Intersection of ISO and the Environment 1998.06(47)

■ “Conceptualization of the Standard”

ISO 14001 certification means establishing and operating an environmental management system. The results are then reviewed, and top management is responsible for spiraling up the environmental policy, objectives, and targets to solve the next problem, in accordance with the ISO standard. This sequence of steps is called “continuous improvement through the PDCA cycle” of the environmental management system. It should be noted that the international standard ISO 14001 only establishes the framework of the environmental management system and how to operate this framework.

The “policies, objectives, and targets” positioned in the environmental management system are not modeled anywhere, but rather must be determined voluntarily by the organizations and companies that adopt the ISO 14001 environmental management system. In layman's terms, it says that we will create a framework for solving problems and teach how to move that framework, but it does not say anything about how to fill that framework or how to work on higher content.

Furthermore, whether the environmental management system is functioning well or not is to be verified by a company through internal environmental audits, followed by third-party certification in the form of surveillance and reassessment by an audit organization. In other words, there are two aspects to obtaining ISO 14001 certification: (1) the creation of an environmental management system and (2) having an audit organization assure the status of maintenance and operation of the environmental management system as a third-party certification.

First, (1) is characterized as a system standard that is said to have started with ISO 9000. （Third-party certification (2), as mentioned in the previous section, evaluates an organization or company in terms of quality, environment, health and safety, financial accounting, labor, travel, and so on. The evaluation is then certified by a third-party organization.

■ “Fulfillment of Standards, Realistic Response”

When considered in this way, it is clear that ISO 14001 itself does not plan to develop specifics on how to incorporate international issues into the management system and solve them. For example, in the environmental management system, the first step is to establish an environmental policy, evaluate environmental aspects, identify important environmental aspects, and determine objectives and targets to be implemented.

For the environmental policy, the main focus is on the maintenance and preservation of ecosystems for living organisms, water, air, soil, and so on. However, what about the evaluation of environmental aspects? Before evaluating environmental aspects, it would be better if the company has a quality management system that is at the same level, if not to the level of ISO 9000 certification, then to the level of ISO 9000 certification. If the environmental aspects are evaluated on top of that, and if LCA is developed, even greater environmental improvement effects can be achieved.

I believe that an ISO 14001 environmental management system will function effectively only when the prerequisites for quality and production management behind it are in place, and when there is information that contributes to decision making for spiraling up, LCA, and EPE. That is why the ISO 14000 series consists of LCA (Life Cycle Assessment), EL (Ecolabel), and EPE (Environmental Performance Evaluation).

In addition, ISO 14001 is at the crossroads of these flows, and it should be noted that it cannot exist independently of either the vertical or the horizontal flows. Therefore, in terms of environmental issues, ISO 14001 is not a solution to environmental problems.

So, in terms of environmental issues, it is not too late to focus on the preliminary stages of quality and production management and preparation for certification, rather than narrowing the target to ISO 14001 certification only, and only after gaining confidence to implement LCA and EL in the future. Actions aimed solely at certification will only delay the resolution of the problem.

■ “Environmental Risks for Companies”

In general, the risks include: 1) legal risks, 2) risks associated with newly strengthened environmental laws, and 3) risks such as damage to the company's image. Legal risks include administrative and criminal penalties imposed for violations, suspension of operations, liability for pollution cleanup, and liability for damages to third parties due to illegal activities. In addition, risks associated with the new stricter environmental laws include worsening profitability due to capital investment to comply with stricter environmental standards, withdrawal from business, including plant closures, and difficulties for new businesses to enter the market.

And risks such as damage to corporate image refer to cases in which violations of environmental laws or environmental pollution accidents are picked up by the mass media, or when consumer groups brand a company as producing products that are harmful to the environment. Today, in addition to legal responsibility, moral or social responsibility is becoming increasingly important. A typical example of corporate environmental risk is the 1978 Love Canal incident, an environmental pollution accident caused by hazardous waste in the United States. This incident led to the enactment of the Superfund Law (Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)) in 1980, which aims to promote the cleanup of soil contaminated by hazardous substances.

In Japan, however, there has been no legal basis for ordering companies and other polluters to clean up contaminated sites, and most contaminated sites have been left unattended. However, with the enactment of the amendment to the Water Pollution Control Law in May 1996, prefectural governors have been able to order companies that have contaminated soil with toxic substances to take cleanup measures since April 1997. In addition, a manifest system to control illegal dumping of industrial waste has been introduced and penalties for violators are expected to be imposed. In the future, regulations related to dioxin are expected to be substantially strengthened.

■ “Japan's Environmental Regulations and Corporate Responses

As described above, Japan's environmental regulations are moving in the direction of strictly pursuing corporate responsibility, and companies must thoroughly manage their environmental risks, or they may suffer serious damage to their operations. One way to handle such environmental risks is risk financing through non-life insurance. Insurance coverage varies from country to country, but mainly covers two types of risk: liability for damages to third parties due to tortious behavior and liability for pollution cleanup.

In the past, Japanese insurance companies insured only “accidents that occurred accidentally” under third-party liability insurance, but this was no longer sufficient to deal with real environmental risks, and in 1992 AIU Insurance Company (Chiyoda-ku, Tokyo) developed and launched a new environmental pollution liability insurance policy that also covers “liability for pollution that occurs gradually. The policy covers only business activities. The policy covers damages caused by water, air, and soil pollution resulting from business activities, and specifically covers the following seven items

The following seven items are specifically covered: bodily injury to a third party and damage to property, loss of use of a third party's property, infringement of fishing rights and fishing rights, pollution cleanup costs based on the operator's share of pollution prevention project expenses (however, cleanup costs for land owned by the operator are not covered), damage prevention mitigation costs, costs to preserve indemnity rights, and costs for disputes. Insured businesses include chemical plants, intermediate treatment facilities and final disposal facilities, places that store or use hazardous substances in their premises, and semiconductor plants. In order to join the insurance program, environmental audits are conducted by a third party, and the financial capacity of the insured company to prevent pollution is checked.

It is said that fewer than 100 companies in Japan have environmental pollution liability insurance, but if regulations are tightened, such as by expanding the scope of coverage for hazardous substances, it is expected that a significant number of companies will have environmental pollution. The environmental liability insurance framework is expanding, as evidenced by the fact that in January 1997, Sumitomo Marine became the first company in Japan to sell environmental pollution liability insurance for waste dischargers that outsource the disposal of industrial waste to outside contractors.

Furthermore, in September 1997, AIU launched dioxin insurance as a special policy for environmental pollution liability insurance. Meanwhile, in the U.S., with its strict environmental laws such as the Superfund law, environmental pollution liability insurance is a 50 billion yen market. In the U.S., where strict environmental laws such as the Superfund law exist, environmental pollution liability insurance is a 50 billion yen market, and purchasing environmental pollution liability insurance has already become a social system.

In addition, some insurance companies in the U.S. have launched insurance policies that specifically cover only liability for environmental pollution, professional liability insurance for environmental consultants, and contractor liability insurance for waste disposal companies and others.