ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency

Steven A. Melnyk Roger Calantone Rob Handfield R.L. (Lal) Tummala Gyula Vastag Timothy Hinds Robert Sroufe Frank Montabon Michigan State University

Sime Curkovic Western Michigan University Contents

Tables, Exhibits, Charts, and Appendices ...... 4 Acknowledgments...... 5 Executive Summary...... 6 Implications of the Study ...... 7 Design of the Study...... 8 Overview ...... 8 The Large-Scale Survey...... 8 The Sample ...... 9 The Case Studies...... 9 The Sample for the Case Studies Phase ...... 9 The Interview Protocol Described...... 9 Concluding Comments ...... 10 Chapter 1 ISO 14000, Environmentally Responsible Operations and the Purchasing Profession: An Introduction ...... 11 Introduction ...... 11 Objectives of the Study...... 12 Approach of the Study...... 12 Organization of the Report...... 13 Chapter 2 Understanding ISO 14000 ...... 14 Overview ...... 14 What Is an Environmental Management System?...... 14 The Development of Environmental Standards...... 15 The Forces for a More “Environmentally Conscious” System ...... 15 EMS and the Environmentally Conscious Enterprise ...... 16 ISO 14000 — Positioning This New Certification Standard ...... 16 Understanding the ISO 14000 Certification Standards ...... 17 Why Should Purchasing Managers Be Interested in ISO 14000?...... 19 Alternatives to ISO 14000 ...... 20 Concluding Comments ...... 21 Chapter 3 Analyzing the Survey Data: Understanding the Implications of ECM and ISO 14000 ...... 22 Demographic Information...... 22 Industrial Descriptive Information ...... 22 Background of the Respondents ...... 24 Plant Activities ...... 28 Environmental Management Systems - Findings ...... 31 Environmental Systems — Management Options Considered ...... 34 Environmental Management and Corporate Performance — The Aggregate Impact...... 34 Assessing the Impact of ISO 14000 Certification on the Firm ...... 37 Factors Influencing ISO 14000 Adoption ...... 38 Obstacles to ISO 14000 Certification ...... 40 Comparing ISO 14000 and Voluntary EMS Programs ...... 41 Concluding Comments ...... 44 Chapter 4 Understanding the ISO 14000 Decision in Detail: Case Studies...... 45 Introduction ...... 45 ISO 14000 Status: Not Being Considered...... 46

2 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency 2 Firm A ...... 46 Summary...... 46 Firm B...... 47 Summary...... 48 ISO 14000 Status: Assessing Suitability...... 48 Firm C ...... 48 Lessons Learned ...... 49 Firm D ...... 49 Summary...... 50 ISO 14000 Status: Planning to Implement...... 50 Firm E...... 50 Summary...... 52 ISO 14000 Status: Currently Implementing...... 52 Firm F...... 52 Summary...... 54 Firm G...... 54 Summary...... 56 ISO 14000 Status: Successfully Implemented ...... 56 Firm H...... 56 Summary...... 57 Concluding Comments ...... 58 Chapter 5 ISO 14000 and the Purchasing Professional: Uncovering the Major Lessons...... 59 Introduction ...... 59 Answering the Research Questions ...... 59 What Is the Status of Environmental Management Systems in Most American Plants, and How Are They Perceived by Management? ...... 59 What Factors Influence the Predisposition toward ISO 14000 and Progress toward Achieving ISO 14000 Certification?...... 60 To What Extent Do the Respondents See a Relationship between ISO 14000 Registration and Success and Improved Market or Corporate Performance? ...60 How Effective Is ISO 14000 Relative to the Other Alternatives Available for Improving Environmental Performance?...... 60 What Options Are Available for Firms Interested in Improving Environmental Performance, and to What Extent Are These Options in Practice? ...... 60 Identifying the Lessons of ISO 14000 for the Purchasing Professional...... 61 Achieving ISO 14000 Certification Does Enhance Corporate Performance...... 61 ISO 14000 Certification Is Viewed as an Internal Factory Affair ...... 62 View the ISO 14000 Certification Decision as a Business Decision...... 62 Encouraging Acceptance of ISO 14000 Certification Requires Reducing Uncertainty ...... 64 View ISO 14000 As a Supply Chain Issue ...... 64 Regard ISO 14000 As an Opportunity, Not a Problem or a Constraint ...... 64 Environmental Issues Should Be Integrated into the Three Major Activities of Every Plant and Firm...... 65 Recognize the Relationships That Exist among TQM, ISO 9000, and ISO 14000 ...... 66 More Longitudinal and International Studies of ISO 14000 Impacts Are Needed ...... 66 Concluding Comments ...... 67 References...... 68 Center for Advanced Purchasing Studies ...... 89

Contents Center for Advanced Purchasing Studies 3 Tables, Exhibits, Charts, and Appendices

Table Design-1 Response Rates by Wave...... 9 Exhibit 2-1 A Taxonomy of Various Environmental Management Systems...... 17 Exhibit 2-2 Intent of ISO 14000...... 18 Table 3-1 Classification of Respondents by 2-Digit SIC Codes ...... 23 Table 3-2 Plant Involvement in Corporate/Manufacturing Initiatives...... 24 Table 3-3 Stated Positions of the Respondents ...... 25 Table 3-4 Number of Years Respondents Have Been in Their Current Positions...... 25 Table 3-5 Respondents Classified by Functional Area ...... 25 Table 3-6 Membership Traits of the Respondents...... 26 Table 3-7 Level of Involvement of Respondents in Various Corporate/Plant Initiatives...... 27 Chart 3-1a Stage of Involvement with ISO Standards...... 28 Chart 3-1b Stage of Involvement with Quality Programs...... 29 Chart 3-1c Stage of Involvement with Planning and Control Systems ...... 29 Chart 3-1d Stage of Involvement with Voluntary Environmental Programs.....30 Chart 3-1e Mean Involvement with Various Initiatives...... 30 Table 3-8 Assessing the Plant’s Environmental Management System (Mean Values)...... 32 Table 3-9 Environmental Management Options Considered...... 35 Table 3-10 Assessing the Impact of Environmental Management Systems on Corporate Performance ...... 36 Table 3-11 Impact on ISO 14000 Certification Progress on Dimensions of Performance ...... 38 Table 3-12 Factors Affecting the Status of the ISO 14000 Certification Process...... 40 Table 3-13 Major Sources of Uncertainty Regarding ISO 14000 ...... 41 Table 3-14 Factors Underlying the Dimensions of Uncertainty ...... 42 Table 3-15 Uncertainty Factors Affecting the Status of the ISO 14000 Certification Process...... 42 Table 3-16 Comparison of the Impact of Various Approaches on the Impact of Environmental Management Systems and Corporate Performance (Mean Values Reported) ...... 43 Table 4-1 Categorization of Firms by ISO 14000 Implementation Status ...... 45 Appendix I Survey Instrument...... 70 Appendix II Interview Protocol for Case Studies ...... 87

4 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Acknowledgments

This report has been a major research undertaking. For the members of the research team, this report embodies hundred of hours of time, effort, and work. However, this effort could not have taken place without the active encouragement and financial support of certain people and organizations. We would like to take this opportunity to acknowledge their contributions and recognize that this report owes its existence in large part to them.

Specifically, we would like to recognize the contribution of the following people:

• Phillip Carter, Center for Advanced Purchasing Studies (CAPS) • Mike Lythgoe, Director, Educational and Research Foundation, American Production Inventory Control Society (APICS) • Erik Goodman, Director, Case Center, College of Engineering, Michigan State University • Robert Nason, Chairperson, Department of Marketing and Supply Chain Management, Michigan State University

We would also like to thank the following organizations for their financial and other support:

• CAPS • American Production and Inventory Control Society (APICS) • National Science Foundation (NSF) • Manufacturing Research Consortium (MRC) • Michigan State University

To these, we acknowledge their support. They played a critical role in helping make the idea for this report a reality. Thank you again.

Steven A. Melnyk Roger Calantone Rob Handfield R.L. (Lal) Tummala Timothy Hinds Gyula Vastag Robert Sroufe Frank Montabon Sime Curkovic

Center for Advanced Purchasing Studies 5 Executive Summary

The following report details a two-phased research • Successful attainment of ISO 14000 has a large, project in which American firms’ attitudes toward ISO positive impact on the perceived efficiency and 14000 were analyzed, the firms’ approach to ISO 14000 effectiveness of the environmental management sys- and environmental management systems were reviewed, tem. Except for lead times, which are slightly nega- and the implications of these facets of environmentally tively affected, ISO 14000 greatly improves every conscious manufacturing were summarized. Some dimension of performance. This finding points to a highlights of this research include: situation where those firms that have attained this level of certification are not only more environmen- • Environmental management systems are essentially tally responsible, but also more efficient (and multi-dimensional and complex entities. They potentially better suppliers). embody data collection, reporting, performance • The progress of a plant in attaining ISO 14000 cer- measurement, and tools. At present, most environ- tification is influenced by several factors: size, mental management systems are implemented nature of ownership (foreign-owned firms are more using a separate, formal department that is respon- likely to be ISO-14000 certified), past success with sible for this aspect of corporate performance. They QS 9000/ISO 9000, past success with TQM sys- also tend to focus on tactical and operational prob- tems, and degree to which cross-functional pro- lems. Their stance is primarily reactive. That is, in grams and teams are used. most firms, these systems come into play once a • Progress in attaining ISO 14000 certification is also problem has occurred. They are also driven by influenced by uncertainty concerning federal regu- environmental regulations. Finally, they are lations, changes in ISO 14000 standards, the costs internally oriented, with relatively little attention of certification, the benefits of certification, and the being devoted to environmental problems within impact of the ISO 14000 standards on current envi- the supply chain. ronmental management systems. • Overall, environmental management systems are • Compared with other voluntary-based programs not seen in a positive light. In general, these aimed at improving environmental performance, systems are negatively affecting the major strategic the evidence indicates that the ISO 14000 certifica- dimensions of performance (i.e., lead time, costs, tion process is more effective and efficient when and quality). They are also not seen as enhancing viewed in terms of its impact on performance. the firm’s ability to sell its products internationally. • The ISO 14000 certification program is relatively new, with the result that relatively few plants were certified (37/1,510 respondents or 2.5%). This number is low relative to other environmental programs such as Industrial Voluntary Environmental programs (where 284 respondents noted successful implementation of these programs) and Voluntary EPA programs (where 253 respondents noted successful implementation).

6 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Implications of the Study

Ultimately, the purchasing professional must examine • Foreign-owned subsidiaries tend to pursue ISO any new development or initiative that brings with it 14000 certification before non-foreign-owned firms. the possibilities of improved performance. In the case of • There is a strong relationship between ISO 9000 (in ISO 14000, there is the opportunity that this new certifi- terms of process and benefits) and ISO 14000. In cation process will not only result in improved environ- some cases, the additional certification of the EMS mental performance but also potentially improved over- system costs very little after the ISO 9000 certifica- all performance. This relationship can occur if the tion is completed. process orientation that underlies ISO 14000 is indeed • ISO 14000 certification has a positive impact on appropriate. That is, by changing the process, we can firm performance in terms of reduced costs and reduce both pollution and improve overall performance. improved quality. The reason for this simultaneity is that ISO 14000 • Firms are starting to consider ISO 14000 certifica- encourages users to identify sources of waste. Pollution, tion in their supplier evaluation processes. as noted is nothing more than another form of waste. By • Firms not considering ISO 14000 may not or will eliminating waste, we can save the resources consumed not see the potential benefits coming from this in the creation of that waste. As a result, costs are standard. reduced, and performance is improved. • Firms in the process of certification, or who have already been certified, are not only improving per- In other words, we are interested in finding out the formance, but are looking at previous environmen- extent to which “being clean (better environmentally tal issues or problems as new opportunities. responsible) leads to more green (better performance).” If it does, then by searching out suppliers that are ISO Although ISO 14000 is not yet widely deployed, we 14000 certified, the purchasing professional can expect expect this standard to become a part of the require- benefits accruing to the buying organization in the form ments for doing business not only in the U.S., but also of improved costs, delivery, quality, and better environ- in Europe, Japan, southeast Asia, China, and Latin mental performance. If this is not the case, then ISO America. Because of the growing sensitivity of the global 14000 offers little advantage and, in fact, may only community to the environment, purchasing must be increase suppliers’ costs with no additional benefit. In aware of whether ISO 14000 really makes a difference. If this case, ISO 14000 is not a critical differentiator for it becomes a mandate for doing business, then purchas- the purchasing professional faced with the task of pick- ing must also understand its overall impact on the sup- ing between two equally comparable suppliers. plier community.

Implications of the research that executive management can use to enhance purchasing and supply chain management effectiveness include:

• The acceptance of ISO 14000 certification is slow to start but is gaining acceptance by many foreign countries and large OEMs.

Center for Advanced Purchasing Studies 7 Design of the Study

Overview concerning environmental issues is fraught with Socially Desirable Response (SDR) issues. In order to mitigate The major approach used in this research project is that these issues, generally it is wise to include more ques- of a large-scale survey complemented by extensive field tions as a validity check. interviews at selected plants. The reason for the survey is to allow the research team to record the attitudes of The survey consisted of five major sections (see the respondents toward ECM, their environmental man- Appendix I). The first section gathered information agement system, and ISO 14000. The survey is also about the respondent, his/her position, professional used to identify factors that influence these attitudes affiliations (if any), and extent of involvement in vari- and the perceived effectiveness and efficiency of the ous initiatives (such as Just-in-Time implementations or plant environmental management systems. The survey Lead Time Reduction programs). The second section is appropriate in that its objective is to collect data. focused on the business unit (the basic unit of analysis) However, what the survey does not do is to permit and detail about it. This included product manufac- detailed understanding of decisions, perceptions, and tured, extent of uncertainty facing the business unit and processes. As a result, it was decided to complement the its personnel, and the status of various types of initia- breadth of the large-scale survey with the more detailed tives (e.g., Enterprise Resources Planning, Cross- insight provided by a set of selected case studies. The Functional Teams, and QS 9000). Section III dealt with resulting data should provide the readers with greater the perceived impact of the ISO/QS 9000 certification insight into the ISO 14000 decision and the factors process on the business unit and its competitive posi- influencing this decision. tion in the market place. This section was introduced because it was hypothesized that there would be a strong relationship between the experiences on the ISO/QS 9000 certification process and the ISO 14000 The Large-Scale Survey certification process. In Section IV, the respondent was asked to evaluate a series of questions pertaining to ISO The survey was developed by the research team and pre- 14000. These questions assessed the level of knowledge tested by 15 respondents in a three-round process over a of the respondent on the ISO 14000 certification period of two months. This group represented a variety process, as well as the factors affecting its implementa- of positions and functions within their firms in a variety tion and use. The fifth and final section gathered infor- of industries. The pre-test group was asked to review mation about the business unit’s environmental manage- the survey primarily for clarity of questions and time ment system, the effectiveness and efficiency of this sys- required to complete the survey. The primary potential tem, and the types of options used to improve environ- problem with the survey that the pre-testers pointed out mental performance. It was in this section that the was concern over the length of the survey. The length of researchers would evaluate the strategic and overall the survey is justified by the need to establish valid impact of environmental initiatives such as the ISO measures for the concepts that were included in the sur- 14000 certification process. At the very end of the ques- vey. There is very little previous work on which to base tionnaire, respondents were given some free-form space our questions, so we decided to err on the side of length to describe any obstacles, potential or realized, to their in order to ensure we would be able to obtain valid firm’s implementing ISO 14000. measures. Also, we were aware that any research

8 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency primarily on the methods of qualitative data analysis The Sample developed by Miles and Huberman (1994), which con- Three professional associations (National Association of sists of anticipatory conceptual model development and Purchasing Management, American Production and simultaneous data collection, reduction, display, and Inventory Control Society, and one group that wishes to conclusions testing. Multiple research sites were used in remain anonymous) provided mailing lists of 5,000 order to provide a broader understanding of EMS devel- names each. The constituency of each of the associa- opment within firms and the reasons for firms to choose tions was different enough that only a handful of names EMS certification. was found on more than one list. The Sample for the Case Studies Phase We also worked closely with a major American The researchers initially set out to find a set of organiza- manufacturer, who provided us with an additional list of tions that were at different stages of EMS implementa- 104 managers at six of their facilities. From this list, we tion and ISO 14000 certification. Firms from different received 57 valid responses. In total, we had a mailing EMS stages, industries (i.e., pharmaceutical, furniture, list of 14,584 names, of which we received 1,510 usable and automotive tier-one suppliers), products, processes, responses, for a response rate of 10.35 percent. While and firm size were selected based on geographic prox- this is lower than the 20 percent that researchers strive imity and knowledge of the researchers. Each of the to achieve, we believe that the length of the survey firms selected was chosen to represent a spectrum of discouraged some potential respondents. The overall EMS status. The objective of this sampling approach response rates by wave are summarized in Table was to construct a sample of firms that would be diverse Design-1. enough to capture the EMS attributes available across firms that may be overlooked in a single industry or product sample, and to confirm findings from the large- The Case Studies scale survey.

The purpose of the field visits was to identify ways in Based on these criteria, and using the researchers’ expe- which ISO 14000 is adapted and implemented by a vari- rience with different companies, a list of potential com- ety of firms. This part of the research, which is qualita- panies was developed. In most cases, environmental and tive in nature, is a perfect complement to the quantita- operations managers were contacted at the divisional tive survey research. Field-based data collection meth- level. An initial idea of the level of EMS understanding ods were used to ensure that the important variables and implementation was determined through prelimi- were captured during the interview process. These nary screening over the telephone. After the initial methods also helped develop an understanding of why screening, which also assessed the willingness of the these issues/variables might be important (Eisenhardt company to participate in the study, site visits were 1989). A small detailed sample fit the needs of the arranged. The interviews were conducted with man- research and complemented the large-scale survey. The agers responsible for the EMS strategy at each site using method followed was similar to the grounded theory the structured interview protocols presented in development methodology suggested by Glasser and Appendix II of this report. Strauss (1967). In addition, suggestions made by Eisenhardt (1989) regarding case studies, Miles and The Interview Protocol Described Huberman (1994) regarding qualitative data analysis, There are differing opinions as to the amount of prior and Yin (1994) were also incorporated. instrumentation required before conducting site visits for qualitative research (Miles and Huberman 1994). The researchers participating in this project relied Some prior instrumentation was appropriate for this

Table Design-1 Response Rates by Wave Source of Respondents First Wave Third Wave Unknown Total Automaker 52 5 0 57 Anonymous Group 173 136 0 309 NAPM 301 199 0 500 APICS 435 197 0 632 Unknown 0 0 12 12 Total 961 537 12 1,510

Center for Advanced Purchasing Studies 9 conceptual model proposed in the introduction. The interview protocol included in Appendix II was developed based on the researchers’ general understanding of ERM issues facing industry today. The protocol was pre- tested at two manufacturing facilities and then used for the eight firms included in this study.

The researchers traveled to the respondents’ facilities to carry out the interviews. Generally, only one or two people were interviewed at a time. Other personnel at the respondents’ firms were brought in as needed. At least two researchers were at each interview. The discussion generally progressed serially through the interview protocol. The general context of the firm and the respondents were first discussed. These contexts involved the size of the firm, competitive thrusts, and key success factors. The discussion was then turned to the type of EMS system in place, factors influencing the decisions surrounding EMS, and environmental performance measures. After the interview was completed, the researchers who conducted the interview compared their notes in order to make sure nothing was missed and then completed a write-up on each firm.

Analysis was done by reviewing all the write-ups. As the firms were at different stages with regard to the decision to pursue ISO 14000 certification, the researchers were able to describe and categorize what separated one firm from another. This information was placed into a “meta- matrix” for easy visual reference. The results of this categorization and the use of the meta-matrix allowed the researchers to present the findings in Chapter 5.

Concluding Comments

This very detailed and rigorous set of research methodologies was developed for two purposes. The first was to ensure that the objectives of the research study were achieved. The second was to guarantee that the findings presented in this study and drawn from the various sources were based on the data and did not reflect the biases of the research team. Having established the structure of the research methodology, we can now proceed to examine the findings generated in the first phase of the study — from the large-scale study.

10 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Chapter 1 ISO 14000, Environmentally Responsible Operations and the Purchasing Profession: An Introduction

Introduction its variants, such as QS 9000 (as found in the automotive industry). Second, ISO 14000 is an international The 1990s have been a time of challenge and transition. standard. As a result, it is hoped that this standard will In the past, the managers thought in terms of trade-offs replace the numerous and often conflicting standards (i.e., the paradigm of “or”). That is, you could have low found in various countries across the world. Third, ISO cost OR short lead times OR high quality OR high flexi- 14000 shifts attention from the outcome (reduced pol- bility. You could have superior performance on any one lution) to processes. Finally, the extent to which the of these dimensions. But, you could not have expected firm is able to successfully adhere to these new require- superior performance on two or more dimensions. ments must be evaluated by an impartial third-party Today, however, managers increasingly live with the par- assessor. adigm of “and.” That is, managers are now expected to simultaneously reduce lead times (manufacturing, pur- Finally, because it is a new standard and approach, the chasing, and design), improve quality, reduce costs, introduction of ISO 14000 has raised a number of AND enhance flexibility. questions:

This has also become a period when more and more • Will ISO 14000 generate the same degree of accep- managers are expected to become increasingly environ- tance as ISO 9000? mentally conscious. Being environmentally responsible • Are the benefits offered by ISO 14000 certification is no longer viewed as something that is primarily done sufficient to offset the costs incurred in meeting the for publicity sake. It is now viewed increasingly as a requirements of this new standard? requirement of doing business. For the manufacturing • Is there a relationship between environmental and manager, this has meant re-examining their products corporate performance? and processes with an eye toward the reduction or elim- • Should managers wait until others have undergone ination (if possible) of any resulting waste streams. For ISO 14000 certification before proceeding or until the purchasing profession, the corresponding challenge customers demand it? has been to identify suppliers who can provide environ- • What is current state of ISO 14000 acceptance in mentally responsible goods and services without sacri- American industry? ficing cost, quality, flexibility, or lead time. It has also • Is ISO 14000 the most effective and efficient meant identifying and evaluating any initiative that is approach to improving environmental consistent with these new expanded objectives. One performance? such initiative is that of the ISO 14000 environmental • What factors significantly influence the decision to standard. pursue ISO 14000 certification?

Formally adopted in 1996 by the International This study will examine these and other related Standards Organization, ISO 14000 represents a new questions. standard and approach to improved environmental performance. There are several features that make this new standard noteworthy. First, this standard builds on the success provided by the quality standard, ISO 9000, and

Center for Advanced Purchasing Studies 11

Organization of the Report

The report is organized into five chapters and two appendices. Chapter 2 provides an overview of ISO 14000. It reviews some of the major issues present when studying ISO 14000. In a sense, the information provided in this chapter sets up the research study by identifying many of the major issues examined in this study. In Chapter 3, we summarize the research methodology. Chapter 4 presents the major findings obtained from a study of the survey data. Chapter 5 presents the case studies and summarizes the major lessons obtained from a study of these cases. In this final chapter, we address the question of “Why should the purchasing professional be interested in ISO 14000?” Appendix A contains a copy of the survey instrument developed for this study as well as copies of the various cover letters used to encourage the respondents to participate in the study. Appendix B presents the survey interview protocol.

Center for Advanced Purchasing Studies 13 Chapter 2 Understanding ISO 14000

Overview • Ensure that the activities of the firm are, at a minimum, compliant with the relevant environ- This report is about ISO 14000, its rate of acceptance, mental regulations (be it at a local, state, federal, or and its effect on various dimensions of performance. international level). Before we turn to the data, it is first necessary that we • Summarize and communicate environmental activi- understand what ISO 14000 is, its origins, and the rea- ties to others located either within the firm or with- sons that managers, more specifically purchasing man- out (e.g., stockholders, local community, and envi- agers, should be interested in this new certification stan- ronmental agencies). dard. These issues form the major objectives of this • Help influence critical activities, such as chapter. Since ISO 14000 focuses on the corporate product/process design and production scheduling, Environmental Management System (EMS), the chapter so that environmental concerns and issues are duly will begin by exploring the concept of an EMS. considered. • Create corporate awareness of the need for environmental awareness and of the potential advantages What Is an Environmental Management System? offered by becoming more environmentally responsible. As pointed out by Tibor and Feldman (1996), the ISO • Identify and introduce appropriate tools intended to 14000 standards describe the traits of an effective envi- improve environmental performance or reduce ronmental management system. The EMS is the formal pollution, and to educate users in their use. corporate management system that is responsible for the • Help identify and correct potential environmentally management, organization, measurement, and improve- related problems. ment of environmental performance within the enter- • Review the corporate activities with an eye toward prise. Underlying this definition is the implicit assump- improving them and environmental performance. tion of a positive correlation between environmental and corporate performance. EMS embodies a more comprehensive systems approach to what is typically found in disaggregate form in the As a formal management system, the EMS is charged current Environmental, Health and Safety (EHS) func- with a number of important responsibilities, namely to: tions of many firms. EMS is not an entirely new concept or system. In many cases, the infrastructure of an EMS • Create an environmental policy. is already in place. What is needed for an existing sys- • Set appropriate objectives and targets. tem to become an EMS is the integration of the system • Help design and implement a program aimed at capabilities with environmental metrics (performance achieving these objectives. measures) and goals. • Monitor and measure the effectiveness of these programs. The emergence of the EMS can be traced to two major • Monitor and measure the effectiveness of general factors. The first involves the development of environ- environmental management activities within the mental standards. The second is due to the various firm. focuses encouraging a more “environmentally responsible” perspective.

14 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency The Development of Environmental Standards and AT&T have been invited to help establish interna- For those not familiar with the evolution of EMS, many tional environmental standards such as ISO 14000 of the components of EMS are found in the develop- because of their proactive track records in pollution pre- ment of different standards in the last six years. Masaaki vention. Firms that are laggards in adopting new stan- Imai (1986) states “there can be no improvement where dards and conforming to existing regulations will spend there are no standards.” Thus, the world’s first standard valuable resources in order to stay abreast of the active for EMS, British Standard (BS) 7750 was developed and development of their competitors and new governmen- published by the British Standards Institute in 1992. tal regulations. The United States alone has passed the The BS 7750 standard was the model for the ISO 14000 20,000-page threshold during 1993 and continues to series of standards for EMS developed by the add to the number of environmentally related pages of International Organization for Standardization (ISO). BS regulations since 1993. This increase in federal laws 7750 is also the basis for the European Union’s Eco- does not even include the state and local level regula- Management and Audit Scheme (EMAS). tions that tend to compound the already complex issue of legal compliance. Those firms who choose to be reac- Found within these various EMS standards are almost tive to environmental legislation and implement end-of- the same set of basic elements of an effective environ- pipe solutions to pollution problems will consume more mental management system. They include: (1) creating resources just to comply with these new regulations. It an environmental policy; (2) setting objectives and tar- should be easy to see that compliance is a minimum gets; (3) implementing a program to achieve those requirement for competitive advantage. For those firms objectives; (4) monitoring and measuring its effective- that are already exceeding regulatory compliance, the ness; (5) correcting problems; and, (6) reviewing the proactive investments in previous environmental initia- system to improve it and overall environmental perfor- tives can help defend the firm against new compliance mance. However, while the elements are somewhat issues, costs, and competitors. common, it is the special information the system can generate that serves to differentiate the EMS of one firm Additional evidence of the growing importance of envi- from that of another. Thus, many firms can have an ronmental business practices is seen in the EMS, and each of these systems can be a unique Environmental Protection Agency’s publishing of the resource, delivering specialized information to individ- Code of Environmental Management Principles (CEMP) ual firms. for all Federal Agencies. The intention of this code is to move federal agencies toward a “systems” approach to The Forces for a More environmental management that will mirror private sec- “Environmentally Conscious” System tor initiatives such as EMS standards (Anonymous When asking firms about the importance of the envi- 1997). ronment, we find that it is more than some will admit and less than some would hope. The proponents of Examples of international government’s recognition of more environmental regulation for business have gained environmental importance may also be seen in support from Porter (1991), who briefly discussed the Indonesia’s recently introduced Program for Pollution question of whether strict environmental standards Control, Evaluating, and Rating. This is a landmark ini- make American industry less competitive in interna- tiative under which polluters are assigned environmen- tional markets. The conflict between environmental pro- tal performance ratings that are announced to the pub- tection and economic competitiveness is said to be a lic. The main objectives of the program, which went false dichotomy (Porter, 1991). Strict environmental into effect in June 1995, are to increase compliance with regulations do not inevitably hinder competitive advan- environmental regulations, promote adoptions of clean tage against foreign competition; indeed, they often technologies, create incentives for polluters to enhance it (Rondinelli, Berry & Vastag, 1997). It is here strengthen their in-house environmental management that we can see the paradox of the view that EMS is capabilities, and prepare companies in Indonesia for ISO only a cost to the firm. It has been claimed that firms 14000 certification (Wheeler & Afsah, 1996). Due in involved in proactive environmental programs can lead part to governments recognizing the importance of envi- the way into environmental stewardship and new regu- ronmental business practices, corporations now must latory requirements (Rondinelli & Vastag, 1997). evaluate the appropriate corporate environmental policies for their plants and supply chain partners while While there are cost/benefit trade-offs associated with being consistent with new international standards being the standard setter or being a follower, there are (Rondinelli & Vastag, 1996). also times when “best-in-practice” environmental companies are sought by government or the competition as Aside from the looming environmental legislation, firms a benchmark. Managers from firms such as 3M, Dow, still have to handle the delicate issues of special interest

Center for Advanced Purchasing Studies 15 groups, stakeholders, customers, and communities ISO 14000 — Positioning This New Certification Standard around the firm. The recent United Nations Climate Conference discussing the controlling of global warm- Before discussing the ISO 14000 Standard, it is useful to ing, and specifically reduction of carbon dioxide and position this standard in terms of its relationship to the other greenhouse gases to below 1990 levels, has various types of EMS that a firm can develop and imple- brought growing attention to the environmental impacts ment. As discussed in the preceding sections, an EMS is of businesses in many countries. These and other forces increasingly being asked to fulfill a number of objec- have provided the management of many firms with a tives. How it achieves these objectives depends on the strong impetus to develop and implement effective, for- strategy used to develop and implement it. This strategy mal EMS. can be influenced by several factors.

Two dimensions are critical when evaluating this strat- EMS and the Environmentally Conscious Enterprise egy. The first is the Corporate Position Regarding Environmental Performance. This dimension is essen- The environmental management system and ISO 14000 tially a spectrum that is anchored at one end by “Strict (to be discussed in the next section) can be viewed as Compliance” and by “Environmental Leadership” at the elements of the Environmentally Conscious Enterprise other end. With “Strict Compliance,” the firm’s manage- (ECE). This system can be defined as: ment does no more than is necessary to meet the minimum requirements as set down within the appropriate A corporate system that integrates product and design set of regulations. With this approach, the firm’s envi- issues with issues of production planning and control ronmental activities are driven by changes in govern- and supply chain management in such a manner as to mental regulations. As the standards set within these identify, quantify, assess, and manage the flow of envi- regulations become more stringent, the firm improves ronmental waste with the goal of reducing and ulti- its performance to meet these new requirements. Once mately minimizing its impact on the environment, while met, the environmental activities of the firm stop. In also trying to maximize resource efficiency. other words, with “Strict Compliance,” the levels set by regulation are viewed as ceilings; there is no incentive to Associated with this definition are several important exceed these limits. assumptions and premises (Smith & Melnyk, 1996): In contrast, under “Environmental Leadership,” the • ECE decisions are always present and are integrated firm’s management views the requirements contained (and part of) with the business process. within the appropriate regulations as floors. In other • The ultimate goal of ECE is waste elimination. words, they represent the minimum that the firm • To be ultimately successful, ECE must be viewed as should do. Under this stance, the firm views improved a strategically driven decision that is evaluated by environmental performance as being critical. As a result, comparing its relative costs and benefits (and mak- it strives to lead by doing more than is required by the ing appropriate decisions based on this analysis). law. • Effective ECE systems must be viewed as corporate systems, not as manufacturing, engineering or pur- The second dimension is that of the Action Focus. This chasing decisions. dimension describes where the focus of management • Effective ECE systems must focus on the three Ps attention is when dealing with environmental problems — Product, Process, and Packaging. and issues. Like the previous dimension, this can be • To be ultimately successful, ECE must be integrated envisioned as spanning a spectrum that is anchored at into the product and process design and develop- one end by an “End-of-Pipe” focus. With this focus, ment system. attention is directed toward the outputs of the process • To be ultimately successful, ECE must be consid- and the management of these problems once they have ered within the context of both the internal factory been created. For example, the decision to install a (the manufacturing system found within the four scrubber into a smokestack so that particulates can be walls of the enterprise) and the external factory removed before they reach the open air falls into this (the transformation process as it involves the sup- category. The other end of the spectrum is anchored by ply chain). a “Process” focus. Here, management is interested in • ECE is ultimately a cross-functional undertaking. identifying, studying, and changing the performance of • ECE is dynamic. those processes that are responsible for the observed • ECE is primarily process as compared to outcome level of pollution. In contrast to the “End-of-Pipe” (end-of-pipe) oriented. focus, this approach seeks to eliminate the pollution from being created in the first place. It is a preventive

16 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency orientation, in contrast to the corrective stance found 14000 series of standards work as intended, they will set when taking an “End-of-Pipe” focus. a higher level of expected environmental management practices worldwide. Additionally, these new standards When these two dimensions are merged, what is created are predicted to facilitate trade and remove trade is a 2x2 matrix that describes the various basic forms barriers. that an EMS can take (see Exhibit 2-1). This matrix identifies the simplest and most reactive form of EMS. What is ISO 14000? The ISO 14000 standard specifies This form, denoted by A in Exhibit 2-1, is observed the structure information technology in the form of an when the management takes a compliance view of envi- EMS that an organization must have in place if it seeks ronmental issues and when the focus of activity is on to obtain certification of the EMS according to ISO the management of “End-of-Pipe” problems. With this guidelines. The ISO 14000 standards describe the basic type of system, management will only invest in environ- elements of an effective EMS. These elements include mental issues when forced to do so by changes in gov- creating an environmental policy, setting objectives and ernmental regulations. When this investment does take targets, implementing a program to achieve those objec- place, the focus is on the management of pollution after tives, monitoring and measuring its effectiveness, cor- it has been created. With this type of system, any invest- recting problems, and reviewing the system to improve ment in environmental initiatives results in increased it and overall environmental performance (Tibor & costs. The processes causing the pollution go Feldman, 1996). unchanged. To the managers in these firms, pollution control is no more than a cost of doing business. In reviewing the ISO 14000 certification standards, we must note one important feature of this standard: ISO In contrast, the most complex and effective form of 14000’s EMS standards are process, not performance, EMS is observed under conditions of Environmental standards. In other words, these standards do not tell Leadership and a Process focus. This type of EMS, organizations what environmental performance they denoted by D in Exhibit 2-1, attempts to eliminate the must achieve aside from compliance with environmental creation of pollution. With this type of system, the elim- regulation. Instead, the standards describe a system that ination of environmental waste (which is what pollution will help an organization to achieve its own objectives is essentially) can result in reduced costs, improved effi- and targets. The assumption is that better environmen- ciencies, and fewer problems. It is in this quadrant, it tal management will lead indirectly to better environ- can be argued, that we would expect to see firms that mental performance (Tibor & Feldman, 1996). are ISO 14000 certified. To better understand the transition of the intent of ISO 14000 to the actual standards, ISO 14000 encompasses Understanding the ISO 14000 Certification Standards standards in the following seven general areas:

Representatives from some 50 countries around the 1. Environmental Management Systems globe have formally adopted the international standard 2. Environmental Auditing on environmental management systems (ISO 14000) by 3. Environmental Performance Evaluation the International Standard Organization in 1996. This 4. Environmental Labeling standard attempts to build on the success and experi- 5. Life Cycle Assessment ence of its predecessor, the ISO 9000 standards, and its 6. Environmental Aspects of Product Standards variants such as QS 9000 standards now being imple- 7. Terms and Definitions mented within the automotive industry. If the ISO

Exhibit 2-1 A Taxonomy of Various Environmental Management Systems Corporate Position Regarding Environmental Performance Strict Compliance Environmental Leadership Action Focus “End-of-Pipe” A

Process D

Center for Advanced Purchasing Studies 17 Exhibit 2-2 Intent of ISO 14000

Environmental Management

Environmental Management Life Cycle Systems Assessment

Environmental Environmental Performance Environmental Environmental Aspects in Evaluation Auditing Labeling Product Standards

Organizational Evaluation Product and Process Evaluation

These standards are then divided into two general cate- • You export to markets where EMS registration is a gories as shown in Exhibit 2-2. The EMS, auditing, and de facto requirement for entering the market. performance evaluation standards will be used to evalu- • You expect to gain a competitive advantage through ate the firm. The EMS standards provide the framework EMS registration. for the management system. Auditing and performance • Your major stockholders (local community, share- evaluations are seen as management tools in the suc- holders, unions, etc.) expect environmental excel- cessful implementation of an EMS. Labeling, life cycle lence, and an EMS registration is the way to assessment, and environmental attributes in product demonstrate it. standards emphasize the evaluation and analysis of product and process characteristics. If one of the above applies, a firm should decide whether to get registration for the organization as a A firm can implement an EMS that is in line with one of whole or just for parts of it. If the firm is already ISO the EMS standards (BS 7750, EMAS, or ISO) without 9000 certified, it makes sense to define its scope in a external certification. External certification and registra- similar manner (Tibor & Feldman, 1996). If the firm tion becomes a factor once there is a clear reason to opts for a site registration, there is the advantage of not demonstrate conformance to third parties. Some situa- losing the registration for your whole organization if tions where certification could become important are one of the sites does not comply with the requirements (Tibor & Feldman, 1996): of the standard. Also, the process of implementing, certifying, and registering the EMS is broken down into • A customer requires EMS certification as a condi- smaller projects that may be easier to handle. tion to sign a contract. • Your organization supplies to a customer who Generally speaking, there are 10 steps involved in the strongly suggests you become registered. ISO 14000 certification process. These same steps are • A government provides benefits to registered also helpful in customizing your environmental man- organizations. agement system to ISO 14000 without seeking certifica- • You have a site in the European Union, where mar- tion (Sayre, 1996). ket pressure or the regulatory environment forces you to get registration or certification. • Step One: Understand the ISO 14000 standard, its • A single international environmental standard can impact on the organization, its requirements, and reduce the number of environmental audits con- determine the benefits of seeking certification. ducted by customers, regulators, or registrars.

18 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency • Step Two: Understand the certification process, and the final audit if there were any major discrepancies decide whether to commit to certification. identified.

• Step Three: Top management support should be in To date, no research has addressed whether ISO 14000 place for the Management Representative for the will be widely used by businesses as a consensus model, environmental management system to go forward or whether it should be. Instead, the literature is satu- with the process with team members from each rated with conflicting predictions and viewpoints affected area of your organization. If necessary, pro- offered by experts. The champions of ISO 14000 suggest vide any needed training on the certification that it will unify countries in their approach to environ- process. mental management and will eventually be looked upon more favorably than traditional measures (Cascio, • Step Four: With the help of the Management 1996). It has been argued that small manufacturing Representative, select the appropriate certification firms constitute the largest potential market for ISO organization. Investigate the certifying organization 14000 and that the real test of the standard can be mea- to see if there is a waiting list, understand the sured by adoption rates among these firms, which typi- approach to the certification process through their cally need the most direction in these issues. According eyes, and understand what expectations and to some authors, the development to watch is what requirements are involved. industrial customers do with these standards with regard to their supply chains. Acceptance of the stan- • Step Five: Perform internal audits of your environ- dard will come when conformance or certification mental management system against each element of becomes a condition for customer requirements. This the ISO 14000 standard. Perform a gap analysis, suggests that the predisposition of corporations to ISO and identify strengths and weaknesses in the cur- 14000 will mostly influence the adoption rates and ulti- rent system. Repeat audits where deficiencies are mately, the success of this standard. However, no identified. research to date has examined the predisposition of ISO 14000 among managers of corporations. • Step Six: Correct deficiencies while striving to attain full compliance with the standard. If this cannot be done immediately, develop a compliance Why Should Purchasing Managers plan to address discrepancies beyond the current capability to correct. Be Interested in ISO 14000?

• Step Seven: Verify that you have clearly defined For many, the most important question surrounding this environmental management policies, objectives, tar- study is “why we, as purchasing professionals, should gets, and procedures (typically in an environmental be studying ISO 14000?” It has been argued by many management system manual or similar document). managers that ISO 14000 is very different as compared Validate proper regulatory commitments. to ISO 9000. For ISO 9000, there has been a real demand from customers for this level of certification, • Step Eight: Again, address and correct deficiencies. and the benefits to firms pursuing ISO 9000 certification If the deficiencies cannot be fully corrected, then have been repeatedly demonstrated. This logic and the document and implement a corrective action plan accompanying flow of benefits cannot be extended to to resolve issues that may be beyond your current ISO 14000. In spite of consultants’ reports, there has capability to address. been little demand from customers for ISO 14000 certification. Furthermore, again in spite of what self-serving • Step Nine: Apply for certification. Set up meetings groups and consultants have stated, there has been little with the certifying agent for the indoctrination of documented evidence showing that ISO 14000 will gen- your organization, its activities, products, and ser- erate significant benefits. However, it is important to vices. Next, schedule the final audit (there may be recognize that these arguments, as they are applied to several pre-audits). ISO 14000, are currently based on small samples, sup- position, and a great deal of hearsay. • Step Ten: Expedite the final audit (say what you do and do what you say). Be prepared for the outcome There are some potentially strong reasons for being (recommendation for or against certification). Start interested in ISO 14000. Because ISO 14000 is process scheduling the correction of any identified discrep- oriented, then it should help managers improve envi- ancies within 60 days and submit evidence of the ronmental performance by changing the operation of completion of the actions taken. Finally, expedite the process. By changing the operation of the

Center for Advanced Purchasing Studies 19 appropriate, critical processes, it can be argued, the are initiated and championed by firms operating in spe- result should be not only a more environmentally cific industries. The most noteworthy example of this responsible process, but also a more efficient process. category is the Responsible Care® program that was pio- These changed processes should help the firm be more neered by Dow Chemical and now accepted as the envi- efficient when it comes to resources such as material, ronmental system for the chemical industry. energy, and the like. Ultimately, the result should be lower costs, fewer problems, and a product that is easier Voluntary Government-Initiated Environmental to market both locally and internationally. All of these Programs: In contrast to the preceding approach, this traits make the potential supplier far more attractive to approach consists of programs supported by the govern- potential firms and their purchasing executives. ment, specifically the Environmental Protection Agency (EPA). Examples include the Green Light® and the In addition, there is the advantage offered by third-party 33/50 programs. In these cases, it is the governmental assessment. For a firm to be ISO 14000 certified, it must agency, not the firm, that acts as the initiators of these undergo a rigorous assessment by a third-party assessor. programs. As a result, the firm must prove to an outside, impartial third party that it has been able to successfully meet and Voluntary Programs Where Improved Environmental exceed the requirements set down within the ISO 14000 Performance Is a Secondary Benefit: In the previous certification process. It is not enough to rely on self- two sets of programs, improved environmental perfor- reported evidence. All such evidence must be ultimately mance is the desired and primary outcome of these pro- viewed with some degree of suspicion because it is not grams. In contrast, this category of alternatives focuses sufficiently objective and impartial. on another set of outcomes. For example, the programs run by OSHA (Occupational Safety and Health Agency) One of the most compelling reasons for purchasing focus on improving the safety of the environments in managers to consider ISO 14000 certification is related which the employees work. However, it can be argued to the concept of Total Cost of Ownership. that any action that improves safety must, by definition, Organizations can no longer afford to purchase from focus on environmentally related activities such as pol- suppliers who are not environmentally conscious. In the lution prevention and reduction. long run, these suppliers are generating waste, which is built into price charged to the purchaser. Because legis- There are several very critical differences between these lation such as the Superfund Act mandates strict liability three alternatives and the ISO 14000 standards. These up the supply chain, a firm whose major supplier is differences can be best understood by referring back to responsible for cleanup of a polluted landfill may find the taxonomy displayed in Figure 2-1. These three alter- itself responsible if the supplier declares bankruptcy. natives are primarily outcome oriented. The programs Finally, purchasing organizations do not want to be establish the desired outcome; the means by which associated with suppliers who are not environmentally these outcomes are realized is left up to the discretion responsible, as this can provoke a strong negative reac- and initiative of the participating firms and their man- tion from the public. agement. In contrast, ISO 14000 focuses attention on the processes associated with pollution. It focuses attention on the control and management of these processes. Alternatives to ISO 14000 This approach is based on the implicit assumption that pollution is a residual. That is, since pollution is the Before going further, it should be recognized that attain- result of various processes, it cannot be attacked ing ISO 14000 certification is only one way of improv- directly. Rather, for management to reduce pollution, it ing environmental performance. For the American man- must identify and evaluate those processes responsible ager, there are at least three other potentially viable for the pollution and act on them. alternatives to ISO 14000. These include: (1) voluntary industrial environmental programs; (2) voluntary gov- Furthermore, the ISO 14000 standards require third- ernment-initiated environmental programs; and, (3) vol- party, external validation. In contrast, the other three untary programs where improved environmental perfor- programs impose no such requirements. mance is an important but secondary benefit. In studying and comparing these three alternative approaches As a result, it can be argued that the alternatives dis- with ISO 14000, we can assess the relative effectiveness cussed in this section should be more easily and cheaply and efficiency of these various approaches. implemented. However, the effectiveness of the outcomes has yet to be established. Voluntary Industrial Environmental Programs: The first approach consists of environmental programs that

20 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Concluding Comments

As can be seen from this discussion, the ISO 14000 certification standards represent a true purchasing and management paradox. On one hand, it brings with it the promise of significant potential benefits. However, these potential benefits must be weighed against the numerous unresolved questions that surround this new standard. Resolving these questions is critical if this standard is to achieve widespread acceptance and use. This task of resolving these questions forms a major objective of this study. Before the findings consistent with this objective can be presented, it is first necessary that the structure and approach of this study be presented. That task forms the focus of the next chapter.

Center for Advanced Purchasing Studies 21 Chapter 3 Analyzing the Survey Data: Understanding the Implications of ECM and ISO 14000

Demographic Information • Electronic & Other Electrical Equipment & Components Except Computer Equipment (36): Before examining the results gained from this survey as 179 respondents. they pertain to environmental systems, environmental • Fabricated Metal Products, Except Machinery & performance, corporate performance, and ISO 14000, Transportation Equipment (34): 179 respondents. the demographic characteristics of the sample will be • Measuring, Analyzing, & Controlling Instruments; described. By establishing the traits of the respondents, Photographic, Medical, & Optical Goods; Watches this study can begin to assess the extent to which the & Clocks (38): 127 respondents. results are generalizable. To an extent, it can be argued that the concentration of Industrial Descriptive Information the respondents from these five sectors is consistent As previously mentioned, the survey database consists with the industrial activities within the United States. In of 1,510 responses. From the outset, there was an addition, these five industries are ones that should be attempt to develop a sample that was broad-based. interested in ECM-oriented activities within their firms. That is, the sample should reflect a diversity of industrial settings. The responses should not be drawn Other indicators of the diversity within the survey data from only a few industries. One way of determining include the median number of Full-Time Equivalent the extent to which this objective was realized would Employees, a proxy for plant size (400), percentage of be to evaluate the industrial settings from which the sales as exports (19.7%), percent of sales as exports for respondents were drawn. A specific question to that the European Community (9.7%), and the average per- end was introduced into the survey. The respondents centage of sales going to the end customer (or con- were asked to list the principal products produced in sumer) (24.6%). Furthermore, 729 plants (48.3%) were their plants. These responses (open-ended) were publicly owned, 250 (16.6%) were foreign owned, and recoded into appropriate SIC (Standard Industrial 54 plants (3.6%) were joint ventures. In addition, the Classification) codes by an external panel. For the respondents were asked to indicate whether their plants purposes of this coding, a two-digit SIC code was were involved in one or more of seven commonly used. The resulting distribution of industries is sum- encountered corporate/productivity initiatives. For each marized in Table 3-1. initiative, the respondent was asked to check a box if their plant had been involved, either currently or in the As can be seen from this table, the respondents came past, in any of these seven initiatives. These results are from a wide range of industries. From the 40-some SIC summarized in Table 3-2. codes, the bulk of respondents (999 respondents or 66.2% of the respondents) were drawn from one of five Reviewing this table uncovers several interesting find- SIC codes: ings. First, the plants have been involved in a large number of initiatives. That these plants have undertaken • Industrial & Commercial Machinery & Computer these various initiatives points to a situation in which Equipment (35): 316 respondents. plants are increasingly looking for new ways of improv- • Transportation Equipment (37): 198 respondents. ing efficiency and effectiveness within their facilities. Stated another way, plants are now being asked to do

22 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Table 3-1 Classification of Respondents by 2-Digit SIC Codes SIC Description Frequency (#) Percent (%) Agricultural Services (07) 1 0.1 Mining and Quarrying of non-metallic Minerals, except Fuels (14) 2 0.1 Building Construction – General Contractors & Operative Builders (15) 4 0.3 Heavy Construction Other Than Building Construction — Contractors (16) 2 0.1 Construction — Special Trade Contractors (17) 6 0.4 Food & Kindred Products (20) 18 1.2 Textile Mill Products (22 16 1.1 Apparel & Other Finished Products Made from Fabrics and Similar Materials (23) 8 0.5 Lumber & Wood Products, except Furniture (24) 4 0.3 Furniture & Fixtures (25) 35 2.3 Paper & Allied Products (26) 27 1.8 Printing, Publishing, & Allied Industries (27) 9 0.6 Chemicals & Allied Products (28) 99 6.6 Petroleum Refining & Related Industries (29) 18 1.2 Rubber & Miscellaneous Plastic Products (30) 34 2.3 Leather & Leather Products (31) 4 0.3 Stone, Clay, Glass, & Concrete Products (32) 16 1.1 Primary Metal Industries (33) 38 2.5 Fabricated Metal Products, Except Machinery & Transportation Equipment (34) 179 11.9 Industrial & Commercial Machinery & Computer Equipment (35) 316 20.9 Electronic & Other Electrical Equipment & Components except Computer Equipment (36) 179 11.9 Transportation Equipment (37) 198 13.1 Measuring, Analyzing & Controlling Instruments; Photographic, Medical & Optical Goods; Watches & Clocks (38) 127 8.4 Miscellaneous Manufacturing Industries (39) 22 1.5 United States Postal Service (43) 1 0.1 Transportation Service (47) 2 0.1 Communications (48) 2 0.1 Electric, Gas, & Sanitary Services (49) 1 0.1 Wholesale Trade — Durable Trades (50) 22 1.5 Whole Trade — Non-durable Goods (51) 9 0.6 Building Materials, Hardware, Garden Supply, & Mobile Home Dealers (52) 1 0.1 Miscellaneous Retail (59) 2 0.1 Business Services (73) 27 1.8 Automotive Repair, Services, & Parking (75) 1 0.1 Miscellaneous Repair Services (76) 1 0.1 Health Services (80) 6 0.4 Educational Services (82) 4 0.3 Engineering, Accounting, Research, Management, & Related Services (87) 14 0.9 Services, Not Else Classified (89) 1 0.1 Administration of Economic Programs (96) 1 0.1 Industry Not Identified 53 3.5

Center for Advanced Purchasing Studies 23 Table 3-2 Plant Involvement in Corporate/Manufacturing Initiatives Corporate/Manufacturing Initiatives Number Percentage Just-in-Time Manufacturing 751 49.7 Simultaneous Engineering/Concurrent Design 331 21.9 Environmental Management System 273 18.1 ISO 9000/QS 9000 1106 73.2 Total Quality Management 817 54.1 Business Process Re-engineering 461 30.5 Lead Time Reduction Program 689 45.6 more with less. To meet these demands, management is the case. There were 1,106 respondents who indicated turning to new and different ways of improving opera- that their plants had been involved in ISO 9000/QS tions and enhancing performance on the major dimen- 9000 certification, while only 817 indicated that their sions of performance. plants had been involved in TQM management — a difference of 289 or 19.1 percent of the respondents. More Second, the level of acceptance among the seven initia- specifically, when the data were further explored, it was tives greatly varies. At the high end, we have ISO found that there were only 671 respondents who indi- 9000/QS 9000 certification, with almost three-quarters cated that their plants were simultaneously involved in of the respondents indicating that their plants have ISO 9000/QS 9000 certification and TQM. The linkage undertaken such certification. At the low end, there is between TQM and ISO 9000/QS 9000 is not strongly in the development of an environmental management sys- practice, as it has been presented in the popular press tem. This is interesting for two reasons. The first is that and the research literature. it points to the perceived low importance of environmental issues relative to initiatives directed at improving Background of the Respondents quality (ISO/QS 9000, Total Quality Management), Having reviewed the industries and firms from which reducing waste (Just-in-Time Manufacturing), reducing the respondents came, the next step is to determine the lead times (Lead Time Reduction Programs), and nature of the respondents themselves. A starting point is improving product/process quality (simultaneous engi- to focus on the job titles of the respondents. As can be neering/concurrent design). One way of interpreting seen from Table 3-3, the respondents embody variety in this result is that the relatively low level of involvement terms of their job titles. They occupy positions ranging reflects the relatively low priority assigned to this initia- from presidents and Chief Operating Officers (CEOs) to tive. Given that you, as a manager, have limited funds, managers and staff. This diversity argues strongly in why invest in a program that does not generate the favor of the generalizability of the results. same higher level of paybacks obtained from other initiatives? Another way of viewing this result is to see it as The next piece of information important to this study indicating a low level of awareness of environmental was the length of time that respondents had spent in activities within a plant. The data was insufficient to their current positions. This information is summarized determine which of these two interpretations was most in Table 3-4. As can be seen from this table, the respon- appropriate. Second, we should expect that the presence dents, overall, are not new to their positions. On aver- of an environmental management system as being a age, the respondents had been in their current positions requirement for the successful attainment of ISO 14000 for about 5.4 years. As a result, we can expect that these certification. After all, ISO 14000 focuses on the envi- respondents should be familiar with their jobs and what ronmental management system and its information is happening around them. management system components. In addition, data on the functional areas in which the A third interesting result involves the relationship respondents worked was also collected. These data are between ISO 9000/QS 9000 certification and the imple- summarized in Table 3-5. As can be expected, the two mentation and/or presence of a Total Quality major areas represented in the survey data were materi- Management (TQM) system. Initially, the researchers als purchasing and manufacturing. Environmental man- presumed that these two initiatives would be strongly agement (compliance) represented a very minor part of related. To successfully achieve ISO 9000/QS 9000 certi- the data at 48 respondents (3.2 % of the respondents). fication, you had to have a TQM system in place. This indicates that this survey consists primarily of However, the data indicates that this is not necessarily users (engineers, purchasing managers, and manufactur-

24 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Table 3-3 Stated Positions of the Respondents Stated Position Frequency (# Observations) Percentage (%) Chief Executive Officer 13 0.9 President 12 0.8 Vice President 169 11.2 Manager 718 47.5 Senior Management 251 16.6 Staff 317 21.0 Not Listed 30 2.0 Total 1,510 100.0

Table 3-4 Number of Years Respondents Have Been in Their Current Positions Number of Years in Current Position Number of Respondents Percentage Less than 1 Year 153 10.1 1 to 3 Years 377 25.0 3 to 5 Years 282 18.7 5 to 10 Years 318 21.1 Greater than 10 Years 350 23.2 Not Listed 30 2.0

Table 3-5 Respondents Classified by Functional Area Functional Area Number of Respondents Percentage Purchasing, Materials 641 42.5 Manufacturing/Production 332 22.0 Quality 132 8.7 Engineering 85 5.6 Environmental (Compliance) 48 3.2 Management 47 3.1 Other 37 2.5 Information Systems 33 2.2 Distribution 31 2.1 Safety, Security 29 1.9 Inventory 16 1.1 Marketing 13 0.9 Consulting 12 0.8 Human Resources 12 0.8 Accounting 6 0.4 Research and Development 3 0.2 Finance 2 0.1 Unknown/Not Identified 31 1.9 Total 1,510 100.0

Center for Advanced Purchasing Studies 25 ing people) who should be better able to assess ECM spread of Total Quality tools and procedures throughout and ISO 14000 as business/strategic decisions. Again, American industry, a higher membership in this society this is consistent with the objectives of this study. would be expected. After all, ASQC has assumed the leadership position in the dissemination of quality con- The next step was to look at professional affiliations of trol tools and procedures to practitioners and in the the respondents. There are several reasons to be inter- assessment of the extent to which these practitioners ested in this trait. First, membership in a professional have gained mastery over these tools in the certification society or organization such as APICS (American program run by ASQC. Production and Inventory Control Society) or NAPM (National Association of Purchasing Management) The next area of interest involves the extent to which would indicate a manager or respondent who is inter- the respondents have been involved in the implementa- ested in keeping up to date on current developments tion of certain initiatives of interest. In examining this and issues. Second, familiarity (or the lack of familiar- issue, the research team identified a list of some 23 cor- ity) with certain developments such as ISO 14000, busi- porate actions and initiatives. Each respondent was ness process re-engineering or ISO 9000 might be influ- asked to describe their involvement using an 11-point enced by the respondent’s membership in a specific scale, where 0 denoted “No Involvement,” and 11 society. Some societies might be doing “better” jobs at denoted “Extremely Involved.” Using this scale, we can exposing their members to certain developments. Third, see that the higher the mean value reported by the some of the names were drawn from mailing lists pro- respondents, the more involved on average the respon- vided by several professional organizations. As a result, dents were. The average levels of involvement for the it is interesting to determine the extent to which there is respondents on these 23 initiatives is summarized in potential over-response from one professional society Table 3-7. relative to the others. The membership information is summarized in Table 3-6. As can be seen from this This exhibit indicates that the respondents have had a table, a respondent, if he or she did belong to a profes- wide range of involvement in various corporate initia- sional organization, was most likely to belong to either tives. This variety is important because it emphasizes APICS or NAPM. The number of respondents who the notion that this sample is not simply drawn from belonged to one of the other professional organizations purchasing personnel or from personnel highly familiar was relatively small. One area where this finding was with environmental issues. In reviewing this summary, most surprising involved membership in ASQC we can see that their heaviest involvement has been in (American Society for Quality Control). Given the Production Planning and Scheduling, Continuous

Table 3-6 Membership Traits of the Respondents Professional Society to Which the Respondent Belongs Members Not Members American Production and Inventory COntrol Society 689 821 (45.6%) (54.4%) American Society for Quality Control 150 1,360 (9.9) (90.1) Association for Manufacturing Excellence 35 1,475 (2.3) (97.7) Council for Logistics Management 35 1,475 (2.3) (97.7) Institute for Management Accounting 11 1,499 (0.7) (99.3) National Association of Purchasing Management 556 954 (36.8) (63.2) Society of Manufacturing Engineers 111 1,399 (7.4) (92.6) Society of Automotive Engineers 54 1,456 (3.6) (96.4) Other 201 1,309 (13.3) (86.7)

26 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Table 3-7 Level of Involvement of Respondents in Various Corporate/Plant Initiatives Mean Level Number Number of Respondents with No Involvement Responding Involvement 1. Quality Planning, Planning, and Assurance ...... 4.02 1,482 185 (12.3%)1 2. Workplace and Employee Safety ...... 4.60 1,487 244 (16.2) 3. Product Design...... 3.22 1,484 432 (28.6) 4. Process Design ...... 4.42 1,489 273 (18.1) 5. Plant Layout...... 3.44 1,488 464 (30.7) 6. Production Planning and Scheduling ...... 5.34 1,490 273 (35.4) 7. Environmental Planning and Management ...... 2.87 1,485 534 (35.4) 8. Certification Planning and Implementation ...... 4.15 1,481 383 (25.4) 9. Benchmarking ...... 4.16 1,481 359 (23.8) 10. Continuous Improvement Activities ...... 6.75 1,493 98 (6.6) 11. Continuous Improvement Planning ...... 6.22 1,486 151 (10.0) 12. Continuous Improvement Kaizen ...... 3.16 1,466 601 (39.8) 13. Purchasing ...... 6.41 1,490 131 (8.7) 14. Materials Management ...... 6.46 1,493 173 (11.5) 15. New Product Launches ...... 5.48 1,491 254 (16.8) 16. Cost Justification ...... 6.17 1,485 143 (9.5) 17. Process Redesign ...... 4.70 1,488 283 (18.7) 18. Re-engineering ...... 4.13 1,488 355 (23.5) 19. Regulatory Compliance (environmental) ...... 3.29 1,482 495 (32.8) 20. Logistics ...... 4.90 1,489 272 (18.0) 21. Transportation ...... 4.27 1,488 344 (22.8) 22. Warehouse Management ...... 4.04 1,489 400 (26.5) 23. Legal Affairs ...... 2.94 1,487 513 (34.0)

1 The first number in this column identifies those respondents who indicated that they had no involvement in this initiative. That is, they picked the “0” value to represent their level of involvement. The number in brackets represents this number as a percentage of the total sample size of 1,510.

Center for Advanced Purchasing Studies 27 Improvement related programs (i.e., Activities, Plant Activities Planning), Purchasing, Materials Management, New Product Launches, and Cost Justification. To a certain A major concern of this report was to determine the type extent, this pattern of involvement is not surprising for of activities being undertaken at the various plants and certain activities, such as materials management, pur- the status of these projects. To this end, the respondents chasing, and production scheduling and planning. It is were asked to fill in a matrix describing their plant’s level important to remember that the mailing list used in dis- of progress on 11 different initiatives. These initiatives tributing the surveys was drawn from lists provided by were selected because they represented approaches APICS and NAPM. The involvement in the continuous intended to enhance corporate and plant performance. improvement activities is also not surprising, given the In addition, the initiatives were selected because evi- increasing importance that continuous improvement is dence was found in the literature that argued that the playing in most firms. initiatives either preconditioned the plant for the acceptance or implementation of ISO 14000. This was the case Next, when we compare the mean levels of involvement for the inclusion of QS 9000, ISO 9000, Total Quality for those respondents working with compliance and Management (TQM), and Cross-Functional Product those working on an environmental management sys- Development Teams. In other cases, the initiatives were tem, we notice that the level of involvement in compli- selected because they represented possible alternatives to ance and regulation is much higher than those for ISO 14000. This was the case for three of the initiatives: working with an EMS system. This would seem to argue (1) Participation in Industrial Voluntary Environmental that more people are involved correcting the pollution Programs (e.g., Responsible Care); (2) Participation in problem from a regulatory compliance than they are in Voluntary EPA Programs (e.g., 33/50, Green Light); and, trying to prevent or eliminate the problems through the (3) Participation in OSHA’s Voluntary Prevention implementation and use of an EMS system. Program (VPP). By including these alternatives, the research hoped to assess the relative effectiveness and efficiency of voluntary as compared to programmatic initiatives (which is what the ISO 14000 program represents). Below the results are displayed by grouping together similar programs in each chart.

Chart 3-1a Stage of Involvement with ISO Standards

900 800 700 600 QS 9000 500 ISO 9000 400 ISO 14000 300 200 100 0

Not Applicable

Assessing Suitability Not Being ConsideredFuture Consideration Planning toCurrently Implement Implementing Successfully Implemented

28 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Chart 3-1b Stage of Involvement with Quality Programs

450 400 350 300 Total Quality 250 Management (TQM) 200 Cross-Functional Product 150 Development Teams 100 50 0

Not Applicable

Assessing Suitability Not Being FutureConsidered Consideration PlanningCurrently to Implement Implementing Successfully Implemented

Chart 3-1c Stage of Involvement with Planning and Control Systems

600 500 400 Company-specific 300 environmental 200 management system 100 Enterprise Resources 0 Planning (ERP) system

Manufacturing Resource Planning (MRP II) system

Not Applicable

Assessing Suitability Not Being ConsideredFuture Consideration Planning Currentlyto Implement Implementing Successfully Implemented

Center for Advanced Purchasing Studies 29 Chart 3-1d Stage of Involvement with Voluntary Environmental Programs

450 400 350 300 Participation in Industrial 250 Voluntary Environmental 200 Programs (e.g., 150 Responsible Care) 100 Participation in Voluntary 50 0 EPA Programs (e.g., 33/50, Green Light)

Participation in OSHA’s Voluntary Prevention Program (VPP) Not Applicable

Assessing Suitability Not Being ConsideredFuture Consideration Planning Currentlyto Implement Implementing Successfully Implemented

Chart 3-1e Mean Involvement with Various Initiatives

7 6 5 Mean (1=Not 4 Applicable, 7= 3 Successfully 2 Implemented) 1 0

TQM EMS ERP MRP II QS 9000ISO 9000 ISO 14000

Cross Function…VoluntaryVoluntary Envi…OSHA’s EPA… Volunt…

30 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency These results point to some interesting findings. First, were then asked to assess their plant’s systems using an for some initiatives, such as ISO 9000, the results indi- 11-point scale. In this scale, 0 represented “Strongly cate that this is a widely accepted and widely imple- Disagree” while 10 represented “Strongly Agree.” The mented initiative. By this time, you have either decided neutral position for this scale was anchored on the 5 to go with ISO 9000 certification or you have decided point. The mean values for these 46 dimensions are pre- not to achieve this certification. If you have decided to sented in Table 3-8. go with ISO 9000 certification, then you have either achieved or you are well on your way to attaining it. These results paint an interesting picture of the environmental management systems found within the respon- For most of the other measures, there is a strong dents’ plants. First, these systems are strong on the for- bimodal distribution of responses. With initiatives such mal dimensions. That is, in most of the respondents’ as Voluntary Environmental Programs, Voluntary EPA facilities, there is a formal environmental management Programs, OSHA’s Voluntary Prevention Program, and system in place. Within this system, there is a formal TQM, the results show a strong grouping around one of reporting linkage between environmental performance two points. The first is the (0,1) axis (i.e., Not and top management. This system is supported by for- Applicable/Not Being Considered). The second point is mally documented procedures. These procedures are the (6,7) axis (i.e., Currently Implementing/Successfully generally widely circulated and readily available. Implemented). Of these various initiatives, the most Environmental issues are also given visibility during interesting result comes from TQM. This initiative has employee training. In addition, top management has long been emphasized as a key to continued corporate taken a visible role in support of improved environmen- success. In spite of this perspective, it is evident that a tal performance. Environmental performance is formally large number of respondents are still not swayed by the tracked and monitored. value of TQM. In many cases, this environmental management system Another interesting result pertains to the acceptance and is operational and reactive in nature. It is also tactical in implementation of environmental management systems. that it deals with operating problems and issues. It was initially expected that nearly every firm would Environmental issues have a strong influence on process have an environmental management system. However, designs, plant and equipment layouts, new equipment as the data shows, this was not the case. Over 25 per- acquisition, and equipment modification decisions. The cent of the respondents reported that they did not see environmental management system is reactive in nature such a system as being appropriate to them or their cor- in that it responds to the emergence of problems when porate settings. they occur. Furthermore, it is often primarily driven by changes in the environmental regulations. When these The final finding highlighted by this data points to the regulations change, the plant’s environmental manage- acceptance of ISO 14000. As we can see from the data, ment system also changes. only 37 respondents noted that their systems were certified. Of these 37, 15 came from one firm that has However, these systems exhibit certain shortcomings. insisted that all of its plants become ISO 14000 certified. The shortcomings reflect issues of information manage- To a certain extent, this finding can be explained by the ment, performance evaluation, and supplier evaluation. fact that this certification process is relatively new. In general, these systems do not do much in tracking However, despite that finding, it is interesting to note best-in-class performance and in comparing their plants’ that 50 percent of the respondents saw ISO 14000 certi- performance with these “benchmarks.” Further, the per- fication as something that was either not applicable or formance measures do not often identify the qualitative not being considered. This points to a great lack of sup- and quantitative costs associated with environmental port for this new certification process. performance. Environmental performance is also infre- quently considered when evaluating individual performance. These environmental measures, when collected, Environmental Management Systems - Findings rarely involve the efforts of the cost accounting department (despite the fact that in most firms this depart- Before turning our attention to ISO 14000 and its ment is the one most often held responsible for collect- impact, it would be useful to understand the state of ing and distributing performance and cost information). environmental management systems within the plants Finally, environmental efforts are confined to the plant. of the respondents. To this end, a section was developed As shown by the low means recorded on those ques- within the report. This section analyzed the environ- tions pertaining to the supplier base, environmental mental management system and its performance by issues and performance are seldom considered during identifying 46 different dimensions. The respondents supplier selection, retaining, and evaluation stages.

Center for Advanced Purchasing Studies 31 Table 3-8 Assessing the Plant’s Environmental Management System (Mean Values) System Trait Mean Response Number When an environmental problem is identified, attention is focused on the underlying cause and corrective measures...... 6.83 1,420 There is a specific department within your plant that is formally responsible for environmental affairs ...... 6.70 1,429 When an environmental problem is identified, the major effort within your plant is on determining the underlying reasons for that problem and then attacking it 6.66 1,420 The environmental impact within your company is primarily driven by regulatory requirements...... 6.55 1,413 There is a formal reporting position between those responsible for environmental affairs within your plant and one of the plant’s senior executives ...... 6.23 1,426 New equipment has been acquired or existing equipment modified in response to external environmental problems attributable to that equipment ...... 6.23 1,412 Environmental issues are considered when laying out the plant or specifying equipment for use on the plant floor ...... 6.13 1,419 Your plant has an established environmental management system in place . . . . . 6.10 1,432 When an environmental problem is identified, attention is primarily focused on correcting the effects of that problem ...... 6.01 1,418 The environmental management system’s procedures are formally documented . 5.91 1,429 Environmental issues are included in the design process ...... 5.67 1,409 Top management of your plant has taken a highly visible public position in support of improved environmental performance ...... 5.54 1,429 Environmental performance is formally tracked and monitored within the plant 5.45 1,427 The environmental management system’s procedures are widely circulated and available to anyone who needs access...... 5.39 1,429 Environmental issues, policies, and procedures are included in formal plant training programs ...... 5.28 1,426 Process designs and plant layouts have been modified in response to external environmental problems attributable to a specific design flaw ...... 5.23 1,414 Environmental issues influence plant location decisions (i.e., where we locate a new plant)...... 5.23 1,403 Environmentally related information (e.g., changes in regulations, tracking of which companies have been fined and how much) is tracked and monitored on an ongoing basis ...... 5.12 1,429 Environmental performance, as captured by various measures, is periodically summarized...... 4.97 1,427 People within your plant consider your plant’s formal environmental management system highly effective ...... 4.81 1,409 People outside your plant consider your plant’s formal environmental management system highly effective ...... 4.81 1,398 Product designs have been modified in response to environmental problems attributable to a specific design flaw...... 4.79 1,408 Various performance goals have been developed and implemented report environmental performance on different dimensions ...... 4.78 1,422

32 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Environmental performance has been captured primarily in terms of recyclability, i.e., the amount of recycled material used in the product or the degree to which the product is recyclable ...... 4.76 1,415 The environmental position of your plant is given prominent visibility within annual reports and other publications distributed by your plant ...... 4.57 1,426 Those suppliers who are environmentally responsible also tend to be more cost-effective suppliers ...... 4.43 1,401 Your plant has been very successful in creating plantwide awareness of environmental problems, costs, and opportunities...... 4.42 1,410 Your plant has a well-developed environmental data base for tracking and monitoring environmental issues...... 4.39 1,413 Top management of your plant considers environmental performance to be as important as reducing costs...... 4.17 1,413 The environmental achievements of your plant are given prominent visibility within annual reports or other company publications ...... 4.16 1,424 Environmental issues are important today because they reflect a current marketing fad...... 4.16 1,411 Top management of your plant considers environmental performance to be as important as improving quality...... 4.12 1,412 People within your plant view environmental problems as opportunities rather than as costs or constraints to be satisfied ...... 4.11 1,414 Tools and procedures such as risk assessment and life-cycle analysis are incorporated into your plant’s formal environmental management system . . . . . 3.95 1,404 Environmental performance results are widely distributed within your plant . . . 3.93 1,420 Information about best-in-class environmental performance in our industry is tracked and recorded within your plant ...... 3.87 1,427 Environmental practices, procedures, and systems within your plant are compared with the best-in-class on a regular basis...... 3.85 1,427 Environmental concerns play a significant role in supplier selection and/or retention decisions ...... 3.76 1,408 The performance measures identify qualitative costs associated with environmental performance and problems...... 3.75 1,414 Performance on environmental dimensions is considered during supplier evaluations ...... 3.74 1,411 Top management in your plant considers environmental performance to be as important as reducing lead times ...... 3.72 1,415 Cost accounting has been extensively involved in your company in capturing and reporting environmental costs...... 3.70 1,415 Environmental performance is considered during the evaluation of individual departments or areas ...... 3.70 1,418 The performance measures identify the quantitative costs associated with environmental performance ...... 3.69 1,421 The effectiveness of different production schedules is evaluated considering possible environmental problems created by those schedules ...... 3.04 1,402 Performance on environmental dimensions is considered during personnel evaluations ...... 2.98 1,410

Center for Advanced Purchasing Studies 33 In short, the environmental system is portrayed as a with more lax pollution standards. The results indicate separate activity, internally focused, driven by regula- that this option is rarely considered. The other option, tions, and reactive in nature. This picture is further sup- “Consume Internally,” represents somewhat of a mys- ported by the overall negative perceptions given by the tery. Based on the positive experiences reported by firms respondents regarding the impact of environmental such as firm C, which has established a highly success- activities on the various dimensions of corporate ful co-generation plant2 for providing electricity, it was performance. expected that this option would have received a higher score. Environmental Systems — Management Options Considered Most of the remaining options focus primarily on the Before turning our attention to the relationship between process and the operational/tactical management of the the status of the environmental management system and waste. With these options, the major implicit opera- corporate performance, it is useful to examine the fre- tional assumption is that the product design is fixed and quency with which the various ECM-related options the only product-related options available are somewhat were considered and used. Some of these options, how- limited to actions such as material substitution. The ever, are more complex and demanding than others. For options falling under this category include “Process example, alliances are more complex than recycling Redesign,” “Substitution,” “Reduce,” “Waste because of the need to develop relationships that cross Segregation,” and “Recycling.” They also include corporate, not simply departmental, boundaries. Other “Returnable Package.” This option recognizes the options, such as recycling and waste separation, focus opportunities available to reduce waste and clutter by on reducing the “end-of-pipe” waste streams, while oth- eliminating single-use packaging (such as cardboard) in ers such as product and process redesign focus attention favor of multi-use returnable packaging. on preventing the pollution problem from even occurring. Some of these options, however, are more complex Two options currently receiving relatively low values, and demanding than others. For example, alliances are “Disassembly” and “Alliances,” indicates future develop- more complex than recycling because of the need to ments in this field. We can expect firms to work on sim- develop relationships that cross corporate, not simply plifying the disassembly of products, thus facilitating departmental, boundaries. Other options, such as recy- their recycling, rebuilding, or remanufacturing. We can cling and waste separation, focus on reducing the “end- also expect that managers will turn to the supply chain of-pipe” waste streams, while others such as product and work on environmental problems in cross-func- and process redesign focus attention on eliminating the tional teams that involve the insights and expertise of pollution problem from even occurring. To this end, the suppliers and customers. research team identified 16 different options. These options, along with mean responses (and number Environmental Management and Corporate responding), are presented in Table 3-9. As in the other Performance — The Aggregate Impact questions, the respondents were asked to respond using The relationship between environmental systems, envi- an 11-point scale, where 0 indicated “Never ronmental performance, and overall corporate perfor- Considered” while 10 denoted “Always Considered.” mance is not clear. Some writers, such as Makower (1993, 1994) and Porter and Van der Linde (1995), These results portray a balanced and varied approach to have argued that by becoming more environmentally the considerations of options for improving environ- responsible, firms also uncover new sources of waste mental performance. Except for two options (“Consume and productivity. The result is that enhanced environ- Internally” and “Relocation”), all of the options fall into mental responsibility results in improved corporate per- the 4 to 6 range. This indicates that these options were formance. Other writers, primarily Walley and somewhat considered. Of the two options falling below Whitehead (1994), argue that this is not the case. In the 4 point, “Relocation” option does bring with it some most instances, improved environmental performance important negative connotations. When the North comes at the cost of reduced profitability and reduced American Free Trade Agreement (NAFTA) was initially shareholder value. negotiated, some feared that this Act would be used by American firms having plants, products, or processes One way of evaluating the nature of this relationship is experiencing high levels of pollution as a vehicle for to ask the respondents to assess the impact of their moving these plants, products, or processes to areas environmental management systems on several critical

2 This facility uses wood scrap and the such generated both within its own furniture-making processes and from those of its competitors as input into a thermal electrical power generating plant. This plant currently provides up to 50 percent of the electricity needs of the Zeeland, Michigan plant.

34 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Table 3-9 Environmental Management Options Considered ECM-Option Mean Number Response Responding Substitution: replacing a material that can cause environmental problems with another material that is not problematic ...... 6.02 1,428 Process Redesign: redesigning the process to eliminate any potential environmental problems...... 5.94 1,433 Reduce: reducing the level of material and/or components (which are contributing to environmental problems) within products ...... 5.80 1,424 Waste Segregation: an intermediate action in which waste streams are separated out into their individual components before being recycled, reused, or consumed internally ...... 5.76 1,421 Returnable Packaging: using packaging and pallets that can be returned after they are finished being used...... 5.71 1,428 Recycling: making more use of recycled components or making a product which is more easily/readily recycled ...... 5.46 1,429 Product Redesign: redesigning the product to eliminate any potential environmental problems (manufacturing or recycling) ...... 4.99 1,429 Prolonging Use: reducing environmental problems by increasing the overall life of the product (e.g., engines that now last longer before having to be replaced or rebuilt) ...... 4.97 1,418 Alliances: working with either suppliers or customers to address environmental problems and/or issues ...... 4.94 1,418 Rebuilding: rebuilding a product in which some of the parts or components are recovered while others are replaced ...... 4.71 1,415 Spreading Risks: shifting responsibilities for environmental problems to a third party or expert better able to deal with issues ...... 4.38 1,418 Creating a Market for Waste Products: treating waste as an input to another product that can be made and sold at a profit...... 4.21 1,423 Remanufacturing: like rebuilding, except that none of the parts are reduced to raw materials ...... 4.02 1,411 Disassembly: redesigning the product or process so as to simplify disassembly and disposal at the end of the product’s useful life ...... 4.00 1,418 Consume Internally: consuming waste internally (e.g., wood pallets used in shipping or product storage used to generate electrical power in a co-generation facility) ...... 3.62 1,429 Relocation: changing the location of a process or plant to take advantage of more favorable environmental regulations and conditions...... 3.27 1,419

Center for Advanced Purchasing Studies 35 dimensions of corporate performance. To this end, a surprising in that it has been argued that many interna- section was included that focused on this specific aspect tional customers (especially those located in Europe and of performance. The respondents were asked to evaluate Asia) are more sensitive to environmental issues. As a the impact of their environmental management system result, for these customers, improved environmental on 14 dimensions of performance. Some of these performance is a requirement for doing business in dimensions focused on the core strategic areas of com- these new markets. petition (cost, lead time, and market position). Others touched on areas such as reputation and customer At best, environmental systems have caused managers acceptance. Still others dealt with issues of to explore more options when dealing with problems, process/product design and cost/benefit assessment. As especially problems involving new technologies and with many of the other questions, the respondents were procedures. These systems have also not compromised asked to assess the impact of their environmental man- product acceptance and corporate position in the agement system using an 11-point scale (0 — “Strongly marketplace. Disagree;” 10 — “Strongly Agree”). The mean results are summarized in Table 3-10. In light of these results, the natural question that would emerge would focus on the issue of why any firm would The results presented in this table do not give a very ever consider trying to attain certification in an area as positive picture of the impact of environmental manage- strongly environmentally oriented as is the ISO 14000 ment systems. In general, such systems are perceived as certification process. As we will see in the next section, having a strong, negative impact on the major strategic the answer is that there is evidence to indicate that such dimensions of performance. That is, their presence certification does result in some real, quantifiable results in increased lead times, higher costs, and lower benefits. quality. In exchange, the firm’s competitive position in the marketplace is not enhanced. In addition, such systems have not improved the ability of the firm to sell its products in international markets. This last finding was

Table 3-10 Assessing the Impact of Environmental Management Systems on Corporate Performance Mean Value Number Not adversely affected the position of your company in the marketplace ...... 6.57 1,401 Not compromised the product’s acceptability from the customer’s perspective . . 6.29 1,398 Caused your company to investigate alternative technologies and procedures. . . 5.49 1,398 Helped enhance the reputation of your company...... 4.81 1,404 Significantly reduced waste within the production process ...... 4.67 1,401 Placed reasonable demands on the information system and on data requirements...... 4.23 1,395 Had benefits that have definitely outweighed any costs incurred...... 4.18 1,392 Significantly reduced waste within the equipment selection process ...... 3.94 1,389 Improved its chances of successfully selling its products in international markets ...... 3.67 1,387 Helped your company design/develop better products...... 3.59 1,401 Significantly improve its position in the marketplace...... 3.46 1,398 Significantly reduced overall costs ...... 3.32 1,400 Significantly improve product quality ...... 3.26 1,401 Significantly reduce lead times ...... 2.71 1,402

36 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Assessing the Impact of ISO 14000 Certification the relationship between the environmental system and on the Firm lead times. For this relationship, environmental management systems are seen as having a slightly negative The major intent of this study was twofold. The first impact on lead times. Further, for those respondents objective was to assess the attitudes of managers to the that had achieved ISO 14000 certification, the result was newly introduced ISO 14000 certification standards. a slight but positive impact on costs and quality. This The second was to determine what effect, if any, these result runs counter to the perception that improved new standards have had on the firms and their perfor- environmental performance comes at the cost of mance. With respect to the first issue, we can see that increased lead times (some support for this), decreased many managers harbor critical concerns about their quality, and increased overall cost. In addition, this posi- 3 environmental management systems and the impact of tive relationship is statistically significant. these systems on corporate performance. With respect to the second issue, the data showed a far more com- Second, we can see that for those respondents working plex and, ultimately, far more interesting and satisfying in plants that have successfully achieved ISO 14000 cer- answer. To uncover the nature of this response, it is first tification, other important benefits are obtained. First, necessary that we ask a simple but important question these respondents noted that, by attaining this level of — “What effect does the stage of ISO 14000 certifica- certification, the waste within the production system tion have on corporate performance?” was significantly reduced. In addition, these plants were able to enhance their position and reputation within the To address this question, it is important that to note that marketplace. Overall, the respondents agreed that the every respondent could describe the level of ISO 14000 benefits did outweigh the costs. Finally, these various certification in terms of one of seven levels: benefits did not require the expenditure of extra resources or effort in terms of the information system 1. Not Applicable and the data requirements. 2. Not Being Considered 3. Future Consideration In short, these findings are important to the purchasing 4. Assessing Suitability manager. By dealing with plants that are well on the 5. Planning to Implement way to attaining ISO 14000 certification, purchasing 6. Currently Implementing managers can expect to be dealing with plants that are 7. Successfully Implemented more efficient and more competitive. Except for the increased lead times, the attainment of ISO 14000 certi- One way of examining the effect of level of progress in fication has made these plants into better suppliers. terms of certification is to examine the mean responses given by the respondents in each of these seven levels These findings raise two other related issues. The first for the 14 dimensions of performance. This is done in pertains to the decision to pursue ISO 14000 certifica- Table 3-11. tion. That is, if there is a real benefit to being ISO 14000 certified, then what factors influence this decision. The In reviewing the data contained in this table, several second focuses on assessing the effectiveness of ISO important results can be readily identified. Noting that 5 14000 certification relative to the other programs avail- denotes a neutral position, the first result is that there is able (specifically, industry voluntary environmental pro- ® a strong positive relationship between the stage of ISO grams such as Responsible Care or the governmental ® 14000 certification and the effectiveness of the environ- voluntary environmental programs such as Green Light mental management system. In other words, the closer or 33/50). These two issues will be assessed in the fol- that you get to attaining ISO 14000 certification, the lowing sections. greater the positive impact that the environmental management system has on the overall performance of the firm. The only exception to this relationship involves

3 To assess the extent to which the stage of ISO 14000 certification had a significant impact on the various dimensions of performance, one-way Analysis of Variance tests were run. In these tests, the dependent variable consisted of one of the 16 dimensions of performance, while the independent variable was the stage of ISO 14000 certification. The independent variable consisted of 7 levels. For each of the 16 ANOVAs, the stage of ISO 14000 certification was found to have a statistically significant impact on performance. In assessing significance, an ␣=0.05 level was used.

Center for Advanced Purchasing Studies 37

based. Finally, both ISO 9000 and QS 9000 require that ISO 14000 certification is primarily pursued by external auditing and assessment before certifica- larger firms. That is, the larger the firm, the more tion can be conferred. These traits are very much in likely it is to attempt and to achieve ISO 14000 cer- evidence in the ISO 14000 certification process. In tification. This variable is reported using integer addition, it has been argued that past experience values. with these two quality-based certification processes • End Sales: This variable captures the percentage of positively prepares a firm to plan for and attain ISO total sales made by the plant that go directly to the 14000 certification. As a result, two variables, end consumer, as compared to another industrial Status of ISO 9000 certification (ISO9000) and customer. It has been argued that the more a plant Status of QS 9000 certification (QS9000) are or firm sells directly to the end consumer, the included in the model as independent variables. greater the probability of it being interested in Like the status of ISO 14000 certification, the mea- attaining ISO 14000 certification. The reason is that sures in each of these variables are drawn from a end consumers are more interested in the environ- seven-point scale, where 1 denotes “Not mental activities of the supplier. Achieving ISO Applicable,” and 7 denotes “Successfully 14000 certification for such firms offers a method Implemented.” The initial expectation is that ISO of differentiating their products and their corporate 14000 status should be positively influenced by the image from that of their competitors. status of the plant in terms of either ISO 9000 or • Public/Foreign/Private/Joint: These four variables QS 9000 certification. describe the status of the plant or the firm. For each • Past Experience with Total Quality Management: variable, a 0/1 rating is used. In this rating, 0 is The press has stated that environmentally conscious assigned if the condition is not true; 1 otherwise. manufacturing is no less than an extension of Total For example, a plant that is a joint venture would Quality Management. The transition between these receive a value of 1 for Joint. two approaches is made by broadening the defini- • Exports/Exports to the European Union: These tion of Quality and Waste to include environmental two variables measure different aspects of export problems and pollution. In addition, many of the sales. The first variable captures the percentage of same tools used by TQM systems are used in ECM total sales made by the plant/firm that consist of systems. As a result, a variable, TQM, representing exports. The second variable measures the percent- the status of TQM implementation, is included. age of total sales made by the plant/firm that con- This variable uses the same seven-point scale as sists of exports destined to the European Union. described for the preceding variables, ISO9000 and Both variables are based on the view that ISO QS9000. The initial expectation is that TQM should 14000 certification is most desirable internationally significant affect ISO 14000 certification status. overall, and in the European Union, specifically. As • Current Status of Cross-Functional Programs: the percentage of sales going to exports increase, Ultimately, to be certified on the ISO 14000 stan- the firm is increasingly likely to seek ISO 14000 dards, the plant’s personnel must be able to work certification. Such certification is seen as a vehicle together. Many of the problems uncovered during for responding to the “stricter” environmental the process of attaining ISO 14000 certification can- requirements found in foreign markets and as a not be addressed by one function area or group marketing means of appealing to the demands of working in isolation. As a result, it is expected that the “foreign” consumer. success in implementing cross-functional programs should have a significant influence on the plant’s These variables were used to develop an ordinal logistic progress and status in attaining ISO 14000 certifica- regression model.5 The results of this model are summa- tion. To this end, a variable representing the extent rized in Table 3-12. Given our interest primarily in main to which the plant had successfully implemented effects, it was decided to evaluate the results of the cross-functional programs was included. This vari- analysis only in term so the main effects; interactions able used the same seven-point scale as the preced- were ignored. As we can see from the results found in ing three variables. this table, only six of the 12 independent variables were • Full-time Employee Equivalents: This variable, found to have a statistically significant impact on the which reports the number of employees in terms of ISO 14000 certification status of the firm/plant. full-time equivalents, is a proxy for corporate size. These results are interesting for several reasons. First, It is included because some researchers have argued they do provide support for the critical role played by

5 An ordinal logistic regression is a statistical procedure similar to an ordinal linear regression, with one major difference: in a regular regression, the dependent variable is continuous, while in an ordinal logistic regression, the dependent variable is cate- gorical or ordinal.

Center for Advanced Purchasing Studies 39 Table 3-12 Factors Affecting the Status of the ISO 14000 Certification Process

Source Number of Statistically Levels Significant? Full-time employee equivalents 1Yes Foreign ownership 1Yes Past experience with QS 9000 6Yes Past experience with ISO 9000 6Yes Past experience with Total Quality Management 6Yes Current Status of Cross-Functional Programs 6Yes End Sales 1No Public Ownership 1No Private Ownership 1No Joint Venture 1No Exports 1No Exports to the European Union 1No firm size (as represented by FTE). In addition, they pro- • Uncertainty due to potential changes in environ- vide support for the relationship between ISO 9000 cer- mental regulations at the local/community level. tification, QS 9000 certification, TQM implementation, • Uncertainty due to potential changes in environ- and cross-functional programs, on one hand, and the mental regulations at the international level. progress of the plant/firm in achieving ISO 14000 certi- • Uncertainty due to potential changes in the stan- fication. It can be argued that these various programs dards and procedures underlying ISO 14000. act to pre-condition the firm and its systems to the • Uncertainty due to the costs associated with obtain- introduction, acceptance, and progress on ISO 14000. ing ISO 14000 certification. • Uncertainty due to benefits resulting from ISO The only unexpected finding involved the role of for- 14000 certification. eign ownership. The results argue that a firm/plant that • Uncertainty due to changes needed to current envi- is foreign owned is more likely to be either interested in ronmental management system to accommodate or actively pursuing ISO 14000 certification. It could be ISO 14000 certification. argued that ISO 14000 acts to level the environmental • Uncertainty due to the reaction of major suppliers requirements present in the home market and present in to ISO 14000 certification. the American market. This premise needs to be evalu- • Uncertainty due to the reaction of major investors ated in future studies. to ISO 14000 certification. • Uncertainty over the extent to which public disclosure of environmental infractions will be required. Obstacles to ISO 14000 Certification For all 11 dimensions, an 11-point scale was used in The next question examined within this study focused soliciting responses. This scale was anchored at 0, which on the issue of identifying those factors that could act as represented “Highly Uncertain” at one end, and at 10, an obstacle to ISO 14000 certification. Attention was representing “Well Known” at the other end of the scale. focused on the various potential sources of uncertainty. Uncertainty was flagged on the assumption that the The first step in understanding the role of uncertainty is higher the uncertainty, the less likely a firm or plant was to describe it in statistical terms. This was done by gen- to pursue ISO 14000 certification. erating the mean levels of perceived uncertainty for each of the 11 dimensions. These results are presented in In the study, 11 potential sources of uncertainty were Table 3-13. As is evident from this table, the level of identified: uncertainty is very high on all of the 11 dimensions, with the average level of uncertainty being 3.13 (rela- • Uncertainty due to potential changes in environ- tively higher). The reported uncertainty was highest for mental regulations at the federal level. investors’ reaction (remember, with this scale, the lower • Uncertainty due to potential changes in environ- the reported value, the higher the level of perceived mental regulations at the state/provincial level. uncertainty) with a mean value of 2.66 and lowest for changes in local laws with a mean of 3.54.

40 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Table 3-13 Major Sources of Uncertainty Regarding ISO 14000

Uncertainty Due to: Mean Level No. Respondents Local Regulations 3.54 1,343 Potential Changes in ISO 14000 Standards 3.51 1,340 State/Provincial Regulations 3.49 1,344 Federal Regulations 3.33 1,343 Costs of Certification 3.15 1,341 Changes on Current Environmental Management System 3.14 1,344 International Regulations 3.11 1,337 Benefits of ISO 14000 Certification 2.88 1,349 Potential Disclosure 2.88 1,345 Impact on Suppliers 2.74 1,348 Investors’ Reaction 2.66 1,344 Average Level of Uncertainty 3.13

These 11 sources of uncertainty do not describe 11 sep- Of potential interest are the three sources of uncertainty arate distinct areas. These sources can be broken down (impact on suppliers, investors’ reactions, and potential into two distinct factors (as summarized in Table 3-14). disclosures). These have no significant impact on the The first set consisted of sources primarily related to the progress on ISO 14000 certification. These results point government and its action. In contrast, the second set to a situation where the ISO 14000 certification decision focused on issues pertaining to the implementation and is primarily internal in focus. This decision is made for attainment of ISO 14000 certification. The factors falling internal reasons; how this decision affects other stake- into the second set represent ones that organizations holders is not really considered. such as NAPM, NIST (National Institute of Standards and Technology), and APICS (American Production and Inventory Control Society) can influence through their Comparing ISO 14000 and Voluntary EMS Programs educational and media efforts. As previously discussed in Chapter Two, ISO 14000 is These results, while interesting, do not help us address only one of the various programs and approaches avail- the critical question of whether or not these sources of able to a manager interested in enhancing the environ- uncertainty significantly affect a plant’s progress in mental performance of the plant. Other programs achieving ISO 14000 certification. To address this ques- include industry-specific voluntary programs. The best tion, an ordinal logistic regression, similar to the one example of this type of program is Responsible Care® presented in Table 3-12, was formulated where the in the chemical industry. This program was initially dependent variable was again the progress in ISO 14000 spearheaded by Dow Chemical. This program has certification. The 11 different dimensions of uncertainty attracted a great deal of attention because it showed to were the independent variables. The results for this many outside the industry (including those in the gov- analysis are summarized in Table 3-15. ernment) that it was possible for industry to develop and implement pollution prevention and management The results contained in Table 3-15 indicate that the programs that are extremely effective and cost efficient. progress in attaining ISO 14000 certification is signifi- Another alternative available to the manager is to partic- cantly affected by five types of uncertainty. Two of these ipate in one of the voluntary pollution prevention and five sources are governmentally related. One of these management programs initiated by government. One dimensions, federal regulations, can be viewed as such program is the 33/50 program developed by the reflecting the potential impact of such governmental EPA (these programs were discussed in greater detail in agencies as the EPA. The remaining three factors are Chapter 2 of this report). areas where additional information could be very helpful in reducing the uncertainty (and thus encouraging There are several important differences between these more interest in the ISO 14000 certification process). approaches. The ISO 14000 certification approach is

6 This analysis was carried out using the Factor Analysis feature of SPSS for Windows V8.0 (with varimax, non-orthogonal rotation).

Center for Advanced Purchasing Studies 41 Table 3-14 Factors Underlying the Dimensions of Uncertainty Uncertainty Due to the Government Uncertainty Due to Implementation Concerns • Uncertainty due to potential changes in environ- • Uncertainty due to potential changes in the stan- mental regulations at the federal level. dards and procedures underlying ISO 14000. • Uncertainty due to potential changes in environ- • Uncertainty due to the costs associated with obtain- mental regulations at the state/provincial level. ing ISO 14000 certification. • Uncertainty due to potential changes in environ- • Uncertainty due to benefits resulting from ISO mental regulations at the local/community level. 14000 certification. • Uncertainty due to potential changes in environ- • Uncertainty due to changes needed to current envi- mental regulations at the international level. ronmental management system to accommodate ISO 14000 certification. • Uncertainty due to the reaction of major suppliers to ISO 14000 certification. • Uncertainty due to the reaction of major investors to ISO 14000 certification. • Uncertainty over the extent to which public disclosure of environmental infractions will be required.

Table 3-15 Uncertainty Factors Affecting the Status of the ISO 14000 Certification Process

Source Number of Statistically Levels Significant? Federal Regulations 10 Yes Potential Changes in ISO 14000 Standards 10 Yes Costs of Certification 10 Yes Benefits of ISO 14000 Certification 10 Yes Changes on Current Environmental Management System 10 Yes State/Provincial Regulations 10 No Local Regulations 10 No International Regulations 10 No Impact on Suppliers 10 No Investors’ Reaction 10 No Potential Disclosure 10 No

more process oriented. It requires that the participants One method of comparing the effectiveness and identify and manage the various critical processes asso- efficiency of these three competing approaches is to ciated with environmental performance and targeted by compare the impact of environmental activities on the this certification process. In addition, it requires that the various aspects of corporation and systems for those environmental management system be audited and eval- firms that have or are implementing these three uated by a third party (typically an outside auditor or approaches. That is, for each of the three approaches, certification group). This means that the plant must only those firms that are currently implementing or that prove it has met or exceeded all of the requirements set have completed the approaches are selected (i.e., where down by ISO 14000 certification process. In contrast, the values for status of “Participation in Industrial the voluntary programs, while interested in the same Voluntary Environmental Programs,” “Participation in outcomes (e.g., reduced pollution), are voluntary in Voluntary EPA Programs,” and “ISO 14000” are either 6 nature. In addition, they are more interested in the out- (currently implementing) or 7 (successfully imple- comes (reduced pollution and waste), rather than the mented). The results are summarized in Table 3-16. processes. Finally, they do not require outside certification. Effectiveness is assessed in terms of the data pro- As can be seen from the above data, of the three vided by the participating firms. approaches, ISO 14000 certification is far more effective.

42 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency In every case and for every dimension of performance, ISO 14000 is process oriented, rather than output based. the mean responses for ISO 14000 are higher than those As a result, when pursuing this form of certification, reported for the other two approaches. The differences firms are more likely to change the underlying between the two voluntary program approaches are not processes. These changes result in more efficient that great. What these results point to is that plants processes, less waste, and less pollution. An alternative actively pursuing ISO 14000 certification seem to do explanation lies in the requirements found in ISO 14000 better on the various dimensions of performance. The for outside certification. Plants pursuing this form of reason for this improved performance is to be certification must demonstrate to a third party that they determined. However, as pointed out previously, two have met the various requirements of ISO 14000. As a possible explanations can be identified. The first is that result, these plants are more likely to take this approach

Table 3-16 Comparison of the Impact of Various Approaches on the Impact of Environmental Management Systems and Corporate Performance (Mean Values Reported) Environmental management systems with your plant have: Industrial Voluntary ISO 14000 Voluntary EPA Environmental Programs Programs Not adversely affected the position of your company in the 7.37 7.34 7.86 marketplace ...... (447) (378) (116) Not compromised the product’s acceptability from the 7.28 7.31 7.74 customer’s perspective ...... (446) (376) (116) Helped enhance the reputation of your company ...... 6.52 6.53 7.60 (448) (380) (117) Caused your company to investigate alternative technologies 6.92 6.83 7.06 and procedures ...... (446) (377) (116) Significantly reduced waste within the production process . . . 6.01 5.89 6.87 (446) (378) (116) Improved its chances of successfully selling its products 4.86 4.86 6.40 in international markets ...... (442) (373) (114) Had benefits that have definitely outweighed any costs 5.42 5.43 5.97 incurred ...... (443) (377) (116) Placed reasonable demands on the information system and 5.36 5.37 5.73 on data requirements ...... (444) (377) (116) Significantly reduced waste within the equipment 5.09 5.12 5.51 selection process ...... (442) (374) (116) Significantly improved its position in the marketplace ...... 4.74 4.75 5.46 (444) (377) (116) Helped your company design/develop better products...... 4.84 4.76 5.38 (448) (379) (116) Significantly reduced overall costs ...... 4.33 4.24 5.05 (446)7 (378) (116) Significantly improved product quality ...... 4.38 4.21 4.58 (447) (378) (116) Significantly reduced lead times ...... 3.52 3.43 3.94 (446) (378) (116)

7 The first value is the mean response value, while the second is the number of respondents for which this mean is based.

Center for Advanced Purchasing Studies 43 “more seriously.” The current data cannot be used to enhancing the firm’s competitive position in the determine the reasons for this improved level of perfor- marketplace. They are also not seen as improving mance. The real reasons can be found in one or both of the firm’s ability to sell its products internationally. these factors. However, it is difficult to overlook the These results are influenced by the progress of the major finding — pursuing ISO 14000 is more effective plant in attaining ISO 14000 certification. rather than pursuing the voluntary options. • The ISO 14000 certification program is relatively new. As a result, there are relatively few plants that have attained this certification. Out of the 1,510 Concluding Comments respondents, only 37 (2.5%) have attained this level of certification. This number is low relative to other With a sample of 1,510 respondents, this study was environmental programs, such as Industrial faced with an “embarrassment of riches.” That is, the Voluntary Environmental programs (where 284 researchers were presented with a great deal of informa- respondents noted that they successfully imple- tion. This report represents an attempt to identify the mented these programs) and Voluntary EPA pro- critical findings from this large database. In reviewing grams (where 253 respondents noted successful this chapter and its findings, the following major points implementation). were flagged as important: • Successful attainment of ISO 14000 does have a large, positive impact on the perceived efficiency • The respondents in this study came from a variety and effectiveness of the environmental management of industries and were in a variety of managerial system. Except for lead times, which are slightly positions. They also had familiarity with their posi- negatively affected, ISO 14000 greatly improves tion, being in the current position for an average of every dimension of performance. This finding 5.4 years. They also had been involved in a wide points to a situation where those firms that have range of corporate initiatives, including Continuous attained this level of certification are not only more Improvement, new Product Launches and Re-engi- environmentally responsible, but also more efficient neering. (and potentially better suppliers). • The plants represented in this study have worked • The progress of a plant in attaining ISO 14000 cer- with numerous initiatives. The initiative most fre- tification is influenced by several factors. It is quently pursued was that of ISO 9000/QS 9000 cer- affected by size (the larger the firm, the more tification; the initiative least often pursued was that progress it is likely to have made), nature of owner- of implementing an environmental management ship (foreign-owned firms are more likely to pursue system. and attain ISO 14000 certification), past success • Environmental management systems are essentially with QS 9000 and ISO 9000 certification, past suc- multi-dimensional and complex entities. They cess with the implementation of TQM systems, and embody data collection, reporting, performance degree to which cross-functional programs and measurement, and tools. They can affect corporate teams are used. reputation; they can influence product and process • Progress in attaining ISO 14000 certification is also design and the manner in which problems are iden- influenced by uncertainty concerning federal regu- tified and resolved. At present, most environmental lations, changes in ISO 14000 standards, the costs management systems are implemented using a sep- of certification, the benefits of certification, and the arate, formal department. They also tend to focus impact of the ISO 14000 standards on current envi- on tactical and operational problems. Their stance ronmental management systems. is primarily reactive. That is, in most firms, these • Compared with other voluntary based programs systems come into play once a problem has aimed at improving environmental performance, occurred. They are also driven by environmental the evidence indicates that the ISO 14000 certifica- regulations. Finally, they are internally oriented, tion process is more effective and efficient when with relatively little attention being devoted to envi- viewed in terms of its impact on performance. ronmental problems within the supply chain. • Enhanced environmental management can be In short, the data seems to indicate that, with ISO attained through a variety of actions. The respon- 14000 certification, plants can be both clean (more dents regularly considered most of these options. environmentally responsible) and green (more efficient). • Overall, environmental management systems are These are important findings for the purchasing man- not seen in a positive light. In general, these sys- ager. These findings are explored in greater detail in tems are seen has having a strong negative impact Chapter 6 of this report. on the major strategic dimensions of performance (i.e., lead time, costs, and quality) and not

44 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Chapter 4 Understanding the ISO 14000 Decision in Detail: Case Studies

Introduction industries: pharmaceutical, furniture, and automotive tier-one and tier-two suppliers), geographic proximity, The role of this chapter is to enhance quantitative find- level of contact, and the firm’s response to the large- ings obtained from a large-scale survey through adding scale survey. “thick” description of events, motivations, and values behind the ISO 14000 decisions that were somewhat The purpose of the field visits was to identify the moti- simplistically summarized as numbers in the survey. vations for ISO 14000 adoption at different stages of Using qualitative case studies (in addition to a quantita- implementation by a variety of firms. Additionally, this tive survey) serves the purposes of a data triangulation research wanted to substantiate the findings from the (through adding a different data source) and a method- large-scale survey. The research questions we wanted to ological triangulation (through relying on both qualita- explore going into the field research included tive and quantitative methods). The combination of qualitative and quantitative methods in a mixed • What are the driving forces of ISO 14000 methodology is a new development in the field of oper- implementation? ations management, and this report is probably one the • What are the benefits of certification? first ones using this approach. • How can we better understand the ISO 14000 decision-making process? We selected eight companies representing different stages of the ISO 14000 development process. Table 4-1 In most cases, environmental and operations managers summarizes the status of the ISO 14000 development were contacted at the divisional level. An initial idea of and the names of the firms we visited. the level of EMS understanding and implementation was determined through preliminary screening over the In addition to representing different stages of ISO 14000 telephone. Next, site visits and follow-up phone calls development, the selection of the firms was based on were used to collect data on the eight companies industrial affiliation (these firms represented a variety of reported within this chapter.

Table 4-1 Categorization of Firms by ISO 14000 Implementation Status Status of ISO 14000 Development Firms Visited Not Being Considered Firm A: Automotive Casting Facility Firm B: Metal Fastener Manufacturer Assessing Suitability Firm C: Office Furniture Manufacturer Firm D: Pharmaceutical Company Planning to Implement Firm E: Automotive Glass Assembly Currently Implementing Firm F: Breaking Systems Manufacturer Firm G: Automotive Glass Successfully Implemented Firm H: Engine Parts Manufacturer

Center for Advanced Purchasing Studies 45 After the initial screening, which also assessed the will- taking into consideration their available resources. The ingness of the company to participate in the study, site decision makers are the CEO, VPs, and owners. visits were arranged. The interviews were conducted with managers responsible for the EMS strategy at each What factors influenced this decision? Available site using the structured interview protocols presented resources, costs, and benefits. in Appendix B. The list below shows the title of the manager we interviewed at each company and the num- Under what conditions would management change ber of years they have spent in this position: this decision? Only if the automotive industry dictates that supplier must have it. Firm A just went through • Firm A: Environmental Engineer (7 years); ISO 9000 certification. Overall, ISO 9000 is perceived as • Firm B: Operations Manager (4 years); a good thing, and the process of certification was con- • Firm C: Corporate Environmental Manager (6 sidered to be good. The manager interviewed wonders years); “what’s next?” • Firm D: Manager “Leader” Environment and Safety (16 years); What are the benefits you can see being generated by • Firm E: Manager of Technical Services “Quality and this form of certification? Improved company image. Environmental” (13 years); • Firm F: Manager, Health, Safety, & Environmental Costs: For this facility, it would cost about $20,000. Quality (1 year); • Firm G: Corporate Manager of Safety and Risks: Heightened public awareness (both good and Environmental Strategies (26 years) and the bad). This facility has had problems in the past and Operations Management Manager for the nearest appears to still have some environmental issues. facility (2 years); • Firm H: Manager of Environmental Systems (5 How do you measure performance in your depart- years; 25 years in environmental management). ment/area? Within the environmental department, they are measured by the number of complaints (public, state, and federal). The lack of complaints is a better ISO 14000 Status: Not Being Considered way to look at it. Other departments are not directly affected. There are some indirect effects when it comes Firm A to product substitution. While they do not formally pro- Will Not Pursue Certification Unless It Is Mandated by mote this approach, new products are looked at to Customers assess feasibility. While they are assessing new product This privately owned firm employs 250 people with and process ideas, environmental issues may come into only three people in the environmental division. This play, but no one outside the environmental department firm does not export its product and, therefore, does not has environmental performance measures. conduct business in Europe. This firm produces small to medium castings ranging from 50 to 60 pounds of Summary gray iron castings for automotive, refrigeration, and • This firm cannot see any real benefits coming from hydraulics markets. The major competitive thrusts ISO 14000 and will wait until it is mandated before involve labor and raw materials. The key success factors going ahead with certification. Much the same as typically involve quality and delivery. the results from Chapter 3, this category of firms tends to not have a deep understanding of ISO What type of environmental system is in place? This 14000 and does not see any real benefits coming firm has a very informal system. This manager is con- from certification. sulted on a regular basis concerning environmental • Largest factors affecting ISO certification involve issues. These issues typically involve the planning stages the availability of resources. The size of the firm for new processes and capital budgeting. This manager’s determines the resources available, and Firm A understanding of ISO 14000 is general in nature. seems to have few resources available for another Exposure to information regarding ISO 14000 is occa- certification process. These resources are more sional. This manager has reviewed the ISO 14000 series important to everyday operations and solving short- of standards and clauses. term problems. • Exposure and knowledge of ISO 14000 is limited, Firm A has just completed ISO 9000 and does not want and benefits are only perceived as improved com- ISO 14000. They will not go for certification voluntarily pany image. It appears this firm has some historical but will do it if the automotive industry says they have pollution image problems and thus the focus on to. This decision on ISO 14000 was arrived at through image.

46 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency • Environmental issues seem to be limited to new disposed of at the end of the oil’s useful life cycle), and process design and engineering. water. Therefore, they do not see the need for a formal • Within the environmental department performance EMS. involves reactive measures such as the number of environmental complaints (public, state, and fed- If ISO 14000 becomes mandated by the Big Three eral). No one outside the environmental depart- (where they receive 95% of sales), they will then do it. ment has environmental performance measures. According to this manager, the Big Three seem to be • They are taking the “wait and see” approach to cer- talking about ISO 14000; and, in past years, the impor- tification but will do it if the automotive industry tance of environmental impact in general. No mandate says they have to. has been issued, therefore, they will not be looking into or doing ISO 14000 certification. Firm B Will Not Pursue Certification Unless It Is Mandated by How was this decision arrived at? Unless it’s mandated, Customers there is no decision to make.

This UAW firm employs 145 people. There is no envi- What factors influenced this decision? The customer ronmental staff. Firm B is publicly traded and exports (the Big Three) is the largest factor influencing ISO about 12 percent of its products, with very little (less 14000. MRC is taking the “wait and see” approach. This than 1 percent) going to Europe and less than 1 per- facility is QS 9000 and Q1 certified. The manager inter- cent of sales going to the parts market. This facility viewed asks “what’s next?” If the automotive industry produces metal fasteners and specialty automotive requires this, then this firm will go ahead and get certi- parts. The target market is automotive, industrial, farm fied. Usually suppliers are given one to two years to implements, and power products. This company is a comply with the mandate. This manager feels the facil- Tier I and II supplier to the automotive industry. The ity is not an environmental problem and certification primary competitive pressures in this industry are could be done within a year. It’s just a matter of going price and international competition in the form of through the audit process. imports. What are the benefits you can see being generated by Key success factors involve their ability to produce com- this form of certification? Doesn’t know of any benefits. plicated parts that are not readily manufactured without The facility is already in compliance; they see them- expertise. Firm B also has the ability to do secondary selves as a good corporate citizen anyhow. The only operations on primary parts. benefit would be to meet the minimum requirements to do business if mandated by the automotive industry. This firm does not have an environmental system. The “system” in place is that of a ground water run-off pro- Costs: Audits. This consists of personnel and time to cedures, EPA and OSHA labeling and MSDS sheet avail- review processes and documents. ability, dikes near petroleum products, and annual permits. While these examples of documentation and pro- Risks: Firm B sees itself as good enough already and cedures are attributes of a system, there is no formal realizes the importance of the environment. Pollution is system in place. an expensive form of mismanagement that they feel is already under control. The staffing of the IS consists of a clerical person who handles the IS components and acts as a How do you measure performance in your depart- coordinator/organizer for anything that can be seen as ment/area? Productivity: efficiency and piece per man- environmental. Contracting has a person specifically hour, scrap, and uptime versus available time. Firm B responsible for State and Federal permits. does not track outbound wastes. They recycle the steel scrap. Outside of the scrap, this firm only has one What is your understanding of ISO 14000 at this dumpster that is taken to a landfill periodically. This time? Firm B appears to have very little knowledge of could be easily captured with the existing system if they ISO 14000. The respondent thinks it is much like QS needed to. 9000 where “you say what you want to do and then have to do what you say.” This facility has next to noth- Summary ing that can be considered an environmental problem. • This firm has no real need for ISO 14000. Again, This facility does not pollute, burn anything, and is not we see that this category of firms tends to not have chemically intensive in its operations. They a deep understanding of ISO 14000 and does not reclaim/recycle all air, 100 percent of their oil (which is see any real benefits coming from certification.

Center for Advanced Purchasing Studies 47 • No mandate has been issued. Therefore, they will already very strong and that they need to look at where not be looking into or doing ISO 14000 certifica- the benefits from ISO 14000 certification will come tion. This firm is taking the “wait and see” from. approach. • The only benefit would be to meet the minimum How was this decision arrived at? The decision to eval- requirements to do business if mandated by the uate ISO 14000 was made by the central steering com- automotive industry. This view of the benefits asso- mittee. This involves the coming together of a group of ciated with ISO 14000 certification is again consis- people from multiple functions. tent with the survey results in that those firms that have not even considered certification or assess- What factors influenced this decision? Environmental ment of ISO 14000 see very few benefits coming champions such as the corporate environmental man- from the standard. ager influenced the decision to implement ISO 14000. • Certification is seen as a small issue and pretty easy This manager is the person responsible for bringing this to obtain. They will have a couple years to do it issue to the committee. First, they need to assess the once certification is mandated. costs versus the benefits. This firm already has a strong • Most of the ISO 14000 stuff is perceived as an and well-established environmental model and system OSHA and EPA compliance issue. that is different from the requirements for ISO 14000. • The handling of hazardous materials is something The evaluation of the current situation may uncover they want to avoid at all costs. It is important to reasons to change current practices. At this time, the have a safe and clean working environment. They committee has commissioned a study of ISO 14000. are not sure if ISO 14000 will make the work environment any safer than it already is. Under what conditions would management change • Pollution is an expensive form of mismanagement this decision? The steering committee can make a that they feel is already under control. change in the decision regarding certification. This committee has a large amount of power within the company. This committee was commissioned by the board of ISO 14000 Status: Assessing Suitability directors.

Firm C What are the benefits you can see being generated by Evaluating ISO 14000 Certification this form of certification? Marketing of their certification. Their system “process” is already good. It is a This firm employs 2,500 people locally and 7,500 glob- loose-knit system that does not have strict documenta- ally. Firm C is a publicly traded company known for tion. If they decide to get certified for ISO 14000, it will environmental awards and practices within the office not be for compliance reasons. ISO certification should furniture industry. This firm is a manufacturer of office add structure to the existing environmental and manu- furniture. facturing systems.

The major competitive thrusts in the office furniture Costs: Training, development of the program, and industry are designing of new products and product dif- auditing: “If they decide to get certified it will be an ferentiation. Threats to this industry involve the econ- external certification.” omy. Typically, there is a five-to six-month lag in which there is a decrease in the amount of new buildings and Risks: Someone else in the industry doing it and Firm offices being built and thus a lag in demand for office C’s becoming the follower. furniture. The key success factor for this firm involves being a leader in design. How do you measure performance in your department/area? They have about four “output” measures. What type of environmental system is in place? The They track “total wastes” in the form of recycling, environmental system is made of the professionals and amount sent to their energy center to generate steam their given responsibilities. At the top level, Firm C has and energy, landfill, and amount of sawdust sent to a corporate steering committee that sets policy. Next, Consumers Energy Company to generate energy for the teams implement the projects and policy. local community. At the end of October 1998, the Communication within the network of professionals is number of measures is expected to double to eight or facilitated through the use of Lotus Notes. nine.

Firm C is currently evaluating ISO 14000. Based on past Hurdle rates for investing in projects are lower for envi- history, they believe the environmental program is ronmental initiatives. Economic Value Added (EVA) is

48 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency often used to evaluate projects and report results of pro- target market for this firm’s products is human jects. It was noted that there are no EVA projects that do pharmaceutical; basic business areas include oncology not impact the environment. (cancer), infectious disease, anti-cancer, and diabetes.

Lessons Learned The most important competitive thrust in this industry • In the last 5 years, Firm C has received seven or is the company with the first drug to market wins. In eight environmental awards. So why go for ISO general, they compete in “trying to finding a cure to 14000 if they are already doing so well? The execu- help advance the quality of life.” Other thrusts include tive interviewed at this firm claims that they will innovation and quality. Pricing is fixed and, therefore, not seek ISO 14000 certification at this time. They not a factor. Speed is a complex issue when the time to are already ISO 14000 compliant, but they will not market takes 10 years and $15 million. Therefore, prod- pursue certification because it is costly and their uct development and reduction of cycle times become customers are not demanding it. This view is taken increasingly important. The key success factors include because the program itself is already considered to innovation, but they believe they are getting better at all be very good. of the thrusts. • The environmental system is made of the individual professionals. What type of environmental system is in place? • If they decide to get certified for ISO 14000, it will Environmental Safety and Management System (ESMS). not be for compliance reasons. Instead, certification The respondent claims that “too many people separate will be based on performance improvement. The environment and safety.” This firm wanted the system to ISO certification and standards may help with doc- cover safety, too. Their goal is to have a consistent umentation and follow-up of projects. Here we see approach, standards, and focus efforts toward continu- a better understanding of the potential benefits of ous improvement. They want to collect data for bench- the current EMS and the need for a cost- benefit marking and incremental improvement. All sites have approach to certification. been asked to implement this system; no deadline is in • As we now start getting closer to ISO certification place (they are starting to work on it). All sites are ISO- and a better understanding of EMS in general, the 9000 certified; all sites will have the autonomy to go for greater the impact this system has on firm ISO 14000 certification if they deem it necessary. This performance. firm has 40 facilities worldwide; each of these facilities • At the time of the interview, Firm C was conduct- will adopt the ESMS in time. ing a gap analysis to determine what part of their processes can be improved. ISO certification should This manager seemed to have a general understanding add structure to the existing environmental and of ISO 14000 at the time of the interview. There is hope manufacturing systems if they are going to consider that ESMS will lead naturally to ISO 14000 certification integrating it into the existing system. within this firm. The decision to pursue ISO 14000 cer- • An important perceived benefit of ISO 14000 is the tification will be left to each facility. This firm’s position marketing of their certification. The only perceived on ISO 14000 is that ISO 9000 is considered good for risk is the chance that someone else in the industry business, but ISO 14000 has not captured as much is already doing it. It is here that we see ISO certifi- interest. cation transitioning from reactive to proactive in nature. How was this decision arrived at? With a recent • Hurdle rates for investing in projects are lower for merger, there came a need to get all of the top environ- environmental initiatives. mental people together. There was a meeting of the • Eco metrics is in its infancy: Economic Value Added Environment & Safety Council Meeting (managers from could be used to develop a good Eco measure. several countries attended). There was a need for con- • One major reason for the success of firm C is the sistency and a framework they could all use. The ESMS presence of visible top management support. There idea came from this meeting. has always been a CEO commitment to the environment. What factors influenced this decision? Corporate culture of environmental responsibility and a strong Firm D commitment to the environment are major factors in This pharmaceutical firm is publicly traded and employs environmental initiatives, as well as the need for a 6,000 people locally. Its products are sold in the European consistency and a standard of performance. Local facility Union and internationally. Primary products include autonomy, (a profit center) cannot be told how to allocate human pharmaceutical, sterile product injectables, dry their resources since each facility is evaluated differently. products, tablets, anti-cancer, and prostate drugs. The A top-level strategy for developing the new system is

Center for Advanced Purchasing Studies 49 easier for employees to swallow than a very detailed • All sites are ISO 9000 certified; all sites will have approach. the autonomy to go for ISO 14000 certification if they deem it necessary. There is hope that ESMS Under what conditions would management change will lead naturally to ISO 14000 certification within this decision? If countries you operate in say you have this firm. All sites have been asked to implement to meet certain standards. Additionally, image is a big this system; no deadline is in place (they are start- concern; this firm wants to be seen as a good company. ing to work on it). • Corporate culture of environmental responsibility What are the benefits you can see being generated by and a strong commitment to the environment are this form of certification? Most important: we better major factors in environmental initiatives. protect the environment for future generations (sustain- • A facility in Belgium will be the first ISO 14000 cer- able development). Improved image, preventing envi- tified site. They claim this is due largely to cultural ronmental liabilities, saving money/improve cost struc- influences in Belgium. ture, and source reduction. • A top-level strategy to developing the new system seems to be easier for employees to swallow than a Costs: Setting up the system (establishing committees, very detailed approach. assessment, documentation). There should be no capital • Firm D would change its mind and pursue certifica- investment needed at the larger plant level. The smaller tion if the countries it operates in say they have to plants may have cost considerations. The FDA can be a meet the ISO standards. huge hurdle. If firm D tries to make a manufacturing • This firm sees no risks to certification, only costs. process of an existing drug more efficient, it may take 18 • Environmental image is important. to 24 months for the permitting process to be completed.

Risks: Do not see any risks, just costs. ISO 14000 Status: Planning to Implement

How do you measure performance in your depart- Firm E ment/area? This is the second year for their annual Pilot Plant for ISO 14000 Certification for North American Environmental Report. This report and the environmen- Operations tal efforts of the firm have the endorsement of the CEO. This report also states that the ESMS will be the conduit Firm E employs 300 people at this facility and is a Tier I for the tracking and reporting of the performance mea- supplier to the automotive industry. There is one envi- sures. They mostly try to look at end points or output ronmental manager for this facility. This manager is also measures (e.g., total waste, energy consumption, VOC responsible for quality. This is a publicly traded com- levels, hazardous materials, non-hazardous materials, pany owned by a larger company from England. The water, air emissions beyond SARA reportables, and acci- parent company is the largest glass company in the dent rates). world. They sell to the aftermarket division within their company but not to the aftermarket directly. This plant Summary does not have any European business, but they do have • Most important benefit of environmental efforts is customers in Mexico and Venezuela. Basically, this facil- better protection of the environment for future gen- ity is involved in attaching materials to glass. This facil- erations (sustainable development). Improved ity only does assembly with no cutting, bending, or fab- image, prevention of environmental liabilities, sav- rication. Their primary product is automotive glass. ing money, improving cost structure, and source Their primary customers are GM and Ford, with some reduction are all benefits of certification. Again, as of their products going to other automotive OEMs in we move away from firms that are not considering North America. The major competitive thrusts are ISO 14000 certification, we see an increase in the global alignment and increasing sales. They do not types of perceived benefits coming from understand their cost structure very well. The target certification. market consists of more foreign OEM business and • Firm D has a strong understanding of EMS in gen- more business with Ford. They are looking at new pro- eral and sees this system as an opportunity for grams/business with current customers rather than tak- improving firm performance. ing business away from competitors. • This respondent claims that “too many people separate environment and safety.” This firm wanted the This facility is QS 9000 certified. The documentation system to cover safety, too. Their goal is to have a and formalization of their quality system was new. They consistent approach, standards, and efforts toward did not have this formalization before. This standard has continuous improvement. done nothing but raise costs for them. They became cer-

50 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency tified because their customers demanded it. The certifi- gearing up for ISO 14000 certification. They will be reg- cation process did not increase throughput, and scrap istered for ISO 14000 by the end of 1998 if the parent downtime has not changed. This manager says it has offices in North America will support them. just created a standardized layer of bureaucracy that they have to deal with. The environmental manager does not feel their experiences with ISO 14000 and QS 9000 would be different if Their key success factor is to drive costs down. They it were mandated or voluntary. The requirements do not know what their direct costs are. They are trying to change if you approach it because you have to or improve productivity: more work with less. They because you want to. ISO 14000 is perceived as just needed QS 9001 certification in order to quote new another management system that focuses on environ- business. The workforce is not represented by a mental issues rather than quality issues. This plant has union, and the company works hard to keep it that an environmental policy in place, but it is not ISO way. 14000 compliant because this policy does not say anything about the community. What type of environmental system is in place? Their EMS uses/mirrors their QS 9000 system. The respon- What is your firm’s position on ISO 14000? The U.S.- dent is both the quality and environmental manager. based plant will set the stage for certification for the He used his experiences from the QS 9000 certification other plants in the company. The parent company does process to develop their EMS, which resembles QS have five international sites, which are certified. 9000 in structure. This manager performed a gap analysis that allowed them to determine that this facil- How was this decision arrived at? Pressure came from ity is meeting 70 percent of the ISO 14000 require- the parent company in Europe. There is definitely a ments. They are currently lacking the corporate envi- push by the European office that influences the ISO ronmental procedures. These procedures help integrate 14000 decision. The parent company’s offices in North processes. America have offered some resistance and are not excited about ISO 14000. QS 9000 met some resistance They are almost ready for ISO 14000 certification at from the parent company in Europe, but the North the plant level. However, they are not ready at the cor- American offices supported it, in contrast to ISO porate level. Their EMS is open to the entire company 14000. and is on-line. Information, procedures, and work instructions on EMS issues are available to everyone What factors influenced this decision? They do have via computer database, but goals and performance an environmental section in their annual report. The issues are not available. This database is even accessi- “European” way of thinking is to be more environmen- ble from the shop floor via a touch-screen information tally conscious. The Europeans are much more focused system. on the ISO 14000 standards.

The direction for ISO 14000 certification came from the Under what conditions would management change parent company in Britain. The group said that all facili- this decision? The paper trail and audits associated with ties had to be certified by 1999. Registration pressure ISO 14000 certification scare American management; came from this group, but they were ISO 14000 compli- the audits might turn something up that shows you are ant at the plant level before the group stated this direc- unlawful. The “lawyers handle environmental issues,” tive. At the time of this interview, the plant was 70 per- and the risk of legal liability seems hard to get away cent compliant with ISO 14000. from. They do not have much environmental waste to contend with because they are mostly an assembly Other sites in North America are only 10 percent com- operation. pliant. Unfortunately, there is not much communication among plants. Eventually his plant will dictate and What are the benefits you can see being generated by direct the ISO 14000 certification process for the other this form of certification? The standardization and for- plants since they are the furthest along. malization has had no impact on the environment and no incremental benefits. However, there may one day be QS 9000 was used as the template for the EMS. This is a sales and marketing benefit associated with all this. not unusual given that this manager is both the quality and environmental manager at the plant. This is the Costs: Registration and the certification process itself. only plant this company owns in which the quality and environmental manager are one and the same person. It Risks: There are no risks other than the concern with was a huge benefit in developing the plant’s EMS and the paper trail associated with the ISO 14000

Center for Advanced Purchasing Studies 51 certification process. Parent offices in North America facility. Including the Environmental manager, there are still have to develop the corporate policies and proce- only four people in the environmental division. Only a dures before this plant can get certified. small percentage of sales are exported. Most of their sales are to OEMs with some after-market sales. This is Performance measures: Quarterly corporate statistics: an EPA Superfund site, and dealing with Superfund baseline information such as number of periods, envi- regulations is a big project. This facility makes braking ronmental costs, amount of energy (gas and electric), systems (e.g., calipers, wheel cylinders, etc.). Most trash waste, hazardous waste, how much recycled, non- parts are for passenger cars and light-duty trucks. They hazardous waste. The manager in this area has to make manufacture almost everything in-house. For example, sure that the quality and ERM goals do not conflict. He they have a foundry on-site that casts the calipers. It is says in the long-term they do not conflict and support more cost effective for them to make it themselves, but each other, but in the short term they might conflict they are contemplating selling the foundry so they can with one another. focus on their core competencies. The parent corporation also makes washers, dryers, and deburring equip- Summary ment. This corporation is managed by a foundation in • The “European” way of thinking is to be more envi- Germany. ronmentally conscious. The Europeans are much more focused on the ISO 14000 standards. This is The major competitive thrusts in this industry include also consistent with the findings in Chapter 3 in QS 9000. Firm F is trying to design a standardized that foreign-owned firms tend to be positively brake across several platforms. They also use several dif- related to greater levels of ISO 14000 integration. ferent types of coatings on brakes, and they are trying to • The direction for ISO 14000 certification came from use only one (a product engineering issue, but there are the parent company in Britain. The group said that ERM issues as well). They currently plate them off-site all facilities had to be certified by 1999. because of the environmental implications. They are try- • Eventually this plant will dictate and direct the ISO ing to move away from powder coating because it is too 14000 certification process for the other plants labor intensive. since it is the furthest along. • Their EMS uses/mirrors their QS 9000 system. QS The key success factors include the need to improve 9000 was used as the template for the EMS. Their efficiency and quality. A hindrance to this is the fact that EMS is open to the entire company and is on-line. they are using equipment from the 1940s. Information, procedures, and work instructions on EMS issues are available to everyone via computer What type of environmental system is in place? The database. This database is even accessible from the manager of Health, Safety, & Environmental Quality has shop floor via a touch-screen information system. three ERM staff. This department operates in isolation • The paper trail and audits associated with ISO from the rest of the company. The ERM group does 14000 certification scare American management. It work with the quality group to learn from their experi- is feared the audits might turn something up that ences with the QS 9000 certification process. This is a shows an environmental violation. There is a men- Superfund site, and dealing with Superfund regulations tality that lawyers handle environmental issues. The is a major project. While dealing with Superfund issues risk of legal liability seems hard to get away from, does not directly impact current manufacturing, there and this facility is very cost-focused. may have been rare instances in the past where this was • This manager has to make sure that the quality and not the case. In the past, their EMS was compliance dri- environmental goals do not conflict. He says in the ven and not document driven. long term they do not conflict and support each other, but in the short term they might conflict The new system is an extension of the QS 9000 system. with one another. At this time, the EMS group is still collecting information, such as process flow analysis and costs of waste. The group started by reviewing the site’s compliance ISO 14000 Status: Currently Implementing history and looking for current environmental problems. They have used the services of consultants to per- Firm F form a gap analysis of their EMS system and processes. Pilot Plant for ISO 14000 Certification for North American They were able to realize from the gap analysis that Operations there are many opportunities for improvement. Their EMS has had no impact on the execution of shop-floor Firm F is a privately owned foreign subsidiary in which activities at this time. there are approximately 1,300 employees at this UAW

52 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency This firm appears to have a good understanding of ISO approaches to more opportunity-driven approaches. For 14000. They will be ready for ISO 14000 certification by the first time, they can prioritize and objectively evalu- October 1998. Their corporate staff in the U.S. facility ate waste streams rather than go with instinct, which gave this plant the go- ahead to implement the ISO can be inaccurate. They did use QS 9000 experiences 14000 system, and this plant is the pilot site for North and tools, and it helped. They are starting to look at American Operations. The corporate staff will use this processes differently. They originally had a cross-func- facility to determine whether the process is cost effec- tional team for the ISO 14000 certification process that tive. The corporate staff does not want the plant to actu- was represented mostly by quality and ERM people, but ally follow through with certification because they feel that did not work because the quality people lost inter- that there is no reason to (no one is demanding it). est. The ERM people learned a lot about documentation Their division wants ISO certification, but the parent and procedures. The ERM group is still building a case company offices in North America have told them not for the increased importance of their function. They can to. The corporate office asks why get certified if no one now show that the EMS group is a benefit and not a demands it? However, it would only cost them $500 to cost to the organization. do so. The QS 9000 auditors, who certified them, said they could also certify them for ISO 14000. The Department of Environmental Quality (DEQ) in Michigan does not formally endorse ISO 14000, but All of the parent company’s European plants were Eco being certified will mean shorter time for permits from Management- and Audit Scheme (EMAS)-certified so the DEQ, and they will be given Clean Corporate they wanted to try something similar in North America. Citizen (C3) status as a result of certification. Firm F A major goal of the ERM staff is to shift ERM responsi- also claims the DEQ said they would make fewer visits bility from the ERM staff to others, such as people on after completing ISO 14000 certification. They will the shop floor. This is one of his major challenges come in once every three years instead of once every because right now all ERM issues fall on his staff. year. ISO 14000 so far is a good public relations opportunity with the EPA and the community. What factors influenced the EMS decision? The factors influencing the decision to pursue ISO 14000 certification Costs: Costs to date have come from the use of consul- are the history of the facility (Superfund site) and the Ger- tants and a German full-time co-op employee (mostly man influence of other facilities having EMAS certification. work hours and time in general).

Under what conditions would management change Risks: From this manager’s perspective, there were no this decision? Management will not formally pursue risks other than implementation failure. He was never ISO 14000 certification until the customer demands it. concerned with the paper trail associated with ISO They can get certification for less than $1,000 from their 14000. If anything, it helped him identify opportunities QS 9000 auditor. for improvement with priorities assigned objectively. The paper trail is not a concern because the EPA and What are the benefits you can see being generated by OSHA are there all the time as it is. The continual pres- this form of certification? The major benefits are that ence of the regulators is a current issue that will not be they started to analyze the process formally and in great impacted by the ISO 14000 certification process. detail, identifying waste streams and then prioritizing them. The documentation has helped because they How do you measure performance in your depart- make decisions objectively rather than on instinct. The ment/area? No environmental metrics are used. Instead push for ISO 14000 has come from Germany where they tend to look at end-of-pipe or output measures of their EMSs are formalized and documentation driven, waste. The environmental department is pushing hard similar to ISO 14000. to change this because they feel it would help make them more effective. ERM costs are not included in the In the beginning of the project, there was no economic decision-making process for capital investments. This approach to the ISO 14000 certification process, but the manager could easily incorporate ERM issues into the environmental division is seeing economic benefits. decision-making process because he is getting a better Production volumes have been going up, but scrap rates idea of what the costs will be. However, it is not a part have been going down. By going through the EMS of the mindset of the company to include these costs implementation process, they have been able to rethink into the process. Therefore, the environmental implica- processes. tions of decisions made are not considered, which requires the compliance/reactive approach that sur- The formal documentation of the ISO 14000 certifica- rounds the environmental department. tion process has moved them from compliance-driven

Center for Advanced Purchasing Studies 53 Half of this manager’s work is environmental, yet he is Japanese North American transplants (Honda, Toyota, not evaluated on it. By taking a “management by fact” Nissan, and Mercedes). approach, the EMS group is able to track waste levels and have some metrics for decision making. What they The major competitive thrusts in this industry include are coming to realize is that there are many hidden costs continuously trying to improve quality and drive down that before were considered a cost of doing business. costs. Simplification and integration are also important as they are trying to integrate parts for customers, such Summary as interior and exterior mirrors, and trim and console. • The EMS system is an extension of the QS 9000 system. The key success factors for this firm include quality, • The motivations influencing the decision to pursue delivery, cost, and innovative design. The company is ISO 14000 certification are the history of the facility trying to take concepts and coordinate them with the (Superfund site) and the German influence of other rest of the vehicle. Their customers no longer provide facilities having EMAS certification. There is a them with detailed design specs. They are given general- strong environmental corporate culture coming purpose (black box) specifications that are not detailed. from Europe, and all of the parent company’s This has forced firm G to really develop their engineer- European plants are Eco Management and Audit ing capabilities. Scheme (EMAS) certified, so the company wanted to try something similar in North America. What type of environmental system is in place? The • It is not part of the mindset of the company to managers interviewed point out that this firm has a long include environmental costs in the decision history of being environmentally friendly. They are try- processes, but this is changing. After capturing data ing to make their suppliers greener, but this process is and quantitatively looking at environmental issues, in the infancy stages. A part of having a long-term viable the EMS group can show they are a benefit and not supplier is making sure they are green. In their process a cost to the organization. What they are coming to of downsizing their supply base, they did actually sur- realize is that there are many hidden costs that vey suppliers on environmental attributes. before were considered a cost of doing business. • There are conflicts when dealing with the differ- Firm G was required to be QS 9000 certified by the Big ences and tradeoffs between European and U.S. Three; but it does not require QS 9000 certification from environmental standards. ISO 14000 may help its suppliers. However, it does encourage its suppliers to overcome this. achieve QS 9000 or at least be QS 9000 compliant. Firm • ISO 14000 certification is seen as a way of protect- G realizes that many of its suppliers do not have the ing the firm from external interruptions. Firm F resources to achieve certification; therefore, it does not claims the Department of Environmental Quality mandate it. They plan on offering the same type of will make fewer visits after they complete ISO encouragement for ISO 14000. If they are not certified, 14000 certification. they should be compliant. • This is a federal Superfund site that is well known by the community. Firm G appears to have a good understanding of EMS. EMS and safety issues are a very formal and standard- Firm G ized part of the new product development process (they This privately owned company employs 2,500 people. call it PMP). The customer will come to Firm G or this There is one corporate environmental manager and 10 firm will go to the customer with a product idea. Then, people comprising the environmental staff at this facil- concept development fully begins, and they enter the ity. They also have manufacturing and sales office facili- design phase. At some point, a BOM is generated, and ties in Kentucky, Arizona, Mexico, three in China, in the product manager then submits a PMP to the corpo- Malaysia, and plants in Michigan, Thailand, Portugal, rate manager of Safety and Environmental Strategy. This Scotland, Germany, and Spain. Approximately 10 per- manager will examine a number of ERM issues associ- cent of sales are in exports, and only half of 1 percent of ated with the PMP (e.g., air permit requirements). This sales are to the replacement part market. The parts manager can prevent a product from going through made in the Midwestern U.S. plants typically do not go development if the ERM issues are severe enough. For to Europe since they already have plants located in sev- example, one manager vetoed the product as it currently eral countries there. Their products are automotive — stood because of the environmental implications associ- glass, windows, mirrors, glass touch screens that you ated with dipping glass in arsenic. The product team see on the instrument panel, exterior and interior mir- came back later with an alternative dipping solution rors. Their primary customers are Ford (33%), Chrysler that was approved. (20%), GM (10%), and the rest are German and

54 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Formal ISO 14000 documentation has started with poli- (they said it would cost them $13,000 times 7 sites in cies and procedures at level one and environmental Michigan). Self-certification may be an option. management procedures at level two. The CEO has committed to ISO 14000. They hope to be certified in The managers interviewed said that the QS 9000 certifi- North America by the end of 1999. This should not be a cation process was very costly. They estimate the difficult process because they have always had a formal- process of preparing for certification cost them between ized ERM system in place. ERM has always been part of $1-2 million. They did say that the process helped their culture, which was ingrained in them by the improve performance; therefore, it was more than just a founding father. marketing tool for them. They also said that formalizing their EMS and preparing for ISO 14000 certification The CEO made a trip to Europe to visit their facilities were simplified because of the QS 9000 experiences. there and saw the plants there being pressured by cus- They avoided reinventing many parts of a formalized tomers to pursue ISO 14000, and then made it a corpo- documentation-driven system. rate priority. Their customers in Europe include Rover, Vauxhaull, Opel, and Volvo. These companies placed What are the benefits you can see being generated by pressure on the European facilities to become ISO this form of certification? More employee awareness. 14000 certified. Formalization of processes is perceived as good (especially if knowledge is stored and distributed). What if The company has a long history of top-management the environmental manager leaves, walks out, or retires? commitment to ERM. This environmental manager has Training people and answering people’s questions can never been turned down for ERM project funding. The still be covered if the documentation is there. This doc- environmental manager does not know what the costs umentation ensures the growth potential of the com- of formalizing their EMS will be in dollars. Interestingly, pany because they are less of an environmental risk. any ERM-related investments made do not have to be Firm G stresses the importance of the benefits of for- justified from a cost/benefit perspective. They are envi- malizing the system and creating the documentation. ronmentally proactive and address ERM issues early on Certification should also help eliminate mistakes and in the product development process before the launch eliminate process variation through formalization and actually occurs. record keeping.

External pressures have shown no formal interest from A strict and formalized ERM procedure reduces waste North American customers to pursue ISO 14000. Ford itself because it sends up red flags and identifies oppor- has offered some verbal encouragement. tunities for improvement. Improvement comes from measurement and identification. They have reduced What factors influenced this decision? The ISO 14000 variation and product yield, and process yields have certification process started at this facility was influ- improved. Another benefit includes the prevention of enced by their European firms. Their plants in Europe pollution. The records created by formalizing their EMS were being pressured by customers to pursue ISO 14000 identifies spikes and opportunities for improvement. certification; therefore, the CEO became inspired and Their experiences with QS 9000 helped them with ISO dictated this for all of their facilities, making it a corpo- 14000; it kept their costs down and increased their like- rate priority. The CEO made the decision. This firm has lihood of implementation success. a green culture and, therefore, they want to protect the environment and help the community, not hurt it. Costs: Registration, training per work instructions, travel to international facilities. They say the costs pay The influence to pursue certification is customer driven for themselves, but they do not have to prove it. Firm G in Europe by Volvo, Rover, and Vauxhaull. In the United is fully committed to ERM. The environmental manager States, the OEMs have started to verbally question sup- does not have to do a cost/benefit analysis; funding pliers about ISO 14000 and green issues, but no one is requests are always approved. They say the benefits mandating it yet. exceed the costs, but they do not measure the benefits. It sounds like a blind commitment. Under what conditions would management change this decision? Money or resource issues will influence Risks: ISO 14000 and the documentation that it creates management to change their position on ISO certifica- could show noncompliance issues, but they said this a tion. They already have a formalized and standardized benefit because they want to know what their noncom- EMS system in place that works for them. Why bring in pliances are. The environmental manager reports to the the registrars just to get them certified if they are com- risk manager, who reports directly to the CEO. pliant with ISO 14000? It is costly to get registered

Center for Advanced Purchasing Studies 55 Firm G will not care if its competitors become ISO 14000 operations. Their EMS is currently on-line for all certified. They do not imitate their competitors. However, functions to access. if their customers dictate ISO 14000, they will speed up • ERM-related investments are justified using less the process and become ISO 14000 at all costs. They will restrictive cost/benefit thresholds. not dictate ISO 14000 certification to their suppliers • There is a very strong commitment to the environ- because many of them do not have the resources, but ment. This commitment is so strong that they they will encourage ISO 14000 compliance. sometimes do not measure the costs or the financial benefits. How do you measure performance in your department/area? The ISO 14000 certification process bene- fited them mostly because even though they previously ISO 14000 Status: Successfully Implemented had a formalized EMS system, they did not have documented targets. Because of ISO 14000, they have started Firm H to establish more key measures that were previously Goal — First U.S. Automotive OEM Facility to Obtain ISO overlooked. Energy consumption will be considered in 14000 Certification the future. This firm is a publicly owned and a Tier-I automotive For operations management: Safety, quality, production, supplier. This facility is owned by one of the Big Three morale, delivery, and noncompliance are critical perfor- and has approximately 1,200 employees at this facility. mance measures. For the environmental manager: There are only three people on the environmental staff. Service provided to various units is the major perfor- About 30 percent of sales are exports, no sales to mance metric. Most people set their own goals with Europe, and approximately 10 percent of sales is attrib- supervisors and are measured against these goals. At the utable to after market replacement parts. This facility is corporate level, the metrics consist of the performance both ISO 9000 and QS 9000 certified. The primary on the goals established with the supervisor, manage- products include hydraulic valve lifters for General ment plan, action plans, and goals. Motors’ engines. The major competitive thrusts in this industry are to sell to all OEMs and compete for the Summary repair parts percentage of after-market sales. Other com- • The ISO 14000 certification process started at this petitive thrusts include price and quality. Key success facility was influenced by their European firms. factors for meeting their competitive needs focus on Their plants in Europe were being pressured by teamwork. Typically, the entire workforce is involved in customers to pursue ISO 14000 certification. In the decisions and goals. U.S., some automotive OEMs have only verbally questioned suppliers about ISO 14000. This sup- What type of environmental system is in place? The ports the findings in Chapter 4 that foreign-owned EMS is patterned after the ISO 14000 standards. They firms positively influence the decision to obtain cer- have completed two audits to date and will complete tification. the third in November. Firm H plans on being ISO- • Formalizing their EMS and preparing for ISO 14000 certified in November 1998. 14000 certification was simplified because of the QS 9000 experiences. Their experiences with QS Firm H appears to have a very good understanding of 9000 helped them with ISO 14000; it kept their ISO 14000. There is an EMS system in place. This firm costs down. Benefits stress the importance of for- was the first Michigan plant given the Clean Corporate malizing processes. Citizen award. The award requires: The firm must have • When reducing their supply base, Firm G has eval- the policies and pollution prevention plans completed, a uated suppliers on environmental dimension. They “clean” environmental track record and no major fines believe green suppliers will be better long-term sup- in the last three years. The firm must also communicate pliers. This firm will not dictate ISO 14000 certifi- to the public the results of environmental efforts, and cation to their suppliers because many of them do make policies public. The EMS system helps show their not have the resources, but they will encourage ISO environmental consciousness. The environmental award 14000 compliance. was considered very good for public relations and posi- • Firm G benefits from having a strong corporate cul- tive company image. ture. The company has a long history of top management commitment to ERM. The manager of Environmental Systems is the environ- • Documentation is important to ensure that in the mental champion in charge of making ISO 14000 a real- absence of a key person, they can at least find a ity. The decision to pursue ISO certification was the paper trail, procedures, and policies to continue result of a corporate push, the plant manager, and the

56 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency agreement by staff to pursue it. There appears to be the How do you measure performance in your depart- presence of a green corporate culture. ment/area? Basically, there is a team-oriented approach. There are different groups involved: product line divi- What factors influenced this decision? They looked at sions, lifters (the part), manufacturing services, and the system, recorded and determined “what will this do support groups such as environmental and chemical for us,” and then looked at the cost savings involved. management. All groups are challenged to reduce Firm H did not want to get certified just for the sake of energy, costs, and waste. They hold monthly meetings “doing ISO.” Firm H also wanted to do it before cus- with plant staff and managers to give project updates. tomers asked for it (customers are not at this time). They are typically measured by meeting goals and the This could also be called European hedging. Finally, importance (size, scope) of the projects under way. An they want to be the first plant in North American GM example may be a goal of 10 percent reduction in waste. operations to get the certification. You are measured on how well you are doing in meeting that goal in a certain area or process. Under what conditions would management change this decision? Management would only change this The environmental department is also part of the plant decision if they found that it costs too much. engineering function. This makes it a little easier to find opportunities to save energy. The engineers can better What are the benefits you can see being generated by design processes with lower energy requirements. In this form of certification? Pollution prevention, and it 1997, this firm really started to push for environmental is believed that customers in time will demand it (espe- improvements. In 1996, they made a 29-percent reduc- cially in Europe). Other benefits include the employees tion in waste, and a 14.9-percent reduction in energy and the future (sustainable development will ensure (these numbers are volume adjusted). there will be an environment for our children and the employees). Additional benefits include better employ- The plant was built in 1946 and has had no serious ees; employee morale can increase productivity and the environmental problems. Since 1993, they have elimi- making of quality parts the first time. Finally, combining nated 11 waste streams. They now only have one waste ISO 9000 and ISO 14000 has helped. To do all of this, stream left to deal with. cooperation and support from top management has been a key factor in getting things done. Summary • Firm H wants a system that works and from which When Firm H told their employees that hazardous they can benefit financially. They looked at the sys- materials were going to be eliminated or substituted, tem and recorded what they have and what they the employees told them it couldn’t be done due to a need. Next they asked the question “what will this lack of speed, or quality. They found that eliminating do for us?” while considering the cost savings these materials led to a reduction in costs. They have involved. They are combining their ISO 9000 and been very successful in these types of projects. The ISO 14000 systems. manager interviewed has been in the environmental • They will have achieved ISO 14000 certification as field since 1973 and attributes much of their success to of November 1998. They also plan on using this never having a plant manager turn down an environ- certification in their sales literature. mental project. They have an environmental culture at • Benefits obtained from certification not only this firm. They like to see environmental projects as the include marketing, but also include improved qual- “right thing to do,” and it “saves money.” This manager ity of the products and reduced costs. has been able to sell projects based on both of these • The management saw a first-mover advantage in ideas. Firm H sees good public image as an important getting this form of certification. They wanted to issue. get certified before customers are asking for it (customers do not at this time but believe this will Costs: Certification. become more important in the future). • Top-management support is essential to successful What are the primary reasons for your firms to seek implementation and certification. ISO 14000 certification? Primarily, Firm H is looking • There is strong support for the belief that ISO for a system that works and benefits the firm financially. 14000 certification will help develop systems that, Additionally, this firm wants to be the first firm within in turn, will lead to pollution prevention. this OEM to get certified (all of the OEM’s facilities are • Environmental awards and ISO 14000 certification required to by 2002). Finally, there is the hedging that are considered important for good public relations. European customers will soon be demanding it.

Center for Advanced Purchasing Studies 57 Concluding Comments investigate alternative technologies). These benefits are too important to be overlooked. They reinforce After these eight cases are read, the natural concern that the statement made at the end of the last chapter — emerges is that of identifying their implications for man- namely, being clean does mean more green. agers and purchasing executives. The following are • In the preceding chapter, the results pointed to the some of the most important lessons that can be gleaned presence of certain distinct groupings or categories from these cases: as they pertained to the ISO 14000-certification decision. These categories, in turn, were used to • The information found within the case studies sup- drive the sample selection process used in selecting ports the findings obtained from the survey data, as the case studies used in this chapter. The findings reported in Chapter 3. That is, we find the man- demonstrated that these categories were indeed agers looking at the ISO 14000 certification stan- observed and that their behavior and decision-mak- dards with both a sense of concern and with an eye ing processes were different. This result should toward the relative costs and benefits. The first, the encourage the continued use of such multi-method sense of concern, reflects management’s awareness research methodologies. that the benefits offered by ISO 14000 certification • To date, the purchasing profession has played a rel- are both too uncertain and may be sufficient to off- atively minor role in the ISO 14000 certification set the costs incurred in obtaining such certifica- process. However, this process can and does present tion. The second, the relative assessments of the them with certain opportunities to improve both costs and benefits, confirms one of the major environmental and strategic performance not only premises on which this report is based — managers within the firm but also within the supply chain. will not view ISO 14000 in terms of social desirabil- The cases point out the need for purchasing profes- ity, but rather that they will see it as an economic sionals to take a more active role within the ISO decision. By viewing it as an economic decision, we 14000 certification process. They must start looking can better understand their perceptions of and atti- for and exploiting previously overlooked opportu- tudes toward environmentally conscious nities. ISO 14000-certification represents a growth manufacturing. in opportunities. • There are certain factors that appear to have a significant and major impact on the level of progress This last point is a critical one, because the audience for observed toward ISO 14000 certification. The most this report is the purchasing professional. However, important of these factors include foreign owner- what is needed is a more detailed examination and dis- ship; prior success with quality certification (either cussion of the potential implications of ISO 14000 certi- with ISO 9000 or QS 9000); past exposure to and fication for both the marketplace and the purchasing success with Total Quality Management (TQM) sys- profession. That is the major task of the next chapter. tems; and, the presence of a strong cross-functional approach. • The path between ISO 14000 certification and its impact on the effectiveness of environmental management systems and the impact of these systems on corporate performance consists of two phases. In the first phase, there is the decision to pursue ISO 14000 certification. The factors identified in the preceding point seem to have their greatest impact on this phase. In the second phase, there is impact of the ISO 14000 certification progress on both the performance of the environmental management system and the overall performance of the firm. • The benefits gained by pursuing and attaining ISO 14000 certification are both real and significant. They include reduced costs, improved quality, improved corporate position in the marketplace, enhanced reputation, improved design processes, enhanced ability to design and deliver “better” products, and a broadening of perspectives (that often manifests itself in the firm’s decision to

58 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Chapter 5 ISO 14000 and the Purchasing Professional: Uncovering the Major Lessons

Introduction Based on the analysis of both the survey data and the eight cases, the following responses can be made to each This study began by noting that the ISO 14000 environ- of these five questions. mental standards are a relatively new development in today’s environment. As a result, it is surrounded by a What Is the Status of Environmental Management great deal of uncertainty and questions. Furthermore, its Systems in Most American Plants, and How Are They emergence has raised a number of unresolved questions. Perceived by Management? This study was developed to shed more light on this new development and its impact on environmental and The data show that environmental management systems corporate performance. are essentially multi-dimensional and complex in nature. Their operations can affect various aspects of In this chapter, we return to the questions posed in corporate life and corporate performance, ranging from Chapter 1 and identify the key issues uncovered by this how the plant deals with the government and regula- study. We conclude the chapter by looking at the tions to how products and processes are designed and lessons that this study offers to the American manager, implemented. It can also affect the process by which the specifically the purchasing professional. various problems are identified and resolved.

For the most part, the respondents did not perceive Answering the Research Questions these systems in a positive light. Overall, the environmental management systems were seen as internally ori- This study was driven by a series of research questions: ented (i.e., focused on the plant and not the suppliers), separate, tactically oriented, and primarily reactive in 1. What is the status of environmental management nature. That is, these systems came into place once a systems in most American plants, and how are they problem had been identified (typically by a violation or perceived by management? fine). 2. What factors influence the predisposition toward ISO 14000 and progress toward achieving ISO The operation of the environmental management sys- 14000 certification? tems is perceived as adversely affecting the major strate- 3. To what extent do the respondents see a relation- gic foundations of competition. That is, dealing with ship between ISO 14000 registration and success environmental issues tends to increase lead times, and improved market, or corporate performance? increase costs, and reduce quality. As a result, these 4. How effective is ISO 14000 relative to the other findings describe a system that acts as a cost and a con- alternatives available for improving environmental straint, rather than a benefit and an opportunity for performance? improvement. 5. What options are available for firms interested in improving environmental performance, and to what extent are these options in practice?

Center for Advanced Purchasing Studies 59 What Factors Influence the Predisposition toward ISO Finally, for many of the respondents, a primary factor 14000 and Progress toward Achieving ISO 14000 affecting their orientation toward ISO 14000 certifica- Certification? tion involved the extent to which they saw the market- In this section, we will combine the answers to two place as demanding this form of certification. For most, questions, specifically questions 2 and 6. the incentive to pursue ISO 14000 certification was low because it was not seen as something that the market- While many factors have been cited as influencing the place wanted and was willing to pay for. predisposition toward ISO 14000 certification and the value of this certification, certain factors were identified To What Extent Do the Respondents See a as having a critical and significant (from a statistical per- Relationship between ISO 14000 Registration and spective) impact on predisposition and progress toward Success and Improved Market or Corporate attaining this new form of certification. These factors Performance? included: The findings on this question are clear. Even though the number of plants having attained ISO 14000 certifica- • Previous experiences with Total Quality tion is relatively small (37), the impact of this certifica- Management; tion on corporate performance is very clear and positive. • Past success with quality-based certification Except for lead time (which experienced a slight nega- processes, such as ISO 9000 or QS 9000; tive impact), ISO 14000 certification positively impacted • Previous experience with cross-functional teams the remaining 13 dimensions of performance. There was and management; a real benefit to attaining this level of certification. • Firm size; Furthermore, the level of benefits increased the closer • Nature of corporate ownership (foreign-owned the plant got to attaining this form of certification. plants are more likely to pursue and receive ISO 14000 certification); and, How Effective Is ISO 14000 Relative to the Other • Uncertainty concerning federal regulations, changes Alternatives Available for Improving Environmental in ISO 14000 standards, the costs of certification, Performance? the benefits of certification, and the impact of ISO In addition to ISO 14000, this study considered three 14000 certification on the current environmental other forms of environmental initiatives. These con- management systems. sisted of environmental initiatives undertaken by industry (e.g., the Responsible Care® program found in the These factors describe a situation where the respondents chemical industry), environmental initiatives sponsored saw ISO 14000 as an extension of the TQM movement. by the government (specifically the EPA in the United They also describe a situation in which the respondents States), and initiatives related to environmental affairs. recognized that success with ISO 14000 requires cross- These three alternatives can be described as being more functional teams and cooperation. There seems to be outcome/output oriented when compared to ISO 14000. recognition that succeeding with ISO 14000 requires more than simply introducing a new program or creat- In comparing these alternatives to ISO 14000, the study ing a new department. Rather, ISO 14000 is an under- found that the results reported for those plants that had taking that requires the participation of multiple parties achieved ISO 14000 certification were better than those working together. reported for the other three alternatives under similar conditions. This finding seems to argue (for reasons to Predisposition toward and progress on attaining ISO be pointed out later in this chapter) that there is some- 14000 certification has also been influenced in a signifi- thing about the approach being taken in achieving ISO cant manner by uncertainties. These uncertainties can 14000 certification that accounts for this improvement be broken into two categories. The first consists of in results. uncertainty due to the government and regulations. The second consists of implementation concerns. What Options Are Available for Firms Interested in While plant personnel (remember that the unit of Improving Environmental Performance, and to What analysis was the plant) can do little about the first cate- Extent Are These Options in Practice? gory of uncertainty, they can address the second cate- The study identified 16 different options available to the gory. This category, to a large extent, reflects uncer- plant interested in improving environmental perfor- tainty attributable to the “newness” of this standard. mance. The respondents regularly considered all Addressing this second category requires the collection options. It was interesting and gratifying to note that the of data and the distribution of any results gained from respondents did not take advantage as frequently of the analysis of this data. those options that carried with them negative connotations. These options included the relocation of plants

60 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency and processes to areas where the environmental regula- feel pressed to justify their investments. Even if the cer- tions were less stringent. tification was not successful, it would be presented as such. No one wants to admit that they have failed (even when they have). The research team tends to dismiss these two explanations based on the findings reported Identifying the Lessons of ISO 14000 in Chapter 3. for the Purchasing Professional The third explanation is that the awareness of the benefits has taken place after the certification has been com- When taken as a whole, this study offers some impor- pleted. Up to this point, everyone is involved in getting tant lessons for the purchasing professional. To facilitate the plant certified. Once it has been certified and they the presentation of these lessons, we will use a format in have a chance to take stock of the impact, these respon- which these critical lessons will be discussed in sections. dents found that the certification itself has created a set In each section, the section heading will contain the les- of important benefits for the plant. son, and the text body will discuss the implications. In addition, the text body for each section will present, The final explanation, and one supported by the mem- where appropriate, any cautions to these findings. bers of the research team, is that these benefits are a nat- Finally, this section will draw on insights obtained from ural result of the approach taken by the ISO 14000 cer- different sources in expanding on the various lessons tification process. As noted in Chapter 2, ISO 14000 dif- and their implications for purchasing. fers from the three other approaches to improved environmental performance. It focuses on the processes Achieving ISO 14000 Certification Does Enhance (rather than the outcomes), and it emphasizes a proac- Corporate Performance tive rather than reactive mode of dealing with environ- This study began by asking the question, “Is ISO 14000 mental problems. It is this process orientation that not certification worth the time and effort?” While not only accounts for the differences, but which is also the being able to identify the resources devoted to the vari- source of these observed improvements. ous activities required for ISO 14000 certification, the benefits reported in this study indicate that the firms do By studying environmental problems from a realize actual benefits as they move from stage to stage system/process perspective, managers begin to see that in the certification process. These reported benefits are pollution is the problem to be attacked. It is a “resid- highest for those plants that have successfully been ual,” a symptom, an indication that something is going certified. wrong somewhere in the process. In many cases, pollution is the most visible but not the only indication that It has been assumed that there is a real trade-off between we are encountering problems. By documenting and being more environmentally responsible and corporate studying the underlying processes, managers are able performance. That is, being more environmentally not only to reduce pollution but also to improve other responsible does come at a cost. The cost is one of aspects of performance. It is this process perspective increased lead time, increased cost, and decreased qual- that fosters the presence of simultaneity (reducing pol- ity. These costs are critical to the firm for the elements lution while also simultaneously reducing costs and that they involve form the strategic basis on which the improving quality). firm competes (Melnyk & Denzler, 1996). However, except for lead times, this trade-off was not observed for As previously noted, this argument explains the those plants that had achieved ISO 14000 certification. observed reductions in cost and improvements in quality. It does not, however, explain the slight adverse Before accepting this finding, we must first challenge it. impact on lead times. One possible speculation about We must see if there are other possible explanations for this result is that it may reflect learning with the process this observed result. perspective. It takes time for managers to learn how to study processes and how to uncover the underlying These results in favor of the positive impact of ISO sources of problems. It can be expected that this learn- 14000 certification on overall performance could be due ing process will improve in performance over time. to one of four factors. The first is that the plants that Again, we must remember that the ISO 14000 process is were first certified were ones that were already leaders relatively new; it has only been formally accepted in late in environmental performance. The second is that what 1996. we are observing is a situation where those who have pursued certification and who have invested the time, For the purchasing manager, the process perspective resources and effort required by this certification process fostered by the ISO 14000 environmental standards is

Center for Advanced Purchasing Studies 61 very important. The same approach that is used to certified. Such suppliers should be able to compete reduce pollution can also be used to uncover the source effectively with suppliers that are not ISO 14000 certi- of lost material productivity and waste. This approach fied (especially in light of the observations discussed in offers the purchasing professional two major advan- the preceding point). In addition, such suppliers should tages. The first is a better product or service (as charac- have better and more complete mastery of their own terized in terms of cost and quality). The second is that internal processes. They should not be sources of vari- the firm has fewer worries about using a product or ser- ances and waste for our internal factories. Second, the vice that contributes to pollution or waste. This may purchasing manager must now think in terms of the result in fewer potential legal problems, better reputa- entire supply chain (this point will be discussed in tion, and, ultimately, a better supplier. This again is greater detail later in this chapter). Third, the purchas- related to the concept of total cost of ownership. ing professional must think in terms of facilitating the Purchasing must for now evaluate the entire business integration of environmental management activities process for key suppliers. This is especially important between the internal and external factories. when considering relationships such as partnerships and alliances. Purchasing must find suppliers who can This last point is not new. It is a restatement of a lesson effectively manage their internal processes, including that purchasing professionals have learned from past actions such as hazmat disposal, recycling, and source undertakings that involved TQM, Just-in-Time, and reduction. ISO 14000 is, therefore, an excellent indica- integrated product design. From these endeavors, pur- tor that the supplier has documented formal processes chasers have learned to view suppliers not only as and has established baseline metrics in these areas, and providers of goods and services but also as sources of is more likely to control costs effectively in these areas. expertise, knowledge and problem-solving capabilities. As we have learned to draw on the expertise of our sup- ISO 14000 Certification Is Viewed as an Internal pliers to help the internal factory improve quality, Factory Affair. reduce cost and reduce lead time, we can now think of In the past, we have separated manufacturing/produc- drawing in suppliers for the purposes of identifying and tion concerns from concerns involving suppliers and reducing pollution. supply chain management by differentiating between the internal and external factories. The term “internal View the ISO 14000 Certification Decision As a factory” has been used to refer to the firm’s own manu- Business Decision facturing system (the system found within the four If there is one lesson that is repeatedly echoed by the walls of the plant). In contrast, the term “external fac- results of this study, it is that the decision to pursue ISO tory” has been used to refer to the supplier base. Using 14000 certification is ultimately based on economic this set of terms, we can best characterize the ISO 14000 considerations. For the most part, the costs associated certification process as an affair of the internal factory. with ISO 14000 certification are relatively easy to quan- What this means is that the implications of ISO 14000 tify. They are also fairly significant. In many situations, for the supply chain have been virtually overlooked. these costs, combined with uncertainty over the exact size and nature of the benefits to be gained by ISO Increasingly, purchasing managers are recognizing the 14000 certification, form a barrier to the increased interdependencies linking the internal and external fac- acceptance and achievement of ISO 14000 certification. tories. The ability of the internal factory to become more environmentally responsible while also simultane- To a certain extent, the firms that the researchers stud- ously improving quality and reducing cost is ultimately ied that have achieved ISO 14000 certification can be dependent on the activities and processes found within regarded as either innovators or early adopters. These the supply base. As we have learned from past experi- two categories are drawn from the model of technologi- ences with TQM and Just-in-Time systems, as we elimi- cal adoption and diffusion first developed and proposed nate or reduce waste and variance from within our by Moore (1991) for the American software industry. internal systems, we become very sensitive to the waste This model, initially developed to explain product suc- and variances coming from our supply base. cess and failure within the software industry, can be readily adapted to explain user acceptance of a new In short, it can be argued, that for the full benefits of environmental certification standard such as ISO 14000. ISO 14000 certification to be realized, we must be able to manage and control both the internal and external In this framework, all the potential users and adopters factories. For the purchasing professional, this realiza- of any new technology can be broken up and assigned tion brings with it several important implications. First, to one of five categories: innovators, early adopters, the purchasing manager may now have to think in early majority, late majority, or laggards. Innovators are terms of requiring that certain suppliers be ISO 14000 the smallest group. These users are the first to accept

62 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency and implement ECM systems. Often, the reason for this benefits in changing. They had to be forced to change. decision is not based on an economic analysis or justifi- These compelling reasons came in the form of legal or cation. Rather, it is based on considerations such as the regulatory changes. As a result, these users introduced social desirability of the action. For the managers of one ECM-driven changes because they were forced to. They firm, the decision to become more environmentally only introduced the minimum level of change. For these responsible was based on the view that “it was the right users, ECM was now and will also be a constraint. They thing to do.” The managers recognize that these new could never be convinced that ECM offered a com- systems could improve the performance of the firm. pelling and verifiable set of benefits. However, they were willing to proceed without first having proof of the benefits. Separating these five groups was a series of gaps. For a development to gain wide-scale acceptance, it had to The second group, early adopters, was larger in number. cross each of these gaps. Of the four gaps, the most crit- Managers in these firms had done an analysis of the rel- ical was that one separating the early adopters from the ative costs and benefits. While they were aware of the early majority. As defined by Moore, this was the benefits, there was often no quantitative proof of their “chasm” that most innovations failed to cross. This gap existence. Rather, there was an expectation (often rather was also noted in the companies studied. Specifically, strong) of the presence of these benefits. The managers the difference between the two groups could be best were willing to make the investments necessary to attain seen in this chasm. For the early adopters, the firms these benefits. In other words, they were willing to take were working on the assumption that ECM was good risks. for the firm. They were also willing to invest in a broader set of environmental options. Finally, they were Early majority users were willing to consider ECM. interested in the active development of a wider set of However, they were much more risk adverse. They metrics. The reason is that they wanted to identify the wanted to see verifiable, quantitative evidence of the impact of ECM-initiated programs and to monitor the presence of these benefits before they would make the impact of these initiatives. required investments. They also wanted to see systems that did not extensively change the current systems or In contrast, the early majority users tended to be more affect the “way” that activities were carried out. These conservative in their approach. They were more inter- users can be viewed as highly practical. Unless it was ested in the cost impact of any ECM-based initiative. shown otherwise, they initially tended to view new Their metrics were more cost-based and were often developments such as ECM as fads. Because many of based on the EPA measures. They also tended to con- the fads typically do not pan out, these users tended to sider a more limited set of ECM-options. For example, take a “wait and see” attitude. That is, they were willing they were interested in options such as recycling and to let others (typically the early adopters) take the risks. reducing the use of pollution-causing material. Also, These early majority users would evaluate the experi- they experienced more difficulties in dealing with the ences of the others and, if the returns were adequate, various trade-offs inherent in the ECM decision-making follow suit. In many cases, these users had to be pre- process. When implementing ECM-based options, their sented with a strong, compelling reason to change. This approach was also very conservative. They tended to compelling reason to change took one of three forms: implement proven approaches and technology. They also picked those options that fit well with existing pro- • A reduction in costs (direct or overhead); cedures and systems. • Enabling a previously unavailable strategic capability that provides a dramatic competitive advantage It is here that we saw a major problem facing the pur- in an area of prime operational focus; or, chasing profession. On one hand, there are real benefits • Improving productivity on a well-understood criti- to be gained by attaining ISO 14000 certification (espe- cal success factor. cially in the firm’s supplier base). However, this decision can now be expected to be based on economic consider- The fourth group, the late majority, was very similar to ations and evaluations. In other words, the supplier the early majority, except in one respect. They tended to must have a strong, compelling reason for undertaking be less comfortable with the new innovations and the process of becoming ISO 14000 certified. Since it changes being proposed. As a result, they tended to be can be expected that most of the innovators and early more hesitant. They needed stronger proof of the advan- majority adapters have now made the move to pursue tages offered by ECM systems. this form of certification, the type of suppliers still potentially interested in attaining ISO 14000 certifica- The final group, laggards, was the most resistant to tion can be expected to belong to the “early majority” change. These firms and users tended to see no real category.

Center for Advanced Purchasing Studies 63 If these suppliers are to make the move toward ISO This change has required managers to consider the 14000 certification, then they need to be presented with impact of decisions made within their firms’ supply evidence. This evidence must be quantitative, and it chains on their own systems’ performance (as well as must enable the supplier to effectively assess the differ- the impact of their decisions on their suppliers). In ence between the cost of pursuing this type of certifica- addition, this change has meant that managers must tion and the benefits gained from attaining it. For the consider these impacts beyond the first-tier suppliers. most part, such information is both lacking and very Ultimately, this has meant thinking in terms of the needed. entire supply chain.

Encouraging Acceptance of ISO 14000 Certification When dealing with the ISO 14000 certification decision, Requires Reducing Uncertainty it is not appropriate to view this as an internal corporate In Chapter 3, this study showed that uncertainty was a matter. This decision, if taken internally, will eventually major obstacle to a plant’s decision either to pursue ISO affect how suppliers are selected, managed, and evalu- 14000 certification or to effectively evaluate this deci- ated. Friction can be increasingly expected to be reduced sion. One way of encouraging greater interest in this if an ISO 14000 certified firm also works with customers new environmental certification standard is to reduce and suppliers that are somehow involved in attaining these sources of uncertainty. Those sources attributable this same type of certification. This decision can also to the government (federal, state, local, international) affect the types of measures used to evaluate supplier are ones about which the purchasing professional can performance. In all of these changes, we can expect to do little. However, the other forms of uncertainty, with see a greater role for the purchasing professional. special emphasis on the costs of certification, the benefits from certification, and the type of changes to the Regard ISO 14000 as an Opportunity, Not a Problem current environmental systems needed to meet the new or a Constraint standards, are ones that can be influenced by the pur- As shown in Chapter 3, there are definite costs and ben- chasing manager. Reducing these sources of uncertainty efits associated with the decision to pursue ISO 14000 requires the collection of more data and the distribution certification. However, what ISO 14000 certification of the results gained from the collection of such data. forces plants to do is to recognize the real costs of pollu- These data can be gained from numerous sources, tion problems. In the past, pollution problems have including further surveys and detailed case studies. tended to remain largely hidden because they were typically included as part of overhead. When included in Such information is needed before we can come to any overhead, pollution lacked any visibility. It was some- stronger position and conclusion on this new approach thing that occurred but no one was responsible for it. to improved environmental management. With data on pollution more visible, attention and awareness can occur. View ISO 14000 as a Supply Chain Issue As previously noted in this chapter, current attention Pollution is a type of defect, an indicator (symptom) involving ISO 14000 has treated this decision as a mat- that something went wrong in the system. Management ter for the internal factory. However, such a perspective can respond in one of three ways to this symptom. It is not in line with the current views and practices per- can ignore it, it can cope with it (do enough to reduce taining to the transformation process. In the past, every the size of the symptom), or it can eliminate it. The firm and plant was expected to develop and manage its most effective stance is the last elimination. own transformation process. This process would contain all of the resources and skill sets needed to design, In addition, the process of attaining ISO 14000 certifica- build, and deliver its products. Under this approach, tion forces the people involved to examine and docu- suppliers were expected to act as providers of raw mate- ment the various processes involved in their plants’ rial or as alternative sources of capacity (i.e., outsourc- environmental management systems. This gives them ing). We now recognize that such an approach is ulti- the opportunity of identifying what is right and wrong mately too costly and too slow. It has less relevance in a with these processes. It also gives them the opportunity market where customers want more and better products to correct problems in these processes–problems delivered faster and at lower costs. To compete in this previously overlooked. new environment, firms and plants have now come to rely increasingly on the skills and capabilities of the In short, with ISO 14000, management now has the suppliers that form the firm/plant’s supply chain. As a opportunity to understand their environmental manage- result, the new transformation process is a seamless ment systems, to learn what is taking place with envi- marriage of the capabilities and capacities of the firm ronmental problems and to correct the problems. ISO with those of its suppliers. 14000 offers a potential chance to improve.

64 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Environmental Issues Should Be Integrated into the emissions and regulated limits placed on it by the gov- Three Major Activities of Every Plant and Firm ernment). This balance between demand and capacity is For the most part, ISO 14000 deals with the environ- maintained by either changing the demand or altering mental management system. This system, while impor- capacity. tant, is primarily a support activity. In this regard, the EMS is similar to systems such as accounting, human The Performance Measurement/Feedback System: The resource management, or facilities management. These third major activity is that of performance measure- systems exist to support the activities and operations of ment. This activity fulfills several critical needs within the core activities, which generate the products and ser- the firm. First of all, it is an important and integral ele- vices in the marketplace and which generate the revenue ment of the feedback system. It identifies what must be streams required by the firm for its growth and survival. done and provides users with a yardstick indicating how In most firms, these core activities are found within three they have performed on the measured dimensions. It systems: (1) design; (2) planning/scheduling/execution; shows users where their performance is acceptable and and, (3) performance measurement/feedback. where improvement is needed.

The Design System: This system is responsible for two Second, it describes in very operational terms what the major types of design activities: (1) new product design firm and its employees must do well for the firm to suc- and development; and, (2) process design and develop- ceed. By measuring an activity in quantitative terms and ment. Both products and processes, while separate, are reporting this performance back to the responsible peo- closely interrelated and greatly influence each other. ple, we focus attention on certain things. We also Both aspects must be considered to ensure that the firm implicitly tell the employees what they do not really has developed and implemented effective and efficient have to worry about. This focusing of attention is criti- designs and processes. These two design activities, when cal for it is the means by which the firm and its manage- combined, determine and shape the transformation pro- ment communicate in very real terms the expectations cess. They determine the types of inputs required and and the critical tasks of the firm. As Oliver Wight, a the types of outputs created. Some of these outputs are famous manufacturing consultant, once commented desired (e.g., cars built) while others, such as pollution, about the importance of performance measurement, are undesired. For example, Fabrycky (1987) estimated “You get what you inspect, not what you expect.” that up to 85 percent of the life-cycle costs are commit- Performance measurement can provide a mechanism for ted by the end of the preliminary design stages. In linking and integrating the three core activities of the another study, Ulrich and Pearson (1993) found from a typical manufacturing firm. field research study that at least 50 percent of the costs (for a class of mature products) are design determined In many firms, ECM is typically a process that runs in and that up to 70 percent of costs are affected by manu- parallel with these three core activities. It only interacts facturing process decisions. with these activities during periodic checks. During these checks, managers from these core activities work The Planning/Scheduling/Execution System: The next with managers from the EMS to make sure that their major set of activities that take place within the firm actions have not violated an environmental constraint or consists of Planning, Scheduling, and Execution. The requirement. Under this approach, the EMS and any three terms describe the three major activities needed to associated developments, such as ISO 14000, will tend go from broad-based plans that reflect corporate objec- to be seen as constraints or costs. tives to focused operational planning and, ultimately, to the detailed execution of these plans either on the shop For this situation to be avoided, the EMS must become floor (i.e., within the internal factory) or in our suppli- integrated in some form with these core activities. What ers (i.e., within the external factory). This set of activi- this statement means for ISO 14000 is that this form of ties consistently tries to balance demand against capac- certification must become a corporate initiative (some- ity. The demand comes not only from customers (in the thing that is done to improve the competitive position form of orders, either planned or actual) but also from of the firm), rather than an environmental initiative. stakeholders such as the government, stockholders, and top management. The capacity discussed here is more In addition, by integrating ECM issues into these three than simply manufacturing capacity (consisting of activities, we now have a greater opportunity to close equipment, tooling, and labor capacity) but also the gap among those areas where the pollution prob- includes information and environmental capacity. This lems are identified (typically in the planning/schedul- latter capacity includes storage facilities for waste (either ing/execution system), the areas where the pollution in-process or disposal) and limits on emissions (as in problems are ultimately created (typically the product the case of Volatile Organic Compound [VOC] and process design decisions) and those areas charged

Center for Advanced Purchasing Studies 65 with resolving the pollution problem (the EMS depart- same sets of tools and procedures. In many cases, the ment). This gap exists for several reasons. First, there is same tools that are used in TQM systems or by plants a time gap between the moment that those design deci- pursuing ISO 9000 certification are also found in plants sions (ultimately responsible for the pollution problem) seeking ISO 14000 certification. All three developments are made and the time that these problems become evi- encourage a continuous approach to the challenge of dent in the execution system. There is also a gap waste identification and elimination. between those groups charged with correcting the pollution on the floor (typically the EMS department) and As a result, it can be argued that those plants that have those groups that can eliminate the problems (typically previously dealt with TQM or ISO 9000 are in a better the designers). Finally, there is a data gap. The activities position to successfully attain ISO 14000 certification. that ultimately create the pollution problems are largely The personnel in these plants have been exposed to the unaware of these problems because they are not given structure required by ISO 14000; they understand what the data. The activities faced with the pollution prob- is required. Further, these plants can use their TQM sys- lems are too busy trying to correct these problems in the tems and ISO 9000 certification experiences as a foun- short term. As a result, we have a system where every- dation on which to build their ISO 14000 certification one is correcting pollution problems, but no one is activities. They are further along the learning curve rela- really effectively eliminating them. tive to other plants without the same background.

What is needed here is recognition of the need to bring For the purchasing professional, the implications of this together representatives from the areas where the pollu- discussion are fairly clear. If ISO 14000 certification is tion problem is created, the areas where it is identified, seen as being an important trait of any desirable sup- and the areas charged for correcting these problems. plier, then when evaluating those suppliers yet to be The interaction among these three areas should con- certified, it makes sense to focus on those suppliers that tribute to the reduction or elimination of the pollution have had successful experience with TQM and one of problem. ISO 14000 certification offers one mechanism the various quality-certification standards. Such suppli- for focusing on these intersection opportunities. The ers are more likely to accept the potential value offered reason is that the process of attaining this certification by ISO 14000. They are also better prepared to attain forces plants to collect data on pollution problems (thus this form of certification. As a result, their probabilities creating awareness through data). It also forces manage- of becoming certified are relatively high, as compared to ment to implement processes focused on the disposal of those suppliers that lack one or more of these quality- these problems. These actions create conditions that related attributes. In the future, we realize that ISO encourage an interest in these opportunities. They also 14000 will be a requirement for doing business in the create a demand for the involvement of people that can next millennium, which will have implications for manage the interactions among different groups (skills global supplier development. In order for suppliers to often found in the purchasing professional). have global support capabilities, they will need to be able to meet local regulations wherever they are doing Recognize the Relationships That Exist among TQM, business. More and more countries are adopting ISO ISO 9000, and ISO 14000 14000 as the international standard for doing business. One lesson that became very evident from this study Examples include the UK, Indonesia, Japan, and Korea. was the strong relationship that exists among TQM, ISO Purchasing must take the initiative and integrate ISO 9000 and ISO 14000. This relationship has been argued 14000 into supplier evaluation and certification systems in the literature pertaining to these three developments. early, to avoid having to “react” to this change. However, for the most part, it has been presented as a hypothesized relationship. In this study, we see empiri- More Longitudinal and International Studies of ISO cal support for this relationship. Furthermore, the find- 14000 Impacts Are Needed ings of this study in this respect corroborate the findings While the results reported in this report are fairly reported by Curkovic (1998). Curkovic also used a sur- promising, we must recognize that, in spite of the rela- vey sample to examine the extent to which ECM sys- tively large sample, there were very few plants that had tems paralleled in their structure and content TQM achieved ISO 14000 certification. Out of the sample of systems. 1,510, only 37 had been certified. This number consti- tutes a small sample. In addition, this sample is drawn To a large extent, we should have expected to see sup- from a specific time period (1997). As a result, this port for this relationship. All three developments have a study raises some interesting, yet unresolved, questions. similar focus — the identification and elimination of For example, will the results of this research be sup- waste from the processes. All three are process based ported by the experiences of other plants? What will and oriented. More importantly, all three use nearly the happen to the relationship between ISO 14000

66 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency certification, perceived EMS effectiveness, and corporate environmental performance but also corporate perfor- performance over time? To address these and other sim- mance. The evidence also indicates that this standard ilar questions, more research into the experiences of does outperform many of the popular alternative firms with ISO 14000 is needed. This research can take approaches available for enhancing environmental per- multiple forms (mail surveys, telephone surveys, formance. The evidence also shows that the movement detailed case studies). It should focus on broadening the toward ISO 14000 certification is strongest in those range of firms and industries included. It should look at firms that have previously been certified in quality the experiences of plants that have attained ISO 14000 (using ISO 9000 or one of its variants, such as QS 9000) over time. By studying these experiences over time, we and have positive experience with TQM and cross-func- can better assess the “staying” power of ISO 14000 (i.e., tional management. Finally, the evidence also indicates the extent to which the benefits are persistent). Finally, that, for many implementers, ISO 14000 certification this research should broaden the scope to include not has been something that has been applied to their only American plants but also plants internationally. By plants. The supply chain implementations of this stan- comparing the experiences of American plants with dard have not been extensively explored or exploited. those plants located in countries such as Canada, Japan, South Korea, or Germany (to a name a few), we can In summary, this study has reported on the early returns begin to assess the success of American managers in on the ISO 14000 environmental standard. The findings exploiting the capabilities and improvements potentially are promising. For the purchasing professional, they offered by the ISO 14000 environmental standard. indicate that ISO 14000 certification may offer another means of differentiating the “best” suppliers from the There is another important advantage of carrying out rest. Given the increasing importance of the supply more research on this topic. As previously noted, we are chain, ISO 14000 may offer the purchasing professional now dealing with managers that can be best described another opportunity for improving corporate perfor- as “early majority.” For these managers, compelling, mance by enhancing performance within the supply quantitative evidence is needed. Such studies offer a chain. means of collecting evidence. The evidence will provide a compelling reason for the plant whether to pursue ISO In short, this study shows that there is something more 14000 certification. It will also provide purchasing pro- than hype about the ISO 14000 environmental stan- fessionals with more information with which to assess dards. The early results are in and the evidence, while the potential benefits and costs generated by such a not complete, indicates that ISO 14000 certification standard. This information, in turn, can potentially does work. It does achieve the twin objectives of influence such activities as supplier selection, supplier reduced pollution and improved corporate performance. development, and supplier evaluation.

Concluding Comments

The ISO 14000 environmental standard is a relatively new development. It deals with a dimension of corporate performance that has been largely overlooked within most firms — enhancement of environmental performance. This new standard has emerged for a number of reasons. However, underlying its emergence is the assumption that improved environmental performance will ultimately enhance corporate performance. Being a relatively new development, it is surrounded by a number of unresolved issues and questions. This study has attempted to resolve some of these issues and questions and to provide a greater understanding of both the ISO 14000 certification standard and its potential impact on the firm.

What this study has found is that, while there are relatively few American firms that have successfully attained ISO 14000 certification, there is evidence to indicate that this certification not only improves

Center for Advanced Purchasing Studies 67 References

Cascio, Joe. (1994). International Environmental Makower, J. (1993). The Bottom Line Approach to Management Standards. ASTM Standardization Environmentally Responsible Business. New York, News, April, p. 44-48. NY: Times Books. Cook, T.D., and Campbell, D.T. (1979). Quasi- Makower, J. (1994). Beyond the Bottom Line. New York, Experimentation - Design and Analysis Issues for NY: Simon & Schuster. Field Settings. Boston, MA: Houghton-Mifflin. McCutcheon, D.M., and Meridith, J.R. (1993). Curkovic, Sime. (1998). The Link Between Total Quality “Conducting Case Study Research in Operations Management and Environmentally Responsible Management.” Journal of Operations Management, Manufacturing. Doctoral Dissertation, Michigan 11 (3), 239-256. State University. Melnyk, S.A., and Denzler, D.R. (1996). Operations Eisenhardt, K.M. (1989). “Building Theories from Case Management: A Value Driven Perspective. Burr Ridge, Study Research.” The Academy of Management IL: Irwin-McGraw-Hill. Review 14 (4), 532-550. Miles, M.B., and Huberman, A.M. (1994). Qualitative Fabrycky, W.J. (1987). “Designing for the Life Cycle.” Data Analysis: A Sourcebook of New Methods. Mechanical Engineering, January. Newbury Park, CA: Sage Publications. Glasser, B.G., & Strauss, A.L. (1967). The Discovery Of Moore, G.A. (1991). Crossing the Chasm. New York, NY: Grounded Theory: Strategies for Qualitative Research. Harper Business. Chicago, IL: Aldine. Porter, M.E. (1991). America’s Greening Strategy, Hamner, Burt. (1996). “Pollution Prevention: The Cost Scientific American, 264, (4): 168. Effective Approach Towards ISO 14000 Porter, M.E., and Van der Linde, C. (1995). “Green and Compliance,” Environmentally Conscious Design and Competitive — Ending the Statement,” Harvard Manufacturing List-Server, University of Toronto, Business Review, September-October, pp. 120-134. March 20. Porter, M.E., and Van der Linde, C. (1995). “Toward a Imai, Masaaki. (1986). Kaizen, the Key to Japan’s New Concept of the Environment-Competitive Competitive Success. New York: McGraw Hill. Relationship,” Journal of Economic Perspectives, Vol. Klassen, R.D. (1995). The Implications of Environmental 9, No. 4 (Fall), pp. 97-118. Management Strategy for Manufacturing Rondinelli, Dennis A., and Vastag, Gyula. (1996). Performance. Doctoral Dissertation, University of International Environmental Standards and North Carolina at Chapel Hill. Corporate Policies: An Integrative Framework. Klassen, R.D, and Whybark, D.C. (1995). Plant-level California Management Review, 39, (1):106-122. Choices of Environmental Technologies: The Rondinelli, Dennis A., and Vastag, Gyula. (1998). Influence of Environmental Strategy. Working Paper Private Investment and Environmental Protection: no. 96-01, Western Business School, the University Alcoa-Kofem’s Strategy in Hungary. European of Western Ontario. Management Journal, July-August.

68 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Rondinelli, D. A., Berry, M. A., and Vastag, G. (1997). Strategic Programming for Environmental Management: Sonoco’s Take-Back Policy. Business Horizons, vol. 40, no. 3, 23-32. Sayre, Don. (1996). Inside ISO 14000: The Competitive Advantage of Environmental Management. Delray Beach, Florida: St. Lucie Press. Smith, R.T., and Melnyk, S.A. (1996). Green Manufacturing. Dearborn, MI: Society for Manufacturing Engineering. Tibor, Tom, with Ira Feldman. (1996). ISO 14000: A Guide to the New Environmental Management Standards. Burr Ridge, IL: Irwin Professional Publishing. Walley, N., and Whitehead, B. (1994). “It’s Not Easy Being Green.” Harvard Business Review. May-June, pp. 46-52. Wheeler, D. and Afsah, S. (1996). Going Public on Polluters: Indonesia’s New Program. Asian Executive Reports, 18, (9): 9. Ulrich, K.T., and Peason, S.A. (1993). “Does Product Design Determine 80% of Manufacturing Cost?” MIT Sloan School Working Papers. Yin, R.K. (1994). Case Study Research: Design and Methods. Thousand Oaks, CA: Sage Publications.

Center for Advanced Purchasing Studies 69 I APPENDIX Appendix I: Survey Instrument

Dear : This letter is to request your participation in a survey regarding the acceptance of the new ISO 14000 certification program being introduced both here in the United States and in the rest of the world. This is a relatively new program which attempts to build on the successful ISO 9000/QS 9000 certification programs in quality. However, since it is relatively new, there is a great deal of confusion surrounding it. This survey, supported by several professional societies such as the National Association of Purchasing Management (NAPM), and the American Production and Inventory Control Society (APICS), is intended to identify how managers such as yourself view this new certification program and to determine the degree to which this program has been accepted. Given the potential importance of this topic and the great deal of interest being shown in it, your participation in this project would not only be helpful but also of great concern to other managers in your field. It is expected that by participating, you will gain insight into your potential implementation of ISO 14000.

Accompanying this letter, you will find a survey. In testing this questionnaire, we have found that managers typically invested less than an hour’s worth of time in completing it. However, they noted that it was a relatively enjoy- able and very informative exercise.

All individual responses will be kept strictly confidential. The responses, when used, will be reported in a summarized benchmarking type of report. This report will allow you to benchmark your firm by industry and against best practice. If you would like a copy of this report, you can fill in a request form found at the end of the survey or just attach a business card to the front cover of the questionnaire. The report will be then sent to you upon completion of the study.

If you have any questions about the survey, please contact one of the project research assistants, Frank Montabon, Sime Curkovic, or Robert Sroufe. They can be reached by phone (517-353-6381), by fax (517-432-1112) or by e-mail ([email protected] for Frank, [email protected] for Sime, [email protected] for Robert).

Sincerely,

Roger Calantone Rob Handfield Steven A. Melnyk Lal Tummala Professor of Professor of Professor of Professor of Marketing Supply Chain Operations Engineering Management Management

enc.: Letters of Support ISO 14000 Survey Questionnaire

70 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I ISO 14000 Certification System Project The Eli Broad Graduate School of Management Michigan State University East Lansing, Michigan

QUESTIONNAIRE ISO 14000 CERTIFICATION STUDY

General Instructions and Information

Thank you for agreeing to take part in this study of the ISO 14000 Certification system. On the questionnaire attached...

• All individual responses will be kept strictly confidential.

• Please note that we are interested in your responses to each question. There are no right or wrong answers.

• Please try to answer every question, even though you may not be 100% sure of your answer. An approximate answer is better than no answer, since incomplete questionnaires create serious analysis problems. If appropriate, please seek information from colleagues who have access to more accurate information.

• Please read definitions and explanations carefully because they are critical to your ability to answer each question.

If you have any questions/problems, please feel free to contact one of the project research assistants:

Frank Montabon Sime Curkovic Robert Sroufe Department of Marketing and Department of Marketing and Department of Marketing and Supply Chain Management Supply Chain Management Supply Chain Management Michigan State University Michigan State University Michigan State University (517) 353-6381 (517) 353-6381 (517) 353-6381 FAX: (517) 432-1112 FAX: (517) 432-1112 FAX: (517) 432-1112 e-mail: [email protected] e-mail: [email protected] e-mail: [email protected]

Thank you again.

Center for Advanced Purchasing Studies 71 I APPENDIX SECTION I — GENERAL DESCRIPTION OF POSITION OF RESPONDENT

Please read carefully The terms “Company” or “your company” are used throughout. These terms mean company, division, or business unit. If you are a divisionalized or decentralized firm, with divisions or units operating fairly independently, substitute “division” or “business unit” for “Company” as appropriate. In this first section, our interest is obtaining some general descriptive information about you and your position within the company.

1. What is your job title? ______

2. Number of years in current position? (✔ one box only) Less than 1 Year 1-3 Years 3-5 Years 5-10 Years Greater than 10 years

3. Are you a member of... (✔ all appropriate boxes) American Production and Inventory Control Society (APICS) American Society for Quality Control (ASQC) Association for Manufacturing Excellence (AME) Council for Logistics Management (CLM) Institute for Management Accounting (IMA) National Association of Purchasing Management (NAPM) Society for Manufacturing Engineering (SME) Society of Automotive Engineering (SAE) Other - Please describe: ______

4. Is your company involved currently, or in the past, in the following program implementations? (✔ check all boxes that are appropriate)

Just-in-Time Manufacturing (JIT) Total Quality Management (TQM) Simultaneous Engineering/Concurrent Design Business Process Reengineering/Redesign Environmental Management System (EMS) Lead Time Reduction Program ISO 9000/QS 9000 Certification

72 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I Please Read Carefully For the following questions, you are asked to indicate your response by circling a number between the anchor points of the zero-to-ten scales.

5. To what extent are you involved in: No Involvement Extensive Involvement

1. Quality Planning and Assurance ...... 0 1 2 3 4 5 6 7 8 9 10 2. Workplace and Employee Safety ...... 0 1 2 3 4 5 6 7 8 9 10 3. Product Design ...... 0 1 2 3 4 5 6 7 8 9 10 4. Process Design ...... 0 1 2 3 4 5 6 7 8 9 10 5. Plant Layout ...... 0 1 2 3 4 5 6 7 8 9 10 6. Production Planning and Scheduling ...... 0 1 2 3 4 5 6 7 8 9 10 7. Environmental Planning and Management ...... 0 1 2 3 4 5 6 7 8 9 10 8. Certification Planning and Implementation ...... 0 1 2 3 4 5 6 7 8 9 10 9. Benchmarking ...... 0 1 2 3 4 5 6 7 8 9 10 10. Continuous Improvement Activities ...... 0 1 2 3 4 5 6 7 8 9 10 11. Continuous Improvement Planning ...... 0 1 2 3 4 5 6 7 8 9 10 12. Continuous Improvement Kaizen ...... 0 1 2 3 4 5 6 7 8 9 10 13. Purchasing...... 0 1 2 3 4 5 6 7 8 9 10 14. Materials Management ...... 0 1 2 3 4 5 6 7 8 9 10 15. New Product Launches ...... 0 1 2 3 4 5 6 7 8 9 10 16. Cost Justification...... 0 1 2 3 4 5 6 7 8 9 10 17. Process Redesign ...... 0 1 2 3 4 5 6 7 8 9 10 18. Reengineering ...... 0 1 2 3 4 5 6 7 8 9 10 19. Regulatory Compliance (environmental) ...... 0 1 2 3 4 5 6 7 8 9 10 20. Logistics ...... 0 1 2 3 4 5 6 7 8 9 10 21. Transportation...... 0 1 2 3 4 5 6 7 8 9 10 22. Warehouse Management ...... 0 1 2 3 4 5 6 7 8 9 10 23. Legal Affairs and Issues ...... 0 1 2 3 4 5 6 7 8 9 10

Center for Advanced Purchasing Studies 73 I APPENDIX SECTION II — GENERAL COMPANY INFORMATION

The following question refer to your company. As previously noted, “company” refers to the unit in which you are located. This can be a company, division or business unit. If you are a divisionalized firm, with divisions in different industries and relatively autonomous, substitute “division” or “business unit” for “company” as appropriate.

1. Please list the principal products offered by your “company.” Focus on those few which account for the largest percentage of total sales whether sold outside or for internal transfer.

______

2. Total annual sales of your “company”: ($000) ______.

3. Total number of Full Time Equivalent employees: ______

4. Your company’s export sales as a percent of total sales: ______%. What percentage of total sales are made to the European Union: ______%.

5. Your company’s consumer/end user sales as a percent of total sales ______% (where consumer sales refer to those made directly to end users or customers, as compared to intermediate or industrial customers).

6. Is your company (✔ all that apply): publicly traded privately owned a foreign-owned subsidiary/transplant a joint venture

7. The industrial sector in which your company primarily operates? (✔ one box only) automotive office systems (furniture) and fixtures agricultural/forestry other manufacturing: ______chemical and allied products pharmaceutical computer and other electronic equipment printing and publishing fabricated metal products transportation equipment food and kindred products services industry machinery and equipment primary metal industries laboratory/medical instruments and related products Other (please describe )

______

74 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I Please Read Carefully Below are questions concerning various strategic aspects of your company. Please indicate your own personal feeling about each item by circling the number closer to your particular feeling.

How would you characterize the external situation within which your company operates? Very safe, little threat to the survival Very risky, a false step can mean and well-being of my firm...... 1 2 3 4 5 6 7 8 9 10 my firm’s undoing. Rich in investment and marketing Very stressful, exacting, hostile; opportunities...... 1 2 3 4 5 6 7 8 9 10 very few opportunities. An environment that my firm can A dominant environment in which control and manipulate to its own my firm’s initiative counts for very advantage, such as a dominant firm little against the tremendous has in an industry with little competitive, political or competition and few hindrances ...... 1 2 3 4 5 6 7 8 9 10 technological forces.

How rapid or intense is each of the following in your main industry? Our firm must rarely change its Our firm must change its marketing marketing to keep with the market practices extremely frequently (e.g., and competitors ...... 1 2 3 4 5 6 7 8 9 10 semiannually). The rate at which products/services are getting obsolete in the industry The rate of obsolescence is very is very slow ...... 1 2 3 4 5 6 7 8 9 10 high, as in some fashion goods. Actions of competitors are quite easy Actions of competitors are to predict...... 1 2 3 4 5 6 7 8 9 10 unpredictable. Demand and consumer tastes are Demand and tastes are almost fairly easy to forecast...... 1 2 3 4 5 6 7 8 9 10 unpredictable. The production/service technology is not subject to very much change and The modes of production/service is well established ...... 1 2 3 4 5 6 7 8 9 10 change often and in many ways.

The rate of new product/service introduction by the company relative to competitors: Has decreased very much ...... 1 2 3 4 5 6 7 8 9 10 Has increased very much.

The rate of change in your methods of production or rendering of services: Rate has declined much ...... 1 2 3 4 5 6 7 8 9 10 Change has accelerated greatly.

Risk taking by key executives of your company in seizing and exploring “chancy” growth opportunity: Has decreased very much ...... 1 2 3 4 5 6 7 8 9 10 Has increased very much.

Center for Advanced Purchasing Studies 75 I APPENDIX In dealing with its competitors, the company: Resorts much more to a live and let live philosophy ...... 1 2 3 4 5 6 7 8 9 10 Has become more aggressive.

Seeking of unusual, novel solutions by senior executives to problems via the use of “idea people,” brainstorming, etc.: Has become less common ...... 1 2 3 4 5 6 7 8 9 10 Has become much more common.

In general, the top managers of your company believe that: Owing to the nature of the competitive Owing to the nature of the environment, it is best to explore it competitive environment, bold, wide- gradually via timid, incremental ranging acts are necessary to achieve behavior ...... 1 2 3 4 5 6 7 8 9 10 the company’s objective.

When confronted with decision-making situations involving uncertainty, your company: Typically adopts a cautious, Typically adopts a bold aggressive, “wait and see” posture to minimize posture in order to maximize the the probability of making costly possibility of exploiting potential decisions ...... 1 2 3 4 5 6 7 8 9 10 opportunities.

76 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I Please Read Carefully For each program listed down the left side, please place an “X” in the cell which best describes its status in your company (only one (1) “X” per row please).

WHAT IS THE STATUS OF THE FOLLOWING DEVELOPMENTS IN YOUR COMPANY?

Not Not Future Assessing Planning Currently Successfully Applicable Being Consideration Suitability to Implement Implementing Implemented

QS 9000

ISO 9000

Total Quality Management (TQM)

Cross Functional Product Development Teams

Participation in Industrial Voluntary Environmental Programs (e.g., Responsible Care)

Participation in Voluntary EPA Programs (e.g., 33/50, Green Light)

Participation in OSHA’s Voluntary Prevention Program (VPP)

Company-specific environmental management system

Enterprise Resources Planning (ERP) system

Manufacturing Resource Planning (MRP II) system

ISO 14000 (Only one “X” per row please)

Center for Advanced Purchasing Studies 77 I APPENDIX SECTION III — POSITION ON ISO/QS 9000 CERTIFICATION PROCESS

Please Read Carefully If your company is either actively implementing or has implemented ISO 9000/QS 9000, then fill out this section; if not, please go to Section IV. For the following questions, you are asked to indicate your response by circling a number between the anchor points of the following zero-to-ten scale: No Influence - 0 1 2 3 4 5 6 7 8 9 10 - Major Influence

1. To what extent was your decision to implement the ISO/QS 9000 certification process influenced by the following factors: No Influence Major Influence

Customer Demand: required by some customers as a condition for doing business with them ...... 0 1 2 3 4 5 6 7 8 9 10 Ease of Trade: By implementing the ISO/QS standards, we could enhance our ability to sell our products internationally...... 0 1 2 3 4 5 6 7 8 9 10 Reduction in Costs: By implementing these standards, our company could identify opportunities for cost reductions in overhead and in rework...... 0 1 2 3 4 5 6 7 8 9 10 Reductions in Liabilities/Risk: The ISO/QS standards offer reductions by improving conditions on the shop floor ...... 0 1 2 3 4 5 6 7 8 9 10 Improving the overall quality of our products ...... 0 1 2 3 4 5 6 7 8 9 10 Anticipated reductions in inventory levels ...... 0 1 2 3 4 5 6 7 8 9 10 Anticipated reductions in lead times...... 0 1 2 3 4 5 6 7 8 9 10 Enhanced Reputation/Visibility in the Marketplace: The ISO/QS standards offered us a means of enhancing our reputation as a quality/leading edge producer ...... 0 1 2 3 4 5 6 7 8 9 10 Pressure from shareholders ...... 0 1 2 3 4 5 6 7 8 9 10 Credibility Through Third-Party Certification: Third-party certification ensures the credibility and substance of a commitment to quality and to the management of the processes associated with quality ...... 0 1 2 3 4 5 6 7 8 9 10 Better Process Management: Through better documentation, analysis and understanding of basic business processes . . . . . 0 1 2 3 4 5 6 7 8 9 10 Higher Quality Workforce: By exposing them to the skills and tools required by the ISO/QS certification process ...... 0 1 2 3 4 5 6 7 8 9 10 Other: Please Describe ______0 1 2 3 4 5 6 7 8 9 10

2. To what extent has your company’s implementation of the ISO/QS 9000 certification standards affected: Negative Impact No Impact Positive Impact

Overall Product Quality 0 1 2 3 4 5 6 7 8 9 10 Overall Costs 0 1 2 3 4 5 6 7 8 9 10 Improved Process Management & Control 0 1 2 3 4 5 6 7 8 9 10 Enhanced Marketplace Reputation 0 1 2 3 4 5 6 7 8 9 10 Reductions in Lead Times 0 1 2 3 4 5 6 7 8 9 10 Reductions in Inventory Level 0 1 2 3 4 5 6 7 8 9 10 Improvements in the quality of the workforce 0 1 2 3 4 5 6 7 8 9 10 Reductions in levels of scrap/rework 0 1 2 3 4 5 6 7 8 9 10 Reductions in liabilities/risk 0 1 2 3 4 5 6 7 8 9 10 Improved overall operating flexibility 0 1 2 3 4 5 6 7 8 9 10 Enhanced visibility with your major customers 0 1 2 3 4 5 6 7 8 9 10 78 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I SECTION IV — POSITION ON ISO/QS 9000 CERTIFICATION PROCESS TO BE FILLED IN BY ALL RESPONDENTS

Please Read Carefully For the following statements, you are asked to indicate your response by circling a number between the anchor points of the zero-to-ten scales.

1. The ISO 14000 certification procedure is: Strongly Disagree Strongly Agree

Well understood by people within your company ...... 0 1 2 3 4 5 6 7 8 9 10 Demanded by the major customers...... 0 1 2 3 4 5 6 7 8 9 10 Consistent with Quality initiatives (e.g., TQM or ISO/QS 9000) ...... 0 1 2 3 4 5 6 7 8 9 10 Demanded by major stockholders...... 0 1 2 3 4 5 6 7 8 9 10 Demanded by the community which we reside ...... 0 1 2 3 4 5 6 7 8 9 10 A condition for simplifying or enhancing our position in foreign markets where we want to have a presence ...... 0 1 2 3 4 5 6 7 8 9 10 A factor for reducing our environmental liability/risk position 0 1 2 3 4 5 6 7 8 9 10 Consistent with reduced manufacturing costs ...... 0 1 2 3 4 5 6 7 8 9 10 Consistent with reduced lead times ...... 0 1 2 3 4 5 6 7 8 9 10 Consistent with improved product quality ...... 0 1 2 3 4 5 6 7 8 9 10 Of strategic importance to your company...... 0 1 2 3 4 5 6 7 8 9 10 Demanded by major environmental groups ...... 0 1 2 3 4 5 6 7 8 9 10 A method of improving compliance with legislative and regulatory requirements ...... 0 1 2 3 4 5 6 7 8 9 10 A method of reducing company’s exposure to penalties (by identifying and correcting pollution problems during the discovery phase) ...... 0 1 2 3 4 5 6 7 8 9 10 A result of regulatory incentives ...... 0 1 2 3 4 5 6 7 8 9 10 Consistent with the current environmental management system within our company ...... 0 1 2 3 4 5 6 7 8 9 10 A method for effective pollution prevention and waste reduction...... 0 1 2 3 4 5 6 7 8 9 10 Cost justified in light of the various costs and benefits associated with certification ...... 0 1 2 3 4 5 6 7 8 9 10 Consistent with the development of a high quality work force for your company ...... 0 1 2 3 4 5 6 7 8 9 10 Supported by major industrial organizations to which either you or your company belong ...... 0 1 2 3 4 5 6 7 8 9 10 A vehicle for reducing environmentally related costs ...... 0 1 2 3 4 5 6 7 8 9 10 A factor influencing product design within your company. . . 0 1 2 3 4 5 6 7 8 9 10 A factor influencing process design and plant layout within your company ...... 0 1 2 3 4 5 6 7 8 9 10 A factor influencing the management of the supply chain . . . 0 1 2 3 4 5 6 7 8 9 10 A factor influencing performance evaluation at either the personnel or area level ...... 0 1 2 3 4 5 6 7 8 9 10 A factor affecting the selection of possible suppliers ...... 0 1 2 3 4 5 6 7 8 9 10 A factor affecting the evaluation of current suppliers ...... 0 1 2 3 4 5 6 7 8 9 10 Center for Advanced Purchasing Studies 79 I APPENDIX Please Read Carefully For the following statements, you are asked to indicate your response by circling a number between the anchor points of the zero-to-ten scales, using the following scale: Highly Uncertain - 0 1 2 3 4 5 6 7 8 9 10 - Well Known

2. Please consider major sources of uncertainty in the ISO 14000 certification procedures, specifically: Highly Uncertain Well Known

Potential changes in environmental regulations at the federal governmental level are...... 0 1 2 3 4 5 6 7 8 9 10 Potential changes in environmental regulations at the state/provincial level are: ...... 0 1 2 3 4 5 6 7 8 9 10 Potential changes in environmental regulations at the local/community level are: ...... 0 1 2 3 4 5 6 7 8 9 10 Potential changes in environmental regulations at the international level (i.e., changes in the regulations of other countries to which your company exports) are: . . . . 0 1 2 3 4 5 6 7 8 9 10 Potential changes in the standards and procedures underlying the ISO 14000 certification procedure are: ...... 0 1 2 3 4 5 6 7 8 9 10 Costs associated with obtaining ISO 14000 certification are : . 0 1 2 3 4 5 6 7 8 9 10 Benefits resulting from obtaining ISO 14000 certification are: 0 1 2 3 4 5 6 7 8 9 10 Changes to current environmental management systems to accommodate ISO 14000 certification are: ...... 0 1 2 3 4 5 6 7 8 9 10 Reaction of major suppliers to ISO 14000 certification is: . . . 0 1 2 3 4 5 6 7 8 9 10 Reaction of major investors to ISO 14000 certification is:. . . . 0 1 2 3 4 5 6 7 8 9 10 Extent to which public disclosure of environmental infractions will be required is:...... 0 1 2 3 4 5 6 7 8 9 10

80 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I SECTION V — INFORMATION ABOUT YOUR COMPANY’S ENVIRONMENTAL MANAGEMENT SYSTEM AND EFFORTS:

Please Read Carefully For the following statements, you are asked to indicate your response by circling a number between the anchor points of the zero-to-ten scales, using the following scale: Strongly Disagree - 0 1 2 3 4 5 6 7 8 9 10 - Strongly Agree

1. Your company’s environmental management system:: Strongly Disagree Strongly Agree

Your company has a “formal” environmental management system in place...... 0 1 2 3 4 5 6 7 8 9 10 The environmental management system’s procedures are formally documented ...... 0 1 2 3 4 5 6 7 8 9 10 The environmental management system’s procedures are widely circulated and available to anyone who needs access . 0 1 2 3 4 5 6 7 8 9 10 Top management has taken a highly visible public position in support of improved environmental performance...... 0 1 2 3 4 5 6 7 8 9 10 There is a specific department within your company which is formally responsible for environmental affairs...... 0 1 2 3 4 5 6 7 8 9 10 There is a formal reporting position between those responsible for environmental affairs within your company and one of the company’s senior executives (director level or above)...... 0 1 2 3 4 5 6 7 8 9 10 The environmental position of your company is given prominent visibility within annual reports and other publications distributed by your company ...... 0 1 2 3 4 5 6 7 8 9 10 Environmentally-related information (e.g., changes in regulations, tracking of which companies have been fined and how much) is tracked and monitored on an on-going basis ...... 0 1 2 3 4 5 6 7 8 9 10 Information about best-in-class environmental performance in your industry is tracked and recorded within your company ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental practices, procedures and systems within your company are compared with the best-in-class on a regular basis ...... 0 1 2 3 4 5 6 7 8 9 10 The environmental achievements of your company are given prominent visibility within annual reports or other company publications ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental issues, policies and procedures are included in formal company training programs ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental performance is formally tracked and monitored within the company...... 0 1 2 3 4 5 6 7 8 9 10 Various performance goals have been developed and implemented which report environmental performance on different dimensions ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental performance, as captured by various measures, is periodically summarized ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental performance results are widely distributed within your company ...... 0 1 2 3 4 5 6 7 8 9 10

Center for Advanced Purchasing Studies 81 I APPENDIX Your company’s environmental management system: Strongly Disagree Strongly Agree

Performance measures quantify costs associated with environmental performance ...... 0 1 2 3 4 5 6 7 8 9 10 The performance measures identify qualitative costs associated with environmental performance and problems. . . 0 1 2 3 4 5 6 7 8 9 10 When an environmental problem is identified, attention is primarily focused on correcting the effects of that problem . . 0 1 2 3 4 5 6 7 8 9 10 When an environmental problem is identified, attention is focused on the underlying cause and corrective measures . . . 0 1 2 3 4 5 6 7 8 9 10 When an environmental problem is identified, the major effort within your company is on determining the underlying reasons for that problem and then attacking it . . . 0 1 2 3 4 5 6 7 8 9 10 Product designs have been modified in response to environmental problems attributable to a specific design flaw ...... 0 1 2 3 4 5 6 7 8 9 10 Process designs and plant layouts have been modified in response to external environmental problems attributable to a specific design flaw ...... 0 1 2 3 4 5 6 7 8 9 10 New equipment has been acquired or existing equipment modified in response to external environmental problems attributable to that equipment ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental issues are included in the process design process ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental issues are considered when laying out the plant or specifying equipment for use on the plant floor . . . . 0 1 2 3 4 5 6 7 8 9 10 Environmental issues influence plant location decisions (i.e., where we locate a new plant) ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental performance has been captured primarily in terms of recyclability i.e., the amount of recycled material used in the product or the degree to which the product is recyclable ...... 0 1 2 3 4 5 6 7 8 9 10 Cost accounting has been extensively involved in your company in capturing and reporting environmental costs . . . 0 1 2 3 4 5 6 7 8 9 10 Environmental performance is considered during the evaluation of individual departments or areas...... 0 1 2 3 4 5 6 7 8 9 10 Performance on environmental dimensions is considered during personnel evaluations ...... 0 1 2 3 4 5 6 7 8 9 10 Performance on environmental dimensions is considered during supplier evaluations...... 0 1 2 3 4 5 6 7 8 9 10 Environmentally responsible suppliers tend to be more cost effective suppliers ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental concerns play a significant role in the supplier selection and/or retention decisions ...... 0 1 2 3 4 5 6 7 8 9 10 Your company has been very successful in creating company wide awareness of environmental problems, costs and opportunities...... 0 1 2 3 4 5 6 7 8 9 10 People within your company view environmental problems as opportunities rather than as costs or constraints to be satisfied ...... 0 1 2 3 4 5 6 7 8 9 10

82 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I Your company’s environmental management system: Strongly Disagree Strongly Agree

Your company has a well developed environmental data base for tracking and monitoring environmental issues . . . . . 0 1 2 3 4 5 6 7 8 9 10 The effectiveness of different production schedules is evaluated considering possible environmental problems created by those schedules ...... 0 1 2 3 4 5 6 7 8 9 10 Top management considers environmental performance as important as reducing costs ...... 0 1 2 3 4 5 6 7 8 9 10 Top management considers environmental performance as important as reducing lead times ...... 0 1 2 3 4 5 6 7 8 9 10 Top management considers environmental performance as important as improving quality...... 0 1 2 3 4 5 6 7 8 9 10 People within your company consider your company’s formal environmental management system highly effective . . 0 1 2 3 4 5 6 7 8 9 10 People outside of your company consider your company’s formal environmental management system highly effective . . 0 1 2 3 4 5 6 7 8 9 10 Tools and procedures such as risk assessment and life cycle analysis are incorporated into your company’s formal environmental management system ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental issues are more important today because they reflect a current marketing fad ...... 0 1 2 3 4 5 6 7 8 9 10 Environmental concerns within your company are primarily driven by regulatory requirements...... 0 1 2 3 4 5 6 7 8 9 10

2. If your company does have a formal environmental management system in place, how long has that system been in place? ______years.

3. Environmental activities within your firm have: Strongly Disagree Strongly Agree

Significantly reduced overall costs ...... 0 1 2 3 4 5 6 7 8 9 10 Significantly reduced lead times ...... 0 1 2 3 4 5 6 7 8 9 10 Significantly improved product quality ...... 0 1 2 3 4 5 6 7 8 9 10 Significantly improved its position in the marketplace ...... 0 1 2 3 4 5 6 7 8 9 10 Helped enhance the reputation of your company ...... 0 1 2 3 4 5 6 7 8 9 10 Helped your company design/develop better products ...... 0 1 2 3 4 5 6 7 8 9 10 Significantly reduced waste within the production process. . . 0 1 2 3 4 5 6 7 8 9 10 Significantly reduced waste within the equipment selection process ...... 0 1 2 3 4 5 6 7 8 9 10 Had benefits that have definitely outweighed any costs incurred ...... 0 1 2 3 4 5 6 7 8 9 10 Improved its chances of successfully selling its products in international markets ...... 0 1 2 3 4 5 6 7 8 9 10 Placed reasonable demands on the information system and on data requirements ...... 0 1 2 3 4 5 6 7 8 9 10 Caused your company to investigate alternative technologies and procedures...... 0 1 2 3 4 5 6 7 8 9 10 Not compromised the product’s acceptability from the customer’s perspective...... 0 1 2 3 4 5 6 7 8 9 10 Not adversely affected the position of your company in the marketplace ...... 0 1 2 3 4 5 6 7 8 9 10

Center for Advanced Purchasing Studies 83 I APPENDIX Please Read Carefully For the following questions, you are asked to indicate your response by circling a number between the anchor points of the following zero-to-ten scale: Never Considered - 0 1 2 3 4 5 6 7 8 9 10 - Always Considered

4. To what extent are the following options considered within your company: Never Considered Always Considered

Product redesign: redesigning the product to eliminate any potential environmental problems (manufacturing or recycling) ...... 0 1 2 3 4 5 6 7 8 9 10 Process redesign: redesigning the process to eliminate any potential environmental problems ...... 0 1 2 3 4 5 6 7 8 9 10 Disassembly: redesigning the product or process so as to simplify disassembly and disposal at the end of the product’s useful life ...... 0 1 2 3 4 5 6 7 8 9 10 Substitution: replacing a material which can cause environmental problems with another material which is not problematic...... 0 1 2 3 4 5 6 7 8 9 10 Reduce: reducing the level of material and/or components (which are contributing to environmental problems) within products...... 0 1 2 3 4 5 6 7 8 9 10 Recycling: making more use of recycled components or making a product which is more easily/readily recycled . . . . . 0 1 2 3 4 5 6 7 8 9 10 Rebuilding: rebuilding a product where some of the parts or components are recovered while others are replaced ...... 0 1 2 3 4 5 6 7 8 9 10 Remanufacturing: like rebuilding, except that none of the parts are reduced to raw material ...... 0 1 2 3 4 5 6 7 8 9 10 Consume Internally: consuming waste internally (e.g., wood pallets used in shipping or product storage used to generate electrical power in a co-generation facility) ...... 0 1 2 3 4 5 6 7 8 9 10 Prolonging Use: reducing environmental problems by increasing the overall life of the product (e.g., engines which now last longer before having to be replaced or rebuilt). . . . . 0 1 2 3 4 5 6 7 8 9 10 Returnable Packaging: Using packaging and pallets which can be returned after they are finished being used ...... 0 1 2 3 4 5 6 7 8 9 10 Spreading Risks: shifting responsibilities for environmental problems to a third party or expert better able to deal with issues ...... 0 1 2 3 4 5 6 7 8 9 10 Creating a market for waste products: treating waste as an input to another product which can be made and sold at a profit ...... 0 1 2 3 4 5 6 7 8 9 10 Waste Segregation: an intermediate action in which waste streams are separated out into their individual components before being recycled, reused or consumed internally...... 0 1 2 3 4 5 6 7 8 9 10 Relocation: changing the location of a process or plant to take advantage of more favorable environmental regulations and conditions ...... 0 1 2 3 4 5 6 7 8 9 10 Alliances: working with either suppliers or customers to address environmental problems and/or issues ...... 0 1 2 3 4 5 6 7 8 9 10

84 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX I 5. In the box below, briefly describe the major obstacles or barriers to the development, implementation and acceptance of ISO 14000 within your company.

Thank you very much for your time and effort in completing this questionnaire.

Center for Advanced Purchasing Studies 85 I APPENDIX Please either fill in the information in the box below or attach your business card if you wish to receive a copy of the final report based on the summarized responses to this survey. This page can be sent in separately to authors at the following address:

ISO 14000 Certification System Project Room N333 NBC Department of Marketing and Supply Chain Management The Eli Broad Graduate School of Management East Lansing, Michigan 48824-1122 USA

I wish to receive a copy of the final report from this study. Please send to the name and address found below (please fill in address or attach your business card):

Address Block

Please staple your business card to this page

HERE

86 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency APPENDIX II Appendix II: Interview Protocol for Case Studies

ISO 14000 site visit protocol

We would like to thank you for taking your time in participating in this study. As you are aware, we have seen the recent introduction of the ISO 14000 certification standard. This standard supposedly builds on the success of the ISO/QS 9000 certification standards. However, this standard is mainly targeted towards the environmental management systems and processes. At present, this new standard has generated a great deal of confusion. Some firms have decided to pursue ISO 14000 certification, while others with good environmental systems have decided not to pursue this certification. Our interest is to understand your company’s position on this certification standard. Please understand that there is no right or wrong answer. Whether or not to pursue ISO 14000 certification is ultimately a business decision and we want to study it as such. To this end, we have a few questions that we would like to ask you. We expect that this interview should take no more than 60 minutes.

Interviewers ______Date ______Company ______Respondent(s) ______What is/are your job title(s)? 1. ______2. ______3. ______4. ______

Number of years in current position? 1. _____ 2. _____ 3. _____ 4. _____

What are the primary products produced by your company? 1.______2.______3.______

Number of employees at this facility? ______

What is your company’s export sales as a percentage of total sales?______

What percentage of sales are made to the European Union?______

Center for Advanced Purchasing Studies 87 II APPENDIX What is your company’s consumer/end user sales as a percentage of total sales______% (Where consumer sales refer to those made directly to end users or customers, as compared to international or industrial customers)

Is your company: Publicly traded YES/NO Privately owned YES/NO A foreign owned subsidiary/transplant YES/NO A joint venture YES/NO

What is the market targeted by your firm?

What are the major competitive thrusts in your industry (current, and near future)?

What are the key success factors for your firm?

What type of environmental system is in place, and what is its role in the planning and execution activities of the firm?

What is your understanding of ISO 14000 at this time?

What is your firm’s position on ISO 14000?

How was this decision arrived at?

What factors influenced this decision?

(Use one of the four questions depending on the company being interviewed) 1. What are the primary reasons for your firms to seek ISO 14000 certification?

2. What are the primary reasons for your firm to consider ISO 14000 certification?

3. What are the primary reasons for your firm to implement an EMS and not seek ISO 14000 certification?

4. What are the primary reasons for your firm to not need an EMS, or ISO 14000?

Under what conditions would management change this decision?

What are the benefits you can see being generated by this form of certification? Costs? Risks?

How do you measure performance in your department/area?

Do you have any final comments or question for the interviewers that you would like to make before we finish this interview?

Are there any other people in this firm you think we should talk with? Name: ______Phone:______

Can we use your name when we introduce ourselves?

88 ISO 14000 Assessing Its Impact on Corporate Effectiveness and Efficiency Center for Advanced Purchasing Studies

THE CENTER FOR ADVANCED PURCHASING STUDIES (CAPS) was established in November 1986 as the result of an affiliation agreement between the College of Business at Arizona State University and the National Association of Purchasing Management. It is located at The Arizona State University Research Park, 2055 East Centennial Circle, P.O. Box 22160, Tempe, Arizona 85285-2160 (Telephone [602] 752-2277). The Center has three major goals to be accomplished through its research program: to improve purchasing effectiveness and efficiency; to improve overall purchasing capability; to increase the competitiveness of U.S. companies in a global economy.

Research published includes 37 focus studies on purchasing/materials management topics ranging from purchasing organizational relationships to CEOsí expectations of the purchasing function, as well as benchmarking reports on purchasing performance in 26 industries.

Research under way includes: Major Changes in Purchasing/Supply Organizations; Supply Chain Management Strategies; International Purchasing and Supply Management in the United States and in Germany; and the benchmarking reports of purchasing performance by industry.

CAPS, affiliated with two 501 (c) (3) educational organizations, is funded solely by tax-deductible contributions from organizations and individuals who want to make a difference in the state of purchasing and materials management knowledge. Policy guidance is provided by the Board of Trustees consisting of:

Stewart Beall, C.P.M., Cyprus Amax Minerals Company Phillip L. Carter, D.B.A., CAPS Edwin S. Coyle, Jr., C.P.M., IBM Corp Carl Curry, The Quaker Oats Company Harold E. Fearon, Ph.D., C.P.M. Edward P. Hoffman, Eastman Kodak Company Andy Icken, Exxon Company Edith Kelly-Green, Federal Express Richard A. Kotler, Nortel Barbara B. Lang, Fannie Mae Charles A. Lileikis, Lockheed Martin Corporation Jose Mejia, Lucent Technologies Alex M. Munn, Coca-Cola USA Dave Nelson, C.P.M., Deere & Co. Paul Novak, C.P.M., NAPM Larry Penley, Ph.D., Arizona State University Helmut F. Porkert, Ph.D., Atlantic Richfield Company Alan R. Raedels, Ph.D., C.P.M., Portland State University William L. Ramsey, AlliedSignal, Inc. Richard D. Rich, C.P.M., NAPM Jim Scotti, Halliburton Company David Sorensen, General Mills, Inc. Louis P. Vaccarelli, BMG Entertainment N.A. Stephen Welch, SBC Joseph Yacura, American Express Center for Advanced Purchasing Studies 89