementation agency: The Federal Ministry of Economics and Technology (BMWi) and Kreditanstalt fr
Wiederaufbau (KfW)/ Reconstruction Loan Corporation
Target Group:Small and medium-sized enterprises
Types of policy instruments: Subsidies, information services

2
Fore more detailed information on the methodology of identifying the opportunity areas, please see: CPI (2009): Simplified Life Cycle Assessment.
Hot spot identification.

32
Goals: With an energy consultation component of the Special Fund for Energy Efficiency in SMEs, the BMWi and KfW
seek to overcome barriers to providing qualified energy consulting services for SMEs and tap the potential for energy
efficiency. The advisory service support aims to provide support and incentives for SMEs to enable them to acquire
necessary investment for energy efficiency improvements.
Enforcement Mechanism: Through the fund subsidies are provided to SMEs to support the identification of energy
efficiency opportunities in production processes and technologies. SMEs benefit from the funding to finance initial and
detailed energy efficiency audits by the external experts. The experts analyze potential energy losses in the SME during
an initial examination. At the second stage the SMEs are provided advice on concrete steps and measures that can be
taken to reduce energy consumption and reduce cost.
Initial consultation: An expert consultant together with the SME analyzes the available primary technical data on energy
consumption and identifies potential areas where energy consumption is inefficient. The outcome of this examination is
documented by the consultant in a standard report format. This report covers all the aspects of energy demand and use,
including current status, existing efficiency gaps and required measures to address these gaps.
Detailed consultancy: At this level a complete and detailed analysis of energy consumption is undertaken by the
consultant. On the basis of this analysis a concrete action plan is prepared to achieve the identified energy efficiency
potential in the SME. The areas of major energy waste and those with greater potential for energy saving will be the
priorities for energy efficiency measures. A final report from the consultant includes details such as the cost of total
energy consumption, priorities for energy efficiency, proposed steps and measures, a financial appraisal of the
recommended energy efficiency measures, and a concrete operators manual and code of conduct.
Subsidies: The consultants energy efficiency analysis services can be financed via the investment credit available under
the framework of the ERP Environmental and Energy Efficiency Program, Part B - Special Funds. Through this facility
SMEs are eligible for funding support for:
For the initial consultancy an SME is eligible for 80% of the consultants daily rate. This amount is payable to
finance consultancy services for two working days of 8 hours each.
For the detailed consultancy an SME is eligible for funding 60% of the consultants daily rate. The amount is
payable to finance the services of consultant for ten working days.
Information Services: The KfW helps SMEs find qualified energy consultants through an online database. To apply for
the loan it is important that the selected consultant be identified in the database. The communication with companies
regarding details such as application deadlines is done via regional partners, such as chambers of trade and industry,
business associations, and energy companies. These partners explain the loan eligibility conditions and forward the
application to the KfW, which is responsible for approving or denying the loan.
Impact Evaluation: An evaluation of the success of the KfW Special Fund for Energy Efficiency in SMEs is presented
below:
Environmental Effectiveness: The fund helped avoid CO2 emissions in the range of 0.6 to 0.65 tons of CO2 per
MWh. The total emissions reduction through more efficient consumption of fuel in industries accounted for 0.2 to
0.35 t CO2.
Economic Efficiency: The KfW project based funding for energy efficiency in SMEs helped the sector tap energy
efficiency potential that would otherwise remain untapped due to the lack of sufficient financial resources on the
part of SMEs.
Budget impact: Budgetary burdens for the intervention is high due to the funding provided to SMEs. For
developing countries, heavy public expenditure for such funding support could be a deterrent. Low-interest rate
loans are one potential alternative to facilitate the energy efficiency investment in SMEs.

33
Ability to implement and enforce: External consultants carry out the energy efficiency audits, so government does
not need to have these capacities itself. However, experts need to be available in the country and government
needs to communicate the program.
Support from stakeholders: The implementation of this fund requires strong support from stakeholders such as
chambers of commerce and industry, business associations and energy service companies. Their cooperation
can expedite the loan processing. SMEs are likely to support such funds since investment costs are supported to
access quality consulting advice to save energy.
Read more:
The website of the KfW(www.kfw.de)
For more information about the Energieeffizienzprogramm
consult:http://www.kfw.de/kfw/de/Inlandsfoerderung/Programmuebersicht/Energieeffizienzberatung/index.jsp (in
German)
Frahm B, Gruber E, Mai M. et al. (2010). Evaluation des Frderprogramms Energieeffizienzberatung als eine
Komponente des Sonderfonds' Energieeffizienz in kleinen und mittleren Unternehmen (KMU). Karlsruhe: Institut fr
Ressourceneffizienz und Energiestrategien GmbH (IREES). Fraunhofer-Institut fr System- und Innovationsforschung
ISI. Retrieved from: http://www.energie-verstehen.de/Energieportal/Redaktion/Pdf/evaluation-foerderprogramm-
energieeffizienzberatung,property=pdf,bereich=energieportal,sprache=de,rwb=true.pdf(in German)

4.2 Energy Efficiency Network (Bransjenettverket), Norway
Policy Priorities: 1) Increasing SME energy efficiency, 2) Increasing SME access to finance
Established: 1989. The Network is still active.
Implementation agency: In 2002 a professional organization, Enova was established as a subordinate organization of
the Ministry of Petroleum and Energy (MPE). Enovas task is to stimulate energy efficiency by motivating cost-effective
investment decisions. During 1996-2002 the Norwegian Water Resources and Energy Directorate (also a MPE
subordinate) has been responsible for managing different programs to limit the use of energy. Although the MPE had
established the network as early as 1989, it began to play an important role in identifying and realizing energy saving
potential in the mid 1990s.
Target Groups: Industrial firms and industry sectors that are interested in participating in the network.
Types of policy instruments: Subsidies, voluntary agreements
Goals: The overall goal of the MPE is to either reduce energy consumption and/or promote renewable energy to the
amount of 43 PJ/year in total by 2010. Out of this 9 PJ/year of the reduction/change to renewable was expected to come
from industry alone.
Enforcement mechanism: Through Enova network members receive technical and economic support to improve
energy performance through increased knowledge and awareness.
Subsidies: Network members are eligible to receive financial and technical support for activities on two levels. The fist
level of support is provided for activities focussing on energy management. These include: energy policy, information to
employees, education and training, organizational support, and monitoring systems for energy and water consumption.
The direct costs incurred for this work were refunded to members to a maximum of 90% of the costs up to an upper limit
of EUR 3,750. An additional 50%, to a maximum EUR 12,500, can be provided for hardware and software investments to
establish energy efficiency monitoring systems if existing systems are inadequate. At the second level of support,
network members are eligible for financial support to undertake further steps based on the initial energy analysis. At this
stage, a more in-depth analysis of potential profitable investments in energy conservation could be carried out. For that
purpose network members are eligible for 50% of the consultancy and other costs to a maximum of EUR 25,000.

34
Voluntary agreement: In addition to direct financing, a web-based benchmarking system has also been developed that
enables members to extract information about their own energy performance in relation to other plants within the same
industrial sector. A requirement to join the network is the active participation with this benchmarking project. Through a
pilot project, efforts were made to extend the reach of benchmarking system linking industries in 11 European countries.
Impact Evaluation: An evaluation of the success of the Energy Efficiency Network for the period 1996-2004 is
presented below.
Environmental effectiveness: During the period 1996-2004 an energy reduction of 6 PJ/y has been estimated to result
from the activities of the network. This is a cumulative figure of energy savings and does not distinguish the contribution
of savings achieved through conversion from fossil fuel to renewable energy as compared to being achieved through
energy efficiency, however significant reductions in CO
2 emissions have been achieved. .
Economic efficiency: A 2006 ex-post evaluation (Gunner 2006) indicates that the ratio between government costs
incurred through the administration of network and the energy reduction achieved during the 1996-2004 period was close
to 0.03 cent/MJ, a very favourable cost. However, considering the financial constraints on the part of developing
countries, alternative investment financing options for carrying out network activities may be more suitable rather than
making expenditures from government budgets.
Budget impact: During 1996-2004 the total government expenditure for network activities amounted to about EUR 13.5
million for grants and administration costs, with a large majority going to financing for energy efficiency. In developing
countries governments might not be in a position to allocate funding at these levels for energy efficiency programs.
Alternative financing opportunities may need to be considered.
Ability to implement and enforce: In Norway a new organization (Enova) was established with the responsibility for the
overall energy savings program with great freedom to adopt various activities to achieve the established goals. Without a
specialized organization responsible for organising network activities, it is hard to anticipate success.
Support from stakeholders: Network stakeholders comprise the government of the Norway, Enova, member industries
and subcontractor consultancies/advisors. Enova received generous financing from the government to support network
activities. Members showed strong interest in implementing energy saving opportunities. Network members accounted
for 63% of the total industrial energy consumption in Norway. Only 8% of participants did not complete agreed projects.
Read more: Gunnar Modig, (2006). Evaluation of the Industrial Energy Efficiency Network in Norway, Energy
Intelligence for Europe Program. Retrieved from: http://www.aid-
ee.org/documents/013IndustrialEnergyEfficiencyNetwork-Norway.PDF

4.3 Industrial Waste Minimization and Corporate Synergy System (IWM-
CSS), Peoples Republic of China
Policy Priorities: 1) Increasing SME consumption efficiency for raw materials and water and decreasing waste and
wastewater
2) Increasing worker health and safety
Established: 1995. The incentive program remains in place.
Implementation agency: The Industrial Development Bureau (IDB) of Taiwan commissioned the Foundation of Taiwan
Industry Service (FTIS) a technical consulting organization - in 1995 to apply the Corporate Synergy System (CSS) tool
for Integrated Waste Minimization (IWM) in SMEs.
Target Groups: SMEs
Types of policy instruments: Voluntary agreement, education and training
Goals: To encourage the application of the Corporate Synergy System (CSS), a system for Integrated Waste
Management (IWM),and from 1998 onward, also ISO 14001 based Environmental Management Systems (EMS) and
Occupational Health and Safety Management Systems (OHSAS) in SMEs.
Enforcement Mechanism: At the beginning of each fiscal year, the IDB publishes a bulletin to solicit companies as
central firms. Central firms are companies that lead in the implementation of the IWM-CSS within firms/SMEs that are

35
the up-stream/down-stream supply chains of the lead central firm. Any firm active locally can apply to be a central firm
whether based in China or abroad. These firms must have experience implementing IWM, a strong cooperative
relationship with supplier SMEs and a willingness to provide necessary resources to run an IWM-CSS program. Based
on these conditions, the IDB and FTIS select qualified firms to operate as central firms in new programs. Once selected
as central firms, these firms approach their suppliers and encourage participation in IWM-CSS (See Figure 3.
Relationships among organizations involved in a IWM-CSS. Source: Chen Wen-Huei and Tang Yi-Han, (2011)).
Through the IWM-CSS, the central firms are able to rank suppliers on various parameters including product quality,
financial ability and environmental performance. Central firms reward dedicated suppliers through special credit
treatment, granting of additional orders, supplying free-staff training and other measures.
Below is the description of the specific instruments adopted
to implement the IWM-CSS system:
Voluntary Agreement: The program relies on the
commitment of decision-makers in each participating firm to
follow the IWM-CSS methodology and implementation
schedule

Education and training: To meet the requirements of the
program training sessions are conducted for the staff of
each participating firm. Management level employees are
trained the
IWM system,
likely benefits
and barriers,
general
approaches, and OHSAS. The process and operational staff
take part in technical classes including plant audit
procedures, IWM opportunity assessment methodology, and available IWM processes and measures and practices.

The IDB and the central firms provide recognition or other rewards and incentives to outstanding IWM-CSS firms. These
firms/SMEs may receive for example, special credit treatment, long-term supplier orders or free staff training from the
central firms.
Impact Evaluation: An evaluation of the success of the IWM-CSS program is presented below.
Environmental Effectiveness: The implementation of IWM-CSS at Sanyang (a motor and auto-bicycle industry that
served as a central firm in 1998 that ran this program with 15 suppliers) resulted in a reduction of 1,700 ton/yr of CO
2,
1,500 ton/yr of CO and a savings of 17,000 ton/yr water.
Economic Efficiency: In 1996 Cheng-Loong (a paper manufacturing company) implemented the IWM-CSS program.
Cheng-Loong worked with 10 upstream and 3 downstream suppliers, over 90 percent of which were SMEs. Through the
program, savings of US$ 3.5 million were achieved on investments of US$ 991,000 among the partner companies.
Budget impact: A large portion of program costs is provided by government. Since 1989 more than 500 firms have
applied for and received assistance from the IDB program. In developing countries governments could create alternative
sources of financing, such as by engaging international donors.
Ability to implement and enforce: The program provides an incentive for firms to green supply chains. Companies with
sound environmental performance encourage supplier firms/SMEs to improve environmental management. The SMEs
typically face a lack of extra capital, lack expert staff and financial resources to devote to environmental management
tasks. The success of the IWM-CSS depends on a close collaboration between four parties: the IDB with the role of
providing funding, the FTIS with the responsibility to assist participating firms in program implementation, review and
assistance in process audits, the central firms supervise and propose requirements for IWM-CSS implementation, and
the satellite firms/SMEs that are responsible to organize internal teams that are in charge of the program.
Figure 3. Relationships among organizations
involved in a IWM-CSS. Source: Chen Wen-
Huei and Tang Yi-Han, (2011)

36
Support from Stakeholders: The major firms take strong interest in the IWM-CSS program as it allows them to influence
and induce their suppliers to improve environmental and social performance. The SMEs generally support
implementation of the IWM-CSS programs due to various incentives including special credit treatment, additional orders
and free-staff training. The government supports the program since it relieves administrative burdens on government
agencies. The public also supports the mechanism as results are clear and visible.
Read more: Chen Wen-Huei and Tang Yi-Han, (2011). An overview of the Industrial Waste Minimization: Corporate
Synergy System in the Republic of China, Foundation of Taiwan Industry Service, Taipei. Retrieved from:
http://www.apo-tokyo.org/gp/e_publi/gsc/0316RES_PAPERSrev.pdf

4.4 SME Program prescribed under the Energy Conservation Act, India
Policy priorities: 1) Increasing SME capacities, 2) Increasing SME access to finance
Established: 2002. The program remains in place.
Implementation agency: Bureau of Energy Efficiency (BEE), India
Target groups: 25SME clusters
Types of policy instruments: Education and training
Goals: To accelerate the adoption of energy efficiency (EE) technologies and practice in 25 SME clusters through
knowledge sharing, capacity building and development of innovative financing mechanisms.
Enforcement Mechanism: The BEE SME program aims at capacity building through workshops to share knowledge
among energy efficiency (EE) service providers, SME clusters and banks regarding leading EE technologies, innovative
financial mechanisms for EE projects and best management practices. The program aims to assess energy efficiency
problems in various SME clusters and undertake capacity building among local service providers and SME
entrepreneurs/managers.
Cluster Specific Energy Efficiency Manuals: The major objective of the program is to develop 25 cluster specific energy
efficiency manuals covering specific energy consumption norms, energy efficient processes and technologies, best
practices, and case studies. These studies provide information on the status of technologies, best operating practices,
skills and knowledge gaps, energy conservation opportunities, energy saving potential within each SME sub-sector. The
studies provide direction for the design of sub sector specific SME energy efficiency programs.
Education and Trainings: On the basis of the findings of these studies, training workshops will be designed for local
experts in energy efficiency, representatives of industry associations and clusters of SMEs. The aim of the training
programs is to share the information on current energy usage patterns and information on energy efficiency financial
incentives available to SMEs. The capacity building measures will also include training on managerial issues for
implementing energy efficiency initiatives. This is mainly targeted toward financial aspects of managing the energy
efficiency measures in SMEs. The managers are provided training on record keeping, the types of available financing
schemes and additional opportunities. Local service providers are provided information needed for their role in specific
projects and their energy efficiency expertise. Officials from banks and financial institutions are trained on evaluation of
energy efficiency projects, including information on risk mitigation measures and funding opportunities for energy
efficiency projects.
Impact Evaluation: An evaluation of the success of the program follows below.
Environmental Effectiveness: The program has a target of achieving a 5% energy reduction in each sub-cluster and
cluster level. Based on energy and technology audit studies, suitable energy efficiency measures have been identified for
each SME sub-cluster. For example, within the textile sector, the Solapur textile cluster, which comprises 600 textile

37
mills, energy use and technology audits have already been conducted and best practices for energy efficiency in this
cluster have been disseminated.
Economic Efficiency: The implementation of technologies identified through the BEE SME program could be financed
through a variety of government funding schemes. In the textile sector for example, the program has been very
successful in cost reductions in an amount that exceeds initial investments, meaning that the investments under the
proposed EE technologies/measures are generally cost effective.
Budget impact: The funding is provided by pooling available resources from sources such as the World Bank (WB) and
United Nations Development Program (UNDP), which have shown interest to partner with the BEE for EE efforts in
Indian SMEs. As the WB and UNDP have been providing program financing, the financial burden carried by the
Government of India has been limited.
Ability to implement and enforce :The partnership with the WB and United Nations Development Program-Global
Environment Facility (UNDP-GEF) allows a pooling of resources. Other partner organizations include the Small
Industries Development Bank of India (SIDBI) and United Nations Industrial Development Organization (UNIDO) with
expertise in providing training on preparing Detailed Project Reports (DPRs) for different technologies/equipment that
can be adopted by SMEs. The WB will be providing assistance for creating risk-mitigation measures for financing EE
projects and the Energy Conservation Center, Japan (ECCJ), will be supporting small group activities in the SMEs. The
Ministry of Micro, Small and Medium Enterprises (MMSME) has responsibilities to assist in the selection of 25 SME
clusters and capitalization of DPRs.
Support from stakeholders: There is a great interest among multilateral donors (e.g., WB, UNDP/GEF) to fund the energy
management project in SMEs in India. Stakeholders support the program as it directly addresses individual needs of
each stakeholder. This includes, for example, capacity building and training for SMEs, banks, local energy efficiency and
SME sector experts.
Read more: Bureau of Energy Efficiency (BEE) India. (2002). Background and Objectives of BEE SME Program.
Retrieved from www.bee-india.nic.in.
BEE. (2009). Final report: National Conference on Financing Mechanism for Energy Efficiency Improvement in SMEs.
Retrieved from: www.bee-india.nic.in/schemes/documents/smes/Aboutnationconferencein-SMEs.pdf
Vitthal S. (2011). Energy Conservation and Efficiency DSM Initiatives in India. Retrieved from:
http://www.theiet.org/local/asia/india/mumbai/workshop-sustain/Presentations/energy-conserv-effeciency.cfm
Tiwari P. (2010). Energy Efficiency in Textile SMEs Clusters (BEE SME Program). Retrieved from: http://www.emt-
india.net/Presentations2010/20-Textile_17July2010/PawanKumarTiwari-BEE.pdf
The Energy and Resource Institute (TERI). (2011). BEE SME Program Situation Analysis in 35 Clusters. Retrieved
from: http://www.teriin.org/upfiles/projects/TOC/2007IE14_20101208135005.pdf

4.5 Torch Program sponsoring high-tech business incubators,
Peoples Republic of China
Policy priorities: 1) Increasing technology innovation and transfer, 2) Increasing SME access to finance
Established: 1988. The program remains in place.
Implementation agency: At the central government level, the Ministry of Science and Technology (MOST) provides
strategic direction for Technology Business Incubators (TBIs). Local governments are responsible for governance of
TBIs, sometimes in partnership with universities, state-owned enterprises and other sponsors. These founding
institutions and financing agencies have representatives on the TBI Board of Directors (BOD), which are responsible for
establishing policies and monitoring the activities of the TBI. Responsibility of one or several management committees

38
(working below the BOD level) is to guide the creation of the TBI at the very early stage, auditing the financial situation of
the TBI, implementing human resource management and proposing entry and exit criteria for tenants (See figure 2).
Target groups: Projects to be incubated must be connected to the high-tech sector; ownership of intellectual property
rights; having a mature technology with commercial potential; and environmentally friendly products. In terms of tenant
firms, the selection criteria is the firm has a legal status of less than 2 years, with registered capital less than EUR 0.2
million, a land area of less 1000m
2
and employ qualified R&D professionals.
Types of policy instruments: Subsidies, environmental financing (venture capital)
Goals: To create high-tech business incubators that promote commercialization and industrialization of Science and
Technology (S&T) results.

Enforcement Mechanism: The TBIs are
being enforced through:
Subsidies: Almost 90% of the Chinese TBIs
are registered as not-for-profit
organizations. Local governments provide
subsidies to these TBI organisations. At the
early stage the government offers free land
and initial construction funding. At the TBI
operation stage, financing is available in
three different ways: (i) to cover all
operation costs but the TBI should submit
all income to government; (ii) compensate
the cost-income spread of the TBI; (iii)
subsidize the TBI based on performance.
Environmental financing: The following
three different financial support frameworks
are available for the tenant firms in the TBI:

1) From the Ministry of Science and Technology: The TBI provides support and assistance to its tenant firms to make
application for the Innovation Funds for Technology-based SMEs (Innofund) operated by the Ministry of Science and
Technology through a project competition. In 2008, Innofund received 6,765 projects and 36.5% were selected for
funding.
2) From local government agencies: The tenant firms also have opportunities to obtain funding from different local
government agencies. The local Departments of Finance, Science and Technology Bureau, and the Bureau of Industry,
Commerce and Taxation are involved in pooling funds, identifying investment opportunities and channelling funding
toward new ventures. The government backed guarantee companies, for instance, have been set up to guarantee bank
loans to local ventures. Tenant firms benefit from tax holidays, below-market price treatment for rents, efficient
administrative services and preferential conditions from local government. Tenant firms can continue benefiting from
special tax exemptions if they are recognized as high-tech firms.
3) From investors: In the early stages, venture entrepreneurs mostly depend on self-financing and only a fraction of
ventures are successful in securing seed funding from TBI-based venture capital. During the incubation process,
financial support can be sought from domestic and foreign venture capital, and regional and national Innofunds.
Figure 4. Generic organization
structure of a Technology Business
Incubator (TBI) in China. Source:


39
Impact Evaluation: An evaluation of the success of the Torch program follows below:
Environmental Effectiveness: Environmentally friendly products are the selection criteria for incubated projects under the
Torch Program.
Economic Efficiency: Based on figures between 2005 and 2008, the number of tenants in TBIs increased from 39,491 to
44,391. The total income of tenants has risen from 162 to 186 million Euros. These figures demonstrate that the Torch
Program has been economically efficient.
Budget impact: A significant share of financing comes from subsidies provided by the Ministry of Science and
Technology and other local government agencies. Developing countries facing financial constraints would find it
challenging to subsidize the TBIs independently. Foreign venture capital funds and multilateral assistance agencies,
such as the United Nations Fund for Science and Technology (UNFS&T) may provide seed capital.
Ability to implement and enforce: At the macro-level, the Ministry of Science and Technology provides direction, while at
the micro-level, local governments are responsible for governance of the TBIs, at times with participation from
universities, state-owned enterprises and other sponsors. According to Tang M, Angathevar et. al. (2010), such
enforcement mechanisms illustrate the importance of administrative management in fostering TBIs rather than on
marketing for the tenant firms.
Support from stakeholders: The program received strong support from the Ministry of Science and Technology and local
governments which provided financing to establish TBIs. The Torch program saw significant support with the number of
tenants doubling between 2005 and 2008 from 15,815 to 31,176.
Read more: Tang M, Angathevar B, Pancholi J, (2010). Technology Business Incubators in China and in India: A
comparative analysis, The paper presented at the Globalics - 8
th
International Conference: Making Innovation Work for
Society Linking, Leveraging and Learning at the University of Malaya, Kuala Lampur, Malaysia on November, 1-3,
2010. Available at: http://www.ieri.org.za/sites/default/files/outputs/IERI_WP_2010_005.pdf
UNIDO, (2000) Country Studies China incubators, available at:
http://www.unido.org/fileadmin/import/30306_NYstudy_China.pdf

4.6 The Voluntary Protection Program Guidelines, Taiwan/Republic of
China
Policy priority: Increasing worker health and safety
Established: 1994. The program remains in place.
Implementation agency: The Industrial Technology Research Institute (ITRI) is leads the program. A not-
for-profit third party is designated to promote the Voluntary Protection Program (VPP).
Target Groups: 281,000 business firms and 4.82 million workers
Types of policy instruments: Norms and standards, certification, subsidies
Goals: Cooperate with enterprises by voluntarily establishing Occupational Health and Safety Management
Systems (OHSMS) based on workplace risk assessments.
Enforcement Mechanism: The Voluntary Protection Program guidelines provide support for enterprises to
establish their own OHSMS management systems. Seven main elements are identified in the Voluntary
Protection Program with 102 items that are quantitatively ranked by auditors on a score from 0 to 100.
Personnel resources from non-governmental organizations are utilized in addition to temporarily appointed

40
professionals from industry to assist applicants by furnishing application documentation, training the
Voluntary Protection Program auditors, conducting initial on-site reviews, fulfilling management commitments
and reporting to the Voluntary Protection Program review committee.
Norms and standards: In 1994 the Council of Labour Affairs (CLA), a Cabinet agency of Taiwan, established
a regulation entitled the Voluntary Protection Program, Guidelines. These guidelines refer to various health
and safety management systems and International Safety Rating Systems for Loss Control. The aim was to
encourage industries to establish and carry out their own voluntary OHSMS programs. The benefits of this
approach were to achieve compliance with national interests to minimize risks to employees within limited
government inspection capacities. Organizations complying with the VPP guidelines can apply for VPP-merit
certificate. A third-party organisation is responsible to accept enterprises applications, conduct document
review and organize site inspections.
Certification: In 2001 the Council of Labour Affairs amended the VPP program legislation to share basic
elements of BS 8800 (guidelines on OHSMS by the British Standards Institute for assisting with compliance
with Health, Safety and Environment in organizations) and OHSAS 18001 (Occupational Health and Safety
Assessment Series proposed by the British Standards Institute in 1999). Under the new VPP it became
easier for firms to transfer from an approved VPP to the certified OHSAS 18001, which enhances their global
competitiveness.
Subsidies: Each year audit results are discussed within the VPP review committee that comprises 11-12
specialists from local authorities, scholars from university management or health and safety departments.
Based on the assessment of audit reports the committee decides on renewals and new applicants.
Enterprises receiving a score of 70 or greater become a certified VPP Merit worksite. The enterprises that
score over 85 are eligible for competency grants under a national excellence award. These firms benefit
through reductions in insurance premiums from the Ministry of Finance and the Association of Property
Insurance Providers as an economic incentive for a period of two years. On the basis of annual reporting
requirements the VPP review committee is entitled to revoke certification if the worksites fail to maintain
performance.
Impact evaluation: An evaluation of the success of the VPP program follows below:
Social effectiveness: The VPP provides incentives to enterprises to gain access to grant funding by taking
voluntary actions to reduce work-related injuries and illness. By the end of 2003, 724 worksites had been
granted VPP awards. The workplace average injury frequency rate (lost workday cases per million work
hours) is 49% lower in VPP worksites based on 2001-2003 data relative to industry in general. Similarly the
severity rate (total days lost per million work hours) reduction was 80% less over the same period.
Economic efficiency: The VPP program allows government to optimally allocate its limited resources and
provides a framework for enterprises to independently develop and implement corrective management
systems. The government is active only during the certification stage. By the end of 2003, 724 worksites had
been granted VPP awards.
Budget impact: The economic incentives provided to VPP Merit worksites are designed in cooperation with
the Ministry of Finance and the Association of Property Insurance Providers in the form of reduced insurance
premiums. These incentives impose no negative impact on the government budgets.
Ability to implement and enforce: The Industrial Technology Research Institute in partnership with a non-profit
third party have been designated as implementation agencies for the VPP program. This enforcement
mechanism has been adopted in view of limited government resources, which enhances efficiency and
effectiveness of the VPP.

41
Support from stakeholders: Enterprises support the VPP as they can easily transfer from an approved VPP
certification to the OHSMS 18001 standard. Government supports voluntary systems because of the capacity
to utilize resources from enterprises and third parties and target those resources toward areas of highest risk.
Read more: Sheng SuT,Yi Tsai, W and Chun Yu Y, (2005). An Integrated Approach for Improving
Occupational Health and Safety Management: The Voluntary Protection Program in Taiwan. Journal of
Occupational Health (47); pp. 270-276.





















42
5 What to learn - Conclusions and Recommendations

5.1 Potential to adapt case study examples to the Pakistani context
The following table provides an overview of the potential to apply the strategies and lessons from the above
demonstrated case studies to the case of Pakistan. The table is based on the impact evaluation behind each case study.
+ means that there is a high potential for positive impacts in Pakistan. A - means that the aspect will likely be
challenging and a +/- means that the potential impact could be positive or negative, depending on the implementation.

5.2 Recommendations for Pakistan based on the case studies
The case studies presented above can help overcome challenges described in the opportunity assessment booklet. The
following describes how the cases could be adopted to the situation in Pakistan and which lessons can be learnt.
1. Special Fund for Energy Efficiency in SMEs, (2008) Germany: This case study shows the initiatives of the
Reconstruction Loan Corporation (KfW) for increasing energy efficiency in SMEs. SMEs are provided subsidies to
finance the services of energy efficiency audits conducted by external consultants. An online database helps SMEs find
qualified energy consultants and apply for loans to finance their services. The present initiatives with regard to energy
efficiency in SMEs in Pakistan suggest that relevant government implementation and monitoring agencies lack required
capacities and funding. To enforce energy efficiency in SMEs, KfW encourages SMEs to hire energy consultants to
perform audits and identify areas where investment is required to tap the energy saving potential. Because of this
enforcement mechanism, government does not need to possess these capacities directly; but rather qualified
consultants provide their expertise directly to SMEs. The government has the role of promoting the program.
Environmenta
l / social
Effectiveness
Economic
Efficiency
Budgetary
Impact
Ability to
implement
and enforce
Support from
stakeholders
Case study + - +/- + - +/- + - +/- + - +/- + - +/-
1. Special Fund for Energy Efficiency in
SMEs, (2008) Germany
2. Energy Efficiency Network
(Bransjenettverket), (1989) Norway
3. Industrial waste minimization and
corporate synergy system (IWM-CSS),
(1995) Peoples Republic of China
4. SME Program prescribed under the
Energy Conservation Act, (2002) India
5. Torch Program sponsoring high-
tech business incubators, (1988)
Peoples Republic of China
6. The Voluntary Protection Program
Guidelines, (1994) Taiwan


43
2. Energy Efficiency Network (Bransjenettverket), (1989) Norway: This case study presents how technical and economic
support is provided within the Energy Efficiency Network, Norway. In Pakistan, one of the opportunity areas for better
energy efficiency policy enforcement is to establish an autonomous body to perform functions related to energy
efficiency. The network provides an example of best practice in this regard. Enova was established in 2002 and has
responsibilities for the overall energy saving program. Enova receives generous funding support from government to
undertake network activities. The potential to implement similar activities with the assistance of one institution exists in
Pakistan in the form of provisions of the Pakistan Energy Efficiency and Conservation Bill, 2010. Under the Bill, the
National Energy Conservation Authority (ENERCON) will be made an autonomous body in charge of all energy
efficiency related issues.
3. Industrial waste minimization and corporate synergy system (IWM-CSS), (1995) Peoples Republic of China: This
case study illustrates how the government is working with companies that possess experience in implementing IWM with
the goal of extending this expertise to the supply chain. This enforcement mechanism is based on cooperation between
all stakeholders to establish practical waste minimisation objectives and programs. The case study contains best
practice examples that offer potential to further improve the existing interventions in the area of industrial waste
management in Pakistan. Considering the limited government capacities in monitoring and enforcement, the IWM-CSS
model could be a good alternative. Utilizing IWM-implementation experience of firms to support the program will require
less government monitoring and a concurrent lower cost. Direct learning from the experience in China could be fostered
by field visits.
4. SME program prescribed under the Energy Conservation Act, (2002) India: This case study is based on an SME
program established under the provisions of the Energy Conservation Act of India. The case shows how the Bureau of
Energy Efficiency is supporting the adoption of energy efficiency technology in 25 chosen SME clusters. In Pakistan,
opportunities exist to adapt training and education initiatives to the energy efficiency needs of industry.
5. Torch Program sponsoring high-tech business incubators, (1988) Peoples Republic of China: This case study
describes how technology innovation has been sponsored in the Peoples Republic of China. This case study provides
best practices in the area of developing and implementing environmentally sound technology within SMEs. It shows how
innovative firms can be encouraged to develop and market environmentally friendly products. Financing technology
incubators through foreign venture capital will have limited budget impact. However, establishing technology incubators
might not result in the development of profitable technologies in the short-term. Government should be prepared to bear
the initial costs. As appropriate technology is a core barrier to improving E&RE in Pakistani SMEs, technology innovation
can be supported.
6. The Voluntary Protection Program Guidelines, (1994) Taiwan/Peoples Republic of China: This case study illustrates
how Taiwanese companies are encouraged to voluntarily comply with occupational health and safety guidelines. The
case study is an example of best practice to improve worker health and safety in Pakistan. Existing legislation and
practice in health and safety have been designed without involvement of employers and workers. This case example
demonstrates how stakeholders can be effectively engaged in the health and safety program and thereby reduce
enforcement costs and increase compliance. The government need only design appropriate incentives for participation
from the enterprises.

5.3 Outlook to future activities
Based on the information provided above, the SCI-Pak project will, together with Pakistani policy makers, develop
recommendations for new policy sustainable production interventions in Pakistan. During the planned round table with
policy makers, the opportunity analysis and arguments in favour and against the use of specific policy instruments for
sustainable production will be presented. Based on this discussion, the group will develop an action plan for the
formulation of new policies and improvement of existing policy to foster sustainable production in SMEs in Pakistan

44



























45
6 Read more

Bureau of Energy Efficiency (BEE) India, 2002. Background and Objectives of BEE SME Program. Retrieved from
www.bee-india.nic.in
CSCP / GTZ / Wuppertal Institut, 2006. Policy Instruments for Resource Efficiency. Deutsche Gesellschaft fr
Technische Zusammenarbeit (GTZ) GmbH, Berlin.
CSCP, 2010. Best Practice Collection on SCP Networks, CSCP, Wuppertal.
Greenpeace International, 1995. The Role of Environmental NGOs in Cleaner Industrial Production. UNIDO, pp. 7-8.
Hans Diefenbacher, Volker Teichert and Stefan Welhelmy, 2004. How have ecotaxes worked in Germany? The Lilliput
Press Ltd.
Industries Department - Government of Tamil Nadu, 2007. The Industrial Policy 2007. Retrieved from.
http://www.tidco.com/images/industrialpolicy_e_2007.pdf
IPCC, 2007. Fourth Assessment Report: Climate Change 2007.
Ministry for the Environment (New Zeeland), 2004. Proposed National Environmental Standards for Air Quality Resource
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7 About the project

7.1 The Switch programme
The SWITCH-Asia Programme aims to promote economic prosperity and poverty reduction in Asian countries through
sustainable growth with reduced environmental impact by industries and consumers, in line with international
environmental agreements and processes. The projects under the SWITCH-Asia Programme focus on the issues of
sustainable production and sustainable consumption patterns and behaviours. The programme is funded by the
European Commission.
7.2 The SCI-Pak Project
The Project Sustainable and Cleaner Production in the manufacturing industries of Pakistan SCI-Pak operates under
the SWITCH-Asia network facility. Head of the project is the ttz Bremerhaven, supported by the UNEP/Wuppertal
Institute Collaborating Centre on Sustainable Consumption and Production (CSCP). Implementation partners from
Pakistan are the Iqbal Hamid Trust (IHT), a not-for-profit development consulting firm and the Cleaner Production
Institute (CPI).
The programme aims to develop a model of sustainable production through the implementation of Energy and Resource
efficiency (E&RE) initiatives among small and medium-sized enterprises (SMEs) in the textile and tannery sector in
Pakistan. Additionally, to this immediate target group the project aims to expand the number of industry stakeholders to
include additional manufacturing sectors, such as pulp & paper, sugar, and other energy intensive industries.
One project activity is the creation of a Sustainable Consumption and Production Network in Pakistan. The network shall
link manufacturer SMEs with stakeholders from financial institutions, universities, government and consumers to
exchange know-how and experience, to build capacities and provide financing, respectively. The aim is to create a
collaboration facility to foster multi-stakeholder dialogues for SCP in Pakistan. The best practice collection on
Sustainable Consumption and Production Networks in Europe and Asia presented in this booklet will support the
creation of the network.