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The International Organization for Standardization ("ISO"), a worldwide federation founded to develop and promote standards for international manufacturing, trade and communications, is in the process of promulgating international standards to enable companies to systematically manage the environmental aspects of their operations. These standards, known as the ISO 14000 series, do not themselves create substantive obligations related to environmental protection; rather, they provide a methodology by which companies can identify, comply with and, where appropriate, exceed the environmental requirements imposed by sovereign regulatory authorities where the companies conduct their operations. Like all standards promulgated by ISO, the ISO 14000 series is voluntary insofar as no legal requirements compel countries to adopt it. Many governments, however, have expressed a strong interest in the ISO 14000 series, and it is expected that several countries will adopt the standards once they are finalized.1
Moreover, it is anticipated that other factors, such as expected improvements in productivity as a result of implementation of the standards and market advantages in adhering to an established regimen of environmental care, will make the ISO 14000 series a pivotal part of environmental management in many countries. Thus, numerous American companies that are engaged in international trade (and, in particular, the sale of products internationally) are closely monitoring the development of the ISO 14000 series with the expectation that it will have a significant impact on their foreign legal or contractual obligations.
What remains less clear at this point is the effect the ISO 14000 series will have on the environmental aspects of operations conducted exclusively within the United States. The U.S. Environmental Protection Agency ("EPA") has been involved in the development of the ISO 14000 series and has expressed support for its adoption, particularly in the context of exploring systematic environmental management and auditing as alternatives to environmental protection based on performance-based criteria. It remains to be seen, however, whether EPA or the regulated community will consider the ISO 14000 series as breaking new ground in the development of systematic environmental management in this country. While some of this uncertainty is attributable simply to the fact that the ISO 14000 series is still being developed, much of it is attributable to the fact that the transition from "reactive" environmental management to a systematic, cradle-to-grave environmental management has already begun in the United States. As part of this transition, protocols for systematic environmental management and self-auditing have already been developed by EPA, other regulatory agencies and the regulated community itself.
Nonetheless, even in the absence of direct regulatory endorsement of the ISO 14000 series, market forces may cause the ISO 14000 series to become the standards by which domestic environmental management is measured. As a general matter, the impact of the ISO 14000 series on global environmental operations—which, by all current indications, will be significant—will necessarily have a "ripple effect" in the United States. More specifically, entities doing business with or in the EU, who appear destined to eventually comply with and become certified under the ISO 14000 series, may require their American subcontractors and suppliers to become certified as a condition of doing business. Moreover, to the extent these ISO-certified entities conduct business in the United States as well, they will undoubtedly market their certification domestically, thereby helping to create an American business climate in which ISO certification makes a difference. Meanwhile, insurers and financial institutions may start to view ISO compliance and certification as indications of a company's superior environmental performance, and may therefore be more willing to extend coverage or credit on that basis.
ISO was formed in 1946 and currently is composed of more than 110 member nations, with the United States represented by the American National Standards Institute ("ANSI"). ISO develops standards in all industries except those related to electrical and electronic engineering. In 1991, ISO established the Strategic Advisory Group on the Environment ("SAGE") to study the prospect of developing international standards for environmental protection. SAGE spent more than one year studying BS 7550, the national environmental management system ("EMS") standard for the United Kingdom, and other national EMS standards, and in 1993 recommended the formation of an ISO technical committee dedicated to developing uniform international EMS standards. Technical Committee 207 ("TC 207") was the committee formed based on SAGE's recommendation. TC 207 is itself broken down into various Sub-Technical Advisory Groups, and ANSI has organized a U.S. Technical Advisory Group to provide input reflecting American interests to TC 207.
TC 207 has developed the core structure of the ISO 14000 series, although the specific standards that comprise the series are in different stages of development. The standards that comprise the ISO 14000 series essentially can be placed in two main categories: organization evaluation standards and product evaluation standards. The standards that fall under the organization evaluation category are EMS, environmental auditing and environmental performance evaluation. Under the product evaluation category, there is environmental labeling, life-cycle assessment and environmental aspects in products. At present, the EMS and auditing standards are the only standards contained in the ISO 14000 series that have been developed in any meaningful way; these standards are at the draft international standard level and are expected to be finalized and adopted by ISO by mid-1996.
The EMS standards are memorialized in two documents: a document entitled "Environmental Management Systems—Specifications" (numbered 14001) and a guidance document entitled "Environmental Management Systems—General Guidelines on Principles, Systems and Supporting Techniques" (numbered 14004). The specifications document is the standard against which a company's EMS will be judged; the other standards in the organization evaluation category, including ISO 14004, are informative guidance documents, and adherence to them is not auditable. The specifications document essentially calls for a company to articulate its principles and goals of environmental management and to adhere to and achieve those principles and goals. It does not set pollution prevention or reduction goals; rather, it defines the critical management processes that a company must follow to control the potential environmental impacts of its operations. Thus, it is up to the company to specify what production processes will be used and what environmental impacts will be tolerated.
The specifications document contains five core elements for managing a company's processes and activities:
Policy. This section requires a company to establish an organizational environmental policy that is endorsed by the company's top management.
Planning. This section provides the various elements that must be considered in planning for an organizational EMS, including legal and other environmental requirements, objectives and targets, and any established environmental management programs.
Implementation and Operation. This section sets forth the requirements for establishing and maintaining an organizational EMS, including training, awareness and competence, communication, document control, operational control, and emergency preparedness and response.
Checking and Corrective Action. This section sets forth what a company must do to ensure its continued adherence to its EMS, such as monitoring, corrective and preventive action, and audits.
Management Review. This section charges top management to review the EMS to ensure its continued suitability, adequacy and effectiveness.
ISO 14004 explains fundamental environmental management concepts, defines key terms and provides the elements of a pre-assessment review for companies trying to determine whether it is appropriate to pursue adherence to the specifications document.
One of the key aspects of ISO 14001 is that it contemplates that companies can be certified to be adhering to their own EMS, either by accredited third parties or through self-declaration. Because ISO 14001 has not yet been finalized or adopted, no certification is yet underway, and the actual certification process has yet to be worked out.
The auditing standards are captured in three documents. The document entitled "General Principles of Environmental Auditing" (numbered 14010) is intended to educate organizations and auditors on the general principles necessary to conduct environmental audits. The second document, entitled "Auditing Procedures—Part I: Auditing of Environmental Management Systems" (numbered 14011), establishes the procedures for planning and performing an audit to determine whether or not conformance with a company's EMS is being achieved. The third, entitled "Qualification Criteria for Environmental Auditors" (numbered 14012), addresses the qualifications for both internal and third-party auditors.
Currently, there is no pending legislation in either Congress or the states that would mandate use of the ISO 14000 series, and particularly ISO 14001, by the regulated community. In addition, there is no indication at present that any regulatory agency of the United States plans to adopt ISO 14001 verbatim into regulation. In fact, the closest any federal regulatory authority appears to have come thus far in requiring use of ISO 14001 was the Department of Energy's ("DOE") announcement in early 1995 that it would require ISO 14001 certification for its contractors by 1997.2 DOE drafted an order to this effect.3 Subsequently, however, the agency decided not to adopt the order.4
As a participant in the U.S. Technical Advisory Group formed by ANSI, EPA has been involved in the process of developing the ISO 14000 series and fully supports the series. Nonetheless, to date EPA has not articulated that it will require use of the ISO 14000 series. Thus far EPA's regulatory focus on the ISO 14000 series has been solely in the context of the agency's exploration of voluntary pollution prevention and self-monitored performance initiatives as alternatives to environmental protection based on performance-based criteria. For example, in 1994, EPA proposed a pilot project as part of its effort to establish an "Environmental Leadership Program" to encourage facilities to "develop innovative auditing and compliance programs and to reduce the risk of non-compliance through pollution prevention practices."5 One of the criteria for companies that wished to participate in this pilot project was that they have an established environmental management program, and EPA recommended the ISO 14000 series among several guidelines that could be used by industry in establishing an environmental management program.6 In addition, as part of a regulatory reform effort, EPA announced in May 1995 that it would seek proposals to develop alternative strategies that may replace or modify specific regulatory requirements (called "Regulatory Reinvention (XL) Pilot Projects").7 EPA suggested that one such proposal could be the application of the ISO 14000 series within a specific industry sector.8
EPA's references to the ISO 14000 series in this regard suggest that a company's adherence to the series in conducting its domestic operations will have positive regulatory consequences. In its Environmental Leadership Program pilot project, EPA states that it will publicly recognize participants that have demonstrated outstanding environmental management practices, and provide them with an opportunity to inform and directly participate in EPA's effort to reassess the agency's self-monitoring and environmental auditing policies.9 Moreover, in its "Voluntary Environmental Self-Policing and Self-Disclosure Interim Policy Statement"—in which EPA offers penalty mitigation and other enforcement benefits for companies that voluntarily identify, disclose and correct violations—the agency "recognizes the development of and growing reliance on international voluntary environmental management standards in the United States and other countries" and states its intention to "continue to pursue a dialogue with interested parties and to pilot policy approaches... to determine how EPA can make use of and encourage these standards."10
Still, there is no indication at this point that EPA will consider the ISO 14000 series to be the preeminent guidance for systematic environmental auditing and management in the United States. As part of the Environmental Leadership Program pilot project, EPA cites several available guidances, in addition to the ISO 14000 series, that can be used by companies to establish effective environmental management and auditing programs, such as: EPA's own Environmental Auditing Policy Statement,11 the "Minimum Factors for Demonstrating a Commitment to Environmental Compliance" in the Draft Corporate Sentencing Guidelines for Environmental Violations,12 the Global Environmental Management Initiative and the Responsible Care Program.13 Furthermore, many American companies are quite far along in developing their own internal environmental management protocols for their operations. EPA notes that "recent surveys show that the vast majority of large companies engage in environmental auditing and/or have environmental management systems in place."14 Thus, it remains to be seen whether EPA will focus singularly, or at least more heavily, on adherence to the ISO 14000 series in assessing whether a company has maximized its efforts to achieve the best available environmental management practices.
Even if the ISO 14000 series does not gain the momentum necessary to become law or official regulatory policy in the United States, it may still have a significant impact on the environmental aspects of domestic operations simply by virtue of market forces. For starters, no other environmental management standard promulgated thus far has been met with such global enthusiasm, and many experts believe that the international attention given to and support of the ISO 14000 series alone will have a "snowballing" effect in the United States.15
More specifically, it seems clear that if the EMS and auditing standards are adopted as part of the EU's environmental standards (which appears very likely), compliance with or certification under ISO 14001 will become an economic reality for companies conducting business with or in the EU, including American companies. These companies—as well as governmental bodies in the EU—may in turn require their American suppliers and sub-contractors to comply with or be certified under the standard. On this point, the Co-leader of the U.S. Technical Advisory Group's Ad Hoc Legal Issues Forum states that "[a] number of companies have announced that they will be certifying to ISO 14001 themselves and/or requiring their suppliers to certify. The imposition of such a requirement by significant corporate customers—if it occurs—will have the same domino effect as occurred with ISO 9000."16 Additionally, the Chairman of the U.S. Technical Advisory Group reports that "[w]e are already seeing examples of government procurement offices considering ISO 14001 from their suppliers. Should this actually materialize, we will see wholesale adoption and conformance to ISO 14001 in industry. No major supplier will willingly forego the public sector market."17
In addition, American companies and foreign companies conducting business in the United States that become certified under ISO 14001 for purposes of their businesses abroad are bound to use ISO 14001 certification to their commercial advantage in the United States.18 Thus, even in the absence of a contractual obligation with these companies to become certified, a perceived competitive disadvantage may compel companies whose operations are conducted exclusively within the United States to opt for certification.
Certification under ISO 14001 may take off in the United States simply because American companies are better-positioned to be certified than many, if not most, of their foreign counterparts. With the widespread establishment of environmental management and auditing systems in the United States, American companies will be well-positioned to obtain certification once a mechanism is underway. That the certification process may not be overly burdensome is likely to make it all the more attractive.19
Finally, in time, there may be increasing pressure from the financial sector in the United States to comply with or be certified under ISO 14001. In light of the possibility of lower liability exposure, insurers may be willing to offer reduced premiums to ISO-certified companies. Similarly, financial institutions may be more willing to extend them credit, and investors may place a higher value on their shares.20
Already, there is strong indication of a commitment by some American companies and industries to comply with ISO 14001. On January 30, 1996 three industry groups, the United States Council for International Business, the Mexican Confederation of Industry Chambers and the Canadian Council for International Business, signed a voluntary agreement to exchange information and technical expertise for compliance with the standard, to be coordinated by the Commission on Environmental Cooperation of NAFTA.21 In addition, the following is a partial list of companies that are actively exploring implementation of and certification under ISO 14001: AT&T Corporation, AT&T Microelectronics Division; Matsushita Electric Industrial Company; Merck & Company, Inc.; Pitney Bowes; and Texas Instruments.22
[1] As an indication of the strong level of commitment to the ISO 14000 series, Austria and Switzerland have already adopted the draft version of ISO 14001, one of the standards in the ISO 14000 series, as their national standard. Telephone interview with Mary Saunders, National Institute Standards and Technology, Global Standards Policy Division (March 21, 1996). Meanwhile, the European Union ("EU") is currently in a "parallel voting" process (a four-month process), and it is widely expected that EU members will adopt ISO 14001 as part of the EU's environmental standards at the end of this process. Id.
[2] See Hemenway, Caroline G. and Gildersleeve, James P. (eds.), WHAT IS ISO 14000? QUESTIONS AND ANSWERS 15 (CEEM Information Services in association with International Environmental Systems Update 1995).
[3] See Flanagan, Michael D., ISO 14000: A New Environmental Standard with Ramifications for Wisconsin and the World, 10 Corporate Report Wisconsin 34 (September 1995).
[4] Telephone interview with John Larry Stirling, Environmental Protection Specialist at DOE (March 12, 1995).
[5] 9 Fed. Reg. 32062 (June 21, 1994).
[6] 59 Fed. Reg. at 32063.
[7] 60 Fed. Reg. 27282 (May 23, 1995). This proposal called for EPA to initially select up to six Regulatory Reinvention (XL) Pilot Projects and then to begin the development of a final project agreement. For final project agreements, EPA stated that it would seek to use a variety of administrative and compliance mechanisms to provide flexibility from existing regulations in exchange for the attainment of environmental results beyond what would have been achieved through full compliance with those regulations. 60 Fed. Reg. at 27287.
[8] 60 Fed. Reg. at 27286.
[9] 59 Fed. Reg. at 32062-63.
[10] 60 Fed. Reg. 16875, 16876-77 (April 3, 1995). This Interim Policy Statement was replaced by a Final Policy Statement in December 1995. See 60 Fed. Reg. 66706 (December 22, 1995).
[11] 51 Fed. Reg. 25004 (July 9, 1986).
[12] 24 Env't Rep. (BNA) 1382-84 (November 26, 1993).
[13] 59 Fed. Reg. at 32063. The Global Environmental Management Initiative is a not-for-profit organization, with 27 member companies representing a cross-section of industry, which has published a series of tools addressing total quality management principles in environmental management. The Responsible Care Program is an environmental management and auditing guidance document published by the U.S. Chemical Manufacturers Association for its members.
[14] 60 Fed. Reg. at 16876.
[15] Telephone interview with Jonathan Plaut, Chair of the Joint Public Advisory Committee of NAFTA and chairman of the Environment Committee of the U.S. Council for International Business (March 20, 1996); Cascio, Joe, They Will Be Used—For Good Reason, 12 The Environmental Forum 39 (November/December 1995) ("The momentum beyond ISO 14001 is orders of magnitude greater than what it was for ISO 9000 at this same stage of development.")
[17] Freeman, David J., Standards Will Be Used—With Qualifications, 12 The Environmental Forum 41 (November/December 1995).
[18] Cascio, Joe, They Will Be Used—For Good Reason, 12 The Environmental Forum 38 (November/December 1995).
[19] For example, Philips Components of Lebring, Austria has already achieved certification to the draft version of ISO 14001, which Austria has adopted. See Hemenway, Caroline G. and Gildersleeve, James P. (eds.), WHAT IS ISO 14000? QUESTIONS AND ANSWERS 27 (CEEM Information Services in association with International Environmental Systems Update 1995). Philips Components' sister subsidiaries in the United States are apparently preparing to follow suit when certification becomes available in the United States. Telephone interview with Ann Pizzorusso, Director of Environmental Affairs, Philips Electronics North America Corporation (March 22, 1996).
[20] Freeman, David J., Standards Will Be Used—With Qualifications, 12 The Environmental Forum 41 (November/December 1995).
[21] Id. 21 Daily Env't Rep. (BNA) B-1, B-2 (February 1, 1996).
[22] Interview with B. Tod Delaney, President, and Steven D. Caretsky, Vice President, First Environment (February 5, 1996).
