Study Reveals Financial, Regulatory and Internal Benefits from ISO 14K

While meeting customer and corporate requirements, companies certified to ISO 14001 in the United States also have obtained financial, regulatory and internal benefits, according to a new landmark survey.

“The survey indicates that certifying to ISO 14001 provides a strong impetus to achieving goals set in the environmental area. It indicates that, while meeting customer and corporate requirements, the certified facilities are also obtaining financial, regulatory and internal benefits,” say researchers from the University of Pennsylvania’s prestigious Wharton Risk Management and Decision Processes Center, who performed the analysis.

“It reinforces that having performance components along with certification delivers environmental performance improvement,” according to the researchers, who examined responses from 421 environmental managers in an extensive analysis that will be published later this year by QSU Publishing (also see page 7).

The study, which was conducted by the ANSI-ASQ National Accreditation Board LLC (ANAB) and QSU Publishing Company (QSUP) in cooperation with Wharton, reveals that ISO 14001 certification provides enhanced employee and management awareness of environmental inputs, better awareness of environmental aspects that leads to improvement as well as enhanced standardization and an improved structure.

Moreover, researchers conclude that the presence of a certified ISO 14001 environmental management system is likely to lead to beneficial written documentation of environmental programs and a systematic approach to managing environmental issues.

“Based on these findings, regulators and trade organizations should encourage firms with marginal environmental programs to undertake certification and develop an EMS,” declares Peter J. Schmeidler, a Wharton senior research fellow, who is leading the research effort.

“Incentives should be considered by the regulatory community and, while harder to materially define, the public sector should recognize those firms that have committed to improving their environmental footprint.”

Environmental Managers Contacted
The research team began contacting ISO 14001 certificates holders in the United States to ascertain the costs, benefits and savings associated with accredited, third-party certification in February 2006. Respondents visited a special web site that was set up to collect data, but not all completed the survey instrument, which took some respondents as little as 15 minutes and others as long as 45 minutes.

“A great number of people in the survey said that it helped raise awareness in general. That’s what it’s supposed to do,” observes Robert H. King, Jr., president of ANAB. “That really means to me that the people who are using it have driven it down through the ranks of the organization. It showed me that it just wasn’t the environmental department doing the work.

Everybody was involved. This is not speculation. It’s feedback from actual users of the system, from a broad spectrum of industries.”
Paul Scicchitano, president and CEO of QSU Publishing, says that the survey focuses on meat-and-potato type issues that will help companies make more informed decisions regarding third-party certification.

“One of the most important findings in my opinion is that companies can increase their bottom-line benefits by doing a thorough job up front in identifying environmental aspects and targeting them for improvement. It makes sense, but now we have the facts to back it up.”

Greater Performance Gains
The analysis reveals that facilities that didn’t previously have formal environmental management systems (EMS) in place prior to becoming certified to ISO 14001 had improved their environmental performance to a greater extent than other organizations.

“They generally felt that this improvement was due to certification,” says Schmeidler. “Additionally, the financial data collected demonstrates that the cost of certification is not excessive, and that savings attributable to being certified could provide a fairly quick payback of around two years.”

Benchmarking
Schmeidler tells ESU that the analysis will be a useful benchmarking tool that companies can use in determining how they stack up to other organizations without undertaking costly and time-consuming benchmarking studies.

“Facilities should also compare their responses with those in the survey and review these data for opportunities to improve their environmental programs,” he says.

No Significant Differences
While the survey was open to certificate holders from all industries and sectors, researchers did not observe any significant differences among the various SIC groups, or “certainly not large enough to make any definitive findings,” observes Schmeidler.

“The biggest mistake regarding the adoption of ISO 14001 is to have it as a stand-alone process,” he tells ESU.

“It should be integrated with other facility systems to obtain the greatest benefits at the lowest cost. The survey demonstrates that facilities which have better integrated ISO 14001 with other systems achieve larger environmental improvement than others.”

Schmeidler says that it is also clear from the analysis that companies must commit sufficient resources to identify improvement opportunities and implement them. “Facilities should also take advantage of the periodic audits, to get best-practices benchmarking ideas from their registrar’s representative and determine if what works for others will lead to better environmental approaches.”

Customer Expectations
The vast majority of companies in the United States that attained ISO 14001 certification were obliged to do so by their customers or by a corporate mandate.

“Customer expectations are the strongest motivation for ISO 14001 certification. This is also consistent with previous findings relative to ISO 9000 certification in the case of quality management systems,” according to the survey team.

“Conversely, the absence of customer expectations, more than any other single factor, might explain why there have not been more third-party certifications to ISO 14001 in the United States. While there are many positive findings relative to third-party certification, companies may not necessarily seek them out if left to their own devices.”

Invitations to Participate
Electronic invitations to participate in the survey were sent to certified clients of the 10 largest ISO 14001 certification bodies in the United States as determined by QSU Publishing (ESU’s parent organization), which maintains the WhosRegistered.com Global database as well as the ISO 14001 Worldwide Certified Company Directory of ISO 14001 certificate holders.

In addition, electronic invitations were sent to the clients of some smaller certification bodies, based on extensive outreach conducted by ANAB and QSU Publishing. All but one of the Big Ten Registrars for North America cooperated in making client information available.

The fourth in a series of surveys conducted by QSUP and Quality Systems Update (QSU) since 1993, the current initiative will result in a book and/or CD-ROM by the end of the year.

The present survey is the first to look specifically at ISO 14001, which was first published in September 1996 and revised in November 2004.

Haitao Yin, a Wharton doctoral candidate, who has been culling through the responses, confirms that the data shows a direct positive correlation between the environmental performance of certified facilities and the environmental aspects they target as part of their ISO 14001 implementation.

“If you really select one environmental aspect as your EMS goal, you really will do better on this aspect,” Yin has said.

Conversely, companies that do not tie a particular environmental aspect to an EMS goal do not report improvement in those areas merely from the presence of an environmental management system based on ISO 14001.

The survey team also drew from the experiences of the three previous surveys of ISO 9000 certificate holders. The first survey was conducted with Deloitte & Touche while QSU partnered with Dun and Bradstreet Information Services on the second survey and Plexus Corp. on the third. The latter drew responses from 1,150 respondents representing nearly 4,000 certificate holders in the United States and Canada. It resulted in a 301-page survey analysis and CD-ROM published by McGraw-Hill (now published by QSUP).

Each of the previous surveys turned up both positive and negative findings with respect to quality management system certification. Registration costs can vary widely depending on a number of variables, including whether companies use their system as a springboard for advanced quality practices, whether they incorporate audit findings into training and whether top management applies data to find solutions to problems.

The US accreditation body for management systems, ANAB, accredits certification bodies (CBs) for ISO 9001 quality management systems (QMS) and ISO 14001 environmental management systems (EMS) as well as a number of industry-specific requirements. ANAB is a member of the International Accreditation Forum (IAF) and a signatory of the IAF multilateral cooperative arrangements (MLAs) for QMS and EMS programs.

Through the IAF MLAs and a Multilateral Cooperative Accreditation Arrangement, ANAB cooperates with other accreditation bodies around the world to provide value to its accredited certification bodies and their clients, ensuring that accredited certificates are recognized nationally and internationally. The global conformity assessment system ensures confidence and reduces risk for customers engaging in trade worldwide.

QSUP publishes authoritative journals, books and software on management systems, including Quality Systems Update (QSU), Environmental Systems Update (ESU), WhosRegistered.com Global and WhoIsTraining.com.

Respondents of the ISO 14001 survey received complimentary subscriptions to ESU for a limited time. In addition, they were offered a free copy of the book, Ford and ISO 14001, written by Tim O’Brien, then the Director of the Environmental Quality Office of the Ford Motor Company. Everyone who completes the survey was also entered in a drawing to win a $250 shopping certificate for use on Amazon.com.