Over the last two decades, competition among refrigerator and freezer companies has extended beyond just marketing CFC-free products. Firms like Electrolux, Whirlpool, and Bosch und Siemens Hausgeräte (BSH) have also been competing to develop more energy-efficient models, advertising them as win-win purchases for consumers—a way to save the environment and save on utility bills. Many are upgrading factories, modifying packaging, and introducing codes of conduct to conserve energy, emit less pollution, reduce waste, and promote recycling. Some are cooperating with governments and nongovernmental organizations to develop environmental legislation to make producers more responsible for recycling, thus creating incentives to develop models that are easier and cheaper to recycle (as well as justifying higher consumer prices across the refrigeration sector). A few firms, such as Electrolux, are even auditing suppliers in developing countries like China and Brazil to monitor compliance with corporate codes of conduct and environmental regulations.
Today, as a result of these environmentally friendly changes, a new refrigerator tends to use less energy and produce less waste than even a decade-old model. Every corporate brochure on social and environmental responsibility touts these commendable changes as “progress” for consumers and the global environment. But do they constitute true progress? The answer, this chapter argues, is a qualified no. Although the changes do save some consumers money on utility bills, they don’t always lower personal consumption: consumers in “mature” markets tend to buy more refrigerators and freezers with more storage capacity, thus drawing more electricity and producing more waste. Nor have they translated into smaller impacts on the global environment: rising world-wide consumption of refrigerators and freezers offsets the per unit gains in producing, using, and disposing of them. Before considering these more critical points, however, let’s survey corporate efforts to sell the new and “superior” refrigerators.
Marketing Energy-Efficient Refrigerators
Guidelines to promote the energy efficiency of home appliances are now common in many countries. Governments use many different tactics and policies to promote higher efficiency. The United States imposes minimum energy efficiency standards for appliances (with, for example, rules to require manufacturers to improve current efficiency over past efficiency in a baseline year). Belgium gives consumers cash bonuses, funded by its energy firms, for buying refrigerators with the highest energy efficiency rating. France relies on its state-owned energy firm to educate consumers about the value of buying an energy-efficient appliance. Some countries in the developing world—China, for example—have offered financial incentives to domestic producers to develop models with less environ-mental impact.1
In many households, running a refrigerator is the single largest expense on the electric bill. In the United States, for example, refrigerators and freezers account for about 14 percent of the electricity consumption of U.S. households: a typical refrigerator costs over $1000 to run over its lifetime (with operating costs rising as the refrigerator ages).2 Many jurisdictions, including the United States, China, and the European Union, impose caps on the allowable level of energy consumption for refrigeration appliances. Many also require firms to include energy ratings to inform consumers. The European Union, China, and Australia, for example, all have mandatory energy labeling schemes for refrigerators, freezers, and air conditioners.
In 1995, the European Union adopted a mandatory rating system for refrigeration appliances. Ratings are from A to G, with A standing for most and G for least energy-efficient. The EU added two additional ratings for refrigerators and freezers in 2004: A+ and A+ +, earned for using 25 percent and 45 percent less energy, respectively, than an A-rated appliance. These new ratings are not easy to achieve. Only 18 percent of the refrigerators and freezers made by BSH, for example, were rated A+ or A+ + in 2004; the following year, only 21 percent were.3
International programs also encourage manufacturers to develop appliances with higher environmental standards. The world’s largest appliance firms all participate in these programs to some degree. The Swedish firm Electrolux, the world’s leading manufacturer of refrigeration appliances by volume in 2002—selling under the brand names “Electrolux,” “Frigidaire,” “Zanussi,” and “Kelvinator”—widely publicizes its policy of corporate social responsibility, as do the world’s second and third largest refrigerator and freezer makers in 2002: the U.S. firm Whirlpool and the German firm BSH.4
Environmental Responsibility at Electrolux
Electrolux is one of Sweden’s largest companies, with 276 subsidiaries in 60 countries and with sales of more than 40 million products in more than 150 countries. At the core of the environmental code of conduct for the Electrolux Group of companies, Electrolux’s environmental policy commits its companies to improve the environmental performance of their suppliers, producers, users, and recyclers. This policy is implemented through “globally facilitated, locally owned management systems” that comply with the International Organization for Standardization (ISO) 14001 standard, the only certifiable standard in the ISO 14000 series.5 Under the specific guidelines of the standard, a firm must (1) declare it will comply with all environmental regulations in its locale; (2) put a management system in place that conforms to its environmental policy; (3) commit both to preventing pollution and to continually improving environmental management; and (4) agree to encourage all contractors and suppliers to implement environmental management systems that meet the ISO 14001 standard.
All production units in the Electrolux Group with more than 50 employees must receive ISO 14001 certification. The number of units certified by ISO 14001 went from fewer than 20 percent in 1998 to nearly 80 percent by 2003. At the beginning of 2006, 68 Electrolux manufacturing units were certified—or 91 percent of the total number requiring certification and 98 percent of the Electrolux Group’s total manufacturing capacity.6 Electrolux is using this standard to create a baseline for monitoring compliance across its many units. Like the other 90,000 or so firms certified under this standard, it is also using ISO 14001 certification to reassure consumers of its environmental commitment (and thus sell more of its products).
As part of that environmental commitment, Electrolux is implementing policies to address climate change. Because electricity for home appliances accounts for about 4 percent of total carbon dioxide emissions in Europe, a primary tactic is to “stimulate” consumers to purchase more energy-efficient appliances. Electrolux Home Products, for example, cooperated with the Dutch energy company Eneco in a 2005 advertising campaign in the Netherlands on the value of buying more energy-efficient products. Electrolux is also working to improve the energy efficiency of its products, in recent years achieving an annual average efficiency gain of 4 percent across all products. “Too many homes have appliances running on technologies developed more than a decade ago,” explains Environmental Affairs Vice President Henrik Sundström. “Although we continue to cut energy levels in our products, the best approach I know to cut consumption is to encourage customers to exchange models that are more than 10 years old for new, more efficient ones.”7
Electrolux sees expanding sales of more energy-efficient appliances in China—a market that could represent as much as 35 percent of global demand for appliances by 2012—as critical for the success of this strategy. Its efforts to that end are aided by China’s mandatory energy labeling scheme for refrigerators, freezers, and air conditioners. Electrolux is working as well to reduce waste from packaging. The World Packaging Organization, an international federation of packaging institutes, awarded the Electrolux freezer plant in Hungary a WorldStar award in 2004 for developing recyclable pressed-cardboard packaging that saves around 900 metric tons of wood a year. To ensure that its manufacturers comply with the Electrolux code of conduct (including its environmental policy), the company provides regular training programs for managers and employees on the code (as well as on business ethics more generally). It’s also conducting audits: 12 in 2004, with 2 follow-ups and 1 new audit in 2005; by 2006, all Electrolux factories in Asia, and all but one in Latin America, had gone through an audit for social and environmental practices.
Because increasingly its products and components are made in developing countries, suppliers are a growing part of the global impact of Electrolux. Monitoring and enforcing its code of conduct among these suppliers can encounter thorny cultural and political problems, such as in China, one of the more difficult places to hold suppliers to foreign standards. Even here, however, Electrolux completed the first phase of its Supplier Monitoring and Compliance Program in 2005. This involved 45 audits of large and small firms to gain experience before finalizing the procedures for evaluating its 400 or so Chinese suppliers. The initial audits found many cases of “noncompliance,” although Electrolux expects higher compliance once suppliers gain a better understanding of expectations. Over the next few years, Electrolux intends to assist suppliers in complying with the corporate code of conduct. “Ending a contract with a supplier does not improve the situation for workers or the environment,” explains Jean-Michel Paulange, head of Electrolux purchasing for the Asia-Pacific, “and it’s a costly and less-than-optimal solution for Electrolux. Whenever possible, we will try to work with suppliers to fulfill our requirements.”8
In a practice it calls “responsible lobbying,” Electrolux is also cooperating with governments to develop environmental legislation. A good example is the European Union’s Waste Electrical and Electronic Equipment (WEEE) Directive, which went into force in many European countries in 2005.9 This directive addresses the growing volume of waste in Europe—which includes an additional 50 million or so discarded large home appliances each year. The directive requires the collection and recovery of 80 percent of the weight of large appliances: at least 75 percent must be recycled (5 percent can be converted into energy).
Electrolux claims it “fought strongly” for years, along with nongovernmental organizations like the European Environmental Bureau and the WWF (World Wildlife Fund/World Wide Fund for Nature), to establish the WEEE Directive to make producers responsible for waste. This was necessary, Electrolux argued, to create sufficient corporate incentives to develop products that are easier and cheaper to recycle, such as the hydrocarbons (HCs) it now uses in its refrigerators and freezers: not only are these easier and cheaper to recycle, but they also have less impact on climate change than many alternatives. Making firms responsible for waste also allows a firm like Electrolux to adjust consumer prices to recoup the extra costs arising from recycling and disposal.10
Electrolux is involved in a host of other environmental initiatives as well. Along with Braun/Gillette, Hewlett Packard, and Sony, it’s a founding member of the European Recycling Platform, the first pan-European effort by industry to manage recycling under the WEEE Directive, covering three-quarters of the total volume of waste in Europe. Electrolux has also taken an active role in developing the legislation to comply with the EU Directive on Restriction of the Use of Certain Hazardous Substances. By restricting six hazardous substances found in electrical and electronic equipment sold after 1 July 2006, this directive required Electrolux to modify nearly all of its electrical products.11 As part of meeting its commitments here, Electrolux put in place a list of banned and restricted substances for its suppliers to assist with compliance and prepare for future phaseouts. (Electrolux suppliers, such as those in Brazil, work with lower domestic standards, but must still comply with this list when supplying Electrolux for products to be sold in Europe.)
Electrolux is involved, too, in campaigns to educate consumers about the benefits of energy-efficient appliances. Thus, in 2004-05, it released 80,000 copies of an information package in Italy called “Ecoguida” (made in cooperation with the WWF) that shows consumers how to use appliances more efficiently and how to choose an eco-efficient model when buying a new appliance. And, finally, Electrolux is a member of the United Nation’s Global Compact, whose corporations have pledged to abide by the compact’s ten guiding principles on human rights, labor standards, environment, and corruption—as is the German appliance company Bosch und Siemens Hausgeräte (BSH).
Environmental Responsibility at BSH
Founded in 1967 and best known for its brand name, “Bosch and Siemens,” BSH has facilities in some 40 countries with over 35,000 employees. Like Electrolux, BSH publishes annual sustainability reports. “Responsibility for the environment and society is for us an ethical obligation,” one report begins, “and at the same time an essential prerequisite for sustainable business success.”12
BSH aims to set the environmental “benchmark” for home appliances. As a member of the European Committee of Manufacturers of Domestic Equipment (CECED), the company played a leading role in developing CECED’s 2005 voluntary code of conduct for corporate social respon-sibility.13 BSH’s own environmental policy focuses on preventing ozone depletion and climate change—on producing ever more “low-consumption” appliances with ever more efficient use of inputs. This policy has yielded measurable results: from 2002 to 2004, the percentage of BSH refrigerators and freezers receiving an EU Class A rating went from 70 to 85 and from 48 to 64, respectively. The average energy consumption of its refrigerators fell an impressive 78 percent from 1990 to 2004, primarily because of advances in compressor technologies. These achievements are all the more significant given that between 80 and 90 percent of the environmental impact of home appliances occurs during the usage stage.14
BSH is also working to use less energy and water and to generate less waste and carbon dioxide during production, packaging, and transportation. Through dialogue with its wholesalers, retailers, consumers, and disposal firms, the company is striving to maximize environmental efficiencies throughout the product life cycle. As with Electrolux, the BSH environmental guidelines require all production sites “where environmental matters are an issue” to receive certification by the International Organization for Standardization under the ISO 14001 standard. Already, by the close of 2004, the ISO had certified 96 percent of these sites.15
For both Electrolux and BSH these environmental strategies are part of a broader strategy to retain and capture markets. This is true, too, for the U.S. appliance company Whirlpool, which, as its move to acquire Maytag in 2005-06 shows, is aggressively expanding its operations.
The world’s largest manufacturer of “major home appliances,” with sales in over 170 countries, Whirlpool has more than 68,000 employees and nearly 50 manufacturing and technology units worldwide.16Like Electrolux and BSH, Whirlpool has developed a corporate policy for social and environmental responsibility. “Equal to protecting the health and safety of our employees,” the company emphasizes, “we consider environmental stewardship among our most important business responsibilities.”17
Unlike Electrolux and BSH, however, as of March 2008, Whirlpool was not a member of the Global Compact, although the corporation stresses its commitment to improving environmental performance and protecting ecosystems. In 1993, Whirlpool’s Super Efficient Refrigerator Program beat out over 500 firms and inventors for a $30 million winner-take-all contest—a prize awarded by a coalition of 25 public and private electric utilities for designing and mass-producing a CFC-free refrigerator at least 25 percent more energy efficient than U.S. minimum standards. More recently, Whirlpool proudly declared itself the first major appliance company to set a target for reducing greenhouse gases (3 percent below 1998 levels). Its primary means for achieving this target is through developing and manufacturing more energy-efficient appliances; to help market them, Whirlpool has participated in the U.S. government’s ENERGY STAR program since 1998.
Established in 1992 as a voluntary partnership between industry and government, ENERGY STAR assists American households and builders with energy conservation, advises businesses on how to produce goods with less energy, and provides consumers with information comparing the energy efficiency of various products (including new homes). The primary means is through the ENERGY STAR label, which provides consumers and businesses with a “credible, objective source of information . . . to make well-informed energy decisions;” products bearing the label must meet energy efficiency standards set by the Environmental Protection Agency and the Department of Energy. Consumers have bought over 2 billion products with an ENERGY STAR label since 1992; currently, more than 1,500 manufacturers use this label on over 35,000 models.18
The ENERGY STAR program is designed, not to reduce the consumption of, say, household appliances like refrigerators, but rather to help manufacturers and consumers save energy when producing and using them (and in the process save money all around). According to ENERGY STAR, a typical household that follows its advice can save around a third on its energy bill “without sacrificing features, style or comfort.”19 Thus it becomes possible to lower greenhouse gas emissions by appealing to the self-interest of consumers. The U.S. government sees this as a profit-able win-win solution: one that in recent years is gaining power as energy prices rise.
Credible evidence exists of the value of this program. With the assistance of ENERGY STAR, Americans saved $14 billion on utility bills in 2006, averting greenhouse gas emissions equal to running 25 million automobiles for a year (representing about one-third of the total reductions arising from the EPA’s climate change programs). This translated into a drop in U.S. demand for electricity of about 4 percent. Over time, the program appears to be getting more effective. The energy savings more than doubled in the five years after 2000. And ENERGY STAR expects these to nearly double again over the next decade.20
The ENERGY STAR program is influencing the manufacturing and marketing strategies of multinational appliance companies, too. Whirlpool, for example, has sold over 300 models across 7 product categories that qualify for the ENERGY STAR program. It now has more appliances with an ENERGY STAR rating than any other manufacturer. One example is its Conquest refrigerator, which consumes roughly the same amount of energy per year as a continuously burning 75-watt lightbulb, exceeding minimum U.S. federal energy efficiency standards by 15 percent.21
Whirlpool received ENERGY STAR Awards every year from 1999 to 2002 and from 2004 to 2007 (these are given by the Environmental Protection Agency and the Department of Energy). Whirlpool’s 2007 award was for “sustained excellence.” The selection criteria took into account efforts to use energy-efficient technologies, to explain the benefits of saving energy to consumers and businesses, and to encourage other firms to join the ENERGY STAR program. Other 2007 winners included some of the world’s best-known firms, such as Toyota, Ford, PepsiCo, McDonald’s, Home Depot, and Marriott.22
Firms and consumers could do many other small things to improve efficiency further. One easy one is to unplug (or design) products to avoid drawing power 24 hours a day. As much as one-fifth of the electricity appliances use occurs in “standby” mode; every year, this consumes $3.5 billion in electricity in the United States alone.23 Still, the progress in developing better appliances is impressive. Newer models no longer emit CFCs, use less electricity, and are easier to recycle. Average energy efficiency of refrigerators in the United States, for example, has much improved—over 150 percent from 1980 to 2002 alone. By replacing older refrigerators with newer, more energy-efficient ones, consumers can save considerable energy and significantly reduce greenhouse gas emissions per unit. (Deteriorating parts can reduce the energy efficiency of these aging refrigerators by as much as 40 to 60 percent, and simple repairs generally cannot restore their original efficiency.)24 Yet, at the same time, these significant efficiency gains are part of a process of change that is expanding markets and spurring consumer spending, adding further to the pressures on natural resources and waste sinks. A glance at global trends for electricity consumption is revealing.
Plugging in Global Electricity
Worldwide, consumption of energy has been rising on average by 2.2 percent per year since 1970. Household appliances are the fastest growing drain on energy reserves, after automobiles. Rising sales of home appliances, for example, were the main reason household consumption of electricity more than tripled in China during the 1990s. Household consumption of electricity was growing in other developing countries in the Asia-Pacific over this time as well. The annual rate of increase was 11 percent in South Korea, 13 percent in Indonesia, 25 percent in Thailand, and 28 percent in the Philippines.25
Trends suggest even higher consumption of electricity in the future. The U.S. Energy Information Administration predicts a steady annual rise of nearly 2 percent in the next two decades (for a total increase of 57 percent from 2002 to 2025).26 Already, the main drivers of rising consumption are in emerging economies like Brazil, China, India, Indonesia, Mexico, and Russia—where per capita energy consumption is still well behind the wealthy world. Each year, the United States consumes the equivalent of some 8,600 kilograms (63.6 barrels) of oil per capita. This compares to the equivalent of just over 1,000 kilograms (7.4 barrels) of oil per capita in China and just below 350 kilograms (2.6 barrels) of oil per capita in India. And the United States is not even the highest per capita energy user: in cold places like Canada and hot ones like Singapore, annual energy consumption is the equivalent of well over 10,000 kilograms (74 barrels) of oil per capita.27
Fossil fuels are expected to account for some 90 percent of the increase in electricity consumption over the next two decades. The International Energy Agency predicts global demand for oil will increase from about 85 million barrels per day to 116 million barrels per day by 2030, adding further to global carbon dioxide emissions (and thus to warmer temperatures).28 Changing electricity needs will alter the relative impact of advanced and emerging economies on climate change. This is already beginning to occur. Carbon dioxide emissions rose 15 percent in the United States from 1990 to 2001. The United States, with less than 5 percent of the world population, accounted for 24 percent of global emissions by the end of this period. On the other hand, the amount of carbon dioxide from China went up 35 percent over this time. By 2001, China, with around 20 percent of the global population, was the second largest emitter (accounting for 12.7 percent).
That year, however, China was still far behind the United States in carbon dioxide emissions. Yet, in 2006, just five years later, China passed the United States to become the world’s largest emitter of carbon dioxide, in large part because rapidly rising profits for investors and traders in China’s liberalizing economy had led to rapid increases both in the construction of coal-fired power plants and in the production of cement, automobiles, and other manufactured goods.29 Globalization means that a new refrigerator in China is now far superior to an old CFC one from the 1980s. But it also means that increased consumption is casting longer and deeper ecological shadows.