Certifying environmental management systems by …home.kelley.iupui.edu/gvastag/Papers/IJPR_2002_ISO14001.pdfCertifying environmental management systems by ISO 14001 4745 • What

INT . J . PROD. RES ., 2002, VOL . 40, NO . 18, 4743-4763

Certifying environmental management systems by the ISO 14001standards

G. VASTAGt* and S . A. MELNYK$

While the rest of the world has generally accepted ISO 14001 as the environmentalstandard, US firms, in general, have lagged behind in their acceptance of thisstandard . Given the relative importance of US manufacturing and given that oneof the objectives of the ISO 14001 standard was that it was to be a globalstandard, this apparent `hesitancy' on the part of US firms is troublesome . Thispaper attempts to explain this hesitancy by casting the certification decision as abusiness decision . As such, certification will occur when the quantifiable benefitsexceed the measured costs . The paper examines how US managers perceive therelative costs and benefits associated with this form of certification . The analysis iscarried out at two levels : at an aggregated level using data generated from a large-scale mail survey and at the micro level using data provided by a detailed casestudy . The results indicate that environmental activities have a more positiveimpact on plant operations among those facilities that are certified . Moreover,these benefits tend to be primarily attitudinal in nature and strongly influenced bythe industrial setting in which the plant is located .

1 . IntroductionSince its formal adoption in September 1996, the ISO 14001 environmental

standard has generally experienced increased global acceptance . Plant certificationshave consistently increased every year . As noted by the International StandardsOrganization (ISO World 2001), by the end of 1998, 7887 sites had been certified ;by the end of 1999, it had jumped to 14 106-an increase of 78 .85% (ISO 1999) .Finally, by March 2001, the total number of certified plants had risen to 27 509 (ISOWorld 2001) . However, hidden in these numbers is an important anomaly-theacceptance of this new environmental acceptance has not been universal. Amongthe industrial countries, strong support for ISO 14001 can be found in Japan,Germany, and the UK . In contrast, US firms have not embraced ISO 14001 tothe same extent . For example, by March 2001, 6261 Japanese plants had certified,while only 1420 US plants had achieved this status . In addition, the number of USplants certified was fifth overall (behind Japan, Germany [n = 2400], the UK [2010]and Spain [1444]) . The failure of US firms and management to embrace this newenvironmental standard enthusiastically is perplexing because ISO 14001 certifica-

O Taylor & FrancisTaylor & Francis Group

Revision received April 2002 .t Kelley School of Business, BS 4027, Indiana University, 801 West Michigan Street,

Indianapolis, IN 46202-5151, USA .$ Department of Marketing and Supply Chain Management, The Eli Broad Graduate

School of Management, N 370 NBC, Michigan State University, East Lansing, MI 48824,USA .

*To whom correspondence should be addressed . e-mail: gvastag@iupui .edu

International Journal of Procluerion Research ISSN 0020-7543 print ISSN 1366-588X online i' 2002 Taylor & Francis Ltdhttp : www.tandf.co .u k journalsDOI :10 .1080 00207540210161632

4744 G. Vastag and S . A . Melnyk

tion has had a positive impact on many aspects of manufacturing and corporateperformance for these same US firms .

In one of the first large-scale studies of ISO 14001 certification and its impact oncorporate and functional performance within the US context, Melnyk et al. (1999)used a large-scale, single-respondent perceptual survey to conclude that `those firmsthat have attained this level of certification [ISO 14001] are not only more environ-mentally responsible, but also more efficient (and potentially better suppliers)' . In asubsequent study, Melnyk et al . (2001) found that compared with other voluntaryprogrammes used in the USA (e .g . Responsible Care or the EPA's 33/50 pro-gramme), the ISO 14001 certification process was more effective and efficient interms of its impact on performance . In a rare exception to these survey-based studies,Sharma and Vredenburg (1998) used a combination of qualitative case studies and amail survey in one industry to discover and test relationships between environmentalstrategy and organizational capabilities . They noted the presence of a relationshipbetween environmental initiatives and corporate performance within the proactivefirms.

These various findings present us with the following question : If there is evidencethat environmentally oriented actions such as obtaining certification do have a posi-tive impact on overall performance, then why are not more US managers interestedin pursuing ISO 14001 certification? This study proposes to address this question byviewing the decision to become ISO 14001 certified as being economically driven, i .e .management will pursue ISO 14001 certification for a specific site when the benefits(real or anticipated) exceed the costs . Using this perspective, it can be argued that USmanagers have not actively pursued ISO 14001 certification because the benefits havenot been sufficient to outweigh the costs of becoming certified .

The study focuses on identifying and categorizing the types of benefits reportedgained from attaining ISO 14001 certification within US plants . This study tries todifferentiate between quantifiable or strategic benefits (those that either reduce leadtime, improve quality, reduce cost or otherwise enhance the ability of the plant tocompete in its marketplace) and attitudinal benefits (those that result in greaterawareness of environmental issues or opportunities) .

Explicitly included in this analysis is an assessment of the industrial context onthe type of benefits included . By focusing on the industrial context, this study tries todetermine if ISO 14001 and its accompanying implementing process leads to thesame type of attitudinal and operational results across certain selected industries .The industries selected for analysis in this study are ones that represent diversityalong such dimensions as degree of environmental regulation, potential for interestin ISO 14001, and different manufacturing processes and technologies .

It is important to note that this study focuses on the US experience . While ISO14001 is a global phenomenon, there is value in studying the US experience . Such ananalysis provides a basis for comparing the US experience with those observed inother countries or settings . Such comparison should eventually help researchers toidentify those aspects that are common and that are unique to a specific nationalcontext .

Specifically, this paper addresses the following questions .

•

What are the major benefits of becoming ISO 14001 certified?•

To what extent are these benefits influenced by the industrial settings in whichthe sites being certified are located?

Certifying environmental management systems by ISO 14001

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•

What insights can be drawn by studying the benefits of ISO 14001 certificationand by focusing on the industrial context as a moderating variable?

These questions are answered using a two-level, multimethod research methodology .The first level is aggregate in that it draws on data provided by a large-scale surveyfocusing on Environmentally Responsible Manufacturing and the attitudes of USmanagement towards ISO 14001 . The resulting database consists of 1510 site-specificresponses. The second level consists of data drawn from a detailed case study of asuccessful ISO 14001 certification .

This paper is organized as follows . Section 2 summarizes the ISO 14001 environ-mental standard . Section 3 provides an overview to the research methodologicalapproach employed by this study and also summarizes the major findings fromboth an analysis of data from a major large-scale survey (focusing on environmen-tally responsible manufacturing and corporate perceptions of environmental devel-opments such as ISO 14001) and the detailed case study on ISO 14001 . Section 4presents and explores alternative possible explanations for these findings . The con-cluding remarks form the basis of Section 5 .

2 . Understanding ISO 14001 environmental certificationRepresentatives from 50 countries have formally adopted the international

standard on environmental management systems (ISO 14001) by the InternationalOrganization for Standardization in September 1996 . This standard attempts tobuild on the success and experience of its predecessor, the ISO 9000 standards,and its variants such as QS 9000 (Miles and Russell 1997, Block 1999, Caillibot1999, Reid 1999) . One of the objectives of this new standard was to set a higherlevel of expected environmental management practices world-wide . It was alsoexpected that this standard would facilitate international trade and remove tradebarriers .

The ISO 14001 standard specifies the structure of an information system, knownas the Environmental Management System (EMS), which an organization must havein place to be certified according to ISO guidelines . These standards (Tibor andFeldman 1996) enable a firm to do the following .

•

Establish an environmental policy appropriate to the organization .•

Identify the environmental aspects of the organization's products, services andactivities to determine both impact and significance .

•

Identify priorities and establish objectives .•

Establish a programme to implement these policies and objectives .•

Facilitate planning, control, monitoring and changes to insure policy is com-plied with and remains appropriate for the organization .

•

Be ready to adapt to changes in the business environment .•

Identify the relevant legislative and regulatory requirements .

ISO 14001's EMS standards are process standards . They do not tell organizationswhat environmental performance they must achieve . Rather, they describe a systemthat will help an organization achieve its own objectives and targets . The assumptionis that better environmental management will lead to better practices and environ-mental performance .

A firm can implement an EMS that is in line with one of the EMS standards (BS7750, EMAS or ISO) without external certification . However, it is common practice

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4746 G. Vastag and S. A. Melnyk

for firms to become certified using external (third party) audits . ISO 14001 certifica-tion is typically done at the plant level .

2 .1 . Benefits of attaining ISO 14001 certificationThere are major costs and uncertainties associated with the attainment of ISO

14001 certification . However, in spite of these potential obstacles, there has also beenstrong support and encouragement provided for firms to pursue this new certifica-tion. The following arguments have been proposed in support of the increasingacceptance of ISO 14001 certification .

•

Improved public relationships and corporate image (Litskas 1999) .•

Improved document control (Litskas 1999) .•

Appropriate response to increased customer pressure (Clark 1999, Graff 1997,Krut and Drummond 1997, Litskas 1999) .

•

Cost of doing business abroad (Graff 1997, Hormozi 1997, Litskas 1999) .•

Cost of doing business within the supply chain (Graff 1997, Krut andDrummond 1997) .

•

Peer pressure (Clar 1999) .•

Improved risk management and liability (Graff 1997) .•

Creates a common ground (Litskas 1999) .•

Reduced inspection frequency (Litskas 1999) .•

Improved bottom-line performance and enhanced internal efficiencies (Tiborand Feldman 1996, Clark 1999, Graff 1997, Litskas 1999) .

For the most part, support for these arguments is anecdotal, based on expertopinion, or drawn from experiences with ISO/QS 9000. How firms and managementreact to costs, risks and benefits potentially associated with attaining ISO 14001certification may influence their position on whether it is a worthwhile undertaking .

2.2 . ISO 14001 certification : understanding the industrial contextAttaining ISO 14001 certification can be a potentially costly undertaking .

Consequently, management will pursue it only when a strong compelling reasonexists . In certain cases, this comes from the firm/site's view of itself as an industrialenvironmental leader (as in the case of Lucent Technologies' decision to become ISO14001 certified) . In other cases, a plant may pursue this form of certification when itsees this as something demanded by its customer (as in the case of many US Tier Iautomotive suppliers' actions in response to the decision of GM and Ford to havetheir plants ISO 14001 certified) . Still, for others, the site may pursue ISO 14001certification because the certification process offers a well-defined path for develop-ing and implementing an effective and integrated environmental management system(a major concern for those plants lacking such a system in the first place) . Finally,there are also those sites that may pursue such certification when it is economicallyjustified, i .e . when the perceived benefits are seen as outweighing any perceived costs .This position seems to describe the approach taken by many US firms (Melnyk et al.1999, 2001) .

It is also important to recognize that a site may pursue such certification forreasons that are primarily industry specific . For example, a site may pursue ISO14001 certification because such certification is an important element of an industry'sattempt to portray itself as either environmentally responsible or an environmentalleader. Alternatively, a site may do so because of the nature of the technology (and


4747

the associated opportunities for introducing and integrating environmental oppor-tunities) . Various types of technologies and processes encountered in certain indus-tries, in turn, can also be described as being either inherently `clean' (with fewopportunities for large environmental problems) or `dirty' (their operation tendsto create large and persistent pollution streams) . Finally, in some industries, beingenvironmentally responsible is critical because it is part of a large-scale marketing/strategic thrust . Such concerns, because they cut across site/firm boundaries, shouldbe isolated and studied as distinct possible contributing factors since they offeradditional insight into the actions of plants and their positions on ISO 14001 certi-fication . For this (and other similar industrially related reasons), this dimensionshould be included in this research study .

3. Research methodology describedThis study uses a mixed methodology approach, which integrates elements of the

quantitative (positivist/empiricist) and qualitative (constructivist/phenomenological)approaches. Specifically, this study integrates two complementary procedures :(1) statistical analysis of a large-scale database generated from a mail survey ; and(2) a detailed, structured case study of a specific ISO 14001 certification .

In every research project, there is a trade-off between measurement precision ordata integrity and contextual richness . Survey-based approaches emphasize measure-ment precision and focus on data integrity, often referred to as ìnternal validity'(Campbell and Stanley 1963), `statistical conclusion validity' (Cook and Campbell1979) or `reliability' (Guilford 1954, Sellitz et al. 1959) . Bonoma (1985), like Dyerand Wilkins (1991), Meredith (1998) and many others, argued, `many interestingphenomena cannot be understood if removed from their social context' . Pushinghard for measurement precision and data integrity, the strong suites of survey-basedapproaches, may lead to `sterilized research' . In contrast, case studies excel atproviding contextual richness . They are also more appropriate when the emphasisis on theory building rather than on theory confirmation . In combining these twoapproaches, it is our intent to carry out research that is characterized by both dataintegrity and theory building .

For the purposes of this study, we wanted to gain a `deep understanding' of theperceived benefits attributable to ISO 14001 certification and the extent to whichthese benefits were influenced by the industrial context in which the site seekingcertification was located . Consequently, a three-step process for analysis was devel-oped and implemented .

•

Identification of the industrial context .•

Deductive reasoning based on an analysis of data generated by a large-scalemailing survey .

•

Inductive reasoning based on a detailed case study .

3 .1 . Identifying the industrial contextIndustrial context was implemented by focusing on groupings as identified by

specific SIC codes. Consequently, three industrial groups were selected for inclusionin this study . These groups, along with the relevant SIC codes and rationale for theirinclusion, are summarized in table 1 .

Consistent with the ISO 14001 certification process, in every case the datagenerated and reported in this study pertain to plant sites . For many companies

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Group

Industrial groups present

G. Vastag and S. A. Melnyk

I

SIC 28 (Chemical Industry and AlliedProducts

II

SIC 35 (Industrial and CommercialMachinery and ComputerEquipment)SIC 36 (Electronic and OtherElectrical Equipment andComponents, Except ComputerEquipment)SIC 38 (Measuring, Analysing, andControlling Industries, Photographic,Medical and Optical Goods, Watchesand Clocks)

III

SIC 37 (Transportation Equipment)

Table I . Industrial groups studied .

consisting of only one site, the company and the site are identical . In other caseswhere the company contains multiple plants and sites, the result is that one companycan generate multiple data points-each produced by an individual site . Since thesite and plant are often the same, these two terms are used interchangeably .

3.2 . Deductive reasoning : a large-scale surveyHaving bounded the potential population through the specification of the indus-

trial context, the next step was to develop an understanding of how managers per-ceived, in quantitatively stated terms, environmentally responsible manufacturing,their plant's environmental management system, and voluntary environmental pro-grammes such as ISO 14001 . Since this objective focused on data analysis and dataintegrity, the primary vehicle for data collection was the survey. The survey con-tained items that identified factors that influence these previously identified attitudesand the perceived effectiveness and efficiency of the plant environmental manage-ment systems. Since details about the survey's content, validation and administrationhave been previously discussed (Melnyk et al . 1999), we have chosen to summarize

Rationale for inclusion

This industrial group, through theemergence of Responsible Care", hasimplemented a well-regarded andcomprehensive programme forimproving environmentalperformance within the industry . Byincluding this industry, we areinterested in determining if such anindustry perceives any additionalbenefits to be gained from ISO 14001certification . Furthermore, thetechnology employed in this industryis generally regarded as `dirty' .

The technology found in theseindustrial groups tends to be discretebatch, tightly controlled andfundamentally `clean' .

Within the automotive industries,companies such as Ford and Saturn(as examples) are increasinglyemphasizing environmentalresponsibility as marketing andstrategic thrusts .


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pertinent information about its structure as well as the major attributes of therespondents .

3 .2 .1 . Survey designThe survey consisted of five major sections . The first gathered information about

the respondent, their position, professional affiliations (if any) and extent of involve-ment in various corporate initiatives . The second focused on the business unit (thebasic unit of analysis) and detail about it. This included products manufactured, theextent of uncertainty facing the business unit and its personnel, and the status ofvarious initiatives . The third section dealt with the perceived impact of the ISO/QS9000 certification process on the business unit and its competitive position in themarket place . In the fourth section, the respondent was asked to evaluate a series ofquestions pertaining to ISO 14001, a major environmental initiative . These questionsassessed the level of knowledge of the respondent on the ISO 14001 certificationprocess, as well as the factors affecting its implementation and use . The final sectiongathered information about the business unit's environmental management system,the effectiveness and efficiency of this system and the types of options used toimprove environmental performance .

3.2 .2 . Sample and responsesA mailing list of 5000 names each was obtained from three professional associa-

tions (National Association of Purchasing Management, American Production andInventory Control Society and one anonymous group) for a total of 15 000 names .The lists were checked for duplicate names, with the few identified being eliminated .Where possible, the associations were asked to provide names of managers whoworked for manufacturers (i .e . in the two-digit SIC code range of 20-39 inclusive) .The researchers also worked closely with a major US manufacturer, who providedan additional list of 104 managers at six of their facilities .

Three waves of mailings were sent out using the modified Dillman (1978) method.The survey was sent out in the fourth quarter of 1997 and responses were receivedwell into 1998 . As a result, 1510 usable responses were obtained, a response rate of10.35% . While this is lower than the 20% that researchers strive to achieve, it islikely the length of the survey discouraged some potential respondents (a viewsubstantiated by feedback received from those who did not return their surveys) .For additional information about the survey and the demographic traits of therespondents, see Melnyk et al. (1999) .

3 .2 .3. Selection of the specific responsesGiven the interest of this study in the industry influence, only firms belonging to

the five industrial groups previously identified (SIC codes 28, 35, 36, 37, 38) wereselected . Furthermore, one additional criterion was applied-the sites studied alsohad to be ISO 9000 certified. This criterion insured comparability with the third step,the detailed case study. Applying these conditions generated a database of 504responses (49 from Group I-SIC Code 28; 333 from Group 11-SIC Codes 35,36, 38 ; and 122 from Group III-SIC Code 37) .

3 .2 .4 . Variables of interestWhile the survey collected information about some 250 manifest measures of

interest, it was decided to limit the analysis to seven performance measures . These

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Category

G. Vastag and S . A . Melnyk

Item questionEnvironmental activities within your firmhave :

Operational Effectiveness

Significantly reduced overall costsSignificantly reduced overall lead timesSignificantly improved product quality

Operational Effectiveness (waste

Significantly reduced waste within thereduction and recycling at the

production processplant level)Operational Efficiency (goals and benefits)

Significantly improved the firm's position inthe marketplaceHad benefits that have definitelyoutweighted any costs incurred

Environmental Awareness

Helped enhance the reputation of yourcompany

Table 2 . Environmental performance measures in the survey .

seven variables were selected because when taken as a whole, they were perceived torepresent the impact of the environmental activities within the site . These measureswere next grouped into four categories (table 2) .

3.2 .5 . Analysis of the data describedAt the time of the survey, most of the 504 sites that were ISO 9000 certified

lacked the ISO 14001 certification (about 81%), with a little over 13% were in theprocess of seeking certification and 6% (30 sites) being certified . The number ofcertified sites greatly varied across industrial groups . For example, only 3 .3% ofthe companies in Group II (SIC codes 35, 36, 38) were certified, as compared with13 .1% in Group III (SIC code 37) .

3 .2 .6 . Assessing environment impacts and the importance of the industrial effectOur approach to the data analysis was the classic statistical one, as laid out by

Cleveland (1993) ; it consisted of the following four steps .

•

Discover the pattern .•

Develop a model based on the pattern .•

Fit the model .•

Test and modify the model if necessary .

Considering the exploratory nature of our analysis and the few sites that possessedthe certification, it was decided to focus on discovering a pattern that would providea basis for building and testing a model of certification factors to be used in the nextphase of our research .

A Trellis display was selected as the most appropriate tool for pattern recogni-tion . Trellis displays (Cleveland 1993), in general, provide a framework for thevisualization of multivariable databases . The display consists of several panelsorganized in a specific sequence and on each panel a subset of the data is graphed .Each panel shows the relationship of certain variables conditioned on the values ofother variables . This representation of complex data structures provides a powerful


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mechanism for understanding interactions, especially in studies where a responsedepends on several explanatory variables .

Three panel displays (one per industrial group) were created to show the impactof the ISO 14001 certification (or the lack of it) on seven environmental performanceindicators that were listed in the section above . On each panel, the perceived impactof environmental activities on seven response variables was plotted against the site'sstatus of certification . The vertical axis in each panel measured the level of agreementwith each performance measurement on the 11-point Likert scale . The horizontalaxis showed the facility's status in terms of progress towards ISO 14001 certification .This horizontal axis consisted of three major points: `No' (the respondents' facilityhad not taken any concrete steps in pursuing ISO 14001 certification); 'In-Process'(the respondents' facility was working on attaining ISO 14001 certification) ; and`Yes' (the respondents' facility was ISO 14001 certified) .

The sequence of the panels (from left to right) was determined by the overallmean of the seven response variables for each industrial group . Going from left toright, the first panel shows Industrial Group II (SIC 35, 36, 38) in which the envir-onmental activities had the least overall impact on the seven response variables (witha mean of 3.9), followed by Industrial Group III (SIC 37), with a mean of 4 .9, andthe last one depicts Industrial Group I (SIC 28), where the overall average environ-mental impact was the greatest (5.0 on a scale from 0 to 10) . Organizing the data insuch a structured manner would make the influence of the conditioning variable, theindustry effect more evident .

Figure 1 confirms the existence of an industrial effect, i .e. industrial settings havea strong influence on the impacts of the firms' environmental activities ; the leveland shape of the seven response variables varies greatly across industrial sectors .Moreover, the sequencing of the seven performance measures (the impacts of envir-onmental activities) does not change much by industrial group . Irrespective of the

10

8

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4

2

0

SIC Codes 35, 36 and 38

$0 \

re'

ISO 14001 Certification?

10

8

6

4

2

0

Environmental Activities Within Your Firm Have :Helped enhance the reputation of your companySignificantly reduced waste within the production processHad benefits that definitely outweighed any costs incurred

- - Significantly improved its position in the marketplace- Significantly improved product quality

- - - Significantly reduced overall costs---- Significantly reduced leadtime

Figure 1 . Impacts of environmental activities in some industrial sectors and certificationlevels .

SIC Code 37

ISO 14001 Certification'

to

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6

4

Z

0

SIC Code 28

ISO 14001 Certification'

Level of Agreement : 10=Fully Agree, O=Fully Disagree


industrial group examined, environmental systems have the least impact on lead-timeand the greatest impact on firm reputation .

3 .2 .7 . Assessing the impact of ISO 14001 certificationThe most important question firms face in justifying the investment in the certi-

fication process is whether or not it was worthwhile . In other words, what differencedoes certification make on the seven outcome variables we measured? For eachindustrial group, we tested whether the mean of each response variable differedacross certification statuses (not certified vs . certified) .

For Industrial Group II (SIC Codes 35, 36, 38), certification did not significantlyimprove lead-time (p = 0 .05). However, ISO 14001 certification was found toimprove performance significantly for the six remaining measures . For IndustrialGroup III (SIC Code 37), ISO 14001 certification significantly improved only oneperformance measure : firm reputation . Otherwise, it had no impact on the remainingsix measures. In this group, an unusual pattern was observed for several of theperformance measures-a pattern in which impact was perceived as highest forthose with facilities that were in the midst of getting certification . For these firms,additional data collection was carried out that revealed that these facilities were`mandated' by corporate management to pursue ISO 14001 certification. Oncethat was attained, they discovered that many of the promised benefits were yet tobe realized . In short, they had incurred the costs up front, but not the benefits .Finally, for Industrial Group I (SIC Code 28), ISO 14001 certification had asignificant positive impact on two dimensions of performance : firm reputation andcost/benefit assessment (the benefits were seen as outweighing the costs) .

These results, while interesting, are not sufficient by themselves . They indicatethat while there are some quantitative improvements, the nature of these benefits isstrongly influenced by the industrial setting . The benefits do not make for a 'compel-ling' argument in favour of ISO 14001 certification . There is still a need to develop abetter understanding of the `how' and `why' of the certification decision . To meet thisneed, we now turn to the field study-based inductive reasoning methodology .

3 .3 . Inductive reasoning: ISO 14001 certification at Alcoa's Mt Holly PlantThe focus of the case study was Alcoa's Mt Holly Plant, South Carolina . The

plant was one of the first industrial facilities in the USA to seek and obtain ISO14001 certification . When it began operations in late 1980, it was the only all newaluminium reduction plant built in the country since 1973 . The plant was an industryleader in production efficiency, energy use and environmental control .

The plant uses about 400 000 tons of alumina annually to produce `T'-shaped,rolling, extrusion and 30-lb foundry ingots. Most of the metal is alloyed to meetcustomer specifications and then shipped to fabrication plants throughout the USA .The company's aluminium is recognized world-wide by industrial users for its extre-mely consistent high quality . The Aluminium Company of America (Alcoa), whichhas its own stringent environmental management standards, acquired the plant fromAlumax in 1998 .

The ingot plant is located on 6000 acres of land . From the point of view ofenvironmental compliance, the plant's large site is an advantage because environ-mental pollution (especially air pollution, which is most the most significant type ataluminium smelters) is measured at the fence line. When the plant was constructed,Alumax invested more than US$40 million in the environmental control systems to


4753

make the $340 million facility one of the cleanest plants in the world . The plant hasnever paid an environmental fine . The smelter, which employs more than 600 people,produces ingot in a I million square-foot facility with a carbon plant, a cast houseand a pot line operation . The plant operates 24 hours a day throughout the year .

The Mt Holly plant was registered under ISO 9002 in 1992. The plant's managerssaw ISO 14001 certification as an extension of ISO 9002 and as a vehicle to improveoverall operations. In addition, the plant's managers considered ISO 14001 certifica-tion as a good way to demonstrate publicly its commitment to the environment .Since the plant supplied both domestic and international customers, certification wasseen as generating both potential competitive advantages as well as environmentalbenefits . When the environmental team began to develop the requirements for ISO14001, expectations grew that the review and development of the EMS could helpconserve materials and energy and perhaps facilitate obtaining permits from localand state government agencies, improve industry-government relations and, possi-bly, obtain regulatory relief. Managers expected the EMS to help reduce costs,eliminate incidents that resulted in liabilities, contribute to developing and sharingnew environmental solutions, improve maintenance, insure conformance to policy,and better meet vendor requirements .

A `structured conceptualization' methodology (Trochim and Linton 1986) wasassessed to study the impact of ISO 14001 certification at Mt Holly . The process is asequence of concrete operationally defined steps that yields a conceptual representa-tion of an evaluation result or idea domain-in this case the impact of ISO 14001certification of the EMS on the Mt Holly plant-through `concept mapping' .Concept mapping (Trochim 1989a-c, Trochim et al. 1994) involves six steps :(1) selecting participants (at Mt Holly, plant managers and Pollution Prevention[P2] team members) and developing the focus or domain for the conceptualization ;(2) generating statements (e.g . òne specific impact of the ISO 14001 environmentalmanagement system was that . . .') ideally representing the conceptual domain for thetopic of interest; (3) obtaining information from participants about how the state-ments are related to each other ; (4) representing the conceptual domain graphically ;(5) producing several different maps that provide different views of the same struc-ture and interpreting them; and (6) using the maps. The study focused on the first fivesteps; use of the maps, the final step, was left to the plant's employees .

At Mt Holly, the concept mapping exercise was carried out after first having tworesearchers undertake personal interviews and a plant visit . These interviews insuredthat the researchers were familiar with the facility and its management and that thefacility met the research requirements of the study . In addition, the interviewsinsured that the plant participants understood the project and the associated datacollection procedures . The concept mapping was implemented by e-mail over 3months at the end of 1999 . Fifteen Alcoa Mt Holly employees participated in thisprocess (10 members of the P2 team and five managers). Except for two, the P2members had been working at the plant since 1980 . They covered all units of theplant (quality, environmental management, maintenance, pot line department, pur-chasing, safety, warehouses) and showed some variety in job titles (engineer, super-visor, specialist, technical advisor, analyst, coordinator, planner, director) . Themanagers represented different functional areas (Carbon Plant, Engineering andMaintenance, Quality and Alcoa Production System, Production, Laboratory) andwere one level below the plant manager .


The 15 participants generated 80 statements . These were combined into one list,randomized (in terms of order) and all personal identifiers removed . The resulting listwas sent back to all participants with a request that they eliminate overlaps, correctwording and add new statements if necessary . After several iterations, the groupreached a consensus on 40 statements that described the `conceptual domain', i .e . theimpact that ISO 14001 certification of Mt Holly's EMS had on the plant and itsperformance. The next step examined how these statements, which described theperceived impacts, were related to each other . These interrelationships were capturedusing an unstructured card procedure (Rosenberg and Kim 1975, Weller andRomney 1988) . All participants were sent a complete set of 40 cards with the state-ments written on them. They were then asked to sort the cards into piles ìn a waythat makes sense to you' . There were two sorting restrictions : each card could onlybe placed in one pile, and the number of piles had to be more than one and lessthan 40 .

The participants also received statements in questionnaire form . They were askedto rate each statement on a five-point scale in terms of how important they thoughtthe statement was for the plant, where 1 = `relatively unimportant' (compared withthe rest of the statements) and 5 = èxtremely important' . Based on the sortingresults, a total similarity matrix of the statements was computed . A cell value inthis matrix indicated the number of people who placed the (i, j) statement pair in thesame pile. The higher the value was, the more similar the participants thought thetwo impact statements were . This similarity matrix was the input to a two-dimen-sional non-metric multidimensional scaling (MDS) . This analysis placed those state-ments that were piled together more often closer to each other in the two-dimensional space . The usual statistic in MDS analyses indicating goodness of fitof the two-dimensional configuration to the original similarity matrix is called thestress value . The stress value in this analysis was well within the range of similarstudies, so a two-dimensional MDS configuration of the statement points was judgedacceptable .

The result of the MDS process-the two-dimensional configuration of state-ments-was next analysed using hierarchical cluster analysis. The objective of thisanalysis was to group individual statements into clusters of statements, whichpresumably reflected similar concepts (Trochim 1989a) .

Recognizing the difficulties in selecting the most appropriate clustering procedure(Fisher and van Ness 1971, Anderberg 1973, Everitt 1980, Milligan 1980, 1981), theresearchers drew on the insights provided by Trochim . Trochim (I 989a), after tryinga number of approaches, found that Ward's algorithm generally gave more sensibleand interpretable solutions as compared with other approaches (e .g . single linkage orcentroid method) . Ward's algorithm minimizes the within-cluster sum of squares tothe between-cluster sum of squares at each level of joining .

Deciding on the number of clusters requires significant input from the users, whoare the 'problem-owners' . Subsequently, several cluster solutions were generated andevaluated by the participants who reached a consensus on the `best' one . All thecomputations and outputs related to concept mapping were carried out using TheConcept System v1 .751 software (http ://www.conceptsystems .com) .

The resulting consensus `cluster map' (figure 2) consisted of six clusters . Startingfrom the left side of the map and moving counter-clockwise they were : (1)Environmental Awareness, (2) EMS Implementation, (3) Improved ManagementPractices, (4) Goals and Benefits, (5) Waste Reduction and Recycling at Plant


4755

entation

e

i

EMS Impl

mpr

ctices

o

and Be

Layer Value1 2.87 to 3.092 3 .09 to 3 .323 3.32 to 3.544 3.54 to 3.775 3 .77 to 3 .99

Operational Effectiveness"Doing the right things."

Waste Red . & Recyc . (Plant)

Operational Efficienc:"Doing things right"

Figure 2. Impacts of ISO 14001 certification : attitudinal and operational changes .

level (as it pertains to plant level activities, like reducing the number of laboratorychemicals), and (6) Waste Reduction and Recycling at Employee Level (e .g . commit-ment to increased recycling at home) . The importance ratings of the statements onthe five-point scale were averaged across participants for each item and each cluster .The number of cluster layers indicates the average importance of each cluster for allof the participants .

3 .3 .1 . Environmental awarenessOne of the strongest impacts of ISO 14001 certification and the adoption of a

strengthened EMS was behavioural . Managers noted that the ISO 14001 certifica-tion made everyone more aware of environmental aspects, regulations and impacts,not only at work, but also at home and in the community . One statement on whichthere was strong consensus was that

the single most significant impact of the ISO 14001 process was the improvedenvironmental awareness that the preparation, registration and surveillance pro-cess brings to all employees . The management system that the standard requiresdrives awareness to all facets of the organisation . It clarifies that environmentalresponsibility is everyone's, not just the Environmental Department's .

Managers also noted that being one of the first US facilities to receive the certi-fication enhanced the plant's reputation in the community, state and region .Personnel from many other facilities requested and received information about,and free 'benchmarking' of, the Mt Holly system .


3.3 .2 . Waste reduction and recycling efforts of employeesThe certification of Alcoa Mt Holly's EMS led to more ideas among employees

for materials recycling within the plant and increased their commitment to recycle athome. Ideas for reducing pollution were solicited from all employees and recognitionwas given to individuals for their ideas . Employees improved their outdoor picnicarea at the plant using money earned by recycling materials collected at the plant andthose brought from home . The pollution-prevention team spearheaded trash pick-upon Highway 52 in front of the plant site . Workers began to use colour-coded ormarked containers for readily recyclable items such as plastic bottles, aluminiumcans, paper, magazines, cardboard, steel, brass, copper, aluminium, oil filters,florescent tubes, lead-acid batteries and used motor oil .

3 .3 .3 . Waste reduction and recycling at the plantThe ISO 14001 certification process not only made employees more sensitive

to opportunities for recycling but also led to waste reduction within the plant .For example, the Administration Department increased paper recycling and thePurchasing Department began recycling its trash more carefully . Managers providedthe colour-coded and marked containers that employees used to recycle materialsthroughout the plant . Consequently, the plant's annual trash generation fell fromabout 1500 tons in 1995 to almost half (about 800 tons) by 1998 . The amount ofwaste that had to be sent to landfills was reduced from 7608 tons in 1995 to 4960 tonsin 1998. The waste cost of production per ton of aluminium dropped from $8 .33 in1995 to $6.50 in 1998 .

An Environmental Department manager noted that `prior to 14001, 1 rarely wasconsulted on proper waste management choices (e.g. "Can this be recycled"?), andmost employees did not recognize the environmental aspects of their jobs' . Theenvironmental training programmes that resulted from Alcoa Mt Holly's ISO14001-certified EMS led workers to begin chipping waste wood scrap for fuel outsidethe plant, thereby reducing the amount of waste sent to the landfill . Managersworked with employees to reduce the number of chemicals in inventory in thelaboratory by 47% between 1997 and 1999 . In-plant sharing of discontinuedproducts among departments created new uses for materials that had previouslybeen considered waste . The maintenance department purchased a Pall Oil Purifierto expand the useful life of tube oil and hydraulic fluids, not only reducing thevolume of waste oils, but also reducing maintenance costs . The ISO 14001 certifica-tion process, according to a Maintenance Department manager, also increased

contractor awareness that they are responsible for spoil material generated whenthey do work on our facilities . If they dig a hole-they arrange for getting rid ofthe dirt . If they break up concrete-they do something with the rubble . Also thecontractors have had to furnish information about any chemical they bring onthe plant site. This is required by OSHA, but ISO 14001 pushed this so that it gotwritten into our procedures .

3 .3 .4 . Management practicesThe process of developing the EMS for ISO 14001 certification also generated

procedural improvements . After a detailed examination, managers improved existingpractices for processes, equipment and areas of the plant that could increase emis-sions . ISO 14001 certification required the Environmental Department to develop


4757

and maintain environmental management manuals for wastewater management,cooling water treatment, waste management, chemical management, air quality con-trol, storm water pollution prevention, spill prevention, control and countermeasureplans, and emergency preparedness and response . The EMS required more andbetter record keeping and documentation and forced managers and workers tofind better ways to do these things . Managers in several departments improvedcontrols . Planning and scheduling of environmental tests and instrument equipmentcalibrations became more structured and precise . As one manager noted, 'imple-menting MSDS (material safety data sheets), through the EnvironmentalDepartment, prior to any product being brought to the plant, has promoted bettercontrol of hazardous products' .

ISO 14001 certification also required the plant's managers to set specific andmeasurable goals for improving performance in environmental aspects of thefacility's operations . In solid waste, for example, the plant developed specific targetsfor reducing landfill waste, assigned responsibility for solid waste costs to eachdepartment, and performed waste hopper àutopsies' to identify the types ofmaterials that were being disposed .

As a result of ISO 14001 certification, supervisors felt stronger pressures to insureenvironmental compliance because it was seen as a plant- and company-widepriority . Management created a Monthly Environmental Report to track bothrecycled and non-recycled waste, by crew, and routed them to all crews eachmonth. Ìt increased the amount of internal and external auditing of our documenta-tion', a manager in the Quality Department observed, and ìnternal auditing of theenvironmental department for elements other than quality system documentationhelped identify improvement opportunities that could better insure compliance . . .especially with emergency preparedness and response' . Preparations for ISO 14001certification 'uncovered' weaknesses that crossed over into Safety & Health withregard to emergency preparedness . `Requirements to review procedures after theoccurrence of an emergency situation has brought substantial benefit to our organi-zation to help us take preventive measures that we might not have taken if therequirement to review procedures was not in effect .'

3.3 .5 . Achieving goals and benefitsThe strongest impacts of ISO 14001 certification identified by participants were

that it helped them to achieve the plant's environmental goals and obtain newbenefits. The ISO 14001 certification process required managers to set specific andmeasurable environmental goals and implement appropriate practices to attainthem. As one division representative noted, `supervisors feel the pressure for envir-onmental compliance because it is a Mt Holly goal, not just an EnvironmentalDepartment goal. ISO 14001 has allowed upper management to demand betterwork practices and [waste] reduction efforts out of everyone' .

The ISO certification required management to get involved in reporting observa-tions and adding environmental concerns to procedures for waste disposal . It forcedmanagement to look at and list everything (raw materials, parts, lubricants,manpower, office supplies, etc.) that went into the process and the final dispositionof these items . Consequently, the plant reduced its solid waste going to landfills by37% from 1997 to 1998 .

Third-party auditing, a requirement for ISO 14001 certification, had a significantimpact . As the plant's quality manager observed .

4758 G. Vastag and S. A . Melnyk

Third-party audits helped keep people more honest . People tended to give moreattention to the things they knew they were supposed to do by knowing that some-one might expose their shortcomings if they let down . Third-party auditors were farmore effective at getting attention than internal auditors .

The EMS also established a formal management review process . The EMS man-agement representative was made responsible for reporting on the plant's environ-mental performance at Management System Review Meetings . Senior managementwas responsible for assessing the extent to which the EMS's objectives and targetswere being met, the need for changes to EMS checklist items resulting from auditresults, and appropriate site-specific environmental management issues .

3 .3 .6. Recognition of EMS implementation complexitiesManagers noted that ISO 14001 certification made them aware that environ-

mental improvement was a never-ending process . Some of the products theywould have to use in the future to replace existing products had not been inventedyet, and to maintain their EMS they would have to be continuously watchful for newways of improving environmental performance . At the same time, the certificationprocess made managers and supervisors more aware of the difficulties of makingimprovements that depended on changing the attitudes of employees and customers .Alcoa Mt Holly managers' attempts to encourage customers to adopt ISO 14001standards had met with little success by the end of 1999 .

Participants emphasized that the process of certifying the plant under ISO 14001allowed them to combine documents required for both ISO 14001 and ISO 9002, butthat `while this documentation pulled together loose ends into a structured formatit has also, at times, been a significant burden to maintain' . Increased efforts wereneeded in the Environmental Department and in some of the divisions to stayabreast of reporting and documentation procedures . As a maintenance managerpointed out, `there is a lot of additional paperwork associated with ISO' .

Managers in the Environmental Department were surprised that `customerimpact has not been evident' but noted, `some customers are indicating that regis-tration or adoption of the Standard may be required in the near future' . Somemanagers also expressed disappointment that the plant received no direct regulatorybenefits from state or local government agencies as the result of certifying the plant .Environmental management department personnel noted that ISO 14001 certifica-tion also created more work for them in maintaining the system .

As a manager in the Quality Department confirmed, ISO 14001 does not insurecompliance. `There was a certain amount of trust that if you put a system in place tocomply with the Standard that it will insure compliance . Not so, unless the peopleputting the system in place are fully aware of compliance issues and are committedto adhering to compliance' . The same manager noted, however, that ISO 14001certification `brought to my attention all the various regulatory issues our facilitymust comply with concerning environmental aspects . This information was privyonly to the Environmental Department prior to ISO 14001' .

As might be expected in a plant already ISO 9002 certified, there were not manyclear-cut or surprising `hard' benefits from the ISO 14001 certification process . Withthe exception of the reduction in the number of chemicals in the laboratory and insolid waste, all of the other (quite positive) changes were either expected (if everyemployee had to go through a training programme, then environmental awarenessshould improve) or could be labelled as general, good business practices (improved


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documentation and control procedures) . What was surprising was that participantsrated the `Goals and Benefits' cluster as the most important although it showed onlyone specific operational efficiency improvement-solid waste reduction . Further-more, even though one-third of the participants were senior managers, no onelisted any improvements in the plant's competitiveness . During the interviewsbefore the concept mapping exercise, some participants noted that they felt thatthe plant received some regulatory relief due to its ISO early adopter status . Theyalso noted (but could not prove) that environmental permitting became faster afterthe certification .

4 . Implications for researchThe findings uncovered by an analysis of both the large-scale database and the

detailed case study show that, in general, the benefits generated by obtaining ISO14001 certification are primarily qualitative in nature, i .e . the certification helps toimprove the visibility and reputation of the site's environmental system and activitiesboth within the site and within the community in which the site is located . However,the perceived benefits do not appear to have a pronounced strategic impact, i .e . theydo not help the site to compete better in the marketplace . In addition, the resultsshow. that the industrial context must be considered when evaluating how ISO 14001affects the plant and its operations. These findings are bothersome in that they donot provide strong compelling reasons for a US plant to pursue ISO 14001 certifica-tion. The benefits are apparently not sufficient to justify the time, effort and cost .However, before this position can be accepted, the other possible explanationsmust be identified and eliminated . There are four possible explanations for theseresults .

•

ISO 14001 certification cannot be justified on economical grounds . This is the`base case' . In this scenario, what we have observed is essentially correct . Thebenefits generated from ISO 14001 certification are primarily qualitative, notquantitative. Consequently, sites will pursue such certification because it iseither the `right' thing to do or is demanded by our customers (a cost ofdoing business with them), or it is something that sites are forced to do .

•

Findings reflect the early stage of ISO 14001 certification activities . The secondpossible explanation argues that at the time that the study was carried out(1998-99), the ISO 14001 certification standard was relatively new . Conse-quently, few sites were aware of it . Since the standards and the plant certifica-tions were relatively new, there was not enough time for the benefits to becomeevident. This anticipated pattern of behaviour is based on the pattern ofbehaviour between costs and benefits observed by Wacker (1989) for firmspursuing ISO 9000 certification--costs incurred in a relatively short time upfront followed by a stream of benefits occurring over time . If the study were tobe repeated today, it could be argued, the type and impact of the benefits mightbe very different .

• Type of benefits observed might reflect the environmental experiences of the sitesinvolved. According to this line of logic, the firms studied were ones that werealready very aware of the need for comprehensive and effective environmentalmanagement systems . This awareness could be attributable to the selection ofa sample from industrial categories that were already tightly regulated or inwhich the need for good environmental conduct was already established .

4760 G . Vastag and S . A . Melnyk

Consequently, these sites could not generate the expected levels of quantitativebenefits because they had already obtained them . However, if we were toextend the study to other categories where the need for good environmentalperformance or effective environmental systems was not currently established,then we might observe some very different results .

•

Types of benefits are consistent with Innovators or Early Adopters . A finalpossible explanation can be found by applying the Innovator/EarlyAdopters/Early Majority/Late Majority/Laggard categorization scheme firstdeveloped by Moore (1991) . This framework identifies users as falling intoone of five categories . The Innovator is someone who is attracted to a newdevelopment such as ISO 14001 certification because it is new . This user is notlooking for economic payback . The Early Adopter, in contrast, is attracted bythe promise of a pay-off. They are willing to take the risk based on thispromise. The Early Majority is a very different type of user. This person isvery risk averse . This person is only willing to invest in ISO 14001 certificationwhen there are verifiable, quantitative, compelling reasons for such an action .They are willing to invest when the certification allows them to do somethingthat is strategically important-something that they could not do before . TheLate Majority is like the Early Majority, but more risk averse . Finally, theLaggard cannot be convinced to pursue ISO 14001 certification . The benefitsare never sufficient . With this framework, it can be argued that the firms thathave been studied really belong to the first two categories of users . There werevery few Early Majority/Late Majority/Laggards . However, with time (asmore of the other three categories of users become interested in ISO 14001certification), we can expect to see the emergence of more compelling reasonsfor change, coupled with the more careful and detailed monitoring of costs andbenefits (very important to the Early Majority) .

The presence of these four plausible and competing explanations strongly shows theneed for more research into the benefits associated with ISO 14001 certification in theUS market .

5 . Overall conclusionsThis study began by noting the need to clarify the benefits that can be expected

from ISO 14001 certification in certain selected industries . The results have presentsome surprising results . First, it is interesting to note that at present (the time atwhich the data were collected) there is no compelling reason (based on economicbenefits) to pursue ISO 14001 certification . For all three industrial groups selected,the most pronounced benefits are not strategic in nature (i .e . based on improvementsto lead time, quality and cost) . Rather, the most pronounced benefits are `soft' innature and involve such areas as corporate reputation .

Second, industrial context is important. ISO 14001 had its greatest impact inIndustrial Group II . This group consisted primarily of discrete batch/job shopsystems. In contrast, the impact of ISO 14001 was very limited for the remainingtwo industrial groups, which involved manufacturing processes that were process/linked . It can be argued that there is less opportunity for immediate impact becausethe processes are so tightly coupled with changes in these processes being highlydependent on long-term changes in process design . Finally, the most importantimpact of ISO 14001 is reputation . Attaining such certification was felt to affect


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how the facility is perceived by others in the industry and by its customers . Theseresults, while interesting, must be viewed as tentative . More research is needed todevelop a better understanding of the benefits generated by ISO 14001 certificationand to understand better a site's motivation to pursue such certification .

This study helps to explain why US firms are somewhat tardy relative to otherplants in other countries . Economically, ISO 14001 certification does not generatethe type of benefits (strategic and quantitative) necessary to justify its introduction .Until such benefits are generated, we can expect to see the decision to attain ISO14001 certification being influenced by factors other than the relative costs andbenefits-factors such as customer requirements, the need to enhance reputationor the need to create greater awareness of environmental issues and opportunities .However, for the bulk of US firms, the lack of real, or at least quantifiable, benefitspresents a significant obstacle to decide to pursue actively and seriously ISO 14001certification .

AcknowledgementsThe authors thank Mark Hanna of Miami University at Oxford, OH, Dennis A .

Rondinelli of University of North Carolina at Chapel Hill, and Robert Sroufe ofBoston College for suggestions and comments . They also appreciate the support ofthe National Science Foundation Division of Design, Manufacture, and IndustrialInnovation (ECM Initiative) under Grant No . DMI-9528759 . Additional supportwas provided by the Center for Advanced Purchasing Studies (CAPS) of theNational Association for Purchasing Management (NAPM) and the Educationand Research Foundation of the American Production and Inventory ControlSociety (APICS) .

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