Introducing Value Chain Stewardship (VCS)

After a decade of international negotiations to limit greenhouse gas (GHG) emissions, a sufficient number of countries have ratified the Kyoto agreement. However, even with this positive development there is a formidable challenge since, according to the World Resource Institute (WRI 2004), For the most part, developed nations have failed to attain the non-binding emission reductions they committed to in the original climate treaty in 1992. Ensuring adherence to the reductions stated in the treaty by these nations may become an immense managerial task, not to mention the enforcement of sanctions. Instead of national emission targets the approach of this paper is to focus on trade within selected industry sectors – i.e. housing and transport – responsible for most of the world’s GHG emissions. This paper shows that vehicle manufacturers – the design owners – may use their information advantages to influence customers to focus on other aspects of the vehicle than costs during use. Expanding the environmental responsibility of the design owners to coincide with the area of environmental impacts will convert emissions cost into a production cost. It is indicated in this paper that when applying the estimated costs for GHG emissions to the vehicle user, strong enough incentives are not given to drive technological change, but if the responsibility is allocated to the design owner the very same additional costs will be an incentive for the designer to use its information advantage to innovate away from those emissions-rendering technologies. A value chain stewardship (VCS) is, thus, established.