ࡱ>  S@ bjbj x1 &&&Tz>>> zi&$" % % % %:NDs\0 nppp:J$KR& % % x& % %#& %& %nn01:Ǟo&&J % 0M>6 j90i@ ӛJzz &&&J Д0"">ДДДzzzӛ.zzz ISO 14001 and EPA Region I's StarTrack Program: Assessing their Potential as Tools in Environmental Protection Jennifer Nash John Ehrenfeld Jeffrey MacDonagh-Dumler Pascal Thorens Technology, Business, and Environment Program Massachusetts Institute of Technology Prepared for the National Academy of Public Administration June 2000 Learning from Innovations in Environmental Management: The Research Papers This report is one in a series of independent evaluations of innovations in environmental management commissioned by the National Academy of Public Administration's Center for the Economy and the Environment. The entire series is available at the Academy's website,  HYPERLINK http://www.napawash.org www.napawash.org, and will be available in print in late 2000. The U.S. Congress initiated this study in FY 1998 when it asked the Academy to undertake an independent evaluation of some of the most promising innovations in environmental management. A panel of Academy Fellows and other experts is guiding the project. The panel selected the research topics and researchers, and encouraged the researchers to offer their own findings and recommendations. The reports in this series are the work products of the research teams; neither the Academy nor the project panel endorses their findings and recommendations. The panel will use the research reports as a foundation for its own report and recommendations to Congress and the U.S. Environmental Protection Agency later this year. The overall project is under the direction of DeWitt John and Richard A. Minard, Jr. The U.S. Environmental Protection Agency has funded the project through contract number 68-W-98-211. About the Academy The National Academy of Public Administration is an independent, nonprofit organization chartered by Congress to improve governance at all levels: local, regional, state, national, and international. The Academys membership consists of 480 Fellows with distinguished careers in public management as practitioners, scholars, and civic leaders. Since its establishment in 1967, the Academy has assisted hundreds of federal agencies, congressional committees, state and local governments, civic organizations, and institutions overseas. The Center for the Economy and the Environment undertakes projects that help build the capacity of the nation, states, regions, and communities to produce stronger economies, healthier ecosystems, and safer living and working environments.  TOC \o "1-3"  Executive Summary  PAGEREF _Toc483122648 \h 5 Chapter 1. INTEREST IN ENVIRONMENTAL MANGEMENT SYSTEMS  PAGEREF _Toc483122649 \h 11 The Purpose and Requirements of ISO 14001  PAGEREF _Toc483122650 \h 11 ISO 14001's Potential Benefits to Regulators  PAGEREF _Toc483122651 \h 13 ISO 14001's Potential Benefits to Firms  PAGEREF _Toc483122652 \h 14 PATTERNS OF ADOPTION  PAGEREF _Toc483122653 \h 17 Chapter 2. PRACTICAL EXPERIENCE WITH ISO 14001  PAGEREF _Toc483122654 \h 20 Facility A  PAGEREF _Toc483122655 \h 21 Facility B  PAGEREF _Toc483122656 \h 21 Facility C  PAGEREF _Toc483122657 \h 22 Facility D  PAGEREF _Toc483122658 \h 22 Facility E  PAGEREF _Toc483122659 \h 22 Facility F  PAGEREF _Toc483122660 \h 23 Factors that Enabled ISO 14001 Registration  PAGEREF _Toc483122661 \h 24 Motivations for Becoming Registered to ISO 14001  PAGEREF _Toc483122662 \h 25 Behavioral Changes Brought About Through ISO 14001  PAGEREF _Toc483122663 \h 27 Formalization and Reinforcement of Existing Environmental Practice  PAGEREF _Toc483122664 \h 27 Integration of Environmental Objectives into Operating Routines  PAGEREF _Toc483122665 \h 29 ISO 14001 and Compliance  PAGEREF _Toc483122666 \h 29 Beyond-Compliance and Pollution Prevention  PAGEREF _Toc483122667 \h 30 Economic Considerations  PAGEREF _Toc483122668 \h 34 Corporate Influence  PAGEREF _Toc483122669 \h 34 Responsible Care  PAGEREF _Toc483122670 \h 35 Impact on External Relationships  PAGEREF _Toc483122671 \h 36 Corporate Recognition  PAGEREF _Toc483122672 \h 36 Supplier Relationships  PAGEREF _Toc483122673 \h 36 Inclusion of External Stakeholders in Decisions  PAGEREF _Toc483122674 \h 36 External Communication  PAGEREF _Toc483122675 \h 36 Community Outreach  PAGEREF _Toc483122676 \h 37 Regulators  PAGEREF _Toc483122677 \h 37 Summary of ISO 14001 Analysis  PAGEREF _Toc483122678 \h 37 Chapter 3. StarTrack: A Pilot Reinvention Program  PAGEREF _Toc483122679 \h 39 The Beginnings  PAGEREF _Toc483122680 \h 39 The Goals  PAGEREF _Toc483122681 \h 39 To Change Agency Behavior  PAGEREF _Toc483122682 \h 40 To Change Firm Behavior  PAGEREF _Toc483122683 \h 40 To Inform Agency Reinvention Programs  PAGEREF _Toc483122684 \h 41 StarTrack Requirements  PAGEREF _Toc483122685 \h 42 Gaining Admission  PAGEREF _Toc483122686 \h 42 Periodic Program Requirements  PAGEREF _Toc483122687 \h 42 Benefits to Facility Managers  PAGEREF _Toc483122688 \h 46 Chapter 4. Case Studies of Region 1 StarTrack Facilities  PAGEREF _Toc483122689 \h 47 Facility I  PAGEREF _Toc483122690 \h 47 Changes in Management Practices  PAGEREF _Toc483122691 \h 47 Facility II  PAGEREF _Toc483122692 \h 50 Changes in Management Practices  PAGEREF _Toc483122693 \h 50 ISO 14001 Impacts  PAGEREF _Toc483122694 \h 51 Facility III  PAGEREF _Toc483122695 \h 52 ISO 14001 Impacts  PAGEREF _Toc483122696 \h 54 Facility IV  PAGEREF _Toc483122697 \h 56 Changes in Management Practices  PAGEREF _Toc483122698 \h 57 ISO 14001 Impacts  PAGEREF _Toc483122699 \h 58 Chapter 5. Other Responses to StarTrack  PAGEREF _Toc483122700 \h 59 Concerns from OECA and States  PAGEREF _Toc483122701 \h 59 Perspectives of StarTrack Staff  PAGEREF _Toc483122702 \h 60 Partnerships with Agencies  PAGEREF _Toc483122703 \h 60 Penalty Mitigation  PAGEREF _Toc483122704 \h 61 Inspection Relief  PAGEREF _Toc483122705 \h 61 Rapid Response to Permit Applications  PAGEREF _Toc483122706 \h 61 Public Recognition  PAGEREF _Toc483122707 \h 62 Perspectives of Environmental Groups  PAGEREF _Toc483122708 \h 62 Chapter 6. Study Findings  PAGEREF _Toc483122709 \h 64 Why Managers Have Chosen ISO 14001  PAGEREF _Toc483122710 \h 64 The Relationship Between an EMS and Environmental Performance  PAGEREF _Toc483122711 \h 64 The Value of Third-Party Certification to Managers  PAGEREF _Toc483122712 \h 65 How ISO 14001 and StarTrack Contribute to Public Understanding of Facility Operations  PAGEREF _Toc483122713 \h 66 Is StarTrack Achieving its Goals?  PAGEREF _Toc483122714 \h 66 Chapter 7. Recommendations  PAGEREF _Toc483122715 \h 69 Appendix. Statistical Analysis: Data, Methods, and Results  PAGEREF _Toc483122716 \h 72 Bibliography  PAGEREF _Toc483122717 \h 83 Endnotes  PAGEREF _Toc483122718 \h 86  Executive Summary This report is part of an evaluation of environmental innovation undertaken by the National Academy of Public Administration. The goal of the Academys evaluation is to help Congress, the general public, state governments, and EPA understand which [innovations] are working well, which are not, and how to improve the initiatives and environmental management more generally. The environmental innovations of interest to the Academy are defined broadly as regulatory "reinvention." The central idea of reinvention is today widely acceptedthat EPA can and should find more effective and efficient ways of protecting the environment by working cooperatively with its stakeholders. The goals of the EPA Office of Reinvention are the following: use incentives and promote environmental management systems (EMSs) provide timely and accessible compliance-assistance create flexible and streamlined permitting help communities make sound environmental decisions EPA reinvention activities comprise some 30 programs. This research explores two recent initiatives related to those goals: ISO 14001 and the EPA Region I's StarTrack program. We studied ISO 14001 through two approachesa statistical analysis of the characteristics of early adopters, and case studies at six chemical facilities, five of which had adopted the standard. To study StarTrack, we interviewed managers at four of the six facilities that have participated in the program since its inception, as well as EPA staff members at the regional and national levels, state environmental officials, and representatives of environmental advocacy groups. THE ROLE OF ISO 14001 IN ENVIRONMENTAL PROTECTION ISO 14001 is a private effort to standardize and promote the implementation of environmental management systems. This research seeks to understand the extent to which a facilitys adoption of ISO 14001 may serve as a proxy for environmental excellence, that is, environmental performance above a normal baseline. This understanding could help to inform EPA decisions about the role of ISO 14001 in regulatory reinvention. We attempt to answer two questions about ISO 14001: Why do managers choose to adopt that standard, and what changes does it bring about in the organization, management, and ultimately environmental performance of facilities? Facilities that adopted ISO 14001 between 1996,when the standard was published, and mid-1999, when we completed gathering data for this research, we call "early adopters." We analyzed their characteristicsin terms of size, ownership, management practices, and environmental performancewith a database we developed for that purpose. Our analysis shows that early adopters tend to be large, foreign-owned facilities, that had already adopted ISO 9000, the international quality-management standard. They also tend to emit more toxic pollutants than their peers. Managers of large facilities who have experience with ISO 9000 are more capable of adopting ISO 14001 than managers of smaller, less-sophisticated plants, due both to managerial experience and plant size. That does not, however, fully explain why some managers have chosen early adoption. The relatively high level of toxic emissions of early adopters suggests a possible motivation: a desire to improve environmental performance, particularly compliance. Managers in the five ISO 14001 facilities we studied cited that desire as a reason for becoming registered. Those managers had determined, for a variety of reasons, that strong environmental management is in their interest. By adopting ISO 14001 early they hoped to assume the designation of "leaders." How does ISO 14001 change environmental management in early adopters? We found that, in the case-study facilities, ISO 14001 led to some common practices: greater attention to regulatory compliance, increased formalization of environmental practices, and stronger integration of environmental objectives into operating routines. It had little impact on managers' relationships with regulators and other external constituencies. Managers told us that ISO 14001s greatest contribution was in strengthening regulatory compliance programs. Managers included regulatory compliance in the targets they set in their ISO 14001-structured EMSs. They said that ISO 14001 helped to indoctrinate employees so that the goal of compliance became unquestioned. But ISO 14001 did not guarantee compliance, as demonstrated by a major accident that occurred in one of the adopting facilities more than one year after registration. Less significant incidents had occurred at each of the other ISO 14001 plants, as well, but managers we spoke with felt strongly that ISO 14001 will help to reduce such incidents over time. Within those common trends we found substantial variation. Each of the five ISO 14001 facilities we studied is using the standard in its own way, to achieve its own objectives. Many facilities are using ISO 14001 to improve their performance beyond what is required by regulation. The extent to which that happens depends entirely on the decision of managers to include "beyond-compliance" goals in their ISO-structured EMSs. In most of the facilities we studied, beyond-compliance goals were pursued only if they resulted in cost savings. In one facility, environmental objectives were pursued for their own sake. Those findings raise a question for EPA as it considers using ISO 14001 as a tool in environmental policy. Our research shows that early adopters are both capable (due to their large size and experience with ISO 9000) and motivated (as shown by their expressed desire to become environmental leaders) to use ISO 14001 to improve environmental performance. Evidence suggests, therefore, that the improvements in environmental management we observed in our case studies may be attributable to characteristics already established in those organizations: their resources, capabilities, and commitments. What will happen as firms that lack those characteristics adopt ISO 14001? During the study period, in September 1999, Ford Motor Company and General Motors Corporation announced they will require their suppliers to adopt ISO 14001. Other manufacturers may soon follow suit, imposing ISO 14001 as a requirement for business. We anticipate that firms that adopt ISO 14001 because it is required will experience different outcomes than those that adopt at their own initiative. Later adopters will not necessarily possess the resources, capabilities, and commitments to achieve the results we observed in the early adopters. We have seen that the standard allows managers to implement the standard in their own ways, and that even among early adopters, environmental objectives vary substantially. As the characteristics of adopting firms become more diverse, we expect that the impacts of adoption will also be more varied. THE ROLE OF STARTRACK IN ENVIRONMENTAL PROTECTION EPA's Region I office initiated StarTrack in 1996 as a pilot project. The goals of StarTrack are to improve: efficiency of public and private resource allocation protection of the environment public understanding of a company's environmental performance The programs initial goal was test the use of third parties to verify compliance. The original name of the program was the Third Party Certification Project, and most of the activities of the program appear to support that goal. The program provides benefits to facilities that establish the goal of continuous improvement in environmental performance, audit their compliance and environmental management systems, have results verified by qualified third parties, correct any violations discovered through that process within 60 days, and disclose environmental performance to EPA and the public. Currently 15 facilities participate. Is StarTrack achieving its goals? StarTracks success is most apparent with respect to the third goal, improving public understanding of a companys environmental performance. StarTrack overcomes a major deficiency in ISO 14001, which contributes little to public understanding of facility operations. Firms that participate in StarTrack disclose information about their emissions, product performance, and use of resources. At StarTrack facilities, compliance and EMS audits are public events, in which agencies and environmental groups are invited to participate. Results from the audits are publicly available. Success with respect to the first and second goals is more ambiguous. At this point, StarTrack appears not to be improving the efficiency of public and private resource allocation. StarTrack is a pilot project, just finishing its second operational year. With StarTrack, EPA is testing a system whereby third parties verify the sufficiency, and the substantive results, of both compliance and EMS audits. Staff members from the regional office and state environmental agencies routinely participate in the third party audits as observers. Observation is necessary, agencies say, in order to verify that participating firms are honoring their commitments and that third parties are identifying all significant issues. Preparing for audits, participating in them, and assessing results require substantial amounts of agency time. StarTrack will result in improved efficiency as EPA and states find, through careful testing of the program, that it is a reliable substitute for direct agency oversight. StarTrack includes the necessary elements to serve that function. EPAs confusion with respect to the second goal, the role of StarTrack in improving environmental protection, weakens the program, however. Members of the EPA StarTrack team assert that, in addition to privatizing compliance assurance for firms with strong environmental histories, StarTrack strengthens the environmental performance of firms that participate, as well as firms that may aspire to participate in the future. Our case studies suggest that environmental performance is improving in StarTrack facilities, but not as a result of the program. To be admitted, a facility must have a history of pollution prevention and an EMS that includes environmental performance improvement as a goal. Firms that meet those criteria are managed by people who have already invested in environmental performance improvement, and are committed to continuing to do so. Our cases suggest that, at this point, the factors that push StarTrack managers to develop beyond-compliance programs have little to do with agencies. StarTrack is impeded by a lack of specific program benefits. The benefits EPA promises are partnerships, penalty mitigation, inspection relief, rapid processing of permits, and recognition. StarTrack team staff members admit that participants are not receiving all of those benefits. Some StarTrack firms are still inspected by agencies; their permit applications are not handled any differently from the way they were before joining. The only benefit that is consistently delivered is public recognition. Currently, StarTrack facilities receive plaques and notice at a year-end conference. The EPA Region 1 website mentions participating companies by name. Research presented in this report suggests that recognition from agencies will not, however, on its own, move facilities in the direction of excellence. Larger forces shape the environmental practices of firms. Like the early adopters of ISO 14001, the facilities currently joining StarTrack are both capable and motivated to strive toward excellence. Those characteristics, established in the facilities prior to joining, are what move firms forward. When adequately tested, StarTrack may prove to be an effective program for privatizing agency oversight in those firms. It is a weak tool, however, for changing firm behavior. EPA should therefore limit participation to firms with established records of strong environmental performance. RECOMMENDATIONS FOR STARTRACK We recommend that EPA improve the specificity of StarTrack goals and the enforceability of StarTrack agreements. One step toward achieving those improvements would be to divide StarTrack into two programs. The first program, which should retain the StarTrack name, would have as its goal improving the efficiency of agency compliance assurance programs. It should focus on changing agency behavior. StarTrack should work to reduce the level of direct agency oversight of facilities with strong compliance performance, freeing inspectors to focus on average and poor performers. Candidates for StarTrack should be limited to facilities with strong compliance histories and established commitments to pollution prevention and environmental performance improvement. Only firms with little to hide should be invited to join a program that relies on facility managers to publicly disclose their environmental problems. Many in the agency believe their roles as environmental stewards extend beyond compliance assurance. They say that EPA's role should include helping firms do more than what regulations require. Promoting beyond-compliance performance could be the focus of a second EPA program. The goal of such a program would be to change the behavior of companies. If EPA wants to promote beyond-compliance performance, it need not focus on StarTrack facilities. StarTrack facilities have shown that they are already both capable and motivated to achieve that level of environmental performance. In designing its beyond-compliance program, EPA should decide which inhibiting factor it will address: lack of capability, or lack of motivation. An appropriate focus might be to attempt to engage firms managed by people who are motivated to improve but do not have the necessary skills, knowledge, or resources. EPA could help to move such firms in the direction of environmental excellence by offering technical assistance. It need not provide such assistance directly; many states have developed exemplary programs in that area. Alternatively, EPA could attempt to engage firms managed by people who are not yet motivated to strive beyond what is required by law. If it chooses that population of firms, it should focus on developing incentives. Incentives that EPA has been using in StarTrack may not be sufficient or appropriate. Regulatory flexibility could potentially be a strong motivator because it can affect a firms costs and competitiveness. Flexible approaches, however, are often time-consuming to negotiate, and must be developed on a case-by-case basis. In summary, we recommend that efforts to change the behavior of agencieswhich is the appropriate focus for StarTrackbe separated from campaigns to change the behavior of firms to embrace beyond-compliance goals. Combining those two objectives, as EPA has done in its current design of StarTrack, has made it difficult to evaluate the program, to plan for its expansion, and, ultimately, to achieve either goal. Chapter 1. INTEREST IN ENVIRONMENTAL MANGEMENT SYSTEMS Environmental management systems are formal structures of rules and resources that managers adopt in order to routinize behavior that helps satisfy corporate environmental goals. They are a subset of management systems in general. Firms have used EMSs since at least the mid-1980s when the potential liabilities and strategic implications of environmental performance became a business concern. In the United States, a variety of institutions have promulgated different types of EMSs. Several trade associations, most notably the Chemical Manufacturers Association, have developed codes of environmental management practice for their members. Those trade association codes fit our definition of an EMS: they require managers to establish environmental objectives, assign responsibility, allocate resources, and regularly measure and report progress. Many individual firms have developed their own environmental management systems tailored to the specific needs of their organizations. Of particular interest to regulators are formalized EMSs that include systems to verify the consistency of a firm's stated goals and its management practices. A leading example of such a system is ISO 14001. The Purpose and Requirements of ISO 14001 The International Organization for Standardization published ISO 14001 in September 1996 to help firms achieve three objectives: to manage the environmental aspects of business operation reliably and consistently to integrate environmental consideration into all activities of the enterprise to create a means for objective validation of corporate commitment to effective environmental management It provides organizations of all kinds with a common framework for establishing an independently verifiable environmental management system, or EMS. That framework is based on the concept of quality management, a term coined by W. Edwards Deming in the 1950s. Quality management requires a comprehensive, or "systems" approach, in which managers work to continuously improve not only their products, but the processes through which products are developed, made, serviced, and disposed. The goal of quality management systems is total satisfaction of customer need. While thatgoal can never be fully attained, quality management offers a system whereby managers move closer and closer to thatgoal. Joseph Cascio, chairman of the United States Technical Advisory Group to the international committee that developed ISO 14001, has compared the process of continual improvement to ascending a spiral staircase. As you complete each upward spiral, you find yourself one level closer to your destination, he explains. ISO 14001 is structured as a continuous "Plan-Do-Check-Act" cycle of: environmental policy-making environmental planning environmental program implementation auditing management review The ISO14001 standard requires each adopting organization to establish an environmental policy that includes, as a minimum, a commitment to regulatory compliance. While the standard also requires that policies include a commitment to prevention of pollution, the term is defined so broadly that its meaning is virtually lost. ISO 14001 requires that managers assess their environmental aspectsthe environmental impacts associated with their activities, products, and servicesand develop targets for reducing them. Managers must designate responsibility for meeting those targets and the dates by which milestones will be achieved. They must establish a training program to make workers aware of environmental policy and their roles in implementing it. All those steps must be carefully documented so that independent auditors will be able to understand the planned system, and verify that it is in place. Those activities constitute the planning and doing steps of the cycle. Managers must commit to continually improving their EMSs. ISO 14001 defines continual improvement as the process of enhancing the environmental management system to achieve improvements in overall environmental performance in line with the organizations environmental policy. Thus an organization must revise its EMS periodically to improve its ability to achieve its policy goals. In revising an EMS, managers may re-examine the environmental aspects they have identified, or reconsider the targets they have selected, or assess their progress toward achieving them, or review their record-keeping procedures. The ISO 14001 definition of continual improvement includes the note that the process [of continual improvement] need not take place in all areas of activity simultaneously. One year managers might focus on improving their aspects identification; another year they might focus on record-keeping. ISO 14001 offers no guidance as to the expected rate of improvement. ISO 14001 requires that managers assess their progress on a regular basis through auditing. Section 4.4.4 stipulates that managers establish and maintain programs and procedures for EMS audits. The purpose of ISO 14001 audits is to determine that a firms EMS conforms to the standard. Managers must report audit results to senior managers and correct any deficiencies. Those activities are the checking and acting part of the cycle. Firms that adopt ISO 14001 may either self-declare conformance with the standard based on their own audits, or use accredited third parties to make that determination. Only facilities that choose third-party verification are registered to the standard. Independent registration audits ensure to outsiders that an organization has established a systematic structure for managing its environmental impacts and is following through on internal environmental commitments. Before giving their approval of the management system, registrars audit to ensure that each element is in place, is linked to the achievement of the organization's goals, and conforms to the standard. ISO 14001's Potential Benefits to Regulators ISO 14001 is of interest to regulators because it has the potential to improve regulatory compliance and environmental performance in several arenas. Regulatory compliance The importance of regulatory compliance is made clear in the first several sections of the standard where the requirements for a firms environmental policy and planning are spelled out. Section 4.1 of the standard stipulates that an organizations environmental policy must include a commitment to comply with relevant environmental legislation and regulations, and with other requirements to which the organization subscribes. Section 4.2.2 states that a firm must establish and maintain a procedure to identify and have access to its legal requirements. Section 4.2.3 requires that, when managers develop their objectives and targets, they must consider their legal obligations. Because ISO 14001 requires that managers identify their legal and other obligations and implement a system for achieving them, EMS audits must include an evaluation of the facilitys regulatory compliance program. The EMS audit determines whether the system for managing compliance is functionalthat it is resulting in continual improvement toward the goal of total compliance. ISO 14001 does not, by itself, ensure compliance but does ensure that a firm continuously improves its compliance programs. ISO 14001 offers regulators the assurance that facility managers are aware of their compliance obligations and are moving toward achieving them. Environmental performance improvement Section 4.3.1 states that managers must establish a procedure to identify the environmental aspects of their activities, products, or services in order to determine which have or can have significant impacts on the environment. Managers must take those significant impacts into account when they establish their environmental targets. A facilitys environmental aspects are not limited to their regulated releases. Managers may include toxic run-off from their parking lots, diesel fumes emitted as their products are transported, or any other environmental impact they deem significant. The annex to the standard explains that managers should take the following activities into account as they identify their environmental aspects: emissions to air; releases to water; waste management; contamination of land; impact on communities; use of raw materials and natural resources; other local environmental issues. That list goes beyond the scope of environmental regulation. Managers are also to consider financial and technological constraints as they set their environmental targets. The extent to which they choose ambitious goals is up to them. ISO 14001 has the potential to move facilities beyond regulatory compliance if managers view their environmental aspects broadly, establish ambitious targets, and develop practices to meet them. Third-Party Registration Third party registration provides its own set of benefits to regulators. The objective review assures regulators that a facility's management systems is designed and implemented in accordance with the standard and that EMS performance is improving. Undertaking a third-party audit itself may improve environmental performance by bringing deficiencies in the EMS to management attention. Critiques of the Standard The standard is criticized for its failure to adequately involve and respond to the interests of environmental advocates and developing countries, and for disadvantaging small-to-medium size enterprises because of the high relative cost of implementation. It is further criticized for not setting performance requirements (the standard requires only continual improvement of the system itself): a company may be registered to ISO14001 without being in regulatory compliance. In addition, the standard does not require the disclosure of specific environmental performance information to the public. As a result, critics point out that there is no guarantee of a link between adoption of the standard and improved environmental performance, and many believe that organizations may use adoption of the standard to falsely represent their environmental commitment. ISO 14001's Potential Benefits to Firms The fact that environmental management systems in general are consistent with good business practice, improving both environmental and overall business performances, seems accepted today. EMSs may increase expected revenues (if customers value strong environmental management) or lower expected costs (through pollution prevention and resource conservation). Adopting ISO 14001 offers firms opportunities to strengthen internally and externally focused activities. Internal benefits include opportunities to: increase compliance assurance, thereby decreasing the likelihood of legal upset and the costs of regulatory non-compliance improve efficiency and cost savings. Companies that have registered to ISO 14001 have identified cost savings "as one of their first and most noted improvements after implementation of an EMS." improve environmental performance Those benefits could yield additional advantages as they: raise the value of the firm to shareholders, by reducing the risks and the costs of liabilities and increase its expected value increase employees' morale and pride Managers often adopt an EMS to signal environmental performance to: customers. The environmental management system can become a marketing tool, providing a means of differentiation and a competitive advantage, often enhancing relationships with customers (when not a supply-chain requirement). the public. The EMS provides some basis for a reputation of good corporate citizenship. regulators. Adoption can reduce friction and improve relationships with regulatory agencies, providing the demonstration of steps taken toward compliance, as shown in recent settlement agreements. insurance companies and lenders. The EMS lowers business risks, reducing the probability of adverse events and violations, and lowering the cost of externally raised capital. Intervention of an independent qualified third-party to review and verify the organizations' EMS and its implementation provides additional benefits to firms: review of the EMS. The objective review assures an organization that its management systems is correctly designed and implemented. In addition, a large firm seeking company-wide certification may register one facility to assess the amount of work it must do to become fully ISO 14001 compliant. enhanced effectiveness. Undertaking a third-party audit is one step beyond merely designing and implementing the EMS, and generally increases employees' commitment. additional credibility of an independent audit recognition as international standard. The actual registration provides competitive advantage when engaging in foreign trade by increasing business opportunities, and reducing the threat of non-tariff trade barriers. While it is important to distinguish the benefits associated with ISO 14001 adoption from those associated with registration, in practice both sets of benefits are intricately linked, and it is the combination of both that drives organizations to register to the standard. For example, a recent adopter declared that "by carrying ISO14001, we hope to waste fewer resources, reduce liability, improve our public image, and increase profits." Figure 1 depicts the many potential benefits to firms that adopt the standard. Figure 1. Summary of Firms' ISO 14001 Expectations  PATTERNS OF ADOPTION Since its inception in late 1996, ISO 14001 has been widely adopted in Europe and Asia. On those continents, some manufacturers are requiring that their suppliers are registered to the standard. Capital investors in Europe are starting to systematically demand ISO 14001 certification, and there are some signs that participation yields informal regulatory flexibility. By contrast, in mid-1999(the time of our research(many U.S. firms were taking a wait-and-see attitude. While many firms have adopted environmental management systems, few facilities perceive the need to actually register to ISO 1400. Registration is generally viewed as a poor use of resources. Many companies appear to be using the standard without actually registering. For example, anecdotal evidence suggests that many facilities have used the standard as a guide in developing EMSs, and many have performed gap analyses to assess the effort that would be needed to register in the future. At the end of 1998, fewer than 250 facilities in the United States had registered. That number almost doubled in the first half of1999, however, suggesting that managers believe the value of the standard is growing. It is too soon to draw conclusions about the future development of the standard in the world, as well as in the United States, but it is possible to analyze the characteristics of the organizations that have already chosen to adopt ISO 14001. In this chapter we compare the characteristics of United States facilities that have become registered to ISO 14001 with those that have not. A description of the data and methodology we used in this analysis, and statistical results, can be found in the appendix of this report. We compare ISO 14001 with non-ISO 14001 facilities on the basis of the following characteristics: a firm's nature (size, ownership, profitable or not, exposure, market position) industry sector (level of pollution, regulatory context, structure of competition) past environmental performance (based on toxic releases and regulatory compliance history) participation in other "beyond-compliance" initiatives ISO 9000 registration. Our analysis shows that larger facilities, that presumably already have well-structured management systems, are more likely to adopt ISO14001 than smaller ones. Based on 1996 performance data of facilities that must report their toxic releases to the toxic release inventory (TRI), we concluded that facilities with larger numbers of employees obtained registration to ISO 14001 disproportionately often. The data indicate as well that the size of the parent company is a factor. We also found that facilities that have already registered to ISO 9000, five standards published in the early 1990s that describe elements of quality management systems, are more likely to register to ISO 14001 than those that have no experience with ISO 9000. Why would large facilities with management systems that are already well established be more likely to register to ISO 14001? Large firms or facilities are more vulnerable to risks of poor environmental performance and need advanced EMSs such as ISO14001 to manage the greater complexity of those environmental operations. Those companies and facilities have readily available the necessary resources, and can afford the significant costs of both implementation and registration. Such large firms may want to test the compliance of their EMSs with the international standard in order to be ready if and when it becomes a business requirement. (At this early stage, very few organizations have achieved company-wide registration.) ISO 9000 prepares managers for ISO 14001. Many of the requirements for documentation and auditing are similar. Firms already compliant with ISO 9000 have less work to do to become ISO 14001-registered, compared to firms without ISO 9000 experience. Regardless of those potential benefits, organizations that have actually registered to the standard are the ones for which the costs of development and implementation of an environmental management system are relatively low. Hence, larger facilities, which possess the necessary resources and are in general better organized, and the facilities that are already registered to the ISO 9000 quality standard and whose structures fit the new EMS, have a comparative advantage and are more likely to adopt ISO 14001 early. Below-average environmental performance also increases the likelihood of registration. Facilities that emit more pollution than peers in their industry tend to adopt ISO 14001. One possible explanation may be that those facilities have lacked effective EMSs in the past and are now adopting ISO 14001 in order to improve their management practices. Once again, the formal registration to ISO14001 (which is tested here) should not be confused with the implementation of an EMS. Another explanation for that finding could be that reputational benefits spur adoption among the most emission-intensive facilities. Indeed, it may very well be that large facilities with greater-than-average emissions levels are subject to more intense public scrutiny and would gain greater benefits from formal registration. There is no significant relationship between a facility's compliance history and its decision to become registered. Neither a history of compliance nor non-compliance appears to contribute to the registration decision. Facilities with strong compliance performance are just as likely to obtain registration as those with compliance problems. Furthermore, belonging to one or another EPA region does not influence the adoption of the standard. In addition, our data suggest that facilities operating in industry sectors with higher average levels of effluent per employee or with heavier regulation are not more likely to obtain ISO 14001 registration. Neither does there seem to be a significant relationship between a facilitys industry and its decision to become registered. Even though the data suggest companies in some sectors are less likely to register, it is difficult to draw any conclusion, given the structure of that data and the sizes of the sample at this stage of the standard development. Foreign ownership, however, is a key determinant of ISO14001 registration. That confirms the broadly held sentiment that US firms are waiting to see whether the standard will become a competitive requirement or yield substantial economic benefits. Chapter 2. PRACTICAL EXPERIENCE WITH ISO 14001 The annex to the ISO 14001 standard states that improvements in [an organization's] environmental management system are intended to result in . . . improvements in environmental performance. That is the uncertain promise offered by ISO 14001. Do firms that adopt the standard achieve superior environmental performance compared with those that do not? To answer that question we conducted case studies of six facilities belonging to or close to the chemical industry. We detail our findings, analyzing the influence and impact of adoption on practices and behavior. Only 42 chemical facilities (SIC code 28) had registered to ISO 14001 at the time that data were collected for this study (July 1, 1999). Like ISO 14001 facilities generally, those facilities tend to be large, with greater-than-average emissions, and have parent corporations based outside the United States. The only difference lies in the influence of the Responsible Care membership, which replaces ISO 9000 as an explanatory variable. Facilities that already have elements of an EMS in place find adopting ISO 14001 relatively cost-effective. (For an explanation of the data and methods we used to derive those conclusions, please refer to the appendix of this report.) We limited our case studies to facilities within the same industry. By keeping the industry as a constant we hoped to discern the impact of ISO 14001 more clearly. We chose to focus our study in the chemical industry because of its relatively high number of registrations. Also, we had previously studied implementation of Responsible Care in the chemical industry and had contacts in the industry as well as background information that could contribute to this study. Our initial plan was to focus our case studies in three chemical firms. Our research design called for matching each of the ISO 14001 case-study facilities to a similar non-ISO facility, allowing us to compare management practices in ISO and non-ISO plants. Hoping to control as many parameters as possible, we tried to study facility pairs within the same firm. However, we soon discovered that most firms had either no experience with the standard at all, or were working toward registration at all of their facilities. Rather than continue our search for matched pairs, we chose to study five chemical facilities that had become registered to the standard. as well as one that had not. All the facilities have different parent companies. (See Table 1 for comparative information on the facilities.) We asked questions in five areas: normative change, management consciousness, employee consciousness, environmental performance, and external communication. Most of the questions solicited information about integration of environmental considerations into facility operations. An additional section included questions about the motivations that led to adoption of the standard. The questions were aimed at representatives of general management, environmental management, design or process engineering, and productions. Facility A Facility A, which is owned by a large European multinational operation, makes detergent alkylates used in household and industrial cleaners. It is small, employing only 120 people, and is located in an in urban area. Few people live near the facility, and it, along with its industrial neighbors, is attempting to relocate those who do. In 1998, it had a major fire in which no one was injured, but which did shut down operations for three months. Facility managers initiated ISO 14001 registration on their own; corporate managers were unsure about the value of registration. All of the managers we spoke with had been in their jobs for many years(the minimum tenure was 15 years. Most of the facilitys pollution-prevention and waste-minimization efforts were established after the adoption of ISO 14001 in 1997. A program for life-cycle assessment and other environmental management practices was in place prior to ISO 14001 adoption, but the EMS existed only in fragments. The facility has no established program for community participation. Managers report few citizen-inquiries about environmental performance, and that their relations with the community and the regulators are excellent. Notably, Facility A was the only facility in the study that provided us with a list of its environmental aspects, as well as its objectives and targets for reducing them. Other facilities considered that information confidential. Facility B Facility B, a large industrial site employing more than 1,000 people, manufactures chemical products used in cosmetic applications. It has a strong commitment to environmental stewardship. Indeed, its U.S.-based parent company is a signatory of the International Chamber of Commerce Business Charter on Sustainability, which managers use as a guide to business decisions. In 1993, those managers developed an environmental policy that stressed beyond-compliance environmental performance. They implemented a corporate EMS in 1995, as well as programs in total quality management, pollution prevention, waste minimization, life cycle analysis, and product stewardship. The company was one of the first in the United States to publicly state a company-wide commitment to the ISO 14001 standard, and has created a corporate ISO Center of Excellence to advise facilities on ISO 14001 implementation. Corporate and facility policies emphasize sustainability, which managers say requires integration of EHS into the business fabric. The EHS manager has stated that product redesign represents the most cost effective way to move toward environmental excellence. The facility has had no major compliance issues in recent memory. It is attempting to integrate full cost accounting in its practices and participates in agency beyond-compliance programs, including StarTrack. Facility C Like Facility B, Facility C produces chemicals used in the cosmetics industry. It is smaller, however, employing just 175 people at a plant located in a commercial center in a small town. It is owned by a large multinational firm based in Europe. Several years ago corporate managers required that all facilities develop EMSs compatible with ISO 14001. Facility Cs managers decided to take the additional step of registering to the standard. The major emphasis of environmental programs, in addition to regulatory compliance, has been packaging recycling and waste reduction, which programs were in place prior to ISO 14001 adoption. Programs in the areas of product stewardship, life-cycle analysis, and total quality management are nascent. Managers have established no program for local external communication, yet claim that local relationships are positive. The facility has a good compliance history with no major issues in the past several years. In addition, managers participate in several agency beyond-compliance programs, including the StarTrack program. Facility D Facility D is a large manufacturing site that produces catalysts used in the manufacture of plastics. It is located in a heavily industrialized area adjacent to 80 acres of undeveloped land. The original plant was built in the early 1920s. Ownership has changed five times since then; it is now owned by a large company based in Europe. Managers consider the facility a flagship in the area of environmental management for the companys North American sites. The facility participates in several voluntary programs, including OSHAs Voluntary Protection Program for facilities with strong health and safety programs. The decision to embrace ISO 14001 was a corporate one; officers wanted to assess the costs and benefits of registration through experience at the location. According to the facilitys environmental performance report, corporate managers subsequently decided to use the facilitys EMS at all sites on this continent. Facility E Facility E is large, employing 1,500 people in a heavily industrialized location. It is one of several United States sites of a company based in Asia. Environmental management practices at the plant were strongly influenced by community opposition to a major facility expansion in 1993. Under pressure from residents and EPA, managers agreed to implement programs that led to significant reductions in toxic and wastewater releases. The agreement also established a technical-review committee that strengthened environmental auditing and compliance. Managers now plan to double facility capacity in the next several years. The facility practiced pollution-prevention planning and waste-minimization planning prior to ISO 14001 adoption. It also published an environmental performance report. It conducted compliance audits and risk assessments and had an active product stewardship program. Facility F Facility F, our non-ISO 14001 control, was nationally recognized for its commitment to toxic-use reduction and environmental-performance reporting in the late 1980s and early 1990s. At that time, managers instituted programs for total-quality environmental management, pollution prevention and waste-minimization planning, environmental accounting, life-cycle analysis, and product stewardship. Environmental goals were achieved on or ahead of schedule during the first years of those programs. Progress has slowed recently, however. The facilitys managers contend that further reductions in chemical use and waste are constrained by their products They have been unsuccessful in attempts to substitute less-toxic materials. Furthermore, declining profits have required managers to focus more intensely on achieving business objectives. New environmental management practices include a product- delivery program that integrates environmental concerns with product development. Regulatory compliance is the major emphasis for corporate environmental managers: since 1995, the company has been assessed substantial penalties from state and federal agencies. Facility F has strong ties with environmental advocacy groups, and annually publishes a comprehensive report on its environmental performance. Table 1: Summary Characteristics of Case-Study Facilities FacilitiesABCDEFSize (number of employees)< 200> 1000< 200< 200> 1000<500Age (years since facility creation)> 50>50 > 50> 50< 10>15International ownershipEuropeanUSEuropeanEuropeanAsianUSISO 9000YesNoNoYesYesYesResponsible CareYesNoYesYesNoYesDate of ISO 14001 Registration7/19971/19977/199910/19969/1996*(*) Non-ISO Facility Factors that Enabled ISO 14001 Registration Information gathered in interviews confirmed the finding from our statistical analysis that relatively low implementation costs favored early registration. All five ISO facilities already had elements of an environmental management system in place prior to the adoption of the standard. (Three of the facilities are members of the Chemical Manufacturers Association and are implementing Responsible Care.) In the case of Facility B, a complete EMS had been implemented globally throughout the company in 1994, and was considered mature at the time of the certification. The other four facilities also had environmental procedures or pollution-prevention programs but were lacking formalization, planning, and documentation. For example, an independent audit undertaken in Facility C prior to the implementation of the ISO14001 system concluded that the "facility's EMS appear[ed] to be functioning effectively to maintain compliance and meet their specified goals; however, the facility's EMS program [was] largely informal, mostly undocumented and [had] few written programs or procedures." The interviews confirmed as well the importance that an existing ISO 9000 system can have in the design and implementation of a standardized EMS. The synergy between the two standards, in functions such as document and data control, training, and internal auditing, was appreciated by managers of the facilities registered to both. Approximately two-thirds of Facilitys As EMS came directly from its quality-management system, according to the plant's EHS manager, who believes it would have been "a mistake not to combine the two systems." Facility D acknowledges the "high integration" of the two systems, and Facility E recognizes that its ISO 14001 program was developed as "an additional layer" to the ISO 9000 basis. Because both smaller and larger plants were represented in our cases, it is impossible to draw any conclusion from our sample about the influence of a facility's size on the decision to register. It is interesting to notice however that all five ISO 14001 facilities belong to large international organizations (one based in the United States, one Asian, and three European). Motivations for Becoming Registered to ISO 14001 Questions asked during the interviews probed the motivations of the facility managers to seek registration. Managers at all six facilities emphasized the absence of customer or supply-chain requirement for ISO 14001 in the United States. Early adopters are choosing to adopt the standard for reasons other than market requirements. The primary motivation for adoption cited by all managers in those ISO-registered facilities was to improve compliance and environmental performance. The plants are using ISO 14001 to enhance existing procedures or management systems in order to achieve their number-one objective: compliance. It was "job one" for Facility Es manager and "difficult but necessary" for Facility C. Compliance needed to become "institutionalized" for Facility D and ISO's framework was expected to provide the required formalization. Reacting to an unacceptable number of incidents, Facility As "first concern was [compliance] results," although the opportunity for cost savings was a factor too. Environmental performance was systematically cited together with compliance as a motivation. Compliance and environmental performance were also a factor in Facility Bs decision to augment its existing EMS, but the prospect of worldwide recognition and the opportunity to use certification as a public relations and marketing tool were significant as well. Thatobservation is consistent with the findings of a recent survey of early adopters. According to that study, based on telephone interviews with people in 22 organizations worldwide, "the most common reasons for pursuing ISO 14001 certification among the companies surveyed were to ensure an ability to compete in all markets and to promote a leading environmental image. Both Facility C and D admit an intention to use the standard as a public relations tool that will demonstrate themselves as responsible members of the chemical industry. Similarly, Facility E, whose major expansion in the early 1990's encountered significant community resistance, has used, with success, ISO 14001 as a signal of its good environmental intentions to regulatory agencies and the neighboring community. All six facilities describe themselves as environmental leaders with a good reputation among regulatory agencies and, often, communities. Once again, it is difficult to draw a line between reputational benefits provided by the EMS and those related to the official registration. A "potential competitive advantage in acquiring customers" is one of the most important motivators for certification, and Facility Ds manager indeed considers ISO14001 a "valuable marketing tool" in that respect. Another important benefit of certification is to "demonstrate EHS [environment, health, and safety] due diligence, as recognized by Facility B, which, in spite of the prior existence of a mature EMS, said that "nothing is as credible as a third-party certification." Facility As EHS manager views third-party certification and the independent audits as primarily a means to "make the EMS real." Explained Facility Es plant manager, "certification does have the added value of an independent set of eyes to challenge the process." The role of corporate management in the decision to register differed widely from one plant to another. Facility A, for example, made the decision entirely on its own under the leadership of its environmental manager, and was the first to be certified in the United States. Facility B acted in the context of a global corporate self-declaration, and voluntarily chose to seek third-party certification. The decision was shared by facility and corporate managers in the case of Facility E. In contrast, a corporate decision led to the registration of Facility D, which agreed to take the role of a "pilot" plant in the efforts leading to the design of the ISO14001 EMS. Facilities B and E also mentioned the role of pilot. Apparently, IO 14001 adoption is a way facilities can distinguish themselves within corporate boundaries.: Facility C highlighted corporate recognition (in contrast with regulatory agencies') whereas Facility A recognized its drive for leadership among the firm's seven U.S. plants. Table 2: Summary of Enabling Factors at Case-Study Facilities FacilitiesABCDECustomer or supply-chain requirementnononononoElements of an Environmental Management System Member of Responsible Care Implemented ISO 9000( ( (( no no( ( no( ( (( no (Facility size Large parent company Foreign owned Corporate (C) or Facility (F) decision< 200 ( ( F> 1000 ( no F< 200 ( ( F< 200 ( ( C> 1000 ( ( F/C Behavioral Changes Brought About Through ISO 14001 We found that adoption of ISO 14001 led to two types of changes in the case-study facilities. First, adoption has formalized and reinforced existing environmental practices. Second, ISO 14001 has led to increased integration of environmental objectives into operating routines. By that we mean that regulatory compliance has been institutionalized as a priority for business managers and, in several facilities, pollution-prevention activities have been incorporated into responsibilities of many workers. Formalization and Reinforcement of Existing Environmental Practice The ISO 14001 helped case-study facilities formalize and reinforce their environmental management systems. That formalization and reinforcement occurred in several steps. First, in setting up an EMS, managers reviewed their environmental policies. Managers of Facility B rewrote their environmental policy to make it more suitable for an ISO 14001 system. Second, managers reviewed their EMS procedures and wrote down systems that used to be in people's heads. That methodical review helped them "to focus on areas that had been overlooked." In addition, when problems did occur, ISO 14001 helped managers identify the cause and institute systems to prevent recurrence. Policy. The ISO 14001 EMS requires an organization to establish an environmental policy that articulates its commitment to manage its environmental aspects. All of the facilities we studied had developed environmental policies prior to ISO 14001 adoption, with the exception of Facility D. Adoption required its managers to set down in writing their commitments to compliance, pollution prevention, and community involvement. ISO 14001 adoption triggered changes in Facility Bs environmental policy. The previous policy committed the company to the broad goal of environmentally responsible management of facilities, materials, production processes, products and packaging, transportation and distribution, waste, energy, and general business operations. Environmentally responsible management was not defined. The old policy was written not as a framework against which the companys progress could be assessed, but as a source of guidance and inspiration. The new policy closely follows the specific requirements of the ISO standard, committing the company to compliance with all applicable governmental requirements, prevention of pollution, and continual improvement of [the] EHS management system. The new policy is specific enough so that managers and ISO 14001 registrars can evaluate the degree to which it is being implemented. The definitions included in the ISO 14001 standard have added precision to Facility Bs environmental policy. However, the policy is arguably now more narrow in its scope. Awareness of policy One of the most obvious impacts of the ISO 14001 registration, according to the managers, was an increase in employees' awareness of their facility's environmental policy. Managers at all of the ISO facilities had implemented training programs geared specifically to policy content. At Facility A large banners summarizing the policy hung in all common spaces. Those approaches have "indoctrinated" employees, according to the environmental manager. Facility Ds EHS manager declared that he had "drilled [the new policy] into employees' heads" with three catch-words: compliance, continual improvement, and communication. In contrast, the environmental manager at Facility F, our non-ISO plant, admits poor employee awareness of its environmental policy. Written procedures. A major impact of ISO 14001, according to the people with whom we spoke, is documentation. The ISO EMS standard requires that every procedure and operation that is part of the EMS be described in writing. We mentioned earlier that Facility Cs lack of documentation had been identified as a deficiency in an independent audit prior to the implementation of the ISO system. That same lack of documentation was identified by managers of Facility F, the non-ISO 14001 control facility in our study, when they performed a gap analysis at the time of the standard's publication. Environmental practices at this plant consist of a semi-formal EMS that relies heavily on the EHS director to manage personally all information flows. In most cases, the procedures that were in the new ISO 14001 manual were already in place and implicitly followed by employees prior to adoption. Yet managers considered documentation valuable. Facility Ds environmental manager explained that "writing [the procedures] down made it easier to ensure that employees understood the 'why' of their actions, and where they could find answers. For example, adoption of the standard helped better define and detail each worker's role in handling waste at all phases of production. Facility E organized and enhanced its procedures by building its ISO 14001 manual around existing health, safety, and quality reference materials. The EMS was seen as a "strengthening of programs already in place since those existing programs were considered "solid." Several facilities had developed databases to collect audit results and corrective actions. Corrective Action. ISO 14001 enabled Facility A to "consolidate the bits and pieces" of environmental practices. "The systems approach helps to reduce chaos in the operations," and helps managers "focus on getting to causes of problems," said the plant manager. The facility suffered a major incident in 1998 when workers attempted to remove a residue that had formed in one of the reactor vessels. Unfortunately, there was no established procedure for doing so, and the method they tried resulted in a massive explosion. As a result, the plant was closed for three months. Managers then amended their EMS, adding the appropriate procedure for cleaning the by-product, as well as a new "procedure compliance policy" to prevent similar events from happening. According to the environmental manager and process engineers, using the EMS structure they were able to rapidly take corrective actions and rebuild the process. The incident was closely scrutinized during the following ISO14001 audit, which found that the new system was an appropriate corrective action. Facility F(our control(recognized that its environmental programs were slipping due to budget constraints. Its managers noted that such slippage was less likely to occur in ISO 14001-registered plants. Aspects of formalization emphasized by managers are discussed briefly below. Integration of Environmental Objectives into Operating Routines Analysis of the six case studies indicates that ISO14001 adoption provides the opportunity to integrate environmental objectives (whether strictly compliance related or extending beyond compliance) into day-to-day plant activities. ISO 14001 appears to foster the involvement of a broader sector of plant workers in at least some aspects of environmental management. Environmental concerns, particularly concerns about compliance, are integrated into operating routines through that approach. ISO 14001 and Compliance Improvement of compliance was one of the first motivations cited to explain adoption of an EMS, and of ISO14001 in particular. The interviews showed that, indeed, implementation of the standard EMS has helped manage compliance activities. Compliance problems still occur: releases may exceed permitted levels, hazardous-waste containers are sometimes improperly labeled, monitoring and waste manifests are not always complete. While ISO does not ensure that compliance is always achieved, it helps to focus the attention of workers on that goal. The first objective of Facility As EMS is to "reduce incidents." For Facility C, "compliance is difficult but necessary." The benefits gained from an increased respect for regulations and a "sharper focus on the law" are well worth the effort of registration, according to the managers we spoke with. The interviews in Facility E demonstrated the significance of compliance activities. Compliance "is job one" for the plant manager and "the whole purpose" for production engineers; one operations manager even considers that his very job "is to maintain compliance." Notably, those are managers whose jobs address core business functions. Compliance is a priority in the facility's EMS objectives, and a majority of the goals are compliance-related. In order to "assure" the highest possible degree of compliance, Facility Es has purchased an information system from a competitor consisting of detailed procedures aimed at every aspect of regulation; that system is integrated into the EMS. Facility Ds process manager considers that "regulated aspects are not goals, [but] must-do's." The plant manager expected that ISO14001 would "institutionalize" compliance. He gave as evidence that this has occurred the fact that conversations about compliance are now rare. There is little reason to discuss a subject about which workers have reached agreement. Of course, managers can improve compliance performance without ISO 14001. Managers at Facility F have chosen not to register to the standard, but are firmly committed to distancing themselves from the problems of several years ago that resulted in substantial fines. Faced with declining profits and very tight budgets for environmental concerns, they consider ISO 14001 an expenditure they cannot afford. The requirement for documentation is time consuming and in many instances does not contribute to performance, according to the people we spoke with. Managers at Facility F have decided to focus the resources they have available on self-auditing compliance and correcting compliance problems. Beyond-Compliance and Pollution Prevention Compliance is only one aspect of environmental activity, and, as we discussed earlier, many firms develop and implement an EMS to improve environmental performance beyond regulated levels. Regardless of the ultimate motivation, an advanced management system such as ISO14001 appears to enable greater integration of environmental improvement goals into every day operations. Facility As environmental steering team identified three objectives from the ISO14001 aspects identification: to reduce incidents, with a focus on procedures and human resources; to reduce waste, with a focus on equipment and maintenance; and to reduce energy, with a focus on process. Establishing goals that address unregulated aspects, such as the last two, has shifted the facility's focus to beyond-compliance. The environmental manager spends only half of his time on compliance issues; the rest he devotes to planning, community involvement, and EMS implementation. Prior to adoption, attention to energy efficiency had been sporadic: it is now a major focus for process and design departments. According to process engineers, managers' decision to include beyond-compliance goals in the EMS has introduced incentives other than cost savings. Those incentives have "generated projects that would have not been completed in the past." An example of one such project is a secondary vent collection system, implemented as a result of an incidents analysis. Interviewees in other facilities also reported increased attention to beyond-compliance activities. Facility Bs business goals include environmental as well as economic targets. The EMS, which was mostly in place before adoption of ISO14001, aims at making "EHS a part of the strategic plan." That integration of environmental objectives into activities was also noticed in both Facility C and Facility D. In Facility D, ISO 14001's strongest impact was reported to be on manufacturing, where "production was [previously] a higher priority than environmental issues." According to the process manager, changes to the manufacturing process must now be reviewed in terms of their impact on achieving environmental targets. The same is true of Facility E, where the requirement for continual improvement "helps keep environment as part of the plant's activity," and where the EMS and its procedures have identified particular individuals as responsible. An emphasis on "prevention at the source" has accentuated and formalized the decentralization of the environmental function to the production units. Production engineers are "becoming environmental experts," taking care of stack testing and permits management, for example. As a consequence, production has become the key decision-maker concerning environmental improvements of the processes. Managers of the different product lines have full responsibility for integrating EMS goals, and identifying, initiating, designing, and implementing projects. The purchase of a new technology to eliminate most of the facility's hazardous waste by turning it into a marketable product is a good example. The purchase was consistent with the facility's EMS targets. Table 3 summarizes what managers considered the most important pollution prevention projects implemented in their facilities since 1996. The role of plant management in developing pollution-prevention projects appears to be weaker in Facility F, our non-ISO 14001 facility. Table 3: Pollution-Prevention Activities Cited by Interviewees (with identification of the driving entity) FacilityDescription of ActivityDriving EntityReduce "Incidents"AReduce "Waste"Corporate and Facility EHS managementReduce "Energy"Implementation of secondary vent collection system header - Cope with periodic failures of the systemFacility EHS management, result of incidents analysisImplementation of an integrated response plan - Spill management team and computerized scenariosFacility EHS and all operational unitsBReformulation of products to reduce or eliminate TRI-chemicalsFacility EHS and chemical labDevelopment of natural products - Construction of a new plant with optimized productionFacility EHS and chemical labReduction of VOCs by changing formula of product - Less alcohol is usedProduct standard set by California lawCElimination of chemical use in a cooling tower by installing a sand filter and ozone feed systemFacility EHS and manufacturingAutomated compounding tank cleaning systemEngineering and manufacturing Reuse of spent solvent (with customer agreement) - Led to reduction of waste by halfProcess Engineering and productionDRecovery and recirculation of air-steam condensateFacility EHS, maintenance and process engineeringImplementation of waste management planFacility EHS Purchase of technology to treat waste material and turn it into product - Elimination of 90% of hazardous wasteFacility production and general managementEImplementation of early-release system - Preventive shutdownEHS, production and maintenanceWastewater recyclingFacility production and wastewater departmentProduct stewardshipCorporate EHS and process engineeringFCo-generationCorporate EHSUpgrading of after-burnerFacility EHS and engineering  Economic Considerations The five ISO 4001-registered facilities we studied behave differently in their approaches to economic factors. On one end, managers at Facility A say they disregard the economic dimension and set environmental objectives independently from economic considerations. As already described, managers based EMS objectives on their understanding of their facility's environmental impacts. At Facility A, once an environmental need is established, it is considered as a "must-do" and eventually is addressed. On the other end, Facilities C, D, E, and F all declare that the ultimate driver for environmental projects is cost savings. For Facility Ds plant manager, "good business" implies that "there are always economic reasons for a project," including pollution-prevention projects. While the EHS department often identifies and implements environment related projects, the final approval usually comes from corporate management, which acts as the source of funding. The same is true in Facility E, where decentralization of environmental functions to the production lines can explain why "motivation number one is cost savings." A project "has to be lucrative" and "economically beneficial to be implemented. The objective of this facility's EMS is resource conservation, which is supposed to provide both environmental benefits and cost savings. For example, the treatment of a chloroform leak problem in cooling towers through use of a new technology will conserve use of that chemical and also reduce risk. In Facility C, business decisions are also motivated by cost savings. Performance goals set within the ISO14001 framework are chosen realistically, and take economic opportunities into consideration. Corporate Influence Corporate directives have a significant influence in shaping the unregulated portion of facilities' environmental goals. That is clearly the case for Facility B, whose strategy derives from a strong corporate commitment to environmental stewardship and sustainability, as well as the will to maintain environmental leadership in the industry. Corporate directives are also a significant factor in Facility Ds decisions. A "strong feeling about meeting regulation and beyond compliance issues" led to the design of an ambitious corporate program in 1995 that included both profitability and environmental goals. Corporate goals are important at Facility E as well, where corporate management based in the United States has identified sustainability as a concern. The official corporate objective is zero emissions by 2005, with a 25 percent reduction every year. Each department must set its own goals and objectives in line with that directive. Although Facility A operates with relative independence from corporate oversight, its objectives, described earlier, are also in line with company objectives. Facility objectives focus on subsets of the corporate goals. Table 4 summarizes the main factors that have influenced facility goal setting, as gathered from the six case studies. Table 4: Relative Importance of Factors Influencing EMS Goals in Case-Study Facilities FacilitiesABCDEFSignificance of compliance++++++Significance of unregulated aspects++~~~~Significance of economic factors0~++++Significance of corporate influence~+~++++ indicates factors that strongly influence facility goals; ~ indicates factors that are somewhat significant; 0 indicates insignificant factors. Responsible Care The relationship between ISO14001 and Responsible Care varies among facilities, and depends on managers' perceptions of the goals of the two approaches. At Facility D, ISO14001 is viewed as "a tool that helps in meeting some of the codes of Responsible Care," especially pollution prevention. The managers give more credit to ISO14001 than to Responsible Care in environmental progress. Facility As environmental manager believes that Responsible Care is "more subjective" than ISO14001, and that ISO 14001 "defines quantitative criteria" for action. As a result, Responsible Care is seen as a set of requirements to be managed within the ISO 14001 EMS by implementing procedures to comply with the different codes. At Facility A, Responsible Care requirements are seen as "already decided aspects" that the EMS must address. ISO14001 is the framework that managers use to ensure that the organization is continuously improving toward Responsible Care objectives. Facility Es managers told us that Responsible Care and ISO14001 rely on the "same principlesboth programs achieve the same goals and objectives." ISO 14001 adds third-party certification. Impact on External Relationships The impacts of ISO 14001 on internal operations can be easily identified and described (as above). There is much less evidence of ISO 14001's impacts on managers' behavior towards outside parties. Facility As environmental manager, for example, reports that his involvement in the community and with the regulators was already important, yielding a good image, and that his facility's external relations have not been modified with the implementation of ISO14001. Corporate Recognition As mentioned earlier in the discussion of motivations for adoption, managers at all five registered facilities acknowledged their desire to be recognized by corporate officers, either through serving as an ISO 14001 "pilot plant" (as was the case for Facility D and to a lesser extent Facility B and Facility E), or as an innovator. Corporate recognition is an important component of ISO 14001 implementation at this stage. Supplier Relationships Adopting ISO14001 has not changed facilities' policies towards their suppliers, and has not induced any change in what is required of them in terms of environmental practices. Suppliers to Facility A and Facility F had been qualified through checklists that included environmental performance criteria; however those checklists were developed and managed at the corporate level, in the context of purchasing policy. Facility D is developing an environmental questionnaire for its suppliers in order to meet Responsible Care commitments, but no action is taken in the context of ISO. While ISO 14001 is not, at least not yet, a business requirement in the United States, Facility Bs corporate management officially encourages its suppliers to implement an ISO14001-compliant EMS and to register. Inclusion of External Stakeholders in Decisions Although most of the facility managers we interviewed cited examples of changes they had made to their manufacturing processes in response to community concern, they all reported that the implementation of ISO14001 has had no impact on the participation of outside interested parties in decisionmaking. ISO 14001 has not brought about increased community involvement. External Communication Similarly, a standardized EMS has not led to any major change in external communication patterns. Facility A, for instance, did not(and still does not(release any formal document regarding its environmental practices (although the information is available on demand). In contrast, Facility F, which is not registered, has been publishing an extensive environmental report since 1988. Community Outreach The interviewed facilities all have community-outreach programs. Facility A organizes an annual community reception and holds an open house. Considered as "one of the best operators in the area," it has recently launched a relocation program to clear the industrial peninsula of the few remaining residents. Facility Ds community-outreach programs are shaped by the Responsible Care principles and include a community advisory panel (CAP). The plant manager recognizes the public's strong negative perception of the chemical industry and believes the public is made "less anxious by the information it receives through the CAP. Facility E, in addition to similar programs, believes that its employees, who generally live in the local community, share their knowledge of facility environmental programs with their neighbors. All those programs existed prior to the adoption of ISO14001, and ISO has not augmented or re-directed community outreach activities. Regulators The managers we spoke to told us that their facilities' reputations with regulators are strong. The EHS manager at Facility A told us that prior to registration regulators viewed his plant as the best around. Managers at Facility D, who also said they have a good image with regulators, nonetheless admit that their ISO certification "has made a great impression," and that since adoption managers have been invited to participate in a beyond-compliance program. The ISO14001 system has also helped Facility Es relationship with agencies, although a "cooperative working relationship existed already." Our control facility, Facility F, has also maintained a favorable reputation as a "reasonable company." While ISO14001 has been used in some cases as an effective public relations tool, there is no clear link between registration and the quality of a facility's relationship with regulators. Summary of ISO 14001 Analysis ISO 14001 offers potential benefits to regulators by increasing the effectiveness of a facilitys environmental program. The standard is both stringent and lax. It is stringent in its requirement for consistency between what an organization says it will doin its environmental policy and planand its practice. Managers who have implemented the standard emphasize that one of its most significant requirements is documentation. Under ISO 14001, environmental responsibilities and procedures must be clearly documented so that an independent person could verify that what managers do is consistent with what they have said, and that what they do and say are consistent with the standard. In one of our cases, managers revised their environmental policy as part of the ISO 14001 adoption process. The previous policy was more sweeping, but managers felt it was not suitable for ISO 14001. Auditors would not be able to assess whether stated goals were consistent with practice. That example suggests what we mean by ISO 14001s laxness. It does not require excellence, that is, performance above a normal baseline. It does not require that managers set ambitious environmental targets. It does not specify the content of the organizations policy or plan, with one important exception: managers must include in their environmental policy a commitment to regulatory compliance. In the case-study facilities, managers adopted ISO 14001 in order to improve compliance performance. Managers included regulatory compliance in their EMS targets. In several instances, production engineers and operations managers had taken responsibility for compliance programs. Compliance had been integrated into routine business practice in a more consistent and comprehensive manner than before ISO 14001 adoption. The fact that ISO 14001 EMS does not guarantee compliance is demonstrated by the major accident at Facility A, which occurred more than one year after registration. Less-significant incidents had occurred at each of the case study facilities since adoption. Will ISO 14001 help to reduce the number and severity of incidents over time? Managers we spoke with felt strongly that the answer to that question is yes. Total compliance exists only in theory, at the top of the spiral staircase Joseph Cascio has written about, ever-present as a goal, but never reached. ISO 14001 helps to move a facility up the staircase, a little higher every year. The extent to which managers establish ambitious environmental targets that go beyond what is required by regulation is up to them. Facility A had included waste reduction and energy use reduction in its ISO 14001 targets, which resulted in new projects that would not have been completed in the past. At Facility C, in contrast, targets were chosen realistically, so as not to stretch resources. Managers at each of the ISO 14001 facilities are actively pursuing pollution prevention. Pollution prevention was practiced in Facility F, but projects appeared to be driven by corporate, rather than plant, management. Of course can pursue compliance and beyond compliance without adopting ISO 14001. Managers at Facility F have chosen not to pursue ISO 14001 registration for financial reasons. They feel they have instituted systems that will improve compliance performance without the administrative costs associated with ISO 14001. Chapter 3. StarTrack: A Pilot Reinvention Program We now turn to a discussion of the StarTrack program. After briefly outlining the requirements of the program we consider the benefits it offers to regulators, facility managers, and environmental and community advocates. We then consider the perspectives of facilities that participate in the program. Ultimately the success of StarTrack will depend on leaders at agencies and firms deciding that the program is worth the effort. Currently 15 facilities participate in the program. The Beginnings StarTrack, a pilot program of EPA Region I which in 1999 completed its second operational year, grew out of the National Environmental Leadership Program announced by the EPA in June 1994. The Environmental Leadership Program (ELP) was EPA's second experiment with reinvention, implemented after the Common Sense Initiative. According to EPA publications, ELP was designed to recognize facilities that demonstrate[d] accountability for compliance with existing laws. To be admitted into ELP, facilities were expected to exhibit qualities of leadership: a strong compliance history, state-of-the-art compliance management and environmental management systems, independent audits, public involvement, pollution prevention programs, and mentoring. EPA asked companies to submit proposals describing innovative approaches in any of those leadership areas. EPA and participating states promised to forego routine inspections of ELP sites and offered an amnesty period in which managers could corrected violations voluntarily disclosed. EPA also publicly recognized ELP sites as excellent environmental performers. The Gillette Company submitted an ELP proposal and was accepted into the program in 1995. The Gillette ELP project developed a system for using third parties to verify compliance and EMS audits. The Gillette project was the starting point for StarTrack. John DeVillars, regional administrator for Region 1, launched StarTrack in 1996 to test the Gillette experience on a wider scale. The Goals As stated in StarTrack descriptive materials, the goals of the program are to improve: protection of the environment public understanding of a companys environmental performance efficiency of public and private resource allocation Those broad goals motivate many agency activities, not just StarTrack. To develop a clearer understanding of the purpose of the program, we interviewed members of the StarTrack team at EPA Region 1, as well as their supervisors. Initially the goal of the program was to test the use of third parties to verify compliance. The original name of the program was the Third Party Certification Project. Most of the activities of the program appear to support this goal. However, staff members emphasized that the program is also intended to improve the environmental performance of firms. In addition, it is intended to provide the agency with information about what constitutes environmental excellence and what motivates managers to pursue it. We describe these goals in the following paragraphs. To Change Agency Behavior The primary goal of the program has been to change agency behavior: to gather information that will allow agency managers to allocate inspection resources more efficiently. In organizing the program, DeVillars hoped to show thatfor firms already committed to regulatory compliance and willing to disclose their performancecompliance assurance could be privatized through a system of audits similar to those of the Securities and Exchange Commission. Federal and state inspection coverage rates are low, and likely will not increase due to resource constraints. For example, over a recent two-year period, fewer than one percent of facilities with federal permits were inspected in all three media. The overarching goal of StarTrack is to target the agencys scarce resources to poor performers. To Change Firm Behavior Members of the EPA StarTrack team assert that, in addition to providing a mechanism to allow the agency to focus more intently on firms with significant compliance problems, StarTrack is about improving environmental performance beyond compliance, both of StarTrack and non-StarTrack firms. According to the programs staff members, moving StarTrack and non-StarTrack facilities beyond compliance is of equal importance to the compliance assurance objective discussed. StarTrack has focused intensively on compliance assurance during its first two years in order to build a base of support for the program within agencies. Figure 2, below, depicts the vision of agency StarTrack managers. The bell-shaped curve represents the distribution of firms based on their environmental performance. StarTrack firms, on the right side of the curve, are above-average performers. Members of the EPA StarTrack team assert that the requirements for performance beyond compliance included in StarTrack (discussed below) will move these firms toward greater environmental excellence. They further assert that programs such as StarTrack, if implemented on a broader scale, have the potential to shift the entire performance curve to the right. That will occur, they assert, as firms that do not meet StarTrack requirements observe the benefits accrued to members, and decide to change their behavior so they may be included in the program.  Figure 2: StarTrack's Role in Improving the Environmental Performance of Firms To Inform Agency Reinvention Programs According to Ira Leighton, director of Region 1s Office of Environmental Stewardship, which oversees StarTrack, at this point the programs primary purpose is to help answer two questions. The first is what constitutes excellent or even good environmental performance? We know how to define bad, but don't know what a good performer looks like. If we asked around the agency, we'd get 10 different views, he explained. The second question StarTrack is intended to answer is what works and what doesn't work to improve environmental performance? Do EMSs, and ISO 14001 EMSs in particular, improve performance? Can a program like StarTrack help provide leverage to managers of firms so they can push harder to move their companies beyond compliance? We encourage our inspectors to [observe facility audits] because that's how we learn whether a program that puts good companies under a microscope works, Leighton explains. He stressed that StarTrack facilities are not necessarily superlative performers, a view shared by other EPA staff members familiar with the program. They do not necessarily have exemplary design for environment programs, for example, or life cycle assessment programs, according to the people to whom we spoke. What does it take to make a good performer become excellent, and how do we get a firm on that path? is a question he would like to answer with StarTrack. StarTrack Requirements Gaining Admission In order to join StarTrack, a company must show EPA that it has: an established compliance audit program an acceptable compliance history a cooperative relationship with regulators top management commitment to EMS implementation and continuous environmental improvement significant pollution-prevention efforts with quantified results EPA uses significant discretion in picking companies since there are no quantifiable measurements that guide StarTrack admission. Moreover, since selection factors cover a wide range of environmental management activities, companies can have quite different characteristics. For example, some companies show most excellence in auditing, others in pollution prevention. The vagueness of the requirement that facilities demonstrate an "acceptable compliance history" is deliberate. Once the program has been fully tested, StarTrack staff members say they may admit firms that have experienced some compliance problems. New England state agencies participate in StarTrack as EPA partners. They review facility applications and must sign off on facility agreements. After Region 1 and the relevant state environmental agency review an application, all parties sign a letter of commitment. Usually the Region 1 office, the state agency, the facility managers, and, possibly, municipal officials are signatories. The company promises to complete four primary requirements after being accepted to StarTrack. Periodic Program Requirements Companies participating in StarTrack agree to conduct annual compliance and EMSs audits and submit audit results to EPA, state, and local regulatory agencies. During their first year in the program, and every three years thereafter, participating facilities must have audit results reviewed by a qualified third party. In addition, participating facilities must annually publish a comprehensive environmental performance report. StarTrack has four fundamental requirements, outlined in Figure 3. These are specified in the formal agreement signed by all parties, and further elaborated in the guidance documents. Several points require clarification. Annual compliance audits required by StarTrack may be conducted by corporate or divisional staff, facility personnel whose jobs are not directly related to the functions being audited, or by third parties. Compliance auditing is quite common in large companies, and StarTrack attempts to build upon that compliance-assurance measure by adding guidelines to audit protocols. Guidance documents specify the minimal requirements for document review, facility background review, inspection, and sampling/testing of many different environmental aspects. The results of compliance audits conducted under StarTrack are public documents. Facility managers must release them to the EPA Region I office. In practice, EPA and state agency staff members generally participate in annual compliance audits as observers. Issues identified in the compliance audits must be corrected within 60 days; after that time the facility is subject to standard agency enforcement-action. The annual EMS audit may also be conducted by corporate staff, but is usually done by an outside consultant(an ISO 14001 registrar, for example. While guidance documents list ISO 14001 as an effective EMS, there is no specific requirement that binds a facility to that management system. Four facilities that participate in StarTrack have become registered to ISO 14001. Others are at different stages of EMS development. Many have established partial or informal EMSs. While EPA does not require ISO 14001 as a condition of participation in StarTrack, facilities that have not adopted that EMS standard present a problem for auditors. How are auditors to assess a facility's environmental management system in the absence of a formal statement of what its environmental management system is supposed to be? EMS auditors must have some standard against which to assess management practices, and ISO 14001 is the standard they generally use. The EMS audit undertaken as part of StarTrack assesses the gap between a facility's existing EMS and ISO 14001. Results must be disclosed to EPA and state agencies, and deficiencies must be corrected. EPA included an EMS requirement in StarTrack because the agency recognizes that formalized systems of environmental management can increase facilities self-monitoring capacities. As long as a facility has developed a good system to monitor the right aspects of its environmental management, then an EMS can be effective in compliance assurance and overall environmental performance improvement. The environmental performance report is a summary of the major audit-findings and needed corrections, as well as facility background, facility environmental goals and objectives, and aspects of its environmental performance. The format has recently been harmonized with the Global Reporting Initiative guidelines in an attempt to solicit more consistent data and clarify procedures for environmental managers. Managers must disclose information about a facility's activities, management, and organization; its relationships with community groups; its compliance status, including results from the StarTrack audit; as well as its use of resources, its emissions, and its product performance. Every third year a third party, hired and paid for by the participating facility, checks the above three activities. That third party must meet the following criteria set by EPA guidance documents: be independent from the facility; i.e., not own stock in the company, and have no historical or anticipated contractual arrangements have undergone training in each of the major federal environmental regulatory programs, and have knowledge of state and local requirements have previously conducted compliance and multimedia audits for a total of 20 equivalent work days of auditing in at least four different situations possess technical background necessary to assess pollution control equipment and pollution prevention have expertise in EMSs, with training that meets or exceeds requirements of independent professional organizations, such as the American National Standards Institute (ANSI) While third-party review certification is technically required on a triennial basis, the reviews have been conducted during each facility's first year in the program because StarTrack is in its pilot phase. The intent of StarTrack is to use third-party certification as a review of audit sufficiency in addition to commenting on the substantive results of audits. In other words, third parties check deficiencies in both the format of facility audits and findings of those audits. As part of the review, third parties must submit to the facility and the Region 1 office a Certification Review Report and Statement, outlining the results of their evaluations. These requirements are outlined more specifically in the guidance documents. Figure 3: Summary of StarTrack Requirements  Benefits to Facility Managers StarTrack agreements signed by facility managers and federal and state agencies stipulate that EPA and states will not initiate any enforcement action for violations discovered at StarTrack facilities if they are corrected within 60 days. According to members of the StarTrack team, the promise of penalty mitigation provides facility managers with predictabilitythey can be assured that operations will not be disrupted through legal upset, and that their reputations with corporate offices and the public will not be sullied through an enforcement action. Region 1's policy with respect to StarTrack facilities is consistent with EPA's Audit Policy. EPA recognizes StarTrack facilities as environmental leaders. It lists the names of StarTrack firms on it website, and recognizes their achievements at annual meetings. Such recognition could raise the value of the firm to shareholders, deter criticism from environmental and community advocates, and strengthen employee morale. EPA also offers what it calls partnerships to firms participating in StarTrack. By that, the agency means constructive feedback to help improve auditing programs, environmental management systems, and measures for improving overall environmental performance. StarTrack promotional materials list additional benefits to managers of firms. These additional benefitswhich are not listed in the formal agreements signed by the partiesinclude modified inspection priority and express lane service for permits and other regulatory actions. Later we describe EPA's delivery of those benefits, which differs from what it has promised. Chapter 4. Case Studies of Region 1 StarTrack Facilities Currently 15 facilities participate in StarTrack. They represent a wide variety of industries including building materials, bulk gas-supply, defense, electronics, paper, and plastic manufacturers. A facility of the U.S. Postal Service and a facility of the U.S. Coast Guard also participate. Six of the commercial facilities have participated in the program since its initiation in 1996. In order to understand the impact of StarTrack over time, we contacted these six facilities and asked to meet with managers to discuss their impressions of how the program was working. Two facilities declined to participate. We conducted interviews at the remaining four sites. Facility I Facility I is a large industrial facility owned by a multinational corporation. Approximately 1,200 employees work at the site. The extensive grounds include wastewater-treatment ponds, a landfill, a materials-holding area, and highly mechanized industrial processes. The facility is located in a small town, and is within one mile of residential areas. The facilitys competitors are mostly other large multinational companies. Product imported from Asia, after shipping costs, can be purchased at substantially lower cost than comparable product manufactured in the United States. Product differentiation is a key factor in its business, and StarTrack has helped distinguish the facility's operation as environmentally superior. Although customers have not explicitly demanded superior environmental performance, the facilitys managers believe that two major customers recently signed contracts with the facility based in part on its environmental reputation. Facility I experienced compliance problems in the 1980s. It was subject to a multimillion dollar criminal violation, as well as smaller actions by state and local officials. In the 1990s facility managers reconsidered their stance on environmental management. They invested millions of dollars to improve environmental controls, and hired as the plant environmental manager a former director of a state environmental department. That decision signaled a shift in corporate culture. Now environmental management would mean complying with the spirit and intent of the law. That new attitude was in part driven by increased regulation from local municipal officials. Town ordinances were specific to the facility, and directly addressed good neighbor issues. As a result, the facility worked more collaboratively with local officials to demonstrate respect for community concerns. Changes in Management Practices The facility chose an unusual strategy to fulfill its StarTrack obligation for its annual internal compliance audit. In its second year participating in the program, it requested that the state environmental agency(not corporate auditors(conduct a compliance audit. The facility was not due for a corporate audit for another year, having recently completed a corporate review prior to its StarTrack participation. The state agency complied with the facility's request and hired an environmental consultant to develop a compliance auditing protocol. The facilitys environmental manager preferred the state agency audit over corporate review, noting that corporate auditors are very difficult to please and look at many aspects of performance, not just compliance and EMS programs. That environmental manager has strong personal relationships with regulators, having previously worked for a government agency. Corporate managers agreed that if state inspectors are satisfied with compliance performance, they are satisfied as well. Facility I has not implemented a facility-wide EMS. The consultant that helped develop the state's compliance auditing protocol also audited the facility's EMS, comparing it to ISO 14001. The consultant found that a considerable effortthe equivalent of one person working full time for a yearwould be required to bring the EMS up to the ISO 14001 level. That same consultant, serving in the role of third party, recently certified that the plant was addressing some of the deficiencies she had identified, and was taking steps to improve its EMS. Table 5: Summary of Changes at Facility I Attributed to StarTrack Participation Management PracticePrior to StarTrackDuring StarTrackCompliance auditsMonthly self-audits, periodic internal auditsMonthly facility self-audits. Audit by state agency in which federal inspectors participated as observersEMS auditsNo facility-wide EMS, no EMS auditingConsultant compares facilitys informal EMS to ISO 14001 requirements (gap analysis)Third-party verification of compliance audit competency NoneAs part of state agency compliance-audit, third party confirmed audit competencyThird-party verification of EMS audit competencyNoneEMS consultant, serving as third party, verifies that gaps identified in the EMS are being addressedEnvironmental performance reportInformal disclosures to community advisory boardMore information is disclosed, in standardized format Table 5 lists concrete changes as a result of StarTrack. The facility environmental manager worked closely with EPA, the state agency, and consultants to implement these changes. While other employees we talked with were vaguely aware that the facility participated in StarTrack, they could not identify its specific purpose or effect. The facility environmental manager attributes significant intangible benefits to StarTrack. StarTrack helped to strengthen already cooperative relationships between facility management and regulators. The audit by state officials created a problem-solving atmosphere. The facility was looking for ways to improve, and highly valued input from regulators, while regulators valued the opportunity to learn more about the facility. During the course of the interviews we were able to witness the cooperative relationship at work. The state agency contact for StarTrack was present during our site visit. At one point during a discussion about pollution-prevention projects the environmental manager mentioned a new idea he had to reduce waste. By combining several waste streams, he hoped to create an inert material that could be used on-site for landscaping. The state agency person immediately responded by giving his candid opinion of the regulatory concerns such a project might raise. That open sharing of ideas quickly resolved several issues. Without such interaction the environmental manager might have been reluctant to share his plans at such a preliminary stage. At best, the dialogue would have occurred over a longer time scale, and would have consumed more agency and facility resources. Facility I managers repeatedly mentioned continual compliance-improvement as an important goal, even though they were not concerned about breaking the law. They consistently run their operations at 10 percent to 20 percent of permitted levels, but still strive to reduce the number of temporary exceedances. Government recognition through programs such as StarTrack helps legitimize a facilitys extra work, providing an additional incentive to continue beyond-compliance activity. Facility II Facility II was founded as a private company in the early 1950s and currently employs over 4,000 employees. It is a low-volume/high-margin production facility that uses a variety of toxic materials as inputs. It operates several oil and gas-fired boilers on site. Hazardous waste is shipped off site for treatment and disposal. In 1997, a much larger corporation acquired Facility II and placed new requirements on environmental management departments. The facilitys environmental manager departed, and the department was left without a leader for several months. Environmental affairs lost stature. Since the hiring of a new director the role of the environmental department has begun to assume its former influence. The new director has shifted the focus of activity away from beyond-compliance programs to a more intense focus on compliance with regulatory and corporate requirements. The facility is located near other commercial businesses as well as residential areas. There is historical groundwater-contamination on-site. Remediation efforts are ongoing, and the groundwater does not pose a major environmental risk according to facility managers. Facility II is the largest employer in the area. The environmental manager said that local residents and elected officials perceive the facility as a good environmental neighbor. There are no noticeable emissions, either odiferous or visible. Changes in Management Practices Participating in StarTrack was an initiative of a former environmental manager. Originally, StarTrack participation was intended to aid Facility II in ISO 14001 certification. Corporate environmental management required that all facilities in the facilitys division become registered to the standard. Facility IIs environmental manager saw StarTrack as a way of easing implementation through advice of regulators and third party consultants. C summarizes changes in management practices brought about by StarTrack. Table 6: Summary of Changes at Facility II Attributed to StarTrack Participation Management PracticePrior to StarTrackDuring StarTrackCompliance auditsCorporate-led audit teamCorporate-led audit team, joined by federal and state observersEMS auditsOnly to determine what would be required for ISO 14001 registrationCorporate-led audit team as required by ISO 14001, joined by federal and state observersThird-party verification of compliance audit competency NoneEPA-approved third party certifies compliance audit competency. Federal and state inspectors participate as observersThird-party verification of EMS audit competency NoneThird-party EMS audit as required for ISO 14001 registration Environmental performance reportInformation disclosed to corporate managementSimilar information is now disclosed publicly, formatted to StarTrack requirements The facilitys managers support EPA's goal of reinvention and view participating in StarTrack as a way to further that goal. The environmental manager hopes that by participating in the StarTrack program, other businesses will become involved in more partnership initiatives, thereby encouraging less command-and-control approaches to regulatory issues. As at Facility I, StarTrack helped to establish a cooperative relationship among facility environmental managers and regulators. The audit process, in which agency personnel participated as observers, offered opportunities for managers to learn more about the key concerns of regulators, and how compliance issues were being handled at similar plants. A focus on compliance, both with regulatory requirements and corporate environmental goals, was well established at Facility II prior to StarTrack. Employees we spoke with were greatly concerned about how they were perceived by corporate managers, and took corporate directives very seriously. Facility managers felt that corporate auditors were generally more stringent than agency inspectors. They cited as an example the fact that Facility II received a C rating from corporate auditors on environmental management, while at the same time receiving numerous awards from environmental groups. Compliance assurance repeatedly came up as job #1 of the environmental management department. The environmental manager likened compliance to a houses foundationthe foundation comes first, and the house will fall if it is not reliable. ISO 14001 Impacts The facilitys environmental manager explained that initially his group included targets that were outside the scope of regulatory requirements in its ISO 14001-structured EMS. The EMS included the goal of reducing emissions from the facility's boilers, for example. However, managers soon discovered that continuous reductions in boiler emissions would be costly(and could potentially place them at a competitive disadvantage. The "Plan-Do-Check-Act" cycle established by ISO 14001 required managers to probe periodically and document why continuous reductions were not being achieved. The resulting paperwork which the facility environmental manager called "administrivia"was overwhelming. Managers decided to change the EMS objectives to focus more narrowly on compliance. At Facility II, ISO 14001 served as a system for organizing and formalizing activities, not necessarily a source of new procedures and routines. While all employees suggested increased awareness as a result of ISO 14001, three out of four said there was no direct change in their job routines. Pollution prevention Facility II boasts impressive bar charts from the late 1980s through the mid-1990s that show significant declines in emissions and hazardous waste generation. But pollution prevention is much more difficult now, and the facilitys pollution-prevention performance has plateaued. Because of the high cost of many of the products the facility produces, managers are conservative about the degree to which they will undertake changes in production process that might reduce environmental impacts. They consider current levels of chemical use and waste generation extremely low. They would rather waste small quantities of chemicals than experiment with new processes that might yield lower quality. An additional barrier to pollution prevention relates to facility behavior. At one point, the facility was considering lab consolidation, which would reduce holding costs and waste of chemicals. At any one time, however, the facility has more than 200 contracts, and each contract employs a specific group of people who tend to interact only sporadically. Group leaders have opposed lab consolidation because they have seen it as interfering with the established organizational structure. One major innovation in chemical management would be to contract the handling of chemical procurement and disposal. Currently, the facility must buy chemicals in bulk sizes but rarely uses all of the chemicals before their expiration dates. By outsourcing, managers could order chemicals in batch sizes and minimize disposal costs. The option is currently being explored. Facility III Facility III is one of several sites of a large multinational corporation. The facility's major environmental impacts include emissions of VOCs such as acetone and methanol, as well as TCE (trichloroethylene) and anhydrous ammonia. There is a wastewater-treatment facility in the building, managed by the environmental specialist. Facility III is located in a small industrial park close to residential areas and downtown. Although the facility has made the local newspapers Top Ten Polluters list (based on TRI reporting), the employees interviewed all felt that community perception was generally positive. The facilitys general manager seemed very committed to being a good neighbor and saw facility policies as a reflection of that principle. Approximately 250 employees work at the facility, considerably less than in the late 1980s. Production at the facility has been consolidated from four floors to one. Business seems somewhat stable now. As management described, competitors are large corporations that also supply and purchase from the facility. The facility has found a strong niche market for its specialized products. Five years ago, the facility was assessed a $25,000 penalty for on-going environmental violations. The facility then implemented a European management system standard and soon thereafter registered to ISO 14001. Facility III was one of the first U.S. facilities to become ISO 14001-registered. A corporate manager compared the approach embodied in ISO 14001 to a zero-defects quality-management program. ISO 14001 is a zero notice of violations program; i.e., it enhances compliance assurance, he said. Neither corporate nor facility environmental management cited ISO 14001 as a requirement by customers, which explains why most other facilities in this company are not certified by a third-party registrar. Instead, managers use it as a product-differentiating characteristic, saying, our product was made with zero compliance issues. Facility III became involved with StarTrack through the Environmental Leadership Program, and the facility was ISO 14001-registered by the time an agreement was signed with the EPA. As indicated in Table 7, most StarTrack requirements were already in place prior to participation. Table 7: Summary of Changes at Facility III Attributed to StarTrack Participation Management PracticePrior to StarTrackDuring StarTrackCompliance auditsAnnual corporate compliance-auditsAnnual corporate compliance-audits. Federal and state inspectors participate as observersEMS auditsInternal EMS audits as required by European EMS and ISO 14001Corporate EMS audits as required by European EMS and ISO 14001. Federal and state inspectors participate as observersThird-party verification of compliance-audit competency NoneEPA-approved third party certifies compliance-audit competency. Federal and state inspectors participate as observersThird-party verification of EMS audit competencyThird-party registrar certifies that facility EMS is appropriate given facility's impacts and is consistent with ISO 14001EMS certification as per ISO 14001 registration requirements. Federal and state inspectors participate as observersEnvironmental performance reportEuropean EMS requires public disclosure of major environmental impactsSimilar information is disclosed, formatted to StarTrack requirements ISO 14001 Impacts When asked for the three most-significant events that shaped environmental management in their facility, all four Facility III interviewees listed ISO 14001. From the perspective of the environmental manager, ISO 14001 is the tool to identify environmental aspects, set environmental performance goals, signal to customers that the facility is an environmental leader, and design products with fewer environmental impacts. A major benefit cited by several interviewees was the changes in auditing brought about by ISO 14001. Internal auditors are employees, often from outside the environmental management department, who periodically check to see that management practices conform with the standard. Anyone, from the custodian to senior engineer, may serve as an internal auditor. Facility III had eight active internal auditors and another two to four people capable of assuming the role. Internal auditors receive three days of training, and must have participated in three audits before becoming fully qualified. Aside from involving more workers in environmental management, the internal audit process serves as an important information resource to workers who may feel separated from the management culture. For example, a painter may feel uncomfortable asking an environmental manager how to deal with a paint spill, but may not hesitate to ask a co-worker/internal auditor. ISO 14001 appears to be the primary driving force for environmental management change in Facility III. Not only has that EMS changed routines for many employees, but also the fundamental attitudes and identity of the facility appear to have shifted to seek out environmental opportunities. The next section lists some of the projects that have been implemented as a result. Pollution prevention Three projects were identified during the interviews. Table 8 summarizes these projects and their resulting changes. Table 8: Pollution-Prevention Projects Undertaken by Facility III Project DescriptionDrivers for ImplementationCostsBenefitsChemical lab consolidation combining several labs across facility into one central locationPart of facility-wide consolidationInitially, production capability decreasedLower production and pollution control costs, environmental management more uniform across labsChemical dispenser change: chemicals are now stored in squeeze bottles which reduce evaporationGoal to reduce VOCsVery littleBetter production capability (it's easier to use squirt bottle), lower production and pollution-control costsEnergy-reduction projects : changed lighting fixtures, added sensors, changed ventilationElectrician in the facilities management departmentUp-front capital costs, defrayed by utility demand-side management incentivesLower production and pollution-control costs (cut utility bill by 50%); important morale booster for employees All three projects had direct benefits that exceeded costs of implementation. The chemical lab consolidation occurred during a general period of consolidation for Facility III. Thathelped cut down on costs to modify workspace areas since other parts of the facility were also being changed. In addition, capital financing was easier to obtain because chemical lab consolidation was budgeted as part of general consolidation. Squeeze bottles are no more costly than the beakers previously used to dispense chemicals. Squeeze bottles reduce VOC emissions as well as the volume of chemicals procured for production. The process change integrated well into existing production protocolsno one had to substantially change his or her routine to continue producing the same good. The energy-conservation project was implemented due to its easily quantified cost-savings. Two pollution-prevention projects advocated by environmental managers were not get implemented. An effort to recycle alcohol used in production was abandoned because of its impact on product quality. A program to discontinue nickel plating of some products was also halted due to customer demand. (The plating served only a cosmetic function.) Facility IV Facility IV is very visible, located on the main street of a small town, and a large employer in the area. Its major environmental impacts include 15,000 gallons of wastewater a day, solid waste from packaging, product disposal, VOC emissions, and emissions from a large boiler. Approximately 200 employees work in the 375,000 square-foot facility, operating three shifts five days a week. The facility is heavily automated. In addition to compounding and mixing solutions, the facility also manufacturers plastic containers for its products. It is a high-volume operation with low profit margins per-unit of output. . The industry structure for Facility IV is highly competitive. Product differentiation is a crucial aspect for success, both through new products and advertising. In addition, production costs play a major role in profit margins. The need to minimize production costs is directly related to environmental management. The quality of wastewater discharge is related to how much waste product must be processed. The product waste-stream has high biochemical oxygen demand (BOD) loading, which needs to be reduced before discharging into the environment. By reducing product waste, the facility saves money and improves the wastewater quality. The facility is owned by a European-based parent corporation, which also drives environmental management. Several years ago, corporate management encouraged all facilities to adopt environmental management systems. Corporate offices also conduct audits which employees claim are very thorough and rigorous. Facility IV has a good compliance record with no major issues in many years. Of the issues documented, many seem to be a result of a somewhat strained relationship with state regulators. For example, Facility IV was cited for pH level exceedances, but managers claim the states testing method was flawed. Facility IV became involved with StarTrack through the Environmental Leadership Program. It already had a well-developed audit system, consisting of both corporate and internal audits. The facility was also cited for its extensive vendor-certification program, which requires suppliers to meet high standards. Table 9 compares pre and post-StarTrack activities. The next section describes the drivers and effects of those changes. Table 9: Summary of Changes at Facility IV Attributed to StarTrack Participation Management PracticePrior to StarTrackDuring StarTrackCompliance auditsCorporate-led compliance auditsCorporate-led compliance audits, joined by federal and state observersEMS auditsNo facility-wide EMS, no EMS auditingCorporate EMS audits as required by ISO 14001. Federal and state inspectors participate as observersThird-party verification of compliance-audit competency NoneEPA-approved third party certifies compliance-audit competency. Federal and state inspectors participate as observersThird-arty verification of EMS audit competencyNoneThird-party EMS audit as required for ISO 14001 registration. Federal and state participate as observersEnvironmental performance report NoneInformation disclosed in accordance with StarTrack requirements Changes in Management Practices Becoming ISO 14001-registered was helped along by StarTrack. Facility IV was already feeling pressure from its parent corporation to adopt a structured EMS. Corporate management boasts in its 1998 environmental performance report: our systems are compatible with the internationally recognized standard ISO 14001 and 13 of our plants won certification by the end of 1997. The facility was required to be ISO 14001-compatible, and third-party certification was required for StarTrack. The cost of becoming certified to the ISO 14001 was only a small additional cost. While other facilities in the StarTrack program noted a more open relationship with regulators, Facility IV voiced a more ambivalent response. The corporate environmental manager described EPAs Regional Office as understanding, reasonable, and cooperative. On the other hand, the facility environmental manager seemed frustrated by a lack of benefits from participation. When he needed to change the facility's wastewater permit, he did not receive any faster consideration. His perception was that facilities that participate in StarTrack are exempt from agency inspections. Yet the state agency has continued to inspect his plant. Although designed to build trust, in this case StarTrack may be exacerbating tensions due to its failure to deliver promised benefits. ISO 14001 Impacts As mentioned earlier, Facility IV was on its way toward adopting a robust EMS before StarTrack.  Participation in the program lowered costs to adopting ISO 14001 because StarTrack required significant investments in a facility EMS. Facility IV has a long history of waste-minimization projects. It views waste minimization as critical to keeping production costs down. An added benefit, from the perspective of managers, is that those projects also improve the environment. Chapter 5. Other Responses to StarTrack In addition to evaluating how StarTrack worked at the facility level, we also studied how the EPA staff responsible for StarTrack interacted with companies and other government offices involved with the project. We interviewed the five members of the StarTrack Team, and on several occasions shared with them our observations about the program. The team is part of the Region 1 Office of Assistance and Pollution Prevention, which is in charge of administering many programs, including Project XL and the Center for Environmental Industry and Technology. We also spoke with representatives from the Office of Enforcement and Compliance Assurance (OECA) in Washington, D.C., and from each of the state agencies that participates in StarTrack. Concerns from OECA and States StarTrack staff have worked hard to bring EPA and state enforcement employees on board with the general goals and methodologies of the program. They have organized EMS training sessions as well as quarterly meetings to brief enforcement staff on how StarTrack works. They have also encouraged people from enforcement offices to observe StarTrack compliance and EMS audits. The best way to build support is to expose enforcement people to the audit process first hand, explained one StarTrack team member. A chief concern for OECA at the outset was that participating companies might reduce attention to compliance once admitted into the program. That has not happened, according to the OECA and state enforcement personnel with whom we spoke. There is no evidence to suggest that environmental performance at StarTrack companies is declining, or that companies are taking advantage of the penalty-mitigation provisions offered by the program. In most cases, companies follow through on their commitments in a serious way, explained one manager at OECA familiar with StarTrack. Yet OECA has not accepted the idea that companies admitted into StarTrack do not need to be inspected by EPA. John Fogarty, acting director of the Office of Planning and Policy Analysis at OECA, believes that Region 1 has yet to prove that the program provides compliance assurance. The fact that these companies are less likely to violate environmental laws has not yet been established, he said. More experience is needed to test the reliability of the audits and the third-party system. Others at OECA also urged giving the program more time. The only way to build legitimacy in the program is to observe the audits, explained an OECA staff person. If no substantial problems are discovered over the course of 50 or so audits, headquarters will have to see the program as legitimate. Representatives of both OECA and state environmental agencies expressed concern about the costs of StarTrack. Often, between five and 10 people from agencies observe compliance and EMS audits. Inspectors from air, water, and waste departments take part. Preparing for audits, participating in them, and assessing their results require substantial amounts of time. Bob Minicucci of New Hampshires Department of Environmental Services explained that participating in StarTrack requires one full-time-equivalent for his agency. Four New Hampshire companies belong to StarTrack. Perspectives of StarTrack Staff We asked StarTrack staff to identify what they considered the most effective aspects of the program. They told us that the program has been most successful in improving relationships been EPA and participating companies. StarTrack provides opportunities for agencies and facility managers relate to each other in a problem-solving setting. Under the old system, there was basically no communication until agencies had a legal obligation to inspect and fine. Through observation of compliance and EMS audits and interaction at the annual StarTrack meetings, EPA staff better understand the technical and financial constraints of facility environmental managers; likewise, facility staff have opportunities to use regulators as problem-solvers. Mutual respect has replaced the fear and suspicion which used to characterize those relationships. Through StarTrack, agency staff serve as liaisons or consultants to facilities. Environmental managers can get quick feedback on new regulations, information about legal hurdles to pollution prevention projects, technical advice, and news about trends in environmental policy. The relationship is helping to create trust, which is allowing agencies to communicate their concerns to environmental managers more effectively. We also asked the StarTrack team to describe what they considered the major weaknesses in the program. They told us that the difficulty in defining and delivering benefits was their chief concern. Because EPA has not been able to develop meaningful incentives, it has limited leverage with firms. StarTrack companies do not always file performance reports on time. The agency has not always been satisfied with the consultants facilities have picked to serve as third-party verifiers. Yet StarTrack staff members feel they are in no position to complain about those issues. Below we consider how the benefits promised by the programpartnerships with agencies, penalty mitigation, inspection relief, rapid processing of permits, and recognitionwork in practice. Partnerships with Agencies StarTrack staff members offered an example of regulatory flexibility provided by the program. One participating company, Texas Instruments, requested that EPA delay processing its operating permit until it could work out changes in one aspect of its manufacturing process. EPA agreed to that request. Penalty Mitigation StarTrack program materials list as one of the benefits of the program limited penalty mitigation. Facility managers must disclose to agencies all violations of local, state, and federal environmental laws; EPA and state agencies agree not to initiate any enforcement action if the disclosed violations are not egregious, and are corrected within 60 days. No StarTrack facility has been subject to enforcement action. However, under EPA's audit policy, equivalent penalty-mitigation is available to managers at any facility who voluntarily disclose and correct violations. One facility was not readmitted into StarTrack due to a major compliance issue. The facility is now under an administrative order issued by its state environmental agency. Neither EPA nor the state took action against the facility based on information gathered through the StarTrack process, however. Inspection Relief The EPA Region 1 website lists modified inspection priority as a benefit of StarTrack. Facility managers interpret that to mean inspection relief. The agreements signed by EPA, the state agency, and facility managers stipulate that agencies "will not, during the [StarTrack project], conduct any routine regulatory inspections. Mandated inspections, according to the agreements, "will be used to aid in the development and implementation of the [StarTrack program] rather than for enforcement purposes. However, StarTrack staff members told us that agencies may inspect StarTrack facilities if they so choose. Region 1 has recommended "spot checks of participants' performance and adherence to program requirements. Two of the facilities we studied reported that they had not been inspected since joining the program, the other two had been subject to inspections. Rapid Response to Permit Applications The Region 1 website lists express-lane permitting as a benefit of StarTrack. Facility managers we spoke with mentioned that the benefit, if delivered, would be significant to them. Their facilities often change product lines and production levels, which can alter the amount or kind of pollution emitted from their processes. If managers know such plans far enough in advance, the permit application process can sometimes happen quickly, with a smooth transition. But environmental managers with whom we spoke noted that permitting new operations often does not proceed smoothly. Sometimes provisional permits can be negotiated, but often new processes must be put on hold until permits can be arranged. Thus the permitting procedure often leaves environmental managers frustrated. One example, in a non-StarTrack facility, brought out the idiosyncrasies of permitting. The facility planned to consolidate two operations which happened to be in different states. While combined emissions in the consolidated facility were below the permitted level for the original facility, the environmental manager was concerned that a sudden increase in production could result in an exceedance. The time necessary to obtain the new permit for the consolidated operation meant that the facility would continually be at risk, despite the fact that the combined operations were expected to be cleaner than the two previous sites due to returns-to-scale on combined pollution-control and pollution-prevention technologies. The example shows how, in a worst-case scenario, slow turnaround-times for permitting could result in a facility being fined for having cleaner operations. We conducted interviews at this facility because it fit the profile of a potential StarTrack plant. It had a strong record of regulatory compliance and emphasized safety and environmental performance in some marketing materials. We wanted to understand the factors that might motivate such facilities to join the StarTrack. Fast-track permitting could clearly provide significant benefits, possibly enough to offset administrative costs. Unfortunately, none of the managers we spoke with at StarTrack facilities felt that their permits were processed any faster than before joining the program. Permit applications went through regular administrative channels, resulting in usual processing times. The same people, in the same offices, process their permit applications. Public Recognition Currently, StarTrack facilities receive plaques and notice at a year-end conference, and the Region 1 website mentions participating companies by name. StarTrack staff mentioned internal disagreements about StarTrack granting wider official recognition. Some people within EPA feel that StarTrack facilities are not necessarily excellent, especially since a few have had compliance actions taken against them within the last 10 years. They feel that three years of good behavior does not constitute excellence. According to one StarTrack staff member, a philosophical schism exists between those in the agency who advocate rewarding improving companies, and those who believe in rewarding firms only after a long history of excellence. Some staff members are concerned that official recognition by EPA might be used against the agency later. For example, if a facility backslid and was found culpable for illegal activity, EPA might then be seen recognizing a company that did not have a true environmental commitment. StarTrack facilities see the need to legitimize their environmental management, which can be done more effectively by EPA endorsement than glossy corporate reports. The environmental advocates we interviewed for this study supported further public recognition for StarTrack facilities. A coordinated endorsement by environmental groups and EPA could also help insulate the agency from public scrutiny in the case that a facility does backslide. Perspectives of Environmental Groups A premise of StarTrack is that public disclosure of environmental performance will help to ensure that participating facilities continue their commitment to regulatory compliance. StarTrack staff members have invited community and environmental groups to participate as members of audit teams, review environmental performance reports, and attend the annual StarTrack conference. We interviewed representatives of the two environmental organizations that had observed StarTrack audits prior to October 1999. Both representatives had participated in facility self-audits and third-party verifications. They both found facility managers very responsive" to their involvement. They environmental group representatives perceived their role to be legitimization of the StarTrack program and the facility's standing as an environmental leader. They did not feel qualified to address the adequacy of compliance or EMS audits because these areas are outside their expertise. Environmental organizations expressed support for the program. Explained one environmental advocate, "StarTrack provides a space for non-confrontational relationships to develop, which eventually can lead to incorporation of environmental concerns into business decision-making." We also spoke with a representative of local government that had observed audits of the StarTrack facility in his town. He described the audits by saying, they were tough on themselves. Observing the audits marked a turning point in his view of the facility. He decided that the town could gain more by not enforcing in certain instances. A more cooperative relationship could yield greater environmental improvement than "nit-picky enforcement." Chapter 6. Study Findings Why Managers Have Chosen ISO 14001 Our statistical analysis shows that, at this point, ISO 14001 facilities tend to be owned by large companies with highly developed management systems. They have the capabilitiesthe resources and existing knowledgeto make adoption relatively inexpensive. ISO 14001 represents a next step in an already established trajectory toward structured and formalized management. What motivates managers to adopt ISO 14001? Our case studies suggest that early adopters may be driven by a desire to distinguish their environmental programs. Managers told us that, for a variety of reasons, strong environmental management is in their interest. ISO 14001 helps them to formalize and extend their commitment to regulatory compliance and continual improvement, and to demonstrate their commitment to internal and external constituencies. Evidence suggests, therefore, that the improvements in environmental management we observed in our case studies may be attributable to characteristics already established in these organizations: their resources, capabilities, and commitments. An important question for policy makers is what will happen as firms that lack these characteristics adopt ISO 14001. During the study period, in September 1999, Ford Motor Co. and General Motors Corp. announced that they will require their suppliers to adopt ISO 14001. We anticipate that firms that adopt ISO 14001 because it is required will experience different outcomes than those that adopt at their own initiative. Later adopters will not necessarily possess the resources, capabilities, and commitments to achieve the results we observed in the early adopters. The Relationship Between an EMS and Environmental Performance We stated at the outset that environmental management systems are formal structures of rules and resources that managers adopt in order to routinize behavior that helps satisfy corporate environmental goals. Goals drive the system. A firm may choose goals that are trivial or ambitious; the choice is up to facility managers. ISO 14001 is a particular kind of EMS that offers several features of interest to regulators. ISO 14001 says very little about the actual content of EMS goals. It does require, however, that an organization include a commitment to regulatory compliance in its environmental policy, that managers are aware of their regulatory obligations, and that a system is established to identify and correct regulatory lapses. It requires continuous improvement in environmental-management performance. Furthermore, the strong emphasis of ISO 14001 is consistency between the standard and the EMS that managers put into practice. ISO 14001 ensures consistency by requiring that both managers and third parties periodically audit the system and correct deficiencies. ISO 14001 adoption does not constitute environmental excellence, that is, performance above the norm. Through a statistical analysis of the characteristics of facilities that have registered to ISO 14001, we found that relatively poor environmental performance increases the likelihood of registration. We can draw two interpretations from that finding. Facilities could be adopting the standard in order to disguise their poor performance. The reputational benefits associated with third party registration might provide a smoke screen allowing poor performance to continue undetected. The other interpretation is that facilities adopt ISO 14001 in order to improve their performance. Managers are aware that they could be doing better, and choose ISO 14001 as a tool toward doing so. That explanation was supported by our case studies of chemical-facility managers who cited improvements in compliance and environmental performance as the primary motivation for adoption. Managers at all the facilities we studied shared a commitment to regulatory compliance and were using their EMSs to achieve that goal. ISO 14001 helped to institutionalize compliance-driven activities. It helped ensure that, in the face of other corporate objectives, compliance would not slip, all operations would be included, and everyone would be involved in the process through what one person called "indoctrination." We found, in the facilities we studied, substantial variation in managers' commitments to pollution prevention. While each facility could cite examples of projects that prevented waste, several had chosen not to include pollution prevention goals in their ISO 14001 structured EMSs. At one end of the spectrum was Facility A, pursuing waste reduction and energy conservation for their own sake, even if they cost the facility money. At the other end was the StarTrack Facility II, whose managers' negative experience in attempting to achieve beyond-compliance goals had led them to narrow their focus to compliance alone. The Value of Third-Party Certification to Managers We found that third-party certification achieves two purposes for managers of the five chemical facilities that had adopted ISO 14001. It first demonstrates environmental "due diligence" to both employees and external stakeholders. It also offers managers an objective assessment of the strengths and weaknesses of an EMS. In other words, third-party certification offers both reputational benefits and opportunities for learning. Managers of the four StarTrack facilities we studied appeared to have somewhat different perceptions about the value of third-party certification. Those managers said that third-party review of compliance systems occasionally uncovered minor issues but generally confirmed that internal audits were conducted properly. They learned little through third-party review. On the other hand, StarTrack managers highly valued the participation of agencies as audit observers. They were anxious to hear what agency personnel had to say about the strengths and weaknesses of their compliance programs. The managers at Facility I were particularly pleased when the state environmental agency agreed to conduct compliance audits itself instead of relying on corporate representatives. They believed that if state inspectors looked carefully they would find a sound operation dedicated to compliance and beyond. All of the facility managers we talked with sought agency recognition. What better way to achieve it than through direct agency observation, without the threat of penalties? Reputational benefits were important to managers of both the ISO 14001 facilities we studied from the chemicals sectors and the StarTrack facilities. StarTrack managers believed their reputations would be enhanced more effectively through agency, rather than third-party, review. StarTrack facilities are also subject to third-party review of their EMSs. Three of the four facilities we studied had decided to become registered to ISO 14001 prior to joining StarTrack. Since ISO 14001 registration requires third-party certification, the StarTrack requirement resulted in no additional burden for these facilities. But most StarTrack facilities are not registered to ISO 14001; for them, the cost of both an EMS audit and third-party certification of the EMS audit is substantial. To address that concern, StarTrack guidelines allow the EMS consultant that performs the EMS audit to also perform the third-party certification. The question arises, then, as to what constitutes a third party . How ISO 14001 and StarTrack Contribute to Public Understanding of Facility Operations Our case studies show that ISO 14001 is helping firms improve environmental performance and achieve cost savings. It contributes little, however, to public understanding of facility operations. It did not foster public involvement in managers' decisions about their products or operations. StarTrack overcomes a key limitation of ISO 14001 by requiring public reporting. While environmental and community groups are generally supportive of StarTrack, participation is a relatively low priority. Given resource constraints, those groups focus their time on major polluters, not above-average facilities. While the groups endorse the goal of public disclosure of information, the documents produced by StarTrack are not particularly interesting to them. As a result, performance reports are rarely requested or used by external stakeholders. Is StarTrack Achieving its Goals? We explained earlier that StarTrack has numerous goals. The first goal is to change agency behavior by generating information that would allow inspection resources to be administered more efficiently. Clearly, at this stage, the goal is not being achieved. All parties consider the program expensive. StarTrack focuses the agency's scarce resources on above-average facilities, which is a negative result for a program geared toward improving efficiency. But the program should not be judged on the basis of its current performance. The appropriate question is whether StarTrack is designed so that it could achieve that goal over time. To be admitted into the program a facility must have an acceptable compliance history and a commitment to pollution prevention and continual improvement in environmental performance. Managers audit their performance, and third parties verify that audits have conformed to established protocols, and have uncovered all compliance problems. Is such a program likely to yield reliable results results that could at some future point take the place of routine agency inspections? We believe that the answer to that question is yes, but only if StarTrack limits participation to firms with established commitments to compliance-performance. Firms with a history of compliance problems should not be candidates for StarTrack. Firms that participate in StarTrack are expected to disclose, and correct within 60 days, every instance of non-compliance. A history of compliance problems indicates that a firm lacks the capability to identify and correct such problems. Furthermore, increasing the potential candidates for StarTrack to include firms with compliance problems will undermine the legitimacy the program has worked so hard to build. Is StarTrack improving the performance of firms that participate in the program? The answer, based on our case studies of participating facilities, appears to be no. While environmental performance at StarTrack firms is improving, improvements should not be attributed to the program. To be admitted, a facility must have a history of pollution prevention and an EMS that includes environmental performance improvement as a goal. Firms that meet those criteria are managed by people who have already invested in environmental performance improvement, and are committed to continuing to do so. Neither is StarTrack likely to improve the performance of facilities that might aspire to participate in StarTrack. The reason is important. Our cases show that the factors that push managers to develop beyond-compliance programs have little to do with agencies. Our research suggests that managers adopt ambitious environmental programs because they are both capable and motivated. In our statistical analysis we saw that facilities that have already instituted advanced management systems such as ISO 9000, and that are owned by large organizations, are the ones that adopt ISO 14001. Those facilities have the capabilityin terms of knowledge and resourcesto embrace the EMS standard. In the case-study facilities, managers were motivated to invest in environmental performance improvement by the need to improve efficiency and reduce costs, and, in some cases, to gain stature with corporate management. Managers told us that they also wanted to improve their reputations with agencies. But that desire, on its own, was not a sufficient incentive. Our cases suggest, therefore, that even if EPA could deliver the benefits it has promised in StarTrack, those benefits alone would not be adequate to shift the curve of environmental performance in the direction of excellence. Larger forces shape the environmental practices of firms. Fortunately, those forces have in recent years driven many companies in the direction of compliance and beyond compliance. Agencies have stood at the sidelines. Is StarTrack generating information that could help to inform agency reinvention efforts? We believe the answer to that question is yes. Through StarTrack, the agency is gathering information that is essential to establishing the legitimacy of the program within EPAs enforcement offices. OECA cannot accept on faith that audits with third-party verification are a reliable supplement to agency inspections. It must have evidence that StarTrack facilities maintain strong compliance records over time. Yet facility managers are justifiably confused when they sign up for a program that offers "modified inspection priority," only to find that they are scrutinized more closely than in the past. Chapter 7. Recommendations Based on our evaluation and case studies, we make the following recommendations. 1. Strengthen the specificity and enforceability of StarTrack agreements. Agency reinvention programs such as StarTrack are based in negotiated agreements between facility managers and agencies. They have the potential to break down over each party's difficulty in determining if the other has kept its promise. Knowing how well another has kept a promise is rooted in two characteristics. The first is how well the conditions of satisfaction can be specified (specificity). The second is how well those conditions can be observed (observability). A third problem is how to handle breaches or failures to keep the promises (enforceability). The same problems of specificity, observability, and enforceability arise in standard contract theory in both the legal and economic contexts. They pose particular problems in negotiated agreements involving environmental performance. By requiring facility managers to publicly disclose audit results, StarTrack offers a model for the observability of facility environmental performance. Not only are internal and third-party audit reports available for review by anyone who asks; agency staff members usually participate as observers during audits, and in two cases environmental advocates have taken part as well. The lack of specificity about program goals undermines the program. Is StarTrack about changing agency behavior? It is about changing the behavior of firms that participate, or the larger universe of firms that do not? Is it about gathering data to inform reinvention programs? Lack of specificity leads to confusion about the kind of firms that should participateexcellent, above-average, or those below the norm? It leads to fuzziness about program requirements. Is continual improvement required because it ensures that managers will maintain their commitments to compliance, or because performance improvement of above-average facilities is an agency priority? It leads to frustration on the part of facility managers, who believe they are not receiving the benefits they have been promised. Facility managers have been unable to enforce their understanding of StarTrack benefits. While EPA has established elaborate systems to ensure that facilities maintain their commitments to compliance, little attention has focused on ensuring that agencies uphold their side of the bargain. Facility managers have little in the way of leverage with EPA, other than to drop out of the program. Once in, dropping out is difficult, because it suggests a facility is no longer an environmental leader. 2. Divide StarTrack into compliance-assurance and beyond-compliance programs. We recommend that StarTrack be divided into two programs. The first program, which should retain the StarTrack name, would have as its goal improving the efficiency of agency compliance assurance programs. It should focus on changing agency behavior. StarTrack should work to reduce the level of direct agency oversight of facilities with strong compliance performance, freeing inspectors to focus on poor performers. Candidates for StarTrack should be limited to facilities with strong compliance histories and established commitments to pollution prevention and environmental performance improvement. Many in the agency believe their roles as environmental stewards extend beyond compliance assurance. They say that EPA should also help firms do more than regulations require. We have argued, based on the findings contained in this report, that firms move beyond compliance because they have the capability and motivation to do so. Many in the agency believe their roles as environmental stewards extend beyond compliance assurance. They say that EPA's role should include helping firms do more than what regulations require. Promoting beyond-compliance performance could be the focus of a second EPA program. The goal of such a program would be to change the behavior of companies. If EPA wants to promote beyond-compliance performance, it need not focus on StarTrack facilities. StarTrack facilities have shown that they are already both capable and motivated to achieve that level of environmental performance. In designing its beyond-compliance program, EPA should decide which inhibiting factor it will address: lack of capability, or lack of motivation. An appropriate focus might be to attempt to engage firms managed by people who are motivated to improve, but which do not have the necessary skills, knowledge, or resources. EPA could help to move such firms in the direction of environmental excellence by offering technical assistance. It need not provide such assistance directly; many states have developed exemplary programs in that area. Alternatively, EPA could attempt to engage firms managed by people who are not yet motivated to strive beyond what is required by law. If it chooses that population of firms, it should focus on developing incentives. Incentives that EPA has been using in StarTrackrecognition and penalty mitigationmay not be sufficient or appropriate. Regulatory flexibility could potentially be a strong motivator because it can affect a firms costs and competitiveness. However, flexible approaches are mean time-consuming negotiations, and must be developed on a case-by-case basis. 3. Give StarTrack time. StarTrack is a pilot program. By that, we mean that agencies are testing the degree to which corporate and third-party audits are appropriate tools to supplement agency inspections. Several years of data are needed to determine the reliability of that approach. OECA's managers do not believe the program is fully reliable at this point. They say they do not yet have evidence that StarTrack provides compliance assurance. They have told us that observing the audits and third-party process is the best way to assess the program's potential. We recommend that StarTrack continue to engage OECA and states in the process. Region 1 StarTrack staff members are just beginning to develop criteria to determine when the program will be ready to move from pilot to functional implementation. By functional implementation, we mean operating as a true system of third-party certification in which EPA and states no longer routinely observe the audits. We suggest that criteria should focus on the results of corporate and EMS audits and should address the following questions: do StarTrack companies maintain strong compliance performance over time? do corporate compliance audits identify all compliance problems? do third parties catch issues overlooked by corporate auditors? Once the agency has determined that the opinions of compliance and beyond-compliance represented in the audit reports are believable, it should move toward functional implementation of the program. Appendix. Statistical Analysis: Data, Methods, and Results We base our statistical analysis on an environmental performance database developed by MITs Technology, Business, and Environment Program and New York Universitys Stern School of Business. The database is uniquely complete and accurate. It links EPA's Toxic Release Inventory (TRI), CERCLA Information System (CERCLIS), Site Enforcement Tracking System (SETS), RCRA Information System (RCRIS), Water Permit Compliance System (PCS) and legal action data (DOCKET), with McGraw-Hill's ISO 9000 certification database, and the Dun & Bradstreet $1M Database (DUNS). The Toxic Release Inventory is one of the few longitudinal data sets of facility environmental performance. The DUNS database includes data concerning the number of employees at each facility. Since TRI does not include information about the production volume of facilities, we have used the DUNS data to control for size differences. The database gathers information for facilities in the United States, belonging to 20,231 firms. It includes manufacturing firms only. Of those 38,586 facilities, we identified 335 as ISO 14001-registered as of July 1, 1999. The identified facilities are those that we could match, with a fair degree of confidence, with the publicly available data on ISO 14001 collected from various sources and databases: U.S. registrars, the Global Environmental Technology Foundation's website, and the Globus Registry. The environmental performance database covers a ten-year period (1987-1996). The time frame provides insight into firms' performance prior to ISO 14001, but does not provide the opportunity to view improvement since the standard was published in 1996. Our analysis uses data from 1996. We believe that 1996 is likely to provide the most relevant information with respect to early-adopters' decisions to register. Because we are attempting to discern motivations, we are interested in a facility's characteristics at the point when managers decided to pursue registration. For most of the 335 ISO 14001 facilities we identified in our database, we do not know precisely when that decision occurred, but we know it was well before the date of registration. A firm does not receive its registration until its ISO 14001 EMS is in place. The process of becoming registered requires substantial time, six months to two years. We know that some facilities were pursuing registration as early as 1995. We maintain, therefore, that 1996 represents a reasonable time to assess the characteristics of early adopters. The small number of registered facilities in the United States (a few more than 450 at the time of the study) may challenge the significance of the results of the analysis. Table A-1: Data Summary Total number of facilities in database:38,586TRI-reporting facilities (in 1996):16,672ISO-registered facilities (recorded observations):335TRI-reporting ISO facilities (in 1996):181 Table A-2: Descriptive Statistics (for Year 1996) # Obs.MeanStandard DeviationMinimumMaximumISO 1400138,586.0086819.092772601Relative Emissions16,672-.00044091.002719-5.07000812.68858Responsible Care 38,586.0769968.266589901ISO 900038,586.0740683.261885401Facility size25,3974.7720031.375051.693147210.16589Firm size38,5865.7784463.275799012.76008Sector emissions21,3815.01351438.114710907.5129Regulatory burden21,626.4211135.541029603Non-compliance38,586.1158971.056959069Foreign ownership38,586.0454051.208193601 Table A-3: Correlation Table for Year 1996 - 16,672 observations ISO 14001Relative EmissionsResponsible CareISO 9000Facility sizeFirm sizeSector emissions Regulatory burdenNon-complianceForeign ownershipISO 140011.0000 Relative Emissions 0.02181.0000Responsible Care 0.02260.04351.0000ISO 9000 0.03610.00180.06411.0000Facility size 0.0970-0.00300.04840.11611.0000Firm size 0.09290.01410.27240.09890.62491.0000Sector emissions -0.00420.00010.11580.0154-0.02160.01341.0000Regulatory burden 0.02320.07120.13830.04700.23760.25110.06131.0000Non-compliance 0.02070.06290.17450.04870.08950.08230.04900.11121.0000Foreign ownership 0.05720.01550.12050.04400.06170.11030.02970.06190.03691.0000 Explanation of Variables In order to test the level of pollution generated by a facility relative to the rest of its industry, we must define both the meaning of "pollution" and "the rest of its industry." The U.S. EPA's Toxic Release Inventory (TRI) is a database that contains information, reported by facility managers, on releases of chemicals into the environment. Managers of facilities that employ ten or more full-time people must complete TRI reports if they manufacture or process 25,000 pounds, or use more than 10,000 pounds, of any of 246 listed chemicals. The chemicals that must be reported to TRI vary widely in terms of their relative toxicity. To correct for differences in relative toxicity, we weighted each chemical using the "reportable quantities" (rq) scale established in the CERCLA statute. We constructed aggregate releases for a given facility in a given year by summing the weighted releases of the 246 chemicals. TRI does not include information about the production volume of facilities, making facility-level analysis difficult. We addressed that problem by matching TRI facility data with data about facility size contained in the Duns database. (TRI includes Dun & Bradstreet numbers for each facility, allowing us to correlate the two databases.) Unfortunately, the Duns database includes information about the number of employees at each facility, not production volumes. We use number of employees as a surrogate for production volume. We then estimated a production function, yielding a facility's weighted emissions as a function of size (number of employees) and of industry sector (identified by its four-digit SIC code). We designated the environmental performance of a facility by the residual, or deviation, between observed and predicted emissions, given the facility's size and industry. Thus, if a facility emits more than we predicted, given its size and SIC code, it will have a positive residual (Facility emissions). This variable is a measure of a facility's effluent per worker, relative to the average of other facilities in the same SIC code sector. Responsible care participation Responsible Care (Responsible Care) is coded as a binary dummy variable for each facility. ISO 9000 registration and foreign ownership ISO 9000 registration (ISO 9000) and foreign ownership (Foreign ownership) are also coded as binary dummy variables for each facility, based on the ISO 9000 and DUNS databases, respectively. Facility and company size The facility size was measured using the log of total of employees at each facility (Facility size), as given by the Duns database. Firm sizes are measured with the cumulative number of employees in their facilities (Firm size). Pollution levels of industry sectors Using the emissions-production function mentioned above, based on employees and industry sector, it was possible to determine emissions per employee in each sector, and then rank the sector in terms of emission intensity (Sector emissions). Heavily regulated industry sectors Permitting requirements under both RCRA and the NPDES are taken as proxies for substantial regulatory oversight. The more permits a facility holds, the greater its regulatory burden (Regulatory burden). History of regulatory non-compliance Reported spills, RCRA violations, EPA Docket fines, water-permit compliance, and completed lawsuits were all taken into account in one variable used as proxy for non-compliance history (Non-compliance) Industry Sector and EPA region Facilities were classified according to the first two digits of their SIC codes (SIC code) and to the region they belong to (EPA region). The model then tested whether belonging to one given sector or one given region, could explain a facility's decision to register ISO14001. The Probit Model To test our hypotheses concerning the ISO 14001 registration we use a probit model, which specifies the likelihood that a given facility registers. The dependent variablewhether a firm is registered or notis qualitative in nature, and is represented by a 0-1 dummy variable. The independent or explanatory variables include measures of environmental performance, facility size, and participation in ISO 9000. The probit model is computed by regression using available data. We have interpreted the value of the dependent variable predicted by the model as the conditional probability that the facility will adopt ISO 14001, given the facility's characteristics (the values of the explanatory variables). Our statistical analysis of the data has determined the significance of each of the variables we considered in explaining facility-level registration to ISO 14001. Probit models are sensitive to misspecifications, and in particular to the omission of an explanatory variable. That potential flaw should be kept in mind when interpreting our results. Table A-4: Probit Model - Estimates of Decision to Register ISO 14001Coefficient.zP>|z|Facility emissions.07207572.6240.009Number of obs = 16,672Responsible Care.06099780.6560.512LR chi2(9) = 231.08ISO 9000.23965033.0640.002Prob > chi2 = 0.0000Facility size.16373945.7320.000Pseudo R2 = 0.1157Firm size.10235945.4700.000Sector emissions-.0011116-0.5550.579Regulatory burden-.0657942-1.1550.248Non-compliance.00723070.5340.593Foreign ownership.46590245.7710.000Constant-4.038697-26.5680.000 Note: The significance is given by the P>|z| score: the independent variables with the lowest score are the ones that are the most significant (in bold italics) Table A-5 ISO 14001 Facilities by EPA Region (as identified in the database) EPA Region 1Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont35EPA Region 2New Jersey, New York, and the territories of Puerto Rico and the Virgin Islands30EPA Region 3Delaware, Maryland, Pennsylvania, Virginia, West Virginia, and the District of Columbia22EPA Region 4Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee51EPA Region 5Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin96EPA Region 6Arkansas, Louisiana, New Mexico, Oklahoma, Texas31EPA Region 7Iowa, Kansas, Missouri, Nebraska9EPA Region 8Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming5EPA Region 9Arizona, California, Hawaii, Nevada, and the territories of Guam and American Samoa46EPA Region 10Alaska, Idaho, Oregon, Washington10Total335 Table A-6: ISO 14001 Facilities by SIC Code (as identified in the database) SIC Code Industry# of facilities20.Food and kindred products921.Tobacco products022.Textile mill products223.Apparel and other finished products made from fabrics and similar materials024.Lumber and wood products, except furniture425.Furniture and fixtures026.Paper and allied products1327.Printing, publishing, and allied industries028.Chemicals and allied products4229.Petroleum refining and related industries230.Rubber and miscellaneous plastics products1031.Leather and leather products032.Stone, clay, glass and concrete products333.Primary metal industries1534.Fabricated metal products, except machinery and computer equipment2635.Industrial and commercial machinery and computer equipment3436.Electronic and other electrical equipment and components, except computer equipment8037.Transportation equipment7338.Measuring, analyzing, and controlling instruments; photographic, medical and optical goods; watches and clocks1739.Miscellaneous manufacturing industries4-Other1Total335 Table A-7: Data Summary - Chemical Sector TotalChemical SectorTotal number of facilities in database:38,5866,323TRI-reporting facilities (in 1996):16,6723,058ISO-registered facilities (recorded observations):33542TRI-reporting ISO facilities (in 1996):18125 Table A-8: Correlation Table (for 1996 - 3,058 observations) Chemical sector only ISO 14001Relative EmissionsResponsible CareISO 9000Facility sizeFirm sizeSector emissions Regulatory burdenNon-complianceForeign ownershipISO 140011.0000Relative Emissions 0.04571.0000Responsible Care 0.05620.10911.0000ISO 9000 0.02430.01720.15741.0000Facility size 0.0480-0.00140.29200.14701.0000Firm size 0.02800.06810.55040.13960.56001.0000Sector emissions 0.0168-0.00180.16140.05510.03990.08061.0000Regulatory burden 0.04500.12280.24850.09710.30340.29250.15281.0000Non-compliance 0.03120.13150.13900.08720.23360.15890.08240.15541.0000Foreign ownership 0.06440.01880.20700.02490.11010.23280.03630.05850.01991.0000 Table A-9: Probit Model - Estimates of Decision to Register (chemical sector only) ISO 14001Coefficient.zP>|z|Facility emissions.14013391.9410.052Number of obs = 3,058Responsible Care.38506151.9570.050LR chi2(9) = 27.07ISO 9000.14458070.7050.481Prob > chi2 = 0.0014Facility size.15105161.8640.062Pseudo R2 = 0.0933Firm size-.0986986-1.7380.082Sector emissions-.0001628-0.0560.955Regulatory burden.17598391.1720.241Non-compliance.0058970.3240.746Foreign ownership.50019382.7450.006Constant-2.873905-9.1640.000 Note: The significance is given by the P>|z| score: the independent variables with the lowest score are the ones that are the most significant (in bold italics) Bibliography Bregman, Eric and Arthur Jacobson, "Environmental Performance Review: Self-Regulation in Environmental Law." In Environmental Law and Ecological Responsibility: The Concept and Practice of Ecological Self-Organization, edited by Gunther Teubner, A. Farmer, and D. Murphy. New York: John Wiley & Sons Ltd., 1994. Reprinted in Cardozo Law Review 16 (December 1996): 465-499. Breger, Marshall J. "The Fiftieth Anniversary of the Administrative Procedure Act Past and Prologue: Regulatory Flexibility and the Administrative State." Tulsa Law Journal 32 (Winter 1996): 325-353. Cascio, Joseph. The ISO 14000 Handbook. Baltimore: CEEM Information Services, 1996. Cichowicz, Judith. "New Opportunities for Expanding P2." In Moving Ahead with ISO 14000, edited by P.A. Marcus and J. T. Willig. New York: John Wiley & Sons, Inc., 1997. Davies, Terry and Jan Mazurek. "Industry Incentives for Environmental Improvement: Evaluation of U.S. Federal Initiatives," Global Environmental Management Initiative. Washington, D.C.: 1996. Environmental Protection Agency. Aiming for Excellence: Actions to Encourage Stewardship and Accelerate Environmental Progress. Report of the Environmental Innovations Task Force. Washington, D.C.: 1999. Environmental Protection Agency, Office of Enforcement and Compliance Assurance. Audit Policy: Incentives for Self-Policing. Washington, D.C.: December 22, 1995. Environmental Protection Agency, Region 1. "StarTrack Environmental Performance Reporting Guidelines - Instructions for Users." Boston, MA: May 1999. Environmental Protection Agency, Region 1. StarTrack Year One Final Report. Boston, MA: August 5, 1998. Environmental Protection Agency, Region 1. "Guidance for Compliance Audit, Compliance Audit Report and Facility Corrective Action Plan." Boston, MA: March 9, 1998. Environmental Protection Agency, Region 1. "Guidance for Environmental Management Systems Audit, Environmental Management Systems Audit Report and EMS Implementation Plan." Boston, MA: March 9, 1998. Environmental Protection Agency, Region 1. "Certification and Facility EMS Improvement Plan Guidance." Boston, MA: July 17, 1997. Environmental Protection Agency, Region 1. "Leadership Agreement between Massachusetts Department of Environmental Protection, EG&G-Salem, and Environmental Protection Agency - New England, Attachment 2: Program Benefit Guidelines." Boston, MA: April 11, 1996. Environmental Protection Agency, Region 1. "Third Party Certification Project Leadership Agreement between International Paper Company - Jay, Maine Facility, Maine Department of Environmental Protection, Town of Jay, Maine and United States Environmental Protection Agency - New England." Boston, MA: June 26, 1996. Foster, Scott. "Registrars, Accreditation, and ISO 14001." In Moving Ahead with ISO 14000, edited by P.A. Marcus and J. T. Willig. New York: John Wiley & Sons, Inc., 1997. Hale, Rhea. "The National Expansion of StarTrack: Issue Regarding Delegation of Environmental Compliance Oversight," U.S. EPA Region 1. Boston, MA: August 10, 1998. International Organization for Standardization. Environmental Management SystemsSpecification with Guidance for Use. ISO/TOC 207/SC1 Geneva: 1996. Johannson, Lynn. "ISO 14000: What's In It for You?." In Moving Ahead with ISO 14000, edited by P.A. Marcus and J. T. Willig. New York: John Wiley & Sons, Inc., 1997. King, Andrew and Michael Lenox. "Prospects for Self-Regulation Without Sanctions: A Study of Responsible Care in the Chemical Industry," The Academy of Management Journal, forthcoming. Krut, Riva and Harris Gleckman. ISO 14001: A Missed Opportunity for Sustainable Global Industrial Development. London: Earthscan Publications Ltd., 1998. Nash, Jennifer and John Ehrenfeld. "Environmental Management Systems and their Roles in Environmental Policy," Multi-State Working Group Research Summit on Environmental Management Systems. Washington, D.C.: November 2-3, 1999. Nash, Jennifer and John Ehrenfeld. "Codes of Environmental Management Practice: Assessing Their Potential as a Tool for Change." Annual Review of Energy and the Environment 22 (1997): 487-535. National Academy of Public Administration, "Project Plan: Learning from Environmental Initiatives," Washington, D.C.: May 27, 1998. Orts, Eric. "Reflexive Environmental Law," Northwestern University Law Review 89 (1995): 1227-1340. Rees, Joseph. "Development of Communitarian Regulation in the Chemical Industry," Law & Policy 19 (1997): 477-528. Roht-Arriaza, Naomi. "Shifting the Point of Regulation: The International Organization for Standardization and Global Lawmaking on Trade and the Environment." Ecology Law Quarterly 22 (1995) 479-539. Ross, M. "The Value of Registration: ISO 9000 compared to ISO 14001," ASTM Standardization News. September 1997. Scott, Alex. "Europe Weighs its Standards Options," Chemical Week (April 2, 1998): 33-35. Sissel, Kara."ISO 14000 Looking for Business Value," Chemical Week (April 2, 1997): 29-30. Sissel, Kara. "Behind the Scenes, U.S. Companies Prepare for Certification," Chemical Week (April 8, 1998): 43-47. Steinzor, Rena I. "Reinventing Environmental Regulation: The Dangerous Journey From Command to Self-Control, The Harvard Environmental Law Review 22 (1998): 103-202. Switzer, Jason. "ISO 14001: Regulatory Reform and Environmental Management Systems." masters thesis, Massachusetts Institute of Technology, 1999. Tener, Beth. ISO 14001: Lessons from Early Adopters. Arlington, MA: Business and the Environment, 1999. Thayer, A. "Chemical Companies Take Wait-and-See Stance toward ISO 14000 Standards," Chemical and Engineering News, April 1996. Websites consulted Chemical Week (http://chemweek.com). Global Environment Technology Foundation (http://www.getf.org). Globus Registry (http://www.globusregistry.com). Endnotes  PAGE  PAGE 19  National Academy of Public Administration, "Project Plan: Learning from Environmental Initiatives," (Washington, D.C.: May 27, 1998).  EPA's initial experiments with reinvention were criticized for lacking clear objectives and failing to offer tangible and significant incentives. See, for example, Terry Davies and Jan Mazurek, "Industry Incentives for Environmental Improvement: Evaluation of U.S. Federal Initiatives," (Global Environmental Management Initiative. Washington, D.C.: 1996).  EPA, "Aiming for Excellence: Actions to Encourage Stewardship and Accelerate Environmental Progress," Report of the Environmental Innovations Task Force. (Washington, D.C.: 1999).  The program was put on hold after its first year in order to evaluate progress and recruit more participants. StarTracks first operational year was 1996-97; it was not active in 1997-98. 1998-99 was its second operational year.  By increasing the number of facilities that move beyond compliance, EPA will increase the potential applicant pool for StarTrack.  Jennifer Nash and John Ehrenfeld, "Environmental Management Systems and their Roles in Environmental Policy," Multi-State Working Group Research Summit on Environmental Management Systems. (Washington, D.C.: November 2-3, 1999).  Joseph Cascio, The ISO 14000 Handbook, (CEEM Information Systems Baltimore, MD1996).  Ibid., 26.  International Organization for Standardization. Environmental Management SystemsSpecification with Guidance for Use. (ISO/TOC 207/SC1 Geneva: 1996), Section 3.1.The relevant section of the text reads as follows: 3.13 prevention of pollution: use of processes, practices, materials or products that avoid, reduce or control pollution, which may include recycling, treatment, process changes, control mechanisms, efficient use of resources and material substitution.  Ibid.  Ibid.  In written comments in response to this report, EPA's Office of Enforcement and Compliance Assurance argues that ISO 14001 fails to provide regulators with such assurance. We agree that a firm's adoption of the standard does not guarantee continuous improvement toward compliance. Managers may adopt the standard but fail to devote the resources necessary for implementation; registrars may overlook managers' failure to address compliance issues. Those examples are not what drafters intended, however. Continual improvement toward regulatory compliance is the clear intention of ISO 14001. For example, the introduction to ISO 14001 states that "this standard does not establish absolute requirements for environmental performance beyond commitment, in the policy, to compliance with applicable legislation and regulations and to continual improvement." ISO 14001 drafters view compliance as a performance requirement, not an empty commitment.  Riva Krut and Harris Gleckman, ISO 14001: A Missed Opportunity for Sustainable Global Industrial Development (London: Earthscan Publications Ltd., 1998).  Jason Switzer, "ISO 14001: Regulatory Reform and Environmental Management Systems" (masters thesis, Massachusetts Institute of Technology, 1999).  Lynn Johannson, "ISO 14000: What's In It for You?," in Moving Ahead with ISO 14000, edited by P.A. Marcus and J. T. Willig (New York: John Wiley & Sons, Inc., 1997).  M. Ross, "The Value of Registration: ISO 9000 compared to ISO 14001," ASTM Standardization News (September 1997) : 10.  Alex Scott, "Europe Weighs its Standards Options," Chemical Week (April 2, 1998): 33.  A. Thayer, "Chemical Companies Take Wait-and-See Stance toward ISO 14000 Standards," Chemical and Engineering News, (April 1996).  Kara Sissel, "ISO 14000 Looking for Business Value," Chemical Week (April 2, 1997): 29.  Kara Sissel, "Behind the Scenes, U.S. Companies Prepare for Certification," Chemical Week (April 8, 1998): 43.  The methodology and general approach used for this analysis are taken from Andrew King and Michael Lenox, "Prospects for Self-Regulation Without Sanctions: A Study of Responsible Care in the Chemical Industry," The Academy of Management Journal, forthcoming.  An alternative explanation for this observation is that facilities choose to register to ISO 14001 to distinguish themselves from other facilities owned by the same firm.  An additional explanation was offered by a reviewer of this report. Firms that register to ISO 9000 establish a relationship with an ISO registrar. The registrar may use this relationship to sell its ISO 14001 registration services.  Given the small number of registered companies in the US, the absence of ISO14001 facilities in some sectors cannot be explained today by anything other than chance.  During the study period, both Ford and General Motors announced that they will require suppliers to install an ISO-compliant EMS.  International Organization for Standardization. Environmental Management SystemsSpecification with Guidance for Use (ISO/TOC 207/SC1 Geneva: 1996): A.1.  This classification was not communicated to the interviewees.  While researchers asked questions and gathered data about the facility's StarTrack participation, the main focus of our interviews at Facility B was ISO 14001 implementation. The facility is not one of the four StarTrack sites discussed in this report.  Two researchers visited this site, one studying StarTrack adoption and another studying ISO 14001. The facility is the same one identified as Facility IV in this report.  The company was one of the first to self-declare conformance of its EMS with ISO 14001.  Judith Cichowicz, "New Opportunities for Expanding P2," in Moving Ahead with ISO 14000, edited by P.A. Marcus and J. T. Willig (New York: John Wiley & Sons, Inc., 1997).  Beth Tener, ISO 14001: Lessons from Early Adopters (Arlington, MA: Business and the Environment, 1999).  Ibid., 16.  Scott Foster, "Registrars, Accreditation, and ISO 14001," in Moving Ahead with ISO 14000, edited by P.A. Marcus and J. T. Willig (New York: John Wiley & Sons, Inc., 1997).  Ibid., 4.  Corporate management in the U.S. did not actively support registration, considering it "a leap of faith."  The sustainability vision of the firm consists of economic, social, and environmental targets.  A project aiming at avoiding the emission of salt water into the nearby bay was rejected because the "economics were too bad compared with the benefits." There are, however, examples of decisions based only on environmental considerations, such as the implementation of an early-release preventive shutdown system initiated by EHS.  Facility E does not participate in the Responsible Care program.  A community survey conducted by plant management following the accident found that residents were surprised that the facility would experience a major problem.  Regulatory inspections have identified few issues, according to managers, and the plant recently obtained the OSHA VPP status.  Rena I. Steinzor, "Reinventing Environmental Regulation: The Dangerous Journey From Command to Self-Control, The Harvard Environmental Law Review, 22 (1998): 103-202.  Federal air, water, and RCRA large-quantity permits. Rhea Hale, "The National Expansion of StarTrack: Issue Regarding Delegation of Environmental Compliance Oversight," U.S. EPA Region 1 (Boston, MA: August 10, 1998).  EPA Region 1, "StarTrack Program - Program Guidance Document 1998." (Boston, MA: August 26, 1998).  In written comments to a draft version of this report, Region 1 explained its position with respect to admitting firms with compliance problems as follows: "We do anticipate that participation in the Program may be broadened beyond firms with unblemished compliance records, but we do not contemplate allowing firms who have not shown a commitment to compliance into the Program."  EPA Region 1, "Guidance for Compliance Audit, Compliance Audit Report and Facility Corrective Action Plan." (Boston, MA: March 9, 1998).  EPA Region 1, Guidance for Environmental Management Systems Audit, Environmental Management Systems Audit Report and EMS Implementation Plan." (Boston, MA: March 9, 1998).  EPA Region 1, "StarTrack Environmental Performance Reporting Guidelines - Instructions for Users." (Boston, MA: May 1999).  EPA Region 1, "Certification and Facility EMS Improvement Plan Guidance." (Boston, MA: July 17, 1997).  Enforcement action will still be taken in the case of criminal violations, violations which result in serious environmental harm, or violations that result in significant economic benefit to the facility.  EPA audit policy states that "where violations are found through voluntary environmental audits or efforts that reflect a regulated entity's due diligence, and are promptly disclosed and expeditiously corrected, EPA will not seek gravity-based (i.e., non-economic benefit) penalties and will generally not recommend criminal prosecution against the regulated entity." EPA Office of Enforcement and Compliance Assurance, "Audit Policy: Incentives for Self-Policing." (Washington, DC: December 22, 1995).  The environmental performance reports required by StarTrack include information that could potentially damage the reputations of facilities. For example, managers must include findings from compliance and EMS audits, as well as information about releases. While that information is available to the public, EPA has received few, if any requests for StarTrack environmental performance reports from citizens. The act of disclosing information may strengthen a firms reputation; the content of information becomes almost irrelevant if reports are not widely read.  See, for example, EPA Region 1, "Leadership Agreement between Massachusetts Department of Environmental Protection, EG&G-Salem, and Environmental Protection Agency - New England, Attachment 2: Program Benefit Guidelines." (Boston, MA: April 11, 1996).  Facility IV is the same as Facility C.  See, for example EPA Region 1, "Third Party Certification Project Leadership Agreement between International Paper Company - Jay, Maine Facility, Maine Department of Environmental Protection, Town of Jay, Maine and United States Environmental Protection Agency - New England." (Boston, MA: June 26, 1996).  Ibid.  EPA Region 1, "StarTrack Year One Final Report," (Boston, MA: August 5, 1998): ii.  For example, when a facility environmental manager learned he would need two separate permits for manufacturing operations in separate buildings (historically regulated jointly under a single permit) he expected his permit application would go to the "top of the pile" at his state environmental agency. Instead he received the same treatment as before joining StarTrack.  A third environmental group observed StarTrack audits at a Massachusetts facility in October 1999, after we had finished collecting data.  We were not able to include air-compliance data in our environmental performance database because EPA AIRS data are not longitudinal. It appears that EPA deletes historic air-compliance information from AIRS when new measurements are made at a facility. Each data point appears to represent the last time EPA monitored the facility. That practice, combined with the problem of matching facilities from one dataset to another (which we encountered as we integrated each of the different data sources) made it very difficult to include AIRS. If EPA can provide a longitudinal record of air-compliance information, we will gladly include it in future analyses. Such information would be extremely valuable.  www.getf.org  www.globusregistry.com  In the United States, public concern about environmental degradation has focused to a large degree on industry releases of toxic chemicals during manufacturing. TRI, which includes information on releases of tens of thousands of facilities, is a good proxy for that measure of environmental performance. It is important to note, however, some of the deficiencies of TRI. First, data are reported by facility managers and are not externally verified. Second, in most cases the data are not based on monitoring but are estimates. Third, many chemicals of concern are not included. 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