Environmental management is good business.

EXECUTIVE SUMMARY

Companies are increasingly investigating environmental management certification--either because their customers demand it or because it promises to offer opportunities for improvement. But what are the real benefits of ISO14001 certification? The authors draw from their experience in the Kentucky Pollution Prevention Center to detail benefits as well as implementation pointers.

Many firms began environmental management certification efforts in the mid-1990s due to increased global competition, customer awareness, and the potential benefits both in terms of bottom-line performance and operational efficiency, ISO 14001 certification represents a merger of two recent trends in the field of operations management that have shifted management attention from outcome to processes. The two trends are to have the critical processes for delivering quality products properly documented and widely understood and to have a sound environmental policy adhering to international standards.

Within the family of ISO 14000 certification standards, ISO 14001 specifies the structure of an environmental management information system--commonly called an environmental management system or EMS--which builds on and adds to existing environmental efforts such as regulatory compliance, training, records keeping, emergency planning, and preparedness. EMS integrates environmental considerations into and throughout all of an organization's activities, products, and services based on established business principles, allowing operations managers to address and continually improve environmental concerns based on the "plan, do, check, review" philosophy.

Many large corporations such as Ford Motor Co., General Motors, Honda, Toyota Motor Manufacturing, and Xerox are requiring their suppliers to obtain 14001 registration and driving considerable interest in environmental management systems.

However, most facility operations managers have unanswered concerns regarding the proven benefits of an EMS at the facility level. These concerns seem to stem in part from the comprehensive nature of an EMS (compared to the compliance-based, reactive, piecemeal approach to environmental management most companies have taken) as well as managers' relative inexperience with implementing and maintaining an EMS.

Operational benefits of an EMS

The development and use of cross-functional teams consisting of operations managers is one example of how ISO 14001 promotes greater employee involvement in a facility's environmental efforts. In a fully functioning EMS, employees are knowledgeable about the EMS, why the system is in place, and what their role is in supporting environmental performance.

This was observed most markedly during a three-day ISO 14001 registration audit at an electrical motor manufacturing facility. The auditors devoted one of three days to speaking with employees in all departments. The auditors asked employees about the environmental policy, environmental objectives, and targets in their work area, such as what they did on a daily basis to meet their objectives, why it was important to meet them, what kind of emergencies might happen in their area, and what they would do if these happened. All employees knew the answers to auditor questions. Never before in nearly five years of experience have we seen this breadth and depth of environmental knowledge and awareness in employees at a facility.

The benefits of this kind of employee awareness are many. One manager indicated that greater employee involvement allowed him to focus less on tactical, day-to-day environmental issues and more on strategic environmental issues such as continual improvement of goals and awareness of new environmental compliance regulations. Knowing what new regulations are coming down the pike, for example, helps appropriate planning and budgeting, staying in compliance, and avoidance of monetary fines and plant shutdowns imposed by regulatory agencies. Through involvement, employees are aware of what needs to be done environmentally, are empowered to correct it, and begin to recommend continual improvement opportunities. This potentially reduces the chances for environmental violations and the fines, penalties, and bad community relations that can subsequently occur.

Another operational benefit of an EMS is that it serves as a pollution prevention vehicle. Pollution prevention focuses on reducing water, air, and solid waste emissions as well as lost time and energy. Pollution prevention seeks to increase the utilization of raw materials, thereby increasing throughput. Examples include installing over-fill alarms on fill tanks to reduce spills, implementing first-in, first-out inventory controls, and increasing material utilization in production processes. Pollution prevention can also reduce overhead expenses such as utilities, environmental compliance administration burden, and worker health and safety costs. Even more important than these direct out-of-pocket expenses are the time and energy savings that can be achieved through pollution prevention. In an example shared by the Kentucky Pollution Prevention Center, reducing direct materials expenses at one company saved $75,000; the accompanying 1 percent increase in productivity was worth $125,000 to the company.

One of the guiding principles of ISO 14001 is continual improvement in the system and environmental performance. Pollution prevention is one of the best ways to demonstrate continual improvement in ISO 14001 and earn a financial return from the system. The Kentucky Pollution Prevention Center recently received a request from an ISO 14001-registered manufacturer for assistance in finding a less toxic replacement for methyl-ethyl ketone (MEK) in an adhesive process. This request came directly from the fact that the facility had an EMS objective to investigate MEK replacement during the year.

The cost savings from implementing an ISO 14001 EMS depend on a variety of factors:

* The number, type, and magnitude of environmental impacts

* The aggressiveness of environmental efforts to date

* The degree to which impacts are subsequently reduced in EMS efforts

* Differences in materials, processes, or technology used at the facility

For example, one EMS manager reported that through EMS employee awareness training and changes in work practices (i.e., with no cash expenditure), the company boosted throughput and cut operating expenses by reducing 1.5 million gallons of waste oil to 800,000 gallons per year, saving $700,000 annually.

Other pollution prevention-based EMS efforts dropped the facility from a large-quantity to a small-quantity hazardous waste generator, freeing the plant from the more onerous hazardous waste regulatory requirements. Additional benefits in non-regulated areas include 32 percent water usage reduction during the past two years, removal of all PCB transformers from the plant, and change out to low-mercury lighting tubes throughout the plant.

The companies in the above examples achieved objectives and targets that were initially identified as part of the EMS planning process. Specifically, ISO 14001 requires organizations seeking registration "to identify the environmental aspects of its activities, products, or services that it can control and over which it can be expected to have influence ... in order to determine those which have or can have significant impacts on the environment." Those with significant environmental impacts must be considered in setting objectives and targets. This part of ISO 14001 requires facilities to inventory their environmental issues and then prioritize those issues based on criteria of their own choosing. These criteria commonly include cost, whether or not the facility is regulated, frequency of occurrence, volume or duration of impact, toxicity, probability of entry to the environment, and degree of impact on the environment. The facility then chooses significant aspects it will manage through environmental management programs.

The significance of this process for operational managers is that many facilities have never systematically identified and prioritized their environmental issues, leaving the true extent of environmental impacts from the facilities' activities, products, and services unknown and unaddressed. For example, one chemical processor identified approximately 550 environmental aspects from the time that rail-cars unload raw material through the time the final product is shipped to the customer. Of these 550 aspects, approximately 50 were determined significant, and about a dozen were selected to be managed through environmental management programs.

Financial benefits in non-regulated areas such as energy, water, and solid waste are prime cost-saving areas of opportunity as many companies have only very recently begun to explore these areas for efficiency improvement. For example, drought conditions in central Kentucky forced one municipality to approach an electroplater for water use reductions; through a systematic effort, the plater was able to reduce water usage from 300,000 to 140,000 gallons per day with no adverse effect on production. Non-regulated benefits such as noise, lighting, and traffic present opportunities for improvement in community relations with some facilities.

In sum, successfully implemented environmental management systems take companies from compliance-based (minimum acceptable level) to performance-based environmental management.

Implementing an EMS

The focus on continual improvement and non-regulated benefits supports an EMS as a performance-based approach to environmental management. An EMS achieves this through seven channels:

1. Integrate the EMS into facility operations. In most manufacturing companies, environmental management efforts such as regulatory compliance are a support activity that becomes a cost center. While many companies have taken a proactive stance to integrating environmental management into and throughout plant operations, the overwhelming majority seem to keep the environmental manager as a stand-alone element in the company. An effectively implemented EMS applies business principles and practices from areas like accounting, payroll, production, information systems, and quality to environmental issues.

Print Get the Mag Weekly Updates