The Rules: Green standard requires organisations to make environmental management a strategic issue

ISO 14001 is the second-most used business standard in the world, holding its position in the global league table of standards for more than a decade.

This multi-faceted cross-business management system has a laser-like focus on driving down businesses’ environmental impact and consistently delivers a wide range of benefits, including cost savings and winning new work. This explains its popularity – more than 324,000 certificates have been issued to companies since its introduction in 1996.

The economic case for standards is clear; research shows they make a net £8.2bn contribution to the UK economy. In recognition of a growing list of climate, resource and energy threats facing organisations worldwide, a new version of the ISO 14001 standard has just been published to highlight the role environmental management plays in modern business.

Achieving the new standard

The revised version of ISO 14001 now requires organisations to make environmental management a strategic issue. While implementation of the standard is typically managed by skilled environment and sustainability professionals, the 2015 version sets new expectations on executives – including finance directors – to demonstrate leadership for environmental performance and associated cost savings.

Certificated businesses must meet a range of environmental management requirements to attain or retain their status, and senior management must support the initiative.

Achieving ISO 14001 is not just about ticking boxes; it brings significant cost savings through efficiencies in energy, water, fuel and materials. According to IEMA’s research, 40% of ISO 14001 organisations saved at least £10,000, and some saved more than £5m since implementation. Further, companies are required to demonstrate year-on-year environmental performance improvements, benefiting both the business and the environment.

The new requirements also mean organisations must demonstrate that they take potential external environmental challenges (such as climate change, flood risk, resource availability, etc.) into account against the context of their main business objectives, making their business more resilient in the future. Companies must demonstrate that they are taking action against these risks, and ensure that they feature in business planning.

The role of the FD

Finance directors in particular have a critical role in supporting ISO 14001. Appraising the business case, ensuring that investments are made, driving business returns and overseeing that the right financial data is reported will fall to an engaged FD.

The businesses that have benefited most from ISO 14001 are the ones where the chief environment/sustainability officer and the FD have worked together. Nigel Marsh, global head of environment at Rolls-Royce, a business that has saved tens of millions of pounds through ISO 14001, says that FDs have an important part to play in supporting environmental management systems: “Budgets for essential maintenance or related to compliance are always forthcoming, as is often support for longer-term investments for energy reduction – like photovoltaic installations and LED lighting where payback models are mature. But enlightened FDs will also look to business cases for waste reduction projects which will add up to significant overall cost savings.”

Daniel Perry, finance director at Park House Healthcare, says his business has initially benefited from more than £50,000 of savings through ISO 14001 because the organisation made the right decisions about investments in capital.

“We have spent a large amount of time on our environmental measures, spending in excess of £100,000 on updating our factory lighting and our vehicle fleet. And the dividends are paying off: we expect a total return on investment by the end of 2016, with further ongoing savings of £25,000 each year. Over the past four years, we have invested heavily in specialist equipment and technology to improve our environmental performance and we continue to pay strategic attention to reducing our impact because we see such a huge return on investment,” he explains.

Quite simply, where FDs engage in the management of the standard, the business sees significant rewards.

The new requirements offer businesses the opportunity to manage environmental performance in the most rewarding way; managing compliance, satisfying stakeholders, gaining recognition for being a responsible business, reducing risk and ultimately making serious cost savings. If a business case for ISO 14001 lands on your desk, I would give it your full attention. ?

Tim Balcon is CEO of IEMA