SMEs represent the largest sector in the global economy. Therefore it is essential that this cohort understand the growing need and expectation for improved sustainability, and how they as a sector can contribute through the implementation of relevant and effective Environmental Management Systems (EMS).
ISO:14001 provides organisations with a framework of requirements for a structured approach to environmental management processes. Although the standard is more process than results orientated, it does prescribe a cyclical approach using PDCA (Plan Do Check Act) emphasizing the importance of continual improvement. This results in better environmental performance and improved economic outcomes for SMEs.
Research suggests that there are two reasons why SMEs choose to implement ISO:14001.
- Symbolic effect/benefits.
This is an externally driven reason and reflects the socio-political context in which an organisation operates, where regulators, investors or customer have defined environmental policies and require evidence of improved environmental performance. In effect ISO:14001 legitimizes an organisation’s branding and marketing efforts, signaling that they are operating in a environmentally responsible and sound manner by proactively managing their environmental impact on all interested parties/stakeholders.
Evidence supports the conclusion that SMEs overwhelmingly adopt ISO:14001 because of customer-driven requirements, and that the extent of these requirements is influenced largely by their position on the broader supply chain. ‘Voluntary’ compliance objectives are essentially being imposed onto smaller firms from larger firms for whom image and branding are critical in gaining a competitive advantage. There are also increasing examples of mandatory requirements for ISO:14001 certification in some of the more environmentally progressive countries. For example in Sweden certification is mandatory for all social enterprises and in the UK some industrial sectors are required to have environmental permits granted to ISO:14001 certified organisations.
This raises the question as to whether or not ISO:14001 is truly voluntary. Also with a growing number of international voluntary standards being adopted by large companies, e.g. UNPRI, GRESB, meeting key customer needs is becoming more complex and risks a reactive approach to EMS by smaller organisations in the supply chain and product life-cycle. The effective delivery of information to meet customer compliance needs is likely to require sophisticated data gathering and reporting systems in SME’s at a potential significant cost.
2. Substantive reasons – improved performance outcomes.
This refers to the adoption of ISO:14001 to increase efficiencies in environmental processes and improve environmental performance. The research on this is a bit vague, largely because there historically has been very little consensus on how to measure ‘environmental performance’. This has improved somewhat over the last few years with the introduction of some standardized key performance indicators, however much variation still exists resulting in complex demands being placed on the smaller players in the product/service lifecycle.
A recent research study of SME’s however does indicate that substantive benefits do indeed occur from the implementation of ISO:14001, even if the the decision was driven by customer requirements. This is not surprising given the standards focus on continuous improvement, effective processes and the alignment of EMS with the organisations overall strategic objectives. Evidence shows that these substantive benefits translate into improved environmental performance in particular with regards to energy and emission outputs generated by the organisations operational activities.
There is increasing evidence to support the view that the decision to adopt ISO:14001 by SMEs is not one of ‘choice’, but of necessity. By extension this suggests that rather than adoption being voluntary it is in reality an enforced compliance in order to adhere to the prescribed terms and conditions of doing business. However this is ultimately being driven by consumer demand and a growing social conscience with regards to how organisations use our planets resources and emit damaging VOCs into our atmosphere. Also there is increasing evidence to show that the implementation of an effective EMS not only improves environmental performance but increases economic outcomes through improved efficiencies in the use of resources.
Reference: Johnstone, Hallberg, 2020, ISO:14001 adoption and environmental performance in SMEs, Journal of Environmental Management 266 (2020) 110592.
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