The Best and Worst Aspects of ISO 14001

Introduction

The concept of corporate environmental management is generally conceptualised in terms of sustainable development. This means that an organisation must consider the implications of its business decisions and activities from an economic, social and environmental perspective (Edgeman & Hensler, 2001). To this end, businesses around the world are adopting existing standardized Environmental Management Systems (EMS) as strategic business approaches to put corporate sustainability into practice (Asif & Searcy, 2014; Isaksson & Garvare, 2003). EMSs provide frameworks for companies to manage the impact of their processes and products on the environment (Netherwood, 1998) with an emphasis on continuous improvement to protect the environment for both current and future generations (Chavan, 2005).

There are several EMS standards including EMAS[1], ISO14001, BS8555 and BS7750; but ISO14001 is the global leader in terms of diffusion, adoption and acceptance with no signs of this changing in the near future (Evangelos et al., 2012; Marsh & Perera, 2012). By December 2013, 301 647 ISO14001[2] certificates had been issued to organisations in 171 countries around the world (ISO, 2014). The main “elements of ISO14001 are environmental policy, planning, implementation and operation, checking and corrective action, and management review” (Liyin et al., 2006:247) as shown in the figure below. In particular, ISO14001 describes the organisational structure: the planning of activities, practices, systems, and processes, and the allocation of responsibilities and resources for creating, executing, evaluating and reviewing a firm’s environmental policy (Marimon et al., 2009).

Generally, it is expected that the implementation of a standardised EMS such as ISO14001 will result in improved environmental management (Pringle et al., 1998; Asif & Searcy, 2014) and increased competitive advantage for the organisation (Morrow & Rondinelli, 2002). However, “demonstrating the relationship between…” ISO14001 implementation and its contribution to improved “… environmental performance has been complex” (Schylander & Martinuzzi, 2007: 134). It can be argued that due to this complexity, the very best aspects of ISO14001 as an EMS standard are also its worst aspects as will be demonstrated in this essay.

ISO 14001: the best and the worst

There have been several arguments for and against the implementation of ISO14001. Many scholars, business leaders and policy makers have debated its viability as an EMS on both local and global scales. Moreover, several studies illustrate the strengths, weaknesses, benefits, limitations and opportunities of ISO14001 (Marsh & Perera, 2012; Evangelos et al. 2012; Marimon et al., 2009; Rondinelli & Vastag, 2000) while others have explored its contribution to an organisation’s economic and environmental performance (Prakash & Potoski, 2014; Schylander & Martinuzzi, 2007; Liyin et al., 2006; Morrow & Rondinelli, 2002). Additional studies have investigated the relationship between drivers, motivations, and characteristics and attributes of organisations, and the adoption of the Standard (Evangelos et al., 2012; Gonzalez-Benito & Gonzalez-Benito, 2005; Morrow & Rondinelli, 2002; Chapple et al., 2001).

Drawing from these studies, it can be argued that ISO14001 can be considered from contrasting perspectives: its benefits and disadvantages; its strengths and weaknesses; and its limitations and opportunities. Some of these can in fact be rectified or changed; however, some are characteristic of the format that the Standard has taken.

1. Environmental Performance

The most obvious positive aspect of ISO14001 is that when correctly used, it leads to improved environmental performance which can be attributed to efficient use of key energy types and raw materials (Marsh & Perera, 2012). In a case study involving a pharmaceutical company, Pinero and Mason (2000) found that there was reduced waste outputs and emissions from the organisation. After studying 316 electronics facilities in the USA, Russo (2001) found that companies that adopted ISO14001 decreased their toxic emissions. In yet another study of over 3000 facilities in the USA, Potoski and Prakash (2005) found that companies that adopted the ISO14001 polluted less and showed better compliance with environmental regulations than non-adopters. The need to improve environmental performance is also seen as a main driver and motivation for adopting the Standard especially among the large multinational corporations in the chemical, electronic and automobile industries (Morrow & Rondinelli, 2002).

The Standard provides for continuous improvement of the company’s EMS. This requires management to set specific time-lines for allocating responsibilities and implementing strategies to improve environmental performance (Pringle et al., 1998). In addition, the periodic audits of compliance with and implementation of the EMS requires the assessment of improvements and indications of required improvements in the system leading to eventual improvement in environmental performance, even when initially low targets were set (Rondinelli & Vastag, 2000).

However, the Standard requires ongoing improvement in the management system rather than in the resulting environmental performance (Pringle et al., 1998). Critics of the Standard affirm that it neither establishes performance standards and targets, nor measures environmental performance outcomes (Yin & Ma, 2009; Rowland-Jones et al., 2005; Hansen, 1998). Therefore, it doesn’t guarantee any improvement in performance beyond regulation (Evangelos et al., 2012). Even though some argue that it assists organisations in realising improved environmental performance (Proto & Supino, 2000; Chavan, 2005), the Standard is more concerned with the processes rather than the actual outcomes of the EMS. Studying the Standard certified Greek companies, Evangelos et al. (2012) found that determination of environmental performance was one of the difficulties faced by these companies during the implementation of the Standard. They argue that although the Standard aims for performance beyond environmental regulation and legislation, its implementation does not establish absolute requirements for environmental performance. It is a non-performance standard and according to Poksinska et al. (2003), given its aim is not to measure any environmental impacts or to ensure that they are reduced, it is “wrongly called an ‘environmental standard’” (p.586).

2. Savings and Costs of ISO14001 Implementation and Certification

Studies of the benefits of ISO14001 implementation in companies reveal it saves costs due to improved efficiency, waste management and reduced costs of energy and materials (Chung & Parker, 2008; Morrow & Rondinelli, 2002; Pinero & Mason, 2000; Rondinelli & Vastag, 2000). According to NCHR[3] (2013), three districts in the Pennsylvania Department of Transportation that followed material usage control practices set under the Standard, EMS were able to extend road salt inventories by more than three weeks during winter. This translated into cost savings of $25,000/year for labour and equipment.

Casio (in Rondinelli & Vastag, 2000) claims that as an international standard, ISO14001 helps firms to harmonize and minimize their environmental management practices within a coherent framework. This leads to a reduction of the cost of multiple registrations, permits and requirements by different local and national regulations. It improves a company’s relations with regulators, insurance companies, financial institutions and potential investors, thereby saving costs that would arise from fines, high insurance premiums and loss of investors (Marsh & Perera, 2012). It strengthens the company’s relationships with local governments and big industry players, positioning it well for winning tenders. This saves money that would otherwise have been used for vigorous marketing.

On the downside, the process of acquiring the international ISO14001 certification is costly both in terms of money, time and required expertise. Internally, Marsh and Perera (2012) noted that the implementation of the Standard incurs costs for new equipment for taking measures or the modification of existing equipment. Liyin et al. (2006) mention that construction companies are discouraged from adopting the ISO14001 as an EMS standard by the high costs of training employees and sourcing EMS experts as well as the consumption of employee time.

Malmborg (2004) stated that the main barrier to adopting the Standard among the SMEs in Uruguay was the total cost of setting up the system, long-term maintenance and improvement costs. There are also external costs of services from third party auditors for initial and annual audits as well as costs incurred for legal advisors (Marsh & Perera, 2012). Marsh and Perera (2012) report that these costs can vary from £5,000 to £50,000 for SMEs and from £50,000 to over £500,000 for large corporations. Other costs result from ISO14001’s high requirement for documentation of collected environmental data and communication (Malmborg, 2004). These costs are estimated to take up approximately 80 per cent of the total budget required (Marsh & Perera, 2012).

3. Self-Implementation and Management

The implementation of ISO14001 is a self-governed process whose success largely depends on top management’s commitment, employee involvement, internally set goals and targets, and transparency. ISO14001 is a standard built for business by business. It is written in a language that management easily understands, making it easy to capture and retain the attention of the top-management. This encourages self-management in undertaking the process of implementation, and gives organisations the mandate to control their own environmental programme. This has an impact on their processes, products and services (Pringle et al, 1998). Marsh and Perera (2012) affirm that those who work in the company best understand the business and the waste it produces. In the same light, George (1999) argued that self-governance allows company experts to set more accurate and meaningful goals and targets because they understand better how to control, alleviate and manage the resulting waste than would a third party such as a government official who has limited specialized knowledge of the company’s activities and intricacies. Moreover, George (1999) affirms that the exponential increase of businesses in the global market has made self-governance a more effective method of accountability since governments cannot oversee see all processes of production in every company.

Conversely, a self-governed EMS, Marsh and Perera (2012) say, runs the risk of failure especially if the top management is not aware of the required commitment in terms of money and time. Moreover, internal goal setting may be exploited by managers who may set targets that are too lenient. These are then very easy to achieve and managers communicate to their stakeholders that they are ISO14001 certified while they don’t actually deserve the status (Potoski & Prakash, 2005). This makes the company appear ethical to the stakeholders when they may have improved by a mere one per cent. This is misleading and exploitative of customers and other stakeholders because they are not involved in the EMS process.

The level of stakeholder involvement under ISO14001 is left to the discretion of the management. The organisation is only required to have a plan for dealing with external communication which according to Pringle et al. (1998) could be ‘meaningless’. This is one of the biggest criticisms of the Standard: lack of transparency and accountability. Compared to EC’s EMAS, ISO14001 pays less attention to legal compliance and has a lack of emphasis on external communication. Marsh and Perera (2012) conclude that ISO14001 as a self-management process lacks transparency thereby exposing stakeholders to unscrupulous managers who may have different reasons for seeking ISO14001 certification.

4. Voluntary Standard

Rondinelli and Vastag (2000) say that the value of ISO14001 lies in its voluntary nature which gives organisations “the flexibility to develop an EMS that is appropriate to their operations, characteristics, location and risk levels” (p.501). Similarly, Lim and Prakash (2014) argue that a voluntary EMS approach can spur innovation especially when designed to enhance the firm’s internal management system allowing employees to revolutionize and improve environmental performance. This is in contrast to the “command and control regulations” which stifle innovation by requiring firms to use specific technologies to reduce emissions (Lim & Prakash, 2014; Pringle et al. 1998).

High-cost environmental regulations encourage the relocation of high-polluting industries from countries that are highly regulated to countries where there are few or no environmental regulations (Cao & Prakash, 2010; Jaffe & Palmer, 1997). Fortunately, Lim and Prakash (2014) affirm that voluntary EMSs like ISO14001 can potentially mitigate this “regulatory dilemma” and increase regulatory efficacy. They found a positive relationship between the ISO14001 participation and environmental patent activity in countries (Lim & Prakash, 2014). Adoption of voluntary programmes like ISO14001 encourages innovation which is critical for finding cost-effective strategies for environmental management.

The use of voluntary EMSs has, however, not been without controversy. Sceptics of the voluntary nature of ISO14001 contend that it requires no commitment from the company to actually implement the developed goals and objectives (Rondinelli & Vastag, 2000). Pressure on a company to achieve certification may come from stakeholders such as customers, shareholders, regulators and local government. However, companies that are not willing to adopt the Standard are not automatically obliged to do so (Marsh & Perera, 2012). This is a matter of great concern especially when firms which may be having an excessive impact on the environment should be monitored.

Sullivan (2005) in his book, Rethinking Voluntary Approaches in Environmental Policy, suggests that the limitations of ISO14001 as a voluntary approach can be addressed by developing standardised approaches to reporting, setting SMART targets, clearly stating objectives and goals, and setting clear provisions for de-certification for failure to meet the required standards. Moreover, with increasing environmental legislation, such as the UK’s Climate Change Bill (CCB) (Defra, 2009), it may become mandatory for companies to be ISO14001 certified. With such changes, the performance of the voluntary ISO14001 standard can be monitored over time by external stakeholders.

5. Internationally Recognised Standard

ISO14001 is an internationally recognised standard that is flexible enough to be applied to any organisation, whatever its size, industrial sector, country or geographical location, as well as varying social and cultural circumstances (Evangelos et al., 2012). Studies indicate that one of the main motivations for companies adopting the Standard is that expectations are that international awareness would give the company competitive advantage, global market presence and access to foreign markets (Marsh & Perera, 2012; Evangelos et al., 2012; Morrow & Rondinelli, 2002; Rotherham, 1998). Chapple et al. (2002) observed that a major characteristic of UK firms obtaining ISO14001 accreditation was that they had higher export levels than non-ISO firms. Other studies show that international competition acts as a major catalyst in the decision to invest in ISO14001 because, it is believed, this investment acts as a signal to overseas customers that the company is environmentally credible and meets supply chain demands (Asif & Searcy, 2014).

The global implementation of ISO14001 makes it an important factor in international commerce and development for three reasons: it builds worldwide consensus that there is the need for standardised EMSs; it contributes to improved environmental performance; and it facilitates international trade and removes trade barriers (Rotherham, 1998). Therefore, ISO14001 creates a common international EMS language for global corporate sustainability (Georgiadou &Tsiotras, 1998).

The downside of ISO14001’s international recognition is that it has become an international non-tariff trade barrier since it has become a pre-requisite for many customer/supplier transactions in the global market (Prakash & Potoski, 2006). This restricts companies in developing countries from accessing developed country markets, causing shifts in trade patterns. In addition, it imposes conditions on SMEs that are required to meet the “green procurement” standards but due to their limited capacity and capital to meet these conditions, they might be forced out of business.

While the Standard boosts customer confidence because of its universality, it is to be noted that environmental standards differ among the countries and nations with the lowest environmental standards and weak regulations may attract more pollution-intensive foreign manufacturers (Cao & Prakash, 2010). Unfortunately, these low standards, which are used as the baseline, are desirable in these nations and since ISO14001 is an international standard, products produced in such nations easily penetrate the international market (Jaffe & Palmer, 1997).

Consequently, countries with the lowest environmental standards are continuously exploited for their resources and polluted due to lack of strict regulations while their local companies face trade barriers in the global market. Therefore, though ISO 14001’s international recognition is its major strength, in practice it is actually a weakness, allowing lower standards and poor countries continuing to be exploited (Pringle, 1998; George, 1999).

Conclusion

There is no denying that ISO14001 has helped thousands of companies around the world to improve their environmental performance (Russo, 2001). This achievement stretches across businesses of all types, sectors and sizes. However, it is clear that the Standard has limitations which are connected to the very aspects that define its success. This opens windows of opportunity for improvements that are expected to be addressed by the ongoing revision of the Standard.

The future ISO14001:2015 standard expected at the end of 2015 is likely to be stricter, more robust and demand better adherence to regulations (da Fonseca, 2015). These are expected to address most of the limitations discussed in this paper and to make full use of its strengths.

Finally, Marsh & Perera, (2012) recommend that integrating the implementation of ISO14001 into business improvement techniques and tools such as Lean Six Sigma will increase its ability to solve environmental problems and also potentially its sustainability in the future.

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[1] EMAS refers to European Commission’s Eco-Management and Auditing Scheme.

[2] ISO14001 is referred to as ‘the Standard’ in the rest of the essay.

[3] NCHR stands for National Cooperative Highway Research Program