The ISO 14000 Series International Environmental Management Standards are receiving significant attention from business managers and their legal and economic advisers, and it is said that the standards may be a "watershed in the annals of environmental regulation." Business managers view ISO 14000 as a market-driven approach to environmental protection that provides an alternative to "command and control" regulation by government. Therefore, the standards are of significant interest to business organizations and their legal representatives; environmental groups and their members; and governments, their agencies, and their officials.
The ISO 14000 standards were issued in September 1996 by the International Organization for Standardization (ISO), a major, private organization involved in standardization of industrial management practices. Although the ISO 14000 standards are the product of a nongovernmental organization and compliance with the standards is voluntary, one of the primary purposes of the standards is to ensure that businesses comply with applicable environmental law. Businesses view implementation of ISO 14000 as a means to self-regulate, thereby minimizing their exposure to surveillance and sanctions by the U.S. Environmental Protection Agency (EPA) and its state-level counterparts. Part II of this article explores reasons for the development of ISO 14000. Part III describes the provisions of ISO 14000, and Part IV describes the perspectives of various parties on the utility of ISO 14000. Finally, Part V surveys the overall strengths and limitations of ISO 14000.
Several converging factors relating to the developing global marketplace led to the development of the ISO 14000 Series International Environmental Management Standards. As industrialization has spread to countries throughout the world, citizens and their governments have voiced their concerns about the effects of that industrialization on the environment. As a result of such concerns, the concept of sustainable development was developed. Its pursuit has been adopted as a goal by governments and business groups around the world.
Sustainable development was articulated as a goal and defined in 1987 by the World Commission on the Environment and Development (World Commission), a body established by the United Nations. In Our Common Future, the World Commission defined sustainable development as development which 'meets the needs of the present without compromising the ability of future generations to meet their own needs."
For more than a decade, sustainable development has been at the center of discussion of environmental issues, especially with respect to the effects of increased trade on the environment. Sustainable development was the focus of discussion at the United Nations Conference on the Environment and Development held in Rio de Janeiro in 1992, and it was listed as one of ten goals in the Environmental Side Agreement to the North American Free Trade Agreement (NAFTA), which took effect on January 1, 1994. And in 1996, the ISO incorporated the attainment of sustainable development as a major goal in its new ISO 14000 Series International Environmental Management Standards.
Another impetus for ISO 14000 was the desire of businesses to self-regulate and minimize their exposure to government regulation. Such regulations can be burdensome. For example, in the United States, environmental regulations fill more than 20,000 pages of the Federal Register, and there are thousands of additional environmental regulations at the state and local levels.
A third impetus for the ISO 14000 Series Standards came from the United Nations Conference on the Environment and Development (UNCED), which was held in Rio de Janeiro in 1992 and attended by representatives of more than 100 nations. In response to documents issued by UNCED, the international business community adopted a "Business Charter for Sustainable Development." The document includes 16 proposals that set out basic elements for any environmental management system (EMS).
A fourth source of inspiration for development of the standards comes from environmental management programs proposed by groups of concerned citizens around the world. For example, in response to a major oil spill off the coast of Alaska by a ship called the Exxon Valdez, a group of environmentalists, investors, government agencies, and economists formed the Coalition for Environmentally Responsible Economies (CERES). The CERES group issued a set of principles that was first known as the Valdez Principles and was later renamed the CERES Principles. The CERES Principles give guidelines designed to lead to an international standard for EMS. CERES has been recognized as a direct impetus for the ISO 14000 series and similar programs.
A fifth impetus for the ISO 14000 series is the need for harmonization among various environmental management and auditing programs. Such harmonization is needed within the United States. For example, the EPA has designed several different environmental management programs, including the XL Program, the Star Track Programs, and the Environmental Leadership Program (ELP). ELP is a voluntary program in which a participating business creates its own EMS according to EPA guidelines. The incentive for participation is that the EPA may treat the company leniently in instances of noncompliance, and, upon certain conditions, the EPA refrains from conducting routine enforcement inspections at the company's facilities. Various state-level counterparts to the EPA have developed similar programs.
In addition, there are industry-specific environmental review programs such as the Chemical Manufacturers Association's (CMA's) Responsible Care program (also known as CARE). All members of the CMA are required to participate in the program, which sets out conformance standards in the areas of pollution prevention, emergency response, and employee health and safety protection and awareness.
Harmonization is also needed internationally. Companies must deal with EMSs originating in the various countries in which they operate. For example, in 1995 the British Standards Institute (BSI) became the national standards setting organization for the United Kingdom. In that same year it became the first national organization to implement a program recognizing independently verified EMSs. In 1995 the European Union (EU) implemented an Eco-Management and Audit Regulation (EMAR) program. EMAR includes the Eco-Management and Audit Scheme (EMAS), which took effect in 1995. It is a voluntary program through which a company may register a site as being in compliance with the system. The objectives of the program are to promote adherence to standards for environmental management and to inform the public about the environmental performance of companies.
Businesses are searching for a way to harmonize EPA standards, state standards, private industry standards (such as the CARE program), and requirements of other countries and trade organizations. They want to avoid the record keeping involved in compliance with multiple environmental systems and other management systems, such as quality control systems. In addition, they want to avoid dealing with conflicts between and among substantive provisions of such systems. Elimination of multiple sets of standards or, at least, harmonization of such standards became particularly important in the late 20th century in connection with the globalization of business. Today, large and small companies deal with the laws and regulations of multiple countries and must comply with the requirements of various trade organizations. It is an essential part of doing business as we move into the 21st century.
The initial standards in the 14000 series include numbers 14000, 14001, 14004, 14010, 14011, and 14012. They were developed by ISO Technical Committee (TC) 207 Environmental Management and were adopted by the ISO in 1996.
A company must fulfill the following three requirements to comply with ISO 14000:
ISO 14000 sets up criteria pursuant to which a company's EMS may be certified. The EMS is a set of procedures for assessing compliance with applicable environmental laws. It must also include procedures for assessing the company's own procedures for identifying and resolving environmental problems, and for engaging the company's workforce in a commitment to improved environmental performance.
ISO 14001 describes two types of documents (guidance documents and specification documents), and it sets out standards used to evaluate a company's EMS. For example, the EMS must include an accurate summary of the laws and legal standards with which the company must comply. Applicable laws include federal, state, and local laws. Applicable legal standards include permit stipulations and provisions of administrative or court-certified consent judgments.
To be certified to ISO 14001, the EMS must include five elements. First, it must establish an environmental policy. Second, it must set environmental goals and establish plans to comply with legal requirements. Third, it must provide for implementation and operation of the policy including training of personnel, communication, and document control. Fourth, it must set up monitoring and measurement devices and an audit procedure to ensure continuing improvement. Finally, it must provide for management review to take place on a regular, planned basis.
The EMS must be certified by a registrar who has been qualified under ISO 13012, which is a standard that predates the ISO 14000 series. If a company chooses not to undergo third-party EMS certification, it may decide to use ISO 14001 as a basis for self-declaration. It is important to note that ISO 14001 is the only standard in the ISO 14000 series that leads to certification. The others support 14001 or provide guidance only.
The ISO 14004 standard gives advice only; compliance with its provisions is not required. It includes five principles, each of which corresponds to one of the five areas of ISO 14001 listed above. First, the company should define its environmental policy and take steps to ensure its commitment to the EMS. Second, the company should develop a written plan to implement its environmental policies. Third, it should provide support mechanisms to implement its environmental policies. Fourth, the company should monitor and evaluate its environmental performance. Fifth, the company should review and revise its EMS periodically with the objective of improving its overall environmental performance.
ISO 14010, 14011, and 14012 are auditing standards. ISO 14010 gives general principles of environmental auditing, and ISO 14011 provides guidelines for auditing of an EMS. ISO 14012 gives guidelines for establishing qualifications for environmental auditors called "registrars."
The ISO is considering various proposals for additions to the ISO 14000 series standards. (Documents providing proposals are designated by the prefix "CD.") CD 14021 gives terms and definitions for use in self-declaration through environmental labeling. The proposed standard has two goals. First, it establishes guidelines for environmental claims made in connection with the supply of services and goods. Second, it defines specific terms used in environmental claims and provides rules for their use.
Several draft documents address other concerns. CD 14024 provides guidelines, practices, and certification procedures related to environmental labeling. CD 14040 deals with life-cycle assessment of a product. CD 14050 provides a comprehensive set of definitions of terms used in environmental management.
In addition, an ISO working group is reviewing the needs and concerns of small and medium sized enterprises (SMEs). The group is preparing CD 14002 Environmental Management Systems—Guidelines on Special Considerations Affecting Small and Medium Size Enterprises.
It is important to note that the ISO issued a separate set of management standards in 1987 called the ISO 9000 series. It is a series of standards designed to lead to quality in design, development, production, inspection, testing, installation, and servicing of products. In short, the standards are designed to promote quality management practices.
The ISO 9000 series and the ISO 14000 standards are process standards, not performance standards. Both series promote management systems that focus on prevention rather than corrective action. But the ISO 14000 series can be distinguished from the 9000 series in at least four major aspects. First, the 9000 series is designed to help an organization maintain quality as it designs, produces, and delivers a product or service to a customer. Thus, it focuses on the customer-supplier relationship. The ISO 14000 series is of concern to various groups of interested parties or "stakeholders." It concerns businesses and their customers as well as government, environmental organizations, consumer groups, and others. Second, the ISO 14000 series involves more strategic planning; it prompts businesses to pursue continuous improvement in their environmental performance. Third, the subject of the 14000 series (environmental protection) is heavily regulated by government through thousands of statutes and regulations. Noncompliance with environmental law can result in substantial fines or even imprisonment of business managers. Thus, a major goal of the ISO 14000 series is to ensure that businesses are in compliance with their own national and local applicable environmental laws and regulations. Quality of management is less directly tied to law. Fourth, the ISO 14000 series covers a broad area (the environment) and takes a holistic approach to that area, focusing on the business organization's activities and how they affect the land, water, and air. The quality of management area covered by ISO 9000 is more limited.
Certification to ISO 9000 is not a precondition to ISO 14000 certification, but coordination of the two sets of standards has been addressed by the U.S. Technical Advisory Group, which provides advice to the ISO's Technical Committee charged with formulation of the ISO 14000 standards.
Many organizations that are already registered to ISO 9000, however, have decided to seek ISO 14000 registration, also. As they do so, they are seeking ways to integrate ISO 14000 systems into their existing ISO 9000 systems.
The benefits and detriments of the ISO 14000 standards depend on the perspectives of the speaker. Therefore, this section looks at the ISO 14000 standards from the perspectives of business organizations, governments, and environmentalists.
ISO 14001 certification may bring various rewards to a company, most of which can ultimately provide a financial advantage to the company. Seven potential rewards are explored below, but this list could be expanded.
First, many firms are hoping that, in return for obtaining ISO 14001 certification (and the actions required to do so), regulatory agencies such as the EPA will give them more favorable treatment. For example, businesses are hoping for less stringent filing, or less monitoring, or even less severe sanctions for violations of environmental laws.
Many state regulatory agencies have suggested that the ISO 14001 certificate may be classified as a voluntary audit program that will, in turn, qualify a business for leniency in filing or monitoring requirements or even, less severe sanctions for violations of environmental regulations. In fact, some states have already acted to provide such leniency. For example, the Pennsylvania Department of Environmental Protection (PA DEP) grants regulatory relief to companies that conduct voluntary environmental compliance audits. If a company, local government body, or an individual completes an environmental compliance audit and discovers a problem, discloses the problem to the PA DEP, and takes action to correct the problem, the DEP will not take civil or criminal action. James M. Seif, secretary of the PA DEP stated, "Our policy is centered on one simple premise: You find it, you fix it, you tell us—no penalty." At least 14 other states have adopted legislation or policies to encourage voluntary environmental audit programs and to limit penalties associated with violations discovered in the process of those audits. Those states include Arkansas, Colorado, Idaho, Illinois, Indiana, Kansas, Kentucky, Minnesota, Mississippi, Oregon, Texas, Utah, Virginia, and Wyoming.
In a state that has not adopted legislation or policies to provide regulatory relief to businesses that implement an EMS, a business can at least benefit from an enhanced relationship with environmental regulatory agencies and regulated businesses. A cordial and cooperative relationship between the business and regulators can be valuable in many instances.
A second benefit to businesses that choose to become certified to ISO 14001 is that substantial numbers of citizens can be influenced in their buying decisions. Obtaining ISO 14000 certification is a way for companies to demonstrate their environmental stewardship and accountability to the public.
Third, ISO 14000 certification can attract investors to the business organization. A growing number of individual investors as well as investment managers and managers of mutual funds search for environmentally responsible businesses.
Fourth, the company may save money on insurance premiums. For example, some insurance companies give reduced rates on insurance to cover accidental pollution releases if the insured company has successfully implemented an EMS.
Fifth, actions taken in the process of implementing the EMS are likely to reduce the likelihood of toxic spills endangering employees and members of the community.
Sixth, financial institutions are sensitive to environmental risks and their impact on collateral. ISO 14001 may help a corporation obtain loans and protect it from allegations of investor fraud.
Seventh, by implementing an EMS, a company may realize internal cost savings as a result of waste reduction, use of fewer toxic chemicals, reduced energy use, and recycling.
A company's costs in becoming ISO 14001 certified depend on the scope of the EMS. For example, the EMS might be international, national, or limited to individual plants operated by the company. National and international systems can be very costly. With respect to a company operating in more than one legal jurisdiction (whether that means two states of the United States or two countries, such as the United States and Mexico), it will be necessary to assess the company's compliance with the laws of all national, state, and local jurisdictions involved.
Lawyers studying the ISO 14000 standards are discussing a number of legal issues related to use of environmental audit documents prepared as a part of the ISO 14001 certification process. There are serious questions as to whether a governmental regulatory agency can require disclosure of information discovered during a self-audit by a company. The use of a third-party auditor may weaken a company's argument that information is privileged. In view of the fact that some companies conducted environmental audits for various reasons prior to the creation of ISO 14001, this is not a new area of the law. It is still developing, however, and questions specific to ISO 14001 must be resolved. Taking one step to deal with such problems, the EPA has implemented an Interim Environmental Audit Policy that encourages business organizations to conduct environmental audits. It provides the potential for eliminating or reducing civil penalties and avoiding criminal prosecution when specified conditions are met. Similarly, various states have adopted some form of environmental audit privilege.
The ISO 14000 series has potential consequences with respect to international trade, also. ISO 14000 is designed to provide a series of universally accepted EMS practices and lead to consistency in environmental standards between and among trading partners. It has the potential to lead to two kinds of cultural changes: one of them would be within individual companies and the other would be a global change. First, within the corporation, the ISO 14000 Series can promote consideration of environmental issues throughout the company's operations. Managers of companies that have implemented ISO 9000 have learned to view their companies' operations through a "quality of management" lens. Similarly, it is hoped that implementation of ISO 14000 will lead to use of an "environmental quality" lens by businesses. Second, the ISO 14000 series has the potential to become part of a global culture as the public comes to view ISO 14001 certification as a benchmark connoting good environmental stewardship.
The perspectives of developing countries differ substantially from those of industrialized countries such as the United States and Britain for a variety of reasons. The ISO 14000 Series standards were developed by business representatives from industrialized countries. Developing countries from Latin America, Africa, and elsewhere had little input. As compared to developed countries, developing countries and their businesses suffer from limited financial resources, and they have less experience in environmental law enforcement. In many cases, control of industrial sources of pollution is seen as a "luxury" as compared to other more pressing needs of citizens. Their citizens' needs include food, basic housing, clothing, electricity, and clean drinking water.
Because their attentions have been on even more pressing matters, the governments of many developing countries have not developed and consistently enforced environmental legislation. Thus, there has been much discussion about whether the ISO 14000 series standards can be used as an alternative to environmental law in those countries. Some commentators even argue that it could be adopted as law. Some developing countries such as Mexico are reviewing the ISO 14000 series standards and considering incorporating their provisions within their own environmental laws and regulations. Zimbabwe has incorporated ISO 14001 into its national regulatory system. It is important to note, however, that Zimbabwe's plan is to use ISO 14001 in conjunction with its additional legislation and a "tuned up" monitoring system.
On the other hand, various commentators as well as the governments of some developing countries argue that the ISO 14000 environmental standards are functioning as nontariff barriers to trade. This assertion is based on the fact that costs of ISO 14000 registration are prohibitively high for poorly funded companies. Thus companies in developing countries, especially small to medium size companies, will suffer disproportionately if ISO 14000 standards become a "de facto" requirement of doing business with other nations.
Governments' approach to the standards varies widely from one industrialized country to another. Within the EU, efforts are under way to minimize such variance. The European Commission (EC) is the primary legislative body for the EU, and harmonization of standards is a primary missions of the EC. Various European governments provide backing to privately run standards organizations; some grant government charters to their standards organizations. Portugal's primary standards organization is part of its Ministry of Industry, and in Germany and Britain the government makes contracts to obtain standards services as a part of its efforts to serve the public.
Because the countries of the EU are, collectively, the United States's largest trading partner, its standards activities are important to U.S. businesses that trade with its members. U.S. companies doing business with Europe must design their products and ensure that their management practices conform to the requirements of the EU.
The perspectives of the U.S. government merit separate examination because of the dominant place the United States occupies in world commerce. But it is important to remember that U.S. perspectives are those of a wealthy, highly industrialized society with a highly developed regulatory law system.
Agencies of the U.S. government have been actively following the development of the ISO 14000 series standards and have provided input in various contexts. For example, the EPA, the Department of Defense, and the Department of Energy provide representatives to the U.S. Technical Advisory Group (U.S. TAG). The U.S. TAG, in turn, provides input to TC 207, the ISO technical committee responsible for the ISO 14000 series.
The United States has a highly developed regulatory system designed to protect the environment. The EPA, in conjunction with state-level counterparts, enforces a myriad of environmental protection statutes including, but not limited to, the Clean Air Act; the Clean Water Act; Comprehensive Environmental Response, Compensation, and Liability Act (Superfund); and the Toxic Substance Control Act. Thus, unlike a developing country, which may lack a comprehensive regulatory scheme in the area of environmental protection, the United States does not view the ISO 14000 series as a potential substitute for statutes and regulations. Nevertheless, implementation of an EMS by a company certified to ISO 14001 does have the potential to improve that company's rate of compliance with state and federal environmental law.
Environmentalists and their organizations were active in debate and discussion before the United States joined the NAFTA. As a consequence of their concerns the Environmental Side Agreement was added to NAFTA before the United States joined the agreement.
In contrast, environmentalists have not been outspoken with respect to the benefits and limitations of ISO 14000. Their quiet approach to ISO 14000 can be explained, however, by the differing nature of the two sets of documents. The ISO 14000 series standards are not laws. The standards were prepared by business representatives for use by businesses, and environmentalists were not parties in the drafting of the standards.
Yet, as consumers and investors, environmentalists can play an important part in the success (or lack of success) of ISO 14000. At a minimum, the ISO 14000 series will provide environmentalists with further information to enable them to choose to "do business" with environmentally responsible companies. They can choose to purchase the products and services of companies certified to ISO 14001, and they can invest in those companies by purchasing their stock offerings.
Certification to ISO 14001 standards by a business serves one of the purposes of community right-to-know (RTK) and worker right-to-know (RTK) laws. Community RTK and worker RTK laws provide citizens with some of the information they need in order to make decisions about their exposure to toxic chemicals. Similarly, knowledge of the fact that a company's facility is certified to ISO 14000 can provide citizens with useful information as they choose products and services and invest their savings.
On a limited basis, certification to ISO 14001 can help reduce the workload of environ-mental inspectors. To the extent that businesses regulate themselves, government will not have to do as much work to identify violations of environmental law. In days of reduced budgets, the EPA may be able to allocate enforcement personnel and funds to investigation of companies that do not implement self-imposed EMSs.
ISO 14000 series standards require a participating company to review environmental statutes and regulations as it prepares its EMS and as it undergoes periodic review of its environmental practices under the EMS. Self-assessment is likely to increase compliance rates.
Further, the ISO 14000 series can provide a company with a systematic approach for implementing an EMS that will qualify it for participation in the EPA's Excellence in Leadership (ELF) program. Participation in the ELF program can result in leniency by the EPA toward a company that self-discovers violations of environmental law and makes timely efforts to comply with the law. In addition, participation in ELF will exempt the company from certain routine enforcement inspections.
A limitation of the ISO 14000 series is that participants are self-selecting. Because participation is voluntary, it covers only a limited segment of the business community.
A second major limitation of the ISO 14000 series is that it depends on self-enforcement. Thomas Ott, corporate manager for environment, safety, and industrial hygiene with Motorola Corporation, is the U.S. chairperson of the ISO's working group on environmental auditing. He observed, "Having a certificate doesn't mean you have a clean company.… The bad guys who pollute today will still do it, and they'll have a certificate." The successful implementation of an EMS within an individual company will depend substantially on the leadership of the managers of the company. The organization must show its commitment through its statement of policy in the EMS, articulation of goals, and communication of the policy and goals to its personnel. Further, the company must allocate adequate funds for implementation of its goals and for training of personnel.
A related limitation is that the quality of the environmental audit depends on the qualifications and integrity of the registrar who performs the audit. As increased numbers of companies seek certification to ISO 14001, increased numbers of auditors will be needed for initial audits and continuing, periodic audits. Certification of registrars depends on the accrediting body or bodies of individual countries. For example, in the United States, the American National Standards Institute operates as a partner with the U.S. Registrar Accreditation Board (RAB). RAB is a nonprofit organization that accredits ISO 9000 registrars, and many of those same registrars are beginning to provide ISO 14000 audit services. Even with the services of an accreditation board, a company must choose its auditors and other consultants carefully.
A fourth limitation is that certification to ISO 14000 series standards does not serve as a substitute for conformance to environmental management standards that have been adopted by other organizations. For example, the CMA's Responsible Care (RC) program is not as broad as ISO 14001; an organization meeting RC requirements must do more before it can also be certified to ISO 14001. Because membership in the CMA requires conformance with RC, a chemical company may not wish to undergo the number of audits (and costs) involved in conformance with RC and certification to ISO 14001.
The effects of ISO 14000 around the world will vary depending on the needs and perspectives of participating companies, their governments, and individual citizens. In developing countries, adoption of ISO 14000 is likely to lag because of limited resources of developing businesses and their governments. ISO 14000 may even act as a nontariff barrier to trade for those companies.
The perspectives of companies from developed, industrialized countries such as the United States and the members of the EU are different. Overall, the ISO 14000 series can provide a useful supplement to governmental environmental regulation in such countries. It will cause companies to engage in self-examination and self-correction of many environmental problems. That, in turn, may free government environmental enforcement personnel to concentrate on companies that are not in compliance with environmental law.
Even in industrialized countries with highly developed regulatory systems, however, ISO 14000's reach is limited. It is a voluntary program and, as such, can provide only a supplement to governmental environmental regulation. The effectiveness of ISO in promoting environmental stewardship within individual companies depends on the leadership of the company's managers and the creation of a corporate culture in which environmental management permeates the daily operations of the business in all areas. Further, a company must hire well-qualified consultants and registrars (auditors) as it formulates and implements its EMS. In the end, the success of the ISO 14000 series program depends on qualified, committed people and the allocation of sufficient resources to accomplish the goals identified in the company's EMS.
[ Paulette L. Stenzel ]
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