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ISO 14000

Assessing Its Impact on Corporate Effectiveness and Efficiency

A Report prepared for theRespondents to the ISO 14000 Certification Study

Steven A. MelnykRoger CalantoneRob Handfield

R.L. (Lal) TummalaGyula Vastag

Timothy HindsRobert Sroufe

Frank Montabon

Michigan State University

Sime CurkovicWestern Michigan University

3 March, 1999

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Table of Contents

Acknowledgments................................................................................................................................. IExecutive Summary..............................................................................................................................2Design of the Survey ............................................................................................................................3

The Questionnaire................................................................................................................................3The Sample..........................................................................................................................................3

Table Design-1 Response Rates by Mailing..................................................................................4Concluding Comments.........................................................................................................................4

Chapter 1 ISO 14000 and Environmentally Responsible Operations: An Introduction ..................5Introduction .........................................................................................................................................5Objectives of this Study .......................................................................................................................5

Chapter 2 Understanding ISO 14000..................................................................................................7Overview .............................................................................................................................................7What is an Environmental Management System? .................................................................................7

The Development of Environmental Standards.................................................................................8The Forces For a More “Environmentally Conscious” System..........................................................8

EMS and the Environmentally Conscious Enterprise ............................................................................9ISO 14000 – Positioning This New Certification Standard .................................................................10

Exhibit 2-1 A Taxonomy of Various Environmental Management Systems ................................11Understanding the ISO 14000 Certification Standards ........................................................................11

Exhibit 2-2. Intent of ISO 14000 ...............................................................................................12Concluding Comments.......................................................................................................................14

Chapter 3 Analyzing the Survey Data: Understanding the Implications of ECM and ISO 1400015Demographic Information ..................................................................................................................15

Industrial Descriptive Information..................................................................................................15Table 3-1 Classification of Respondents by 2-Digit SIC Codes...................................................15Table 3-2 Plant Involvement in Corporate/Manufacturing Initiatives ..........................................17

Background of the Respondents .....................................................................................................18Table 3-3 Stated Positions of the Respondents ............................................................................18Table 3-4 Number of Years Respondents have been in their Current Positions............................18Table 3-5 Respondents Classified by Functional Area ................................................................19Table 3-6 Membership Traits of the Respondents .......................................................................20Table 3-7 Level of Involvement of Respondents in Various Corporate/Plant Initiatives...............21

Plant Activities ..................................................................................................................................22Chart 3-1a Stage of Involvement with ISO Standards .................................................................23Chart 3-1b Stage of Involvement with Quality Programs ............................................................24Chart 3-1c Stage of Involvement with Planning and Control Systems .........................................24Chart 3-1d Stage of Involvement with Voluntary Environmental Programs.................................25Chart 3-1e Mean Involvement with Various Initiatives ...............................................................25

Environmental Management Systems - Findings ................................................................................26Table 3-8 Assessing the Plant’s Environmental Management System (Mean Values)..................26

Environmental Systems – Management Options Considered...........................................................29Table 3-9 Environmental Management Options Considered........................................................30

Environmental Management and Corporate Performance – The Aggregate Impact .........................31Table 3-10 Assessing the Impact of Environmental Management Systems on CorporatePerformance...............................................................................................................................32

Assessing the Impact of ISO 14000 Certification on the Firm.............................................................33Table 3-11 Impact on ISO 14000 Certification Progress on Dimensions of Performance.............33

Obstacles to ISO 14000 Certification .................................................................................................34

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©Copyright, Green Team at MSU, 1999

Table 3-12 Major Sources of Uncertainty Regarding ISO 14000.................................................35Concluding Comments.......................................................................................................................36

References ............................................................................................................................................1

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Acknowledgments

This report has been a major research undertaking. For the members of the researchteam, this report embodies hundred of hours of time, effort, and work. However, thiseffort could not have taken place without the active encouragement and financial supportof certain people and organizations. We would like to take this opportunity toacknowledge their contributions and recognize that this report owes its existence in largepart 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 othersupport:

• 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 theidea for this report a reality. Thank you again.

Steven A. MelnykRoger CalantoneRob HandfieldR.L. (Lal) TummalaTimothy HindsGyula VastagRobert SroufeFrank MontabonSime Curkovic

February 1999

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Executive SummaryThe following report details a research project in which American firms’ attitudes towards ISO 14000were 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 systemsare negatively affecting the major strategic dimensions of performance (i.e., lead time, costs andquality). 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 werecertified (37/1510 respondents or 2.5%). This number is low relative to other environmentalprograms such as Industrial Voluntary Environmental programs (where 284 respondents notedsuccessfully implementation of these programs) and Voluntary EPA programs (where 253respondents noted successful implementation).

• Successful attainment of ISO 14000 has a large, positive impact on the perceived efficiency andeffectiveness of the environmental management system. Except for lead times, which are slightlynegatively affected, ISO 14000 greatly improves every dimension of performance. This findingpoints to a situation where those firms that have attained this level of certification are not only moreenvironmentally responsible, but also more efficient.

• The progress of a plant in attaining ISO 14000 certification is influenced by several factors: size, natureof ownership, past success with QS 9000/ISO 9000, past success with TQM systems, and degree towhich cross functional programs and teams are used.

• Progress in attaining ISO 14000 certification is also influenced by uncertainty concerning federalregulations, 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, theevidence indicates that the ISO 14000 certification process is more effective and efficient whenviewed in terms of its impact on performance.

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Design of the Survey

The QuestionnaireThe survey was developed by the research team and pre-tested by 15 respondents in a three-round processover a period of two months. This group represented a variety of positions and functions within theirfirms in a variety of industries. The pre-test group was asked to review the survey primarily for clarity ofquestions and time required to complete the survey. The primary potential problem with the survey thatthe pre-testers pointed out was concern over the length of the survey. The length of the survey is justifiedby the need to establish valid measures for the concepts that were included in the survey. There is verylittle previous work on which to base our questions, so the research team decided to err on the side oflength, in order to ensure we would be able to obtain valid measures. Also, the research team was awarethat 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 asJust-in-Time implementations or Lead Time Reduction programs). The second section focused on thebusiness unit (the basic unit of analysis) and detail about it. This included product manufactured, extentof 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 theperceived impact of the ISO/QS 9000 certification process on the business unit and its competitiveposition in the market place. In Section IV, the respondent was asked to evaluate a series of questionspertaining to ISO 14000. These questions assessed the level of knowledge of the respondent on the ISO14000 certification process, as well as the factors affecting its implementation and use. The fifth and finalsection gathered information about the business unit’s environmental management system, theeffectiveness and efficiency of this system and the types of options used to improve environmentalperformance. At the very end of the questionnaire, respondents were given some free-form space todescribe any obstacles, potential or realized, to their firm implementing ISO 14000.

The SampleThree professional associations (National Association of Purchasing Management, American Productionand Inventory Control Society and one group who wishes to remain anonymous) provided mailing lists of5,000 names each. The constituency of each of the associations was different enough that only a handfulof names were found on more than one list.

We also worked closely with a major American manufacturer, who provided us with an additional list of104 managers at six of their facilities. From this list, we received 57 valid responses. In total, we had amailing 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 surveydiscouraged some potential respondents. The overall response rates by wave are summarized in TableDesign-1.

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Table Design-1Response Rates by Mailing

Source of Respondents First Mailing Third Mailing Unknown TotalMajor Manufacturer 52 5 0 57Anonymous Group 173 136 0 309NAPM 301 199 0 500APICS 435 197 0 632Unknown 0 0 12 12Total 961 537 12 1510

Concluding CommentsThis very detailed and rigorous research methodology was developed for two purposes. The first was toensure that the objectives of the research study were achieved. The second was to guarantee that thefindings presented in this study and drawn from the various sources were based on the data and did notreflect the biases of the research team. Having established the structure of the research methodology, wecan now proceed to examine the findings from the survey.

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Chapter 1ISO 14000 and Environmentally Responsible Operations:

An Introduction

IntroductionThe 1990s have been a time of challenge and transition. In the past, the managers thought in terms oftrade-offs (i.e., the paradigm of “or”). That is, you could have low cost OR short lead times OR highquality 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, managersincreasingly live with the paradigm of “and.” That is, managers are now expected to simultaneouslyreduce lead times (manufacturing, purchasing and design), improve quality, reduce costs, AND enhanceflexibility.

This has also become a period when more and more managers are expected to become increasinglyenvironmentally conscious. Being environmentally responsible is no longer viewed as something that isprimarily 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 eyetoward the reduction or elimination (if possible) of any resulting waste streams. For the purchasingprofession, the corresponding challenge has been to identify suppliers who can provide environmentallyresponsible goods and services without sacrificing cost, quality, flexibility or lead time. It has also meantidentifying and evaluating any initiative that is consistent with these new expanded objectives. One suchinitiative is that of the ISO 14000 environmental standard.

Formally adopted in 1996 by the International Standards Organization, ISO 14000 represents a newstandard and approach to improved environmental performance. There are several features that make thisnew standard noteworthy. First, this standard builds on the success provided by the quality standard, ISO9000, and its variants, such as QS 9000 (as found in the automotive industry). Second, ISO 14000 is aninternational standard. As a result, it is hoped that this standard will replace the numerous and oftenconflicting standards found in various countries across the world. Third, ISO 14000 shifts attention fromthe outcome (reduced pollution) to processes. Finally, an impartial third-part assessor must evaluate theextent 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 ofquestions:§ 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 StudyOne of the objectives of the study was to gather the various benefits and obstacles/concerns to ISO 14000and environmentally responsible manufacturing that have been presented in various articles, conferenceproceedings, books and expert discussions. These benefits and obstacles/concerns were incorporated into

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the large-scale survey and objectively evaluated. The data received from this survey was intended toprovide insights into how adopters and potential adopters of ISO 14000 view this development. It alsohelps assess the extent to which there is excitement or acceptance for ISO 14000 (as well as the degree ofawareness of the need for such a standard). It should also validate (or not) the various perceptionsregarding ISO 14000, the need for such a certification process, the factors affecting its acceptance and thevarious 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 arethey perceived by management?

• What is the initial predisposition of potential users/adopters of ISO 14000 to the ISO 14000standards?

• How are these predispositions influenced by factors such as past experience with ISO 9000,corporate orientation towards environmental responsibility, industrial factors, importance ofinternational 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 successand improved market, or corporate performance?

• How effective is ISO 14000 relative to the other alternatives available for improvingenvironmental performance?

• What options are available for firms interested in improving environmental performance and towhat extent are these options in practice?

• What are the major sources of uncertainty facing the manager interested in attaining ISO 14000certification and which of these sources have a significant impact on the attainment of ISO 14000certification?

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Chapter 2Understanding ISO 14000

OverviewThis report is about ISO 14000, its rate of acceptance and its effect on various dimensions ofperformance. Before we turn to the data, it is first necessary that we understand what ISO 14000 is, itsorigins, and the reasons that managers, more specifically purchasing managers, should be interested inthis new certification standard. These issues form the major objectives of this chapter. Since ISO 14000focuses on the corporate Environmental Management System (EMS), the chapter will begin by exploringthe 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 effectiveenvironmental management system. The EMS is the formal corporate management system that isresponsible for the management, organization, measurement and improvement of environmentalperformance within the enterprise. Underlying this definition is the implicit assumption of a positivecorrelation between environmental and corporate performance.

As a formal management system, the EMS is charged with a number of important responsibilities, namelyto:

• 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 thefirm.

• Ensure that the activities of the firm are, at a minimum, compliant with the relevant environmentalregulations (be it at a local, state, federal or international level).

• Summarize and communicate environmental activities to others located either within the firm orwithout (e.g., stockholders, local community, and environmental agencies).

• Help influence critical activities, such as product/process design and production scheduling, so thatenvironmental concerns and issues are duly considered.

• Create corporate awareness of the need for environmental awareness and of the potentialadvantages offered by becoming more environmentally responsible.

• Identify and introduce appropriate tools intended to improve environmental performance or reducepollution 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 formin the current Environmental, Health and Safety (EHS) functions of many firms. EMS is not an entirelynew concept or system. In many cases, the infrastructure of an EMS is already in place. What is needed

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is an existing system to become an EMS is the integration of the system capabilities with environmentalmetrics (performance measures) and goals.

The emergence of the EMS can be traced to two major factors. The first involves the development ofenvironmental standards. The second is due to the various focuses encouraging a more “environmentallyresponsible” perspective.

The Development of Environmental StandardsFor those not familiar with the evolution of EMS, many of the components of EMS are found in thedevelopment of different standards in the last six years. Masaaki Imai (1986) states “there can be noimprovement 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 standardwas the model for the ISO 14000 series of standards for EMS developed by the International Organizationfor Standardization (ISO). BS 7750 is also the basis for the European Union’s Eco-Management andAudit Scheme (EMAS).

Found within these various EMS standards are almost the same set of basic elements of an effectiveenvironmental management system. They include: (1) creating an environmental policy; (2) settingobjectives and targets; (3) implementing a program to achieve those objectives; (4) monitoring andmeasuring its effectiveness; (5) correcting problems; and, (6) reviewing the system to improve it andoverall environmental performance. However, while the elements are somewhat common, it is the specialinformation 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, deliveringspecialized information to individual firms.

The Forces For a More “Environmentally Conscious” SystemWhen asking firms about the importance of the environment, we find that it is more than some will admitand less than some would hope. The proponents of more environmental regulation for business havegained support from Porter (1991), who briefly discussed the question of whether strict environmentalstandards make American industry less competitive in international markets. The conflict betweenenvironmental protection and economic competitiveness is said to be a false dichotomy (Porter, 1991).Strict environmental regulations do not inevitably hinder competitive advantage against foreigncompetition; indeed they often enhance it (Rondinelli, Berry & Vastag, 1997). It is here that we can seethe paradox of the view that EMS is only a cost to the firm. It has been claimed that firms involved inproactive environmental programs can lead the way into environmental stewardship, and new regulatoryrequirements (Rondinelli & Vastag, 1998).

While there are cost/benefit tradeoffs associated with being the standard setter or being a follower, thereare also times, when “best-in-practice” environmental companies are sought by government or thecompetition as a benchmark. Managers from firms such as 3M, Dow, and AT&T have been invited tohelp establish international environmental standards such as ISO 14000 because of their proactive trackrecords in pollution prevention. Firms that are laggards in adopting new standards and conforming toexisting regulations will spend valuable resources in order to stay abreast of the active development oftheir competitors, and new governmental regulations. The United States alone has passed the 20,000 pagethreshold during 1993 and continues to add to the number of environmentally related pages of regulationssince 1993. This increase in federal laws does not even include the state and local level regulations whichtend to compound the already complex issue of legal compliance. Those firms who choose to be reactiveto environmental legislation and implement end-of-pipe solutions to pollution problems will consumemore resources just to comply with these new regulations. It should be easy to see that compliance is aminimum 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 firmagainst new compliance issues, costs, and competitors.

Additional evidence of the growing importance of environmental business practices is seen in theEnvironmental 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 EMSstandards.

Examples of international government’s recognition of environmental importance may also be seen inIndonesia’s recently introduced Program for Pollution Control, Evaluating and Rating. This is alandmark initiative under which polluters are assigned environmental performance ratings that areannounced to the public. The main objectives of the program, which went into effect in June 1995, are toincrease compliance with environmental regulations, promote adoptions of clean technologies, createincentives for polluters to strengthen their in-house environmental management capabilities, and preparecompanies in Indonesia for ISO 14000 certification (Wheeler & Afsah 1996). Due in part to governmentsrecognizing the importance of environmental business practices, corporations now must evaluate theappropriate corporate environmental policies for their plants and supply chain partners while beingconsistent with new international standards (Rondinelli & Vastag, 1996).

Aside from the looming environmental legislation, firms still have to handle the delicate issues of specialinterest groups, stakeholders, customers, and communities around the firm. The recent United NationsClimate Conference discussing the controlling of global warming, and specifically reduction of carbondioxide and other greenhouse gases to below 1990 levels, has brought growing attention to theenvironmental impacts of businesses in many countries. These and other forces have provided themanagement of many firms with a strong impetus to develop and implement effective, formal EMS.

EMS and the Environmentally Conscious EnterpriseThe environmental management system and ISO 14000 (to be discussed in the next section) can beviewed 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 productionplanning 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 reducingand ultimately minimizing its impact on the environment, while also trying to maximizeresource 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 evaluatedby comparing its relative costs and benefits (and making appropriate decisions based on thisanalysis).

• Effective ECE systems must be viewed as corporate systems, not as manufacturing, engineering orpurchasing 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 anddevelopment 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 StandardBefore discussing the ISO 14000 standard, it is useful to position this standard in terms of its relationshipto the various types of EMS that a firm can development and implement. As discussed in the precedingsections, an EMS is increasingly being asked to fulfill a number of objectives. How it achieves theseobjectives depends on the strategy used to develop and implement it. This strategy can be influenced byseveral factors.

Two dimensions are critical when evaluating this strategy. The first is the Corporate Position RegardingEnvironmental 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,” thefirm’s management does no more than is necessary to meet the minimum requirements as set down withinthe appropriate set of regulations. With this approach, the firm’s environmental activities are driven bychanges in governmental regulations. As these standards set within these regulations become morestringent, the firm improves its performance to meet these new requirements. Once met, theenvironmental activities of the firm stop. In other words, with “Strict Compliance,” the levels set byregulation are viewed as ceilings; there is no incentive to exceed these limits.

In contrast, under “Environmental Leadership,” the firm’s management views the requirements containedwithin the appropriate regulations as floors. In other words, they represent the minimum that the firmshould do. Under this stance, the firm views improved environmental performance as being critical. As aresult, 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 ofmanagement attention is placed when dealing with environmental problems and issues. Like the previousdimension, 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 ofthese problems once they have been created. For example, the decision to install a scrubber into asmokestack 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 inidentifying, studying and changing the performance of those processes that are responsible for theobserved level of pollution. In contrast to the “End-of-Pipe” focus, this approach seeks to eliminate thepollution from being created in the first place. It is a preventative orientation, in contrast the correctivestance 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 basicforms that an EMS can take (see Exhibit 2-1). This matrix identifies the simplest and most reactive formof EMS. This form, denoted by A in Exhibit 2-1, is observed when the management takes a complianceview 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 todo so by changes in governmental regulations. When this investment does take place, the focus is on themanagement of pollution after it has been created. With this type of a system, any investment inenvironmental 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.

Exhibit 2-1A Taxonomy of Various Environmental Management Systems

Corporate Position Regarding EnvironmentalPerformance

Strict Compliance EnvironmentalLeadership

ActionFocus

End-of-Pipe A

Process D

In contrast, the most complex and effective form of EMS is observed under conditions of EnvironmentalLeadership and a Process focus. This type of EMS, denoted by D in Exhibit 2-1, attempts to eliminate thecreation of pollution. With this type of system, the elimination of environmental waste (which is whatpollution is essentially) can result in reduced costs, improved efficiencies and fewer problems. It is in thisquadrant, it can be argued, that we would expect to see firms that are ISO 14000-certified.

Understanding the ISO 14000 Certification StandardsRepresentatives from some 50 countries around the globe have formally adopted the internationalstandard on environmental management systems (ISO 14001) by the International Standard Organizationin 1996. This standard attempts to build on the success and experience of its predecessor, the ISO 9000standards, and its variants such as QS 9000 standards now being implemented within the automotiveindustry. If the ISO 14000 series of standards work as intended, it will set a higher level of expectedenvironmental management practices worldwide. Additionally, these new standards are predicted tofacilitate trade and remove trade barriers.

What is ISO 14000? The ISO 14000 standard specifies the structure information technology in theform of an EMS that an organization must have in place if is seeks to obtain certification of the EMSaccording 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 aprogram 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 donot tell organizations what environmental performance they must achieve aside from compliance withenvironmental regulation. Instead, the standards describe a system that will help an organization toachieve its own objectives and targets. The assumption is that better environmental management will leadindirectly to better environmental performance (Tibor & Feldman, 1996).

To better understand the transition of the intent of ISO 14000 to the actual standards, ISO 14000encompasses standards in the following 7 general areas:

1. Environmental Management Systems

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2. Environmental Auditing3. Environmental Performance Evaluation4. Environmental Labeling5. Life Cycle Assessment6. Environmental Aspects of Product Standards7. 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 theframework for the management system. Auditing and performance evaluations are seen as managementtools in the successful implementation of an EMS. Labeling, life cycle assessment, and environmentalattributes in product standards emphasize the evaluation and analysis of product and processcharacteristics.

Exhibit 2-2. Intent of ISO 14000

Organizational Evaluation Product and Process Evaluation

EnvironmentalAspects in

Product Standards

EnvironmentalLabeling

Life Cycle Assessment

EnvironmentalAuditing

EnvironmentalManagement

Systems

EnvironmentalPerformanceEvaluation

Environmental Management

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 clearreason to demonstrate conformance to third parties. Some situations where certification could becomeimportant 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 environmentforces you to get registration or certification.

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• A single international environmental standard can reduce the number of environmental auditsconducted 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 environmentalexcellence 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 awhole or just for parts of it. If the firm is already ISO 9000 certified, it makes sense to define its scope ina similar manner (Tibor & Feldman 1996). If the firm opts for a site registration, there is the advantage ofnot losing the registration for your whole organization if one of the sites does not comply with therequirements of the standard. Also, the process of implementing, certifying, and registering the EMS isbroken 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 stepsare also helpful in customizing your environmental management system to ISO 14000 without seekingcertification (Sayre 1996).

§ Step One: Understand the ISO 14000 standard, its impact on the organization, itsrequirements, and determine the benefits of seeking certification.

§ Step Two: Understand the certification process and decide whether to commit tocertification.

§ Step Three: Top management support should be in place for the ManagementRepresentative for the environmental management system to go forward with the processwith team members from each affected area of your organization. If necessary, provideany needed training on the certification process.

§ Step Four: With the help of the Management Representative, select the appropriatecertification organization. Investigate the certifying organization to see if there is awaiting list, understand the approach to the certification process through their eyes, andunderstand what expectations and requirements are involved.

§ Step Five: Perform internal audits of your environmental management system againsteach element of the ISO 14000 standard. Perform a gap analysis, and identify strengthsand 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 discrepanciesbeyond 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 systemmanual or similar document). Validate proper regulatory commitments.

§ Step Eight: Again, address and correct deficiencies. If the deficiencies can not be fullycorrected, the document and implement a corrective action plan to resolve issues that maybe beyond your current capability to address.

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§ Step Nine: Apply for certification. Set up meetings with the certifying agent for theindoctrination of your organization, its activities, products, and services. Next, schedulethe final audit (there may be several pre-audits).

§ Step Ten: Expedite the final audit (say what you do and do what you say). Be preparedfor the outcome (recommendation for or against certification). Starts scheduling thecorrection of any identified discrepancies within sixty days and submit evidence of thecompletion of the actions taken. Finally, expedite the final audit if there were any majordiscrepancies identified.

To date, no research has addressed whether ISO 14000 will be widely used by businesses as a consensusmodel, or whether it should be. Instead, the literature is saturated with conflicting predictions andviewpoints offered by experts. The champions of ISO 14000 suggest that it will unify countries in theirapproach to environmental management and will eventually be looked upon more favorably thantraditional measures (Cascio 1996). It has been argued that small manufacturing firms constitute thelargest potential market for ISO 14000, and that the real test of the standard can be measured by adoptionrates among these firms, which typically need the most direction in these issues. According to someauthors, the development to watch is what industrial customers do with these standards with regard totheir supply chains. Acceptance of the standard will come when conformance or certification becomes acondition for customer requirements. This suggests that the predisposition of corporations to ISO 14000will mostly influence the adoption rates and ultimately, the success of this standard. However, noresearch to date has examined the predisposition of ISO 14000 among managers of corporations.

Concluding CommentsAs can be seen from this discussion, the ISO 14000 certification standards represent a true managementparadox. On one hand, it brings with it the promise of significant potential benefits. However, thesepotential benefits must be weighed against the numerous unresolved questions that surround this newstandard. Resolving these questions is critical if this standard is to achieve widespread acceptance anduse. This task of resolving these questions forms a major objective of this study. Before the findingsconsistent with this objective can be presented, it is first necessary that the structure and approach of thisstudy be presented. That task forms the focus of the next chapter.

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Chapter 3Analyzing the Survey Data:

Understanding the Implications of ECM and ISO 14000

Demographic InformationBefore examining the results gained from this survey as they pertain to environmental systems,environmental performance, corporate performance, and ISO 14000, the demographic characteristics ofthe sample will be described. By establishing the traits of the respondents, this study can begin to assessthe extent to which the results are generalizable.

Industrial Descriptive InformationAs previously mentioned, the survey database consists of 1510 respondents. From the outset, there wasan attempt to develop a sample that was broad-based. That is, the sample should reflect a diversity ofindustrial settings. The responses should not be drawn from only a few industries. One way ofdetermining the extent to which this objective was realized would be to evaluate the industrial settingsfrom 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 externalpanel. For the purposes of this coding, a two-digit SIC code was used. The resulting distribution ofindustries is summarized in Table 3-1.

Table 3-1Classification of Respondents by 2-Digit SIC Codes

SIC Description Frequency (#) Percent (%)Agricultural Services (07) …………………………………. 1 0.1Mining and Quarrying of nonmetallic Minerals, except

fuels (14) ………………………………………………. 2 0.1Building Construction – General Contractors & Operative

Builders (15) …………………………………………... 4 0.3Heavy Construction Other than Building Construction –

Contractors (16) ……………………………………….. 2 0.1Construction – Special Trade Contractors (17) ……………. 6 0.4Food & Kindred Products (20) …………………………….. 18 1.2Textile Mill Products (22) …………………………………. 16 1.1Apparel & Other Finished Products Made from fabrics and

similar materials (23) ………………………………….. 8 0.5Lumber & Wood Products, Except Furniture (24) ………… 4 0.3Furniture & Fixtures (25) ………………………………….. 35 2.3Paper & Allied Products (26) ……………………………… 27 1.8Printing, Publishing, & Allied Industries (27) …………….. 9 0.6Chemicals & Allied Products (28) ………………………… 99 6.6Petroleum Refining & Related Industries (29) ……………. 18 1.2Rubber & Miscellaneous Plastic Products (30) …………… 34 2.3Leather & Leather Products (31) ………………………….. 4 0.3Stone, Clay, Glass, & Concrete Products (32) …………….. 16 1.1

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Primary Metal Industries (33) ……………………………... 38 2.5Fabricated Metal Products, Except Machinery &

Transportation Equipment (34) ……………………….. 179 11.9Industrial & Commercial Machinery & Computer

Equipment (35) ………………………………………... 316 20.9Electronic & Other Electrical Equipment & Components

Except Computer Equipment (36) …………………….. 179 11.9Transportation Equipment (37) ……………………………. 198 13.1Measuring, Analyzing & Controlling Instruments;

Photographic, Medical & Optical Goods; Watches &Clocks (38) ……………………………………………. 127 8.4

Miscellaneous manufacturing Industries (39) ……………... 22 1.5United States Postal Service (43) ………………………….. 1 0.1Transportation Service (47) ………………………………... 2 0.1Communications (48) ……………………………………… 2 0.1Electric, Gas & Sanitary Services (49) ……………………. 1 0.1Wholesale Trade – Durable Trades (50) …………………... 22 1.5Whole Trade – Nondurable Goods (51) …………………… 9 0.6Building Materials, hardware, Garden Supply & Mobile

home Dealers (52) …………………………………….. 1 0.1Miscellaneous Retail (59) …………………………………. 2 0.1Business Services (73) …………………………………….. 27 1.8Automotive Repair, Services & Parking (75) ……………... 1 0.1Miscellaneous Repair Services (76) ……………………….. 1 0.1Health Services (80) ……………………………………….. 6 0.4Educational Services (82) …………………………………. 4 0.3Engineering, Accounting, Research, Management &

Related Services (87) ………………………………….. 14 0.9Services, Not Else Classified (89) …………………………. 1 0.1Administration of Economic Programs (96) ………………. 1 0.1Industry Not Identified …………………………………….. 53 3.5

As can be seen from this table, the respondents came from a wide range of industries. From the 40-someSIC codes, the bulk of respondents (999 respondents or 66.2% of the respondents) were drawn from oneof 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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To an extent, it can be argued that the concentration of the respondents from these five sectors isconsistent with the industrial activities within the United States. In addition, these five industries are onesthat 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 wereinvolved in one or more of seven commonly encountered corporate/productivity initiatives. For eachinitiative, the respondent was asked to check a box if their plant had been implemented, either currently orin the past, in any of these seven initiatives. These results are summarized in Table 3-2.

Table 3-2Plant Involvement in Corporate/Manufacturing Initiatives

Corporate/Manufacturing Initiatives Number PercentageJust-in-Time Manufacturing 751 49.7Simultaneous Engineering/Concurrent Design 331 21.9Environmental Management System 273 18.1ISO 9000/QS 9000 1106 73.2Total Quality Management 817 54.1Business Process Reengineering 461 30.5Lead Time Reduction Program 689 45.6

Reviewing this table uncovers several interesting findings. First, the plants have been involved in a largenumber of initiatives. That these plants have undertaken these various initiatives points to a situationwhere plants are increasingly looking for new ways of improving efficiency and effectiveness within theirfacilities. 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 onthe major dimensions of performance.

Second, the level of acceptance among the seven initiatives greatly varies. At the high end, we have ISO9000/QS 9000 certification, with almost three-quarters of the respondents indicating that their plants haveundertaken such certification. At the low end, there is the development of an environmental managementsystem. This is interesting for two reasons. The first is that it points to the perceived low importance ofenvironmental issues relative to initiatives directed at improving quality (ISO/QS 9000, Total QualityManagement), reducing waste (Just-in-Time Manufacturing), reducing lead times (Lead Time ReductionPrograms), and improving product/process quality (simultaneous engineering/concurrent design). Oneway of interpreting this result is that the relatively low level of involvement reflects the relatively lowpriority assigned to this initiative. Given that you, as a manager, have limited funds, why invest in aprogram 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 environmentalactivities within a plant. The data was insufficient to determine which of these two interpretations wasmost appropriate. Second, we should expect that the presence of an environmental management systemas being a requirement for the successful attainment of ISO 14000 certification. After all, ISO 14000focuses on the environmental management system and its information management system components.

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A third interesting result involves the relationship between ISO 9000/QS 9000 certification and theimplementation and/or presence of a Total Quality Management (TQM) system. Initially, the researcherspresumed that these two initiatives would be strongly related. To successfully achieve ISO 9000/QS9000 certification, you had to have a TQM system in place. However, the data indicates that this is notnecessarily the case. There were 1106 respondents who indicated that their plants had been involved inISO 9000/QS 9000 certification, while only 817 indicated that their plants had been involved in TQMmanagement – a difference of 289 or 19.1% of the respondents. More specifically, when the data wasfurther explored, it was found that there were only 671 respondents who indicated that their plants weresimultaneously involved in ISO 9000/QS 9000 certification and TQM. The linkage between TQM andISO 9000/QS 9000 is not strongly in practice, as it has been presented in the popular press and theresearch literature.

Background of the RespondentsHaving reviewed the industries and firms from which the respondents came, the next step is to determinethe 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 occupypositions ranging from presidents and Chief Operating Officers (CEOs) to managers and staff. Thisdiversity argues strongly in favor of the generalizability of the results.

Table 3-3Stated Positions of the Respondents

Stated Position Frequency (#) Percentage (%)Chief Executive Officer 13 0.9President 12 0.8Vice-President 169 11.2Manager 718 47.5Senior/Supervisor 251 16.6Staff 317 21.0Not Listed 30 2.0Total 1510 100.0

The next piece of information important to this study was that of the length of time that the respondentshad been spent in their current positions. This information is summarized in Table 3-4. As can be seenfrom this table, the respondents overall are not new to their positions. On average, the respondents hadbeen in their current positions for about 5.4 years. As a result, we can expect that these respondentsshould be familiar with their jobs and what is happening around them.

Table 3-4Number of Years Respondents have been in their Current Positions

Number of Years in Current Position Frequency (#) Percentage (%)Less than 1 Year 153 10.11 to 3 Years 377 25.03 to 5 Years 282 18.75 to 10 Years 318 21.1Greater than 10 Years 350 23.2Not Listed 30 2.0

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In addition, data on the functional areas in which the respondents worked was also collected. This data issummarized Table 3-5. As can be expected, the two major areas represented in the survey data werematerials purchasing and manufacturing. Environmental management (compliance) represented a veryminor part of the data at 48 respondents (3.2 % of the respondents). This indicates that this surveyconsists primarily of users (engineers, purchasing managers and manufacturing people) who should bebetter able to assess ECM and ISO 14000 as business/strategic decisions. Again, this is consistent withthe objectives of this study.

Table 3-5Respondents Classified by Functional Area

Functional Area Frequency (#) Percentage (%)Purchasing, Materials …………. 641 42.5%Manufacturing/Production …… 332 22.0Quality ………………………….. 132 8.7Engineering …………………….. 85 5.6Environmental (Compliance) …. 48 3.2Management …………………… 47 3.1Other …………………………… 37 2.5Information Systems …………... 33 2.2Distribution …………………….. 31 2.1Safety, Security ………………… 29 1.9Inventory ……………………….. 16 1.1Marketing ……………………… 13 0.9Consulting ……………………… 12 0.8Human Resources ……………... 12 0.8Accounting ……………………... 6 0.4Research and Development …… 3 0.2Finance …………………………. 2 0.1Unknown/not identified ……….. 31 1.9Total ……………………………. 1510 100.0

The next step was to look at professional affiliations of the respondents. There are several reasons to beinterested 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 PurchasingManagement) would indicate a manager or respondent who is interested in keeping up-to-date on currentdevelopments and issues. Second, familiarity (or the lack of familiarity) with certain developments suchas ISO 14000, business process reengineering or ISO 9000 might be influenced by the respondent’smembership in a specific society. Some societies might be doing “better” jobs at exposing their membersto certain developments. Third, some of the names were drawn from mailing lists provided by severalprofessional organizations. As a result, it is interesting to determine the extent to which there is potentialover-response from one professional society relative to the others. The membership information issummarized in Table 3-6. As can be seen from this table, a respondent, if he or she did belong to aprofessional organization, was most likely to belong to either APICS or NAPM. The number ofrespondents who belonged to one of the other professional organizations was relatively small. One areawhere this finding was most surprising involving membership in ASQC (American society for QualityControl). Given the spread of Total Quality tools and procedures throughout American industry, a highermembership in this society would be expected. After all, ASQC has assumed the leadership position inthe 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 runby ASQC.

Table 3-6Membership Traits of the Respondents

Professional Society Members Not MembersAmerican Production and Inventory Control

Society689

(45.6%)821

(54.4%)American Society for Quality Control 150

(9.9%)1360

(90.1%)Association for Manufacturing Excellence 35

(2.3%)1475

(97.7%)Council for Logistics Management 35

(2.3%)1475

(97.7%)Institute for Management Accounting 11

(0.7%)1499

(99.3%)National Association of Purchasing

Management556

(36.8%)954

(63.2%)Society of Manufacturing Engineers 111

(7.4%)1399

(92.6%)Society of Automotive Engineers 54

(3.6%)1456

(96.4%)Other 201

(13.3%)1309

(86.7%)

The next area of interest involves the extent to which the respondents have been involved in theimplementation of certain initiatives of interest. In examining this issue, the research team identified a listof some 23 corporate actions and initiatives. Each respondent was asked to describe their involvementusing 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 moreinvolved on average the respondents were. The average levels of involvement for the respondents onthese 23 initiatives is summarized in Table 3-7.

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Table 3-7Level of Involvement of Respondents in Various Corporate/Plant Initiatives

Corporate Initiative

Mean Levelof

InvolvementNumber

Responding

Numberwith No

Involvement

Quality Planning, Planning and Assurance ..................……. 4.02 1482 185(12.3%)1

Workplace and Employee Safety …...................................... 4.60 1487 244(16.2%)

Product Design ............................................................…….. 3.22 1484 432(28.6%)

Process Design ..............................................................…… 4.42 1489 273(18.1%)

Plant Layout .................................................................……. 3.44 1488 464(30.7%)

Production Planning and Scheduling ............................…… 5.34 1490 273(35.4%)

Environmental Planning and Management ....................…... 2.87 1486 534(35.4%)

Certification Planning and Implementation …...................... 4.15 1481 383(25.4%)

Benchmarking …................................................................... 4.16 1481 359(23.8%)

Continuous Improvement Activities …................................. 6.75 1493 98(6.6%)

Continuous Improvement Planning ….................................. 6.22 1486 151(10.0%)

Continuous Improvement Kaizen .................................…… 3.16 1446 601(39.8%)

Purchasing …......................................................................... 6.41 1490 131(8.7%)

Materials Management .................................................……. 6.46 1493 173(11.5%)

New Product Launches .................................................…… 5.48 1491 254(16.8%)

Cost Justification ..........................................................……. 6.17 1485 143(9.5%)

Process Redesign ..........................................................……. 4.70 1488 283(18.7%)

Reengineering …................................................................... 4.13 1488 355(23.5%)

Regulatory Compliance (environmental) ….......................... 3.29 1482 495

1 The first number in this column identifies those respondents who were indicated that they had noinvolvement in this initiative. That is, they picked the “0” value to represent their level of involvement. Thenumber in brackets represents this number as a percentage of the total sample size of 1510.

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(32.8%)

Logistics …............................................................................ 4.90 1489 272(18.0%)

Transportation …................................................................... 4.27 1488 344(22.8%)

Warehouse Management …................................................... 4.04 1489 400(26.5%)

Legal Affairs …..................................................................... 2.94 1487 513(34.0%)

This exhibit indicates that the respondents have had a wide range of involvement in various corporateinitiatives. This variety is important because it emphasizes the notion that this sample is not simplydrawn from purchasing personnel or from personnel highly familiar with environmental issues. Inreviewing this summary, we can see that their heaviest involvement has been in Production Planning andScheduling, Continuous Improvement related programs (i.e., Activities, Planning), Purchasing, MaterialsManagement, New Product Launches, and Cost Justification. To a certain extent, this pattern ofinvolvement is not surprising for certain activities such as materials management, purchasing, andproduction scheduling and planning. It is important to remember that the mailing list used in distributingthe surveys was drawn from lists provided by APICS and NAPM. The involvement in the continuousimprovement activities is also not surprising, given the increasing importance that continuousimprovement is playing in most firms.

Next, when we compare the mean levels of involvement for those respondents working with complianceand those working on an environmental management system, we notice that the level of involvement incompliance and regulation is much higher than those for working with an EMS system. This would seemto argue that more people are involved correcting the pollution problem from a regulatory compliancethan they are in trying to prevent or eliminate the problems through the implementation and use of anEMS system.

Plant ActivitiesA major concern of this report was to determine the type of activities being undertaken at the variousplants and the status of these projects. To this end, the respondents were asked to fill in a matrixdescribing their plant’s level of progress on 11 different initiatives. These initiatives were selectedbecause 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 initiativeseither preconditioned the plant for the acceptance or implementation of ISO 14000. This was the case forthe inclusion of QS 9000, ISO 9000, Total Quality Management (TQM), and Cross Functional ProductDevelopment Teams. In other cases, the initiatives were selected because they represented possiblealternatives to ISO 14000. This was the case for three of the initiatives: (1) Participation in IndustrialVoluntary Environmental Programs (e.g., Responsible Care); (2) Participation in Voluntary EPAPrograms (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 andefficiency of voluntary as compared programmatic initiatives (which is what the ISO 14000 programrepresents). Below the results are displayed by grouping together similar programs in each chart.

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Chart 3-1aStage of Involvement with ISO Standards

0100200300400500600700800900

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Chart 3-1bStage of Involvement with Quality Programs

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Total QualityManagement (TQM)

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Chart 3-1cStage of Involvement with Planning and Control Systems

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Enterprise ResourcesPlanning (ERP) system

Manufacturing ResourcePlanning (MRP II) system

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Chart 3-1dStage of Involvement with Voluntary Environmental Programs

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Participation in IndustrialVoluntary EnvironmentalPrograms (e.g.,Responsible Care)

Participation in VoluntaryEPA Programs (e.g., 33/50,Green Light)

Participation in OSHA’sVoluntary PreventionProgram (VPP)

Chart 3-1eMean Involvement with Various Initiatives

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Mean (1=NotApplicable, 7=SuccessfullyImplemented)

These results point to some interesting findings. First, for some initiatives, such as ISO 9000, the resultsindicate that this is a widely accepted and widely implemented initiative. By this time, you have eitherdecided 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 yourway to attaining it.

For most of the other measures, there is a strong bimodal distribution of responses. With initiatives suchas Voluntary Environmental Programs, Voluntary EPA Programs, OSHA’s Voluntary PreventionProgram, 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., CurrentlyImplementing/Successfully Implemented). Of these various initiatives, the most interesting result comesfrom TQM. This initiative has long been emphasized as a key to continued corporate success. In spite ofthis 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 managementsystems. It was initially expected that nearly every firm would have an environmental managementsystem. However, as the data shows, this was not the case. Over 25 percent of the respondents reportedthat 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 thedata, only 37 respondents noted that their systems were certified. Of these 37, 15 came from one firm thathas insisted that all of its plants become ISO 14000 certified. To a certain extent, this finding can beexplained by the fact that this certification process is relatively new. However, despite that finding, it isinteresting to note that 50 percent of the respondents saw ISO 14000 certification as something that waseither not applicable or not being considered. This points to a great lack of support for this newcertification process.

Environmental Management Systems - FindingsBefore turning our attention to ISO 14000 and its impact, it would be useful to understand the state ofenvironmental management systems within the plants of the respondents. To this end, a section wasdeveloped within the report. This section analyzed the environmental management system and itsperformance by identifying 46 different dimensions. The respondents were then asked to assess theirplant’s systems using an eleven point scale. In this scale, 0 represented “Strongly Disagree,” while 10represented “Strongly Agree.” The neutral position for this scale was a 5. The mean values for these 46dimensions are presented in Table 3-8.

Table 3-8Assessing the Plant’s Environmental Management System

(Mean Values)

System TraitMean

Response Number

When an environmental problem is identified, attention is focusedon the underlying cause and corrective measures.....………………. 6.83 1420

There is a specific department within your plant which is formallyresponsible for environmental affairs ......................………………. 6.70 1429

When an environmental problem is identified, the major effortwithin your plant is on determining the underlying reasons for thatproblem and then attacking it........................……………………… 6.66 1420

The environmental impact within your company is primarily drivenby regulatory requirements……………………..…………………. 6.55 1413

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There is a formal reporting position between those responsible forenvironmental affairs within your plant and one of the plant’ssenior executives.......................................…………………………. 6.23 1426

New equipment has been acquired or existing equipment modifiedin response to external environmental problems attributable to thatequipment .................................................…………………………. 6.23 1412

Environmental issues are considered when laying out the plant orspecifying equipment for use on the plant floor ........……………… 6.13 1419

Your plant has an established environmental management systemin place .................................................……………………………. 6.10 1432

When an environmental problem is identified, attention is primarilyfocused on correcting the effects of that problem …………………. 6.01 1418

The environmental management system’s procedures are formallydocumented .............................................................……………….. 5.91 1429

Environmental issues are included in the process design process ..... 5.67 1409

Top management of your plant has taken a highly visible publicposition in support of improved environmental performance ........... 5.54 1429

Environmental performance is formally tracked and monitoredwithin the plant ...............................................…………………….. 5.45 1427

The environmental management system’s procedures are widelycirculated and available to anyone who needs access.……………... 5.39 1429

Environmental issues, policies and procedures are included informal plant training programs........................................………….. 5.28 1426

Process designs and plant layouts have been modified in responseto external environmental problems attributable to a specific designflaw ...............................................................……………………… 5.23 1414

Environmental issues influence plant location decisions (i.e., wherewe locate a new plant) ..................................................

5.23 1403

Environmentally-related information (e.g., changes in regulations,tracking of which companies have been fined and how much) istracked and monitored on an on-going basis ............................….... 5.12 1429

Environmental performance, as captured by various measures isperiodically summarized.....................................................………… 4.97 1427

People within your plant consider your plant’s formalenvironmental management system highly effective………………. 4.81 1409

People outside of your plant consider your plant’s formalenvironmental management system highly effective………………. 4.81 1398

Product designs have been modified in response to environmentalproblems attributable to a specific design flaw ...............…..…….... 4.79 1408

Various performance goals have been developed and implementedwhich report environmental performance on different dimensions ... 4.78 1422

Environmental performance has been captured primarily in termsof recyclability i.e., the amount of recycled material used in the

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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 prominentvisibility within annual reports and other publications distributedby your plant .............................…………………………………… 4.57 1426

Those suppliers who are environmentally responsible also tend tobe more cost effective suppliers……………………………………. 4.43 1401

Your plant has been very successful in creating plant wideawareness of environmental problems, costs and opportunities ........ 4.42 1410

Your plant has a well developed environmental data base fortracking and monitoring environmental issues...........…………....... 4.39 1413

Top management of your plant considers environmentalperformance as important as is reducing costs ..................………... 4.17 1413

The environmental achievements of your plant are given prominentvisibility within annual reports or other company publications ........ 4.16 1424

Environmental issues are important today because they reflect acurrent marketing fad ………………………………………………. 4.16 1411

Top management of your plant considers environmentalperformance as important as is improving quality..................……... 4.12 1412

People within your plant view environmental problems asopportunities rather than as costs or constraints to be satisfied ........ 4.11 1414

Tools and procedures such as risk assessment and life cycleanalysis are incorporated into your plant’s formal environmentalmanagement system ........................................…………………….. 3.95 1404

Environmental performance results are widely distributed withinyour plant..............................................................…………………. 3.93 1420

Information about best-in-class environmental performance in ourindustry is tracked and recorded within your plant .......................... 3.87 1427

Environmental practices, procedures and systems within your plantare compared with the best-in-class on a regular basis ..................... 3.85 1427

Environmental concerns play a significant role in the supplierselection and/or retention decisions.....................................……….. 3.76 1408

The performance measures identify qualitative costs associatedwith environmental performance and problems....…………………. 3.75 1414

Performance on environmental dimensions is considered duringsupplier evaluations ...................................................……………… 3.74 1411

Top management in your plant considers environmentalperformance as important as is reducing lead times......………......... 3.72 1415

Cost accounting has been extensively involved in your company incapturing and reporting environmental costs......…………………… 3.70 1415

Environmental performance is considered during the evaluation ofindividual departments or areas........................……………………. 3.70 1418

The performance measures identify the quantitative costs

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associated with environmental performance.......................………... 3.69 1421

The effectiveness of different production schedules is evaluatedconsidering possible environmental problems created by thoseschedules ..................................................………………………….. 3.04 1402

Performance on environmental dimensions is considered duringpersonnel evaluations..................................................……………... 2.98 1410

These results paint an interesting picture of the environmental management systems found within therespondents’ plants. First, these systems are strong on the formal dimensions. That is, in most of therespondents’ 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. Thissystem is supported by formally documented procedures. These procedures are generally widelycirculated 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 alsotactical in that it deals with operating problems and issues. Environmental issues have a strong influenceon process designs, plant and equipment layouts, new equipment acquisition and equipment modificationdecisions. The environmental management system is reactive in nature in that it responds to theemergence of problems when they occur. Furthermore, it is often primarily driven by changes in theenvironmental regulations. When these regulations change, the plant’s environmental managementsystem also changes.

However, these systems exhibit certain shortcomings. The shortcomings reflect issues of informationmanagement, performance evaluation and supplier evaluation. In general, these systems do not do muchin 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 quantitativecosts associated with environmental performance. Environmental performance is also infrequentlyconsidered 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 thisdepartment is the one most often held responsible for collecting and distributing performance and costinformation). Finally, environmental efforts are confined to the plant. As shown by the low meansrecorded on those questions pertaining to the supplier base, environmental issues and performance areseldom considered during supplier selection, retaining and evaluation stages.

In short, the environmental system is portrayed as a separate activity, internally focused, driven byregulations and reactive in nature. This picture is further supported by the overall negative perceptionsgiven by the respondents regarding the impact of environmental activities on the various dimensions ofcorporate performance.

Environmental Systems – Management Options ConsideredBefore turning our attention to the relationship between the status of the environmental managementsystem and corporate performance, it is useful to examine the frequency with which the various ECM-related options were considered and used. Some of these options, however, are more complex anddemanding than others. For example, alliances are more complex than recycling because of the need todevelop relationships that cross corporate, not simply departmental, boundaries. Other options, such asrecycling 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, alliancesare more complex than recycling because of the need to develop relationships that cross corporate, notsimply departmental, boundaries. Other options, such as recycling and waste separation, focus onreducing the "end of pipe" waste streams, while others such as product and process redesign focusattention on eliminating the pollution problem from even occurring. To this end, the research teamidentified 16 different options. These options, along with mean responses (and number responding), arepresented in Table 3-9. As in the other questions, the respondents were asked to respond using an elevenpoint scale, where 0 indicated “Never Considered,” while 10 denoted “Always Considered.”

Table 3-9Environmental Management Options Considered

ECM-OptionMean

ResponseNumber

RespondingSubstitution - replacing a material which can cause environmentalproblems with another material which is not problematic ................…… 6.02 1428Process redesign - redesigning the process to eliminate any potentialenvironmental problems .....................................................…………….. 5.94 1433Reduce - reducing the level of material and/or components (which arecontributing to environmental problems) within products...........………. 5.80 1424Waste Segregation: an intermediate action in which waste streams areseparated out into their individual components before being recycled,reused or consumed internally …………….............................................. 5.76 1421Returnable Packaging: Using packaging and pallets which can bereturned after they are finished being used …........................................... 5.71 1428Recycling: making more use of recycled components or making aproduct which is more easily/readily recycled …..................................... 5.46 1429Product redesign - redesigning the product to eliminate any potentialenvironmental problems (manufacturing or recycling) ……………........ 4.99 1429Prolonging Use: reducing environmental problems by increasing theoverall life of the product (e.g., engines which now last longer beforehaving to be replaced or rebuilt) ............................................…………... 4.97 1418Alliances: working with either suppliers or customers to addressenvironmental problems and/or issues .............................................……. 4.94 1418Rebuilding: rebuilding a product where some of the parts orcomponents are recovered while others are replaced .........................….. 4.71 1415Spreading Risks: shifting responsibilities for environmental problemsto a third party or expert better able to deal with issues ...……………… 4.38 1418Creating a market for waste products: treating waste as an input toanother product which can be made and sold at a profit ...............……... 4.21 1423Remanufacturing: like rebuilding, except that none of the parts arereduced to raw materials ....................................................................…... 4.02 1411Disassembly: redesigning the product or process so as to simplifydisassembly and disposal at the end of the product’s useful life ......…… 4.00 1418Consume Internally: consuming waste internally (e.g., wood palletsused in shipping or product storage used to generate electrical power ina co-generation facility) .....................................………………………... 3.62 1429Relocation: changing the location of a process or plant to takeadvantage 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 improvingenvironmental performance. Except for two options (“Consume Internally” and “Relocation”), all of theoptions fall into the 4 to 6 range. This indicates that these options were somewhat considered. Of the twooptions falling below the 4 point, “Relocation” option does bring with it some important negativeconnotations. When the North American Free Trade Agreement (NAFTA) was initially negotiated, somefeared that this Act would be used by American firms having plants, products or processes experiencinghigh levels of pollution as a vehicle for moving these plants, products or processes to areas with more laxpollution 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 byfirms, 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 ofthe waste. With these options, the major implicit operational assumption is that the product design isfixed and the only product-related options available are somewhat limited to actions such as materialsubstitution. The options falling under this category include “Process Redesign,” “Substitution,”“Reduce,” “Waste Segregation,” and “Recycling.” They also include “Returnable Package.” This optionrecognizes 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 indicativefuture developments in this field. We can expect firms to work on simplifying the disassembly ofproducts, thus facilitating their recycling, rebuilding or remanufacturing. We can also expect thatmanagers will turn to the supply chain and work on environmental problems in cross-functional teamsthat involve the insights and expertise of suppliers and customers.

Environmental Management and Corporate Performance – The Aggregate ImpactThe relationship between environmental systems, environmental performance and overall corporateperformance 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 sourcesof waste and productivity. The result is that enhanced environmental responsibility results in improvedcorporate performance. Other writers, primarily Walley and Whitehead (1994), argue that this is not thecase. In most instances, improved environmental performance comes at the cost of reduced profitabilityand reduced shareholder value.

One way of evaluating the nature of this relationship is to ask the respondents to assess the impact of theirenvironmental management systems on several critical dimensions of corporate performance. To thisend, a section was included that focused on this specific aspect of performance. The respondents wereasked to evaluate the impact of their environmental management system on 14 dimensions ofperformance. Some of these dimensions focused on the core strategic areas of competition (cost, leadtime, 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 theother questions, the respondents were asked to assess the impact of their environmental managementsystem using an 11 point scale (0 – “Strongly Disagree;” 10 – “Strongly Agree”). The mean results aresummarized in Table 3-10.

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Table 3-10Assessing the Impact of Environmental Management Systems on Corporate Performance

Your company’s environmental management system:Mean

ResponseNumber

Responding

Not adversely affected the position of your company in themarketplace ........................................................................................ 6.57 1401

Not compromised the product’s acceptability from the customer’sperspective ......................................................................................… 6.29 1398

Caused your company to investigate alternative technologies andprocedures .......................................................................................... 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 datarequirements ....................................................................................... 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 ininternational 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 environmentalmanagement systems. In general, such systems are perceived as having a strong, negative impact on themajor strategic dimensions of performance. That is, their presence results in increased lead times, highercosts, 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 internationalmarkets. 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 aresult, for these customers, improved environmental performance is a requirement for doing business inthese new markets.

At best, environmental systems have caused managers to explore more options when dealing withproblems, especially problems involving new technologies and procedures. These systems have also notcompromised 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 firmwould ever consider trying to attain certification in an area as strongly environmentally oriented as is theISO 14000 certification process. As we will see in the next section, the answer is that there is evidence toindicate that such certification does result in some real, quantifiable benefits.

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Assessing the Impact of ISO 14000 Certification on the FirmThe major intent of this study was twofold. The first objective was to assess the attitudes of managers tothe 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 cansee that many managers harbor critical concerns about their environmental management systems and theimpact of these systems on corporate performance. With respect to the second issue, the data showed afar more complex and, ultimately, far more interesting and satisfying answer. To uncover the nature ofthis response, it is first necessary that we ask a simple but important question – “What effect does thestage 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 ISO14000 certification in terms of one of seven levels:

1. Not Applicable2. Not Being Considered3. Future Consideration4. Assessing Suitability5. Planning to Implement6. Currently Implementing7. Successfully Implemented

One way of examining the effect of level of progress in terms of certification is to examine the meanresponses given by the respondents in each of these seven levels for the 14 dimensions of performance.This is done in Table 3-11.

Table 3-11Impact on ISO 14000 Certification Progress on Dimensions of Performance

Level of ISO 1400 certification: 12 2 3 4 5 6 7MeanValue

Not adversely affected the position of yourcompany in the marketplace .............................

5.65(208)

6.27(529)

6.82(275)

7.07(114)

7.47(79)

7.89(79)

7.81(37)

6.57

Not compromised the product’s acceptabilityfrom the customer’s perspective ............……..

5.42(208)

5.95(527)

6.45(275)

6.87(113)

7.19(79)

7.52(79)

8.22(37)

6.29

Caused your company to investigatealternative technologies and procedures ..........

4.62(208)

4.86(528)

5.90(275)

6.32(113)

6.57(79)

6.85(79)

7.51(37)

5.49

Helped enhance the reputation of yourcompany...............…………………………….

4.11(208)

3.87(532)

5.16(275)

5.65(114)

6.25(79)

7.24(80)

8.38(37)

4.81

Significantly reduced waste within theproduction process ...…………………………

3.99(206)

3.89(531)

5.05(275)

5.27(114)

5.84(79)

6.67(79)

7.30(37)

4.67

Placed reasonable demands on the informationsystem and on data requirements ....................

3.78(204)

3.61(530)

4.43(273)

4.61(114)

5.18(79)

5.41(79)

6.43(37)

4.23

Had benefits that have definitely outweighedany costs incurred ..…………………….…….

3.67(205)

3.40(529)

4.59(273)

4.75(114)

5.50(78)

5.85(79)

6.22(37)

4.18

Significantly reduced waste within theequipment selection process ………………….

3.43(205)

3.19(525)

4.45(273)

4.41(112)

4.95(78)

5.44(79)

5.65(37)

3.94

Improved its chances of successfully sellingits products in international markets ...….........

2.77(206)

2.95(532)

4.05(274)

4.02(114)

4.86(79)

6.01(78)

7.25(36)

3.67

2 The first number is the mean response, while the second number in parenthesis refers to the number ofrespondents.

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Helped your company design/develop betterproducts ..........………………………………..

3.17(207)

2.86(530)

3.95(276)

3.95(114)

4.57(79)

5.28(79)

5.60(37)

3.59

Significantly improve its position in themarketplace ...........…………………………...

2.96(206)

2.70(531)

3.74(275)

4.09(114)

4.62(78)

5.09(79)

6.24(37)

3.46

Significantly reduced overall costs ..................2.80(206)

2.71(531)

3.55(275)

3.75(114)

4.66(79)

4.91(79)

5.35(37)

3.32

Significantly improve product quality .............2.90(206)

2.71(531)

3.49(276)

3.60(114)

4.25(79)

4.29(79)

5.19(37)

3.26

Significantly reduce lead times ...............….....2.40(207)

2.27(531)

2.76(275)

3.06(114)

3.52(79)

3.79(79)

4.27(37)

2.71

In reviewing the data contained in this table, several important results can be readily identified. Notingthat 5 denotes a neutral position, the first result is that there is a strong positive relationship between thestage of ISO 14000 certification and the effectiveness of the environmental management system. In otherwords, the closer that you get to attaining ISO 14000 certification, the greater the positive impact that theenvironmental management system has on the overall performance of the firm. The only exception to thisrelationship involves the relationship between the environmental system and lead times. For thisrelationship, environmental management systems are seen as having a slightly negative impact on leadtimes. Further, for those respondents that had achieved ISO 14000 certification, the result was a slight butpositive impact on costs and quality. This result runs counter to the perception that improvedenvironmental performance comes at the cost of increased lead times (some support for this), decreasedquality 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 ISO14000 certification, other important benefits are obtained. First, these respondents noted that, by attainingthis 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, therespondents agreed that the benefits did outweigh the costs. Finally, these various benefits did not requirethe 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 onthe way to attaining ISO 14000 certification, purchasing managers can expect to be dealing with plantsthat are more efficient and more competitive. Except for the increased lead times, the attainment of ISO14000 certification has made these plants into better suppliers.

These findings raise two other related issues. The first pertains to the decision to pursue ISO 14000certification. That is, if there is a real benefit to being ISO 14000 certified, then what factors influencethis decision. The second focuses on assessing the effectiveness of ISO 14000 certification relative to theother programs available (specifically, industry voluntary environmental programs such as ResponsibleCare ® or the governmental voluntary environmental programs such as Green Light ® or 33/50). Thesetwo issues will be assessed in the following sections.

Obstacles to ISO 14000 CertificationThe next question examined within this study focused on the issue of identifying those factors that couldact as an obstacle to ISO 14000 certification. Attention was focused on the various potential sources ofuncertainty. Uncertainty was flagged on the assumption that the higher the uncertainty, the less likely afirm 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 accommodateISO 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 berequired.

For all 11 dimensions, an eleven point scale was used in soliciting responses. This scale was anchored at0, which represented “Highly Uncertain,” at one end and at 10, representing “Well Known,” at the otherend of the scale.

The first step in understanding the role of uncertainty is to describe it in statistical terms. This was doneby generating the mean levels of perceived uncertainty for each of the 11 dimensions. These results arepresented in Table 3-12. As is evident from this table, the level of uncertainty is very high on all of the 11dimensions, with the average level of uncertainty being 3.13 (relatively higher). The reported uncertaintywas highest for investors’ reaction (remember, with this scale, the lower the reported value, the higher thelevel of perceived uncertainty) with a mean value of 2.66, and lowest for changes in local laws, with amean of 3.54.

Table 3-12Major Sources of Uncertainty Regarding ISO 14000

Uncertainty Due to:Mean

ResponseNumber

RespondingLocal Regulations ………………………………………… 3.54 1343Potential Changes in ISO 14000 standards ……………... 3.51 1340State/Provincial Regulations …………………………….. 3.49 1344Federal Regulations ……………………………………… 3.33 1343Costs of Certification …………………………………….. 3.15 1341Changes on current environmental management system 3.14 1344International Regulations ………………………………... 3.11 1337Benefits of ISO 14000 certification ……………………… 2.88 1349Potential disclosure ………………………………………. 2.88 1345Impact on Suppliers ……………………………………… 2.74 1348Investors’ reaction ………………………………………... 2.66 1344Average Level of Uncertainty ………..…………………… 3.13

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Concluding CommentsWith a sample of 1510 respondents, this study was faced with an “embarrassment of riches.” That is, theresearchers were presented with a great deal of information. This report represents an attempt to identifythe critical findings from this large database. In reviewing this chapter and its findings, the followingmajor points were flagged as important:

• The respondents in this study came from a variety of industries and were in a variety of managerialpositions. They also had familiarity with their position, being in the current position for anaverage 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 mostfrequently pursued was that of ISO 9000/QS 9000 certification; the initiative least often pursuedwas that of implementing an environmental management system.

• At present, most environmental management systems are implemented using a separate, formaldepartment that is responsible for this aspect of corporate performance. They also tend to focustactical and operational problems. Their stance is primarily reactive. That is, in most firms, thesesystems come into play once a problem has occurred. They are also driven by environmentalregulations. Finally, they are internally oriented, with relatively little attention being devoted toenvironmental problems within the supply chain.

• Enhanced environmental management can be attained through a variety of actions. Therespondents regularly considered most of these options.

• Overall, environmental management systems are not seen in a positive light. In general, thesesystems are seen has having a strong negative impact on the major strategic dimensions ofperformance (i.e., lead time, costs and quality). They also do not really enhance the firm’scompetitive position in the market place. They are also not seen as improving the firm’s ability tosell its products internationally. These results are influenced by the progress of the plant inattaining ISO 14000 certification.

• The ISO 14000 certification program is relatively new, and as a result, there are relatively fewplants that have attained this certification. Out of the 1510 respondents, only 37 (2.5%) haveattained this level of certification. This number is low relative to other environmental programssuch as Industrial Voluntary Environmental programs (where 284 respondents noted that theysuccessfully implemented these programs) and Voluntary EPA programs (where 253 respondentsnoted successful implementation).

• Successful attainment of ISO 14000 does have a large, positive impact on the perceived efficiencyand effectiveness of the environmental management system. Except for lead times, which areslightly negatively affected, ISO 14000 greatly improves every dimension of performance. Thisfinding points to a situation where those firms that have attained this level of certification are notonly 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 isaffected by size (the larger the firm, the more progress it is likely to have made), nature ofownership (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 ofTQM 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 federalregulations, changes in ISO 14000 standards, the costs of certification, the benefits ofcertification, and the impact of the ISO 14000 standards on current environmental managementsystems.

In the short, the data seems to indicate that, with ISO 14000 certifications, plants can be both clean (moreenvironmentally responsible) and green (more efficient).


1

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