ISO 14000 — a profitable investment?

Environmental management systems are not just for high-risk polluters anymore. As stakeholder interest in environmental management increases, it’s worth considering whether ISO certification will add value to your company

By Sylvie Berthelot, CMA, and Michel Coulmont

In recent years, ISO 14001 signs have been popping up at breakneck speed across the industrial landscape. The ISO 14000 series of standards, of which ISO 14001 is a part, defines the main tenets of an environmental management system (EMS) as it is recognized throughout the world. It does not guarantee that the company will outshine the environmental performance of other companies in the same industry. However, it does set out elements for developing an EMS that will allow the company to meet its environmental protection objectives — an issue that is dear to many stakeholders today. It may be worth considering for your company.

In 1996, the International Organization for Standardization published its first series of standards for managing environ-mental incidents — namely ISO 14001, ISO 14004, ISO 14010, ISO 14011 and ISO 14012 — to help companies implement EMSs to meet the ever-increasing challenges of effective environmental management. In the following years, the ISO published other complementary standards (ISO 14 020, ISO 14021, ISO 14024, ISO 14031, ISO 14040, ISO 14041, ISO 14050, ISO 14061, ISO 064 and many others — for more information visit www.iso.org) that addressed specific environmental management issues.

The ISO 14001 series includes several standards pertaining specifically to the environmental aspects of a company’s processes and products (ISO 14001, ISO 14 004, ISO 14010, ISO 14011, ISO 14012, ISO14 020, etc.). To achieve certification under the ISO 14000 standards, companies must demonstrate that they conform to the standard, basic elements of an EMS — ISO 14001. The other complementary standards provide tools and techniques for implementing the standards, along with guidelines for implementing and maintaining an EMS.

Current implementers

Any company can implement an ISO 14001 EMS. The program is not limited to companies operating in environmentally high-risk sectors or running what are considered highly polluting operations. This is borne out by a survey we conducted of 547 Canadian companies or divisions who have implemented an ISO 14001-certified EMS. Of the respondents, 62.02% said they considered they were operating in an environmentally high-risk sector, and just 38.28% said they were operating in a highly polluting sector.

The purpose of an ISO 14001 EMS is not simply to zero in on critical or extreme situations, or company activities that could have a major environmental impact, such as the discharge of water or air pollutants, accidental spills and so forth. Rather, an EMS examines all company activities that could have environmental implications, including the conservation of water, raw materials and supplies. Hence, from both an ecological and financial standpoint, all companies can benefit.

Likewise, not only large corporations consider implementing such systems. The costs involved may appear less onerous for large corporations simply because of their size; nevertheless, the costs overall could well be less for small and medium-size businesses. One of the major determining cost factors is the scope of the activities that could have an environmental impact. The more numerous these activities are, the more complicated the EMS has to be. In the survey referred to earlier, the average number of full-time employees in the companies that answered the survey was 1,493 employees, with a median of 325, and numbers ranging from 4 to 50,000 employees.

A large percentage (66.7%) of the companies interviewed stated that prior to implementing an ISO 14001 EMS, they already had a certified quality management system in place (either the 1994 or 2000 ISO 9000 series). This suggests that some companies view ISO 14001 as an additional component to other well-established assurance practices.

Corporate maturity levels

In the same survey, slightly more than 50% of the respondents had an EMS in place prior to initiating their ISO 14001 certification process. As Figure 1 shows, these systems were more or less in compliance with the requirements of the ISO 14001 standard. To determine the level of EMS compliance with ISO 14001 standards, the companies were asked to specify on a scale of 1 (no EMS in place) to 7 (full EMS in place) how their system compared to the required elements listed in Figure 1. Figure 1 indicates the average number of replies for each of the characteristics that met the requirements of the ISO 14001 standard.

Companies with an EMS in place prior to initiating the certification process already complied to varying degrees with the requirements of the ISO 14001 standard. The most critical elements, emergency response measures and compliance with environmental legislation, were the most highly developed elements charted. For example, the highest average response obtained on a scale of 1 to 7 (with 1 meaning non-compliance and 7 full compliance) was 5.36 to the question regarding the company’s EMS inclusion of procedures for identifying and responding to environmental emergencies; 4.63 regarding whether the EMS included a system for measuring and monitoring the environmental impacts of the company’s activities; and 4.13 to the question that asked whether preventive and corrective measures for non-conforming situations were included. The average response on the issue of compliance with environmental legislation, specifically whether the company’s EMS identified all applicable environmental acts and regulations, was 4.95.

The other questions that dealt with more functional elements associated with an EMS, such as setting objectives, putting in place a process for achieving set objectives, EMS documentation in place, and implementing an auditing system, had lower average responses. The priorities for EMSs in place were focused on elements that could have a major impact on the company’s image and financial situation. Although vital to sound environmental management, the functional elements were a secondary consideration.

Reasons for implementation

Figure 2 provides an overview of what motivates companies to implement an ISO 14001 EMS. The average responses for each of the reasons listed is indicated according to whether the companies had or did not have an EMS in place prior to seeking ISO 14001 certification.

As figure 2 shows, improving the company’s image and improving its competitive edge were the main motivating forces for implementing an ISO 14001 EMS for both groups of companies. Further down were concerns over improving an existing EMS prior to seeking certification, along with concerns regarding improving environmental performance. Responding to current customer demands and expanding into world markets were followed by protecting companies and managers in the event of lawsuits, cost savings, and improving employee working conditions.

Other reasons suggested in the survey were considered far less important. Also, it’s interesting to note that there was little difference between the motivations of companies that already had an EMS in place prior to seeking ISO 14001 certification and those that did not yet have a system. The most significant differences were perspectives on protecting the company and its managers in the event of lawsuits, and increasing the company’s Canadian client base. This is not surprising. In the event of legal action, having an ISO 14001 certified EMS in place is likely to constitute proof of reasonable due diligence.

Process challenges

As Figure 3 explains, companies face a variety of challenges in implementing an effective ISO 14001 EMS. The main problems encountered by the companies or divisions during implementation were a lack of involvement on the part of managers and employees, as well as the challenge of meeting employee training needs.

A key success factor for the implementation of any management system is expending considerable effort to train and involve management and employees as regards the project. Although companies that embark on the process of implementing an ISO 14001 EMS have to commit financial resources, cope with inevitable delays, thoroughly document their processes, review the legislative context and identify potential environmental impacts of their operations, these obstacles, according to the past experience of respondents, seem far less daunting than achieving the commitment of management and employees, and meeting the training needs of all involved.

The Canadian experience

Despite the potential obstacles associated with implementing an ISO 14001 EMS, Canadian companies and divisions have, on the whole, considered the experience a positive one. According to the managers of these companies or divisions, the benefits in terms of improved environmental performance, enhanced corporate image, increased competitive advantage and improved working conditions largely compensate for the costs and effort involved. Moreover, when asked if they had to do it again, the vast majority of the companies said they would without hesitation.

Various government assistance programs have been set up to facilitate the process of implementing an ISO 14001 EMS. The Business Development Bank of Canada, for example, offers potential funding of up to $250,000, subject to certain conditions, under its Innovation Financing Solutions. It also offers training, professional consulting, and diagnostic tools that allow companies to compare their processes against the ISO 14001 series of standards. Some provinces have a variety of assistance programs in place that offer non-refundable contributions, specifically for training. Training employees for the implementation of an ISO 14001 certified EMS could well fall under a number of programs. The first step for companies about to embark on the process is to inquire at the various federal and provincial government agencies.

Any company concerned about the environmental implications of its operations will find implementing an ISO 14001 EMS a worthwhile option. That, in the end, is what can be deduced from the experience of companies who have implemented such a system.

Sylvie Berthelot is associate professor in accounting management at the Université de Moncton, in addition to holding the Jeanne and J.-Louis-Lévesque Chair in Financial Management.  Michel Coulmont is assistant professor in management accounting at the Université de Moncton.

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