An Approach to Integrating Environmental Considerations within Managerial Decision-Making

We argue that three environmental trends have created a need for new tools to help managerial decision-making: [i.] an expansion of existing command and control directives; [ii.] the introduction of market-based policy instruments; and [iii.] the adoption of Extended Producer Responsibility. To address this need, we develop a non-linear 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. Our model constructs are based on detailed interviews with top managers from two leading competitors in the medium and heavy-duty diesel engine industry. The approach allows the incorporation of traditional operations planning considerations - specifically 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 not only involve all departments within businesses, but also for industrial ecologists and business managers to work together in order to be able to implement meaningful decision models based on accurate and timely data and with the potential to have positive economic and environmental impact.