Your company might be considering an Environmental Management System (EMS). Maybe it's already implemented one. In either case, it's fair to pose a simple question: Is building the EMS and getting it certified worth the trouble? Does it really deliver benefits? In the first two issues, we looked at the relationship between ISO and due diligence. Let's now consider the relationship between ISO certification and financial performance.

The Economic Case for ISO 14001

One of ISO 14001's strongest allures is the promise of improved financial performance. A company that implements an ISO-compliant EMS accrues a strategic advantage by:

• Reducing the amount of resources it consumes and waste it generates;
• Cutting costs and improving efficiency;
• Enhancing its standing in the community and thus, ultimately, increasing its market share.

At least that's the theory. But is it true?

ISO Certification & Financial Performance-the Evidence

The Internet, including especially the ISO site itself, is replete with testimonials purporting to document the economic benefits that companies have achieved as a result of having their EMS certified under ISO 14001. But this evidence is largely anecdotal. If you're an EHS coordinator advocating an EMS, you need more scientific studies supported by hard, comprehensive data.

Unfortunately, there aren't many studies like this out there--at least not yet. Until recently, little effort was made to trace the financial impact of certification on ISO companies. Although a few studies illustrating the economic benefits do exist, they tend to be incomplete and inconclusive. They also come mostly from Europe, Asia and Australia. Such studies include (for more details on these studies, see below):

1. Irish Printing Company Case Study

After achieving ISO 14001 certification in 1996, Printech, an Irish printing company with 360 employees, dramatically reduced emissions and energy costs and improved its market position as a result (Gallagher, 1997).

2. Study of EU Companies

Study author Ruth Hillary assembled case studies of 33 small- and medium-sized enterprises in the EU that adopted an EMS. The good news: All of the companies reported energy savings, greater efficiency and enhanced reputations as a result of the EMS. The bad news: The companies generally had to spend more time, money and effort than anticipated to achieve these benefits (Hillary, 1999).

3. Japanese Manufacturers

A 2001 study documents the increases in profit maximization and utility maximization achieved by Japanese manufacturers after obtaining ISO 14001 certification (Nakamura, Takahashi and Vertinsky, 2001).

4. Australian Companies

A review of 13 Australian companies in a variety of industries showed mixed results with some companies achieving strong financial and reputational benefits from ISO 14001 certification and others achieving no benefit at all (Percher et al., 2002).

5. U.S. Aluminum Company Case Study

In perhaps the most thorough case study of a company's experience with ISO certification, study authors looked at the Alumax aluminum reduction facility plant in Mt. Holly, South Carolina. In 1995, Alumax's EHS coordinator won plant manager approval to pursue ISO 14001 certification. The plant accomplished that goal a year later. Although the study focuses primarily on the plant's environmental performance (we'll talk about this next month), the Alumax facility also improved its management procedures, operating effectiveness and profitability (Rondinelli & Vastag, "Panacea, Common Sense, or Just a Label? The Value of ISO 14001 Environmental Management Systems," European Management Journal, Oct. 2000).

Conclusion

Does an ISO-certified EMS really improve a company's financial performance? The evidence suggests that it does; but it doesn't conclusively prove it. If you're an EHS coordinator trying to build a case for an EMS, you'll need to do the best you can with the evidence that does exist. (You can also make an indirect argument by using studies documenting the economic benefits of ISO 9000 certification on profitability that we list on page x).  But keep in mind that you have another, even more compelling justification for adopting an ISO-certified EMS at your disposal: improvement of your company's environmental performance and compliance.

Does ISO certification really help a company achieve these goals? We'll answer that question next month in Part 2 of this series.

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