Incorporating Life-Cycle Economic and Environmental Factors in Managerial Decision-Making
Recent environmental trends, including (1) an expansion of existing command and control directives, (2) the introduction of market-based policy instruments, and (3) the adoption of extended producer responsibility, have created a need for new tools to help managerial decision-making. To address this need, we develop a nonlinear mathematical programming model from a profit-maximizing firm’s perspective, which can be tailored as a decision-support tool for firms facing environmental goals and constraints. We typify our approach using the specific context of diesel engine manufacturing and remanufacturing. The approach allows the incorporation of traditional operations planning considerations—in particular, capacity, production, and inventory—together with environmental considerations that range from product design through production to product end of life. A current hurdle to implementing such a model is the availability of input data. We therefore highlight the need to involve all departments within businesses and for industrial ecologists and business managers to work together to implement meaningful decision models that are based on accurate and timely data and can have positive economic and environmental impact.
KeywordsLife Cycle Assessment Emission Allowance Machine Capacity Remanufactured Product Complex Tradeoff
This chapter is a summarized version of: Subramanian, R, B. Talbot, S. Gupta. 2010. An Approach to Integrating Environmental Considerations within Managerial Decision Making. Journal of Industrial Ecology 14(3) 378–398.
- EC (European Commission) (2001) Green paper on integrated product policyGoogle Scholar
- EC (European Commission) (2011) Policies. Retrieved from http://ec.europa.eu/environment/policy_en.htm. Accessed 30 Jan 2011
- EPA (Environmental Protection Agency), United States (2005) Acid Rain Program: 2004 Progress ReportGoogle Scholar
- Environmental Resources Management (2005) Study and assessment of available information for a pilot project on a teak garden chair: final report. Oxford, UKGoogle Scholar
- Fourer R, Gay DM, Kernighan BW (2003) AMPL: A modeling language for mathematical programming. Brooks/Cole-Thomson Learning, CaliforniaGoogle Scholar
- Fourer R (2011) Nonlinear programming frequently asked questions. Retrieved from http://126.96.36.199/nonlinear-programming-faq.html. Accessed 30 Jan 2011
- NEOS (Network-Enabled Optimization System) (2011) Optimization software guide. Retrieved from http://www.neos-guide.org/NEOS/index.php/Optimization_Software_Guide. Accessed 30 Jan 2011
- Nokia Corporation (2005) Integrated product policy pilot project\!: life cycle environmental issues of mobile phones. Espoo, FinlandGoogle Scholar
- Scheer D, Rubik F (eds) (2005) Governance of integrated product policy: in search of sustainable production and consumption. Greenleaf Publishing Ltd., Sheffield, UKGoogle Scholar
- Smith VM, Keoleian GA (2004) The value of remanufactured engines: life-cycle environmental and economic perspectives. J Ind Ecol 8(1–2):193–221Google Scholar