Anniversaries: ISO 14001 is 10

Stumbling across ISO 14001 certification figures a few days ago jogged my memory to the days when it was first released - I must admit that discovering 14001 was released 10 years ago this past June was a bit of shocker - time flies!

It was controversial back then. The standard had the backing of governments and many businesses were stongly incentivized to get on board with it. I remember when Ford and GM joined forces a year or two later and made it mandatory for any company providing products or services in their supply chain to become certified under ISO 14001.

But pushback came from companies and environmentalists who said that the standard was causing weaker performance - not stronger. Some companies in Japan, the US, and western Europe had already adhered to high levels of environmental management, and the ISO standard - built with wide global uptake in mind - actually lowered the bar instead of raising it. Of course, there were the to-be-expected complaints of cost and burden as well.

Some say that ISO 14000 has been a solution to many problems: unintentional trade barriers created by environmental standards; the inefficiency of command and control regulations; and the plethora of permits, inspections, regulations and standards faced by companies trading across international borders.

I think the standard has done much for environmental management overall - not the least by creating a standardized set of vocabulary, expectations, actions, and (10 years on) a worldwide infrastructure of practitioners that can help companies cope with their environmental risks.

But is it actually improving performance? Does anyone out there know of any studies or impact assessments of ISO 14000 certifications?

ISO 14001 - on the menu in Asia

I was somewhat surprised to find out that International Organization for Standardization (ISO) does not officially track the number of certifications to its 14001 environmental management standard. All these years I have been jealous of ISO assuming that they can track certifications with ease due to the compliance oriented nature of their standard. We are have always struggled to track the users of the Sustainability Reporting Guidelines because they are a flexible framework - certifications are not required, nor are companies required to inform GRI (or anyone else) when they have issued a report based on the Guidelines.

Anyway, I stumbled across some data from the German Environment Agency (UBA) while surfing the web this evening that seems to be the closest thing we have to a tally of total certifications. They tracked just over 129,000 certifications worldwide by the start of 2007 - they claim this figure represents a rise of about 25% from the previous year. I took that as a good sign that ISO 14000 is still growing that strongly.

Organizations in Asian countries account for over 45% of certifications globally - with Japan and China in the number 1 and 2 spots respectively (approximately 20,000 certifications each), and South Korea, India, Taiwan, and Thailand all in the top 20.

The ususal suspects from western Europe can be found in the top 20 as well - Spain (11,000 certifications - good for #3 spot), Italy, Germany, UK, Sweden, France, and Switzerland. But possibly more interesting is the appearance of some new CEE nations rounding out the bottom of the table - Romania, Czech Republic, and Hungary make the top 20 for the first time with a combined certification total of nearly 5000.

The USA is 5th on the list with 8000 certifications, and Canada is 11th with nearly 2600. No African companies made the top 20, but the survey shows that South Africa has over 400 certifications to-date.

I wonder if reporting rates will or do follow ISO certification rates. Has anybody out there seen any correlation?

Frankfurt Motor Show: Environment on Parade

The International Motor Show or Internationale Automobil-Ausstellung (IAA) is the world's largest motor show and it opens today. IAA is held biennially in Frankfurt, Germany and is known in English as the Frankfurt Motor Show. It will attract at least 1 million visitors and will debut no fewer than 250 new passenger vehicle models.

I am no car junkie, so don't follow this closely but I did watch a segment on the morning news today previewing the models that visitors will be treated to when they arrive at the show this year. Clean, green, hybrid, electic, and other environmentally friendly prototypes will dominate the show apparently. I saw images of tiny space-age looking electric cars, and fancy luxury brands like Audi with the word HYBRID painted over the distinctive sleek bodywork.

Growing up not far from Detroit MI where the annual Auto Show dominates people's calendars, I remember it was all about being big and bad in those days! Large Hummer-type vehicles, trucks with industrial grade power being sold on the consumer market, and big heavy fuselages (I know that is an airplane term, but some of the cars were so large they looked larger than a small plane!).

Nice to see that the most anticipated new models this year are the enviro-friendly ones. They will have their place in the spotlight over the course of the next two weeks in Frankfurt - but the real road test will come when they hit the market. How will consumers vote?

Harvard Business Review asks how reporting helps manage climate risk

To round out a threesome of unprecedented media interest in GRI recently (see previous two posts this week) the Harvard Business Review was in touch to talk about what everyone is talking about - climate change.

The editor wondered how reporting could play a role in helping companies strategically manage risks and opportunities associated with climate change. Here were some perspectives I shared.

Lagging indicators: The starting point for navigating the risks of climate change is to first understand what impact the company’s operations, products and services are having on the environment. By knowing their own ‘carbon footprint’ with certainty, companies can start to take action to reduce their impacts. Benefits of measuring and reporting include realizing cost savings due to energy efficiency, to remain one step ahead of regulation, and to protect brand value by showing accountability and responsibility for environmental responsibilities.

Real time indicators: The climate change issue is so prominent that companies cannot afford to seem like they are not actively looking at their own impacts and helping to shape a more positive future. Benefits of reporting on these indicators include earning and maintaining a license to operate in the public domain, demonstrating a leadership position on one of the most pertinent issues of our time, and earning customers and clients by differentiating the company in the marketplace as responsible on this issue.

Leading indicators: Scientists tell us that climate change will alter our climatic patterns and our physical landscape. Reporting on forward looking indicators lets a company tell its story about how it is going to adapt and innovate to mitigate risk that climate change could cause – such as emerging risks to places where the company has operations, or risks to resources the company is dependant on (e.g., forests or agriculture), and risks associated with rising energy costs. Leading indicators also help the company show how it will capitalize on new market opportunities afforded by climate change – such as introducing new products and services that do not rely on fossil fuels, or engaging in carbon trading.

Search GRI indicators here.

Honesty note:
The Economist and Business Week contacted me this week, but I have to admit that the editor from Harvard Business Review contacted me about three months ago to talk about sustainability reporting and climate change. Since I am on a roll blogging big media interviews this week I couldn't resist adding it to the list. Look for the HBR interview in this October's issue.

What do CEO's say about sustainability? (Part 3)

Globalization is not only here to stay, but is maturing to a next phase - earlier phases being typified by outsourcing and supply chain shifts from "Western" economies to emerging markets. But this next phase will show a marked increase in global integration with China and India in particular being new drivers of demand - not only supply.

The McKinsey study concluded that expectation around adherence to sustainability by companies will become even higher as a result of our entering this next phase. Why? Greater service integration across national boundaries would make intangibles more valuable, and Chinese and Indian companies will need to find ways to demonstrate their "local" loyalties in parallel with their efforts to build globally integrated value systems.

CEO's seemed to agree. When asked which trends would be most important in influencing society's expectations on business "increasing environmental concern" scored highest - a whopping 61%. This was followed by a cluster of three responses scoring in the 30's - Greater demand for and limited supply of natural resources (38%), Emergence of China and India in the global marketplace (37%), and increasing technological connectivity (33%).

There were 7 other responses to this question, all scoring between 6-18%, and included decreasing trust in business, pressure from NGOs, globalization backlash, and overburdened public sectors.

The green business case in Europe

Sometimes a committment to sustainability at the heart of your business pays off - big time. The headlines of the Financial Times in Europe this past weekend read "France an UK push for green tax cuts". Seems that the new leaders in charge of France (Sarkozy) and the UK (Brown) have wasted no time putting the environment first and foremost.

Their main plan is to implement lower Value Added Tax (VAT) on emergy saving goods and services.

Sarkozy was quoted "It is unfair that a polluting car costs less than a car that does not pollute."

The business case cannot get any clearer. Now let's see how long it takes, and how many hoops have to be jumped through for this scheme to actually be implemented!

Happy Earth Day!

People often talk about the three pillars of sustainability - social, economic, and environment. I must admit that this image never really resonated in my mind as one that adequately described the dimensions of sustainability.

An alternative image has conjoured itself up in my mind, follow me if you can:

Imagine instead one large box - lets call this the environment. Within that box image a second, smaller box contained completely within the first - lets call this the social dimension. Within this second box a third exisits - lets label it economic. Finally a fourth box is drawn contained entirely within the third - it is the smallest box but it is at the heart of our diagram - it is labeled financial.

I think this image more accurately portrays the interconnected nature of the dimensions of sustainability. The financial system lies at the heart of of the way the world works today - but it exists in the context of a greater economic system. This economy is the invention of humans, and operates in the context of our cultures and societies - hence the social sphere. Finally, all of this operates within the finite physical boundaries of the planet Earth.

The world celebrated Earth day on Sunday and it was a great excuse to get outside and appreciate the world around us. I headed out of Amsterdam city to the Dutch countryside on my bicycle headed towards the famous tulip fields. They really are a sight to behold if you havent had the chance to see them in person. Acres upon acres of vibrant colours in full bloom, as far as the eye can see (enjoy the photo!). It occured to me that the tulip fields were a great illustration of the interconnectivity of sustainability dimensions. The basic function of the tulip fields is to supply a multi-million dollar trade in tulip bulbs and cut flowers, but this creates a wider economy around it of related products and services, and empowers the Dutch people to participate in the world economy. I still havent determined whether or not the tulip trade has shaped the Dutch culture or if the Dutch culture has shaped the tulip trade, but either way they are a very important part of the country's identity and culture. Finally, they need a healthy environment to grow and flourish, and contribute to the Earth's biodiversity.

Globalization’s offspring: a race to the top or the bottom?

In last week’s Economist an interesting lead article ran: “Globalization’s offspring: How the new multinationals are remaking the old.” The rise of Brazilian, Indian, Chinese, and Russian (BRIC) companies as global powerhouses is happening fast and furious. Here in Amsterdam headlines were made a few weeks ago when Tata Steel of India bought Dutch steel giant Corus – the first time an emerging market company bought out a large company in this country - and a foreshadowing of what many feel the future holds.

Many are worried that the multinationals in emerging markets run lower cost enterprises because, in part, they turn a blind eye to social and environmental conditions, and this results in competitive advantage. But the author of this article claimed that the evidence is overwhelmingly opposite to this assumption due to the fact that price alone does not make a successful multinational – quality is equally as important.

The Economist claimed that in terms of ethics, companies seem to “harmonize up, not down” – meaning there is evidence that BRIC companies do indeed spread better working practices and environmental conditions in their home countries, and also adopt local norms when expanding into Western markets. Thus, the gap in sustainability performance seems to be on track to narrow.

In terms of transparency about performance, we are beginning to see a growth curve in reporting from companies in BRIC nations - most seem to be keen to show their international customers, competitors, clients, and potential business partners that they have earned a license to operate in their home communities and that regardless of slack national laws on human rights and environment these companies meet higher standards.

What is your experience?