Mechanism Design for Sustainability

In this chapter, an introduction to mechanism design is provided. After a brief overview of the introductory concept of mechanism design, a motivation example is presented illustrating the challenges in manufacturing transformation in China’s economic structural change. The role of mechanism design to help the transformation is emphasized, followed by an introduction of mechanism design techniques and cases presented in the remaining chapters of this book.

Sustainable development has become a key concept in environmental and economic policy analysis. From this point of view, it is desirable to integrate culture, legal, business, and financial prospective and increase collaboration among enterprises in order to improve sustainable competitiveness. Enterprises that are collaborating need to define and use performance measurement/management frameworks composed of performance elements (objectives, performance indicators, etc.) that facilitate the management of their activity, as well as monitor their strategy and processes. There are several factors that need to be managed properly in order to support collaborative success. So this chapter aims to present an approach based on the analytic hierarchy process (AHP) to manage collaborative relationships under an integrated approach in order to investigate and promote mechanism design for sustainability. With this approach, enterprises will obtain significant information for the decision-making process regarding sustainable performance elements that have the greatest impact on their competitiveness and therefore should be prioritized.

The problem addressed in this work is concerned with an important challenge faced by any green aware global company to keep its emissions within a prescribed cap. The specific problem is to allocate carbon reductions to its different divisions and supply chain partners in achieving a required target of reductions in its carbon reduction program. The problem becomes a challenging one since the divisions and supply chain partners, being autonomous, could exhibit strategic behavior. We model strategic behavior of the divisions and partners using a game theoretic approach leading to a mechanism design approach to solve this problem. While designing a mechanism for the emission reduction allocation problem, the key properties that need to be satisfied are dominant strategy incentive compatibility (DSIC), strict budget balance (SBB), and allocative efficiency (AE). Mechanism design theory has shown that it is not possible to achieve the above three properties simultaneously. We propose two solutions to the problem satisfying DSIC and AE: (1) a reverse auction protocol and (2) a forward auction protocol, while striving to keep the budget imbalance as low as possible. We compare the performance of the two protocols using a stylized, representative case study.

Firms gained advantage dramatically from the quality revolution, such as Toyota and Motorola, treated quality as an opportunity for process improvements rather than as a cost (Fust and Walker, Corporate sustainability initiatives: the next TQM [white paper]. Executive Insight, pp 1–8. Available at: http://​www.​kornferryinstitu​te.​com/​about_​us/​by_​industry/​industrial/​publication/​620/​Corporate_​Sustainability_​Initiatives_​The_​Next_​TQM, 2007). However, to survive in intense worse era, companies are beginning to embrace sustainability as an opportunity to gain competitive advantage. As we embark into new era which has witnessed global slowdown and intense competition to survive, it is quite appropriate to revisit the role of total quality management (TQM) in enabling and supporting firm to sustain superior performance. This chapter is concerned with soft dimensions of TQM which not only help it in successful implementation but also provide sustainable competitive advantage. Sustainability can perhaps be correlated with the principle of excellence which is now gaining wider acceptance in the business community (Zairi, TQM sustainability: how to maintain it gains through transformational change. Unpublished manuscript, School of Management, University of Bradford, 2005). The present research proposes a soft TQM framework and empirically tested the impact of soft dimensions of TQM on its performance in context to Indian cement industry to understand how soft TQM can help Indian cement industry to sustain competitive advantage in long term. The chapter concludes with a statement that soft dimensions of TQM are critical for sustainability which enable cement firms to achieve superior performance.

This chapter introduces an innovative approach that combines the deductive method used to construct normative energy-economy models and the inductive method of social sciences. Consumer behavior is described via technological attributes and used in virtual process technologies in an energy optimization framework. The main finding is that it is possible to evaluate consumer information and behavior together with technological progress and integrate them on the same modeling platform. The approach eliminates the systematic error on the demand side where the efficiency of demand-side management measures is over optimistic, which may lead to inaccurate decisions and poor policies. Thus, this method paves the way to a new stream in energy modeling.

The objective of this research was to understand how the organizational structure of sustainability-focused companies changes over time as the companies become more environmentally, economically, and socially sustainable. We applied trend analysis to the sustainability Scores, and vertical integration level of the companies. Our sample consisted of ten sustainability-focused companies from the industrials industry. We used the content analysis of annual reports to calculate sustainability development scores and applied the Fan and Lang’s method to determine the vertical integration level of the companies. The study results demonstrated an increasing trend in both vertical integration and sustainability development of industrials industry companies over a 15-year of period. Furthermore, the companies became more vertically integrated as their environmental, economical, and social sustainability increased.

This chapter focuses on international mechanisms for addressing climate change, focusing on linkages and multistakeholder communications, adaptations, and adoptions for greater sustainability. Since the Kyoto Protocol was organized, the idea of creating a carbon credit marketplace has been widely discussed. The United Nations has created a carbon credit certification process, and, at this point, there are a number of recognized evaluators for these credits. Unfortunately, the credit marketplace has substantially changed, and the availability of using this type of financial transaction for encouragement of developing countries to utilize their present initiatives to receive funds for their transition towards sustainability for which the developed countries and corporations would purchase these credits has failed. Failure in the sense that when funds are received by these developing countries, these funds are often diverted and actions towards a lower-carbon lifestyle have not been achieved. Conversely, a number of agencies have funded more localized projects that engage in developing sustainable actions in communities through improved mechanisms, such as sustainable forestry and agriculture and sustainable lifestyles including improved cooking stoves, water recycling, and waste recycling through biogas generation. Many of these projects at the point of achievement for their sustainability lack continued funding necessary to allow for sustainable development.

The Youth Voices in Conservation Program has researched youth action towards conservation and sustainability from the classroom, the field site, and within nongovernmental and governmental organizational situations for the past few years. This research found that by developing a residual funding based upon carbon credit offsets created by these localized actions, there is a possibility of conditional cash transfer based upon these “good actions.” During the latter half of July 2011, intensive fieldwork in conjunction with UNDP-GEF Small Grants Projects and Center for Environment Education (CEE) occurred in India. Ten projects were evaluated for the establishment of an intranet/Internet evaluation mechanism that would allow for the development of the GreenLeaf Marketplace. Projects were also evaluated for their approach to reducing the carbon impact which correlated to the community financially, educationally, and environmentally. Detailed description of how this methodology works for developing financial environmental and financial communities will be discussed. It is hoped through a global mechanism that other localities throughout the world will be able to sign up through this computer-based system. The results of this research indicate that the Youth Voices in Conservation’s GreenLeaf Program may be able to address localized sustainability issues as well as methodology for decreasing carbon footprints and increasing financial sustainabilities within each community, and consequently, the environmental effects from the wide-scale adoption of these plans may be expected. It is anticipated that these credit mechanisms may be used with local bank issuance for green purposes with conditional cash transfer as part of the residual credit program.

This financial market instrument first addresses the issue of “global risk”: the combined world economic, political, and social risks that are rapidly resulting from the unparalleled planetary environmental degradation and climate change. It provides evidence that “global risk” can be reduced with investments in forest preservation, reforestation, and renewable energy. Furthermore, it shows that in order to achieve the urgently needed global scale climate change mitigation and neutralization, new massive capital investments can be stimulated and, thereby, shifted, through the profit motive utilizing financial product innovations in the free market system with the active participation of the private sector. The “Ecological” stock is a certifiable and tradable innovative instrument that incorporates features of a corporate stock, a commodity, a derivative, and a perpetuity.

It aims at developing a world financial market for emissions and environmental services trading by creating financially feasible investments in the following areas: (a) forest conservation and reforestation, (b) renewable energy, (c) CDM projects, and (d) foreign debt swaps for poor and developing countries. The investor acquires certified “Ecological” stocks as a registered security in the national exchange of host (poor, developing, or industrialized) country project and in the international exchanges, with rights to profit and capital gains as well as rights to the certified GHGs emission reductions and the environmental products of the project (carbon sink, water conservation, biogenetics, soil fertility, and global warmth reduction). The shareholder becomes, then, the “ecological” owner of a specific project.

One of its goals is turning the CDM model of the Kyoto Protocol into a new global financial industry under a voluntary scheme as well as under the protocol, using the “Ecological” stock in the exchanges to motivate the participation of ALL nations through profitability—economic democratization of climate change mitigation and neutralization—so as to mitigate climate change “beyond a carbon neutral world” and “beyond global emission reductions” in order to start restoring equilibrium in the planetary ecological system, hence, the climate.

Lake Trasimeno, Perugia, is the largest lake in peninsular Italy, with surface characteristics of 128 km², the fourth among Italian lakes after Lake Como. This extension is accompanied by a shallow (average 4.3 m, maximum 6 m), so that the lake of Trasimeno is one of the laminar. The Trasimeno Lake is a natural lake with shallow water and flat, bordered by fine beaches. Its basin covers an area of natural feeding of 306 km², of which 124 km² occupied by the surface of the lake, its overall average volume of about 586 Mm³. The area was inhabited since prehistoric times, as evidenced by the findings that are now preserved in the National Archaeological Museum. In 217 bc on the shores of the lake took place the battle of Lake Trasimeno, which saw the Carthaginian Hannibal forces defeated the Roman legions of the Consul Gaius Flaminius. Recently, Lake Trasimeno is entered into a new water crisis, perhaps greater than that of the 1950s: the current maximum depth is 4.30 m, but between 2007 and 2008 it fell by 78 cm. Since 2006, the Trasimeno is part of the international Living Lakes, a worldwide network of 52 lakes UN awards for its commitment to sustainable development of the main lakes, wetlands, and other freshwater basins of the world. Within the project called “environmental manifesto” was awarded a quality mark to guarantee and protection of tourists and residents by the companies for compliance with standards and management systems that ensure quality services environment. An interesting example of sustainable development is to build a shed for the “photographic safari drive by ambush.” Within the environmental certification projects involving accommodation and government, Local Agenda 21 stands out, a process that promotes sustainable development in its most qualified. From the point of view of the appeal of tourist flows in the lake area for a long time now, it has developed particularly oriented models of respectful accommodation of natural features of the area offering a kind of holiday activities ranging from cross-cultural tourism to the environment. The management of the water level of Lake Trasimeno is very delicate and very risky because in some years it has reached the minimum acceptable level of aquatic flora and fauna. In Polvese Island, the largest extension of a structure of the Provincial Administration Journal dating back to 1,100, school visits, seminars, and conferences to promote the sustainable development strategy can be done. The site throughout the project to equip a small fleet of seagoing service of lake boats that only go with rechargeable batteries from the local systems of solar energy. In order to enable adequate monitoring and efficiently the Provincial Administration since 1985 with a modern system batch of data collection and analysis are the basis of current management and the strategic importance of the lake. It’s the complexity of the case and articulated, albeit in a dynamic equilibrium, management increasingly inspired by the principles of sustainability, making it a case study of relevant interest that we hope think may enjoy experts and ordinary citizens who have care about the future of the entire world in its entirety, essential diversity.

The small-farm model is the surest route to broad-based economic development as they are multiple functionaries and provide immense benefits for society and for the biosphere. In food production, small farms are more productive and more efficient. With regard to cost and return, a small-farm economy offers a clear solution. Thus, a small farmer can intensify biodiversity and the greater the biodiversity, the higher the productivity and stability and sustainability of agriculture. Small family farms are the backbone of a community, of a nation and of a society as a whole. Small biodiverse farms based on internal inputs are in fact the only promise for increasing agricultural productivity, whether productivity is defined in terms of biological productivity or in terms of financial returns, or in terms of energy. This chapter presents a precise review on the benefits of multi-utility of small farms with the case study of Mr. Madan Lal Deora, a progressive farmer of Pali, district of Rajasthan in India who had established himself as a successful farmer adopting diversified farming system. He had adopted multiple cropping and farming system on his farm which is 1 ha in area by growing cereals, oilseeds, pulses, medicinal plants and forest plants with horticultural crops including fruits and vegetables. Along with agriculture, the farmer is having livestock which yields milk and the dung is converted into valuable vermicompost. Thus, this model of multifunctional small farm which integrate crops, horticulture, livestock and natural vegetation is key to sustainable development in countries dominated by small farms.

Stormwater run-off is difficult to manage in an economically developed and highly urbanized city. It causes diffuse pollution which impacts despite its local origin are not limited to the local pollution problems. The pollution gets mixed with the waste and impacts public health, aquatic life and ecosystem characteristics. The problem is closely linked to land use (e.g. the application of fertilizer to farmland or forestry plantations; livestock stocking rates on pastureland; handling and transport of oil, chemicals, raw materials and products through catchments). The economic development leads to urbanization which increases the impervious area of the catchment. This results in amplification of stormwater being generated and causes diffuse pollution. Planning of management strategies and application of pollution control measures can be done only after identification of sources which become difficult considering the dense sprawl in the city. The existing drainage systems may have many disadvantages like if run-off being added, it can increase the risk of flooding downstream containing contaminants such as oil, organic matter and toxic metals. Therefore, it is very important to amalgamate the use of sustainable urban drainage systems (SUDs) along with the existing drainage infrastructure in order to minimize the adverse impacts of the stormwater in thriftily established and extensively built-up city. The present study comprises of qualitatively evaluating the role of SUDs in stormwater management of dense urban cities. This chapter talks about an approach to manage rainfall run-off arising due to urbanization which is a direct impact of economic growth of a city. The chapter also highlights the need of SUDs for Delhi (national capital territory of India).

The intention of this chapter is to propose a distinct approach to software development sustainability, as well as a different understanding of sustainability in the context of software development. The chapter covers survey of good practices and software development methods as important for sustainable development of software products. Particularly, author focuses on agile methods and product line engineering as approaches supporting the sustainable development of software product. The analyzed practices and methods are suggested to be implemented for the software company sustainability. The implementation results in saving human efforts as well as energy and computer power.

Biofuels are attractive alternative energy carriers not least due to their interface with existing infrastructure for conventional fuels in the transportation sector. But while representing a renewable alternative to petroleum fuels, an expanded usage of biofuels could conflict with ecological and social systems. In face of this risk, a number of countries are designing sustainability standards and safeguard mechanisms for biofuels, in an attempt to reduce the negative effects of their growing usage. This chapter explores biofuel sustainability policies, their economic rationale, and specially their limits, as seen from the basic strategies of dematerialization, detoxification, and transmaterialization. The chapter then frames where biofuel sustainability policies have margin for action, exemplified by the case of the European scheme proposed in 2009. By understanding the economic rationale and guiding principles behind efforts to improve biofuel sustainability, the chapter can contribute to better understand the actual scope and limitations of policy efforts currently aiming to promote responsible biofuels usage. The study concludes by proposing that transparency and dialogue, including parties directly and indirectly affected by biofuel strategies, as the only way to legitimize the sharing of risks in this emerging international market.