"Management System Matters" (JACO)

JFS Newsletter No.11 (July 2003)
"TOWARD A SUSTAINABLE JAPAN : CORPORATIONS AT WORK" ARTICLE SERIES Article No. 2
http://www.jaco.co.jp/ (Japanese only)

The ISO international standard series includes environmental management systems under ISO14001. This standard, adopted in 1996 and currently used by about 40,000 organizations worldwide, is designed to enable an organization to identify the environmental impacts of their activities, set a plan aiming at specific numerical targets to manage the impacts, execute the plan, measure and evaluate the result. Through implementing the so-called PDCA (Plan, Do, Check, Act) cycle, the organization can continuously improve its management concerning environmental impacts.

Readers may be surprised to know that 22 percent (about 12,000) of all ISO 14001 certifications worldwide have been given to Japanese organizations. And the most experienced private organization that provides training for official auditors and implements the actual certification process is JACO (Japan Audit and Certification Organization for Environment and Quality).

Founded in 1994, JACO has been in the business of providing training and certifications for ISO 14001 and ISO9001. In Japanese market, there are 45 entities providing services in this market, including 16 foreign organizations. Having the highest share is a governmental foundation called JQA (Japan Quality Assurance Organization), and JACO follows with a share of 16 percent.

For this article, we interviewed Mr. Tetsuro Fukushima, the former company president, currently serving as an advisor and lead auditor of JACO, on the past and the future of environmental management systems in Japan. In particular, we asked (1) why ISO 14001 (EMS) has spread so rapidly and widely, (2) what it means for so many organizations to have environmental management systems in terms of reducing the environmental impacts of Japanese industry, and finally, (3) what challenges remain ahead. Here, we would like to present what we learned from the interview.

First, let's look at ISO 14001 has spread so rapidly and widely in Japan. The main driver has been an increasing concern for the environment among the business sector, but there was another context that added a sense of urgency to the trend. It comes from a lesson learned from being slow to acquire ISO 9001 (Quality Management Systems).

In the 1980s, when Japanese corporations were making names for themselves for their excellence in quality management, the ISO9000 series started spreading widely as an international quality management standard. These Japanese corporations were already highly confident with their quality management and did not aggressively pursue that certification.

When this became an internationally recognized standard, Japanese corporations found themselves left behind, with a share of only 10 percent of all certifications (30,000 out of 400,000 worldwide). Since then, they had been having a hard time claiming that the level of their quality management systems is high compared to others. This experience was a hard lesson. When ISO 14001 was launched Japanese corporations quickly recognized its potential implications and prepared themselves to aggressively pursue certification.

Now, what does it really mean for so many corporations and institutions to have EMS, in terms of reducing the environmental impacts of business activities? It is hard to say how much has been reduced as a whole, for it is each organization's call to set targets based on their given resources. We can only look at each organization's results from their websites and environmental reports.

Nonetheless, the bottom line is that 12,000 organizations are making progress systematically, not in an ad hoc manner, to reduce their environmental impacts. They are in a cycle of making targets, executing plans, measuring and reviewing the results, and re-making targets for the next term, and they are doing it with a certain degree of motivation, given that an auditor comes in once or twice a year to verify the process.

By now, we know that environmental management systems have become popular and we can be confident that they are making certain progress. What are the challenges for the future? Mr. Fukushima points out the following three issues.

1. Greening of goods and services
2. Balancing "efficiency" and "motivation"
3. EMS in a smaller version

Let's take a look at the first issue, the greening of goods and services. Sometimes, we can witness an organization, which has operated EMS for 4 to 5 years and made certain achievements in reducing paper use, waste, and electricity. But they are at a loss as to what target to aim for next. Such an organization must look beyond reducing the environmental impacts from corporate operations, but apply the EMS to reassess the core of their business directly--the very products and services they provide for the market.

Take the example of a ball-point pen. To meet the standard under Japan's Green Purchasing Law if it contains plastic, it must be more than 40-percent recycled plastic. If a pen does not meet the criteria, the government and other public institutions can not purchase it. If you are a pen manufacturer, then, you need to pursue the challenge of greening the products and services, and make continuous improvements based on an EMS. We will be seeing the same challenges for all kinds of goods and services.

Now, moving onto the issue of balancing "efficiency" and "motivation." If your organization has multiple sites, including factories and offices, you can make the certification process efficient by acquiring just one certification through the head office, called the "multi-site method." This is certainly a very efficient measure in terms of simplifying the management workload, yet along it comes a major challenge in terms of giving the proper incentive to each site.

What this means is that, with this multi-site system, certification is not given to each site, and each factory or office can not earn the visible credit they deserve for making efforts. In addition, each factory often deals with different products, processes, and chemicals, and there is no room for adjusting the environmental policy set by the head office as the greatest common factor.

Furthermore, as the head office adjusts targets based on the least successful factory, keeping motivated becomes a difficult challenge for high-achievers. This is a situation where focusing on efficiency of the management results in lowered motivation for each worker.

In response to this dilemma, JACO recommends a new type of process called "group examination." With this process, the head office only determines the framework of how to make an environmental policy, targets, organization, and evaluation, and each site is given the authority to make them by themselves considering their own context and challenges.

The examination is conducted only once simultaneously, but certification is given to each site. In this way, the internal audit can be conducted by a team consisting of the environmental managers of each site, sharing each site's know-how. Not only that, since the framework is shared, the performance can be managed by the head office collectively. Matsushita Electric's associated companies are making use of this group examination method.

Lastly, let's address the need for smaller environmental management systems. EMS has become widely accepted among relatively large corporations, but the situation is different for small- to medium-size enterprises (SMEs). An SME of 20 to 30 employees often cannot afford having several persons devoted solely to building an EMS, and the volume of requirements is simply too large and burdensome. Given this situation, to spread among SMEs, smaller environmental management systems are critical, with the overarching PDCA mechanism and minimum documentation requirements, as an internationally agreed standard.

According to Mr. Fukushima, environmental management can be seen as an interim answer to the relentless pursuit of being an "excellent company," a process continuing from the birth of the modern corporation in the 18th century. Environmental management has been defined in the context of integrating environmental impacts as internal costs into finance-focused management and doing it efficiently. But this is just an interim status. We will continue to ask ourselves, "What is an excellent company?" and look at the issues of employee welfare, product stewardship, and ethics in conducting business. Management systems need to constantly evolve, as a tool to assist this process.