ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency
A Report prepared for the Respondents to the ISO 14000 Certification Study
Steven A. Melnyk Roger Calantone Rob Handfield R.L. (Lal) Tummala Gyula Vastag Timothy Hinds Robert Sroufe Frank Montabon Michigan State University Sime Curkovic Western Michigan University
3 March, 1999
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Table of Contents Acknowledgments................................................................................................................................. I Executive Summary..............................................................................................................................2 Design of the Survey ............................................................................................................................3 The Questionnaire................................................................................................................................3 The Sample..........................................................................................................................................3 Table Design-1 Response Rates by Mailing..................................................................................4 Concluding Comments.........................................................................................................................4 Chapter 1 ISO 14000 and Environmentally Responsible Operations: An Introduction ..................5 Introduction .........................................................................................................................................5 Objectives of this Study .......................................................................................................................5 Chapter 2 Understanding ISO 14000..................................................................................................7 Overview .............................................................................................................................................7 What is an Environmental Management System? .................................................................................7 The Development of Environmental Standards.................................................................................8 The Forces For a More “Environmentally Conscious” System ..........................................................8 EMS and the Environmentally Conscious Enterprise ............................................................................9 ISO 14000 – Positioning This New Certification Standard .................................................................10 Exhibit 2-1 A Taxonomy of Various Environmental Management Systems ................................11 Understanding the ISO 14000 Certification Standards ........................................................................11 Exhibit 2-2. Intent of ISO 14000 ...............................................................................................12 Concluding Comments.......................................................................................................................14 Chapter 3 Analyzing the Survey Data: Understanding the Implications of ECM and ISO 14000 15 Demographic Information ..................................................................................................................15 Industrial Descriptive Information..................................................................................................15 Table 3-1 Classification of Respondents by 2-Digit SIC Codes...................................................15 Table 3-2 Plant Involvement in Corporate/Manufacturing Initiatives ..........................................17 Background of the Respondents .....................................................................................................18 Table 3-3 Stated Positions of the Respondents ............................................................................18 Table 3-4 Number of Years Respondents have been in their Current Positions............................18 Table 3-5 Respondents Classified by Functional Area ................................................................19 Table 3-6 Membership Traits of the Respondents .......................................................................20 Table 3-7 Level of Involvement of Respondents in Various Corporate/Plant Initiatives...............21 Plant Activities ..................................................................................................................................22 Chart 3-1a Stage of Involvement with ISO Standards .................................................................23 Chart 3-1b Stage of Involvement with Quality Programs ............................................................24 Chart 3-1c Stage of Involvement with Planning and Control Systems .........................................24 Chart 3-1d Stage of Involvement with Voluntary Environmental Programs.................................25 Chart 3-1e Mean Involvement with Various Initiatives ...............................................................25 Environmental Management Systems - Findings ................................................................................26 Table 3-8 Assessing the Plant’s Environmental Management System (Mean Values)..................26 Environmental Systems – Management Options Considered...........................................................29 Table 3-9 Environmental Management Options Considered........................................................30 Environmental Management and Corporate Performance – The Aggregate Impact .........................31 Table 3-10 Assessing the Impact of Environmental Management Systems on Corporate Performance...............................................................................................................................32 Assessing the Impact of ISO 14000 Certification on the Firm.............................................................33 Table 3-11 Impact on ISO 14000 Certification Progress on Dimensions of Performance.............33 Obstacles to ISO 14000 Certification .................................................................................................34 ISO 14000
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Table 3-12 Major Sources of Uncertainty Regarding ISO 14000.................................................35 Concluding Comments.......................................................................................................................36 References ............................................................................................................................................1
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Acknowledgments This report has been a major research undertaking. For the members of the research team, this report embodies hundred of hours of time, effort, and work. However, this effort could not have taken place without the active encouragement and financial support of certain people and organizations. We would like to take this opportunity to acknowledge their contributions and recognize that this report owes its existence in large part to them. Specifically, we would like to recognize the contribution of the following people: • Phillip Carter, Center for Advanced Purchasing Studies (CAPS) • Mike Lythgoe, Director, Educational and Research Foundation, American Production Inventory Control Society (APICS) • Erik Goodman, Director, Case Center, College of Engineering, Michigan State University • Robert Nason, Chairperson, Department of Marketing and Supply Chain Management, Michigan State University We would also like to thank the following organizations for their financial and other support: • • • • •
CAPS, National Association for Purchasing Management (NAPM) American Production and Inventory Control Society (APICS) National Science Foundation (NSF) Manufacturing Research Consortium (MRC) Michigan State University
To these, we acknowledge their support. They played a critical role in helping make the idea for this report a reality. Thank you again. Steven A. Melnyk Roger Calantone Rob Handfield R.L. (Lal) Tummala Timothy Hinds Gyula Vastag Robert Sroufe Frank Montabon Sime Curkovic February 1999
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Executive Summary The following report details a research project in which American firms’ attitudes towards ISO 14000 were analyzed, the firms approach to ISO 14000 and environmental management systems were reviewed, and the implications of these facets of environmentally conscious manufacturing were summarized. Some highlights of this research include: • Overall, environmental management systems are not seen in a positive light. In general, these systems are negatively affecting the major strategic dimensions of performance (i.e., lead time, costs and quality). They are also not seen as enhancing the firm’s ability to sell its products internationally. • The ISO 14000 certification program is relatively new, with the result that relatively few plants were certified (37/1510 respondents or 2.5%). This number is low relative to other environmental programs such as Industrial Voluntary Environmental programs (where 284 respondents noted successfully implementation of these programs) and Voluntary EPA programs (where 253 respondents noted successful implementation). • Successful attainment of ISO 14000 has a large, positive impact on the perceived efficiency and effectiveness of the environmental management system. Except for lead times, which are slightly negatively affected, ISO 14000 greatly improves every dimension of performance. This finding points to a situation where those firms that have attained this level of certification are not only more environmentally responsible, but also more efficient. • The progress of a plant in attaining ISO 14000 certification is influenced by several factors: size, nature of ownership, past success with QS 9000/ISO 9000, past success with TQM systems, and degree to which cross functional programs and teams are used. • Progress in attaining ISO 14000 certification is also influenced by uncertainty concerning federal regulations, changes in ISO 14000 standards, the costs of certification, the benefits of certification, and the impact of the ISO 14000 standards on current environmental management systems. • Compared with other voluntary based programs aimed at improving environmental performance, the evidence indicates that the ISO 14000 certification process is more effective and efficient when viewed in terms of its impact on performance.
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Design of the Survey The Questionnaire The survey was developed by the research team and pre-tested by 15 respondents in a three-round process over a period of two months. This group represented a variety of positions and functions within their firms in a variety of industries. The pre-test group was asked to review the survey primarily for clarity of questions and time required to complete the survey. The primary potential problem with the survey that the pre-testers pointed out was concern over the length of the survey. The length of the survey is justified by the need to establish valid measures for the concepts that were included in the survey. There is very little previous work on which to base our questions, so the research team decided to err on the side of length, in order to ensure we would be able to obtain valid measures. Also, the research team was aware that any research concerning environmental issues is fraught with Socially Desirable Response (SDR) issues. In order to mitigate these issues, generally it is wise to include more questions as a validity check. The survey consisted of five major sections. The first section gathered information about the respondent, their position, professional affiliations (if any), and extent of involvement in various initiatives (such as Just-in-Time implementations or Lead Time Reduction programs). The second section focused on the business unit (the basic unit of analysis) and detail about it. This included product manufactured, extent of uncertainty facing the business unit and its personnel, and the status of various types of initiatives (e.g., Enterprise Resources Planning, Cross Functional Teams and QS 9000). Section III dealt with the perceived impact of the ISO/QS 9000 certification process on the business unit and its competitive position in the market place. In Section IV, the respondent was asked to evaluate a series of questions pertaining to ISO 14000. These questions assessed the level of knowledge of the respondent on the ISO 14000 certification process, as well as the factors affecting its implementation and use. The fifth and final section gathered information about the business unit’s environmental management system, the effectiveness and efficiency of this system and the types of options used to improve environmental performance. At the very end of the questionnaire, respondents were given some free-form space to describe any obstacles, potential or realized, to their firm implementing ISO 14000.
The Sample Three professional associations (National Association of Purchasing Management, American Production and Inventory Control Society and one group who wishes to remain anonymous) provided mailing lists of 5,000 names each. The constituency of each of the associations was different enough that only a handful of names were found on more than one list. We also worked closely with a major American manufacturer, who provided us with an additional list of 104 managers at six of their facilities. From this list, we received 57 valid responses. In total, we had a mailing list of 14,584 names, of which we received 1510 usable responses, for a response rate of 10.35%. While this is lower that the 20% that researchers strive to achieve, we believe that the length of the survey discouraged some potential respondents. The overall response rates by wave are summarized in Table Design-1.
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Source of Respondents Major Manufacturer Anonymous Group NAPM APICS Unknown Total
First Mailing 52 173 301 435 0 961
Third Mailing 5 136 199 197 0 537
Unknown 0 0 0 0 12 12
Total 57 309 500 632 12 1510
Concluding Comments This very detailed and rigorous research methodology was developed for two purposes. The first was to ensure that the objectives of the research study were achieved. The second was to guarantee that the findings presented in this study and drawn from the various sources were based on the data and did not reflect the biases of the research team. Having established the structure of the research methodology, we can now proceed to examine the findings from the survey.
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Chapter 1 ISO 14000 and Environmentally Responsible Operations: An Introduction Introduction The 1990s have been a time of challenge and transition. In the past, the managers thought in terms of trade-offs (i.e., the paradigm of “or”). That is, you could have low cost OR short lead times OR high quality OR high flexibility. You could have superior performance on any one of these dimensions. But, you could not have expect superior performance on two or more dimensions. Today, however, managers increasingly live with the paradigm of “and.” That is, managers are now expected to simultaneously reduce lead times (manufacturing, purchasing and design), improve quality, reduce costs, AND enhance flexibility. This has also become a period when more and more managers are expected to become increasingly environmentally conscious. Being environmentally responsible is no longer viewed as something that is primarily done for publicity’s sake. It is now viewed increasingly as a requirement of doing business. For the manufacturing manager, this has meant reexamining their products and processes, with an eye toward the reduction or elimination (if possible) of any resulting waste streams. For the purchasing profession, the corresponding challenge has been to identify suppliers who can provide environmentally responsible goods and services without sacrificing cost, quality, flexibility or lead time. It has also meant identifying and evaluating any initiative that is consistent with these new expanded objectives. One such initiative is that of the ISO 14000 environmental standard. Formally adopted in 1996 by the International Standards Organization, ISO 14000 represents a new standard and approach to improved environmental performance. There are several features that make this new standard noteworthy. First, this standard builds on the success provided by the quality standard, ISO 9000, and its variants, such as QS 9000 (as found in the automotive industry). Second, ISO 14000 is an international standard. As a result, it is hoped that this standard will replace the numerous and often conflicting standards found in various countries across the world. Third, ISO 14000 shifts attention from the outcome (reduced pollution) to processes. Finally, an impartial third-part assessor must evaluate the extent to which the firm is able to successfully adhere to these new requirements. Because it is a new standard and approach, the introduction of ISO 14000 has raised a number of questions: § Will ISO 14000 generate the same degree of acceptance as ISO 9000? § Are the benefits offered by ISO 14000 certification sufficient to offset the costs incurred in meeting the requirements of this new standard? § Is there a relationship between environmental and corporate performance? § Should managers wait until others have undergone ISO 14000 certification before proceeding, or until customers demand it? § What is current state of ISO 14000 acceptance in American industry? § What factors significantly influence the decision to pursue ISO 14000 certification? This study will examine these and other related questions.
Objectives of this Study One of the objectives of the study was to gather the various benefits and obstacles/concerns to ISO 14000 and environmentally responsible manufacturing that have been presented in various articles, conference proceedings, books and expert discussions. These benefits and obstacles/concerns were incorporated into ISO 14000
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the large-scale survey and objectively evaluated. The data received from this survey was intended to provide insights into how adopters and potential adopters of ISO 14000 view this development. It also helps assess the extent to which there is excitement or acceptance for ISO 14000 (as well as the degree of awareness of the need for such a standard). It should also validate (or not) the various perceptions regarding ISO 14000, the need for such a certification process, the factors affecting its acceptance and the various perceived costs and benefits associated with its introduction. Specifically, this study is targeted in addressing the following questions: •
What is the status of environmental management systems in most American plants and how are they perceived by management?
•
What is the initial predisposition of potential users/adopters of ISO 14000 to the ISO 14000 standards?
•
How are these predispositions influenced by factors such as past experience with ISO 9000, corporate orientation towards environmental responsibility, industrial factors, importance of international trade to corporate performance and the functional positions of the respondents?
•
To what extent do the respondents see a relationship between ISO 14000 registration and success and improved market, or corporate performance?
•
How effective is ISO 14000 relative to the other alternatives available for improving environmental performance?
•
What options are available for firms interested in improving environmental performance and to what extent are these options in practice?
•
What are the major sources of uncertainty facing the manager interested in attaining ISO 14000 certification and which of these sources have a significant impact on the attainment of ISO 14000 certification?
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Chapter 2 Understanding ISO 14000 Overview This report is about ISO 14000, its rate of acceptance and its effect on various dimensions of performance. Before we turn to the data, it is first necessary that we understand what ISO 14000 is, its origins, and the reasons that managers, more specifically purchasing managers, should be interested in this new certification standard. These issues form the major objectives of this chapter. Since ISO 14000 focuses on the corporate Environmental Management System (EMS), the chapter will begin by exploring the concept of an EMS.
What is an Environmental Management System? As pointed out by Tibor and Feldman (1996), the ISO 14000 standards describe the traits of an effective environmental management system. The EMS is the formal corporate management system that is responsible for the management, organization, measurement and improvement of environmental performance within the enterprise. Underlying this definition is the implicit assumption of a positive correlation between environmental and corporate performance. As a formal management system, the EMS is charged with a number of important responsibilities, namely to: • Create an environmental policy. • Set appropriate objectives and targets. • Help design and implement a program aimed at achieving these objectives. • Monitor and measure the effectiveness of these programs. • Monitor and measure the effectiveness of general environmental management activities within the firm. • Ensure that the activities of the firm are, at a minimum, compliant with the relevant environmental regulations (be it at a local, state, federal or international level). • Summarize and communicate environmental activities to others located either within the firm or without (e.g., stockholders, local community, and environmental agencies). • Help influence critical activities, such as product/process design and production scheduling, so that environmental concerns and issues are duly considered. • Create corporate awareness of the need for environmental awareness and of the potential advantages offered by becoming more environmentally responsible. • Identify and introduce appropriate tools intended to improve environmental performance or reduce pollution and to educate users in their use. • Help identify and correct potential environmentally related problems. • Review the corporate activities with an eye towards improving it and environmental performance. EMS embodies a more comprehensive systems approach to what is typically found in disaggregate form in the current Environmental, Health and Safety (EHS) functions of many firms. EMS is not an entirely new concept or system. In many cases, the infrastructure of an EMS is already in place. What is needed ISO 14000
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is an existing system to become an EMS is the integration of the system capabilities with environmental metrics (performance measures) and goals. The emergence of the EMS can be traced to two major factors. The first involves the development of environmental standards. The second is due to the various focuses encouraging a more “environmentally responsible” perspective.
The Development of Environmental Standards For those not familiar with the evolution of EMS, many of the components of EMS are found in the development of different standards in the last six years. Masaaki Imai (1986) states “there can be no improvement where there are no standards.” Thus, the world’s first standard for EMS, British Standard (BS) 7750 was developed and published by the British Standards Institute in 1992. The BS 7750 standard was the model for the ISO 14000 series of standards for EMS developed by the International Organization for Standardization (ISO). BS 7750 is also the basis for the European Union’s Eco-Management and Audit Scheme (EMAS). Found within these various EMS standards are almost the same set of basic elements of an effective environmental management system. They include: (1) creating an environmental policy; (2) setting objectives and targets; (3) implementing a program to achieve those objectives; (4) monitoring and measuring its effectiveness; (5) correcting problems; and, (6) reviewing the system to improve it and overall environmental performance. However, while the elements are somewhat common, it is the special information the system can generate that serves to differentiate the EMS of one firm from that of another. Thus, many firms can have an EMS, and each of these systems can be a unique resource, delivering specialized information to individual firms.
The Forces For a More “Environmentally Conscious” System When asking firms about the importance of the environment, we find that it is more than some will admit and less than some would hope. The proponents of more environmental regulation for business have gained support from Porter (1991), who briefly discussed the question of whether strict environmental standards make American industry less competitive in international markets. The conflict between environmental protection and economic competitiveness is said to be a false dichotomy (Porter, 1991). Strict environmental regulations do not inevitably hinder competitive advantage against foreign competition; indeed they often enhance it (Rondinelli, Berry & Vastag, 1997). It is here that we can see the paradox of the view that EMS is only a cost to the firm. It has been claimed that firms involved in proactive environmental programs can lead the way into environmental stewardship, and new regulatory requirements (Rondinelli & Vastag, 1998). While there are cost/benefit tradeoffs associated with being the standard setter or being a follower, there are also times, when “best-in-practice” environmental companies are sought by government or the competition as a benchmark. Managers from firms such as 3M, Dow, and AT&T have been invited to help establish international environmental standards such as ISO 14000 because of their proactive track records in pollution prevention. Firms that are laggards in adopting new standards and conforming to existing regulations will spend valuable resources in order to stay abreast of the active development of their competitors, and new governmental regulations. The United States alone has passed the 20,000 page threshold during 1993 and continues to add to the number of environmentally related pages of regulations since 1993. This increase in federal laws does not even include the state and local level regulations which tend to compound the already complex issue of legal compliance. Those firms who choose to be reactive to environmental legislation and implement end-of-pipe solutions to pollution problems will consume more resources just to comply with these new regulations. It should be easy to see that compliance is a minimum requirement for competitive advantage. For those firms who are already exceeding regulatory
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compliance, the proactive investments in previous environmental initiatives can help defend the firm against new compliance issues, costs, and competitors. Additional evidence of the growing importance of environmental business practices is seen in the Environmental Protection Agency’s publishing of the Code of Environmental Management Principles (CEMP) for all Federal Agencies. The intention of this code is to move federal agencies toward a “systems” approach to environmental management that will mirror private sector initiatives such as EMS standards. Examples of international government’s recognition of environmental importance may also be seen in Indonesia’s recently introduced Program for Pollution Control, Evaluating and Rating. This is a landmark initiative under which polluters are assigned environmental performance ratings that are announced to the public. The main objectives of the program, which went into effect in June 1995, are to increase compliance with environmental regulations, promote adoptions of clean technologies, create incentives for polluters to strengthen their in-house environmental management capabilities, and prepare companies in Indonesia for ISO 14000 certification (Wheeler & Afsah 1996). Due in part to governments recognizing the importance of environmental business practices, corporations now must evaluate the appropriate corporate environmental policies for their plants and supply chain partners while being consistent with new international standards (Rondinelli & Vastag, 1996). Aside from the looming environmental legislation, firms still have to handle the delicate issues of special interest groups, stakeholders, customers, and communities around the firm. The recent United Nations Climate Conference discussing the controlling of global warming, and specifically reduction of carbon dioxide and other greenhouse gases to below 1990 levels, has brought growing attention to the environmental impacts of businesses in many countries. These and other forces have provided the management of many firms with a strong impetus to develop and implement effective, formal EMS.
EMS and the Environmentally Conscious Enterprise The environmental management system and ISO 14000 (to be discussed in the next section) can be viewed as elements of the Environmentally Conscious Enterprise (ECE). This system can be defined as: A corporate system that integrates product and design issues with issues of production planning and control and supply chain management in such a manner as to identify, quantify, assess, and manage the flow of environmental waste with the goal of reducing and ultimately minimizing its impact on the environment, while also trying to maximize resource efficiency. Associated with this definition are several important assumptions and premises (Smith & Melnyk, 1996): • ECE decisions are always present and are integrated (and part of) with the business process. • The ultimate goal of ECE is waste elimination. • To be ultimately successful, ECE must be viewed as a strategically-driven decision that is evaluated by comparing its relative costs and benefits (and making appropriate decisions based on this analysis). • Effective ECE systems must be viewed as corporate systems, not as manufacturing, engineering or purchasing decisions. • Effective ECE systems must focus on the three Ps – Product, Process, and Packaging.
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• To be ultimately successful, ECE must be integrated into the product and process design and development system. • To be ultimately successful, ECE must be considered within the context of both the internal factory (the manufacturing system found within the four walls of the enterprise) and the external factory (the transformation process as it involves the supply chain). • ECE is ultimately a cross-functional undertaking. • ECE is dynamic. • ECE is primarily process as compared to outcome (end-of-pipe) oriented.
ISO 14000 – Positioning This New Certification Standard Before discussing the ISO 14000 standard, it is useful to position this standard in terms of its relationship to the various types of EMS that a firm can development and implement. As discussed in the preceding sections, an EMS is increasingly being asked to fulfill a number of objectives. How it achieves these objectives depends on the strategy used to develop and implement it. This strategy can be influenced by several factors. Two dimensions are critical when evaluating this strategy. The first is the Corporate Position Regarding Environmental Performance. This dimension is essentially a spectrum that is anchored at one end by “Strict Compliance” and by “Environmental Leadership” at the other end. With “Strict Compliance,” the firm’s management does no more than is necessary to meet the minimum requirements as set down within the appropriate set of regulations. With this approach, the firm’s environmental activities are driven by changes in governmental regulations. As these standards set within these regulations become more stringent, the firm improves its performance to meet these new requirements. Once met, the environmental activities of the firm stop. In other words, with “Strict Compliance,” the levels set by regulation are viewed as ceilings; there is no incentive to exceed these limits. In contrast, under “Environmental Leadership,” the firm’s management views the requirements contained within the appropriate regulations as floors. In other words, they represent the minimum that the firm should do. Under this stance, the firm views improved environmental performance as being critical. As a result, it strives to lead by doing more than is required by the law. The second dimension is that of the Action Focus. This dimension describes where the focus of management attention is placed when dealing with environmental problems and issues. Like the previous dimension, this can be envisioned as spanning a spectrum that is anchored at one end by an “End-of-Pipe” focus. With this focus, attention is directed towards the outputs of the process and the management of these problems once they have been created. For example, the decision to install a scrubber into a smokestack so that particulates can be removed before they reach the open air falls into this category. The other end of the spectrum is anchored by a “Process” focus. Here, management is interested in identifying, studying and changing the performance of those processes that are responsible for the observed level of pollution. In contrast to the “End-of-Pipe” focus, this approach seeks to eliminate the pollution from being created in the first place. It is a preventative orientation, in contrast the corrective stance found when taking an “End-of-Pipe” focus. When these two dimensions are merged, what is created is a 2x2 matrix that describes the various basic forms that an EMS can take (see Exhibit 2-1). This matrix identifies the simplest and most reactive form of EMS. This form, denoted by A in Exhibit 2-1, is observed when the management takes a compliance view of environmental issues and when the focus of activity is on the management of end-of-pipe
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problems. With this type of system, management will only invest in environmental issues when forced to do so by changes in governmental regulations. When this investment does take place, the focus is on the management of pollution after it has been created. With this type of a system, any investment in environmental initiatives results in increased costs. The processes causing the pollution go unchanged. To the managers in these firms, pollution control is not more than a cost of doing business.
Action Focus
Exhibit 2-1 A Taxonomy of Various Environmental Management Systems Corporate Position Regarding Environmental Performance Strict Compliance Environmental Leadership A End-of-Pipe Process
D
In contrast, the most complex and effective form of EMS is observed under conditions of Environmental Leadership and a Process focus. This type of EMS, denoted by D in Exhibit 2-1, attempts to eliminate the creation of pollution. With this type of system, the elimination of environmental waste (which is what pollution is essentially) can result in reduced costs, improved efficiencies and fewer problems. It is in this quadrant, it can be argued, that we would expect to see firms that are ISO 14000-certified.
Understanding the ISO 14000 Certification Standards Representatives from some 50 countries around the globe have formally adopted the international standard on environmental management systems (ISO 14001) by the International Standard Organization in 1996. This standard attempts to build on the success and experience of its predecessor, the ISO 9000 standards, and its variants such as QS 9000 standards now being implemented within the automotive industry. If the ISO 14000 series of standards work as intended, it will set a higher level of expected environmental management practices worldwide. Additionally, these new standards are predicted to facilitate trade and remove trade barriers. What is ISO 14000? The ISO 14000 standard specifies the structure information technology in the form of an EMS that an organization must have in place if is seeks to obtain certification of the EMS according to ISO guidelines. The ISO 14000 standards describe the basic elements of an effective EMS. These elements include creating an environmental policy, setting objectives and targets, implementing a program to achieve those objectives, monitoring and measuring its effectiveness, correcting problems, and reviewing the system to improve it and overall environmental performance (Tibor & Feldman, 1996). In reviewing the ISO 14000 certification standards, we must note one important feature of this standard: ISO 14000’s EMS standards are process, not performance, standards. In other words, these standards do not tell organizations what environmental performance they must achieve aside from compliance with environmental regulation. Instead, the standards describe a system that will help an organization to achieve its own objectives and targets. The assumption is that better environmental management will lead indirectly to better environmental performance (Tibor & Feldman, 1996). To better understand the transition of the intent of ISO 14000 to the actual standards, ISO 14000 encompasses standards in the following 7 general areas: 1. Environmental Management Systems
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ISO 14000 2. 3. 4. 5. 6. 7.
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Environmental Auditing Environmental Performance Evaluation Environmental Labeling Life Cycle Assessment Environmental Aspects of Product Standards Terms and Definitions
These standards are then divided into two general categories as shown in Exhibit 2-2. The EMS, auditing, and performance evaluation standards will be used to evaluate the firm. The EMS standards provide the framework for the management system. Auditing and performance evaluations are seen as management tools in the successful implementation of an EMS. Labeling, life cycle assessment, and environmental attributes in product standards emphasize the evaluation and analysis of product and process characteristics. Exhibit 2-2. Intent of ISO 14000
Environmental Management
Environmental Management Systems
Environmental Performance Evaluation
Environmental Auditing
Organizational Evaluation
Life Cycle Assessment
Environmental Labeling
Environmental Aspects in Product Standards
Product and Process Evaluation
A firm can implement an EMS that is in line with one of the EMS standards (BS 7750, EMAS, or ISO) without external certification. External certification and registration becomes a factor once there is a clear reason to demonstrate conformance to third parties. Some situations where certification could become important are (Tibor & Feldman 1996): •
A customer requires EMS certification as a condition to sign a contract.
•
Your organization supplies to a customer who strongly suggests you become registered.
•
A government provides benefits to registered organizations.
•
You have a site in the European Union, where market pressure or the regulatory environment forces you to get registration or certification.
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•
A single international environmental standard can reduce the number of environmental audits conducted by customers, regulators, or registrars.
•
You export to markets where EMS registration is a de facto requirement for entering the market.
•
You expect to gain a competitive advantage through EMS registration.
•
Your major stockholders (local community, shareholders, unions, etc.) expect environmental excellence and an EMS registration is the way to demonstrate it.
If one of the above applies, a firm should decide whether to get registration for the organization as a whole or just for parts of it. If the firm is already ISO 9000 certified, it makes sense to define its scope in a similar manner (Tibor & Feldman 1996). If the firm opts for a site registration, there is the advantage of not losing the registration for your whole organization if one of the sites does not comply with the requirements of the standard. Also, the process of implementing, certifying, and registering the EMS is broken down into smaller projects that may be easier to handle. Generally speaking, there are ten steps involved in the ISO 14000 certification process. These same steps are also helpful in customizing your environmental management system to ISO 14000 without seeking certification (Sayre 1996). § Step One: Understand the ISO 14000 standard, its impact on the organization, its requirements, and determine the benefits of seeking certification. § Step Two: Understand the certification process and decide whether to commit to certification. § Step Three: Top management support should be in place for the Management Representative for the environmental management system to go forward with the process with team members from each affected area of your organization. If necessary, provide any needed training on the certification process. § Step Four: With the help of the Management Representative, select the appropriate certification organization. Investigate the certifying organization to see if there is a waiting list, understand the approach to the certification process through their eyes, and understand what expectations and requirements are involved. § Step Five: Perform internal audits of your environmental management system against each element of the ISO 14000 standard. Perform a gap analysis, and identify strengths and weaknesses in the current system. Repeat audits where deficiencies are identified. § Step Six: Correct deficiencies while striving to attain full compliance with the standard. If this can not be done immediately, develop a compliance plan to address discrepancies beyond the current capability to correct. § Step Seven: Verify that you have clearly defined environmental management policies, objectives, targets, and procedures (typically in an environmental management system manual or similar document). Validate proper regulatory commitments. § Step Eight: Again, address and correct deficiencies. If the deficiencies can not be fully corrected, the document and implement a corrective action plan to resolve issues that may be beyond your current capability to address.
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§ Step Nine: Apply for certification. Set up meetings with the certifying agent for the indoctrination of your organization, its activities, products, and services. Next, schedule the final audit (there may be several pre-audits). § Step Ten: Expedite the final audit (say what you do and do what you say). Be prepared for the outcome (recommendation for or against certification). Starts scheduling the correction of any identified discrepancies within sixty days and submit evidence of the completion of the actions taken. Finally, expedite the final audit if there were any major discrepancies identified. To date, no research has addressed whether ISO 14000 will be widely used by businesses as a consensus model, or whether it should be. Instead, the literature is saturated with conflicting predictions and viewpoints offered by experts. The champions of ISO 14000 suggest that it will unify countries in their approach to environmental management and will eventually be looked upon more favorably than traditional measures (Cascio 1996). It has been argued that small manufacturing firms constitute the largest potential market for ISO 14000, and that the real test of the standard can be measured by adoption rates among these firms, which typically need the most direction in these issues. According to some authors, the development to watch is what industrial customers do with these standards with regard to their supply chains. Acceptance of the standard will come when conformance or certification becomes a condition for customer requirements. This suggests that the predisposition of corporations to ISO 14000 will mostly influence the adoption rates and ultimately, the success of this standard. However, no research to date has examined the predisposition of ISO 14000 among managers of corporations.
Concluding Comments As can be seen from this discussion, the ISO 14000 certification standards represent a true management paradox. On one hand, it brings with it the promise of significant potential benefits. However, these potential benefits must be weighed against the numerous unresolved questions that surround this new standard. Resolving these questions is critical if this standard is to achieve widespread acceptance and use. This task of resolving these questions forms a major objective of this study. Before the findings consistent with this objective can be presented, it is first necessary that the structure and approach of this study be presented. That task forms the focus of the next chapter.
©Copyright, Green Team at MSU, 1999
Chapter 3 Analyzing the Survey Data: Understanding the Implications of ECM and ISO 14000 Demographic Information Before examining the results gained from this survey as they pertain to environmental systems, environmental performance, corporate performance, and ISO 14000, the demographic characteristics of the sample will be described. By establishing the traits of the respondents, this study can begin to assess the extent to which the results are generalizable.
Industrial Descriptive Information As previously mentioned, the survey database consists of 1510 respondents. From the outset, there was an attempt to develop a sample that was broad-based. That is, the sample should reflect a diversity of industrial settings. The responses should not be drawn from only a few industries. One way of determining the extent to which this objective was realized would be to evaluate the industrial settings from which the respondents were drawn. A specific question to that end was introduced into the survey. The respondents were asked to list the principal products produced in their plants. These responses (open-ended) were recoded into appropriate SIC (Standard Industrial Classification) codes by an external panel. For the purposes of this coding, a two-digit SIC code was used. The resulting distribution of industries is summarized in Table 3-1. Table 3-1 Classification of Respondents by 2-Digit SIC Codes SIC Description Frequency (#) Percent (%) Agricultural Services (07) …………………………………. 1 0.1 Mining and Quarrying of nonmetallic Minerals, except fuels (14) ………………………………………………. 2 0.1 Building Construction – General Contractors & Operative Builders (15) …………………………………………... 4 0.3 Heavy Construction Other than Building Construction – Contractors (16) ……………………………………….. 2 0.1 Construction – Special Trade Contractors (17) ……………. 6 0.4 Food & Kindred Products (20) …………………………….. 18 1.2 Textile Mill Products (22) …………………………………. 16 1.1 Apparel & Other Finished Products Made from fabrics and similar materials (23) ………………………………….. 8 0.5 Lumber & Wood Products, Except Furniture (24) ………… 4 0.3 Furniture & Fixtures (25) ………………………………….. 35 2.3 Paper & Allied Products (26) ……………………………… 27 1.8 Printing, Publishing, & Allied Industries (27) …………….. 9 0.6 Chemicals & Allied Products (28) ………………………… 99 6.6 Petroleum Refining & Related Industries (29) ……………. 18 1.2 Rubber & Miscellaneous Plastic Products (30) …………… 34 2.3 Leather & Leather Products (31) ………………………….. 4 0.3 Stone, Clay, Glass, & Concrete Products (32) …………….. 16 1.1 ISO 14000
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ISO 14000 Primary Metal Industries (33) ……………………………... Fabricated Metal Products, Except Machinery & Transportation Equipment (34) ……………………….. Industrial & Commercial Machinery & Computer Equipment (35) ………………………………………... Electronic & Other Electrical Equipment & Components Except Computer Equipment (36) …………………….. Transportation Equipment (37) ……………………………. Measuring, Analyzing & Controlling Instruments; Photographic, Medical & Optical Goods; Watches & Clocks (38) ……………………………………………. Miscellaneous manufacturing Industries (39) ……………... United States Postal Service (43) ………………………….. Transportation Service (47) ………………………………... Communications (48) ……………………………………… Electric, Gas & Sanitary Services (49) ……………………. Wholesale Trade – Durable Trades (50) …………………... Whole Trade – Nondurable Goods (51) …………………… Building Materials, hardware, Garden Supply & Mobile home Dealers (52) …………………………………….. Miscellaneous Retail (59) …………………………………. Business Services (73) …………………………………….. Automotive Repair, Services & Parking (75) ……………... Miscellaneous Repair Services (76) ……………………….. Health Services (80) ……………………………………….. Educational Services (82) …………………………………. Engineering, Accounting, Research, Management & Related Services (87) ………………………………….. Services, Not Else Classified (89) …………………………. Administration of Economic Programs (96) ………………. Industry Not Identified ……………………………………..
Page 16 38
2.5
179
11.9
316
20.9
179 198
11.9 13.1
127 22 1 2 2 1 22 9
8.4 1.5 0.1 0.1 0.1 0.1 1.5 0.6
1 2 27 1 1 6 4
0.1 0.1 1.8 0.1 0.1 0.4 0.3
14 1 1 53
0.9 0.1 0.1 3.5
As can be seen from this table, the respondents came from a wide range of industries. From the 40-some SIC codes, the bulk of respondents (999 respondents or 66.2% of the respondents) were drawn from one of five SIC codes: • • • • •
Industrial & Commercial Machinery & Computer Equipment (35): 316 respondents. Transportation Equipment (37): 198 respondents. Electronic & Other Electrical Equipment & Components Except Computer Equipment (36): 179 respondents. Fabricated Metal Products, Except Machinery & Transportation Equipment (34): 179 respondents. Measuring, Analyzing & Controlling Instruments; Photographic, Medical & Optical Goods; Watches & Clocks (38): 127 respondents.
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ISO 14000
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To an extent, it can be argued that the concentration of the respondents from these five sectors is consistent with the industrial activities within the United States. In addition, these five industries are ones that should be interested in ECM-oriented activities within their firms. Other indicators of the diversity within the survey data include: • the median number of Full Time Equivalent Employees (400), • percentage of sales as exports (19.7%), • percent of sales as exports for the European Community (9.7%), • the average percentage of sales going to the end customer (or consumer) (24.6%). Furthermore, 729 plants (48.3%) were publicly owned, 250 (16.6%) were foreign-owned, and 54 plants (3.6%) were joint ventures. In addition, the respondents were asked to indicate whether their plants were involved in one or more of seven commonly encountered corporate/productivity initiatives. For each initiative, the respondent was asked to check a box if their plant had been implemented, either currently or in the past, in any of these seven initiatives. These results are summarized in Table 3-2. Table 3-2 Plant Involvement in Corporate/Manufacturing Initiatives Corporate/Manufacturing Initiatives Number Percentage 751 49.7 Just-in-Time Manufacturing 331 21.9 Simultaneous Engineering/Concurrent Design 273 18.1 Environmental Management System 1106 73.2 ISO 9000/QS 9000 817 54.1 Total Quality Management 461 30.5 Business Process Reengineering 689 45.6 Lead Time Reduction Program Reviewing this table uncovers several interesting findings. First, the plants have been involved in a large number of initiatives. That these plants have undertaken these various initiatives points to a situation where plants are increasingly looking for new ways of improving efficiency and effectiveness within their facilities. Stated otherwise, plants are now being asked to do more with less. To meet these demands, management is turning to new and different ways of improving operations and enhancing performance on the major dimensions of performance. Second, the level of acceptance among the seven initiatives greatly varies. At the high end, we have ISO 9000/QS 9000 certification, with almost three-quarters of the respondents indicating that their plants have undertaken such certification. At the low end, there is the development of an environmental management system. This is interesting for two reasons. The first is that it points to the perceived low importance of environmental issues relative to initiatives directed at improving quality (ISO/QS 9000, Total Quality Management), reducing waste (Just-in-Time Manufacturing), reducing lead times (Lead Time Reduction Programs), and improving product/process quality (simultaneous engineering/concurrent design). One way of interpreting this result is that the relatively low level of involvement reflects the relatively low priority assigned to this initiative. Given that you, as a manager, have limited funds, why invest in a program that does not generate the same higher level of paybacks obtained from other initiatives? Another way of viewing this result is to see it as indicating a low level of awareness of environmental activities within a plant. The data was insufficient to determine which of these two interpretations was most appropriate. Second, we should expect that the presence of an environmental management system as being a requirement for the successful attainment of ISO 14000 certification. After all, ISO 14000 focuses on the environmental management system and its information management system components.
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ISO 14000
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A third interesting result involves the relationship between ISO 9000/QS 9000 certification and the implementation and/or presence of a Total Quality Management (TQM) system. Initially, the researchers presumed that these two initiatives would be strongly related. To successfully achieve ISO 9000/QS 9000 certification, you had to have a TQM system in place. However, the data indicates that this is not necessarily the case. There were 1106 respondents who indicated that their plants had been involved in ISO 9000/QS 9000 certification, while only 817 indicated that their plants had been involved in TQM management – a difference of 289 or 19.1% of the respondents. More specifically, when the data was further explored, it was found that there were only 671 respondents who indicated that their plants were simultaneously involved in ISO 9000/QS 9000 certification and TQM. The linkage between TQM and ISO 9000/QS 9000 is not strongly in practice, as it has been presented in the popular press and the research literature.
Background of the Respondents Having reviewed the industries and firms from which the respondents came, the next step is to determine the nature of the respondents themselves. A starting point is to focus on the job titles of the respondents. As can be seen from Table 3-3, the respondents embody variety in terms of their job titles. They occupy positions ranging from presidents and Chief Operating Officers (CEOs) to managers and staff. This diversity argues strongly in favor of the generalizability of the results. Table 3-3 Stated Positions of the Respondents Stated Position Frequency (#) Percentage (%) 13 0.9 Chief Executive Officer 12 0.8 President 169 11.2 Vice-President 718 47.5 Manager 251 16.6 Senior/Supervisor 317 21.0 Staff 30 2.0 Not Listed 1510 100.0 Total The next piece of information important to this study was that of the length of time that the respondents had been spent in their current positions. This information is summarized in Table 3-4. As can be seen from this table, the respondents overall are not new to their positions. On average, the respondents had been in their current positions for about 5.4 years. As a result, we can expect that these respondents should be familiar with their jobs and what is happening around them. Table 3-4 Number of Years Respondents have been in their Current Positions Number of Years in Current Position Frequency (#) Percentage (%) 153 10.1 Less than 1 Year 377 25.0 1 to 3 Years 282 18.7 3 to 5 Years 318 21.1 5 to 10 Years 350 23.2 Greater than 10 Years 30 2.0 Not Listed
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In addition, data on the functional areas in which the respondents worked was also collected. This data is summarized Table 3-5. As can be expected, the two major areas represented in the survey data were materials purchasing and manufacturing. Environmental management (compliance) represented a very minor part of the data at 48 respondents (3.2 % of the respondents). This indicates that this survey consists primarily of users (engineers, purchasing managers and manufacturing people) who should be better able to assess ECM and ISO 14000 as business/strategic decisions. Again, this is consistent with the objectives of this study. Table 3-5 Respondents Classified by Functional Area Functional Area Frequency (#) Percentage (%) Purchasing, Materials …………. 641 42.5% Manufacturing/Production …… 332 22.0 Quality ………………………….. 132 8.7 Engineering …………………….. 85 5.6 Environmental (Compliance) …. 48 3.2 Management …………………… 47 3.1 Other …………………………… 37 2.5 Information Systems …………... 33 2.2 Distribution …………………….. 31 2.1 Safety, Security ………………… 29 1.9 Inventory ……………………….. 16 1.1 Marketing ……………………… 13 0.9 Consulting ……………………… 12 0.8 Human Resources ……………... 12 0.8 Accounting ……………………... 6 0.4 Research and Development …… 3 0.2 Finance …………………………. 2 0.1 Unknown/not identified ……….. 31 1.9 Total ……………………………. 1510 100.0 The next step was to look at professional affiliations of the respondents. There are several reasons to be interested in this trait. First, membership in a professional society or organization such as APICS (American Production and Inventory Control Society) or NAPM (National Association of Purchasing Management) would indicate a manager or respondent who is interested in keeping up-to-date on current developments and issues. Second, familiarity (or the lack of familiarity) with certain developments such as ISO 14000, business process reengineering or ISO 9000 might be influenced by the respondent’s membership in a specific society. Some societies might be doing “better” jobs at exposing their members to certain developments. Third, some of the names were drawn from mailing lists provided by several professional organizations. As a result, it is interesting to determine the extent to which there is potential over-response from one professional society relative to the others. The membership information is summarized in Table 3-6. As can be seen from this table, a respondent, if he or she did belong to a professional organization, was most likely to belong to either APICS or NAPM. The number of respondents who belonged to one of the other professional organizations was relatively small. One area where this finding was most surprising involving membership in ASQC (American society for Quality Control). Given the spread of Total Quality tools and procedures throughout American industry, a higher membership in this society would be expected. After all, ASQC has assumed the leadership position in the dissemination of quality control tools and procedures to practitioners and in the assessment of the
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extent to which these practitioners have gained mastery over these tools in the certification program run by ASQC. Table 3-6 Membership Traits of the Respondents Professional Society Members 689 American Production and Inventory Control (45.6%) Society 150 American Society for Quality Control (9.9%) 35 Association for Manufacturing Excellence (2.3%) 35 Council for Logistics Management (2.3%) 11 Institute for Management Accounting (0.7%) 556 National Association of Purchasing (36.8%) Management 111 Society of Manufacturing Engineers (7.4%) 54 Society of Automotive Engineers (3.6%) 201 Other (13.3%)
Not Members 821 (54.4%) 1360 (90.1%) 1475 (97.7%) 1475 (97.7%) 1499 (99.3%) 954 (63.2%) 1399 (92.6%) 1456 (96.4%) 1309 (86.7%)
The next area of interest involves the extent to which the respondents have been involved in the implementation of certain initiatives of interest. In examining this issue, the research team identified a list of some 23 corporate actions and initiatives. Each respondent was asked to describe their involvement using an 11-point scale, where 0 denoted “No Involvement,” and 11 denoted “Extremely Involved.” Using this scale, we can see that the higher the mean value reported by the respondents, the more involved on average the respondents were. The average levels of involvement for the respondents on these 23 initiatives is summarized in Table 3-7.
©Copyright, Green Team at MSU, 1999
ISO 14000
Page 21 Table 3-7 Level of Involvement of Respondents in Various Corporate/Plant Initiatives Mean Level of Involvement
Number Responding
4.02
1482
Workplace and Employee Safety …......................................
4.60
1487
Product Design ............................................................……..
3.22
1484
Process Design ..............................................................……
4.42
1489
Plant Layout .................................................................…….
3.44
1488
Production Planning and Scheduling ............................……
5.34
1490
Environmental Planning and Management ....................…...
2.87
1486
Certification Planning and Implementation …......................
4.15
1481
Benchmarking …...................................................................
4.16
1481
Continuous Improvement Activities ….................................
6.75
1493
Continuous Improvement Planning …..................................
6.22
1486
Continuous Improvement Kaizen .................................……
3.16
1446
Purchasing ….........................................................................
6.41
1490
Materials Management .................................................…….
6.46
1493
New Product Launches .................................................……
5.48
1491
Cost Justification ..........................................................…….
6.17
1485
Process Redesign ..........................................................…….
4.70
1488
Reengineering …...................................................................
4.13
1488
Regulatory Compliance (environmental) …..........................
3.29
1482
Corporate Initiative Quality Planning, Planning and Assurance ..................…….
1
Number with No Involvement
185 (12.3%)1 244 (16.2%) 432 (28.6%) 273 (18.1%) 464 (30.7%) 273 (35.4%) 534 (35.4%) 383 (25.4%) 359 (23.8%) 98 (6.6%) 151 (10.0%) 601 (39.8%) 131 (8.7%) 173 (11.5%) 254 (16.8%) 143 (9.5%) 283 (18.7%) 355 (23.5%) 495
The first number in this column identifies those respondents who were indicated that they had no involvement in this initiative. That is, they picked the “0” value to represent their level of involvement. The number in brackets represents this number as a percentage of the total sample size of 1510.
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ISO 14000
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Logistics …............................................................................
4.90
1489
Transportation …...................................................................
4.27
1488
Warehouse Management …...................................................
4.04
1489
Legal Affairs ….....................................................................
2.94
1487
(32.8%) 272 (18.0%) 344 (22.8%) 400 (26.5%) 513 (34.0%)
This exhibit indicates that the respondents have had a wide range of involvement in various corporate initiatives. This variety is important because it emphasizes the notion that this sample is not simply drawn from purchasing personnel or from personnel highly familiar with environmental issues. In reviewing this summary, we can see that their heaviest involvement has been in Production Planning and Scheduling, Continuous Improvement related programs (i.e., Activities, Planning), Purchasing, Materials Management, New Product Launches, and Cost Justification. To a certain extent, this pattern of involvement is not surprising for certain activities such as materials management, purchasing, and production scheduling and planning. It is important to remember that the mailing list used in distributing the surveys was drawn from lists provided by APICS and NAPM. The involvement in the continuous improvement activities is also not surprising, given the increasing importance that continuous improvement is playing in most firms. Next, when we compare the mean levels of involvement for those respondents working with compliance and those working on an environmental management system, we notice that the level of involvement in compliance and regulation is much higher than those for working with an EMS system. This would seem to argue that more people are involved correcting the pollution problem from a regulatory compliance than they are in trying to prevent or eliminate the problems through the implementation and use of an EMS system.
Plant Activities A major concern of this report was to determine the type of activities being undertaken at the various plants and the status of these projects. To this end, the respondents were asked to fill in a matrix describing their plant’s level of progress on 11 different initiatives. These initiatives were selected because they represented approaches intended to enhance corporate and plant performance. In addition, the initiatives were selected because evidence was found in the literature that argued that the initiatives either preconditioned the plant for the acceptance or implementation of ISO 14000. This was the case for the inclusion of QS 9000, ISO 9000, Total Quality Management (TQM), and Cross Functional Product Development Teams. In other cases, the initiatives were selected because they represented possible alternatives to ISO 14000. This was the case for three of the initiatives: (1) Participation in Industrial Voluntary Environmental Programs (e.g., Responsible Care); (2) Participation in Voluntary EPA Programs (e.g., 33/50, Green Light); and, (3) Participation in OSHA’s Voluntary Prevention Program (VPP). By including these alternatives, the research hoped to assess the relative effectiveness and efficiency of voluntary as compared programmatic initiatives (which is what the ISO 14000 program represents). Below the results are displayed by grouping together similar programs in each chart.
©Copyright, Green Team at MSU, 1999
ISO 14000
Page 23 Chart 3-1a Stage of Involvement with ISO Standards
N ot N Ap ot pl Be ic ab in g le C o Fu ns tu id re er C ed on s As id er se at ss io in n g Pl S an ui ni ta ng bi lit to y C Im ur re pl nt em l y Su en Im t cc pl es em sf en ul ly tin Im g pl em en te d
900 800 700 600 500 400 300 200 100 0
©Copyright, Green Team at MSU, 1999
QS 9000 ISO 9000 ISO 14000
ISO 14000
Page 24
Chart 3-1b Stage of Involvement with Quality Programs
450 400 350 300 250 200 150 100 50 0
Total Quality Management (TQM)
N N ot ot Ap Be pl in ica g bl C Fu e on tu sid re C er on As ed s se id er ss at Pl in io an g n Su ni ng ita bi C to lity ur I m re p nt le ly Su m I en m cc pl es em t sf en ul ly ... Im pl e. ..
Cross Functional Product Development Teams
Chart 3-1c Stage of Involvement with Planning and Control Systems
600 500 400 300 200
N N ot ot Ap Be pl ic in ab g C le Fu on tu si re de C re o ns d As id se er ss at in io Pl g n an S ni ui ng ta bi C t lit o ur y Im re pl nt em ly Im Su en pl t cc em es e sf nt ul in ly g Im pl e. ..
100 0
©Copyright, Green Team at MSU, 1999
Company-specific environmental management system Enterprise Resources Planning (ERP) system Manufacturing Resource Planning (MRP II) system
ISO 14000
Page 25 Chart 3-1d Stage of Involvement with Voluntary Environmental Programs
450 400 350 300 250 200 150 100 50 0
Participation in Industrial Voluntary Environmental Programs (e.g., Responsible Care)
N N ot ot Ap Be pl ic in ab g C le Fu on tu si re de C re o As ns d id se er ss at in Pl io g an n S ni ui ng ta bi to C lit ur y Im re p le nt m ly Su en Im cc t p le es m sf en ul ly ... Im pl e. ..
Participation in Voluntary EPA Programs (e.g., 33/50, Green Light) Participation in OSHA’s Voluntary Prevention Program (VPP)
Chart 3-1e Mean Involvement with Various Initiatives
Mean (1=Not Applicable, 7= Successfully Implemented)
Q S IS 900 O 0 IS 90 O 00 14 C 00 ro ss 0 Vo F TQ lu unc M Vo nta tio lu ry ... O nta En SH ry v. A’ EP .. s Vo ... lu n. .. EM S ER M P R P II
7 6 5 4 3 2 1 0
These results point to some interesting findings. First, for some initiatives, such as ISO 9000, the results indicate that this is a widely accepted and widely implemented initiative. By this time, you have either decided to go with ISO 9000 certification or you have decided not to achieve this certification. If you
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have decided to go with ISO 9000 certification, then you have either achieved or you are well on your way to attaining it. For most of the other measures, there is a strong bimodal distribution of responses. With initiatives such as Voluntary Environmental Programs, Voluntary EPA Programs, OSHA’s Voluntary Prevention Program, and TQM, the results show a strong grouping around one of two points. The first is the (0,1) axis (i.e., Not Applicable/Not Being Considered). The second point is the (6,7) axis (i.e., Currently Implementing/Successfully Implemented). Of these various initiatives, the most interesting result comes from TQM. This initiative has long been emphasized as a key to continued corporate success. In spite of this perspective, it is evident that a large number of respondents are still not swayed of the value of TQM. Another interesting result pertains to the acceptance and implementation of environmental management systems. It was initially expected that nearly every firm would have an environmental management system. However, as the data shows, this was not the case. Over 25 percent of the respondents reported that they did not see such a system as being appropriate to them or their corporate settings. The final finding highlighted by this data points to the acceptance of ISO 14000. As we can see from the data, only 37 respondents noted that their systems were certified. Of these 37, 15 came from one firm that has insisted that all of its plants become ISO 14000 certified. To a certain extent, this finding can be explained by the fact that this certification process is relatively new. However, despite that finding, it is interesting to note that 50 percent of the respondents saw ISO 14000 certification as something that was either not applicable or not being considered. This points to a great lack of support for this new certification process.
Environmental Management Systems - Findings Before turning our attention to ISO 14000 and its impact, it would be useful to understand the state of environmental management systems within the plants of the respondents. To this end, a section was developed within the report. This section analyzed the environmental management system and its performance by identifying 46 different dimensions. The respondents were then asked to assess their plant’s systems using an eleven point scale. In this scale, 0 represented “Strongly Disagree,” while 10 represented “Strongly Agree.” The neutral position for this scale was a 5. The mean values for these 46 dimensions are presented in Table 3-8. Table 3-8 Assessing the Plant’s Environmental Management System (Mean Values) Mean Response System Trait When an environmental problem is identified, attention is focused on the underlying cause and corrective measures.....………………. 6.83
Number 1420
There is a specific department within your plant which is formally responsible for environmental affairs ......................………………. When an environmental problem is identified, the major effort within your plant is on determining the underlying reasons for that problem and then attacking it........................………………………
6.70
1429
6.66
1420
The environmental impact within your company is primarily driven by regulatory requirements……………………..………………….
6.55
1413
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ISO 14000
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There is a formal reporting position between those responsible for environmental affairs within your plant and one of the plant’s senior executives.......................................…………………………. New equipment has been acquired or existing equipment modified in response to external environmental problems attributable to that equipment .................................................………………………….
6.23
1426
6.23
1412
Environmental issues are considered when laying out the plant or specifying equipment for use on the plant floor ........………………
6.13
1419
Your plant has an established environmental management system in place .................................................……………………………. When an environmental problem is identified, attention is primarily focused on correcting the effects of that problem ………………….
6.10
1432
6.01
1418
The environmental management system’s procedures are formally documented .............................................................……………….. Environmental issues are included in the process design process .....
5.91 5.67
1429 1409
5.54
1429
5.45
1427
5.39
1429
5.28
1426
5.23
1414
5.23
1403
Top management of your plant has taken a highly visible public position in support of improved environmental performance ........... Environmental performance is formally tracked and monitored within the plant ...............................................…………………….. The environmental management system’s procedures are widely circulated and available to anyone who needs access.……………... Environmental issues, policies and procedures are included in formal plant training programs........................................………….. Process designs and plant layouts have been modified in response to external environmental problems attributable to a specific design flaw ...............................................................……………………… Environmental issues influence plant location decisions (i.e., where we locate a new plant) .................................................. Environmentally-related information (e.g., changes in regulations, tracking of which companies have been fined and how much) is tracked and monitored on an on-going basis ............................….... Environmental performance, as captured by various measures is periodically summarized.....................................................…………
5.12
1429
4.97
1427
People within your plant consider your plant’s formal environmental management system highly effective……………….
4.81
1409
People outside of your plant consider your plant’s formal environmental management system highly effective……………….
4.81
1398
Product designs have been modified in response to environmental problems attributable to a specific design flaw ...............…..……....
4.79
1408
Various performance goals have been developed and implemented which report environmental performance on different dimensions ...
4.78
1422
Environmental performance has been captured primarily in terms of recyclability i.e., the amount of recycled material used in the
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ISO 14000
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product or the degree to which the product is recyclable ..................
4.76
1415
The environmental position of your plant is given prominent visibility within annual reports and other publications distributed by your plant .............................…………………………………… Those suppliers who are environmentally responsible also tend to be more cost effective suppliers…………………………………….
4.57
1426
4.43
1401
Your plant has been very successful in creating plant wide awareness of environmental problems, costs and opportunities ........
4.42
1410
Your plant has a well developed environmental data base for tracking and monitoring environmental issues...........………….......
4.39
1413
Top management of your plant considers environmental performance as important as is reducing costs ..................………...
4.17
1413
4.16
1424
4.16
1411
Top management of your plant considers environmental performance as important as is improving quality..................……...
4.12
1412
People within your plant view environmental problems as opportunities rather than as costs or constraints to be satisfied ........
4.11
1414
Tools and procedures such as risk assessment and life cycle analysis are incorporated into your plant’s formal environmental management system ........................................……………………..
3.95
1404
Environmental performance results are widely distributed within your plant..............................................................………………….
3.93
1420
3.87
1427
The environmental achievements of your plant are given prominent visibility within annual reports or other company publications ........ Environmental issues are important today because they reflect a current marketing fad ……………………………………………….
Information about best-in-class environmental performance in our industry is tracked and recorded within your plant .......................... Environmental practices, procedures and systems within your plant are compared with the best-in-class on a regular basis ..................... Environmental concerns play a significant role in the supplier selection and/or retention decisions.....................................………..
3.85
1427
3.76
1408
The performance measures identify qualitative costs associated with environmental performance and problems....………………….
3.75
1414
Performance on environmental dimensions is considered during supplier evaluations ...................................................………………
3.74
1411
Top management in your plant considers environmental performance as important as is reducing lead times......……….........
3.72
1415
Cost accounting has been extensively involved in your company in capturing and reporting environmental costs......……………………
3.70
1415
Environmental performance is considered during the evaluation of individual departments or areas........................…………………….
3.70
1418
The performance measures identify the quantitative costs
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ISO 14000
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associated with environmental performance.......................………...
3.69
1421
The effectiveness of different production schedules is evaluated considering possible environmental problems created by those schedules ..................................................…………………………..
3.04
1402
Performance on environmental dimensions is considered during personnel evaluations..................................................……………...
2.98
1410
These results paint an interesting picture of the environmental management systems found within the respondents’ plants. First, these systems are strong on the formal dimensions. That is, in most of the respondents’ facilities, there is a formal environmental management system in place. Within this system, there is a formal reporting linkage between environmental performance and top management. This system is supported by formally documented procedures. These procedures are generally widely circulated and readily available. Environmental issues are also given visibility during employee training. In addition, top management has taken a visible role in support of improved environmental performance. Environmental performance is formally tracked and monitored. In many cases, this environmental management system is operational and reactive in nature. It is also tactical in that it deals with operating problems and issues. Environmental issues have a strong influence on process designs, plant and equipment layouts, new equipment acquisition and equipment modification decisions. The environmental management system is reactive in nature in that it responds to the emergence of problems when they occur. Furthermore, it is often primarily driven by changes in the environmental regulations. When these regulations change, the plant’s environmental management system also changes. However, these systems exhibit certain shortcomings. The shortcomings reflect issues of information management, performance evaluation and supplier evaluation. In general, these systems do not do much in tracking best-in-class performance and in comparing their plants’ performance with these “benchmarks.” Further, the performance measures do not often identify the qualitative and quantitative costs associated with environmental performance. Environmental performance is also infrequently considered when evaluating individual performance. These environmental measures, when collected, rarely involve the efforts of the cost accounting department (despite the fact that in most firms this department is the one most often held responsible for collecting and distributing performance and cost information). Finally, environmental efforts are confined to the plant. As shown by the low means recorded on those questions pertaining to the supplier base, environmental issues and performance are seldom considered during supplier selection, retaining and evaluation stages. In short, the environmental system is portrayed as a separate activity, internally focused, driven by regulations and reactive in nature. This picture is further supported by the overall negative perceptions given by the respondents regarding the impact of environmental activities on the various dimensions of corporate performance.
Environmental Systems – Management Options Considered Before turning our attention to the relationship between the status of the environmental management system and corporate performance, it is useful to examine the frequency with which the various ECMrelated options were considered and used. Some of these options, however, are more complex and demanding than others. For example, alliances are more complex than recycling because of the need to develop relationships that cross corporate, not simply departmental, boundaries. Other options, such as recycling and waste separation, focus on reducing the "end of pipe" waste streams, while others such as
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product and process redesign focus attention on eliminating the pollution problem from even occurring. Some of these options, however, are more complex and demanding than others. For example, alliances are more complex than recycling because of the need to develop relationships that cross corporate, not simply departmental, boundaries. Other options, such as recycling and waste separation, focus on reducing the "end of pipe" waste streams, while others such as product and process redesign focus attention on eliminating the pollution problem from even occurring. To this end, the research team identified 16 different options. These options, along with mean responses (and number responding), are presented in Table 3-9. As in the other questions, the respondents were asked to respond using an eleven point scale, where 0 indicated “Never Considered,” while 10 denoted “Always Considered.” Table 3-9 Environmental Management Options Considered Mean Number ECM-Option Response Responding Substitution - replacing a material which can cause environmental problems with another material which is not problematic ................…… 6.02 1428 Process redesign - redesigning the process to eliminate any potential environmental problems .....................................................…………….. 5.94 1433 Reduce - reducing the level of material and/or components (which are contributing to environmental problems) within products...........………. 5.80 1424 Waste Segregation: an intermediate action in which waste streams are separated out into their individual components before being recycled, reused or consumed internally …………….............................................. 5.76 1421 Returnable Packaging: Using packaging and pallets which can be returned after they are finished being used …........................................... 5.71 1428 Recycling: making more use of recycled components or making a product which is more easily/readily recycled …..................................... 5.46 1429 Product redesign - redesigning the product to eliminate any potential environmental problems (manufacturing or recycling) ……………........ 4.99 1429 Prolonging Use: reducing environmental problems by increasing the overall life of the product (e.g., engines which now last longer before having to be replaced or rebuilt) ............................................…………... 4.97 1418 Alliances: working with either suppliers or customers to address environmental problems and/or issues .............................................……. 4.94 1418 Rebuilding: rebuilding a product where some of the parts or components are recovered while others are replaced .........................….. 4.71 1415 Spreading Risks: shifting responsibilities for environmental problems to a third party or expert better able to deal with issues ...……………… 4.38 1418 Creating a market for waste products: treating waste as an input to another product which can be made and sold at a profit ...............……... 4.21 1423 Remanufacturing: like rebuilding, except that none of the parts are reduced to raw materials ....................................................................…... 4.02 1411 Disassembly: redesigning the product or process so as to simplify disassembly and disposal at the end of the product’s useful life ......…… 4.00 1418 Consume Internally: consuming waste internally (e.g., wood pallets used in shipping or product storage used to generate electrical power in a co-generation facility) .....................................………………………... 3.62 1429 Relocation: changing the location of a process or plant to take advantage of more favorable environmental regulations and conditions . 3.27 1419
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These results portray a balanced and varied approach to the considerations of options for improving environmental performance. Except for two options (“Consume Internally” and “Relocation”), all of the options fall into the 4 to 6 range. This indicates that these options were somewhat considered. Of the two options falling below the 4 point, “Relocation” option does bring with it some important negative connotations. When the North American Free Trade Agreement (NAFTA) was initially negotiated, some feared that this Act would be used by American firms having plants, products or processes experiencing high levels of pollution as a vehicle for moving these plants, products or processes to areas with more lax pollution standards. The results indicate that this option is rarely considered. The other option, “Consume Internally,” represents somewhat of a mystery. Based on the positive experiences reported by firms, for providing electricity, it was expected that this option would have received a higher score. Most of the remaining options focus primarily on the process and the operational/tactical management of the waste. With these options, the major implicit operational assumption is that the product design is fixed and the only product-related options available are somewhat limited to actions such as material substitution. The options falling under this category include “Process Redesign,” “Substitution,” “Reduce,” “Waste Segregation,” and “Recycling.” They also include “Returnable Package.” This option recognizes the opportunities available to reduce waste and clutter by eliminating single-use packaging (such as cardboard) in favor of multi-use returnable packaging. Two options currently receiving relatively low values, “Disassembly” and “Alliances,” are indicative future developments in this field. We can expect firms to work on simplifying the disassembly of products, thus facilitating their recycling, rebuilding or remanufacturing. We can also expect that managers will turn to the supply chain and work on environmental problems in cross-functional teams that involve the insights and expertise of suppliers and customers.
Environmental Management and Corporate Performance – The Aggregate Impact The relationship between environmental systems, environmental performance and overall corporate performance is not clear. Some writers, such as Makower (1993, 1994) and Porter and Van der Linde (1995), have argued that by becoming more environmentally responsible, firms also uncover new sources of waste and productivity. The result is that enhanced environmental responsibility results in improved corporate performance. Other writers, primarily Walley and Whitehead (1994), argue that this is not the case. In most instances, improved environmental performance comes at the cost of reduced profitability and reduced shareholder value. One way of evaluating the nature of this relationship is to ask the respondents to assess the impact of their environmental management systems on several critical dimensions of corporate performance. To this end, a section was included that focused on this specific aspect of performance. The respondents were asked to evaluate the impact of their environmental management system on 14 dimensions of performance. Some of these dimensions focused on the core strategic areas of competition (cost, lead time, cost and market position). Others touched on areas such as reputation and customer acceptance. Still others dealt with issues of process/product design and cost/benefit assessment. As with many of the other questions, the respondents were asked to assess the impact of their environmental management system using an 11 point scale (0 – “Strongly Disagree;” 10 – “Strongly Agree”). The mean results are summarized in Table 3-10.
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Table 3-10 Assessing the Impact of Environmental Management Systems on Corporate Performance Mean Number Your company’s environmental management system: Response Responding Not adversely affected the position of your company in the marketplace ........................................................................................
6.57
1401
Not compromised the product’s acceptability from the customer’s perspective ......................................................................................…
6.29
1398
Caused your company to investigate alternative technologies and procedures ..........................................................................................
5.49
1398
Helped enhance the reputation of your company ...................………
4.81
1404
Significantly reduced waste within the production process ..……….
4.67
1401
Placed reasonable demands on the information system and on data requirements .......................................................................................
4.23
1395
Had benefits that have definitely outweighed any costs incurred ......
4.18
1392
Significantly reduced waste within the equipment selection process
3.94
1389
Improved its chances of successfully selling its products in international markets ..........................................................................
3.67
1387
Helped your company design/develop better products ..........………
3.59
1401
Significantly improve its position in the marketplace ...........…….…
3.46
1398
Significantly reduced overall costs ........................................………
3.32
1400
Significantly improve product quality ...................................………
3.26
1401
Significantly reduce lead times...............................................………
2.71
1402
The results presented in this table do not give a very positive picture of the impact of environmental management systems. In general, such systems are perceived as having a strong, negative impact on the major strategic dimensions of performance. That is, their presence results in increased lead times, higher costs, and lower quality. In exchange, the firm’s competitive position in the marketplace is not enhanced. In addition, such systems have not improved the ability of the firm to sell its products in international markets. This last finding was surprising in that it has been argued that many international customers (especially those located in Europe and the Far East) are more sensitive to environmental issues. As a result, for these customers, improved environmental performance is a requirement for doing business in these new markets. At best, environmental systems have caused managers to explore more options when dealing with problems, especially problems involving new technologies and procedures. These systems have also not compromised product acceptance and corporate position in the marketplace. In light of these results, the natural question that would emerge would focus on the issue of why any firm would ever consider trying to attain certification in an area as strongly environmentally oriented as is the ISO 14000 certification process. As we will see in the next section, the answer is that there is evidence to indicate that such certification does result in some real, quantifiable benefits.
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Assessing the Impact of ISO 14000 Certification on the Firm The major intent of this study was twofold. The first objective was to assess the attitudes of managers to the newly introduced ISO 14000 certification standards. The second was to determine what effect, if any, these new standards have had on the firms and their performance. With respect to the first issue, we can see that many managers harbor critical concerns about their environmental management systems and the impact of these systems on corporate performance. With respect to the second issue, the data showed a far more complex and, ultimately, far more interesting and satisfying answer. To uncover the nature of this response, it is first necessary that we ask a simple but important question – “What effect does the stage of ISO 14000 certification have on corporate performance?” To address this question, it is important that to note that every respondent could describe the level of ISO 14000 certification in terms of one of seven levels: 1. 2. 3. 4. 5. 6. 7.
Not Applicable Not Being Considered Future Consideration Assessing Suitability Planning to Implement Currently Implementing Successfully Implemented
One way of examining the effect of level of progress in terms of certification is to examine the mean responses given by the respondents in each of these seven levels for the 14 dimensions of performance. This is done in Table 3-11. Table 3-11 Impact on ISO 14000 Certification Progress on Dimensions of Performance Mean Level of ISO 1400 certification: 12 2 3 4 5 6 7 Value Not adversely affected the position of your company in the marketplace ............................. Not compromised the product’s acceptability from the customer’s perspective ............…….. Caused your company to investigate alternative technologies and procedures .......... Helped enhance the reputation of your company...............……………………………. Significantly reduced waste within the production process ...………………………… Placed reasonable demands on the information system and on data requirements .................... Had benefits that have definitely outweighed any costs incurred ..…………………….……. Significantly reduced waste within the equipment selection process …………………. Improved its chances of successfully selling its products in international markets ...…......... 2
5.65 (208) 5.42 (208) 4.62 (208) 4.11 (208) 3.99 (206) 3.78 (204) 3.67 (205) 3.43 (205) 2.77 (206)
6.27 (529) 5.95 (527) 4.86 (528) 3.87 (532) 3.89 (531) 3.61 (530) 3.40 (529) 3.19 (525) 2.95 (532)
6.82 (275) 6.45 (275) 5.90 (275) 5.16 (275) 5.05 (275) 4.43 (273) 4.59 (273) 4.45 (273) 4.05 (274)
7.07 (114) 6.87 (113) 6.32 (113) 5.65 (114) 5.27 (114) 4.61 (114) 4.75 (114) 4.41 (112) 4.02 (114)
7.47 (79) 7.19 (79) 6.57 (79) 6.25 (79) 5.84 (79) 5.18 (79) 5.50 (78) 4.95 (78) 4.86 (79)
7.89 (79) 7.52 (79) 6.85 (79) 7.24 (80) 6.67 (79) 5.41 (79) 5.85 (79) 5.44 (79) 6.01 (78)
7.81 (37) 8.22 (37) 7.51 (37) 8.38 (37) 7.30 (37) 6.43 (37) 6.22 (37) 5.65 (37) 7.25 (36)
6.57 6.29 5.49 4.81 4.67 4.23 4.18 3.94 3.67
The first number is the mean response, while the second number in parenthesis refers to the number of respondents.
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Helped your company design/develop better products ..........……………………………….. Significantly improve its position in the marketplace ...........…………………………... Significantly reduced overall costs .................. Significantly improve product quality ............. Significantly reduce lead times ...............….....
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3.17 (207) 2.96 (206) 2.80 (206) 2.90 (206) 2.40 (207)
2.86 (530) 2.70 (531) 2.71 (531) 2.71 (531) 2.27 (531)
3.95 (276) 3.74 (275) 3.55 (275) 3.49 (276) 2.76 (275)
3.95 (114) 4.09 (114) 3.75 (114) 3.60 (114) 3.06 (114)
4.57 (79) 4.62 (78) 4.66 (79) 4.25 (79) 3.52 (79)
5.28 (79) 5.09 (79) 4.91 (79) 4.29 (79) 3.79 (79)
5.60 (37) 6.24 (37) 5.35 (37) 5.19 (37) 4.27 (37)
3.59 3.46 3.32 3.26 2.71
In reviewing the data contained in this table, several important results can be readily identified. Noting that 5 denotes a neutral position, the first result is that there is a strong positive relationship between the stage of ISO 14000 certification and the effectiveness of the environmental management system. In other words, the closer that you get to attaining ISO 14000 certification, the greater the positive impact that the environmental management system has on the overall performance of the firm. The only exception to this relationship involves the relationship between the environmental system and lead times. For this relationship, environmental management systems are seen as having a slightly negative impact on lead times. Further, for those respondents that had achieved ISO 14000 certification, the result was a slight but positive impact on costs and quality. This result runs counter to the perception that improved environmental performance comes at the cost of increased lead times (some support for this), decreased quality and increased overall cost. In addition, this positive relationship is statistically significant. Second, we can see that for those respondents working in plants that have successfully achieved ISO 14000 certification, other important benefits are obtained. First, these respondents noted that, by attaining this level of certification, the waste within the production system was significantly reduced. In addition, these plants were able to enhance their position and reputation within the marketplace. Overall, the respondents agreed that the benefits did outweigh the costs. Finally, these various benefits did not require the expenditure of extra resources or effort in terms of the information system and the data requirements. In short, these findings are important to the purchasing manager. By dealing with plants that are well on the way to attaining ISO 14000 certification, purchasing managers can expect to be dealing with plants that are more efficient and more competitive. Except for the increased lead times, the attainment of ISO 14000 certification has made these plants into better suppliers. These findings raise two other related issues. The first pertains to the decision to pursue ISO 14000 certification. That is, if there is a real benefit to being ISO 14000 certified, then what factors influence this decision. The second focuses on assessing the effectiveness of ISO 14000 certification relative to the other programs available (specifically, industry voluntary environmental programs such as Responsible Care ® or the governmental voluntary environmental programs such as Green Light ® or 33/50). These two issues will be assessed in the following sections.
Obstacles to ISO 14000 Certification The next question examined within this study focused on the issue of identifying those factors that could act as an obstacle to ISO 14000 certification. Attention was focused on the various potential sources of uncertainty. Uncertainty was flagged on the assumption that the higher the uncertainty, the less likely a firm or plant was to pursue ISO 14000 certification. In the study, 11 potential sources of uncertainty were identified:
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• • • • • • • •
Uncertainty due to potential changes in environmental regulations at the federal level. Uncertainty due to potential changes in environmental regulations at the state/provincial level. Uncertainty due to potential changes in environmental regulations at the local/community level. Uncertainty due to potential changes in environmental regulations at the international level. Uncertainty due to potential changes in the standards and procedures underlying ISO 14000. Uncertainty due to the costs associated with obtaining ISO 14000 certification. Uncertainty due to benefits resulting from ISO 14000 certification. Uncertainty due to changes needed to current environmental management system to accommodate ISO 14000 certification. • Uncertainty due to the reaction of major suppliers to ISO 14000 certification. • Uncertainty due to the reaction of major investors to ISO 14000 certification. • Uncertainty over the extent to which public disclosure of environmental infractions will be required. For all 11 dimensions, an eleven point scale was used in soliciting responses. This scale was anchored at 0, which represented “Highly Uncertain,” at one end and at 10, representing “Well Known,” at the other end of the scale. The first step in understanding the role of uncertainty is to describe it in statistical terms. This was done by generating the mean levels of perceived uncertainty for each of the 11 dimensions. These results are presented in Table 3-12. As is evident from this table, the level of uncertainty is very high on all of the 11 dimensions, with the average level of uncertainty being 3.13 (relatively higher). The reported uncertainty was highest for investors’ reaction (remember, with this scale, the lower the reported value, the higher the level of perceived uncertainty) with a mean value of 2.66, and lowest for changes in local laws, with a mean of 3.54. Table 3-12 Major Sources of Uncertainty Regarding ISO 14000 Mean Uncertainty Due to: Response Local Regulations ………………………………………… 3.54 Potential Changes in ISO 14000 standards ……………... 3.51 State/Provincial Regulations …………………………….. 3.49 Federal Regulations ……………………………………… 3.33 Costs of Certification …………………………………….. 3.15 3.14 Changes on current environmental management system International Regulations ………………………………... 3.11 Benefits of ISO 14000 certification ……………………… 2.88 Potential disclosure ………………………………………. 2.88 Impact on Suppliers ……………………………………… 2.74 Investors’ reaction ………………………………………... 2.66 Average Level of Uncertainty ………..…………………… 3.13
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Number Responding 1343 1340 1344 1343 1341 1344 1337 1349 1345 1348 1344
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Concluding Comments With a sample of 1510 respondents, this study was faced with an “embarrassment of riches.” That is, the researchers were presented with a great deal of information. This report represents an attempt to identify the critical findings from this large database. In reviewing this chapter and its findings, the following major points were flagged as important: • The respondents in this study came from a variety of industries and were in a variety of managerial positions. They also had familiarity with their position, being in the current position for an average of 5.4 years. They also had been involved in a wide range of corporate initiatives, including Continuous Improvement, new Product Launches and Reengineering. • The plants represented in this study have worked with numerous initiatives. The initiative most frequently pursued was that of ISO 9000/QS 9000 certification; the initiative least often pursued was that of implementing an environmental management system. • At present, most environmental management systems are implemented using a separate, formal department that is responsible for this aspect of corporate performance. They also tend to focus tactical and operational problems. Their stance is primarily reactive. That is, in most firms, these systems come into play once a problem has occurred. They are also driven by environmental regulations. Finally, they are internally oriented, with relatively little attention being devoted to environmental problems within the supply chain. • Enhanced environmental management can be attained through a variety of actions. The respondents regularly considered most of these options. • Overall, environmental management systems are not seen in a positive light. In general, these systems are seen has having a strong negative impact on the major strategic dimensions of performance (i.e., lead time, costs and quality). They also do not really enhance the firm’s competitive position in the market place. They are also not seen as improving the firm’s ability to sell its products internationally. These results are influenced by the progress of the plant in attaining ISO 14000 certification. • The ISO 14000 certification program is relatively new, and as a result, there are relatively few plants that have attained this certification. Out of the 1510 respondents, only 37 (2.5%) have attained this level of certification. This number is low relative to other environmental programs such as Industrial Voluntary Environmental programs (where 284 respondents noted that they successfully implemented these programs) and Voluntary EPA programs (where 253 respondents noted successful implementation). • Successful attainment of ISO 14000 does have a large, positive impact on the perceived efficiency and effectiveness of the environmental management system. Except for lead times, which are slightly negatively affected, ISO 14000 greatly improves every dimension of performance. This finding points to a situation where those firms that have attained this level of certification are not only more environmentally responsible, but also more efficient (and potentially better suppliers). • The progress of a plant in attaining ISO 14000 certification is influenced by several factors. It is affected by size (the larger the firm, the more progress it is likely to have made), nature of ownership (foreign owned firms are more likely to pursue and attain ISO 14000 certification), past success with QS 9000 and ISO 9000 certification, past success with the implementation of TQM systems, and degree to which cross functional programs and teams are used.
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• Progress in attaining ISO 14000 certification is also influenced by uncertainty concerning federal regulations, changes in ISO 14000 standards, the costs of certification, the benefits of certification, and the impact of the ISO 14000 standards on current environmental management systems. In the short, the data seems to indicate that, with ISO 14000 certifications, plants can be both clean (more environmentally responsible) and green (more efficient).
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1
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