Boon or Bane?
ISO 14001 Likely
to Join Regulatory Framework

by Gregory J. Hale and Caroline G. Hemenway

Does it seem as if your company is constantly preparing for another environmental audit? Another internal inspection? Another raft of regulatory paperwork submissions?

All this may change if the U.S. Environmental Protection Agency can be convinced that the emerging ISO 14001 environmental management system standard will give regulators the confidence they need that companies are meeting most, if not all their environmental regulatory obligations.

The good news for companies is that EPA officials are leaning hard in that direction. Some of the more sophisticated companies could see regulatory relief by 1997 in the form of reduced reporting and monitoring requirements.

The evidence? EPA initiatives-Project XL, the Environmental Leadership Program, its new auditing policy-all rely in whole or in part on ISO 14001 or a similar EMS as a means of showing good corporate environmental management. AT&T, Union Carbide, 3M, Motorola, Merck and Gillette are among dozens of companies working directly with the EPA in these programs to bring credibility to ISO 14001.

In addition, draft U.S. Sentencing Commission guidelines, interest from the U.S. Department of Justice and state environmental department initiatives all suggest that certification to ISO 14001 or a similar standard will become part of regulatory incentive packages.

This should be seen as part of a trend: For several years now, the federal-and state-government command-and-control posture has been swinging toward accepting the validity of third-party certification to voluntary standards and practices as evidence of good citizenship.

Besides the EMS itself, the ISO 14000 series includes guidelines on implementing an EMS, EMS auditing, environmental labeling, environmental performance evaluation and life-cycle assessment. The ISO 14001 EMS standard, the only specification standard in the series against which companies can be audited, is now a draft international standard and is slated for final adoption by the end of 1996. In a simultaneous schedule, it is expected to be adopted as a U.S. standard by the American National Standards Institute as well.
What does this have to do with quality?

Both the ISO 9000 series of quality management system standards and ISO 14001 are systems standards, not performance standards. And the systems involved are strikingly similar. In fact, ISO 14001 was built largely on the ISO 9000 framework. The major difference is that ISO 14001 contains specific environmental requirements, such as environmental aspect identification and a commitment to complying with appropriate legislation and to prevention of pollution.

But the issue of systems vs. performance takes on a new spin with ISO 14001 that is troubling some corporate lawyers and causing hearty debate. Few doubt that the ultimate goal of ISO 14001 is better environmental performance-through pollution prevention, waste reduction, more efficient systems, better product marketability, etc. But many of the standard's authors adamantly object to its use as a test of a company's environmental performance, the use many companies fear will be made by regulators.

On the other hand, these companies are eagerly seeking ways to "prove" they are meeting government performance standards without subjection to the numerous audits and the avalanche of paperwork they now face-and without compromising themselves legally and in the market. By the end of 1995, many members of the U.S. Technical Advisory Group that developed the U.S. position during the international standards negotiations were urging EPA and other government officials to leave the standard alone for a while and let the market develop before considering it in a regulatory medium.

The EPA's involvement

EPA representatives have been involved with developing all of the ISO 14000 standards since the beginning in 1991. The EPA's influence is evident in the EMS standard and in its recent direct involvement with developing a U.S. accreditation system for ISO 14001 certification bodies. The standard contains language requiring a company to commit to prevention of pollution and to meeting all legal requirements, largely due to EPA arguments within the U.S. TAG.

ANSI is the U.S. representative to the International Organization for Standardization and the body that oversees the TAG. ANSI and the EPA are cosponsoring several workshops around the United States to educate stakeholders, including user organizations and regulators, about the voluntary standards development process. Workshop sites include Washington, D.C.; Cincinnati, Ohio; and Orlando, Florida. In September 1995, Mary McKiel, director of EPA's standards network, became the U.S. TAG vice chair and is among the workshop speakers.

The EPA also will be directly involved in the accreditation process in the United States. In early December 1995, the ANSI Board Committee on Conformity Assessment announced that a representative from the EPA will sit on the organization's EMS council. The council will be responsible for granting accreditations to registrars and training course providers under the supervision of the ANSI Board Committee.

Heed the regulators, but keep them at bay

Companies should listen closely to what regulators are saying about ISO 14000, warns Joseph Cascio, chairman of the U.S. TAG and IBM's program director for environmental, health and safety standardization.

"What needs to be understood is that ISO 14001 is a huge commitment by an organization to shift responsibility from a few designated environmental experts to all members and functions of the organization," says Cascio.

He contends that if ISO 14001 is practiced continually over the long term, the organization's ability to meet its environmental obligations consistently and to prevent disasters will be strengthened. Cascio is convinced that ISO 14001 is "a major investment with enormous benefits for higher and more consistent environmental protection."

"However, we should be careful not to impede this ISO approach with preconditions and qualifiers that may have been relevant in the command-and-control scenario but are less so now," says Cascio. "I must stress that asking organizations to meet special requirements for compliance or disclosure that are neither included in ISO 14001 nor in current regulations simply puts stumbling blocks in the way of ISO 14001."

He says that compliance may not be the intent, but some well-meaning proposals are implying just that, which will not be helpful to the acceptance of ISO 14001 in the market. Cascio agrees with other experts that ISO 14001 is not simply an extension of ISO 9000 standards but rather a collection of best practices for managing an organization's environmental impacts.

The EPA has remained focused on the question of whether ISO 14001 can help improve a company's compliance, notes James Horne, special assistant to the director in the Office of Wastewater Management. Horne is quick to point out that the EPA does not view ISO 14001 as a compliance standard but rather a means to ensuring better environmental performance through an internationally recognized system of management.

"ISO 14001 is not a compliance standard, and we are not looking to substitute one compliance system for another," stresses Horne.

Project XL: EPA testing ground

The EPA is testing the concept of EMSs and voluntary initiatives through several programs that cut across a range of EPA departments. The Office of Policy Planning and Evaluation is pushing President Clinton's agenda to reinvent regulations through its Project XL program. Project XL allows organizations the flexibility to combine permits to achieve higher environmental performance through a multimedia-permitting approach. This would allow companies to forego unnecessary reporting requirements associated with individual permits for media such as water, air and waste.

AT&T's MicroElectronics division, Anheuser-Busch Co., 3M Corp. and the state of Minnesota are among the organizations participating in Project XL (see Figure 1.) Each of these organizations plans to use ISO 14001 as a means of demonstrating a higher level of environmental excellence through proven management techniques. Through its participation in Project XL, AT&T ME became one of the first U.S. companies to commit its eight manufacturing facilities to registering to the standard beginning in 1997.

Christopher Bell, an attorney with the Washington, D.C., firm of Sidley & Austin, is helping the division implement ISO 14001. He says the company sees several benefits from implementation and ultimate third-party certification.

"We don't view [ISO 14001 certification] as another layer to drop on top of the existing command-and-control method of enforcement," explains Bell. "The company sees the standard as consistent with the Dutch covenant approach."

This approach advocates a direct relationship between Dutch industry associations and government authorities to combine EMS implementation with permit requirements. Some 10,000 of the largest Dutch companies were obligated to implement a comprehensive EMS to show their commitment to environmental excellence through this joint agreement by the end of 1995. Several of these Dutch companies are implementing ISO 14001 as a means for fulfilling this mandate.

Environmental leadership touted

The EPA's Office of Compliance launched another initiative, the Environmental Leadership Program, in April 1995. It was specifically set up to pilot various ways in which the agency could use comprehensive environmental management systems, such as ISO 14001, as a tool to ensure better compliance. The 12 organizations participating in ELP's pilot phase have the opportunity to design and develop an EMS that satisfies the EPA's requirements and, in exchange, allows for leniency in areas of noncompliance (see Figure 2.)

The EPA outlined the selection criteria for the program in a notice published in the June 21, 1994, Federal Register. The agency invited facilities of all sizes and types-including small businesses, municipalities and federal facilities-that substantially meet the criteria to submit proposals for the pilot projects. The requirements included:
n Compliance history- A detailed description of the facility's compliance/environmental performance record.
n Environmental management and auditing programs- A description of the facility's existing EMS and/or auditing program.
n Disclosure of audit results- A willingness to disclose the results of its audits in some manner.
n Pollution prevention activities- A description of the facility's pollution prevention agenda.
n Setting an example- Benchmarking and information sharing among other companies and suppliers.
n Performance measures- Proposals for qualitative and quantitative measurements for compliance and pollution prevention directly related to the pilot project.
n Performance objectives- Goals and objectives monitoring.
n Employee and community involvement- A demonstrated commitment to involve employees and surrounding communities in EMS development.

While it is unlikely that ISO 14001 certification by itself will ever be sufficient to allow a company or individual facility to deregulate itself, third-party registration to ISO 14001 could serve as the key common denominator, says Ira Feldman, vice president of Capital Environmental, an affiliate of the Howrey & Simon law firm. Feldman advocates such use of ISO 14001 by state and federal agencies as an adjunct to existing regulatory programs to allow participating companies regulatory flexibility.

Feldman, formerly a special counsel in the EPA's Office of Compliance, was responsible for directing the ELP and explains that ISO 14001 provides a compelling argument for meeting both regulatory and stakeholder needs.

"Under ISO 14001, an EMS must include not only a commitment to compliance but also to document conformance with voluntary obligations," says Feldman. "Thus, ISO 14001 provides a basis for building existing voluntary programs, such as the EPA's 33/50 [a voluntary emission-reduction program], or industry-specific initiatives, such as the Chemical Manufacturers Association's Responsible Care® program, together into a coherent framework."

The ELP program has real potential for industry to police itself, according to George Hawkins, EPA special assistant to the regional director of Region 1. But he cautions companies against expecting ISO 14001 to completely take the place of regulatory audits. EPA New England has developed its own version of the ELP program to explore the potential benefits related to EMS implementation. The New England program-the Third-Party Certification Project-will use ISO 14000 guidance and specification standards as a baseline to develop EMSs and create an audit protocol to assess system performance.

The EPA is also using the Best Management Practices program, the Common Sense Initiative and the Department of Water's National Pollution Discharge Elimination System proposal to develop further data on EMSs. NPDES may provide companies with reduced water permit requirements based on their compliance record and ability to implement and maintain an EMS such as ISO 14001.

Unlike the ELP, Project XL and the NPDES proposal, the BMP and Common Sense programs focus on industry-specific initiatives to compile EMS data.

Sentencing Commission eyes potential

The U.S. Sentencing Commission may expand its guidelines by the first quarter of 1997 to include provisions for fines levied for organizational environmental crimes. In early December 1995, the Commission announced that the revisions would be put off until the 1997 cycle of the Commission's agenda.

Judge A. David Mazzone of Boston and Judge Deanell R. Tacha of Lawrence, Kansas, members of the Commission, are proposing language similar to that contained in ISO 14001. According to the proposal, the "commitment to environmental compliance" would be a mitigating factor when offenses are calculated for organizations breaking environmental laws.

Several experts also speculate that the Department of Justice could consider ISO 14001 a compilation of the best management practices available, thus prompting companies to implement ISO 14001 to avoid due diligence requirements.

"ISO 14001 may become the recognized standard that the Department of Justice looks to when determining if a company that had an accident did everything within its control to avoid the accident," according to one analyst.

He predicts that ISO 14001 will become the de-facto best-practice measurement system and that any other EMS will be considered inferior.

Companies may be further aided in the ISO 14001 implementation process by the revised EPA environmental audit policy scheduled to be available in the first quarter of 1996. EPA representatives suggest that, under the new policy, companies with a "state-of-the-art" EMS in place to identify and correct violations may have a "safe harbor" from criminal referrals and be eligible for economic incentives.

States see promise, voice skepticism

Involvement in EMS work by the EPA and the Sentencing Commission is starting to generate support for ISO 14001-type initiatives from several U.S. states, including Pennsylvania, New Jersey, California, Minnesota, Massachusetts, Indiana, Louisiana and Illinois. Several of these states project a three-to-five year lag before companies will be able to reap significant regulatory benefits from an ISO 14001 registration, but all are convinced that an EMS is the next step for companies to take toward a new level of environmental excellence.

Some experts forecast immediate benefits, however. The Department of Environmental Protection in Pennsylvania has committed itself to helping companies in the state implement ISO 14001 to achieve a higher level of environmental performance than they are currently meeting. California is looking closely at ISO 14001 in concert with a disclosure requirement that would allow key stakeholders access to an organization's environmental performance data. In late 1995, the state of Minnesota passed a limited amnesty law that allows companies a 90-day grace period to correct environmental noncompliances without fear of punishment.

Taking the applications of certification to the extreme, James Seif, the secretary of the Pennsylvania DEP says, "A certification to ISO 14001 could mean that those companies may never have to see another inspector again."

Robert Stevens, chief of the hazardous materials laboratory for the California EPA, supports ISO 14001 but believes Seif may be too trusting of the certification. He says that the "states are on the front lines. It's [the states] that will ultimately be charged with bringing the standards to the factory gate. . . . State inspectors will have to realize that the one-size-fits-all approach to enforcement is not appropriate any more."

John Gibbons, assistant to President Clinton for science and technology and director of the Office of Science and Technology Policy, supports the federal and state ISO 14001 initiatives and praises them for their far-sighted approach to environmental regulations. He agrees with the state approach and says that unless more flexible ways of managing the environment are initiated, U.S. companies will begin to suffer in foreign markets.

"I see that the federal government has a responsibility to foster ISO 14000 and coordinate work on ISO 14000 across its different agencies and departments," says Gibbons.

He notes that the federal government may encourage its agencies and departments to incorporate EMS implementation, specifically ISO 14001, into procurement contracts.

"We are experiencing a paradigm shift from economic vs. environmental principles to economic and environmental compatibility," he says. "Companies and regulators need to understand that environmental improvement can result in a blacker bottom line."

Accreditation and beyond

Federal and state representatives agree that ISO 14000 is part of the new revolutionary shift out of the command-and-control mentality to innovative environmental management schemes. Several open issues remain in the forefront as companies begin to move toward implementing one or more of the ISO 14000 standards.

One high-profile issue is that of joint certification: Most companies with both an ISO 9000 and ISO 14001 system will want to reduce costs by having joint system audits and joint certification. Several certification bodies (registrars) have already moved in that direction, but several questions remain, including how best to form and train an audit team to conduct such audits.

In addition, there is still no U.S.-based accreditation body for these registrars. ANSI and the Registrar Accreditation Board-the United States' ISO 9000 accreditation body-have announced plans to offer accreditation separately. But a lingering issue is how they will include all stakeholders in the process. The EPA has stated that establishing an accreditation system with long-term credibility in both the domestic market and international markets is the key to its continued support of the standard.

Horne says that the EPA is in no rush to make up its mind concerning the acceptance of ISO 14001 and its relationship to the existing regulatory framework. He says it is more important to "watch our actions and not our words," and that EPA projects will speak for themselves.

Companies in Project XL

The EPA's Office of Policy Planning and Evaluation is implementing Project XL, a multimedia-permitting approach to better environmental performance. These companies are involved:
Anheuser-Busch Co.
AT&T MicroElectronics
Couer Alaska Inc.
Merck & Co. Inc.
Molex Inc.
New York State Electric and Gas Corp.
Pennsylvania Electric Co. (Penelec)
SD Meyers Inc.
South Coast Air Quality Management District
State of Minnesota
The 3M Corp.
The Intel Corp.
Union Carbide Corp.

Companies in Environmental Leadership Program

The EPA's Office of Compliance launched its Environmental Leadership Program in April 1995 to test how an EMS such as ISO 14001 can be used to ensure better compliance. Following are the 12 organizations participating in ELP's pilot phase:
Arizona Public Service, Deer Valley Facility, Phoenix, AZ
Ciba-Geigy Corp., St. Gabriel; St. Gabriel, LA
Duke Power Riverbend Steam Station, Mt. Holly, NC
The Gillette Co., South Boston, MA; North Chicago, IL; Santa Monica, CA
The John Roberts Co., Minneapolis, MN
McClellan Air Force Base, Sacramento, CA
Motorola Inc., Oak Hill Facility, Austin, TX
Ocean State Power, Burrillville, RI
Puget Sound Naval Shipyard, Bremerton, WA
Salt River Project, Phoenix, AZ
Simpson Tacoma Kraft Co., Tacoma, WA
WMX Technologies Inc., Arlington, OR

About the authors . . .

Gregory J. Hale is associate editor of "International Environmental Systems Update," a monthly newsletter on ISO 14000 developments and implications. Caroline G. Hemenway is publisher of CEEM Information Services in Fairfax, Virginia. CEEM publishes "IESU" and several other ISO 14000 and other management systems products. For more information, contact CEEM at (800) 745-5565 or (703) 250-5900; fax (703) 250-4117.