Environmental Management Systems

Introduction
Sustainability has two meanings within the context of an environmental management system
(EMS). The ability to preserve and stretch resources is achieved through pollution prevention
and dedicated source reduction programs; waste minimization and recycling enable
companies to stretch finite resources, thereby ensuring resource availability for future years
of operation.

The second interpretation of sustainability is in terms of future risks to a business. In this

regard, we borrow a term from the legal profession: liability. All companies, regardless of the
industry sector within which they operate or how good their compliance records are, face
future liabilities. What is a well-managed waste problem in today's context may not be in the
future. This is often thought of by corporations as an intangible cost for environmental
compliance.

This is a mistake, for many corporations that acted within the existing legal environmental
framework for many years subsequently faced huge liabilities that threatened the very
existence of their businesses.

Environmental Cost Accounting

Introducing the concepts
Financial calculation tools applied to the analysis of investment decisions and life-cycle
costing (LCC, also life-cycle costs) are closely related techniques for evaluating investments
involving expenditures for equipment, installation, services, and various infrastructure
investments needed to maintain and grow a business.

These investments have present and future benefits or will have an impact on future costs.
Readers familiar with business financial management will recognize the process of evaluating
and selecting from among investment alternatives having the same objectives as capital
budgeting. Among engineers this process is referred to as engineering economic analysis.

The process of economic evaluation and comparison of investment alternatives encompasses

a collection of analytical techniques that are tools for investment decision making. For

environmental management, these tools enable a company to assess the financial benefits of
alternative strategies or compare such strategies to the status quo.

Ideally, investments in terms of costs, cost saving, and potential for reducing risk of
environmental liability are the foundation on which smart companies base their long-term
strategies, just as they do for any business. Unfortunately, there still exists a mentality among
enterprises to manage the environmental issues separate from the overall business planning
and strategic investments, which are the mainstream of the business. This is mistake, because
in todays world it is not possible to separate the mainstream business from that businesss
environmental obligations.

The essence of any investment is to sacrifice now in favor of future benefits. A typical
investment decisions asks this fundamental question: Do the future net benefits from the
investment outweigh the initial costs? Benefits may be in the form of additional future
income or revenues, or they may be intangible and possibly nonpecuniary in nature.

LCC addresses the question of how best to accomplish a particular task. In other words, it
assists in defining the least-cost method, taking into consideration both the initial outlay and
future operating costs. LCC also involves risk assessment, in the sense that some of the
strategies or initiatives under consideration require larger initial outlays and achieve
lower future costs than others. In developing criteria for an investment portfolio, a
business should focus on the direct costs for investments and the potential for reducing
long-term liabilities. In terms of the environmental issues facing companies, this requires
that attention be given to the several cost tiers.

Decisions on investing in pollution management strategies that rely heavily on end-of-pipe

treatment technologies are the result of ignoring or not recognizing the true or total
costs associated with pollution control and waste management. To account for all of the
costs we need to recognize that they fall into four distinct categories or tiers (examples of
each category follow):
1. Usual or normal costs.
2. Hidden or indirect costs.
3. Future liability costs.
4. Less tangible costs.

Tier 1 Costs. Usual or Normal Costs

These costs include such costs to the operation as

Pollution fees (i.e., fees paid for discharging pollutants within legally allowable
emissions standards).
Direct labor costs.
Raw materials (e.g., feedstock chemicals, water).
Energy.
Capital equipment items.
Site preparation for pollution control equipment.
Equipment tie-ins and process modifications to accommodate pollution controls.
Employee training.
Permits to construct.

Tier 2 Costs. Hidden or Indirect Costs

These include such costs to the operation as
Expenses associated with monitoring.
Permit fees (e.g., permits to operate, permit renewals, other).
Environmental transformation costs. (For example, costs are associated with
transforming a water pollution problem into a solid waste disposal issue; an example is a
dewatering operation such as a filter press to treat suspended solids in a waste-water
stream. This strategy generates a sludge that requires disposal. Another example is a wet
scrubber used to capture particulates to address an air pollution problem. In this
example, although we eliminate or reduce an air emission problem, we generate a water
pollution problem with the use of this technology. The water pollution problem may also
have to be addressed by separate treatment technologies, resulting in a sludge disposal
problem.)
Environmental impact statements (EIS; depending on the nature of the project, EISs
can cost many thousands of dollars and require long lead times).
Health and safety assessments.
Service agreements.
Legal costs.

 Control instruments.
Maintenance and replacement costs.
Reporting and recordkeeping.

Tier 3 Costs. Future Liability Costs

These include such costs to the operation as
Remedial action costs (site cleanup plus cleanup costs associated with third-party
damages).
Personal injury to workers.
Health risks and injury to the public.
More stringent compliance (environmental compliance is oftentimes a moving target,
hence, a control technology used today may become obsolete a few years down the road).
Inflation (e.g., this could have an impact on higher feedstock costs and energy as well as
waste disposal services).

Tier 4 Costs. Less Tangible Costs

These include such costs to the operation as
Consumer response and loss of confidence due to perceived poor environmental
management (it is well recognized in technologically advanced societies that consumers
and investors favor those companies that are environmentally conscious of their actions
and have proactive environmental management programs).
Employee relations (poor management of environmental issues places workers at health
risks).
Establishing and extending lines of financial credit (lending institutions will not extend
loans to or provide favorable terms for credit lines if a company runs a high-risk
operation from an environmental management standpoint).
Adverse impacts on sales of property or mergers and acquisitions (companies that are
looking to partner or merge with others are not willing to take on the other firm's
environmental liabilities; poor environmental management can bring enormous liabilities
to investors and partner organizations).
Higher insurance premiums (companies that have a poor environmental track record
represent a risk and, therefore, the potential loss of assets from fire or explosion or

health risks to workers and the public; insurers will not take these risks, or they will
impose high premiums with very limited coverage).
Becoming the focus of frequent environmental inspections and corrective actions (if
environmental regulators recognize a recurring theme of noncompliance or accidents,
then the facility will be singled out for numerous violations, fines, inspections, and
corrective actions, all of which can result in significant costs to an operation, including
interruptions in production schedules and legal costs).
Less leverage in negotiating environmental fines and penalties. (The environmental
laws in technologically advanced nations are complex and operations are oftentimes
fragmented, leading to innocent violations of environmental laws. If a company has had a
history of poor environmental management, then it has little basis to negotiate for
leniency on innocent violations. The problem is perceived as systematic.)

The Difference between an Environmental Program and an EMS

An environmental management system (EMS) is a systematic approach to handling the

environmental aspects of an organization. It is a management tool that enables an
organization of any size or type to control the impact of its activities, products, or
services on the natural environment.

Every company today will claim that it has an environmental management system. It
will point to the fact that it has an environmental manager or that the plant manager is
responsible for environmental reporting issues, permits, meeting compliance requirements,
and the like. It will point to the fact that it has personnel and perhaps even a dedicated
department that manages the environmental aspects of its business operations. Some will
highlight the fact that they have a formal waste minimization program. However, this is not
an EMS but a collection of components loosely linked together and applied to address
environmental compliance issues.

There is a fundamental difference between managing environmental issues with corporate

resources under a program within an environmental department and adopting an EMS,
which is a systematic approach to linking and managing all aspects of a business to the
environmental interactions of the operations and products.

Herein lies the difference between managing environmental issues with a program versus
the application of an EMS.
The key elements of an EMS are
An environmental policy. The environmental policy and the requirements to pursue this
policy via objectives, targets, and environmental programs.
Planning. The analysis of the environmental aspects of the organization (including its
processes, products, and services as well as the goods and services used by the organization).
Implementation and operation. Implementation and organization of processes to control
and improve operational activities that are critical from an environmental perspective
(including both the products and services of an organization).
Checking and corrective action. Checking and corrective action, including the monitoring,
measurement, and recording of the characteristics and activities that can have a significant
impact on the environment.

 Management review. Review of the EMS by the organization's top management to ensure
its continuing suitability, adequacy, and effectiveness.
Continual improvement. The concept of continual improvement is a key component of
the environmental management system; it completes the cyclical process of plan,
implement, check, review, and continually improve.

An EMS is based on a set of standards. There are several versions of an EMS, we

recognize the ISO 14000 series. The standards in the ISO 14000 series fall into two
major groups: organization-oriented standards and product-oriented standards.

The organization-oriented standards provide comprehensive guidance for establishing,

maintaining, and evaluating an EMS. They are also concerned with other organizationwide
environmental systems and functions.

The product-oriented standards are concerned with determining the environmental

impacts of products and services over their life cycles and with environmental labels
and declarations. These standards help a business gather information it needs to support
its planning and decisions and communicate specific environmental information to
consumers and other interested parties.

Understanding the Elements of an EMS

The Basics: The Continual Improvement Cycle
A simplified view of any EMS is in terms of the continual improvement cycle. In essence,
what an EMS challenges an organization to do is continually improve its environmental
performance. By continually improving the environmental performance of a facility,
even when the improvements are incremental, over time, the performance improves
measurably.
The continual improvement cycle consist of four basic steps:
1. Plan.
2. Do.
3. Check.
4. Revise.

In the planning stage,

We formulate environmental policy.
We identify environmental compliance needs.
We identify and set priorities for other environmental performance improvement needs.
We design programs and action plans
performance.

to improve environmental compliance and

In the doing or implementing stage, we implement the environmental programs and action plans devised under step 1.

In the "check" step,

We monitor environmental performance.
We evaluate the progress of the environmental programs and action plans.

In the "revise" step,

We revise the environmental programs and action plans.
We consider changes in the environmental policy.
We consider new environmental compliance and other performance improvement needs.

The ISO series of standards address the needs of organizations worldwide by providing a
common framework for managing environmental issues.
ISO 14001 is the part of the standard most pertinent to our discussions. Figure 1-2 relates
the five basic steps and elements essential to implementation of the continual
improvement cycle.

What Conformity Assessment Is All About

The term conformity assessment refers to a situation in which an organization tries to
determine if the requirements of a standard are being met; that is, it is an audit. In the
case of a management system standard such as the ISO 14001 EMS specification,
conformity assessment by an accredited third party is the basis for the "certification"
or "registration" of an organization to the standard.

Just as with the ISO 9000 quality standards, the value of an ISO 14001 certification
depends on the confidence others have in the body that performs the certification and
the process it uses. There must be assurance that the certification was performed
rigorously and fairly. This confidence is provided through the process of accreditation,
which embodies the recognition that a certifying body is qualified to do the work.

There are also direct benefits that affect on the financial wellness of a business. Among
those recognized are
Assuring customers of commitment to demonstrable environmental management.
* Maintaining good public and community relations.
Satisfying investor criteria and improving access to capital.
Obtaining insurance at reasonable cost.
Enhancing image and market share.
Meeting vendor certification criteria.
Improving cost control.
Reducing incidents that result in liability.
Demonstrating reasonable care.
Conserving input materials and energy.
Facilitating the attainment of permits and authorizations.
Fostering development and sharing environmental solutions.
Improving industry-government relations.