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Corporate managers are faced with many salient issues in their attempt to maximize value for
the different and sometimes conflicting interests of stakeholders. One of the most salient
issues pertaining to value creation with multiple stakeholder groups is the relationship of the
organization to its natural environment. The increased population pressures, urbanization,
environmental education, and changes in underlying social values have stimulated the recent
renewal of interest in environmental issues, both by individual citizens and corporations. For
example, the Roper Organization (1993) in a study of US households found that over fifty
percent of households perceive that they are "sympathetic" environmentalists. Shrivastava
(1996) suggests that there is a "ground swell of public awareness and support for
environmental protection" due to the "seriousness of environmental problems."
Pedro's Inc., a U.S. based firm specializing in the development and marketing of eco-friendly
bike equipment, has also developed its competitive advantage based on environmental
issues. Pedro's makes bicycle tire tools out of recycled milk bottles and bike solvents and
lubricants from environmentally friendly, non-toxic chemicals. Other firms have adopted
environmental / eco-labeling to attract the "educated, affluent, and mainstream" green, or
environmentally sensitive, consumer (Ottman, 1993). Even the global fast food giant
McDonald's has made great strides in becoming more eco-friendly. McDonald's has
cooperated with the Environmental Defense Fund to develop a waste reduction action plan
along with other initiatives such as a corporate level environmental affairs officer and a design
team whose goal is to reduce packaging (Frause & Colehour, 1994).
PURPOSE
The purpose of the present study is to explore the implications of the emerging ISO 14000
environmental standards. ISO 14000 is a new set of formal inter-industry, international
standards for environmental management being developed by the British Standards Institute
and the International Organization for Standardization (ISO) (Johnannson, 1994/95). ISO
14000 will be a comprehensive environmental system involving a set of fourteen standards
which will approach environmental management in a similar manner as the ISO 9000
standards approached quality management (Fredericks & McCallum, 1995).
This study will discuss the foundation areas for each of the standards comprising the ISO
14000 system and demonstrate that ISO 14000 is a Total Quality Environmental system which
integrates environmental marketing, corporate environmental policy, and Total Quality
Management (TQM). A discussion of each of these concepts is presented next. The ISO
14000 environmental management standards are then discussed, including value of ISO
14000 certification, components in the ISO 14000 series, and ISO 14000 implementation
issues. Finally, ISO 14000 is shown to be the integrator of environmental marketing, corporate
environmental policy, and Total Quality Management.
ENVIRONMENTAL MARKETING
Why are global businesses concerned with the environment? The adoption of more
environmentally congruent practices and policies by business is derived from the increasing
concern for the natural environment by consumers. This increased level of sympathy toward
the environment is manifested by the finding that a majority of US households are willing to
pay price premiums for environmentally sensitive products (Roper Organization, 1992).
Miles and Munilla (1993) in defining the eco-marketing concept suggest that "consumers are
... concerned with a holistic view of corporate image, particularly with regard to social concern
and (environmental) responsibility." Sheth and Parvatiyar (1995) suggest that corporations'
internal environmental marketing efforts should be augmented by government policy, resulting
in the two dimensional construct of "sustainable marketing" which includes: (1) "proactive
corporate strategies that would benefit both corporations and society;" and (2) "government
intervention for sustainable development." Environmental marketing, green marketing, eco-
marketing, and sustainable marketing are all different perspectives of the attempt by
businesses to adapt to the growing environmental concerns of various stakeholders.
The U.S. Federal Trade Commission's 1992 guidelines on environmental marketing focus on
advertising and define the parameters that are acceptable when making environmental claims
(Coddington, 1993). Table one summarizes the differences between the
sustainable/green/environmental marketing perspective and traditional marketing. Table two
provides an adaptation of Van Waterschoot and Van den Bulte (1992) revised 4P marketing
mix classification framework.
Eco-Labeling
Consumers are looking for indicators of a business's commitment to the environment with
environmental labeling standards. Eco-labeling identifies a product as complying with one of
several environmental certification programs. Likewise, manufacturers and marketers are
attempting to differentiate their products by ecological labeling, with the objective of
enhancing market share or profitability. Coddington (1993) reports that environmental labeling
programs have developed on a global scale, beginning with the German Blue Angel program
in 1978, followed by the Canadian Environmental Choice program in 1988, and the Japanese
Eco-Markprogram in 1989 among others. Table 3 summarizes selected international
environmental labeling standards.
Lifecycle Analysis
Environmental Design
Many organizations with a pro-active perspective towards environmental issues have adopted
(or are in the process of adopting) formal intra-organizational environmental codes of conduct
or industry-specific codes. In addition, many firms are developing their own corporate
environmental statements (see for example Anheuser-Busch, 1970). Formal non-industry
specific intra-organizational statements of environmental principles include: (1) the Coalition
for Environmentally Responsible Economies (CERES) principles, also called the Valdez
Principles; (2) the International Chamber of Commerce's Business Charter for Sustainable
Development, or the GEMI Principles (International Chamber of Commerce, 1990); and (3)
the United States Federal Trade Commission's Guidelines for the Use of Environmental
Marketing Claims (Coddington, 1993).
Cardy and Dobbins (1996) suggest that "what exactly constitutes TQM seems to differ across
organizations and quality proponents." However, the quality movement has focused
organizational resources on improving customer satisfaction and value. Taguchi's (1987) and
Taguchi, Elsayed and Hsiang's (1989) social loss function framework suggests that quality is
defined by the total costs that a product (or an organization) inflicts upon society. These
losses could be either due to: (1) variation in the total product, or (2) negative externalities
that result from any stage in the product's lifecycle, from product development to ultimate
disposition. Miles, Russell and Arnold (1995) suggest that when firms incorporate quality as
the foundation of their corporate culture they should consider: (1) both the production and
consumption externalities associated with the product; (2) the satisfaction of both latent and
explicit customer needs; and (3) the creation of the highest total value possible for the specific
product/market interface. These definitions of quality suggest that organizations consider, if
not always explicitly, the environmental effects of the production and consumption of the
product.
The Global Environmental Management Initiative (GEMI) created the Total Quality and
Environmental Management (TQEM) model in an attempt to "marry environmental
management and Total Quality Management" (Coddington, 1993; GEMI, 1993). TQEM is the
integration of a comprehensive lifecycle approach to TQM and environmental management
which includes (GEMI, 1993): (1) customer identification and satisfaction; (2) continuous
improvement; (3) a proactive approach to problem solving; and (4) a systems approach to
business, explicitly including the natural environment. TQEM even adapts some of the basic
TQM tools into an environmental quality framework including: (1) Plan, Do, Check, Act cycle;
(2) fishbone diagrams; (3) pareto charts; (4) control charts; (5) flow charts; and (6)
benchmarking (see GEMI, 1993). Hence, TQEM appears to be an extension of TQM, explicitly
taking into consideration environmental issues and costs pertaining to the production,
consumption, and the ultimate disposition of the product, its packaging, and related by-
products. Table four provides a summary of the similarities between TQM and TQEM.
The value of ISO 14000 certification to business is derived from the relationship between total
benefits that arc estimated to accrue to the adopting organizations and total cost. Although
ISO 14000 has not yet been fully released (at the time of the present study), an assessment
of the costs of ISO 14000 adoption can be estimated using the costs of adopting the BS 7750
standard (on which the ISO 14000 series was modelled). The pecuniary and non pecuniary
costs of achieving BS 7750 certification are quite high and could in time cost from "$100,000
to $1 million per plant." (Ouellett, 1995) Then, why is ISO 14000 a rational decision for an
organization attempting to maximize shareholder wealth?
There are seven potential benefits accruing to business that achieve I$O 14000 certification:
(1) internal motives based on a corporate culture that values morality, ethics, and corporate
social responsibility; (2) ability to charge more for products due to effect of differentiation
(Kotler, 1994); (3) certification as a barrier to entry in some markets resulting in less
competition (see for example Porter, 1980, 1985); (4) enhanced corporate image which may
allow some special considerations when dealing with public stakeholders; (5) adoption of
standards may help insulate the firm against charges of environmental negligence (Rothery,
1995); (6) the adoption of sound environmental practices such as energy conservation and
recycling may actually produce cost savings (Chemicals Business News Base, June 9, 1995),
including lower insurance rates (Tibor & Feldman, 1996); and (7) voluntary adoption of
environmental practices allows commerce to have input on standards and may pre-empt
government regulations.
Not all firms will realize each of these benefits. However, firms are more likely to achieve ISO
14000 certification, thereby attaining many of these benefits when: (1) the firm is operating in
an environment where ISO 9000 is a business requirement, hence ISO documentation
procedures are well understood; (2) the firm is ISO 9000 certified (irrespective of business
environment pressures) and is familiar with the certification process; (3) the corporation has a
documented company-specific environmental policy; (4) the firm operates in an industry
where environmental codes of conduct have been adopted; or (5) the firm operates in an
industry in which extensive environmental laws and regulations apply. Table 5 summarizes the
motives for ISO-14000 adoption.
ISO 14000 Components
Stoller (1995) suggests that ISO 14000 will consist of several standards classified into six
categories: (1) environment management system; (2) environmental auditing; (3)
environmental performance evaluation; (4) lifecycle assessment; (5) environmental labeling;
and (6) environmental aspects in product standards. A brief discussion of each of these
categories follows.
The ISO 14000 Environmental Management System (EMS) standard (ISO standards 14001,
14004) provides basic requirements for firms implementing an environmental management
system. The standard defines an environmental management system as "that part of the
overall management system which includes organization structure, planning activities,
responsibilities, practices, procedures, processes, and resources for developing,
implementing, achieving, reviewing, and maintaining the environmental policy" (Tibor &
Feldman, 1996). Environmental policy describes a firm's intentions, values, culture, and
principles with respect to environmental performance. ISO 14000 parallels the approach TQM
takes toward quality management, where a quality management system is seen as a
philosophical business orientation. In this way the ISO 14000 standards help define the
corporation's environmental policy. ISO 14000 requires that the firm declare in a policy
statement a strong commitment to comply with environmental regulations and minimize
pollution.
The third standard in the ISO 14000 series addresses environmental performance. This
standard, ISO 14031 (environmental performance evaluation) generates information which
assesses the organization's total performance with respect to the environment. Environmental
performance indicators are identified which detail performance in all environmental aspects
identified in the EMS. These environmental performance indicators are then used to evaluate
and continuously improve environmental performance.
Lifecycle assessment/analysis and environmental labeling are also components of the ISO
14000 series, proposed as individual standards 14040-14041 (lifecycle assessment) and ISO
14020-14022, 14024 (environmental labeling). Hence, the ISO 14000 standards also integrate
environmental marketing into TQEM.
The final component of ISO 14000, proposed as the ISO 14060 standard, addresses
environmental aspects in product standards. The purpose of ISO 14060 is to increase
awareness among standard developers of the potential impact a new standard could have on
the environment. Standards should be developed which achieve the intended performance
while reducing pollution, conserving resources, and guarding against "reasonably foreseeable
misuses" (Tibor & Feldman, 1996).
Dramatic organizational change, such as ISO 9000 or ISO 14000 adoption, does not come
without costs. Costs will accrue both to the adopting organization and its stakeholders. These
costs may be explicit, such as registration fees, training of personnel, or costs incurred to
modify current processes; or implicit, such as moral and productivity problems, shifts in
supplier chain relationships, or competing organizational objectives. Jump (1995) suggests
four major barriers to ISO 14000 registration: (1) cost effectiveness; (2) agency costs; (3) ISO
14000 registration producing trade barriers; and (4) potential conflicts with corporate
reengineering. Gloria, Saad, Breville and O'Connell (1995) propose similar impediments in a
recent study of 34 Fortune 500 companies involved in life cycle analysis (a component of ISO
14000) implementation, stating that life cycle analysis was impeded by costs (ranging "from
$15,000 to $300,000 per product") and data quality/management issues. These barriers and
potential solutions are summarized in Table 6.
Other authors discuss the importance of human resources in the implementation of ISO
9000/14000. A recent study of 290 ISO 9000-certified companies in Belgium indicated that 81
percent believe that contribution of the human resources department is "absolutely essential
in making the quality system work smoothly" and in implementing ISO 9000 (Vloeberghs,
1996). Although many firms in this study utilized the human resource department on an ad-
hoc basis (for training and other specific human resource issues), some firms reported
enlisting the human resources department on a strategic level, giving this department "active
participation" in management meetings and input on quality policy. Based on the similarities
between ISO 9000 and ISO 14000, it is likely that the human resource function will be of
critical importance in ISO 14000 implementation. Tibor and Feldman (1996) advocate this
position in stating that "teamwork, cooperation, good communication, and extensive training"
(all supported by or directly related to the human resources department) are "critical" aspects
of effective ISO 14000 implementation.
A step-by-step approach will likely enhance the success of ISO 14000 implementation. First, it
is typically beneficial to perform an initial environmental SWOT analysis (Tibor & Feldman,
1996). Here, current environmental management practices/policies are analyzed and data
collected regarding measurement/ monitoring of the environmental system. In looking at its
environmental strengths/ weaknesses and opportunities/threats, a firm can determine how
ISO 14000 implementation efforts should be focused. If the SWOT analysis demonstrates that
environmental concern has not become part of the "corporate culture" of the organization,
firms should focus on "identifying those objectives that can be achieved with available
resources and those that result in clear business benefits" (Tibor & Feldman, 1996). This
includes reduction of regulatory violations, recycling, and waste reductions. In this case, using
the basic elements of the ISO 14001 standard may be appropriate.
After implementing a "simple" environmental system (evidenced in the basic elements of the
ISO 14001 standard) designed to increase company-wide environmental awareness, top
management would likely invoke training of employees. It is critical that management provide
both time and resources in support of ISO 14000 certification. It is likewise crucial that
personnel be trained on the systems-based approach ISO 14000 requires. Teamwork and
good communication are essential in the certification effort (Tibor & Feldman, 1996). As has
been evidenced by ISO 9000-certified companies, the final phase in ISO 14000
implementation/certification is a change in company culture. The ultimate goal is to have a
firm where employees own "the environmental issues and the environmental aspects of their
jobs" (Tibor & Feldman, 1996).
ISO 14000: Integrator of Environmental Marketing, Corporate Environmental Policy, and Total
Quality Management
With the ISO 9000 quality management series and the pending adoption of the ISO 14000
TQEM standards, the ability to engage in global marketing is dependent on an organization's
willingness to adopt international quality and environmental management practices. ISO
14000 provides a formal set of consistent international standards which integrate many of the
emerging environmental and quality issues. In summary, the ISO 14000 standards formally
integrate and codify many of the TQM, environmental marketing, and environmental policy
concepts which have been previously developed.
Given the widespread, global adoption of the ISO 9000 quality standards, it is reasonable to
assume ISO 14000 will be likewise embraced. ISO 14000 certification will allow firms to
market globally without constraints due to environmental concerns and to promote its
products as being eco-friendly to an increasing environmentally oriented international
markets.
Subsequent research should address the impact of ISO 14000 adoption on all the
organization's salient stakeholders, including: (1) customers, (2) communities, (3) employees,
(4) government, and (5) owners. One area or focus should be pertaining to the human
resource management implications of ISO 14000. For example, Ocean Spray cooperative has
considered paying its member/producers not only on the traditional attributes of the quality
and quality of the cranberries delivered, but also on the grower's environmental performance
(Murray, 1996).
Companies may also wish to reconsider the manner in which employees are hired,
compensated and promoted under the ISO 14000 umbrella. It is possible that environmental
concern may be incorporated into hiring procedures. Performance evaluations could include
environmental concern as well as recycling and waste reduction initiatives. Additionally,
attitudes toward teamwork and cooperation with other employees (important employee
attributes in the system-based ISO 14000 approach) could be used in determining salary
increases. Further research should also consider the implications of ISO 14000 adoption in
gaining competitive advantage in specific domestic and global markets.
Row 1: Objective/Perspective
Objective
Perspective of Customer
Perspective of Government
Perspective of Demand
Notes:
1 Sheth and Parvatiyar (1995)
PRODUCT
MASS COMMUNICATION
Non-personal message with goals of creating awareness, interest,
and desire.
PLACE
Where and how of availability
PERSONAL COMMUNICATION
Personal messages with goals of maintaining awareness and interest
and stimulating desire and sales.
PRICE
The cost and method of payment
Notes:
1 Van Watershoot and Van den Bulte (1992)
Row 3: Attributes
Blue Angel
Germany
Environmental Choice
Canada
Similar programs in New Zealand and Australia.[2]
Eco-mark
Japan
United States
Green Seal
United States
BS 7750
United Kingdom
ISO 14000
World
Notes:
1 Frause and Colehour (1994)
2 Coddington (1993)
Row 1: Attribute
Row 2: TQM
Row 3: TQEM
Dimensions
Founders
Deming
GEMI
1950's
1990's
Champions
Theoretical Roots[7]
ISO 9000
ISO 14000
Notes:
1 Deming(1986)
3 Taguchi (1987)
5 Svedberg (1990)
6 GEMI (1993)
A - Motive
B - Support
A B
Notes:
1. Donaldson and Preston (1995)
2. Polonsky (1995)
4. Shrivastava (1996)
6. Porter (1980)
7. Porter (1985)
8. GEMI (1994b)
9. Rothery (1995)
A - Implementation Barrier
B - Potential Solution
A B
Notes:
1 Jump (1995)
A B
14012
14015
14022
14024
Adapted from Miles, Munilta, & Russell (forthcoming) and Tibor & Feldman (1996)
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