ISO 14001 Standards and Supply Chain Sustainability - Research Paper Example

ISO 14001 STANDARDS AND SUPPLY CHAIN SUSTAINABILITY By al Affiliation Table of Contents Title page ..........................................................................................................1 Table of contents...............................................................................................2 Executive summary ...........................................................................................3 Introduction .................................................................................................... 3 Purpose and Report Plan ................................................................................. 4 ISO 14001 Standards ......................................................................................6 Criticism of the ISO 14001 standards ............................................................. 7 ISO 14001 as a means of achieving a competitive advantage ......................... 8 Research Methodology ..................................................................................... 9 Sample Collection ............................................................................................9 Interview Protocol .............................................................................................9 Data Analysis ...................................................................................................... 10 Results ..................................................................................................................10 Propositions ...........................................................................................................11 Benefits of applying standards to supply chain sustainability................................13 Challenges of applying standards to supply chain sustainability...........................14 Relationship between standards and supply chain sustainability..........................14 Research Implications ............................................................................................15 Practical Implications ..............................................................................................15 Conclusion ..............................................................................................................16 References ...............................................................................................................19 ISO 14001 Standards and Supply Chain Sustainability Executive Summary For a firm to effectively and successfully reap the benefits of ISO 14001 registration and implementation, it should be able to have a better understanding of the uncertainties, risks, benefits, and implications that surround ISO 14001. This knowledge will lead to an assured sustainability within the supply chain and improved plant performance. However, ISO 14001 registrations do not provide for a level playing ground for all the firms that register. This implies that the level of integration and the impact on the sustainability of the supply chain vary significantly from one firm to another. This variation allows other firms to have a competitive advantage from registration relative to other firms that have to struggle with sustainable development, integration and compliance with the same ISO 14001 registrations (Darnall N. et al, 2008, 41). Introduction ISO 14001 is a collection of standards that relate to environmental management whose main aim is to assist organizations in minimizing the negative effects that their operations and /or processes may have on the environment (Sameer K. et al 2012, 1280). Rather than stating requirements for environmental performance, ISO 14001 maps out a framework that a company can follow in setting up an effective environmental management system (EMS). By integrating ISO 14001 with other management functions, an organization may be able to its resource efficiency, reduce wastes, and drive down its operating costs. Besides assisting organizations in meeting their environmental and economic goals, ISO 14001 also provides an assurance to company management, employees, and the external stakeholders that there is appropriate measurement and improvement of environmental impact of the organization (pp 1281). Boiral (2007) describes supply chain sustainability as a business issue that affects an organization’s supply chain in terms of risk to the environment, waste management, and operational costs. In his work, he continues to argue that high-ranking company executives have commonly and progressively perceived sustainability in the supply chain as a crucial element in attaining a long-term profitability to the company. Consequently, instead of putting more focus on monetary cost, value, and operational speed, current purchasing and supply professionals concentrate more on supply chain sustainability (Curkovic S. et al 2011, 75). Supply chains are vital links that relate the inputs of a company to its output (Beamon BM. 2003, 332). As such, there are many reasons as to why ISO 14001 should be potentially useful to supply chain managers. These include: i) Use of ISO 14001 standards will guide the company in the development of integrated systems ii) It will give requirements and guidelines for the supply chain personnel and; iii) It will assist in reducing pollution from the industry leading to reduced operational costs and higher profits Purpose and report plan The main objective of this paper is to establish a relationship between ISO 14001 standards and supply chain sustainability and to critically analyse the relationship between the two. Though accepted internationally, ISO 14001 also faces stiff criticism (Albuquerque P. et al 2007, 120). This paper uses a case-based research in showing that ISO 14001 can be leveraged across the supply chain into a competitive advantage and other related benefits. A look at ISO 14001 registered firms will provide a sure way of comparing different amounts and integration and sustainability in the supply chain. Following will be to posit several research propositions to provide an empirical framework for the impacts of ISO 14001 on supply chain design and how it is will advance in the future. According to Brio and Junquera (2003, 340), supply chain management represents a significant model shift of modern business management. The paradigm shift takes the form of recognition of individual businesses to be competing as supply chains rather than as autonomous entities (pp 343). A company’s environmental impact does not only depend on the manufacturing of a product but also on the supply chain components. Thus, unless a formal environmental management system (EMS) sets the requirements as daily standards, the unregulated daily operations of an organisation may impede its goals for a long-term sustainability (Bhatt VN. 1998). However, Bhatt (1998) asserts that more often, a number of companies find difficulty both in defining their own sustainability goals and in integrating these goals into their strategy and supply chains. As a result, they resort to dependence on inferior and unstable supply chain design that hampers their ability to accomplish both EMS and sustainability goals. In his 1999 research to determine what drives organisations into seeking ISO certification, Clark realized that an organisation might effectively implement a sustainable strategy by choosing to collaborate with suppliers that have policies supporting its own EMS (pp 14). The research also indicates that for several organisations, the main goal of a sustainable supply chain is to shun the manufacturing of goods and/or provision of services that produce negative impacts on the environment. Instead, they aim at embracing a marketplace that embraces environmental principles by focusing on the development of internal controls that meet environmental needs of their own processes and the needs of the supply chain (Beagley R. 2006, 51). According to Beagley (2006, 52), an increase in the number of companies purchasing from the sustainable supplier leads to a greater integration of sustainable practices throughout a supply chain. This stimulates the supply chain to take a hands-on measure in a bid to increase their chances of operating with registered, economically viable organisations. Such a logical approach to the management of the environment undertaken by organisations forms the basis of formal assessment procedures set by the ISO 14001 and defines the relationship between these standards and supply chain sustainability (King AA et al 2005, 1091). ISO 14001 STANDARDS The development of these standards aimed at allowing for the achievement of a full integration of business and environmental management through the establishment of an EMS. According to ISO, an EMS is a part of the overall management system that includes the organisational structure, responsibilities, planning activities, practices, procedures, processes and resource for development, achieving, reviewing, and maintaining and environmental policy (Cheng J. et al 2008, 283). The standard also aimed at enabling companies and their supply chains to take a more effective approach in managing environmental issues (Tibor T. & Feldman I. 2002). Due to the perceived benefits associated with its registration process, ISO 14001 is rapidly becoming the nationally and internationally accepted environmental standard. Most of these benefits relate with direct advantages such as effective EMS and sustainability strategy, in combination with the potential of keeping current and obtaining new business (Matthew P. & Aseem P. 2005, 235). The ISO 14001 standards, asserts Danja (1997, 1), provides the core requirements for an organisation to develop and implement an EMS. It includes demonstrations, descriptions and options that together assist in both the implementation and strengthening its relation to the overall management of the organisation. However, a number of researches are still underway in a bid to determine, with precision, the exact relationship that exists between ISO 14001 and the sustainable supply chain design (Berger G. et al, 2003, 62). Criticism of the ISO 14001 STANDARDS Despite the above-perceived benefits of the ISO 14001 standards, a number of uncertainty, controversy, and criticism still surround it. According to Michal and Piyush (2004, 31), apart from the high cost of registration, the second-most widespread criticism of this standard is that it is not connected directly enough to environmental performance. Sameer K. et al (2012, 1283) demonstrates this further by explaining that a registered organisation can still posses sustainable processes and waste streams since registration with ISO 14001 does not give a guideline on how a company can improve efficiency or pollute less neither does registration require the organisations to show compliance in ensuring that their stakeholders are satisfied. Furthermore, since managers have to focus on documentation when dealing with the ISO 14001 standards, some managers view the standards as another documentation-driven process for bureaucrats to improve and the use of the paper trail becomes another liability for issues that need no compliance (Suzan, J. 1997, 33). In his 1998 research on Implementing ISO 9000 and ISO 14001 Concurrently, Abarca reports that criticism has been raised regarding the failure of ISO 14001 to assess effectively, the extent to which the planning processes and the environmental requirements of a company are integrated into its overall business planning. Such assessments are normally crucial for any company that is in the process of evaluating a supplier for a potential long-term partnering relationship (p. 46). This assessment process is further deterred by the fact that no set of the ISO 14001 criteria is developed around the appropriateness of the investments based on the total needs and strategic position of the company (p. 47). ISO 14001 as a means of achieving a competitive advantage A number of reasons exist as to why EMSs should be potentially attractive to management (Berger G. et al, 2001, 65). First, there is a potential of an EMS becoming important to supply chain members. Secondly, there is the potential of pollution prevention that leads to reduced costs of production and higher profits (p. 66). Finally, EMS development provides firms with a unique environmental resource, capabilities and benefits that may lead to competitive advantage (p. 67). A number of organisations that were previously reluctant to pursue registration have currently embraced ISO 14001. This has been followed by an attempt by some organisations to reconceptualise ISO 14001 as a program that can promote a sustainable supply chain strategy and lead to a competitive advantage. During their course of interviewing company managers and quick visits to manufacturing facilities for a number of their recent research projects, several authors have been able to make observations on the implementation of ISO 14001 in the company’s supply chain strategy. They have used the observations to help develop a structured interview protocol that have been used to explain the concepts of using ISO 14001 in supply chains through a systematic research procedure (Chen I. & Paulraj A., 2004, 283). Below is a summary of the research procedure and the results of the research relating with the main ideas derived from the literature in this field. Research Methodology The main objective of the study was to explore the strategic supply chain implications of ISO 14001 adoption aiming at building a theory. Qualitative data collection was most appropriate, as the focus of this research was purely explanatory through interview with supply managers. This research study was conducted on nine companies that have a registered EMS and experience with ISO 14001.standards in their supply chain strategy development. Sample selection For the purpose of this study, the researchers wanted to work with companies in a well-established industry where ISO 14001 registration was prevalent. Thus, automotive industry companies were sought, while limiting the researchers’ efforts to plants that have experience with ISO 14001. The list of the automotive suppliers generated was based on geographic proximity and web-based search of ISO registered plants. The researchers added companies to their sample during the process of conducting the interview based on the recommendations of the respondents. The sample in this study included automobile OEMs and Tier I suppliers (Darnall N. et al, 2008, 33) Interview Protocol Just as is suggested by Darnall (2006, 361), a structured interview protocol was used at all sites visited by the researchers. The main topics of the protocol related to ISO 14001 adoptions, reasons for adoption, performance, costs, operating risks, and on criticisms of the EMS standard (p 363). The data gathered from the interview of the company managers were recorded in field notes and the team further reviewed more information from the companies’ publications regarding their experience with ISO 14001. Data Analysis After conducting their research, the team embarked on data analysis using both within and across case analysis. Within case analysis allowed the researchers to examine ISO 14001 in a single context while the across case analysis was used as a form of replication in which the constructs of interest in one setting were tested in other settings (Magali D. 2007). The controlling idea for the researchers was to determine the reasons as to why these companies embraced ISO 14001 and to compare these reasons with their hypotheses concerning the endorsement of these standards. In determining the patterns of the companies’ experience with ISO 14001, the between case analysis was employed that included using a variety of tools to reduce and categorize the data in a meaningful fashion (Magali D. 2007). The data analysis followed a process of combination, renaming, and redefining to come up with main concepts refereed to as the benefits of adopting the ISO 14001. These are the concepts that enabled the researchers to posit several research propositions as discussed below. Results As previously presented in the literature, the results from this field study confirm a number of reasons why most companies do not embrace ISO 14001. These reasons are commonly known as risks and are financial issues, exposure to the standards, need for change in management, and the risk of competition. These reasons confirm many of the pre-existing issues with ISO 14001 registration and backs up the literature that cost is still a primary issue on the side of the company managers (Abarca D. 1998, 48). Also from this research study, in the process of reducing and categorizing data, the researchers found six main concepts for pursuing ISO 14001 registration. The list from the most prevalent to the least prevalent is competition, customers, reputation of the company, mitigation of risks, resource management, and reduction of costs (Magali D. 2007). Additionally, a number of companies have been in the forefront in turning what other companies has previously perceived as risks of ISO 14001 into a business case that derives and explains the benefits of ISO 14001 registration (Beagley R. 2006, 54). Following is a position of several research propositions that seek to provide an empirical framework for the impacts of ISO 14001 on sustainability, supply chain design, and how the supply chain will evolve in the future. Propositions iv) Proactive environmental management-ISO 14001 registration leads to a more proactive environmental management that includes process and performance measurement relating directly to sustainability across a supply chain. As is substantiated by Albuquerque et al (2007, 126), the evolution of sustainability within supply chains has led to the need for measurement, continuous improvements and relationships to performance within a firm. A number of firms have opted to set their own environmental objectives and include these objectives in their business plans. This serves to assist them in promoting efficiency by setting targets to reduce wasted raw materials, disposal costs, and natural resource consumption as highlighted in the ISO 14001 standards (p. 128-129). Additionally, these ISO 14001-registered plants and formal environmental management systems (EMSs) will tend to have higher levels of communications that is required between OEMs and Tier I suppliers. They will also record higher levels of performance across a supply chain than those plants with informal systems and are nonregistered (Boiral O. 2007). v) Resource and cost efficiency – ISO 14001-registered firms that have direct relationships with other registered firms in their supply chains will have hiked levels of waste reduction and cost efficiency as compared to the firms that are not registered. Even though the costs of registration with and implementation of ISO 14001 may prove expensive to small or medium companies, the completion of the process takes the firms into a stage of efficient resource management, environmental concern in production, and a general reduction in the firms’ operating costs. These firms will also have sustainable practices and projects with better guidelines from the ISO 14001 standards as compared to nonregistered firms (Sheldon C. 1997). vi) Competition and reputation – ISO 14001-registered firms with direct relationships to other registered firms will have higher levels of customer relationship management and be positively associated with greater opportunities for expansion than the nonregistered firms are. These registered firms will also have fewer issues with employee health and experience reduced numbers of safety incidents as compared to the nonregistered firms. Thus, a number of plants have a thrust to be registered with ISO 14001 to avoid falling behind their competitors and to increase their access to new customers and business partners (Berger G. et al, 2001, 70). vii) Involvement and communication – in this case, the ISO 14001-registered firms that have direct relationship to other registered firms will have a firm positive relationship between formal communication, training, monitoring/control systems, and performance within the firm. This will also involve higher levels of involvement and communication that will be positively related to more internal and external integration with the supply chain members (Brio J. & Junquera B, 2003, 345). Most firms that adopt an EMS like the ISO 14001 are generally more inclined to be innovative by putting more effort on employee and management involvement in their day-to-day operations. It emerges that transparency and sharing of information with groups of stakeholders have led to more involvement of the top management in sustainable activities. The support by the top management is crucial to ensure the implementation of the ISO 14001 standards after registration, as ISO 14001 lacks specificity, which makes it a challenge for technical people to implement (p. 346) From these propositions, we are able to clearly define our objective in this paper, that is, the relationship between standards and supply chain sustainability: Benefits of applying standards to supply chain sustainability Organisations that apply the ISO 14001 in their supply chain sustainability procedure may realize the following benefits in their supply chain: viii) Operations that take into consideration, effective environmental management practices by majoring on a supply chain that ensures that the organisation releases little waste into the environment. The ISO 14001 provides the firm with a framework that it can follow in setting up an environmental management system that will ensure reduction in waste production and efficiency in resource management. ix) The use of ISO 14001 in a firm will provide it with a number of guidelines that it can follow to reduce environmental pollution. This is directly translated into a reduced cost of supply chain; a constant supply chain due to the conservation practice endorsed, and reduced operating costs in the firm. x) Companies that never had a well-established procedure to developing supply chain strategy may use the procedure in the framework that is mapped by the standards to develop an EMS that ensures supply chain sustainability in the firm. This will enable the firm to have a relative advantage in the market, even in terms of resource acquisition and supply chain stability. xi) A supply chain that operates with an economically viable organisation that is registered with the ISO 14001 standards has a high chance of reaching sustainable suppliers who practice staunch environmental management requirements. As such, such a supply chain will be assured of sustainable chain supply and exposure to a number of customers registered under these standards. The result is a sustainable supply chain and effective environmental management practice. Challenges of applying the standards to supply chain sustainability xii) The ISO 14001 standards are international standards that are quite general and thus, cannot be used to address the various needs of both large and small firms that may have registered with them. xiii) The standards needs extra time and trained personnel to ensure its effective use in the firm. This leads to the use of resources of the firm in the training procedure and the addition of staff, a resource that could have been invested in other areas for the operations of the firm. xiv) The benefits of using the standards take a lot of time to be realized in any firm and this long delay in its benefits may destabilize the operations of a particular firm. Relationship between standards and supply chain sustainability From the benefits and challenges highlighted above, it would be prudent to state that the supply chain sustainability of any organization is depend on whether it has endorsed the ISO 14001 standards or not. For a firm that has endorsed the standards, the standards will not spell for it the requirements for environmental conservation, but will map for it the necessary environmental management guideline that it can apply to ensure a sustainable supply chain in its system. Supply chain sustainable is proved for a firm if a firm operates with a sustainable supplier is fully registered by the standards, as in that case, the firm is exposed to a number of firms that also use the standards. Thus, the shared benefits of the firms can be realized by all these registered frims. Research Implications The only limitation to this research is the fact that its results are derived from case studies that were carried on a limited number of companies and firms. The results that were obtained from these studies are evidently tantamount to change considering the large number of national and global firms that have currently registered with ISO 14001 standards. With the increasing benefits that accompany ISO 14001 registration, a number of organisations (both small and large) are currently embarking on how to gain a competitive advantage in the market relative to the other registered firms by fastening their level of integration and the setting of environment-friendly objectives. Thus, the theory developed from this research does not have to be generalized but should be tested thoroughly, from time to time, through similar successive researches. Practical Implications This work posits practically four main propositions that should be considered in ensuring that a company obtains the full benefits of ISO 14001 registration. Amongst these benefits of ISO 14011 as an EMS are an assurance of a sustainable supply chain design and guidelines to ensuring environmentally conscious operations. The benefits of registration with ISO 14001 standards are only realized when a firm seriously embark on the implementation of the standard. The implementation is usually a continuous process and requires cooperation and participation from both the employees and the company management at large. Conclusion From the foregoing, this paper has demonstrated that companies that fully integrate a formal EMS such as ISO 14001 have important benefits internally and externally in terms of a sustainable supply chain strategy. However, companies that considers ISO 14001 registration as just a game to keep business may not be able to experience the additional benefits as in the case with more proactive firms where more effort is put into performance and supply chain integration. Firms considering registration with ISO 14001 as an opportunity to improve their EMS and supply chain integration of environmental standards are more likely to be a part of a more sustainable supply chain. Supply chain managers that intend to improve the integration of sustainability within their base of supply need to seek out suppliers who are able to translate ISO 14001 registrations into internal efficiency improvement. On the other hand, suppliers who never use ISO 14001 as a driving mechanism for change will only do what is necessary for compliance but not for integration. Thus, supply chain managers should not sought out for suppliers of this kind (Chen I. & Paulraj A., 2004, 127). The interview protocol from the research above never explicitly built the concept of sustainable supply chain but it emerged that it normally the customers that force ISO 14001 on their suppliers. Even large OEMs generally never recognised ISO 14001 as a supply chain tool but merely put pressures on their suppliers to conform to this standard. The large OEMs dumped registration responsibility on their suppliers and put their attention on getting their own facilities registered instead of using it as a tool for supply chain design. From the study, the suppliers expressed the need for an industry network that could enable them to learn more about which metrics to apply, waste reduction opportunities, and potential operational improvements. Thus, Tibor and Feldman (2002) put it that there is need for the integration of long-term supply chain design in conjunction with ISO certification. This will also enable the mentoring of important suppliers and the alignment of evolving firm strategies to include sustainable attributes of value chains. By exploring the strategic dimensions of sustainable supply chains, this work clearly, contribute to theory development. This is backed by positing of new research propositions that are in agreement with previous research propositions in this same topic. From this research, it is worth stating that future research should critically consider the strategic position of a firm in any assessment that involves the impacts of ISO 14001 on the operations of the firm. A similar consideration should be taken when modelling supplier selection practices that includes ISO 14001 registration of a supply base. ISO 14001 is a tool for supply chain sustainability when used under the right circumstances. Firms may use ISO 14001 to tap into various synergies that relate to the greening of a supply chain that include a better perception of the environmental processes, prevention of pollution, lowering of waste, and improved performance (Curkovic S. et al, 2011, 80-81). In their Journal of political reforms (2004, 32), Michal and Piyush assert that in moving environmental management towards supply chains, companies need to principally address the potential lack of certification credibility and aim at simulating the use of improved certification practice. Additionally, customer companies should develop internal facilitators during the implementation of ISO 14001 and actively engage their participation in ensuring supply chain sustainability using the ISO 14001 standards in the company. Thus, skills and knowledge building when it comes to hiring managers for a particular firm is very vital especially in engaging suppliers and motivating them for the environmental work (Sheldon C. 1997). References Abarca D. 1998. Implementing ISO 9000 and ISO 14001 Concurrently. Pollution Engineering, 30(10), pp 46-48 Albuquerque P., Bronnenberg B. & Corbett C. 2007. A spatiotemporal analysis of the global diffusion of ISO 14000 and ISO 14001 certification. Management Science, 53(3), pp 120-133 Beagley R. 2006. Is ISO 14001 Worth it? The Journal of Business Strategy, 17(5), pp 50-55 Beamon BM. 2003. Designing the green supply. Logistics Information Management, 12(4), pp 332 Berger G., Flynn A., Hines F. & Jones R. 2001. 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