EVALUATION OF METALLURGICAL ENTERPRISES COMPETITIVENESS, TAKING INTO ACCOUNT ENVIRONMENTAL RESTRICTIONS. Nadezhda SHMELEVA a

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1 EVALUATION OF METALLURGICAL ENTERPRISES COMPETITIVENESS, TAKING INTO ACCOUNT ENVIRONMENTAL RESTRICTIONS Nadezhda SHMELEVA a a National University of Science and Technology MISIS, 4, Leninsky Prospect, Moscow,119049, Russia. nshmeleva@misis.ru Abstract The Russian government sets up a priority task of increasing its national producers competitiveness, especially, among industrial enterprises. An increase in the foreign trade activity of both private businesses and state enterprises is not possible without competitive quality goods produced in full accord with the international standards and proved by the international certificates. The society, the mass media and the internet resources have been expressing a great interest in ecologically healthy products and food. According to the latest polls more than 76 per cent of the Russian population is in favour of Eco goods. Moreover, the formation of a financially robust sector of consumers, who are sensitive to the ecological properties of goods & services, has been on the rise. That s why the ecological issue is vital not only for the state but for the metallurgical enterprises. The results showed that industrial enterprises competitiveness evaluation was based on the methods that completely ignored ecological factors as well as the damage caused to the environment in the production process. The author suggests that an Enterprise Ecologically Adjusted Competitiveness parameter should be introduced. The parameter derives from a consequent correction of economic parameters that are included in an industrial enterprise competitiveness calculation formula. One can find in the article the results of Competitiveness and Ecologically Adjusted Competitiveness parameters calculations for the three largest Russian metallurgical enterprises. Keywords: competitiveness, ecologization, environmental restrictions, metallurgical enterprises. GLOBAL ECOSYSTEM AND ENVIRONMENTAL SECURITY Sustainable development has been defined in many ways, but the most frequently quoted definition is from Our Common Future, also known as the Brundtland Report: [3] "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts: the concept of needs, in particular the essential needs of the world's poor, to which overriding priority should be given; the idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs." All definitions of sustainable development require that we see the world as a system a system that connects space and a system that connects time. When we think of the world as a system developing over time, we start to realize that the decisions our grandparents made about how to produce metal continue to affect metallurgical technologies today; and the economic policies we endorse today will have an impact on urban living conditions when our children become adults. [5]

2 So, the problems we face are complex and serious. The experts from UNEP consider that these problems can be solved if developing countries move away from the Consumer Economic Model to the Green Economic Model (fig.1). The Consumer Economic Model (linear - unsustainable) energy and product agricultural waste and raw material industrial pollution To succeed (grow, expand): Human well being: Assumption: Main indicator: To be more efficient: Dynamic: Features: Must do more of all this. Equated with quantity of product. If quantity of product increasing, then well-being OK. Gross National Product Participant must externalize as many costs as possible. Towards the largest economic market possible globalizing. Energy-intensive production. Low skilled workforce. The Green Economic Model (circular - sustainable) Minimum energy and raw materials Maximum retention Minimum waste and pollution To succeed (grow, expand): Human well being: Assumption: Must do more of all this. Equated with quality of life. If well-being improving, then production OK. Main indicator: Economic, social and environmental indicators. To be more efficient: Participants must internalise as many costs as possible. Dynamic: Towards the smallest economic market possible localizing. Features: Diverse, local, human- based (energy-efficient) production. Flexibly skilled workforce. Fig 1. The old and new economics [1] The green economy - offers a focused and pragmatic assessment of how countries, communities and corporations have begun to make a transition towards a more sustainable pattern of consumption and production. The new UNEP report demonstrates that a transition to a green economy is possible by investing 2% of global GDP per year (currently about US 1.3trillion) between now and 2050 in a green transformation of key

3 sectors, including agriculture, buildings, energy, fisheries, forests, manufacturing, tourism, transport, water and waste management. However, such investments must be spurred by national and international policy reforms [4 ]. Conducted by global experts and institutions from both developed and developing countries, this timely report confirms that under a green economy scenario economic growth and environmental sustainability are not incompatible. On the contrary, a green economy creates jobs and economic progress, while at the same time avoiding considerable downside risks such as the effects of climate change, greater water scarcity and the loss of ecosystem services. Greening the economy not only generates growth, and in particular gains in natural capital, but it also produces a higher growth in GDP and GDP per capita. (fig. 2.) Fig 2. Green investment scenario. According to Unep's experts from developed and developing nations, the green economy model would deliver higher annual growth rates within 5-10 years than a business-as-usual scenario. ECOLOGIZATION OF THE RUSSIAN ECONOMIC Russia is currently producing 3,8 times more greenhouse gases per unit of GDP than the leading European countries. It is expected, that the goods, originated from the countries with a high emission level, will be pushed out of the market. However, the society, the mass media and the internet resources have been expressing a great interest in ecologically healthy products and food. According to the latest polls more than 76 per cent of the Russian population is in favour of Eco goods. Moreover, the formation of a financially robust sector of consumers, who are sensitive to the ecological properties of goods & services, has been on the rise. That s why the ecological issue is vital not only for the state but for the metallurgical enterprises. The survey shows, ecologization of the Russian economic development will foster diversification of export of goods with natural resources deeper processing value and increase in Russian companies competitiveness on the foreign markets.

4 As far as the producers and consumers of metallurgical goods are concerned, a product s environmental friendliness becomes a decisive factor that opens new opportunities in differentiating goods and services. But the transition to the sustainable development stage requires an introduction of ecology factor into the socio-economic parameters. EVALUATION OF ENTERPRISES COMPETITIVENESS It was found out that the following methods [2] are used for evaluating industrial enterprises competitiveness: matrix methods for the target market selection; methods based on the effective competition theory; graphical methods. The results showed that industrial enterprises competitiveness (C) evaluation was based on the methods that completely ignored ecological factors as well as the damage caused to the environment in the production process. The author suggests that an Enterprise Ecologically Adjusted Competitiveness (EAC) parameter should be introduced. The parameter derives from a consequent correction of economic parameters that are included in an industrial enterprise competitiveness calculation formula. The calculation of EAC parameter evaluates industrial enterprises competitiveness on the bases of the matrix method. Methodologically it reflects the curve of the goods life cycle. The main tool for studying the potential is the matrix created by three indicators: current liquidity, financial leverage and return on net assets. The enterprises rank in this matrix according to their parameters and market conditions. The most competitive are those that occupy the largest market share. Using a matrix approach, CEO s can evaluate both the competitiveness of their own company and competitors. The fundamental difference in the EAC calculation is the usage of ecologically adjusted parameters. One of the enterprise s performance indicators is the return on net assets (RONA), which reflects both quantitative and qualitative parameters. Income FA + NWC. = RONA FA Fixed Assets NWC Net Working Capital. In case of fixed assets build-up without ecological requirements, the company s sales revenues increase, but simultaneously the damage also increases, because with the industrial output increase, the company s environmental capacity also grows. That s why, RONA should be linked to net profits, calculated as a difference between the sales profits and an estimated cost of an industrial activities environmental damage. Both fixed assets and natural resources are involved in the manufacturing process. The way the natural resources are used also influences the final result. In this case, RONA will be as follows: RONA = Income ED FA + NWC + NR ED-valuation of environmental damage from industrial activities; NR - valuation of natural resources.

5 Thus, if the company's activities are detrimental to the environment either through an irrational use or environmental pollution, it will lead to a change in all economic indicators. As a result, return on assets, profits, labour efficiency as well as some other indicators will be reduced. The paper presents the EAC calculations for three biggest Russian metallurgical enterprises in The Industrial enterprises competitiveness evaluation is divided up into three stages. Firstly, the comparable data is compiled. Secondly, the indicators are ranked accordingly and the optimal ones are determined. And finally, the Industrial enterprises competitiveness is evaluated. THE RESULTS OF COMPETITIVENESS AND ECOLOGICALLY ADJUSTED COMPETITIVENESS PARAMETERS CALCULATIONS FOR THE THREE LARGEST RUSSIAN METALLURGICAL ENTERPRISES. Fig. 3. The EAC and C calculations for three biggest Russian metallurgical enterprises in The least competitive metallurgical enterprise is company 3 (EAC = 0.59 in 2009). The most competitive metallurgical enterprise is company 2 (EAC = 0.86 in 2009). In 2009 EAC index company 2 increased to 0.26 (30.2%) compared with Reducing the environmental impact is directly related to the increasing volume of environmental investments in company 2. The level of annual funding for the environmental programmes has increased rapidly - more than 30 times: from USD 4.3 mln in 2000 to USD mln in CONCLUSIONS Changing the Consumer Economic Model to the Green Economic Model in Russia will lead to diversification of export products with a high value added goods and improve the competitiveness of Russian metallurgical companies in foreign markets, as in developed countries, the value environmental responsibility factor and energy efficiency is particularly high for products oriented on the end-consumers. Interest of enterprises in the results of environmental activities can be improved by adjusting performance indicators, taking into account environmental issues. Encouraging the implementation of resource saving and environmental protection technologies to be implemented through the development and approval in accordance with the Federal Law "On Environmental Protection» of advanced technological standards emissions and discharges of substances into the environment from metallurgical enterprises.

6 LITERATURE a) Monographic publication [1.] Schellnhuber H.J, Malina M., Stern N. Global Sustainability: a Nobel Cause. Cambridge, University Press [2.] Fatkhutdinov R. Managing Competitiveness. Moscow, "Market DS, 2008 b) Paper in the Proceedings of the Conference [3.] United Nations General Assembly (1987) Report of the World Commission on Environment and Development: Our Common Future. Transmitted to the General Assembly as an Annex to document A/42/427 - Development and International Cooperation: Environment. [4.] 26 th session of Unep's Governing Council/Global Ministerial Environmental Forum, Nairobi, Kenya, Feb c) Article in professional journal [5] UCN The Future of Sustainability: Re-thinking Environment and Development in the Twentyfirst Century. Report of the IUCN Renowned Thinkers Meeting, January [6] Shmeleva N., Ageenko A. Foreign experience of the metallurgical enterprises in saving environment. Industrial economics,2009, nr.1.

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