ISO 14001 Conformance Benefits

• Jun 01, 2001

We strongly believe that the world is confronted with dramatic environmental challenges, which could threaten future economic development and even social life on the planet. With this in mind, we are renewing our corporate engagement for sustainable growth with even stronger determination than ever before.

Pasquale Pistorio,
President and CEO, STMicroelectronics¹

Traditional regulatory approaches are failing to effectively address prevalent environmental issues. As a result, many businesses and environmental agencies are pursuing a variety of new strategies, one of which is environmental management systems (EMSs). ISO 14001 is one of a series of standards developed by the International Organization for Standardization. The standard identifies the requirements for the development and implementation of an EMS. The overall purpose of an EMS is to put a system in place that enables a business to prevent pollution and negative impacts to the environment.

The EMS development, implementation and verification process can take months, sometime years, and costs industry tens of thousands of dollars. Reportedly, larger companies may invest up to $100,000 whereas it may cost small- to medium-sized companies between $30,000 and $75,000. If a business chooses to seek certification, costs associated with third party auditing for certification typically ranges between $1,300 to $1,500 per auditor per day plus expenses.

The question then becomes, what are the real benefits, if any, to implementing EMSs that conform to ISO 14001? Anyone who has attempted to pitch ISO 14001 conformance or certification to upper management knows the answer to this question is critical to the pitch. You need real, tangible and demonstrable benefits. Are they out there? Absolutely.

The most common, frequently publicized, and most easily quantifiable benefits are those associated with cost savings from pollution prevention and waste minimization efforts. These benefits can improve your company's overall environmental performance. Meeting customer requirements, improving your company's image with customers and stakeholders, and building stronger community relations are also common benefits. Other benefits touted such as regulatory relief and financial breaks are still somewhat vague.

Costs savings associated with the prevention of pollution or waste minimization efforts were easily quantifiable when companies began adopting ISO 14001. It gave companies that historically had not taken a proactive approach to managing environmental issues an opportunity to do so, and those that had been, to revisit their environmental management programs from a slightly different perspective.

Pam Perry has identified a series of waste minimization success stories². ABB Power T&D Company in Florence, SC saw a $10,000 annual cost reduction associated with the reduction of paint waste through the use of centrifuge cleaning. Acushnet Rubber in New Bedford, Mass. estimated its EMS benefits added up to a savings of $2 million annually. Hitachi Research Laboratory in Hitachi City, Japan simply turned off its lights during lunchtime and saved $60,000 annually. The Warner Lambert facility in Lititz, Pa. saw annual savings of $100,000 associated with its waste minimization efforts.

A benefit at the company level includes demonstrating to business customers and competitors that you are a leader in your industry. Responsible environmental performance has moved up to the top of the page with high-level business executives. A survey of 100 of Europe's leading business analysts and decision-makers from France, Germany and the United Kingdom reveals that corporate social and environmental responsibility has moved from an option to a mandate for chief executive officers (June 2000 study).

Another benefit is meeting your customer's requirements. Ford Motor Company announced on September 21, 1999 that it would require suppliers to certify at least one manufacturing site to the ISO 14001 Standard by the end of 2001 and all manufacturing sites shipping products to Ford by July 1, 2003. With this announcement, Ford became the first U.S. auto manufacturer to require its supply chain have an EMS that is certified to an international standard. General Motors followed suit and then in early October 2000, Daimler Chrysler Corporation began a mass mailing to their supply chain indicating that they will be requiring registration of their suppliers by a third party auditor to the ISO 14001 Standard by January 1, 2003. Since then IBM, Analogue Devices Inc., and Acushnet Rubber Company, as well as others, all encourage or require that their suppliers become ISO 14001 certified.

Pursue ISO 14001 certification because you've got a corporate mandate to do so? The Maxell Corporation of America facility in Conyers, Ga., was in such a position. The company became ISO 14001 certified in 1999 and achieved tremendous cost-savings benefits associated with building continuous improvement into its solid waste recycling programs Beers Construction Co. in Atlanta was also driven to pursue ISO certification by the corporate policy of its parent company SKANSKA. In Greenville County, S.C., Beers won a contract to rehabilitate three middle schools. Early in the project, Beers worked with the masonry subcontractor, B&M Masonry from Atlanta, on a recycling program that saved Greenville County $100,000. In Old Salem, N.C., Beers used recycled wood instead of harvested material for another project that saved the client some $10,000 and prevented the use of enough harvested lumber to construct eight or nine medium-sized homes.

Efforts to reduce environmental impacts can result in process or service improvements. In a study reported by Michael E. Porter and Claas van der Linde³, process changes initiated by environmental personnel led to cost reductions, quality improvements and an extension of production capabilities. The implementation of an EMS provides an alternative, practical and effective framework for the management of environmental liabilities. As financial and legal risks associated with poor environmental performance increase, other areas of business, such as finance, risk management and insurance are becoming increasingly involved with the management of environmental performance. Insurance companies are beginning to request more detailed information of potential clients regarding pollution exposure.

It is certainly no secret that regulatory agencies, in particular in the United States and United Kingdom are still assessing the value of EMS implementation and certification by changing their involvement in monitoring certain industries. In 1999, the environmental ministers of the G8 nations, the world's leading industrialized democracies that include the United States, Canada, the United Kingdom, France, Italy, Japan and Russia, called for "greater attention to environmental performance, compliance and public reporting, for example, in the standardization work by the International Organization for Standardization and other organizations." If certified to ISO 14001, your environmental liabilities in -- theory -- should be less than a facility with unrecognized formal system for environmental management. However, the specific benefits for industry remain somewhat elusive.

U.S. Environmental Protection Agency (EPA) issued a report in 1998 announcing its commitment to help promote the use of EMSs⁴ that expanded upon its initial position statement on EMSs and ISO 14001⁵. Since then the agency has prepared guidance documents regarding the implementation of ISO 14001 conformant EMSs and initiated EMS/ISO pilot projects. EPA's 1995 audit policy provides for penalty mitigation and elimination of disclosed violations discovered by auditing or management systems. Revisions proposed in 1999 put more emphasis on EMSs. Recently, EPA developed a new "Performance Track" that will distinguish between different levels of performance in facilities. The goal is to reward and recognize top environmental performers and provide meaningful incentives that can motivate others to improve⁶. Regulatory authorities would perhaps develop more confidence in companies taking proactive responsible steps toward improving environmental performance.

The mandated use of compliance-focused EMSs by the EPA has become more popular in the recent past. On January 23, 1998, U.S. EPA reached a consolidated settlement agreement with ARARCO Inc. requiring the company to implement a comprehensive court-enforced EMS⁷. The ASARCO consent decree was the first of its kind and required ASARCO to establish an EMS that covered 38 facilities in seven states. Since then, other similar cases have arisen in this country and in Canada. General Motors Corporation in Delaware, as a result of allegedly violating Chapter 60 of the state's Code and Air Pollution Control Regulations, was required to seek ISO 14001 certification. Corotec Inc. was also required to obtain ISO 14001 certification by a Canadian court for alleged violations of the Canadian Environmental Protection Act.

Another benefit is the potential to improve a facility's community relations. The positive publicity a company receives for being environmentally responsible can have encouraging results with customers, stakeholders and the community within which the company operates. Acushnet Rubber Company has not only achieved international recognition, but it has encouraged a good neighbor policy. STMicroelectronics, whose Rancho Bernardo facility was the first site in the United States to achieve ISO 14001 certification, has been the focus of numerous case studies, news articles, conference sessions, book chapters and company representatives are sought after for public speaking engagements. Researchers at Carnegie Mellon University conducted a study in late 1999 that looked at EMSs. A total of 580 manufacturing plants were surveyed. Results indicated that facilities with EMSs were significantly more likely to have a positive community impact than other facilities. In addition, these facilities were also more like ly to report EMS or pollution prevention efforts as a source of community environmental benefit.

Data is available to build a case for ISO 14001 certification. Certification can have qualifiable and quantifiable benefits for your company. It may require a change in your business culture, and you may require outside assistance, but there are opportunities for real, tangible benefits.

References

¹ Pistorio, P. Message from the President in the 1999 Annual Report.

² Parry, P. The Bottom Line How to Build a Business Case for ISO 14001. Boca Raton, FL: St. Lucie Press, 2000.

³ Porter, M.E., van der Linde, C. "Green & Competitive - Ending the Stalemate." Harvard Business Review; September - October 1995.

⁴ U.S.EPA. "Promote the Use of Environmental Management Systems" in Aiming for Excellence: Actions to Encourage Stewardship and Accelerate Environmental Performance. Report of the EPA Innovations Task Force, July 1999.

⁵ U.S.EPA. EPA Position Statement on Environmental Management Systems and ISO 14001 and a Request for Comments on the Nature of the Data to be Collected from EMS/ISO 14001 Pilots. Federal Register (FR): March 12, 1998 (FRL-5976-6) 63:12094-7.