Will ISO 14001 Bring You

More Harm Than Good?


ISO 14001: Providing Benefits

Without Legal Liabilities

by James G. Mroz


Compared with ISO 9000, ISO 14000 is a young family of standards, and there are many questions and incomplete answers that companies are considering. Clearly, the majority of companies are taking a wait-and-see approach while awaiting concrete results on which to base their ISO 14001 implementation and registration decision. However, many companies could benefit by hearing what some trainers and course providers have to say about issues relating to environmental management systems, including sensitive ones like regulatory compliance and liability concerns. Will ISO 14001 expose a company to more harm than good?

Robert C. Wilson, president, and James Scott, vice president of environmental and laboratory services, of International Quality and Environmental Services (IQuES) provide their expertise, advice and thoughts in response to many questions on which companies seek guidance.

Training credibility

RAB-certified auditors will require completion of an ANSI-RAB-accredited ISO 14001 lead auditor training course. Wilson thinks training is important to ensuring the credibility of the audit process in the United States. "The cornerstone of the entire registration process is the credibility of the registrar, and crucial to a registrar's performance is the capability of its auditors," says Wilson. "To ensure equal application of a management system standard, consistency is necessary across the scope of an industry. ANSI-RAB has done an outstanding job of communicating specific criteria to course providers for establishing ISO 14001 lead auditor training courses and, in a very short period of time, has established an effective system to ensure that the required training is available to build the necessary base of ISO 14001 auditors and lead auditors. IQuES has already undergone ANSI-RAB assessment and had a witnessed audit of its ISO 14001 lead auditor training course as part of the accreditation process, and we feel that it is a very credible accreditation process."

Who benefits most from attending ISO 14001 training courses&emdash;top management, management representatives, environmental managers, environmental engineers, internal auditors or every employee working in a facility? "Everyone benefits," says Wilson. "But the key is fitting the proper training to the right classification of individual."

Trends in ISO 14001 implementation

"It's too early to see specific trends in terms of industry, region, corporate approach, size, union vs. nonunion or exporters/importers," remarks Wilson. "I think most experts and instructors feel that the first companies will include those in plastics and chemicals, major international corporations and those companies that have a successful ISO 9000-based quality management system. Of course, Ford is an aggressive major corporation worldwide with regard to ISO 14001 implementation, and it is recognized as a world leader in environmental protection."

While management system experts have noted the wait-and-see position at most companies, they point out that interest in ISO 14001 is high compared to ISO 9000 when it was first published. "Companies are familiar with ISO 9000 management systems and the value they bring," explains Wilson. "Also, it's easy to sell clean air and clean water to management. Gone are the bad old days when evil companies sought to despoil the environment for economic advantage.

"Most corporations want to be good citizens&emdash;they see ISO 14001 as a way to achieve that while also lowering their costs." He expects a shift from the wait-and-see mode toward implementation and registration that will continue to expand across the board.

As for companies already sending employees to ISO 14000 training, most IQuES course participants are being sent by companies that plan to implement an ISO 14001-based environmental management system, according to Wilson. And they are planning to register to the standard.

What is the hardest concept within ISO 14001 for course participants to understand and apply? Scott expressed the same difficulty other instructors have listed. "Participants have a hard time separating the environmental compliance parallel from the environmental management system," he says. "I would add that the most difficult elements of ISO 14001 for participants are understanding environmental aspects and impacts. Environmental aspects are the pathways by which activities, products and services can interact with the environment. Environmental impacts are the changes&emdash;good and bad&emdash;to the environment that an organization makes via its environmental aspects."

What about using a quality management system auditor in an ISO 14001 audit? "A quality management system auditor could participate in an environmental management system audit if supervised by a lead environmental management system auditor," acknowledges Scott. "The quality management system auditor should be qualified under ISO 14012, Guidelines for Environmental Auditing&emdash;Qualification Criteria for Environmental Auditors and have successfully completed an ANSI-RAB-accredited ISO 14001 lead auditor training course."

State approaches to ISO 14000

In terms of leniency with environmental compliance, the U.S. Environmental Protection Agency is taking a wait-and-see approach outside some ISO 14001 implementation efforts within the EPA's voluntary programs. However, the environmental protection agencies of some states around the country are taking a more proactive approach in assessing and promoting the use of ISO 14001-based environmental management systems at companies. According to Wilson, the Office of the Great Lakes, Michigan Department of Environmental Quality is one example. The office's director is Tracy Mehan, who sits on the policy board for the Professional Registrar Organization Inc., which is a registrar. Because of his participation at PRO, Mehan's office is very actively interested in ISO 14000 and what it will mean in the future.

"In Michigan, legal privilege has been extended to include environmental management systems," explains Wilson. "Some fear that the EPA is not in favor of permitting states to enact such privilege legislation because it will be an obstacle to federal discovery of compliance violations. Overall, the EPA is heavily involved in ISO 14000 and no doubt is looking for it to be successfully adopted throughout the United States."

In other states, Scott provided examples of ISO 14001-related actions:

The U.S. District Court in Florida has rendered a decision that self-evaluation privileges (i.e., the privileges of a company to keep internal audit results and documentation confidential) could provide protection for those companies that maintained a viable environmental management system.

Pennsylvania has indicated that fines, penalties and surveillance schedules will be mitigated if an organization has an environmental management system, which includes ISO 14001-based systems.

Legal liability concerns

There is significant concern among many environmental managers, quality managers and top management at small to mid-sized companies that ISO 14001 implementation and registration efforts will expose their companies to new liability risks and regulatory noncompliances. Wilson lists two basic concerns a company has with regard to ISO 14001 and legal liability:

Uncovering regulatory violations that will subject the company to fines.

Discovery in a later civil lawsuit.


"Since the entire area of ISO 14000 and legal liability is brand new, the law is obviously not yet settled," says Wilson.

However, are these significant concerns for a company that wants to implement and register its environmental management system to ISO 14001? "An organization's liabilities result from activities, products or services that the organization provides or has," explains Scott. "ISO 14001 is a management tool for managing these attributes in an orderly fashion to assist in minimizing liability."

In addition to being president of an ISO 14000 course provider, Wilson is a lawyer, and he provides his insights into the issue of uncovering a regulatory violation as a result of ISO 14001 implementation and registration.

"In implementing an ISO 14001-based environmental management system, a company necessarily must identify how it impacts the environment, which may lead to the uncovering of some regulatory compliance violations," says Wilson. "Some states, such as Michigan, have enacted privilege statutes, whereby documents prepared relative to environmental management system implementation&emdash;including internal audit documentation&emdash;are considered confidential. Because environmental management system registration is a lengthy process&emdash;it involves early document preparation, internal audits, a third-party audit, identification of nonconformities and subsequent corrective actions&emdash;it's important to clearly label all documents in your environmental management system implementation/registration process as part of the continuing environmental management system program, which will maintain the privilege protection.

"In states that have not enacted privilege protection, some companies seek to extend the lawyer-client privilege and attorney work product doctrine to environmental management system implementation by contracting for their ISO 14000 services (i.e., training and registration) through their legal department or outside counsel. If the company providing ISO 14000 services is headed by an attorney, as is the case with IQuES, the argument also can be made that the lawyer-client privilege applies. Whether either approach will be upheld in court will be determined by future events. At a minimum, it offers one more potential avenue of protection.

"No matter how the privilege protection issue is ultimately decided, it seems clear that all regulatory agencies&emdash;from the U.S. EPA to state agencies&emdash;view ISO 14001 registration as something to be encouraged, and therefore see a genuine effort at environmental management system implementation as a mitigating factor in leveling fines."

Wilson also addresses the second concern&emdash;what happens if an injured party that files a lawsuit against a company acquires the company's environmental management system documentation through the legal discovery process? "In other words, could an internal audit that reveals a noncompliance be later used against a company in a lawsuit for damages?" asks Wilson. "In this situation, I believe the courts will ultimately decide the issue based on public policy. If the courts see it as being in the public's interest for companies to implement an ISO 14001-based environmental management system, then the courts will be averse to decisions that would result in a chilling effect on companies doing what's good for society.

"For example, in tort law, a company's subsequent corrections to a design defect are not admissible in a lawsuit alleging negligent design. Such evidence would certainly be relevant to proving the design defect, but for public policy reasons, it is in the public's interest to allow companies to make improvements without using this action against them. Similarly, as long as a bona fide environmental management system implementation program is in effect, the courts will not be eager to allow environmental management system documentation to be used against the company."

A number of individuals have raised the concern that auditors may face criminal charges from the EPA, state or local environmental agencies if they uncover a regulatory noncompliance during an ISO 14001 internal or third-party audit. "The reporting of environmental noncompliances generally is the responsibility of the company that has the noncompliance," stresses Scott. "A citizen, whether an employee or not, generally has no obligation to report noncompliances to the regulatory agency involved. Three states do have 'bounty hunter' laws that apply to some environmental issues, and some elements of CERCLA [Comprehensive Environmental Response, Compensation and Liability Act of 1980] have unusual reporting requirements.

"Under citizen action suit provisions of the Clean Water Act et al., actions brought by citizens result in no monetary awards to the party reporting the noncompliance. Penalty awards by the courts are usually applied toward remediation costs. Environmental management system auditor actions range from limited memoranda to the auditee as an issue aside from the environmental management system audit to a verbal report to the attorney who hired the auditor with no written commentary. The latter approach utilizes the lawyer-client privilege and/or the attorney work product doctrine to maintain confidentiality."

IQuES courses teach that the auditing organization should confer with the legal counsel of the company being audited to establish work practices applicable to the particular geographical environment.

Arguments have also been proposed that ISO 14001 implementation and registration should not necessarily uncover regulatory noncompliances. Scott concurs. "Environmental management system audits against ISO 14001 are concerned primarily with whether the organization has documented procedures for managing 'legal and other requirements,' " he says. "These include environmental regulations and identification of and access to applicable legal requirements. Environmental management system audits are concerned with the required elements of a management system, not compliance issues. The audit criteria are ISO 14001, the organization's environmental management system policy, procedures, operating objectives, targets and indicators, and record keeping. It must be noted that the audit criteria for compliance audits is the Code of Federal Regulations, Part 40."

The ISO 14001-based environmental management system is intended to include the management of regulatory aspects of the organization, but not compliance.

Benefits of ISO 14001

Clearly, ISO 14001 and ISO 14004 will provide the basis for environmental management system establishment in countries where there is little or no enforcement of national environmental regulations. In fact, Scott points out that these countries may avoid some of the problems U.S. industry has faced.

"Organizations within a country without an environmental regulatory structure will have the opportunity to establish environmental management systems before a myriad of environmental compliance regulations are enacted," says Scott. "There is also the opportunity for one country to learn from other countries how to streamline their environmental regulations."

Wilson sees ISO 14000 as the beginning of a gradual, long-term process. "Once an environmental management system is established, there must be continual improvement. We can't expect an emerging economy to be on a par with U.S. regulations&emdash;if we did, such emerging economies would not buy into ISO 14000. The idea is to begin and then raise the crossbar over time."

Pollution prevention and continual improvement are the most important contributions Scott sees arising from ISO 14001. "They are the hallmark of ISO 14001. These are driven by objectives and targets that are intended to capture and exceed regulatory action levels. Required environmental management programs must be established to detail how the objectives and targets will be achieved, and the environmental performance evaluation will be used to measure the degree of success of the management programs.

One benefit that should be of particular interest to companies is the possibility that the U.S. environmental liability lawsuit situation will be altered as a result of ISO 14001 implementation and registration. "A well-defined, streamlined environmental management system will decrease liability because of the thoroughness of the consensus nature of the standards and a company's efficient implementation of an environmental management system," declares Scott. "Application of the standard must become the method of doing business."

However, Scott warns that registration is not the end purpose of ISO 14000: "The implementation of an ISO 14001-based environmental management system is not limited to one achievement. A company that merely achieves ISO 14001 registration will not succeed in the long haul. The environmental management system must become an integral part of the business for the company to realize its investment, by adhering to the environmental management system that it has successfully established."

Avoiding documentation problems

Most companies already have significant environmental management documentation for compliance reasons. But there are potential problems caused by the documentation necessary to effectively establish and use the procedures ISO 14001 requires. Fortunately, there are steps a company can take to implement ISO 14001 without creating large amounts of unnecessary new documentation.

"Additional documentation requirements can be met by review and revision of existing documents," remarks Scott. "Other documentation will have to be established. Keep in mind that procedures do not have to be voluminous&emdash;they must address company needs only. By far, the bulk of an environmental management document system is the operating and corporate records that already exist but may not be managed as required by ISO 14001. If you have an ISO 9000-registered system, you can use much of your quality assurance system to manage your environmental programs. Redundancy can be minimized."

In addition, Scott indicates that TC 207 and TC 176 have formed a joint task force to examine how ISO 14001 and ISO 9000 can be jointly implemented and maintained.

As far as the EPA, the U.S. Department of Energy or other U.S. government agencies promoting ISO 14001 registration and driving U.S. registration, Scott says that U.S. government agencies are supposed to refrain from endorsements. However, the Office of Management and Budget has issued Circular 119, which requires that consensus documents be used whenever possible.

"Circular 119 is in keeping with 'outsourcing' efforts that are part of all the corporate fabric in the United States today," declares Scott. "The MIL standards of yesterday are all but gone as far as use is concerned. Consensus standards usage means that the federal government will not have to support the maintenance of government standards financially. Cost-cutting is certainly a driving force behind the use of consensus standards."

Wilson adds that an amendment to the National Technology and Transfer Act signed earlier in 1996 by President Clinton mandates that federal agencies adopt consensus standards like ISO 14000 and ISO 9000. If they do not, they must justify their actions to the Office of Management and Budget.

Scott foresees ISO 14001-based environmental management systems providing companies with benefits such as cost savings, increased market share, reduced liability, reduced insurance premiums, elimination of trade barriers and more efficient use of resources. "Organizations that already have ISO 9000-registered quality systems have enjoyed many of these benefits," says Scott. "By adding an ISO 14001-based environmental management system, these benefits will be extended."

About the author

James G. Mroz is editor of The Informed Outlook, a twice-monthly newsletter from INFORM (International Forum for Management Systems Inc.), which provides management executives with timely guidance on ISO 9000, QS-9000, ISO 14000 and other management standards.

For more information, telephone (703) 680-1436, fax (703) 680-1356, e-mail INFORMintl@aol.com or visit INFORM's Web page at http://www. INFORMintl.com.

© 1996 INFORM Inc. Reprinted with permission from the December 1, 1996, issue of The Informed Outlook. All rights reserved.