The revision of the IS0 14001 business standard has introduced a tougher focus when it comes to corporate environmental management – and puts the emphasis squarely on the shoulders of top-level management in order to get there. Tim Balcon, CEO of the Institute of Environmental Management and Assessment, delves deeper into the standard and explains why it is redefining the ‘E’ in CEO.
ISO 14001 - one of the world's most widely used business standards - has introduced new, tougher requirements on corporate environmental management. CEOs in companies such as Rolls-Royce are now expected to play a key role in leading companies to deliver business and environmental benefits.
Research shows that business standards can make a net contribution worth billions to economies by providing frameworks for efficient management, opportunities to win new business and a pathway for improving performance.
CEOs are well versed in the benefits of standards, the competitive advantages they bring and how they provide systems to future-proof their organisations. With organisational resilience in mind, the 'turn-to' standard for a business that understands the importance of putting environment and sustainability at the heart of business thinking has just been revised, elevating the role of CEOs in its implementation.
ISO 14001 is the world's most successful environmental management standard. It is a multifaceted cross-business management system with a laser-like focus on driving down businesses' environmental impact. ISO 14001 has consistently delivered a wide range of benefits including cost savings and winning new work since it was introduced in 1996. This explains its popularity - the latest data reveals that there are 324,148 certificated organisations in 170 countries.
In recognition of a growing list of climate, resource and energy threats facing organisations worldwide, a new version of the ISO 14001 standard has just been published to highlight the role environmental management plays in modern business. Critically, it now requires companies to place environment and sustainability as a key part of an organisation's strategy - with top-level management leading the drive.
Achieving the new standard
The revised version of ISO 14001 requires organisations to make sustainability and environmental management a strategic issue. While skilled environment and sustainability professionals typically manage implementation of the standard, the 2015 version sets new expectations on CEOs to demonstrate leadership for environmental performance and associated cost savings.
The role of the CEO will be vital, as implementation of the standard requires a birds-eye overview to align a multitude of strategic business challenges and opportunities. These range from shaping the organisation's strategy, assessing future risks and opportunities, corporate governance, reputation, effective performance, compliance with legal and regulatory requirements, and climate taxes to understanding your organisation's supply chain vulnerability.
ISO 14001 provides an essential management framework to help CEOs quickly and efficiently navigate their way through this complex set of challenges and drive business benefit. For the fully engaged CEO, the economic case is clear: ISO 14001 can bring significant and ongoing cost savings through efficiencies in energy, water, fuel and materials. According to the Institute of Environmental Management and Assessment's (IEMA) research, 40% of ISO 14001 users saved at least £10,000, and some have some more than £5 million since implementation. Further, companies are required to demonstrate year-on-year environmental performance improvements, benefitting the business and the environment.
The new requirements also mean organisations must demonstrate that they take the growing external environmental challenges - such as climate change, flood risk, resource availability and fluctuating energy prices - into account against the context of their main business objectives, making their business more resilient in the future. Senior management must demonstrate that they are taking these risks into account and ensure that they feature in business planning.
In 1997, just a year after the first ISO 14001 standard was first published, Rolls-Royce was one of the first companies to realise the benefits of ISO 14001 and began the process of implementing it.
Nigel Marsh, global head of environment at Rolls-Royce, has been there since the start of implementing the standard, and has always championed the benefits of ISO 14001 certification to the business and the importance senior management, such as CEOs, has in leading organisations through the necessary changes.
"Sustainability is inherent to our strategy. Our goal is to be recognised as a leading sustainable business. Our world is changing, populations are increasing. We need more power but not at any cost to society. The world needs better power. At Rolls-Royce, we believe that advanced engineering has a critical role to play in meeting the environmental and societal challenges the world faces.
"Our vision is to deliver better power for a changing world. With the customer at its heart, our strategy will deliver better power for our customers, use innovation to secure a better future and build on today's achievements to develop a better business, ready for the opportunities ahead," Marsh says.
It is difficult to fully gauge the environmental and cost savings that have been attributed to ISO 14001 as Rolls-Royce has always been committed to sustainability, however the savings can be estimated to be in the tens of millions. Marsh considers that the greatest savings lie in the reductions of energy and greenhouse emissions. Their other greatest environmental improvement was the reduction in waste solvents - by 70% in five years.
The main advantage and underlying reason for Rolls-Royce choosing to implement ISO 14001 was to have a clear formal system that delivers compliance, consistency and guidelines. ISO 14001 provided them with a framework to follow that allowed them to set targets, make improvements and respond to customer questions regarding environmental issues. The air industry in general was also starting to express an interest - Rolls-Royce considered that it was important, as a leading business in the aeronautics sector, to invest time and effort into reducing their impact on the environment.
There were some difficulties faced while implementing the standards as Rolls-Royce operates multiple businesses on shared sites and was also acquiring new companies. Another challenge was coordinating corporate and HS&E approaches with the certification bodies. These challenges were overcome by providing bespoke tools and programmes.
The key skills that Marsh considers were essential to successful delivery of the ISO 14001 standard were having a clear environmental vision, the need to be strategic, strong leadership from the CEO and board, good programme management, the ability to collaborate well and having great communication throughout the business.
The role of CEOs
With the advent of the revised standard, CEOs in particular have a critical role in supporting ISO 14001. Ensuring that environment and sustainability (and the framework for managing these) are central to your business strategy, and ensuring that the investments you make in ISO 14001 are driving business returns are just some of the key ingredients for success.
The businesses that have benefitted most from ISO 14001 are the ones where the chief environment/sustainability officer and the CEO have worked together. Marsh, says that CEOs have an important part to play in supporting environmental management systems.
"Ensuring that environment and sustainability is inherent to your business strategy is key," he believes. "An enlightened CEO will ensure that investing in technology, people and ideas to improve all aspects of a business performance will drive profitable growth. At Rolls-Royce we are committed to continually improving our operations. We will continue to build on today's achievements to meet the business opportunities and challenges of the future."
For CEOs, the revised ISO 14001 standard quite simply provides the management framework to successful navigation through growing environmental and sustainability challenges, enabling companies to manage environmental performance in the most rewarding way, managing compliance, satisfying stakeholders, gaining recognition for being a responsible business, reducing risk and, ultimately, making serious cost savings. If a business case for ISO 14001 lands on your desk, you should give it your full attention.