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A study of the Environmental Management System implementation practices
Journal of Cleaner Production 9 (2001) 269–276 www.cleanerproduction.net
A study of the Environmental Management System implementation practices I.K. Hui *, Alan H.S. Chan, K.F. Pun Department of Manufacturing Engineering & Engineering Management, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon, Hong Kong Received 7 March 2000
Abstract This paper is based on a survey to analyze the current Environmental Management System (EMS), or Green Manufacturing (GM), practices in Hong Kong. The survey focuses, in particular, on the investigation of: (i) the critical factors that most companies have considered in implementing the GM or EMS; (ii) the benefits that the companies have targeted in implementing the GM/EMS; (ii) the business activities that the companies have carried out in striving for the targeted benefits; and (iv) the business benefits attainable in the implementation of the GM/EMS. The study results show that most of the companies used in the survey have a positive attitude towards the implementation of the GM/EMS. The majority of them also consider that GM/EMS can effectively strengthen their competitiveness in business. 2001 Elsevier Science Ltd. All rights reserved. Keywords: Green Manufacturing; Environmental Management System; ISO 14000; Environmental quality
1. Introduction The increasing environmental consciousness of the public, the statutory requirements due to government policies and regulations, and pressures from organized groups are traditionally considered to be the factors that sway companies to adopt a Green Manufacturing (GM) or an Environmental Management System (EMS) policy [1]. The needs for environmental protection (such as waste minimization, pollution prevention, energy conservation and other health and safety issues) have been widely publicized. An increasing number of firms recognize that adopting a GM/EMS is an integral part of the business strategy. Adoption of a GM helped to decrease waste and pollution generation [2], whereas implementing the EMS provided an effective guidance for companies to simultaneously establish, develop and review their business practices towards both corporate and environmental goals [3]. There are several GM practices and EMS standards currently adopted by different regions and countries throughout the world [4]. The Eco-Management and * Corresponding author. E-mail address: [email protected] (I.K. Hui).
Audit Systems, CSA-Z750-94, BS 7750 and ISO 14000 series are typical examples [5,6]. These standards are designed to help organizations, regardless of their size and business type, to develop a formalized management process with the objective of evaluating and improving their environmental and safety performance [7]. The GM/EMS program in Hong Kong is relatively new; not much information about its implementation results is available. The investigation reported in this paper was based on the eleven companies that had participated in the ISO 14000 EMS Pilot Program organized by the Hong Kong Productivity Council in 1995. One of the objectives of this investigation is to identify the critical factors/sub-factors, benefits and business activities that a company may have considered or targeted in the implementation of the GM/EMS program. Another objective is to discover what activities contributed to a successful GM/EMS program. The benefits that are recognized by these companies for the implementation of the program are also to be determined. 2. GM/EMS implementation factors and subfactors overview Although GM/EMS is still relatively new in Hong Kong, the idea itself has received a great deal of pub-
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licity, particularly in the last few years. For instance, Pun et al. [2] and Lee [8] in their studies have identified the internal and external reasoning behind the adoption of GM/EMS by modern Hong Kong companies. These studies highlighted the needs and importance of having green manufacturing processes. Traditionally, industrialists are more concerned about the possible adverse effects of GM/EMS implementation on their profit margins. Goodman, an environmental specialist [9], emphasizes that the cost of implementing GM/EMS should be considered and analyzed so that department managers cannot use cost as an excuse for avoiding GM/EMS. He emphasizes that the adoption of GM/EMS can in fact provide a competitive edge and other benefits for a company. Following is a review of the five factors commonly being considered by an industry in the implementation of the GM/EMS. 2.1. Operation costs A properly designed GM/EMS can trigger procedural or technological changes, and as a result can reduce the operational costs and improve the value of a product. It allows a company to use raw materials, energy, or labor in a more effective way, and thereby reduces the business/operation costs [9]. Experience from Austria, Netherlands, Sweden, and the UK show that manufacturing environmentally-friendly products or services will not necessarily increase business/operation costs;, on the contrary, because of the better use of resources, a company’s manufacturing costs can be reduced [10]. These overall business/operation costs, including the direct and indirect costs, are generally measured by the following five sub-factors: Process Cost, Material Cost, Labor Cost, Production Overhead and Administrative Expenses.
already emphasized this issue. An enterprise may find it difficult to expand internationally without a valid quality certification [12]. In Hong Kong, environmental quality enhancement has been an important driving force during our move towards the new millennium (Chief Executive’s Policy Address, 1999) [13]. The ability to strengthen the competitive edge of a company through emphasis on environmental protection is conspicuous and eminent in Hong Kong. The amount of weight on this factor can be understood by investigating the following four sub-factors: Government Policy, Market Pressure, Customer Requirements and Investor Criteria. 2.4. Company performance EMS requires that product parts be designed and manufactured from an environmental perspective. To satisfy the GM/EMS requirements, engineers have to proactively improve or develop the business/operation processes in such a way that each manufacturing step is accomplished with the minimal environmental impact. Reactive response to environmental concerns is not encouraged in the GM/EMS [11]. The sub-factors commonly adopted to assess the company business/operation performance in relation to the implementation of the GM/EMS are: Operational Effectiveness, Sales Turnover, Customer Satisfaction, Employee Involvement, and Emergency Preparedness. 2.5. Environmental conservation The fundamental GM/EMS goal is to minimize environmental impact. To assess whether or not an organization can achieve this goal, the following five factors are commonly employed as indicators: Waste Reduction, Waste Reuse, Waste Recycle, Waste Treatment and Use of Sustainable Resources.
2.2. Company image With increasing public awareness of environmental issues, the GM/EMS certification of a company such as the ISO 14001 is appealing to customers and marketers [11]. The implementation of GM/EMS is being accepted as an image-builder and business strategy to strengthen the company’s competitive position [1,3]. The following three sub-factors are commonly used to assess the company’s image: Product Quality, Service Quality and Social Responsibility. 2.3. Market trend Whether GM/EMS would be a bonus to make the company to be inline with the market trend is another commonly considered factor. Although nowadays the adoption of the GM/EMS is usually voluntary, many suppliers and large-sized corporations worldwide have
3. GM/EMS implementation activities The elements in the GM/EMS program strictly require the processes to be planned, designed, implemented, and reviewed from an environmental protection perspective. By doing so, the key benefits attainable involve not only the enhancement of environmental quality, but also the following four business benefits, namely “Strengthened Customer Loyalty”, “Improved Profitability”, “Enhanced Company Image”, and “Stimulated Staff Morale”. To achieve these four benefits, different strategies or activities are adopted in different organizations. 4. Study methodology In an attempt to investigate the current GM/EMS considerations and practices in Hong Kong, an analysis
I.K. Hui et al. / Journal of Cleaner Production 9 (2001) 269–276
through a survey was carried out. This survey consists of two parts. The first part focuses on: (i) investigating the factors and benefits that may have been considered in the GM/EMS implementation; (ii) determining the relative significance of the GM/EMS implementation factors, sub-factors, and benefits; and (iii) evaluating the effectiveness of GM/EMS programs in attaining the targeted business benefits. The second part is to examine the GM/EMS implementation activities that the local companies would like to adopt in achieving the GM/EMS related benefits. With the concept of the Analytical Hierarchy Process (AHP) as a basis, a survey of the factors listed in all levels of Fig. 1 was conducted. The survey was based mainly on eleven medium-sized companies in Hong Kong. These companies can be categorized into two groups, manufacturing and consultancy. A total of twenty-nine questionnaires was distributed to these companies and all were returned. To determine the relative significance of the GM/EMS implementation factors and sub-factors, the respondents were asked to indicate their views based on a nine-point scale, as shown in Table 1. This scale allows the respondents to effectively discriminate among the relative significance of the factors, or activities involved [14]. Data obtained in each hierarchical level of Fig. 1 are transformed into normalized weightings by a software program called “Expert Choice” [15,16]. Detailed results and analysis of the survey are presented in the next section.
5. Results and analysis This section presents the results of the analysis. The first part reports the relative significance of the key fac-
Fig. 1.
271
tors, sub-factors, benefits, and effectiveness of the GM/EMS program. The second part reports the activities that the eleven companies have adopted, or intend to adopt, to achieve the four business benefits. 5.1. GM/EMS implementation factors, sub-factors, and benefits Tables 2a–d present the results in four categories: the normalized weightings of all factors, sub-factors, benefits and effectiveness calculated based on the manufacturing companies, the consultants, and the combined manufacturing companies/consultants’ survey data. It was found that all results fall into the acceptable inconsistency level of 0.1, as recommended by Saaty [15,16]. 5.1.1. Normalized weightings from manufacturing companies With reference to the normalized weightings from the manufacturing companies in Table 2 (level 1), it can be seen that the factor Environmental Conservation has the largest value (0.277). When this value is compared with that of the Operation Costs, Market Trend, Company Image, and Company Performance, it is 4, 15, 1.3 and 1.1 times larger, respectively. This implies that the environmental protection consciousness of this group of companies is very high and prevailing. In the same column and one level down to (Table 2b), we interpret how the manufacturers feel about the issue of GM/EMS. It can be seen that the factors that considered to be most significant by the manufacturers, those with their weightings highlighted in the table, are the Process Cost, Social Responsibility, Customer Requirements, Customer Satisfaction and Use of Sus-
Model used for studying GM/EMS implementation.
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Table 1 Nine-point scale for use by respondents to the questionnaire in evaluating relative importance of different activitiesa Intensity of Importance
Definition
Explanation
1 3
Equal importance Weak importance of
5
Essential or strong important
7
Demonstrated importance
9
Absolute importance
2, 4, 6, 8
Intermediate values between the two adjacent judgments
Two activities contribute equally to the objective Experience and judgment slightly favor one activity over another Experience and judgment favor one activity over another An activity is strongly favored and its dominance is demonstrated in practice The evidence favoring one activity over another is of the highest possible order of affirmation —
a Reciprocals of above non zero: If activity i has one of the non- zero numbers assigned to it when compared with activity j, then j has the reciprocal value when compared with i.
tainable Resources. Their respective weightings are 0.250, 0.426, 0.395, 0.278 and 0.344. In the third level, Table 2c, the weightings of Strengthened Customer Loyalty is predominantly larger than the other three benefits, indicating that this is the major benefit achieved by manufacturing companies through the GM/EMS programs. This result also supports the previous two findings in level 2, under the factors of Market Trend and Company Performance, where customers’ feelings are considered as to be most important. The last level, Table 2d, evaluates the effectiveness of achieving the four benefits listed in level 3. The Effective and Non Effective weightings of the Strengthened Customer Loyalty, Improved Profitability, Enhanced Customer Image and Stimulated Staff Morale are all depicted in this table. If the weighting ratios of Effective/Non Effective for Strengthened Customer Loyalty, Improved Profitability, Enhanced Customer Image and Stimulated Staff Morale are calculated, it can be seen that they are all greater than one, and their respective values are 3.3, 5, 5.8 and 2.2. These results show that the manufacturing companies surveyed believe that all four benefits can be achieved from the implementation of the GM/EMS programs, and amongst the four benefits, Enhanced Company Image can be achieved most effectively. 5.1.2. Normalized weightings from consultants With reference to Table 2a, it can be seen that the consultants regard Company Image as the most important attribute for the implementation of GM/EMS, and it has a weighting of 0.356. Compared with manufacturers, consultants put more emphasis on the Company Image, than on Environmental Conservation because of the nature of their business. The outputs from the manufacturing companies are physical products, thus it is logical that the people responsible for the production are more concerned about the waste generation. Con-
versely, the consultant companies are to provide services and they are concerned more directly with customers’ feelings, hence the resulting Company Image. The weightings in the second level, Table 2b, show that the consultants consider Labor Cost, Social Responsibility, Customer Requirements, Employee Involvement and Waste Reduction as the most significant factors for the implementation of GM/EMS. These factors’ respective weightings are 0.520, 0,458, 0.314, 0.370 and 0.390. This gives a picture that differs from that of the manufacturers. The two factors which are commonly recognized as important by both groups of companies are the Social Responsibility and Customer Requirements. Nevertheless, the other three factors considered crucial in each group are totally different. Manufacturers are more concerned with process cost, customer satisfaction and use of sustainable resources, and the consultants are more concerned with labor cost, the team spirit of the employees and waste reduction. This clearly shows that, in the implementation of GM/EMS, different trades have different considerations. In the fourth level, Table 2d, the Effective and Non Effective weightings of Strengthened Customer Loyalty are equal. This indicates that consultants do not agree on whether GM/EMS would strengthen customer loyalty. The large Non Effective weighting (0.691) of the Stimulated Staff Morale shows that consultants lack confidence in the ability of GM/EMS programs to stimulate staff morale. This result, together with the findings in level 2 where Employee Involvement predominates Company Performance, can be interpreted to mean that team spirit in a consultancy is both crucial and difficult to achieve. For the other two benefits, Improved Profitability and Enhanced Company Image, their Effective weightings are much larger than their Non Effective weightings. This indicates that there is a general consensus among the consultantcies that, by the implementation of GM/EMS, profitability and the image of a company can be improved.
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Table 2
(a) Level 1: Normalized weightings of individual expert groups GM/EMS implementation factors
Manufacturing companies
Consultants
Combined judgment
Operation Costs Company Image Market Trend Company Performance Environmental Conservation
0.070 0.208 0.191 0.253 0.277
0.040 0.356 0.059 0.207 0.338
0.060 0.257 0.134 0.242 0.306
Manufacturing companies
Consultants
Combined judgment
0.250 0.179 0.214 0.161 0.196
0.099 0.234 0.520 0.074 0.072
0.197 0.210 0.308 0.134 0.151
0.255 0.318 0.426
0.262 0.280 0.458
0.258 0.305 0.437
0.231 0.172 0.395 0.202
0.184 0.303 0.314 0.199
0.218 0.210 0.368 0.205
0.106 0.175 0.278 0.215 0.226
0.096 0.057 0.258 0.370 0.220
0.115 0.126 0.257 0.264 0.238
0.304 0.112 0.172 0.068 0.344
0.390 0.292 0.206 0.050 0.062
0.339 0.169 0.197 0.066 0.229
(b) Level 2: Normalized weightings of individual expert groups GM/EMS implementation sub-factors Operation Costs: Process Cost Material Cost Labor Cost Production Overhead Administrative Expenses Company Image: Product Quality Service Quality Social Responsibility Market Trend: Government Policy Market Pressure Customer Requirements Investor Criteria Company Performance: Operational Effectiveness Sales Turnover Customer Satisfaction Employee Involvement Emergency Preparedness Environmental Conservation: Waste Reduction Waste Reuse Waste Recycle Waste Treatment Use of Sustainable Resources
(c) Level 3: Normalized weightings of individual expert groups Benefits
Manufacturing companies
Consultants
Combined judgment
Strengthened Customer Loyalty Improved Profitability Enhanced Company Image Stimulated Staff Morale
0.336 0.141 0.276 0.248
0.076 0.074 0.332 0.518
0.220 0.124 0.316 0.340 (continued on next page)
5.1.3. Normalized weightings from combined judgment To elaborate the findings further, the combined judgements of manufacturing companies/consultantcies are also exhibited in Table 2a–d. Based on the Combined Judgement weightings, it can be seen that Environmental Conservation, Labor Cost, Social Responsibility, Customer Requirements, Employee Involvement, and Waste Reduction are the main considerations for the implementation of GM/EMS programs in Hong Kong.
5.2. Business activities adopted in the GM/EMS program Different companies may select, or adopt, different business activities in the implementation of the GM/EMS program. Their selection and adoption may be based on the companies’ culture, background or customer requirements. This section will report the business activities that manufacturing and consultancy companies
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Table 2 (continued) (d) Level 4: Normalized weightings of individual expert groups Effectiveness Strengthened Customer Loyalty: Effective Non effective Improved Profitability: Effective Non effective Enhanced Company Image: Effective Non effective Stimulated Staff Morale: Effective Non effective
Manufacturing companies
Consultants
Combined judgment
0.770 0.230
0.500 0.500
0.691 0.309
0.833 0.167
0.691 0.309
0.793 0.207
0.853 0.147
0.750 0.250
0.823 0.177
0.691 0.309
0.309 0.691
0.567 0.433
in Hong Kong have adopted, or intend to adopt, in the GM/EMS program with the goal of achieving the four business benefits, Strengthened Customer Loyalty, Improved Profitability, Enhanced Company Image, and Stimulated Staff Morale. Table 3 summarizes the findings. The meanings of the “ticks” in the table are as follows: 앫 ✓✓✓✓ indicates that all companies in the survey selected this activity 앫 ✓✓✓ indicates that most of the companies in the survey selected this activity 앫 ✓✓ indicates that some companies in the survey selected this activity, and 앫 ✓ indicates that only a few companies in the survey selected this activity. Based on this table, the following perceptions are obtained: 앫 The goals of effective communication and better service to customers are adopted by most Hong Kong companies to secure and improve business relationships with customers. 앫 Companies in Hong Kong treat new business opportunities, expenditure minimization and the effective use of energy as effective means of improving profitability. 앫 Activities 10, 12, 15, 16, 17 and 18 in Table 3 are adopted by most of the companies as a means of improving their green image. 앫 Companies in Hong Kong emphasize activities that secure and improve internal and external relationships. Usually, training and activities that may improve internal communications are welcome.
6. Implications
From the results of the survey, the following information can be deduced and is presented as the “three C’s”: Customer Focus: Customer requirements and satisfaction are considered to be priorities in the manufacturing business; that is to say the GM/EMS programs must be tailored to meet the needs of those who use the products. Despite the fact that implementing a GM/EMS program is voluntary, using it as a means of pleasing customers is increasingly more common. Companies involved in the GM/EMS programs cultivate every possible means to communicate with their customers, for instance through newsletters, websites and environmental reports, to let their customers know that they are environmentally aware. Commitment: Employee involvement has been ranked as the most critical factor for quality company performance by consulting companies. This implies that most of the consultants consider that participation from employees is very important to the success of GM/EMS programs. As the nature of consultancies requires employees to work in teams, the need to emphasize team spirit and morale is obvious. Continuous Improvement: The amount of effort and money invested is directly related to the number of benefits anticipated. As exhibited in the results of the survey, the manufacturing and consulting companies target different benefits from GM/EMS programs. For instance, through the GM/EMS programs, the manufacturing companies would like to strengthen customers’ loyalty, while the consultancies would like to stimulate and improve staff morale. We conceive that, as long as the targeted benefits can be sustained, companies in Hong Kong are pleased to continue to invest in the GM/EMS programs.
13. 14. 15. 16. 17. 18.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
Search new business opportunity Minimize operations expenditure Improve energy efficiency Increase business investment Strengthen management commitment Enforce regular management review Maintain documented procedures Promote education and training Improve communication internally Improve communication externally Collaborate with government support Promote company’s 3R (Reduce, Reuse, and Recycle) image to public Produce environmental-friendly products/services Improve product quality Improve service quality Comply with the government regulations Promote safety working environment Enforce clean product practices
Activities
Table 3 Business activities considered or adopted in the GM/EMS program
✓ ✓ ✓
✓
✓ ✓
✓✓ ✓✓
✓ ✓✓ ✓✓✓ ✓ ✓ ✓✓
✓✓ ✓✓✓ ✓ ✓✓
✓ ✓ ✓ ✓✓ ✓
✓ ✓ ✓
✓
✓
✓ ✓✓ ✓
✓
✓✓ ✓✓ ✓
✓
✓
✓✓✓ ✓✓✓ ✓✓✓✓ ✓ ✓ ✓ ✓ ✓
Adopted
Considered
Considered
Adopted
To improve profitability
To strengthen customer loyalty
✓
✓
✓
✓
Considered
✓✓ ✓✓✓ ✓✓✓✓ ✓✓✓✓ ✓✓✓✓ ✓✓✓✓
✓✓ ✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓ ✓✓✓✓ ✓✓ ✓✓✓✓
Adopted
To enhance company image
✓
✓ ✓ ✓
✓
Considered
✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓
✓✓ ✓✓ ✓✓ ✓✓✓✓ ✓✓✓✓ ✓✓✓ ✓ ✓✓✓
✓ ✓✓ ✓✓
Adopted
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7. Conclusion This study reveals that different trades have different anticipations and approaches in the implementation of GM/EMS programs. The role of manufacturing companies is to convert materials into finished products, so to satisfy the environmental issue, they emphasize waste and energy reduction. They consider that, to be successful in business, a company must be able to reduce the process cost, to use resources effectively and to provide satisfaction to customers. The role of the consulting companies is to provide services and employees always work in teams. They consider that success in business depends very much on the harmony and relationship among the employees and this is fully reflected in the survey results. The element that mostly concerned this group of companies is their image with the public and customers. The findings also show that both the manufacturing and consulting companies feel that the implementation of GM/EMS has a positive effects on their business.
[2]
[3] [4] [5]
[6]
[7]
[8] [9]
[10]
[11]
Acknowledgements [12]
This project (no. 7100083) was financed by the City University of Hong Kong.
[13] [14]
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and Manufacture in the Global Manufacturing Era, 1997 Aug 21– 22; Hong Kong, vol. 1, 1997:425–9. Pun KF, Fung YK, Wong FY. Identification of critical factors for total quality environmental management. In: Proceedings of the 3rd Annual International Conference on Industrial Engineering Theories, Applications and Practice 1998 Dec 28–31; Hong Kong, 1998. Willig JT. Environmental TQM. New York: McGraw-Hill, 1994. Subhash C. Stepping up to ISO 14000. Portland: Productivity Press, 1996. ISO EN/ISO 14001 Environmental management systems — specification with guidance for use. International Organization for Standardization, June 1996. ISO EN/ISO 14004 Environmental management systems — general guidelines on principles, systems and supporting techniques. International Organization for Standardization, June 1996. Wever CT. Strategic environmental management using TQEM and ISO 14000 for competitive advantage. New York: Wiley, 1996. Lee W. ISO 14001 certifications: environmental management system. Englewood Cliffs, NJ: Prentice Hall, 1997. Goodman SL, Veritas DN. Is ISO 14001 an important element in business survival? ISO InforCenter Website: http://www.iso14000.com/DNVF Article.htm; 1998. James P, Bennett M. Environment-related performance measurement in business. Industry and Environment 1995;April-September:40–4. Pouliot C. ISO 14000: beyond compliance to competitiveness. Manufacturing Engineering 1996;May:51–6. Struebing L. 9000 standards? Quality Progress 1996;January:23–8. Chief Executive’s Policy Address. http://www.info.gov.hk/pa99 /eindex.htm; 1999. Karni R, Sanchez P, Tummala VMRA. Comparative study of multi-attribute decision making methodologies. Theory and Decision 1990;29:203–22. Saaty J, Whitaker R, Ruffing F. Expert choice user manual. Expert Choice Inc, 1986. Saaty TL. Decision making for leaders. New York: RWS Publications, 1990.
A study of the Environmental Management System implementation practices I.K. Hui *, Alan H.S. Chan, K.F. Pun Department of Manufacturing Engineering & Engineering Management, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon, Hong Kong Received 7 March 2000
Abstract This paper is based on a survey to analyze the current Environmental Management System (EMS), or Green Manufacturing (GM), practices in Hong Kong. The survey focuses, in particular, on the investigation of: (i) the critical factors that most companies have considered in implementing the GM or EMS; (ii) the benefits that the companies have targeted in implementing the GM/EMS; (ii) the business activities that the companies have carried out in striving for the targeted benefits; and (iv) the business benefits attainable in the implementation of the GM/EMS. The study results show that most of the companies used in the survey have a positive attitude towards the implementation of the GM/EMS. The majority of them also consider that GM/EMS can effectively strengthen their competitiveness in business. 2001 Elsevier Science Ltd. All rights reserved. Keywords: Green Manufacturing; Environmental Management System; ISO 14000; Environmental quality
1. Introduction The increasing environmental consciousness of the public, the statutory requirements due to government policies and regulations, and pressures from organized groups are traditionally considered to be the factors that sway companies to adopt a Green Manufacturing (GM) or an Environmental Management System (EMS) policy [1]. The needs for environmental protection (such as waste minimization, pollution prevention, energy conservation and other health and safety issues) have been widely publicized. An increasing number of firms recognize that adopting a GM/EMS is an integral part of the business strategy. Adoption of a GM helped to decrease waste and pollution generation [2], whereas implementing the EMS provided an effective guidance for companies to simultaneously establish, develop and review their business practices towards both corporate and environmental goals [3]. There are several GM practices and EMS standards currently adopted by different regions and countries throughout the world [4]. The Eco-Management and * Corresponding author. E-mail address: [email protected] (I.K. Hui).
Audit Systems, CSA-Z750-94, BS 7750 and ISO 14000 series are typical examples [5,6]. These standards are designed to help organizations, regardless of their size and business type, to develop a formalized management process with the objective of evaluating and improving their environmental and safety performance [7]. The GM/EMS program in Hong Kong is relatively new; not much information about its implementation results is available. The investigation reported in this paper was based on the eleven companies that had participated in the ISO 14000 EMS Pilot Program organized by the Hong Kong Productivity Council in 1995. One of the objectives of this investigation is to identify the critical factors/sub-factors, benefits and business activities that a company may have considered or targeted in the implementation of the GM/EMS program. Another objective is to discover what activities contributed to a successful GM/EMS program. The benefits that are recognized by these companies for the implementation of the program are also to be determined. 2. GM/EMS implementation factors and subfactors overview Although GM/EMS is still relatively new in Hong Kong, the idea itself has received a great deal of pub-
0959-6526/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved. PII: S 0 9 5 9 - 6 5 2 6 ( 0 0 ) 0 0 0 6 1 - 5
270
I.K. Hui et al. / Journal of Cleaner Production 9 (2001) 269–276
licity, particularly in the last few years. For instance, Pun et al. [2] and Lee [8] in their studies have identified the internal and external reasoning behind the adoption of GM/EMS by modern Hong Kong companies. These studies highlighted the needs and importance of having green manufacturing processes. Traditionally, industrialists are more concerned about the possible adverse effects of GM/EMS implementation on their profit margins. Goodman, an environmental specialist [9], emphasizes that the cost of implementing GM/EMS should be considered and analyzed so that department managers cannot use cost as an excuse for avoiding GM/EMS. He emphasizes that the adoption of GM/EMS can in fact provide a competitive edge and other benefits for a company. Following is a review of the five factors commonly being considered by an industry in the implementation of the GM/EMS. 2.1. Operation costs A properly designed GM/EMS can trigger procedural or technological changes, and as a result can reduce the operational costs and improve the value of a product. It allows a company to use raw materials, energy, or labor in a more effective way, and thereby reduces the business/operation costs [9]. Experience from Austria, Netherlands, Sweden, and the UK show that manufacturing environmentally-friendly products or services will not necessarily increase business/operation costs;, on the contrary, because of the better use of resources, a company’s manufacturing costs can be reduced [10]. These overall business/operation costs, including the direct and indirect costs, are generally measured by the following five sub-factors: Process Cost, Material Cost, Labor Cost, Production Overhead and Administrative Expenses.
already emphasized this issue. An enterprise may find it difficult to expand internationally without a valid quality certification [12]. In Hong Kong, environmental quality enhancement has been an important driving force during our move towards the new millennium (Chief Executive’s Policy Address, 1999) [13]. The ability to strengthen the competitive edge of a company through emphasis on environmental protection is conspicuous and eminent in Hong Kong. The amount of weight on this factor can be understood by investigating the following four sub-factors: Government Policy, Market Pressure, Customer Requirements and Investor Criteria. 2.4. Company performance EMS requires that product parts be designed and manufactured from an environmental perspective. To satisfy the GM/EMS requirements, engineers have to proactively improve or develop the business/operation processes in such a way that each manufacturing step is accomplished with the minimal environmental impact. Reactive response to environmental concerns is not encouraged in the GM/EMS [11]. The sub-factors commonly adopted to assess the company business/operation performance in relation to the implementation of the GM/EMS are: Operational Effectiveness, Sales Turnover, Customer Satisfaction, Employee Involvement, and Emergency Preparedness. 2.5. Environmental conservation The fundamental GM/EMS goal is to minimize environmental impact. To assess whether or not an organization can achieve this goal, the following five factors are commonly employed as indicators: Waste Reduction, Waste Reuse, Waste Recycle, Waste Treatment and Use of Sustainable Resources.
2.2. Company image With increasing public awareness of environmental issues, the GM/EMS certification of a company such as the ISO 14001 is appealing to customers and marketers [11]. The implementation of GM/EMS is being accepted as an image-builder and business strategy to strengthen the company’s competitive position [1,3]. The following three sub-factors are commonly used to assess the company’s image: Product Quality, Service Quality and Social Responsibility. 2.3. Market trend Whether GM/EMS would be a bonus to make the company to be inline with the market trend is another commonly considered factor. Although nowadays the adoption of the GM/EMS is usually voluntary, many suppliers and large-sized corporations worldwide have
3. GM/EMS implementation activities The elements in the GM/EMS program strictly require the processes to be planned, designed, implemented, and reviewed from an environmental protection perspective. By doing so, the key benefits attainable involve not only the enhancement of environmental quality, but also the following four business benefits, namely “Strengthened Customer Loyalty”, “Improved Profitability”, “Enhanced Company Image”, and “Stimulated Staff Morale”. To achieve these four benefits, different strategies or activities are adopted in different organizations. 4. Study methodology In an attempt to investigate the current GM/EMS considerations and practices in Hong Kong, an analysis
I.K. Hui et al. / Journal of Cleaner Production 9 (2001) 269–276
through a survey was carried out. This survey consists of two parts. The first part focuses on: (i) investigating the factors and benefits that may have been considered in the GM/EMS implementation; (ii) determining the relative significance of the GM/EMS implementation factors, sub-factors, and benefits; and (iii) evaluating the effectiveness of GM/EMS programs in attaining the targeted business benefits. The second part is to examine the GM/EMS implementation activities that the local companies would like to adopt in achieving the GM/EMS related benefits. With the concept of the Analytical Hierarchy Process (AHP) as a basis, a survey of the factors listed in all levels of Fig. 1 was conducted. The survey was based mainly on eleven medium-sized companies in Hong Kong. These companies can be categorized into two groups, manufacturing and consultancy. A total of twenty-nine questionnaires was distributed to these companies and all were returned. To determine the relative significance of the GM/EMS implementation factors and sub-factors, the respondents were asked to indicate their views based on a nine-point scale, as shown in Table 1. This scale allows the respondents to effectively discriminate among the relative significance of the factors, or activities involved [14]. Data obtained in each hierarchical level of Fig. 1 are transformed into normalized weightings by a software program called “Expert Choice” [15,16]. Detailed results and analysis of the survey are presented in the next section.
5. Results and analysis This section presents the results of the analysis. The first part reports the relative significance of the key fac-
Fig. 1.
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tors, sub-factors, benefits, and effectiveness of the GM/EMS program. The second part reports the activities that the eleven companies have adopted, or intend to adopt, to achieve the four business benefits. 5.1. GM/EMS implementation factors, sub-factors, and benefits Tables 2a–d present the results in four categories: the normalized weightings of all factors, sub-factors, benefits and effectiveness calculated based on the manufacturing companies, the consultants, and the combined manufacturing companies/consultants’ survey data. It was found that all results fall into the acceptable inconsistency level of 0.1, as recommended by Saaty [15,16]. 5.1.1. Normalized weightings from manufacturing companies With reference to the normalized weightings from the manufacturing companies in Table 2 (level 1), it can be seen that the factor Environmental Conservation has the largest value (0.277). When this value is compared with that of the Operation Costs, Market Trend, Company Image, and Company Performance, it is 4, 15, 1.3 and 1.1 times larger, respectively. This implies that the environmental protection consciousness of this group of companies is very high and prevailing. In the same column and one level down to (Table 2b), we interpret how the manufacturers feel about the issue of GM/EMS. It can be seen that the factors that considered to be most significant by the manufacturers, those with their weightings highlighted in the table, are the Process Cost, Social Responsibility, Customer Requirements, Customer Satisfaction and Use of Sus-
Model used for studying GM/EMS implementation.
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Table 1 Nine-point scale for use by respondents to the questionnaire in evaluating relative importance of different activitiesa Intensity of Importance
Definition
Explanation
1 3
Equal importance Weak importance of
5
Essential or strong important
7
Demonstrated importance
9
Absolute importance
2, 4, 6, 8
Intermediate values between the two adjacent judgments
Two activities contribute equally to the objective Experience and judgment slightly favor one activity over another Experience and judgment favor one activity over another An activity is strongly favored and its dominance is demonstrated in practice The evidence favoring one activity over another is of the highest possible order of affirmation —
a Reciprocals of above non zero: If activity i has one of the non- zero numbers assigned to it when compared with activity j, then j has the reciprocal value when compared with i.
tainable Resources. Their respective weightings are 0.250, 0.426, 0.395, 0.278 and 0.344. In the third level, Table 2c, the weightings of Strengthened Customer Loyalty is predominantly larger than the other three benefits, indicating that this is the major benefit achieved by manufacturing companies through the GM/EMS programs. This result also supports the previous two findings in level 2, under the factors of Market Trend and Company Performance, where customers’ feelings are considered as to be most important. The last level, Table 2d, evaluates the effectiveness of achieving the four benefits listed in level 3. The Effective and Non Effective weightings of the Strengthened Customer Loyalty, Improved Profitability, Enhanced Customer Image and Stimulated Staff Morale are all depicted in this table. If the weighting ratios of Effective/Non Effective for Strengthened Customer Loyalty, Improved Profitability, Enhanced Customer Image and Stimulated Staff Morale are calculated, it can be seen that they are all greater than one, and their respective values are 3.3, 5, 5.8 and 2.2. These results show that the manufacturing companies surveyed believe that all four benefits can be achieved from the implementation of the GM/EMS programs, and amongst the four benefits, Enhanced Company Image can be achieved most effectively. 5.1.2. Normalized weightings from consultants With reference to Table 2a, it can be seen that the consultants regard Company Image as the most important attribute for the implementation of GM/EMS, and it has a weighting of 0.356. Compared with manufacturers, consultants put more emphasis on the Company Image, than on Environmental Conservation because of the nature of their business. The outputs from the manufacturing companies are physical products, thus it is logical that the people responsible for the production are more concerned about the waste generation. Con-
versely, the consultant companies are to provide services and they are concerned more directly with customers’ feelings, hence the resulting Company Image. The weightings in the second level, Table 2b, show that the consultants consider Labor Cost, Social Responsibility, Customer Requirements, Employee Involvement and Waste Reduction as the most significant factors for the implementation of GM/EMS. These factors’ respective weightings are 0.520, 0,458, 0.314, 0.370 and 0.390. This gives a picture that differs from that of the manufacturers. The two factors which are commonly recognized as important by both groups of companies are the Social Responsibility and Customer Requirements. Nevertheless, the other three factors considered crucial in each group are totally different. Manufacturers are more concerned with process cost, customer satisfaction and use of sustainable resources, and the consultants are more concerned with labor cost, the team spirit of the employees and waste reduction. This clearly shows that, in the implementation of GM/EMS, different trades have different considerations. In the fourth level, Table 2d, the Effective and Non Effective weightings of Strengthened Customer Loyalty are equal. This indicates that consultants do not agree on whether GM/EMS would strengthen customer loyalty. The large Non Effective weighting (0.691) of the Stimulated Staff Morale shows that consultants lack confidence in the ability of GM/EMS programs to stimulate staff morale. This result, together with the findings in level 2 where Employee Involvement predominates Company Performance, can be interpreted to mean that team spirit in a consultancy is both crucial and difficult to achieve. For the other two benefits, Improved Profitability and Enhanced Company Image, their Effective weightings are much larger than their Non Effective weightings. This indicates that there is a general consensus among the consultantcies that, by the implementation of GM/EMS, profitability and the image of a company can be improved.
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Table 2
(a) Level 1: Normalized weightings of individual expert groups GM/EMS implementation factors
Manufacturing companies
Consultants
Combined judgment
Operation Costs Company Image Market Trend Company Performance Environmental Conservation
0.070 0.208 0.191 0.253 0.277
0.040 0.356 0.059 0.207 0.338
0.060 0.257 0.134 0.242 0.306
Manufacturing companies
Consultants
Combined judgment
0.250 0.179 0.214 0.161 0.196
0.099 0.234 0.520 0.074 0.072
0.197 0.210 0.308 0.134 0.151
0.255 0.318 0.426
0.262 0.280 0.458
0.258 0.305 0.437
0.231 0.172 0.395 0.202
0.184 0.303 0.314 0.199
0.218 0.210 0.368 0.205
0.106 0.175 0.278 0.215 0.226
0.096 0.057 0.258 0.370 0.220
0.115 0.126 0.257 0.264 0.238
0.304 0.112 0.172 0.068 0.344
0.390 0.292 0.206 0.050 0.062
0.339 0.169 0.197 0.066 0.229
(b) Level 2: Normalized weightings of individual expert groups GM/EMS implementation sub-factors Operation Costs: Process Cost Material Cost Labor Cost Production Overhead Administrative Expenses Company Image: Product Quality Service Quality Social Responsibility Market Trend: Government Policy Market Pressure Customer Requirements Investor Criteria Company Performance: Operational Effectiveness Sales Turnover Customer Satisfaction Employee Involvement Emergency Preparedness Environmental Conservation: Waste Reduction Waste Reuse Waste Recycle Waste Treatment Use of Sustainable Resources
(c) Level 3: Normalized weightings of individual expert groups Benefits
Manufacturing companies
Consultants
Combined judgment
Strengthened Customer Loyalty Improved Profitability Enhanced Company Image Stimulated Staff Morale
0.336 0.141 0.276 0.248
0.076 0.074 0.332 0.518
0.220 0.124 0.316 0.340 (continued on next page)
5.1.3. Normalized weightings from combined judgment To elaborate the findings further, the combined judgements of manufacturing companies/consultantcies are also exhibited in Table 2a–d. Based on the Combined Judgement weightings, it can be seen that Environmental Conservation, Labor Cost, Social Responsibility, Customer Requirements, Employee Involvement, and Waste Reduction are the main considerations for the implementation of GM/EMS programs in Hong Kong.
5.2. Business activities adopted in the GM/EMS program Different companies may select, or adopt, different business activities in the implementation of the GM/EMS program. Their selection and adoption may be based on the companies’ culture, background or customer requirements. This section will report the business activities that manufacturing and consultancy companies
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Table 2 (continued) (d) Level 4: Normalized weightings of individual expert groups Effectiveness Strengthened Customer Loyalty: Effective Non effective Improved Profitability: Effective Non effective Enhanced Company Image: Effective Non effective Stimulated Staff Morale: Effective Non effective
Manufacturing companies
Consultants
Combined judgment
0.770 0.230
0.500 0.500
0.691 0.309
0.833 0.167
0.691 0.309
0.793 0.207
0.853 0.147
0.750 0.250
0.823 0.177
0.691 0.309
0.309 0.691
0.567 0.433
in Hong Kong have adopted, or intend to adopt, in the GM/EMS program with the goal of achieving the four business benefits, Strengthened Customer Loyalty, Improved Profitability, Enhanced Company Image, and Stimulated Staff Morale. Table 3 summarizes the findings. The meanings of the “ticks” in the table are as follows: 앫 ✓✓✓✓ indicates that all companies in the survey selected this activity 앫 ✓✓✓ indicates that most of the companies in the survey selected this activity 앫 ✓✓ indicates that some companies in the survey selected this activity, and 앫 ✓ indicates that only a few companies in the survey selected this activity. Based on this table, the following perceptions are obtained: 앫 The goals of effective communication and better service to customers are adopted by most Hong Kong companies to secure and improve business relationships with customers. 앫 Companies in Hong Kong treat new business opportunities, expenditure minimization and the effective use of energy as effective means of improving profitability. 앫 Activities 10, 12, 15, 16, 17 and 18 in Table 3 are adopted by most of the companies as a means of improving their green image. 앫 Companies in Hong Kong emphasize activities that secure and improve internal and external relationships. Usually, training and activities that may improve internal communications are welcome.
6. Implications
From the results of the survey, the following information can be deduced and is presented as the “three C’s”: Customer Focus: Customer requirements and satisfaction are considered to be priorities in the manufacturing business; that is to say the GM/EMS programs must be tailored to meet the needs of those who use the products. Despite the fact that implementing a GM/EMS program is voluntary, using it as a means of pleasing customers is increasingly more common. Companies involved in the GM/EMS programs cultivate every possible means to communicate with their customers, for instance through newsletters, websites and environmental reports, to let their customers know that they are environmentally aware. Commitment: Employee involvement has been ranked as the most critical factor for quality company performance by consulting companies. This implies that most of the consultants consider that participation from employees is very important to the success of GM/EMS programs. As the nature of consultancies requires employees to work in teams, the need to emphasize team spirit and morale is obvious. Continuous Improvement: The amount of effort and money invested is directly related to the number of benefits anticipated. As exhibited in the results of the survey, the manufacturing and consulting companies target different benefits from GM/EMS programs. For instance, through the GM/EMS programs, the manufacturing companies would like to strengthen customers’ loyalty, while the consultancies would like to stimulate and improve staff morale. We conceive that, as long as the targeted benefits can be sustained, companies in Hong Kong are pleased to continue to invest in the GM/EMS programs.
13. 14. 15. 16. 17. 18.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
Search new business opportunity Minimize operations expenditure Improve energy efficiency Increase business investment Strengthen management commitment Enforce regular management review Maintain documented procedures Promote education and training Improve communication internally Improve communication externally Collaborate with government support Promote company’s 3R (Reduce, Reuse, and Recycle) image to public Produce environmental-friendly products/services Improve product quality Improve service quality Comply with the government regulations Promote safety working environment Enforce clean product practices
Activities
Table 3 Business activities considered or adopted in the GM/EMS program
✓ ✓ ✓
✓
✓ ✓
✓✓ ✓✓
✓ ✓✓ ✓✓✓ ✓ ✓ ✓✓
✓✓ ✓✓✓ ✓ ✓✓
✓ ✓ ✓ ✓✓ ✓
✓ ✓ ✓
✓
✓
✓ ✓✓ ✓
✓
✓✓ ✓✓ ✓
✓
✓
✓✓✓ ✓✓✓ ✓✓✓✓ ✓ ✓ ✓ ✓ ✓
Adopted
Considered
Considered
Adopted
To improve profitability
To strengthen customer loyalty
✓
✓
✓
✓
Considered
✓✓ ✓✓✓ ✓✓✓✓ ✓✓✓✓ ✓✓✓✓ ✓✓✓✓
✓✓ ✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓ ✓✓✓✓ ✓✓ ✓✓✓✓
Adopted
To enhance company image
✓
✓ ✓ ✓
✓
Considered
✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓
✓✓ ✓✓ ✓✓ ✓✓✓✓ ✓✓✓✓ ✓✓✓ ✓ ✓✓✓
✓ ✓✓ ✓✓
Adopted
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7. Conclusion This study reveals that different trades have different anticipations and approaches in the implementation of GM/EMS programs. The role of manufacturing companies is to convert materials into finished products, so to satisfy the environmental issue, they emphasize waste and energy reduction. They consider that, to be successful in business, a company must be able to reduce the process cost, to use resources effectively and to provide satisfaction to customers. The role of the consulting companies is to provide services and employees always work in teams. They consider that success in business depends very much on the harmony and relationship among the employees and this is fully reflected in the survey results. The element that mostly concerned this group of companies is their image with the public and customers. The findings also show that both the manufacturing and consulting companies feel that the implementation of GM/EMS has a positive effects on their business.
[2]
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Acknowledgements [12]
This project (no. 7100083) was financed by the City University of Hong Kong.
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