1. Are your customers and stakeholders likely to demand you have an environmental management system in place?
2. What are the costs associated with your product that is lost to the environment?
3. Are environmental impacts of your processes creating a liability that put you or your company at risk?
Environmental Management Systems:
ISO 14000 Requirements
An environmental management system identifies the significant environmental impacts of a company’s process and opportunities to conserve materials and energy. The system also establishes linkage to your business planning process. There are several different environmental management system models to choose from: Sweden’s Natural Step (TM), the Chemical Manufacturer’s Association Responsible Care (TM), and ISO 14000 are some examples.
The ISO 14000 environmental management system model was developed to meet the demand for a single international standard, and it was developed through consensus by an international technical advisory committee of industry, government, consumer interest groups, and the general public. ISO (the International Organization for Standardization), a worldwide federation of national standards bodies, issued the final specification standard in the fall of 1996. While 14000 is the series, 14001 is the actual specification that companies either self-declare or register to through 3rd party confirmation. Demonstration of successful implementation of 14001 can be used by any organization to assure interested parties that an appropriate environmental management system is in place.
The ISO 14001 environmental management system model follows a logical progression of steps that begin with developing a company Environmental Policy. The most prescriptive part of the model, 14001 requires the environmental policy include commitments to prevention of pollution, regulatory compliance, and continual improvement. Next Planning begins, and the first step is critical - identification of significant environmental impacts from the organization’s activities, products, or services. Companies are using a variety of methods, from brainstorming to risk ranking schemes, to prioritize these environmental impacts and plan budgets and schedules to address the most significant. Legal and other requirements the company complies with are also identified during Planning. Objectives and targets are developed for the significant impacts, and an action plan for accomplishing them is required. Implementation puts the plan in action through alignment of resources and development of documentation to minimize environmental impacts. Checking, Corrective action, and Management Review further reinforce the Deming model of Plan-Do-Check-Act that 14000 is based upon to ensure continual improvement.
ISO 14000 represents a marriage of quality systems with preventive environmental management. Many companies that implemented an ISO 9000 quality system realized significant improvements but objected to the burdensome documentation requirements. The authors of ISO 14000 have taken this into account, requiring written documentation of policy and/or procedures in only four or five instances in the model. In addition, companies that are ISO 9000 registered have administrative elements such as document control and record keeping systems already in place and are at a major advantage in implementing 14000.
Why Companies are Developing Environmental Management Systems
The major driver behind the environmental management system trend is the marketplace. In a 1995 survey of 99 U.S. businesses considering 14001 implementation, 50% reported customer demand or a competitive advantage as the reason for certification. Companies with a high percentage of sales in Europe or Asian markets should investigate what their customers expect - for example, China, the home for 20% of the world’s population, recently adopted ISO 14000 as state policy. Xerox Corporation states customer demand drove their decision to seek registration. On the U.S. front, the 'Big Three' auto manufacturers are expecting their Tier 1 suppliers to have environmental management systems. Other global companies are making similar demands on suppliers, including leaders in the pulp and paper industry. According to one corporate manager of environmental affairs, the supplier who inappropriately manages their environmental aspects or ignores opportunities for pollution prevention may pass significant environmental liability and a negative image on to their customer.
Improved risk management and the reduced liabilities are other important reasons U.S. companies are implementing environmental management systems. In 1996, U.S. EPA reported the highest level of enforcement activity in the history of the agency. Over $172 million was collected in fines and penalties. Furthermore, state and federal environmental agencies often use corporate penalty structures that put the CEO and top management at risk personally in the event of a release to the environment. Environmental management systems are preventive, and several elements contain spill prevention and emergency preparedness procedures that help manage risk and influence liability. Companies have received monetary relief in federal penalties for having certain environmental management system elements in place such as self-audits. In a recent landmark case involving GTE, $2.3 million was reduced to $53,000 in penalties because the company conducted self-audits. Companies are also receiving reductions in insurance premiums - Akzo Nobel Chemicals and Synthetic Industries reported premium reductions after ISO registration.
Finally, internal efficiencies and waste reduction are driving the trend. Product lost to the environment equates to dollars down the drain or up in smoke. Unnecessary waste of natural resources is a major business concern of progressive companies. For example, Southwire Company annually reports significant cost savings from the pollution prevention programs essential to implementing their environmental policy. Most often the best ideas come from within, which also results in enhanced employee satisfaction. Team-based management studies have shown that having input to and ownership of company goals enhances employee job satisfaction and decreases the likelihood of employee turnover.
What will an Environmental Management System Cost?
The cost of implementing an environmental management system is highly variable, but often proportional to the size and complexity of the operation. A range of costs between $15,000-$150,000 per site have been reported. Formal registration adds to these costs as a 3rd party audit program and surveillance are required to maintain the registration.
Companies are finding the major environmental management system development cost is employee time. ISO requires all employees are informed about the company’s environmental policy, and specialized knowledge among those whose job may have a significant environmental impact. Training programs can be resource intensive in time lost from production plus costs of instruction, and it takes time to document procedures for certain critical operations. Companies with high employee turnover or multiple sites may find knowledge transfer intranet/extranet technologies and self-directed learning tools effective to develop and maintain employee capabilities and minimize some of these costs.
Capital costs of environmental management system development are relatively small in comparison, assuming companies already have appropriate control equipment and monitoring instrumentation in place to be in compliance with federal, state, and local requirements.
The costs and benefits of environmental management systems can be difficult to measure. How do you measure the value of a preventive system? The costs incurred in the course of complying with regulations such as monitoring and permit requirements are potentially hidden among other items, such as overhead accounts. Intangibles such as enhanced consumer response indeed have value, but that value may depend on how your company is currently positioned on these issues and it’s goals.
Consider Stakeholder Concerns and Sustainable Development Needs
Environmental performance is important to many consumers and stakeholders. Evidence is found by noting the push on parliaments and congresses around the world to effect a culture change, or perhaps even a 2nd industrial revolution, towards sustainable development. Simply put, sustainable development is providing goods and services to meet the needs of current generations without compromising the ability of future generations to meet their own needs. The President’s Council on Sustainable Development was appointed in 1993 to lay the groundwork for a national strategy. 25 leaders from business, government, environmental, civil rights, and Native American organizations are looking for new ways to achieve this goal through performance-based solutions.
21st century manufacturers are looking at ways to reduce the consumption of materials and energy in production processes, and recycle their waste product into new product uses. Ray Anderson, CEO of Interface, Inc., a major manufacturer of floor coverings, cites staggering figures in use of raw materials: 1.2 billion pounds of materials extracted per year, with 2/3 of it burned up in fuel consumption. Ray and Interface are pioneering changes in technology to become completely sustainable by the year 2000. Use of solar energy, providing raw material needs by harvesting and recycling carpet and other petrochemical products, and eliminating waste and harmful emissions are all part of Interface’s strategy to attain this goal.
Environmental management systems that employ tools such as life cycle assessment and performance measures can be used to accomplish sustainable manufacturing goals and report meaningful results to your key stakeholders.
The trend towards environmental management systems is well established. While your company may already have a few key elements of a system in place, many companies are finding considerable value added through implementing a complete system that integrates environmental aspects into business planning. As is true with other areas of industrial management, planning and prevention on the front end may translate to significant gains in the long run.
Think about your company’s goals, marketplace, and the bottom line . . . numerous studies over the past few decades have shown a positive correlation between financial and environmental performance. But also think a few steps beyond today’s bottom line, and the needs of future generations we all should be considerate of. The time is here to make an informed business decision.