2002_Morrow_adopting Coporate Environmental Management Systems

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European Management Journal Vol. 20, No. 2, pp. 159171, 2002 2002 Elsevier Science Ltd. All rights reservedPergamon

Printed in Great Britain0263-2373/02 $22.00 + 0.00PII: S0263-2373(02)00026-9

Adopting CorporateEnvironmentalManagement Systems:Motivations and Results of ISO 14001 and EMASCerticationDAVID MORROW, UBS Asset Management, ZurichDENNIS RONDINELLI, Kenan-Flagler Business School, University of North Carolina atChapel Hill

Multinational and domestic corporations aroundthe world are adopting environmental managementsystems (EMS) and certifying them by internationalstandards. ISO 14001 is becoming the dominantinternational standard for assessing environmentalmanagement processes and in Europe many rmsare also registering their EMS according to the Eco-Management and Audit Scheme (EMAS). Yet, rela-

tively few studies have explored the motivations ofrms adopting and certifying EMS and even fewerhave examined the results or impacts on the compa-nies that do so. The few empirical analyses and casestudies that have been done on corporate EMS pro-vide insights into motivations and results primarilyfor large multinational corporations in the UnitedStates and Europe. We compare these ndings withthose of ve in-depth case studies of smaller dom-estic energy and gas companies in Germany. 2002Elsevier Science Ltd. All rights reserved.

Keywords: Environment , Environmental manage-ment , ISO 14001 , EMAS , EMS, Energy , Gas

European Management Journal Vol. 20, No. 2, pp. 159171, April 2002 159

Introduction

The adoption of environmental management systems(EMS) as frameworks for integrating corporateenvironmental protection policies, programs, andpractices is growing among both domestic and multi-national companies around the world. Many compa-nies that adopt an EMS follow industry standards,such as Responsible Care in the chemicals sector,or international guidelines such as ISO 14001 or theEuropean Eco-Management and Audit Scheme(EMAS).

The growth of EMS as a process for integrating cor-porate environmental policies and programs has been quite rapid over the past decade. The conceptof external certication expanded with the introduc-tion of the British Standard 7750 in the early 1990s,followed by the development of EMAS in 1993, andthe promulgation of the ISO 14000 series in 1996. Bymid-2001 more than 30300 organizations worldwidehad their EMS certied under ISO 14001 guidelinesestablished by the International Organization forStandardization in Switzerland. In Europe, nearly4000 companies have registered under EMAS guide-


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ADOPTING CORPORATE ENVIRONMENTAL MANAGEMENT SYSTEMS

lines (Peglau, 2001). Other companies are adoptingmajor components of industry or international stan-dards for environmental management without for-mally certifying them. Eli Lilly (1999), the inter-national pharmaceutical company, for example, uses

the ISO 14001 framework to allow each of its inter-national sites to develop an EMS and then decide if it should seek of cial certi cation.

Many multinational corporations have designed, cer-tied, and implemented environmental managementsystems under ISO 14001 because it provides a har-monized standard for managing a corporation senvironmental impacts (Tibor and Feldman, 1996).ISO 14001 is a set of guidelines by which a facility a single plant or a whole organization can establishor strengthen its environmental policy, identifyenvironmental aspects of its operations, de ne

environmental objectives and targets, implement aprogram to attain environmental performance goals,monitor and measure effectiveness, correctdeciencies and problems, and review its manage-ment systems to promote continuous improvement(Weaver, 1996).

An increasing number of multinational corporations(MNCs) have adopted and certi ed their EMS. TheFord Motor Company was one of the rst MNCs toembrace ISO 14001 series guidelines for all of itsmanufacturing facilities. By 1998, Ford had certi edall 140 of its manufacturing plants in 26 countries,

and by 1999 it was requiring that all its suppliers andmanufacturing facilities worldwide also adopt andcertify an EMS as a condition for continuing to do business with Ford (Wilson, 2001). General Motors,Daimler-Chrysler, Toyota and other automobilemanufacturers are also requiring all of their manufac-turing facilities around the world to adopt EMS andto certify them by international standards andencouraging and assisting their suppliers to do thesame (Sabatini, 2000). In 1997, IBM (2000) receivedthe rst single worldwide ISO 14001 certi cation thatcovered corporate headquarters and 11 of its 28plants that manufactured microelectronic technology,

data storage systems, personal systems, servers andnetworking hardware. IBM certi ed the EMS of its17 other sites in 1998 and added facilities in Thailandand Ireland in 1999. The Royal Dutch/Shell Group(2000) certied 90% of its major installations underISO 14001 by 1999. Pharmaceutical company Bristol-Myers Squibb (2000) had 19 of its plants worldwidecertied according to ISO 14001 standards by 2000and now Bristol-Myers Squibb, Germany, informshospitals how to implement ISO 14001-type environ-mental standards at their facilities. By 2000, morethan 100 U.S. companies in the electronics and sem-iconductor industry had their EMS certi ed by ISO-14001 registrars (Sissel, 2000).

As more corporations consider the possibilities of adopting an EMS and as they, government agencies,and environmental interest groups consider the

European Management Journal Vol. 20, No. 2, pp. 159 171, April 2002 161

implications of doing so, several questions arise forwhich answers are only beginning to emerge. First,is an EMS only a management tool that only largemultinational corporations have the resources andincentives to adopt or can smaller domestic rms also

benet from developing and certifying an EMS?Second, what motivates corporations large or small,domestic or multinational to adopt an EMS and vol-untarily comply with external standards for design-ing and implementing it? Third, do corporate motiv-ations for adopting EMS vary from country tocountry? And, fourth, what are the results of implementing an EMS and how are companiesimpacted by certi cation?

This article explores these questions by reviewing theliterature on corporate environmental managementsystems and the relatively few empirical studies that

have been done of their adoption and certi cation.We compare these ndings with those of ve in-depth case studies of energy and gas companies inGermany that are implementing environmental man-agement systems. Investigation of the German com-panies in the energy and gas industry offers insightsinto why small- and medium-sized domestic Germanrms adopt and certify an EMS and the results theyobtain from doing so. Germany was selected becauseof its large number of EMAS and ISO 14001 certi -cations. The energy and gas sector was chosen forstudy because of its major environmental impacts.

What are Environmental ManagementSystems?

Although corporations in most industrialized coun-tries have adopted environmental protection prac-tices required by government agencies since the early1970s, these regulations largely focus on control of water and air emissions and waste disposal. Govern-ment regulations usually require companies toreduce or eliminate their toxic air and water pollution by using technologies that control or clean emissionsat the end of the pipe (Rondinelli, 2001). During the1970s and 1980s many corporations, attempting to getahead of complex, costly, and rapidly changingenvironmental regulations, began to adopt voluntarypollution prevention practices that sought to reduceor eliminate from manufacturing processes thesources of pollutants, rather than controlling themafter emission.

As more companies began to use pollution preven-tion techniques and to recognize the relationshipsamong them, some rms started to integrate theirenvironmental management practices into more com-prehensive systems. Industry associations andgovernment and international organizations saw theadvantages of setting standards that corporations canuse as guidelines. The two most frequently used


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guidelines for EMS design and certi cation are theinternational standard, ISO 14001, and the Europeanstandard, EMAS. ISO 14001 provides guidelines bywhich corporations or other organizations designand implement an EMS that identi es the organiza-

tion s environmental policy, the environmentalaspects of its operations, legal and other require-ments, a set of clearly de ned objectives and targetsfor environmental improvement, and a set of environmental management programs (Jackson,1997).

ISO 14001 also requires a system of implementationand operation, including a clear structure of responsibility for environmental management, programs fortraining, awareness and competence among allemployees of the facility, internal and external com-munication of the EMS, a system of environmental

management documentation, a documentation con-trol system, procedures for operational controls of environmental impacts, and emergency preparednessand response. ISO 14001 includes provisions for cre-ating a system of checking and corrective action thatincludes monitoring and measurement, reportingnon-conformance and taking corrective and prevent-ative action, and record-keeping with regard toenvironmental management. It calls for EMS auditsand a management review process through whichsenior management reassesses the suitability, effec-tiveness, and adequacy of the environmental man-agement system at appropriate intervals to assure

continuous improvement.The Eco-Management and Audit Scheme (EMAS) issimilar to ISO 14001 in its components and require-ments (Sulzer, 1999). A main difference between ISO14001 and the European standard, until recently, wasthat EMAS was applicable only at the site level, whileISO can be applied at the facility, company or organi-zational levels. EMAS was revised in April 2001 andnow can be applied across entire organizations.Nevertheless, important distinctions between the twostandards remain. Unlike ISO 14001, EMAS requiresorganizations to produce an environmental state-

ment; it is more rigorous in mandating reductions inenvironmental impacts to levels not exceeding thosecorresponding to economically viable applications of best available technology; and it requires organiza-tions to make much more information publicly avail-able, thereby enhancing a facility s transparency.

Companies seeking EMAS registration (which isdone by a State authority) must report environmentaleffects and legal requirements at the site, while ISOmakes certi cation (by a private registrar) voluntary.ISO 14001 certication allows the company to decidehow to have its EMS veri ed and what informationit should disclose. EMAS requires internal systemcompliance and performance audits, and externalveri cation must be conducted at least once everythree years. ISO only suggests system audits againstinternal benchmarks. EMAS requires compliance

European Management Journal Vol. 20, No. 2, pp. 159 171, April 2002162

with environmental regulations and stipulations oncontinuous environmental improvement. ISO 14001elicits commitment to environmental improvement, but does not stipulate the extent to which perform-ance must be improved.

In brief, ISO 14001 and EMAS have different aims.ISO 14001 provides guidelines that can beimplemented by almost any type of organization inany country and was designed primarily to improvemanagement. EMAS, on the other hand, is designedto bring about changes in environmental perform-ance.

Motivations Adopting CorporateEnvironmental Management Systems

Advocates of environmental management systemsand international standards for EMS certi cationclaim many bene ts that should motivate corporateexecutives to adopt an integrated system of environ-mental management.

Proponents claim that integrated programs of pol-lution prevention can save companies money byimproving ef ciency and reducing the costs of energy, materials, nes, and penalties and that devel-opment and certi cation of EMS can increase investorcondence in a company and give it internationalcompetitive advantages (Kirkpatrick and Pouliot,1996). Adopting an EMS not only focuses a com-pany s attention on negative environmental impacts but also ensures that responsibility is appropriatelyassigned for maintaining high environmental stan-dards throughout the organization.

Clark (1999) points out that many multinational com-panies are adopting EMS to satisfy customer press-ures and to ensure that their suppliers are operatingin environmentally and socially responsible ways.Some are doing so in response to peer pressure asmore corporations adopt environmental manage-ment systems and require their second and third tiersuppliers to do so as well. Growing interest amongcorporate stakeholders within and outside of therm is also driving more corporations to adoptEMS and to certify them.

Advocates of ISO 14001 claim that an internationalstandard assists corporations to simplify and inte-grate their environmental protection programs into amore coherent framework (Cascio, 1994). An inter-national standard makes it easier for corporations todevelop voluntary EMSs and for shareholders,government regulatory agencies, insurance compa-nies, and nancial institutions to assess a company scommitment to improving environmental perform-ance and reducing risks (Donaldson, 1996). Adoptionof an EMAS registered- or ISO 14001-certi ed EMS


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One SWL manager notedthat EMAS certication wassomething that would enable

the CEO to sleep better at

night


Bene ts of Implementing EMS

A growing concern is whether or not the adoptionand implementation of EMS delivers tangible bene-ts to companies. Again, much of the evidence isanecdotal. Ford Motor Company claims to havesaved millions of dollars and reduced substantiallyits environmental impact as the result of havingadopted ISO 14001-certi ed EMS for its plants world-wide (Wilson, 2001). In its 40-year-old, 2.4 millionsquare foot engine plant in Lima, Ohio, for example,Ford claims to have involved all its employees in theimplementation of the EMS that reduced water con-sumption by nearly 757,000 liters a day, eliminatedits production of boiler ash, and increased the use of returnable packaging from 60% to 99%.

IBM reports that the worldwide registration of itsEMS helped the corporation to validate the abilitiesof all of its manufacturing and design facilities tomeet consistently and effectively the requirements of the corporate EMS and thechances for continualimprovement. The EMS gaveIBM disciplined tools withwhich to pursue environmentalimprovements and to assesstheir value (Balta and Wood-side, 1999). The process madeenvironmental managementsystem dependent rather thanperson dependent by improv-ing documentation of important requirements, pro-cedures, and processes. IBM discovered that ISO14001 certication increased the awareness and par-ticipation in environmental activities by employeesand contractors who did not previously know muchabout the corporation s environmental policy or theirrole in supporting it.

ABB Automation which received ISO 14001 certi -cation of its Columbus, Ohio, plant in 1998 reportedthat implementation of its EMS helped the companyreduce costs of energy and of hazardous waste hand-ling and disposal (O Conner, 2000). Certi cationallowed the company to communicate more effec-tively its environmental achievements to its currentand prospective customers and to adopt environmen-tally bene cial procedures earlier than originallyplanned. ABB Automation also saw increasedemployee morale from the company s commitmentto protecting the environment.

The Honda Transmission Manufacturing of Americafacility in Ohio, which certi ed its EMS in 1997,reports both immediate and long-term bene ts(McManus and Sanders, 2001). Honda educated itsentire staff on the importance of the organization senvironmental objectives and raised the priority of environmental improvements. As a result of EMSimplementation, Honda reduced environmental and


safety incidents signi cantly, developed andenforced contractor-training requirements, and sub-stantially reduced costs associated with environmen-tal incidents. Moreover, this Honda plant recordednoticeable improvements in environmental perform-

ance in the areas of waste and wastewater generation,recycling, improved lighting control, and adoption of reusable packaging. The plant saw substantial sav-ings from improvements in waste production andenergy consumption.

In their study of Alcoa s Mt. Holly plant, Rondinelliand Vastag (2000) found that three years after ISO14001 certication, managers identi ed four sets of positive impacts improvements in employee aware-ness, operational ef ciency, managerial awareness,and operational effectiveness. The most signi cantimpact of the ISO 14001 process was in improving

the environmental awareness of managers and work-ers, and in clarifying everyone s responsibility forenvironmental improvements. Employee trainingprograms increased awareness of the importance of

waste reduction throughout theplant and encouraged manydepartments to track and moni-tor their waste. The process of developing the EMS for ISO14001 certication also gener-ated procedural improvements.In developing and certifyingthe EMS, managers were

required to improve existingpractices for processes, equip-ment, and areas of the plant that could increase emis-sions. The Environmental Department had todevelop and maintain environmental managementmanuals for wastewater management, cooling watertreatment, waste management, chemical manage-ment, air quality control, storm water pollutionprevention, spill prevention, control and counter-measure plans, and emergency preparedness andresponse. The EMS required more and better recordkeeping and documentation, which led to improvedcontrols in several of the plant s departments.

In an early survey of the perceived impacts of ISO14000 in 1997 before many companies had actuallycertied their EMS Montabon et al. (2000:16) and hisassociates found that among 116 manufacturing com-panies of all sizes in the United States that were cur-rently implementing or had successfullyimplemented an ISO 14001-certi ed EMS, mostreported that it had a positive and signi cant impacton perceived ef ciency and effectiveness of perform-ance on all dimensions except operational lead-times,which were slightly negatively impacted. Theauthors conclude that those rms that haveattained this level of certi cation are not only moreenvironmentally responsible but also more ef cient(and potentially better suppliers).

In their study of high-adopting rms of EMS and pol-


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By June 2001, Germanyhad 2666 of the 3937 EMASregistered sites in Europe


lution prevention practices in Pennsylvania, Floridaand Davidson (2001) found that these respondentsreported major sources of in-plant improvement,including increased pollution prevention, recycling,reduction or elimination of air emissions, worker

health and safety, and solid waste reduction or elim-ination. These plants also reported much higher lev-els of information sharing, community relationshipactivities, use of the Internet to provide environmen-tal information, and citizen surveys than companiesthat were not high adopters. Similarly, the study of printed circuit board manufacturers in Hong Kongalso found that managers perceived positive impactsof adopting and certifying EMS, including costs sav-ings through reduction of waste and energy con-sumption, improved environmental performance,and reduced legal consequences and economic losses(Chin and Pun, 1999).

EMS Adoption in the German Energyand Gas Industry

Are smaller domestic companies driven by the samemotivations as large multinational companies toadopt and certify EMS, and do small companies achi-eve the same bene ts and impacts as larger compa-nies? To explore these questions, Morrow carried outin-depth case studies of ve energy and gas compa-nies in Germany that had registered their EMS underEMAS or ISO 14001.1 Germany is a good location forexamining the motivations andimpacts for EMS adoption because it is a country that has been enthusiastic about bothISO 14001 and EMAS certi-cation, so much so that it has been called EMAS Land (Freimann, 1999). By June 2001,Germany had 2666 of the 3937 EMAS registered sitesin Europe. In addition, German organizations hadreceived 2400 ISO 14001 certi cations, almost 1000more than those in the United States. As of mid-2000,24 regional or municipal electric utilities had facilitieswith EMAS certi cation.

Of the ve companies with EMS that we studied, theMunicipal Utility of Leipzig (Stadtwerke Leipzig orSWL) had one EMAS-certi ed facility; the EnergyProvider of Halle (Energievorsorgung Halle GmbH,or EVH) certi ed all of its facilities through EMASand had a company-wide certi cation through ISO14001. Two rms, Verbundnetz Gaz (VNG) and theMunicipal Utility of Du sseldorf (Statwerke Du ssel-dorf or SWD), were ISO 14001 certi ed. The MiddleGermany Energy Provider (MEAG) had a non-certi-ed EMS.

The German energy and gas companies we studiedwere of mixed ownership they were owned by


some combination of private energy companies andmunicipal governments. MEAG is owned by the Ger-man energy giant RWE (52.5%), as well as Isar-Amperwerke (12%) and a holding company com-prised of eastern German municipalities from the

States of Sachsen-Anhalt and Thueringen (35.5%).MEAG has a 40% stake in SWL and a 20% stake inEVH. The other 60% of SWL is owned by LeipzigerVersorgungs- und Verkehrsgesellschaft , which inturn is owned 100% by the city of Leipzig. EVH isalso owned by Stadtwerke Halle (60%), RWE (16.7%),and Isar-Amperwerke (3.3%). The city of Du sseldorf owns 80% of SWD, while RWE owns the remaining20%. VNG is owned by eight foreign and domesticcompanies. The largest shareholders are Ruhrgas AG(35%), Wintershall Erdgas Beteiligungs-GmbH (16%),and a holding company comprised of 14 eastern Ger-man towns and municipal distributors (14%), includ-

ing Leipzig and Halle.

Motivations for Adopting an EMS

Insights into why German companies of differentsizes in a cross section of industries participate inEMAS come from a comprehensive study of 1264registered sites in 1998 and 1999 by the German Fed-eral Environmental Agency (Umweltbundesamt,2000). Table 1 (below) indicates that among the mostimportant reasons that German companies registeredtheir EMS was to achieve continuous improvements

in environmental performance,identify weaknesses and poten-tial uses of energy sources,motivate employees, improvetheir image, and increase legalcertainty. Companies were alsomotivated to improve theirinternal organization and docu-

mentation, detect and minimize environmental andliability risks, and reduce speci c environmentalimpacts.

In the ve German energy and gas companies thatwe studied, the motivations for adopting or certify-ing an EMS were not much different from thosereported by the study of the broader sample of com-panies in Germany. The employees interviewed in allve German energy and gas companies reported thatimproved documentation and increased ef ciencywere primary motives for developing and registeringtheir EMS (See Table 2 below).

Prior to the adoption of the EMS at SWD, forexample, managers had no way of knowing whichregulations the company had to comply with, or if itcould ful l them. ISO 14001-certi cation of its EMSwas seen as a way SWD could minimize risk andliability. VNG executives saw EMS certi cation as away to make the rm s documentation on environ-


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Table 1 Why German Companies Participate in EMAS a

Motivation Rating

To achieve continuous improvement of environmental performance 8.7To identify weaknesses and potential use of energy sources 8.3

To motivate employees 8.3To improve company image 8.0To increase legal certainty 8.0To improve internal organization 7.8To detect and minimize environmental and liability risks 7.8To reduce company specic environmental impacts 7.2To achieve cost savings 6.8To respond to customer and other pressure group demand 4.9To enhance process and product environmental innovation 4.7

a N= 1264, Rating: 0 = unimportant, 5 = reasonably important, 10 = important. Source: Umweltbundesamt, 2000.

Table 2 Comparison of Motivations Among Five German Energy and Gas Firms for EMS Implementation

and Certicationa

Motivation SWL EVH SWD VNG MEAG

Regulatory compliance and legal Primary Primary Primary PrimarycertaintyImprove documentation Primary Primary Primary Primary PrimaryIncrease efciency Primary Primary Primary Primary PrimaryEnhance employee awareness Primary Secondary SecondaryImprove environmental PrimaryperformanceImage Secondary Primary Primary SecondaryRegulatory relief Secondary Primary Primary SecondaryCost savings Secondary Secondary Secondary

Competitive advantage Secondary Primary Primary Primarya Source: Compiled by authors.

mentally-related material and personnel expendi-tures more comprehensive. At MEAG record-keepingwas decentralized to the department level and eachfacility kept different sets of records. One managernoted, prior to implementation of the EMS, wecouldn t know everything was in order . The EMSwould help MEAG standardize environmental pro-cedures for data collection and record-keeping and

allow uniformly reported information to ow back tothe company s environmental coordinator.

Four of the ve companies reported that regulatorycompliance and legal certainty were primary motiva-tors. Environmental managers at SWL, for example,were concerned that gaps existed in their knowledgeof environmental laws and problems and that EMAScertication would enable the company to avoid non-compliance with German federal, state and locallaws. One SWL manager noted that EMAS certi -cation was something that would enable the CEO tosleep better at night . The most signi cant motivationfor implementing an EMS at MEAG was to achieveand maintain regulatory compliance. An EMS wouldprovide some assurance that MEAG would be ableto integrate new requirements into its existing systemeffectively, rather than be forced to reassess and

European Management Journal Vol. 20, No. 2, pp. 159171, April 2002166

revamp its environmental management activities inthe light of every statutory change.

Three of the ve companies sought competitiveadvantage through EMS adoption. EVH saw EMAScertication as a way to enhance its competitiveness by showing that its plants were certi ed as environ-mentally-friendly, and thereby hoped to convince

people to switch from coal heating to district heating.Enhancement of the company s image as a sociallyresponsible rm was a primary motivator in twocompanies and a secondary motivator in two compa-nies, as was the prospect of regulatory relief. VNG smanagers were interested in certi cation becauseabove all, it would bene t our image. We are anenvironmentally friendly company. The certi cationwould show that we place a lot of value on safety. Managers at EVH believed that EMAS would serveas a symbol of the company s commitment to protect-ing the environment.

None of the companies saw cost savings as a primarymotivator although it was identi ed as a secondarymotivation in three companies. SWD s managershoped that EMS certi cation and implementationwould help the company develop a clearer idea of


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Table 3 Bene ts German Companies Gained from Participating in EMAS a

Bene t Rating

Better organization and documentation 7.7Increased legal certainty 7.1

Improved image 6.9Greater employee motivation 6.6Reduced resource use 5.8Enhanced plant safety 5.7Opportunity to set the example for suppliers 5.0Optimization of process ows 4.9Improved cooperation with authorities 4.5Positive market effects 4.3Cost savings 4.2Competitive advantages/safeguard of the site 4.0More favorable insurance/loans 2.3Opportunity to use public funds for development purposes 2.1

a N= 1264 Rating: 0 = not applicable, 5 = partially applicable, 10 = fully applicable. Source: Umweltbundesamt, 2000.

how much money was being spent on environmentalmanagement and to identify the potential for costsavings. Only one company reported enhancedemployee awareness as a primary motivator and intwo companies it was a secondary motivator. SWD smanagers saw certi cation of its EMS as a way toheighten employee awareness, particularly of environmental management responsibilities thatremained at the plant level.

Impacts and Results of EMS Adoptionand Certi cation

The German Federal Environmental Agency s studyof 1264 companies participating in EMAS also pro-vided insights into the bene ts or results that they

Table 4 Comparison of Impacts in Five German Energy and Gas Firms of EMS Implementation andCerti cation a

SWL EVH SWD VNG MEAGRegulatory Improvement Improvement Improvement Improvement ImprovementCompliance andLegal CertaintyDocumentation Improvement Improvement Improvement Improvement Minor ImprovementEfciency Improvement Improvement ImprovementEmployee Improvement Improvement Improvement ImprovementawarenessEnvironmental Not related to EMS Minor improvement Not related to EMS Improvement Not related to EMSPerformanceImage Unclear Unclear Improvement Some improvementRegulatory Relief Signi cant None None Relief below

expectations

Cost Savings Signi cant Insigni cant Insigni cant Insigni cantCompetitive None Insigni cant In winning some Not applicable untilAdvantage proposals 2001

a Source: Compiled by authors.


achieved from EMS development and registration.The most applicable bene ts perceived by these com-panies were better organization and documentationof their environmental activities, increased legal cer-tainty, improved image, and greater employee motiv-ation. They considered reductions in resource use,enhanced plant safety, the opportunity to set anexample for suppliers, and optimization of processows as partially applicable. Less applicable bene tsincluded improved cooperation with authorities,positive market effects, cost savings, competitive

advantages, or more favorable insurance rates. (SeeTable 3.) Managers interviewed in the ve Germanenergy and gas companies reported mixed resultsfrom their implementation of EMS. (See Table 4.)Although they perceived strong impacts in someareas that motivated them to adopt EMS originally,not all of their expectations were met.


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Even if the EMS did notaffect someone directly, ittypically affected everyone

indirectly


Like the cross-section of German companies sur-veyed by the Federal Environmental Agency, all veof our energy and gas case companies reportedimprovements in regulatory compliance and legalcertainty, as the result of developing and registering

their EMS. EMS implementation served two mainfunctions for these companies. First, it gave compa-nies a reason to take the time to comb through Ger-many s complex and extensive environmental lawsand regulations (some public utilities have as manyas 2000 pieces of applicable environmental legalrequirements to ful ll) in order to determine theirstance on compliance. For example, prior to EMSimplementation, SWD s managers did not know if the rm was violating laws or regulations because ithad never taken the time to check. Second, theknowledge gained by going through the process of coming to terms with applicable laws and regulations

enabled environmental managers to more easilyadapt to the relatively frequent changes that occur inGerman environmental regulations.

Four companies saw signi cant improvements intheir environmental documentation and a fth com-pany saw minor improvements. Each EMAS and ISO14001-certied company saw certi cation as a con-rmation from an independent third party that thecompany was doing a success-ful job of understanding andaddressing applicable Euro-pean, German, State, and local

environmental laws and regu-lations. Furthermore, certi -cation provided each companywith an extra sense of securitythat it had not overlookedsomething important that could eventually lead to amajor violation.

All of the companies had inadequate environmentaldocumentation prior to EMS implementation. Inad-equate documentation led to a lack of consistency interms of when and how environmental activitieswere conducted. Lack of comprehensive docu-

mentation made it dif cult to identify problems, because each employee had a different perception of how the environment was managed at the company.Before rms could write an environmental handbookor more detailed procedures, however, they were for-ced to improve the fundamental aws in theirenvironmental management processes. SWL, EVH,SWD, and MEAG each made substantial strides incentralizing and systematizing their activities duringthis phase. For VNG, centralization meant combiningenvironmental, safety, and quality management intoone department. Once processes and responsibilitiesfor tasks were clearly de ned, SWL, EVH, and SWDwere then able to write comprehensive environmen-tal handbooks describing these processes andresponsibilities in detail. Detailed environmentalhandbooks have also led to an increased level of organizational security in much the same way that


the regulatory compliance process did. Thus, EMSdid not increase bureaucracy, as some critics believe.Companies with EMAS certi cations, SWL and EVH,had the most transparent environmental docu-mentation: they were the only companies willing or

able to provide detailed documentation and copies of their environmental statements for this study.

The same companies reported improvements inemployee awareness. Considerable resistance to EMSimplementation was encountered at each certi edcompany. SWL, SWD, and VNG had hoped that anEMS would increase employee awareness of environ-mental issues. Each certi ed company did indeedreport substantial improvement in employee aware-ness, and attributed such improvement to EMSimplementation and certi cation. Universal EMSacceptance has not yet been achieved, however, at

every company. SWL and SWD in particular notedthat they are still in the process of overcoming resist-ance, which has been heightened to a certain extent by deregulation of the industry in Germany, and bythe consequent focus on cost reduction in the elec-tricity sector.

Nevertheless, most companies reported signi cantimprovements, and indeed this is one area in which

results of EMS implementationand certi cation exceeded ex-ante expectations. DuringEMS implementation, many

employeeswere consulted andeducated on environmentalissues. Additionally, the EMS became accessible to allemployees. Even if the EMS did

not affect someone directly, it typically affectedeveryone indirectly by virtue of its general goals,such as continual environmental improvement,increased recycling, and waste reduction. Each certi-ed company introduced more consistent trainingand audits that served not only to remind employeesabout environmental issues, but also to encourageimprovement. EMS certi cation was important in

that it gave more weight to each company s emphasison environmental management. Because of theinclusion of a third-party auditor, employees have been more likely to take the EMS more seriously.

With the exception of SWD, no company in this studyhad been highly motivated to implement an EMS bythe expectation that its environmental performancewould improve substantially. Although each com-pany reported environmental improvements after theadoption of the EMS, only EVH thought ex post thatan EMS had improved its environmental perform-ance. The consensus was that investment in mod-ernizing power plants and grids resulted in the mostsigni cant environmental improvements, and thatthese investment decisions were made on the basis of economic and regulatory rather than environmentalconsiderations. Clearly, environmental improve-


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ments were recognized as important secondaryeffects.

Unlike the cross section of German companies thatreported improved image as an applicable bene t,the energy and gas companies were uncertain of theimpacts of EMS certi cation on their image. SWL andEVH perceive that their image has improved throughthe increased transparency of their operations. Publicresponse to these overtures has been disappointing,however. SWL and EVH have received numerousinquiries about their environmental statements, butmost of these inquiries have come from academics,students, and other companies, rather than from cus-tomers. Other studies have found this to hold true formany other German companies (Gerlin, 1995). Thus,EMAS certication does not seem to be making muchimpression on the intended audience. This isespecially important because both SWL and EVHwere motivated to certify their EMSs to demonstratetheir environmental accomplishments to their cus-tomers in increasingly competitive retail markets.Thus, this is an area in which certi cation has notmet expectations. Perhaps the recent revision of EMAS guidelines, which now allow the use of anEMAS logo in advertising, will rectify the situation.

Like other German companies, the energy and gasrms saw relatively weak impacts on competitiveadvantage, although most had hoped for such anadvantage prior to EMS certi cation. Only one com-pany in this study, SWD, reported that ISO 14001 cer-tication had resulted in an advantage in winningcontracts. Again, each of the certi ed companies hadexpectations for some form of regulatory relief priorto undertaking the certi cation process. No across-the-board relief has resulted from certi cation, how-ever, because no European or German federal relief initiatives have been generated. VNG was exemptfrom a new requirement that rms covered by theEU Accident Ordinance have to draft and submit asafety concept to the EU. Strictly speaking, however,this relief was not related to VNG s EMS, but ratherto its Integrated Quality Management System.

Of the companies in this study, SWL was the majorwinner in terms of regulatory relief. In Germany,States are free to decide how companies must reportenvironmental data to them. The State of Saxonychose to require all power plants to report their datavia real-time monitoring. Because of lobbying fromthe Environmental Alliance of Saxony, however, thisrequirement was not applied to facilities with EMAScertication. As a result, SWL has been able to save between DM 250,000 and DM 300,000. Because thedata reporting requirement decision is left open tothe States, however, rms in other States could notexpect such relief. The Environmental Alliance of

Saxony-Anhalt, for example, to which EVH belongs,has not been as successful in persuading Stateof cials to agree to such exemptions.

Cost savings were not really an important motivating


factor for German energy and gas rms to implementand certify an EMS. For three of the ve companies,ex post analyses showed cost savings were insigni -cant. SWL had tried to do a cost-bene t analysis priorto EMS implementation, but was unsuccessful

because it was unable to usefully quantify expected benets such as improved ef ciency and organiza-tional security. Except for SWL, which was sparedfrom having to implement a costly real-time emis-sions monitoring system, cost savings have not beenmeasurable. Environmental management systemshave broadly increased ef ciency, but these bene tsremain dif cult to quantify. EMS implementationcosts for SWL and EVH, the only companiesreporting such information in detail (and the onlytwo EMAS certi ed rms in this study), were sub-stantial but not higher than expected in either case.EVH spent approximately DM 260,000 ($115,000) on

EMS implementation alone. The costs associated withcertication, including continuing personnel costs of training, added about DM 88,000 ($39,000). SWLspent 169 man-days on EMS implementation and cer-tication, not including DM 55,000 ($24,000) in con-sultants fees. VNG reported partial costs of DM25,000 for EMS implementation and DM 13,000 foran auditor for certi cation.

Conclusions

In brief, a review of the relatively sparse body of anecdotal information, case studies, and surveyresearch on environmental management systemsindicates that several factors motivate companies toimplement and certify EMS. Among multinationaland large corporations in the United States, the desireto integrate environmental, health and safety man-agement with total quality management systems, therequirement of parent corporations to improveenvironmental performance, the preference for get-ting beyond regulatory compliance, and nding cost-cutting opportunities are frequently mentioned asmotivators to adopt EMS. Large multinational com-

panies, especially in the chemical, electronics andautomobile industries, also seem to be motivated bythe desire to extend environmental managementstandards to their suppliers. Among companiesoperating in international markets, especially in theUnited States and Europe, ISO 14001 or EMAS certi-cation is an indicator of environmental responsibility and is often seen as a way of developing com-petitive advantage.

The German Federal Environmental Agency s sur-veys of German companies participating in EMASidentify the desire to improve environmental per-formance, make better use of energy sources, mot-ivate employees, improve company image, increaselegal certainty, and upgrade environmental docu-mentation as leading motivators. The small- andmedium-sized energy and gas companies that we


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studied had similar motivations but somewhat differ-ent priorities. They were primarily motivated by thedesire to improve documentation, ensure regulatorycompliance, and increase the ef ciency of their oper-ations.

Although, in general, the motivations of companiesin the United States and Germany are similar, differ-ences in priorities may be due to the more speci cconcerns of small- and medium-sized companieswith organizing themselves more comprehensivelyand effectively to deal with environmental regu-lations and domestic competition. Because gas andenergy industries in Germany are undergoingderegulation, they are especially motivated to ndways of cutting costs and improving ef ciency inorder to enhance their competitiveness. None of theve companies we studied expected signi cant

environmental performance improvements from theEMS because they had adopted, or were in the pro-cess of switching to, cleaner and more sophisticatedtechnology and equipment.

Most of the case studies and surveys show that itis dif cult to attribute environmental improvementsdirectly to the adoption and certi cation of EMS.Environmental management systems seem to beinstrumental, however, in bringing about a variety of impacts. The studies indicate that EMS implemen-tation and certi cation do help companies to inte-grate their environmental, health and safety manage-

ment systems and in some cases their environmentaland quality management systems. Perhaps becauseEMS certication requires strong employee partici-pation and environmental training programs, manyrms report increased employee awareness of theenvironmental aspects of their jobs and of theirresponsibilities for reducing negative impacts. ISO14001-certied companies also report environmentalperformance improvements, especially in the areas of waste recycling, air and waste emissions reductions,materials reuse, energy and water conservation, andenvironmental and safety incidence reduction.

German rms participating in EMAS that were sur-veyed by the German Federal Environmental Agencythought that the most applicable bene ts were betterorganization and documentation of their environ-mental management activities, increased legal cer-tainty, improved company image, and greateremployee motivation. The ve German energy andgas companies that we studied similarly reportedimprovements in regulatory compliance and legalcertainty, improved documentation, improvementsin employee awareness, and some degree of improvement in ef ciency as the result of implementing and certifying their environmentalmanagement systems.

Much more research needs to be done on a broadersample of companies to determine whether or not themotivations for adopting and certifying environmen-


tal management systems are ful lled by the bene tsand impacts of doing so. Anecdotal information, andthe relatively few case studies and surveys of compa-nies participating in ISO 14001 and EMAS seem toindicate that companies both perceive bene ts and

experience positive impacts from implementingenvironmental management systems, and that these benets generally meet ex ante expectations. Those benets tend to focus on management improve-ments, employee awareness, systematic and inte-grated documentation and procedures, and selectedenvironmental performance improvements. Docu-menting cost savings, increased competitive advan-tage, regulatory relief, and operational improvementsis more dif cult, both in large multinational corpora-tions and small- and- medium sized domestic compa-nies.

Note

1. Interviews in the German energy and gas companies werecarried out by David Morrow over a nine-month period in2000. A written questionnaire was used to determine thecontent and extent of each company s environmental man-agement activities, as well as to obtain information oncapacity variables that can affect certi cation. The ques-tionnaire was translated into German and crosscheckedwith native German speakers. In addition, on-site inter-views were conducted with three to four environmentalmanagers, chief executives, and upper level managers ineach company. The survey and interviews were sup-plemented with archival data from each company.

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