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IR/PS CSR Case #07-10

ISO 14001: An analysis
By: Kristyn Wilcox

GRADUATE SCHOOL OF INTERNATIONAL RELATIONS AND PACIFIC STUDIESUNIVERSITY OF CALIFORNIA, SAN DIEGO
Prepared for Professor Peter Gourevitch
Support from the Panta Rhea Foundation
Edited by Jennifer Cheng, MPIA 2008
Corporate Social Responsibility
Winter 2007

Abstract:
The 20th century saw international trade expand on a massive scale and many firms foundthemselves within an ever increasing matrix of global suppliers. Within corporate headquarters it
soon became apparent that very little was actually known about the environmental management
practices within their partnering firms who were so integral in the creation of the final product. In
1996, the International Standards Organization launched a product called ISO 14001 which
outlined a standardized environmental management system that could be applied in any industry
and in any location. Further, the standard called for the utilization of third party certification as amechanism for verifying compliance to the standard at the firm level. Despite the rapidly growing
popularity of ISO 14001 there have been many criticisms regarding the ability of ISO 14001 to
truly illustrate the day to day practices within a firm and the authenticity of its commitment todecreasing its environmental footprint. This paper outlines in detail the history of the ISO standard
and the logic of accountability as designed by the ISO 14001, the need and the major players
which facilitated its creation and ultimately the criticism which threatens its legitimacy.

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Table of Contents
I. ISO 14001 series: An Introduction .......................................................................................3
II. The need for a standardized and decentralized EMS.........................................................5
III. Components to the ISO EMS .............................................................................................9A. Incentives and disincentives in choosing to certify ISO 14001:..........................................12
B. Auditing and Certification.................................................................................................13
C. Costs: Weighing the cost with the reward .........................................................................14
IV. The Drafting of a Standard: How the ISO 14001 was created........................................16
V. ANAB: American National Accreditation Board .............................................................18
VII. Criticism ..........................................................................................................................22
A. Transparency....................................................................................................................22
B. A tool for PR?...................................................................................................................24
C. Can standards lower the overall value of an EMS?...........................................................24
VIII. Conclusions ....................................................................................................................27
IX. Discussion Questions.........................................................................................................31
X. Key resources for understanding the ISO 14000 series. ...................................................33
XI. References .........................................................................................................................34
XII. Appendix..........................................................................................................................35

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I. ISO 14001 series: An Introduction
The 20th century saw the opening up of borders and the expansion of international trade on a
massive scale. International firms found themselves within an ever increasing matrix of global
suppliers and trading relationships which could change at a rapid pace. This complex and global
network was termed the supply chain but soon it became apparent within corporate headquartersthat very little knowledge was actually known about the environmental management and practices
within those outside firms which were so integral in the creation of the final product. In 1987, theInternational Standards Organization (ISO1), a Geneva based nongovernmental organization,
whose specialty was in the creation of production standards, stepped forward with a product which
systemically dismantled the idea of a ‘management system’ and created a management process
standard which could be applied in any context regardless of location or the nature of the firm.

The ISO, having been the primary standard setter in the context of technology related standards
since 1946, was internationally recognized not only for the quality of its products but also because
the ISO is international in nature. ISO membership is comprised of not for profit or private sector
national organizations/bodies. These organizations which make up the membership of the ISO
include both public and private stakeholders and are therefore seen to be diverse groups whichmeet together to devise benchmarks and conformity assessment schemas.

The process

management system which was devised in 1986, known as the ISO 9000 series, was the product of
all of its international members who needed a non-context specific set of best management
practices. Firms needed to know that not only were their trading partners providing them with a1

While ISO is indeed the acronym for the International Standards Organization, they prefer the Greek definition of
the word iso – “equal” as the definition of their philosophy. (Cascio).

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quality product but that a certain level of documented best practices and policies had gone into thecreation of that product.

During the 1990’s a number of voluntary ‘environmental management systems’ (EMS) guidelines
were launched as the threat of government regulations cracking down on inefficient and polluting
firms increased. Though these threats were primarily made by the governments of OECD
countries, many firms also came under pressure by their consumers to verify that the goodpractices employed by the parent company were also followed throughout the supply chain,regardless of which countries these firms were located. However, lack of credible information
about the environmentally related policies and practices of firms both at home and abroad
frustrated parent firms’ abilities to comply with their consumers’ demands. It was during this timethat the ISO’s membership base, which is comprised of both government representatives andprivate sector representatives, began calling for the creation of an environmental management
standard. This standard had to be malleable enough to be applied in any setting and encourage
innovation while being severe enough to insure firm compliance with their respective
government’s regulations.

Commonly referred to as ISO 14001, the 14000 series used the best practices of the ISO’s 9000
series and added environmental processes and policies to create a management system rooted inenvironmental best practices. While other voluntary, environmental guidance based standards
were created and competed with ISO 14001, the 50 year history and established credibility of theISO, in combination with the success of the 9000 series, allowed the ISO guidelines to take off
quickly. Firms already familiar with the ISO 9000 series could easily understand the philosophy

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and implementation ‘road map’ of the 14000 series (though implementation requires a muchhigher level of environmental sophistication and accomplishment). Furthermore by building on
the earlier 9000 series the new environmental management standard could retain the powerfulhistory of ISO branding.

The ISO’s designation as an international community of actors and stakeholders insures that every
ISO standard has had a multitude of voices and inputs from around the world consult on its
creation before it emerges as a final product. This is a key factor which weighs in on its global
popularity. The actual details of how and why the ISO 14000 series emerged in 1996 are given
below.
II. The need for a standardized and decentralized EMS
As the environmental impact of production processes becomes increasingly revealed in the media,
global awareness and concern on a community level has simultaneously increased.

Thisawareness has prompted firms to decrease their polluting habits or pay the price in their bottom
line. Through a variety of media exposés over the past 15 years many firms have seen the
reduction of profits and dips is stock prices when news of pollution and malpractices are madepublic. Recognizing their own vulnerability, or perhaps guilt, firms are increasingly taking theirenvironmental impact seriously, or at minimum emphasizing a commitment to responsible
environmental behavior in corporate rhetoric. However, independently crafting an environmental
management system or set of environmental policies can be a difficult and complex process evenfor the most savvy of managers. The implementation of the 14000 series requires extensive
documentation of carefully crafted firm policies and educational procedures for all employees in
addition to the major investments that often have to be made to achieve compliance with state and6

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national regulations. Thus the ISO 14000 series is incredibly attractive to firm managers because
it is in fact a structured approach to environmental management processes. The ISO 14000 builds
on the ‘best practices’ 9000 series to help firms understand governmental and local regulations
while emphasizing policies concerning environmental targets and also the training of staff within
the work place, in a way which is independent of firm location. The ISO was designed with
universal characteristics which, if implemented correctly, insure that firms all over the world areoperating with the same environmental outlook while consistently increasing their corporate
environmental targets. This is very attractive to firms with extensive, complicated supply chainsor those who change vendors and trading partners often, who do not have the luxury of being able
to visit each production floor. The major attraction, and perhaps it could be argued, the underlying
theory, of the ISO 14001 is the reduction of asymmetrical information about individual firm
practices relating to environment impact reduction.

The creation of the 14000 series was widely supported by the governments of OECD countries.
As pollution levels increase and environmental degradation becomes increasingly more of an issue
governments are increasingly under pressure from their constituents to institute lawful regulations
which will force firms to cut back. Not only is the design of such regulations incredibly complex
and heatedly debated the implementation and compliance mechanisms are incredibly expensive
and a drain on public funding2.

Therefore many governments, including the United States,

vigorously supported the creation of a voluntary standard which had real bite to it. The more
popular the standard became the more firms would voluntarily cut back on their polluting habits

2

Michael Porter and Mark Kramer, “Strategy and Society: The Link between Competitive advantage andCorporate Social Responsibility,” Harvard Business Review, December 2006

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and inefficient waste of resources which would reduce the need for government intervention.
Though governments do not have committees which are members of the ISO, individual public
sector officials are members their nation’s ISO membership body and provide feedback from thegovernment’s point of view. The membership structure of the ISO will be detailed below.

Given that ISO 14001 voluntary conformity and certification actually does signal adherence to abasic set of standards, corollary firm compliance to the standardized environmental management
system allows multinationals a guarantee of management and environmental practices within their
supply chain without having to investigate or determine a benchmark themselves. Effectually, a
trading partner’s adherence to ISO 14000 allows a firm a degree insurance against market
pressure, stakeholder pressure and public relations problems. This has become a major feature of
attraction of the ISO 14001 and arguably, the reduction in risk from stakeholders and consumers
can be considered part of the ‘need’ for the standard. However the appeal of a standard thatallows a firm seeking environmentally conscious trading partners to have proof of daily
management practices without individually verifying themselves is simultaneously the source ofits primary criticism. Though appealing in theory, the ability of a certification scheme to convey
information about the daily practices of a firm involves a lot of trust. Trust, which perhaps is not
be warranted considering many firms have the incentive to convey an appearance of conformity,rather than authentic conformity, to the standard. In essence, the standard, while it attempts toincrease accountability and documented policy changes, is still voluntary and non-binding in a
judicial sense, although trading partners are relying on its authenticity.

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Just as there are firms who will require the use of the ISO 14001 for its benefits without truly
caring about the actual results, there are also firms with the growing sense that the act of requiring
trading partners to adhere to the ISO 14001 standard (which in its most basic application requires
strict adherence to each firm’s respective government laws and regulations) actually transfers bestpractices to the exporting countries. Therefore an ISO 14001 stipulation in a trading contract has
the effect of increasing the rate of a partnering firm’s adherence to their respective government
standards (in those countries where government regulations do exist). This was dubbed the‘California Effect’ by David Vogel in 1995 when the ISO 14001 series was initially being
drafted3.

ISO 14001 has been increasingly adopted by firms in developing countries despite the fact thatdesign and implementation can be exceptionally costly for those firms. Thus, these firms require astandardized environmental management system as well that is both known for quality and also
globally recognized. There would be less credibility in instituting their own version or using alittle known standardized EMS from their own country. There would be low incentives for parent
firms seeking trading partners to take the time to investigate a foreign system and have faith in its
authenticity when they can partner with firms who have implemented the same system they havein their own processes. Therefore, for firms in developing countries the firms the payoff is thecompetitive advantage they receive over similar firms when competing for, or maintaining,international trading contracts. Specifically, for multinationals looking to outsource an item in the
supply chain, 14001 certification signals an organized, documented approach to corporate

3

Prakash, Aseem and Matthew Potoski. “Racing to the Bottom? Trade, Environment, Governance, and ISO
14001.” American Journal of Political Science. Vol.50. No. 2. April 2006. pg. 351.

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environmental responsiveness and is thus an attractive quality in firms they contract with.
Certification, which will be discussed in detail below, provides an added layer of accountability,
as certification is performed by a third party consultant, also detailed in a later section, who isknowledgeable in the ISO behavioral benchmarks, methods for documentation, implementation,
and also individual country regulations.

To understand this more accurately, the individualcomponents and the nature of the standard itself must be analyzed.
III. Components to the ISO EMSThe ISO 14001 series guides organizations in the creation environmental policy by helping
managers define environmental objectives and examine the environmental impact of products,
inputs, and services. It encourages them to set environmental objectives; obliges them to meetlegal and regulatory requirements; expects training for employees to be provided; and offers
suggestions for oversight and auditing procedures. At this juncture, a differentiation must be madebetween the ISO 14001 environmental management system and a corporate social responsibility
report.

The ISO 14001 series does not compete with any of the recent corporate social

responsibility guidance based reporting movements though these missions may overlap in somecases. The 14001 series is strictly concerned with environmental policies and impact at the firmlevel and does not make normative judgments about a firm’s relationship with surrounding
communities or their employees4.

As previously stated, the ISO 14001 builds on the ISO 9000, a standard for quality
management principles. The 9000 series has been very popular as compliance to the standard
indicates a commitment to consistent business practices including transparency of firm policies.
4

The ISO has begun the process of creating a formal Corporate Social Responsibility reporting initiative andstandard creation completely different from the ISO 14000. It is true their mandates may overlap.

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The 9000 series arose from concerns that although an end product may be considered of ‘highquality,’ perhaps the practices within the firm that produced end product were not. In effect, the9000 series came about for many of the same reasons that the ISO 14000 series did. Consumers
and trading partners dealing with intricate supply chains wanted assurance that business practices
were fair, action was taken against corruption, and employees were not only safe but also hadaccess to transparent firm documents and policies. The systemic application of best practices infirm policies and behaviors is also referred to as “process management.” The most recent iterationof the 9000 series (released in 2000) stresses the consistency of process management not just on
the production floor but also seeks to integrate upper executives and stakeholders5. These criteria
are folded into the 14000 series as well. Logically, the ISO 9000 series is subject to many of thesame issues of credibility and criticisms that the 14000 series is. However, the sheer widespread
application and global popularity of the 9000 series has lent the 14000 series a level of credibility
that other environmental management standards do not have. Therefore the 14000 series cannot
claim to emerge as the most widely recognized EMS because it was necessarily ‘the best’ butrather because it was able to build on the ISO’s name and history while other voluntary
environmental management systems could not.

The ISO 14001 uses the process management principles of the 9000 series as a foundation withthe addition of environmental policy and environmental safety elements. The International
Standards Organization gives the following breakdown of the 9000 series and then lists thosecharacteristics which were developed to create the 14001 series.
The ISO 9000 principles for quality management are grouped as follows:5

http://www.iso.ch/iso/en/iso9000-14000/understand/qmp.html#TheNextStep. Accessed 5/26/2007.

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The ISO 14001 adds the additional elements:• Guidelines for an environmental management system• The current status of compliance with legal requirements• Guidelines for environmental auditing• Environmental labels and declarations• Environmental management – performance evaluation, principles and framework, goal andscope definition and inventory analysis, lifecycle impact assessment, environmental
aspects
into product design and development• Environmental communications• Guidelines for measuring, reporting, and verifying entity project level green house gas
emissions• The level of [internal] verification to meet market requirements or stakeholder expectations• Employee training and awareness programs6”
One of the key attractions to these management systems is their flexibility while still being
universally applicable.

While each firm must meet each requirement, their design andimplementation of each requirement will be different, making each interpretation of the standard
unique. Certification assures the sophistication of each element or insures that the firm is actively
working towards compliance with a particular criteria but may require additional time or resources
to do so. However, certification maintains that a firm is in strict compliance with their nationaland state laws and regulations. Therefore while every nation will have different laws andregulations with varying degrees of severity, complexity and supervision, ISO 14000 certification
indicates that lawful conformity has indeed been met. Further, the ISO 14000 requires that there

6“The ISO 14001 family of standards, guides and technical reports.” ISO. www.iso.org

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be some form of internal accountability structure measuring compliance to the commitments it has
made and goals that it has set for itself. While there is no punishment that the ISO can levy for afirm’s failure to meet environmental policy targets the ISO has stipulated that a firm must have an
individual(s) who is accountable for understanding the targets and maintaining a some type of firm‘road map’ for attainment of those goals.

IV. Implementation, Evaluation and Certification
A. Incentives and disincentives in choosing to certify ISO 14001:
An ISO 14001 EMS assumes that an organization already knows the extent of its environmental
impacts and is therefore willing to go beyond basic lawful compliance by designing andimplementing a systemic environmental management system which ensures a certain level ofquality processes. The catch is - organizations which do not 100% comply with ISO 14001
standards can still be certified ISO 14001. Why is this? Technically, an organization simply has toprove that they are in compliance with their national laws and that an environmental management
system has been implemented and documented which demonstrates that the organization
ultimately seeks to achieve 14001 compliance7.

Many organizations find that an EMS is important to them either because of institutional forces(state regulations or investing to pre-empt lawful regulations) or market based pressures. Howevercosts involved in auditing and consultations are nontrivial and as a result many small to medium
firms are limited to voluntary compliance. Without certification these companies may not be able
to compete for 14001 specific contracts along side those organizations that are certified. However,
7

Environmental, Health & Safety Management Systems Information Center. http://emshsms.com//FAQs.htm#FAQ3. Accessed May 27, 2007.

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they may find it very useful as a marketing tool or to solicit business from intrastate firms who
may find ISO 14001 adherence attractive but not a requirement.
B. Auditing and Certification
In the process of auditing and certifying it is important to note that the ISO has created the
management system, published the standard and actively maintains guidelines for the training ofauditors. However, the ISO does not take on the responsibility of certifying or retaining records ofaudits and continuing/lapsing certifications. These roles are assumed globally by consulting firms
who specialize in training individuals to become professionals competent in 14001 auditing,certifying management systems and maintaining records and re-evaluations of audits andcertification. Thus ISO certification is completely decentralized. The ISO creates and maintains
the competitiveness, applicability and accuracy of the standard through its international
membership body which meets in Geneva periodically.

Once the standard is in place it isdispersed and promulgated by its membership and auditing bodies around the world. A firm who
wishes to begin the process of instituting the ISO 14001 may purchase the ISO 14001 manual
directly from the ISO website and begin the process of EMS design and implementation. This
design may occur with or without the assistance of a professional consultant who is trained andknowledgeable in the process and complexities of the 14000 series. As a result, firms may publishthat they adhere to ISO 14001 but they may not claim to be ISO 14001 certified without obtaining
3rd party certification (these 3rd party consultants are referred to as Certification Bodies) which is alengthy and costly process. Firms who simply state that they adhere to the ISO 14001 principles
have absolutely no way of establishing their credibility and compliance without certification.
Firms may publish adherence to 14001 for several reasons; they may have taken steps to reduce
their environmental impact and desire the publicity, they may not be able to afford the cost of

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certification, or they may not be in a position or industry in which they feel they will directly
benefit from the expense of certification. On the other hand, those firms who do seek to obtaincertification commit themselves to a lengthy process of detailed documentation of firm policies,
processes, behaviors and a future goals. These characteristics must be met in addition to provingthat all state and national laws and regulations have been met.
C. Costs: Weighing the cost with the reward
While studies show that the cost of designing, implementing, certifying, and maintaining an EMS
is high, it has not been found that the cost is high enough to be a deterrent. The Global
Environment and Technology Fund has found that design, implementation and certification costs
between $24,000 and $128,000.8 Prakash and Potoski have reported that “William Glasser of the
EPA estimates that “large facilities [firms] spend on average about US $1,000,000.00 in sunktransaction costs to pursue certification.9”” For many small to medium enterprises (SMEs) it isclear that the time, effort, man hours and cost of certification may be too high and therefore
supersedes market or institutional pressure or even the competitive advantage they might receivefrom the certification. Therefore it is clear that the cost is a deterrent for SMEs but perhaps not so
for larger firms.

While many SMEs find certification to be beyond their financial reach, larger firms may see thisas a long term investment and an opportunity to bid for contracts from the largest international
conglomerates that have begun to require 14001 in trading contracts throughout their supply chain.
8

Jiang, Ruihua Joy and Pratima Bansal. “Seeing the Need for ISO 14001.” Journal of Management Studies. Issue
40. No.4. 2003.
9

Prakash, Aseem and Matthew Potoski. “Racing to the Bottom? Trade, Environment, Governance, and ISO
14001.” American Journal of Political Science. Vol.50. No. 2. April 2006. pg. 352.

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Often larger firms are, or perceive themselves to be, more visible or have a closer relationship totheir clients and customers and therefore become more likely to design and implement an EMS.
This elevates the importance of having an EMS being that these firms are more sensitive to thewhims of the market. End producers generally fall into this category as they have a closer
relationship to their core consumer. In both cases, the reason for the adoption of ISO 14001 andsubsequent certification is largely based on a firm’s perceived increase in competitive advantage,
whether that advantage comes from the ability to bid for international contracts with a 14001
stipulation or from an advantage with their core consumers who feel strongly about a product witha environmentally conscious supply chain. The latter is closely related with a firm’s desire toprotect themselves against negative market pressure and unwanted media publicity regarding thepractices within their own production processes or those of their suppliers.

While the incentives to adopt and certify may be strong, much data exists about the nature ofstandardization and the tendency for standards to induce basic compliance rather than facilitate
excellence. Some firms, who pride themselves on their own achievements and standards of
excellence, have stepped forward with complaints about lack of superiority within therequirements of the ISO 14001, specifically that ISO 14001 certification does not communicate
the higher levels of environmental policy integration and achievement but rather signals only themost basic compliance. This attitude indicates that while ISO 14001 may be used as a signal
within the market indicating that environmental standards have indeed been met, from the firm’s
perspective certification will not signal achievement in excess of the basic 14001 standards. It isat this juncture that it can be hypothesized that EMS certification may be subject to adverse
selection – the firms who are most likely to certify are actually the worst environmentally

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performing firms. Effectually, firms with poor performance are actually those who have the mostto gain from communicating some form of environmental policy progress. ISO 14001 certificationis the most widely recognized way of doing so. Despite the fact that ISO certified companies havehigher rates of compliance with national and regional regulations than those who are not ISO
14001 compliant there is no information to suggest that ISO 14001 certification actually indicatesanything other than the most basic forms of compliance and environmental planning10. Further,those firms who consider themselves to be leaders in the field of environmental management andwho are engaged in environmental impact reduction become less likely to certify, thereby reducing
the overall signal of superior performance that the ISO 14001 wishes to communicate (King,
2005). Those firms who have entrenched reputations for advanced environmental initiatives andbest practices have not, on occasion, found certification desirable because there is no mechanism
within the 14001 certification process which signals efforts above and beyond certification
minimums. Therefore there is more to be gained by the lowest environmental performers throughcertification than there is to be gained by those firms who have cultivated reputations for advanced
environmental management objectives within their management and performance.

Higherperforming firms are likely to drop out of the pool of firms who have been certified ISO 14001. It
could be argued however, that these are not the target audience of the ISO’s management series tobegin with.
IV. The Drafting of a Standard: How the ISO 14001 was created10

Potoski, Matthew and Aseem Prakash. “Green Clubs and Voluntary Compliance: ISO 14001 and Firms’
Regulatory Compliance.” American Journal of Political Science. Vol. 49. No. 2. 2005.

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The ISO drafts many kinds of standards which will go on to extensively effect business methods
and production globally. Thus a standard is a process of iterations each of which are changed
based on the input of an international body of stakeholders.

The ISO is an international organization comprised of countries specific member bodies. In the
United States the representing member is the ANSI, the American National Standards Institute,
who is primarily concerned with the promulgation and integrity of standards within the UnitedStates. ANSI is a private entity, having both private and public sector actors from organizations
such as EPA, OSHA and the DOE amongst its members.

In 1991, just before the United Nations Conference on Environment and Development, the ISO
launched the Strategic Advisory Group on the Environment (SAGE). By the time the Conference
was underway in Rio de Janeiro in 1992, the decision to launch an environmental management
system had been made and was subsequently made public. The SAGE was broken into
subcommittees, each headed up by an individual country membership body, who were to address
major themes in the creation of an environmental management best practices standard11. At thispoint in the process many countries began offering up their own versions of an EMS as potential
foundations for the ISO 14001. Despite the SAGE’s designation as an advisory committee,premature standards were drawn up which were to be handed over to a technical advisorycommittee (the TAG), which had the ultimate decision in the creation of the standard. The US
strongly objected to the ISO’s decision to allow individual countries to have such influence overthe foundation of the standard, and incidentally there was no US standard offered up at that time,11

See Appendix 1.

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therefore no US voice was to be found in those original drafts which became the original draft of
the ISO 1400112. Politically, the United States found itself being portrayed as a country who did
not support the promulgation of an ISO EMS despite the fact that it had backed the standard
strongly. From the perspective of the US government and American firms, the 14000 series wasseen to be very much desirable and to ultimately facilitate international trade.

The United States sub-committee was assigned the task of considering “Environmental
Performance Evaluation.” ANSI, the previously mentioned US member organization, formed atask force to address this issue and a number of Technical Advisory Groups (TAGs) whose job it
was to circulate proposals amongst the other country sub committees, and in addition, visit theother country sub committee groups to make the United States position known and negotiate its
position at each meeting.

This group was comprised of nearly 500 members and included

government representatives. ISO working drafts become committee drafts through consensus andfor a committee draft to be considered an “international standard, two thirds of the participating
members of the subcommittee must approve it and not more than 25% of the entire ISO voting
membership can vote against it.13” This process was completed in 1996 and then standard became
available globally.
V. ANAB: American National Accreditation Board
On January 1st 2005 accreditation branch of the American National Standards Institute (ANSI) andthe American Society for Quality (ASQ) merged to form the American National Accreditation

12

Cascio, J. “ISO 14000 Guide: The New International Environmental Management Standards” McGraw Hill. 1996.
pg. 11
13
Cascio, J. “ISO 14001 Guide: The New International Environmental Management Standards” McGraw Hill. 1996.
pg. 22.

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Board (ANAB). Prior to this time accreditation of certification bodies was operated by ANSI, theofficial membership body of the ISO.

ANAB is now the accreditation body for several

management systems including the ISO 14001 series14. This merger was a direct result of the ISO
17001 standard which is specifically interested in the impartiality of accreditation bodies and thosebodies of conformity assessment. As a result, the ANSI, which in addition to being the UnitedStates ISO membership body also provides some certification itself, was required to give up its
accreditation administration. ANAB became a legal body on its own, not overseen by the ANSI15.
Prior to 2005, accreditation of Certification Bodies was actually a partnership program between
ANSI and the American Society for Quality16. Furthermore, the ISO dictates that bodies ofaccreditation be strictly separate from certification bodies while ANSI does provide some training
and certification in specific areas itself. Thus ANAB is an institution which makes up a governing
body for the ISO 14001 and 9000 certification bodies among many other management systems.
Their dual purpose is in the coordination and promulgation of standards while functionally theirrole is in the accreditation certification bodies and bodies who educate auditors, (certification
bodies are those individuals who are in the field evaluating the compliance of management
systems). Therefore, ANAB provides information about the credibility of certification bodies byaccrediting them and holding information on them, implicitly making the claim that thosecertification bodies who achieve accreditation are well established and reliable firms who havebecome accredited in ANAB through merit.

This is important in the accountability andverification of the validity of a firm’s ISO 14001 certification. An accredited auditing/certificationbody gains credibility through establishing rigorous enforcement of ISO 14001 guidelines.
14

ANSI remains its own independent organization and continues to be the governing body for thousands ofstandards and guidelines. This body also provides some personnel training for certification bodies.
15
American National Accreditation Board. http://www.anab.org/.
16
American National Accreditation Board. http://www.anab.org/.

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While there has been much skepticism and criticism regarding the validity and credibility of theseclaims, these are the specified lines of accountability within the system of ISO 14000 certification.
The lack of ability to verify rigorous enforcement of ISO stipulations and criteria or test thecharacteristics which warrant a certification body’s ‘merit’ and elevation to ‘accredited’ status is aserious and obvious loophole in the system. This illustrates the imperfection of using third party
certification, not just in the application of ISO 14000, but in general. While many systems prefer
third party certification for its ability to be nonbiased in its granting of certification status, theaccreditation body, which is supposedly monitoring the monitors has very little mechanism fordoing so.

ANAB also has the ability to play a large role in the lifecycle of a standard from its creation all theway through the process to the accreditation of a certification body or standard making
organization. ANAB plays this role by representing key stakeholders and their concerns as thestandard making body (i.e. the ISO) is in the process of designing the standard. They effectuallyprovide accountability for certification bodies (the consultants who are in the field certifying andauditing the firms seeking ISO 14001 status) while also acting on the behalf of key stakeholders
who will be effected ones a benchmark or standard is created. Therefore ANAB has the ability tovoice concerns about a standard to the ANSI when they represent the US in Geneva.

A certification body who audits firms claiming to have implemented an ISO 14001 series
management system will seek accreditation for many of the same reasons that firms seek
certification. Accreditation for a certification body adds a layer of reliability and accountability as

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they must meet the conformity assessment standards of the American National Accreditation
Board (ANAB). In essence this is a certification body’s way of declaring their credibility and thehigh standards of their management system auditors. For the firm looking to become certified ISO
14001, hiring an accredited certification body is desirable because it adds a layer of credibility totheir own environmental management system for having passed rigorous inspection. In theory, thisadded layer of credibility increases a position of a firm while bidding for contracts.
Simultaneously this signifies that not all certification bodies consider themselves equal.
Certification bodies are distinguishing themselves based on their rigorous application of thestandard they certify. In the United States, a firm which is certified ISO 14001 by one of the top
10 certifications bodies (shown in the table below) signals to potential partnering firms that their
EMS has passed the intensive scrutiny from one of the most widely recognized names in ISO
certification.

Top 10 ISO 14001 Certification Bodies:
o
o
o
o
o
o
o
o
o
o

VI. Audits

BSI Global
QMI: Management Systems Registration
LRQA: Lloyd’s Register Quality Assurance
Perry Johnson Registrar’s
Underwriter’s Laboratories Inc.
NSF – International Strategic Registrations
DNV: Certification Services
IASC
SGS Group
Intertek22

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Certification is the first step for companies wishing to publicize and authenticate their ISO EMS.
After certification status is achieved periodic audits are performed to indicate maintainedcompliance and that incremental and targeted progress has been achieved.

It is important to note that auditing of an ISO environmental management system is based
primarily on continued conformance with country laws and specifications in conjunction with thegoals and assumptions that both the ISO and firm has set out for itself. There are no specifications
laid out by ISO, so ‘progress’ will be different in each application of the standard and within eachfirm. Thus the auditor is looking at conformance not to an overall industry standard but rather at
the company’s continued compliance with all country laws and individual stipulations within thefirm’s self imposed policies. They are making sure that there has been no backsliding within thepast year and also that those targets the firm has established for itself have been achieved or are
credibly being worked towards.
VII. Criticism
A. Transparency
Though the ISO provides a framework and a system for reporting there has been widespread
criticism of the transparency, reproducibility and consistency of the application of the standard.
Tonis Poder has stressed that ‘companies have demonstrated that limited transparency andreproducibility of the assessment process serves as a common shortcoming.17’

Firms who

implement ISO 14001 are required to craft a public statement of their overall environmental
impact.

17

Despite the fact that implementing ISO 14001 is a commitment to incremental

Poder, Tonis. “Evaluation of Environmental Aspects Significance in ISO 14001” Environmental Management.
March 2006. Pg. 732-743.

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improvement, firms are likely to be reluctant to disclose accurate levels of pollution habits orenvironmental risks within their facilities. As a result, this environmental impact report may be
extremely limited in transparency.

Furthermore, ISO 14001 is a framework and open tointerpretation. Subsequently firms have been accused of inconsistently applying their EMS to allof their business relationships and activities, due to the fact that the ISO does not specifically list
every endeavor or activity that a business must include in their EMS. Implicit in these accusations
is that the 14000 series framework is perhaps too broad and allows firms to get away with
excluding key relationships or endeavors which should be included in their environmental
management and business practices.

These are severe criticisms considering that not only is the ISO’s reputation for setting quality
standards in jeopardy but also the 14001 series legitimizes its existence by being known as aconsistently enforced environmental management standard rooted in daily practices. For the ISO
14000 series to work, proof of certification, which insures that a documented system exists andgovernment regulations are met, must be considered sufficient evidence of 14001. However thesuspicion, and resulting criticism, is that if close scrutiny of certified ISO 14001 reports andcorresponding daily behaviors were key in the process of eliciting trading contracts then daily
enforcement and reproducibility would be a essential. However, this does not appear to be the caseand furthermore, it can be assumed that with environmental management being so costly, firms
will take advantage of the lack of oversight and only implement their EMS when a certified
monitor is present. Despite these logical allegations, within the business community, simply
having 14001 certification and yearly audits appears to be sufficient for competing for 14001

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specific international trading contracts. Therefore, whether or not one has faith in the authenticityof the application of 14001 in reality, the system is still operating as designed.

B. A tool for PR?
If demonstrating 14001 certification is sufficient in business circles then this leads us to a most
disturbing assumption which hits at the heart and legitimacy of the philosophy of anenvironmental management system. The philosophy of creating a standard which requires thecreation of a unique firm vision and approach to environmental concerns in addition mandating
basic compliance to national laws and regulations is something which was internationally called
for. Firms needed a way to discriminate between firms that are concerned for the environment andthose that are not. If the ISO 14001 criticism proves correct and certification illustrates a firm’s
management behaviors and policies at a static moment in time rather than indicating a dedicatedapproach to firm behaviors, and yet this is still considered satisfactory, then what does this signify
for the standard? It has been cited in both the ISO 14000 literature and general environmental
management system critiques that is in fact implementation of an EMS is a tool for firms to gain
competitive advantage while parent firms or multilateral conglomerates can use their trading
partners’ proof of certification as a hedging tool. This tool protects them from consumers andactivists who scrutinize supply chain behaviors and can put multinationals at considerable risk ofbad press and share devaluations when environmentally detrimental practices come to light.
C. Can standards lower the overall value of an EMS?
Though the International Standards Organization has been both criticized and praised for its
requirements for firms to document in detail each item and step within the environmental
management system this has not proven to be sufficient within the international community to25

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equate with actual production floor results. It is critical to recognize this key step because
certification is designed to reduce or breakdown information asymmetries between trading
partners when if fact many scholars and firm managers are questioning whether they can actuallytrust that certification actually provides enough information about the day to day activities beyond
the rhetoric of a firm’s vision.

In essence the ISO 14001 certification schema relies and profits on producer/consumer
information asymmetries and claims to reduce these asymmetries. ISO is profiting from the factthat firm managers, wherever they may be in the web of complex production chains, will not takethe opportunity to visit each production site they out source to and are subsequently willing toaccept foreign third party certification in a foreign setting or country as proof of a specific level ofattainment as sufficient information to base trading relationships on (assuming ISO 14001 is themarginal decision). This leads one to wonder if certification is then merely a symbolic act, albeit avery expensive symbolic act, yes in essence guarantees very little substance.

However, King and Lennox, in their recent study, conclude that while certification may in itself bea symbolic act and one which is strategic in attaining and retaining more business contracts,
certification itself cannot be obtained without making real changes within the firm18. This
indicates that beyond cost, implementing ISO 14001 has real teeth and positive environmental
changes must be made, not simply once, but annually for certification status to be maintained.
Therefore it is both the standard which needs to be called into question and simultaneously the18

King, A., Lenox, M. and Ann Terlaak. “The Strategic Use of Decentralized Institutions: Exploring Certification
with the ISO 14001 Management Standard.” Academy of Management Journal. Vol. 48. No. 6. 1091- 1106.

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nature of decentralized certification institutions and their ability to accurately measure theirclients’ behaviors. If certification, in this case ISO, is merely a signal and does not convey
concrete, reproducible results then the actual standard setting body must alter their proposed
methodology to include randomized audits, etc., which are implemented by the third party certifier
who must demonstrate a higher degree of credible reporting measures which allow firms andscholars to regain their faith in the overall standard.

The result of this lack of faith in the business community has also resulted in disdain at the firmlevel. Those firms who pride themselves on their design and implementation of an environmental
management system which they consider to be of the highest levels of environmental management
quality are balking at the idea of becoming ISO 14001 certified. The standard, which was
designed to signal environmental management dedication wherever implemented, regardless oflocation, has also become a signal of mediocrity. The theory is that firms who seek ISO 14001
certification are in need of expressing adherence to the most basic levels of environmental
attainment in order to gain competitive advantage. Those firms who have gone above and beyond
basic standards and regulations have no way to express the quality of their management
approaches and thus are frustrated with the low expectations of the ISO 14001, feeling that it only
denotes adherence to national regulations, which should be expected regardless, and little else.
For these reasons, those firms who excel find themselves without a way to communicate theirsuperiority and are actually losing contracts to lower achieving firms who have gained 14001
certification status. This has the effect of lowering the overall levels of ISO 14001 average
environmental management attainment by primarily obtaining adherence by the lowest
performers.

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VIII. Conclusions
The International Standards Organization has become internationally recognized for the quality of
their standards and their international applicability regardless of location. While the ISO prides
themselves on the cutting edge nature of their standards and the international voices which went
into the creation of that standard, there are growing concerns about the applicability and validity of
the ISO 140001 and the amount of reliable information it can covey. This report presents a
number of different perspectives which both support and criticize the international standard.
Taking a step back and looking at the standard allows one to see the many international players
and voices that were involved in communicating the need for a standard of environmental bestpractices from a number of perspectives which may or may not all be founded in genuine concern
for the environment. This paper also takes a look at the international members of the ISO which
designed the standard and all have their own reasons for supporting a standardized EMS. Further
those who accredit certification bodies for their rigorous application of the standard have comeunder critique for their lack of genuine abilities to monitor their monitors. Importantly the reasons
behind why firms must rely on the standard to inform them of the practices occurring on the
production floor when they can’t see for themselves have been laid out. And finally the incentivesof the firms who claim to live up to their self imposed 14000 policies on a daily basis. Thisillustrates the vast quantity of voices and resources which are ultimately affecting the validity of
the ISO 14000 series.

Though the standard was internationally called for to communicate

environmentally sound best practices within a firm and the logic of accountability is very well laidout, we still come up with obvious areas where the system begins to break down.

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Third party certification, in all its applications in its many settings, was designed as a non-partial
method for signaling that a firm lives up to the practices it claims to implement. From thisperspective third party certification often lives up to its mandate of impartiality and low subject tocapture. However, taking a closer look one can see that the ISO 14000 standard’s strategy breaks
down for the same reasons that third party certification breaks down universally. To have faith in
the application of a standard one must have faith in the certifier. On one level the ISO has
attempted to solve this problem by encouraging accreditation of certification bodies; where
becoming certified by an accredited certifier or auditor has an added level of accountability andcredibility. Yet, it is easy to imagine a situation in which the certifier or auditor is susceptible tocapture by the firm requesting certification. Furthermore the accrediting bodies have very little
mechanisms for maintaining accurate information about certification bodies and their actions.
Discriminating between certification bodies’ rigorous enforcement of a standard is not a system
which is transparent. Meanwhile, certification is designed as a process, a process that extends
beyond the initial certification whereby a firm sets clear targets for future environmental progress.
However, once certification status is granted, certification bodies are required to return to audit
firms only once a year and never randomly. Thus, trading partners can only be sure of how a firm
operates 1 day out of every year and thus we find three problems with third party certification:
limited capabilities for observation of daily processes, the potential for capture, and little
information about the actual merit of a certification body.

Does this mean that the ISO 14000 series has no value? The literature investigating ISO 140001
seems to conclude this is not the case despite all the criticism. While voluntary compliancewithout certification may exist in any format, actual certification requires extensive resources in29

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the form of both time and money. The general conclusion is that certification is just too expensive
to take on without significant devotion to the cause and extensive paper trails are created which
would cause firms considerable negative press should it be found that they reneged on theirclaims. Not to mention resulting losses in and competitive advantage and as a result, their trading
contracts. In fact, we see that firms implementing an ISO 14001 certified environmental
management system are not without risk should they fail to live up to their own claims - claims
which came at considerable expense. So in ISO 14001’s basic and correct application the standard
does provide trading partners with a certain degree of information about the firm it is contractingwith and also indicates that their partner also has something to lose by reneging on their 140001
certification. Yet, the risk to the certified firm will never be as high as the contracting firm who isrelying on certification to communicate genuine environmental practices. Thus the standard is
attempting to expose the risks of both sides of a trading relationship but without bringing risk into
equilibrium, (by increasing the risk of the firm which reneges on its commitment) there is
ultimately no way for blind faith to be restored in 14001’s current state.

In future iterations of the standard, the ISO must mandate a strengthening of the process of third
party certification to indicate an increased degree of knowledge about firm level daily practices
rather than the current certification scheme which indicates a firm’s practice at a stationary point.
Further, and more complex, is the task of increasing the risk to the firm that reneges on their
documented management system which it gained certification from.

The ISO, being anongovernmental body, and the 14000 standard itself, being voluntary in nature, will inevitably
find this challenging. Yet, the firm which puts trust in the ISO 14001 and subsequently partners
with firms based on their certification status without personally auditing them has far more to lose

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in terms of market power and reputation. Conversely, the firm found guilty of malpractice,depending on their geographical location and relationship with final consumers, may retain very
little risk of their own.

In fact, many governments who have taken steps to limit firms’

environmental impacts either through regulations or laws often do not have the resources toprosecute firms in noncompliance.

This further reduces a firm’s risk of reneging on theirenvironmental management system policies and casts doubt on ISO 14000’s ability to elicit actualchange in process management.

Finally it is the opinion here that firms who criticize the ISO 14000 series for its systematic lack of
the ability to signal superior environmental management behavior are actually pointing to the
future of environmental certification.

As environmental concerns come to the forefront ofcorporate rhetoric and consumer increasingly demand change there will be demands for anenvironmental performance rating system similar to that which was instituted by the US Green
Business Council with their LEED19 rating system. The LEED system gives a rating of anarchitectural structure’s environmental impact or their environmental ‘footprint’. Firms accrue
points, and each point represents an architectural achievement that has been determined to
improve a firm’s environmental ‘footprint.’ Firms are challenged to achieve increasing amounts ofpoints to illustrate their superiority and commitment to limiting their environmental impact. This
type of rating system would alleviate ISO 14001’s adverse selection problem, the tendency torecruit he lowest performing firms, by introducing a spirit of competition and offering an
opportunity for achievement within the standard. Firms who wish to standout amongst theircolleagues can be rewarded with ‘silver’, ‘gold’ or ‘platinum’ status for going above and beyond

19

LEED stands for Leadership in Efficiency and Environmental Design. For more information see www.usgbc.org.

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the basic standard by reducing their impact. Though this requires a dramatic new take on the14000 series it could induce increased levels of achievement while highlighting those firms who
have dedicated themselves to best environmental management pracitices. While this solution
speaks only to the number of firms who are ultimately attracted to the ISO 14001 by seeking toraise the bar, it does not solve the greater problem of information asymmetries in relation to firms’
actual day to day activities. This problem is the most critical as it speaks to the series’ credibility.

The ISO 14000 series should not be considered a farce or disregarded across the board as a tool for
better public relations. Certification cannot be obtained without the expense of considerable
resources which include both time and money. However there are basic problems both within theapplication of the standard and the process of third party certification which strike the standard to
the core and have resulted in harsh critique and criticism. Thus this paper does not promote
throwing the proverbial baby out with the bathwater, rather it stresses that the standard has
obvious points of weakness which reduce the overall faith in the 14000 standard. It will be in the
proactive strengthening of these weaknesses and promulgation of the new criteria in future
iterations which will ultimately decide whether or not the 14000 series will remain a standard
which signifies credible policies and regulatory compliance or simply amasses expensive
paperwork for the sake of public relations and competitive advantage.

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IX. Discussion Questions
1. What does the ISO 14000 series seek to communicate?
2. What firms are likely to seek ISO 14001 certification?
3. Where does the ISO 14001 break down?
4. If the ISO were to alter the certification standards and implement a randomized audit
mandate, who would bear that cost?
5. You are the manager of a medium size firm in a developing country. Your firm is
positioned in the middle of a complex international supply network, meaning you both buy
from suppliers and sell to producers. Your government has basic environmental
regulations but enforcement is weak. Would you recommend to the stakeholders that ISO
14001 is an important international standard which your firm should adhere to? Do you
seek certification?
6. Do you believe that the ISO 1400 series is designed to equip companies with good PR
tools to defend against criticism from environmental groups? Or do you believe thestandard actually designed to yield better results for the environment and businessprocesses?
7. Do you believe process management principles utilized by the ISO 14000 and ISO 9000
series is the most effective way of governing environmental and quality business practices
worldwide? Why or why not? What are the benefits of having universal applicability?
What are the drawbacks?
8. How are transgressors of the standard held accountable? Where in the implementation,
evaluation, and certification standards lie room to “cheat”? Does the standard facilitate
adverse selection?
9. Who are the main stakeholders of the ISO 14001? What are their motivations forsupporting or adopting the standard? How independent are third-party certification
organizations?
10. Besides seeking ISO 14001 certifications, what other methods can firms adopt tostrengthen their environmental management strategies? Are there alternative environmental
certification schemes to choose from?

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X. Key resources for understanding the ISO 14000 series.
Cascio, J. “ISO 14000 Guide: The New International Environmental Management Standards”
McGraw Hill. 1996.
King, A., Lenox, M. and Ann Terlaak. “The Strategic Use of Decentralized Institutions:
Exploring Certification with the ISO 14001 Management Standard.” Academy of Management
Journal. Vol. 48. No. 6. 1091- 1106.
Prakash, Aseem and Matthew Potoski. “Racing to the Bottom? Trade, Environment, Governance,and ISO 14001.” American Journal of Political Science. Vol.50. No. 2. April 2006. pg. 350-364.
Also: see www.iso.org

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XI. References
Babakiri K. A., R. Bennett, M. Franchetti. 2003. Critical factors for implementing ISO 14001
standard in United States industrial companies. Journal of Cleaner Production 11:749–752
Cascio, J. “ISO 14000 Guide: The New International Environmental Management Standards”
McGraw Hill. 1996.
Jiang, Ruihua Joy and Pratima Bansal. “Seeing the Need for ISO 14001.” Journal of Management
Studies. Issue 40. No.4. 2003.
Johnston A., J. Hutchinson, A. Smith. 2000. Significant environmental impact evaluation: A
proposed methodology. Eco-Management and Auditing 7:186–195.
(2006). A study on the impact of environmental management system (EMS) certification towards
firms' performance in Malaysia. Management of environmental quality, 17(1).
King, A., Lenox, M. and Ann Terlaak. “The Strategic Use of Decentralized Institutions:
Exploring Certification with the ISO 14001 Management Standard.” Academy of Management
Journal. Vol. 48. No. 6. 1091- 1106.
Neumayer, Eric and Richard Perkins. “What Explains the Uneven Take-up of ISO 14001 at the
Global Level? A Panel Data Analysis.” Environment and Planning. V. 36. 2004. 823-839.
Poder, Tonis. “Evaluation of Environmental Aspects Significance in ISO 14001” Environmental
Management. March 2006. Pg. 732-743.
Prakash, Aseem and Matthew Potoski. “Racing to the Bottom? Trade, Environment, Governance,and ISO 14001.” American Journal of Political Science. Vol.50. No. 2. April 2006. pg. 350-364.
Rondinelli D. and Vastag G. “Panacea, common sense, or just a label? - The value of ISO 14001
environmental management systems.” European Management Journal, Volume 18, No. 5. 2000.
pp. 499-510.
Downloads for the 2002 Version of the 14001 certification system
http://www.iso.org/iso/en/prods-services/otherpubs/iso14001/index.html

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XII. Appendix

Figure 1 ISO Technical Advisory Group Structure in the creation of the ISO 14000 series standard.
Source: Cascio. 1996.