ISO 14000 Environmental Management Standards

This article examines the ISO 14000 environmental management standards. The background and history of the 14000 standards are reviewed along with the status of implementation of the standards. The benefits received by the adopters of the ISO 14000 standards are explained as well as the objectives which the adopters wish to achieve. The purpose and functions of an Environmental Management System (EMS) are examined as well as the challenges that an organization faces when implementing an EMS. The implementation of ISO 14000 standards in the financial sector are reviewed through a case study of a multinational financial corporation. The challenges faced by small and medium-sized enterprises when adopting ISO 14000 standards are also reviewed.

Keywords: Environmental Auditing; Environmental Labeling; Environmental Management Systems; Environmental Performance Evaluation; Environmental Performance Indicators; International Standards Organization (ISO); Life Cycle Assessment; Small and medium-sized enterprises (SMEs)

Overview

During the last thirty years environmental regulation in much of the industrialized world has improved. This has helped to reduce the impact of human activity but there are still challenges ahead for regulators as well as polluting industries. One challenge is to reach a balance between the often high costs of controlling pollution and the need for the economical viability of businesses that create badly needed jobs and services. Another is to actually achieve the goals set down in policies and regulations that are in place. In many cases existing levels of pollution still far exceed the levels allowed in regulations or policies (Coglianese & Nash, 2002).

In late 1996, the long awaited international environmental management standard, the International Standards Organization (ISO) 14000 series was published, with the intention of crossing all trade and political borders, as well as being applicable to any kind of organization. The focus of the standard was initially on technical/scientific standards but in the 1980s, technical committee (TC) 176 developed a quality management standard in order to standardize one aspect of organizational management. The result was the ISO 9000 series of international, generic quality management standards adopted in 1987. In 1993, TC 207 was created to develop a number of environmental standards in different areas including standardization in the field of environmental management, tools, and systems.

The scope of the ISO 14000 environmental series of standards was similar to the ISO 9000 standards in that the environmental standards were process quality standards and as such would not specify final product quality objectives. ISO 14000 is therefore a series of environmental standards aimed at providing organizations with a structured framework to manage their environmental impacts and responsibilities; however, the emphasis is on the management process which aims to be consistent and which in turn should generate products of consistent quality (Elefsiniotis & Wareham, 2005).

Twenty years after ISO 9001 went into effect and 11 years after the release of ISO 14001, which have been continuously updated taking into consideration the experience of organizations around the world, the use of ISO's management system standard formula is being used by more and more organizations. ISO 14001:2004, which states requirements for environmental management systems has been firmly established and followed by those organizations that wish to operate in an environmentally sustainable manner. By the end of December 2006, over 100,000 ISO 14001:2004 certificates had been issued to organizations in 140 countries. The 2006 total was about a sixteen percent increase over 2005. Remarkably, service organizations received about 27 % of all ISO 14001:2004 certificates issued up to the end of 2006 (ISO, 2007).

The primary benefit of an organization becoming ISO 14001 certified is that it gets to claim the status of certification which many believe will contribute to the brand identity of the certification as well as to the reputation of the certified organization. This is true because ISO 14001 is the widely recognized around the world as the premier voluntary environmental program in the world. Many feel that the growth of ISO 14001 is very impressive consider hold few years the standard has been in place. Certified organizations can use ISO 14001 as a marketing and public relations tool. Virtually all the largest auto manufacturers in the United States are quickly trying to get certifications for all of their facilities. Honda claims that all of its major plants worldwide have already met the ISO 14001 standard. Ford Motor Company, like many other manufacturers that rely on parts from other companies has started requiring supplies to get certified (Potoski & Prakash, 2005). Subaru television commercials boast of environmentally safe auto plants that are game reserves and send zero material to landfills.

ISO 14000 can be divided into two separate areas. The first deals with organizations' management and evaluation systems and the second with environmental tools for product evaluation. The Environmental Management System-ISO 14001, Environmental Auditing-ISO 14010, and Environmental Performance Evaluation-ISO 14031 are the standards used for organization evaluation. The Environmental Aspects in Product Standards-ISO 14060, Environmental Labeling-ISO 14020, and Life Cycle Assessment-ISO 14040 focus on product evaluation

ISO 14000 standard series can be considered as a double-edged tool providing tangible and intangible benefits to the government and regulatory agencies — such as the Environmental Protection Agency — and the adopting organizations themselves. The standard aim of ISO 14000 is to assist organizations in achieving objectives such as the following:

• Reduce their impact on the environment.
• Improve product design to reduce environmental impact over the life-cycle of a product.
• Reduce environmental damage in the process of raw material sourcing.
• Create a means for companies to show they are committed to protecting the environment (Korul, 2005).

The Environmental Management System as a Tool

Unlike regulatory standards established by government agencies, an Environmental Management System (EMS) holds organization managers responsible making their own decisions about how to reduce the negative impact caused by their organizations processes. When managers and company professionals develop their own EMS it is possible to have a positive environmental impact at far less cost than merely complying with government standards. For these reasons ISO 14001 is now widely recognized as a standard for EMS design (Coglianese & Nash, 2002).

EMSs can do more than just help organization managers. They may also be helpful to government agencies responsible for environmental protection. As resources become more difficult to get, government agencies will need ways to better enforce compliance with laws, policies, and regulations. Through the use of third-party auditors that help to determine that a company has achieved ISO 14000 standards, government agencies may need to perform fewer audits (Coglianese & Nash, 2002).

Fortunately the private sector is moving rather quickly to adopt EMSs. In the automotive industry, for example, many companies are requiring their suppliers to become ISO 14000 certified. If suppliers fail to achieve the certification they will risk losing their purchase agreements and could even end up being blacklisted (Coglianese & Nash, 2002).

Principles of ISO 14001

A properly established EMS empowers the organization and its personnel to address environmental issues. ISO 14000 truly empowers a firm to address complex concerns. Along with empowerment, all involved must understand that goals must be established and finite resources allocated to address a potentially long list of environmental priorities. The ISO 14001 Environmental Management System Specification is built on five key principles:

• Commitment and Policy: Top management must make a commitment to the program.
• Planning: To be successful, the environmental program must be organized. This includes establishing an organizational structure, promoting internal and external communications, and identifying environmental impacts.
• Implementation: The implementation program must include written process descriptions, establishment of prevention programs and employee training.
• Measurement and Evaluation: A mechanism for assessing performance and progress towards goals must be established.
• Review and Improvement: The program must be routinely reviewed and appropriate actions taken to maintain ongoing improvement (Hersey, 1998).

Maintaining a leadership role in any area requires passion. Rarely, however, is a firm passionate about a subject due to external influences. Thus, if management is interested in the environmental impacts of its operations and products, it must become totally involved. Environmental issues cannot (usually) be resolved by designating an individual as the company environmental representative and bringing them out whenever the regulators arrive. Thus, dedication and teamwork are paramount to improving environmental performance.

ISO defines an environmental aspect as "an element of any organization's activities, products or services that can interact with the environment. A significant environmental aspect is one that has (or can have) a significant environmental impact" (Elefsiniotis & Wareham, 2005, p. 210). The process of identifying these aspects may reveal several issues that require resolution. Once impacts and/or previously unknown regulatory obligations are identified, a mechanism to address them must be implemented. If regulatory non-compliance is involved, failure to properly address identified impacts may have legal implications.

The ISO 14000 process is not easy. It requires a strong commitment — all involved should be proud of their efforts. Once the program has been developed and appropriate environmental principles have been embraced by all employees the process becomes ongoing. The final step is to obtain registration. In addition to certification by an independent registrar, the standard provides a self-declaration option. However, although self-certification may have internal value, it lacks the external marketing value of an independent evaluation.

Environmental issues are rarely easy to discuss or understand. If these issues have been neglected or if resources have been misdirected, ISO 14000 will help a firm focus its resources and achieve environmental goals. However, these goals must be realistic. If efforts have been deficient and substantial compliance has not been achieved, civil and criminal penalties may be incurred. If regulatory non-compliance is identified and a program is not initiated to correct the deficiencies, a firm cannot expect enforcement discretion and should consult legal counsel for guidance.

Since this is a process of establishing goals, it has no true end. Maintaining ISO certification requires both internal and external audits on an ongoing basis. The motivation that drives the pursuit of ISO 14000 is critical to success. Both human and financial resources must be dedicated (Hersey, 1998).

Applications

ISO 14001 in the Financial Sector

UBS AG

UBS AG was the first bank in the world to have its banking business' environmental management system (EMS) ISO 14001 certified on a global basis (UBS is the result of the 1998 merger between two Swiss banks). The certification process helped the bank to identify and manage environmental risks and expand marketing opportunities. This was especially difficult because UBS was faced with working to integrate diverse cultural perspectives. Any global organization is constantly subject to change and UBS AG, as a financial institution had to establish an EMS that was designed around banking processes (Furrer & Hugenschmidt, 1999).

Integration

UBS faced a two-fold challenge in integrating the EMS and the banking processes. First, as a result of the merger banking processes from the former organizations needed to be integrated into a new system. Then the EMS needed to be aligned with the banking process that emerged out of the integration of the two old systems. In addition, the EMS had to be flexible enough to take into consideration the various environmental laws and regulation at the different location at which the bank had facilities.

All multinational companies will need to deal with local perceptions that may be different than the view of the organization as a whole. Perceptions of environmental issues and solutions will likely vary from business unit to business unit, from country to county, and even from province to province. This variance will be dependent on local laws and local environmental regulations as well as local culture.

One way to overcome these cultural and legal barriers, or at least prevent them from overwhelming the environmental management effort in conflicting details, is to assimilate each employee at each level of the company and at each location, into the culture of the EMS, This helps negate the need for processing too much detail in the everyday effort. If the philosophy of the organization is to operate in an environmentally responsible manner then day-to-day activities will be aligned and employees at the various locations may be less confused. The goal is to be environmentally responsible not just comply with local laws. UBS developed a training system to support this goal.

Environmental Audits

Annual independent audits for ISO 14000 implementation, combined with ongoing internal environmental audits provide an ongoing feedback loop for environmental regulation compliance as well as helping to improve environmental protection procedures. The audit results also help to guide planning and budgeting processes for future projects. UBS divisions and business units have conducted as many as 100 environmental audits of banking activities. In addition, there have been as many as 35 audits of facility energy management and internal ecologies.

Assessing Impact

All businesses, including UBS, have a direct impact on the environment. A considerable amount of this impact is caused by basic operations and facility ownership and maintenance. The consumption of electrical power or natural gas resources for heating and cooling as well as powering business or industrial equipment is one of the largest sources of environmental pollution. In the case of UBS, as with many EMSs in other organizations, the EMS is designed to address the impact of facilities and operations.

The EMS can identify the environmental aspects of business, services, and products. In the case of UBS the environmental impact for each banking activity is constantly evaluated in the EMS process and can be rated high, medium or low for a wide variety of risks including business risk, liability for products or operations, and risk to reputation. The EMS can also be used to access the potential environmental of business opportunities that the bank is considering.

Each area is assigned a sub-rating and then is combined to establish an overall rating by using the highest ranking for each area. The areas that carry the most weight in the combined score are considered to be the most relevant in determining final score. This process is repeated each year for each new or modified activity, product or service that can potentially impact the environment.

An internal audit can help to determine if EMS results conform to predefined processes and procedures and if those processes and procedures have been implemented in a correct manner. Each audit represents a slice in time and shows to what degree of effectiveness the EMS has achieved at that time. In the case of UBS, the yearly audits are performed on the full range of banking activities and operations and show the effectiveness of the EMS at key facilities. This makes the selection an audit partner a crucial step in the audit phase of the EMS cycle (Furrer & Hugenschmidt, 1999).

Quantified Environmental Performance Indicators

USB uses Quantified Environmental Performance Indicators (EPIs) EPIs as a management tool for planning, monitoring and controlling environmental procedures within the bank. The EPIs are used in a perpetual process of measuring the environmental performance of the organization. The EPIs can also demonstrate continuous improvement of an EMS. As with ISO 9000, continuous improvement is required by ISO 14001. If properly administered the indicators show to what extent procedure to protect the environment are implemented.

When it comes to evaluating USB's operations the use of EPIs provide a performance measure that shows the consumption of resources and the emissions that result from that consumption. The EPIs illustrate the effectiveness of USB's efforts to control environmental impact.

UBS has used its EMS tool to go beyond just looking at internal operations as has used it to measure potential environmental risk of various investments that the bank is considering. If for example, a client of the bank could be financially affected by poor environmental performance, it is prudent of loan managers or portfolio managers to examine the potential consequence of poor environmental performance on the bottom line of a client or investment target. This is especially true if other investment organizations, such as the World Bank, are setting requirements on loans that could benefit a bank client. In addition, there are many pressure groups that have identified practices or companies that are not environmentally friendly and if they choose can create considerable negative publicity for the bank if loans have been made or investments made in a targeted enterprise.

UBS Credit Assessment

Investment firms and banks are faced numerous pressures to better manage their investment portfolio. In addition to ISO 14000 there are other shifts in management perspectives and in the expectations of investors, business partners, and consumers. The environmental protection movement is certainly strong and ISO 14000 is adding to the momentum. The corporate social responsibility movement is also strong and although it certainly encompasses environmental issues it further address business ethics on many fronts.

Investors are become more particular about the types of companies they want to be associated with and investment firms and banks are aware of this and are conscious of the potential consequences of investing in a polluting enterprise. In addition to negative publicity and press coverage investing in companies that do not pursue improvements in environmental management as well as reduce the environmental impact of the products they manufacture or services they provide can also be a poor economic decision.

The high costs of decontaminating an industrial site or the necessity of disposing of hazardous waste, for example, can quickly drain a company's resources and negatively impact the balance sheet in terms of revenue, profit, and debt to equity ratios. Thus, investing in a polluting company likely means that there will be future costs associated with past and present environmental contamination. UBS is starting to audit client's environmental track record to determine the extent the bank should be involved with the firm.

To mitigate the risk of investing in or extending credit to a company that has a high potential for environmental liabilities USB implemented a process to analysis each company for risk levels. The process starts during consultations with the client when potential environmental opportunities and risks are discussed. Clients are teamed with USB advisers that can go over checklists and use other assessment tools to help identify environmental risks. If risk are identified the adviser consults with USB credit officers to evaluate their potential impact on the long term viability of loans. Depending on the circumstances the adviser and credit officer may request in-depth assessment of environmental risks, with support from an external specialist organization.

At this time the environmental track record and protection efforts that a client has achieved, or failed to achieve, are strong factors in UBS' credit rating procedures. Other traditional credit rating factors are also considered including financial performance indicators and the quality of management. The results of UBS' environmental analysis or other external assessments that have been performed also affects conditions attached to loans (Furrer & Hugenschmidt, 1999).

Issues

ISO 14001 in Small & Medium-Sized Enterprises

Managing small and medium-sized enterprises (SMEs) has become increasingly challenging in a global economy. These companies are working to be agile enough to respond to customers' needs while maintaining a level of profit that allows the company to position its self as solid and reputable player in its area of specialization. SMEs have also been faced with fulfilling the expectations of a growing number of stakeholders and forces including the general public, various classes of consumers, existing and potential customers, local communities, public regulatory authorities, and environmental organizations. As a result of these pressures EMSs have become both a powerful and necessary tool in managing the smaller company.

Resource Constraints

Implementing an EMS can be an expensive proposition for any company and SMEs are by nature rather resource constrained. Many SMEs work on slim profit margins and have limited human resources. These conditions may very well constrain voluntary participation in ongoing movements such as adoption of the ISO 14001 standard. SMEs need financial resources to cover the costs of EMS design and implementation as well as the cost of third-party verification for the ISO 14000 certification process.

In addition, the nature of ISO 14000 is continuous improvement which requires ongoing resources. Although the initial structuring of the EMS may represent the highest one-time expense, this expense can be reduced if there is internal environmental expertise. However such expertise is not likely to be found in most SMEs and thus expenditures for outside consultants is likely to be high during the initial stages of implementation of the EMS.

Time Requirements

SMEs, because of their inherent lack of excess staff also face the barrier of allocating sufficient time on the part of management, production staff, and facility management staff to develop and implement an EMS and to begin addressing environmental management issues. The initial environmental review can take considerable time if the SME has had little or no experience in environmental management. Establishing the base line from which to work and defining objects and designing mitigation programs can be very time consuming.

Most SMEs have been operated with a relatively informal management system. SMEs which have participated in pilot projects have reported that they neither had a quality control system in place nor did they have a defined and formalized management system. Thus not only were they working to structure their EMS they were working to structure their entire management system in a manner that could ease EMS implementation. This includes establishing a documentation trail that could be used to help evaluate environmental impact of materials and processes used in operations or manufacturing.

Once a SME manages to implement an EMS and move toward mitigating or reducing environmental impact they face the challenge of leverage their accomplishments. Research shows that SMEs are usually not accustomed to continuous ongoing interaction with stakeholders including local communities. In addition, SMEs often preferred the low-profile off-the-radar approach to public relations. Again there is a time constraint. Community relations take time and effort and when resources are in short supply it is likely that SME managers will be focusing on revenue and profit rather than having warm and fuzzy conversations with local conservationists or environmental protection groups

(Biondi, Frey & Iraldo, 2000).

Conclusion

In late 1996, the International Standards Organization (ISO) 14000 series was published, with the intention of crossing all trade and political borders, as well as being applicable to any kind of organization. ISO defines environmental aspect as any element of an organization's activities, products or services that can interact with the environment.

The scope of the ISO 14000 environmental series of standards is similar to the ISO 9000 standards in that the environmental standards were process quality standards and as such would not specify final product quality objectives. ISO 14000 is therefore a series of environmental standards aimed at providing organizations with a structured framework to manage their environmental impacts and responsibilities; however, the emphasis is on the management process which aims to be consistent and which in turn should generate products of consistent quality.

For over four decades many pro-environment factions have taken the position that there really is not any choice but to address the negative impact of human activity on the Earth's ecosystem. The popularity of this idea has both risen and fallen over those four decades. In 2009 it seems be popular. It is difficult to predict if the popularity of environmental protection will last long enough to save the planet, at least save it in the form that we now know it.

Terms & Concepts

Environmental Auditing: The process by which an organization can self-test its compliance with environmental standards as well as the process that independent external auditors can test compliance to assure that an organization has met and is maintaining ISO 14000 standards in order to announce compliance and gain certification.

Environmental Labeling: The process of explaining the environmental impact of products or services produced or provided by an organization.

Environmental Management System: A structured system to help guide an organization in its environmental management practices and the achievement of compliance with ISO 14000 or other environmental management standards.

Environmental Performance Evaluation: A comprehensive evaluation of an organizations' efforts or the efforts of a branch or division in achieving environmental management standards.

Environmental Performance Indicators: Measurable aspects of environmental management that show the level of regulatory compliance and the achievement of environmental management standards.

International Standards Organization (ISO): A network of the national standards institutes, consisting of one member per 157 countries. The Central Secretariat which coordinates the system is located in Geneva, Switzerland. ISO is a non-governmental organization and many of its member institutes are part of the governmental structure of their countries, or mandated by the government.

Life Cycle Assessment: The process of evaluating a product or service from the beginning of its life to the end of its life and the impact that each phase of the life cycle has on the environment.

Bibliography

Biondi, V., Frey, M., & Iraldo, F. (2000). Environmental management systems and SMEs. Greener Management International, , 55. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3762418&site=ehost-live

Coglianese, C., & Nash, J. (2002). Policy options for improving environmental management in the private sector. Environment, 44, 10. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=7685453&site=ehost-live

Elefsiniotis, P., & Wareham, D. (2005). ISO 14000 environmental management standards: Their relation to sustainability. Journal of Professional Issues in Engineering Education & Practice, 131, 208-212. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=17328576&site=ehost-live

Furrer, B., & Hugenschmidt, H. (1999). Financial services and ISO 14001. Greener Management International, , 32-41. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3423576&site=ehost-live

Hersey, K. (1998). A close look at ISO 14000. Professional Safety, 43, 26. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=963735&site=ehost-live

International Standards Organization. (2007). The ISO survey — 2006. Retrieved December 5, 2007 from ISO website http://www.iso.org/iso/survey2006.pdf

Korul, V. (2005). Guide to the implementation of ISO 14001 at airports. Journal of Air Transportation, 10, 49-68. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=18346596&site=ehost-live

Potoski, M., & Prakash, A. (2005). Green clubs and voluntary governance: ISO 14001 and firms' regulatory compliance. American Journal of Political Science, 49, 235-248. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=16217301&site=ehost-live

Suggested Reading

Bekkering, M., & McCallum, D. (1999). ISO 14001: A tool for municipal government to achieve sustainability. Greener Management International, , 103-111. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3423609&site=ehost-live

Delmas, M.A., & Montes-Sancho, I.J. (2011). An institutional perspective on the diffusion of international management system standards: the case of the environmental management standard ISO 14001. Business Ethics Quarterly, 21, 103-132. Retrieved November 15, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=57556205&site=ehost-live

Evers, P., & Austin, S. (1999). ISO 14001 and the American Indian Reservation. Greener Management International, , 42-49. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3423579&site=ehost-live

Feldman, I.R. (2012). ISO standards, environmental management systems, and ecosystem services. Environmental Quality Management, 21, 69-79. Retrieved November 15, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=73465215&site=ehost-live

Hepler, J., & Neumann, C. (2003). Enhancing compliance at department of defense facilities: Comparison of three environmental audit tools. Journal of Environmental Health, 65, 17. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=9355908&site=ehost-live

How ISO 14001 dominated the global market. (2013). ENDS (Environmental Data Services), , 04-07. Retrieved November 15, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=89714165&site=ehost-live

Krut, R., & Strycharz, J. (1999). ISO 14001 and design for the environment. Greener Management International, , 69-78. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3423595&site=ehost-live

Matouq, M. (2000). A case-study of ISO 14001-based environmental management system implementation in the people's Republic of China. Local Environment, 5, 415-433. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3954127&site=ehost-live

Tack, J. (1999). Environmental management systems and stakeholders. Greener Management International, , 50-58. Retrieved December 5, 2007, from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=3423582&site=ehost-live