ISO 14001 certification - a cost benefit analysis within the South African manufacturing sector

Abstract

Companies in South Africa who have implemented the ISO 14001 environmental management system have claimed that it offered benefits such as an improved environmental performance and a business advantage. However, to date the commercial benefits associated with ISO 14001 in South Africa have not been quantified so the claims of a financial advantage cannot be verified. This study therefore sought to assess the financial benefits accruing to various manufacturing enterprises in Kwa-Zulu Natal, the Eastern Cape and the Western Cape provinces of South Africa who have implemented ISO 14001. There was a particular focus on determining the cost savings and return on investment which resulted from the purchase of „environmentally friendlier‟ raw materials; the reduction of process waste (by the reuse, reduction and recycling of waste) as well as the more efficient use of resources such as electricity, water and fuel. Data was collected by means of a questionnaire survey sent to key decision makers in the selected organisations, as well as follow-up in-depth interviews with selected individuals within each organisation. The results of the study showed that the benefits of ISO 14001 certification included improved environmental awareness among employees; enhanced responsibility for environmental concerns by employees; better data management; reduced operational and production costs; and new income streams linked to re-use and recycling initiatives. Consequently it can be said that the long-term financial benefits justify the relatively high cost; the time intensive obligations and the human resource requirements of ISO 14001 certification. That said, it was also found that smaller companies face relatively more financial hurdles in implementing an EMS, and thus, it is recommended that tax incentives for such firms to implement and EMS be considered.