Cost and benefit model on implementing environmental management systems

Abstract

The recent establishment of ISO 14001 standard drew attention towards the implementing of Environmental Management Systems (EMS) in business organisations. As business organisations, they will have to take into account the basic financial objectives that they have to achieve, balancing these objectives with the environmental issues. An EMS helps to address these environmental issues in a systematic way. By establishing an EMS, it has been known to result in cost savings, better company image, improved employee motivation and other benefits. However, establishing an EMS requires certain investments by the respective companies. These investments may include costs of hiring consultants, time spent, administrative costs in establishing the EMS, capital investment in environmental projects and many other costs. It would be interesting to examine the cumulative cost and benefit curves of implementing an EMS. Our study is to examine the cumulative cost and benefit curve of implementing an EMS over time with the main aim of deriving a model cost and benefit curves for firms wishing to implement EMS. It will serve as a guide as to how the costs and benefits will behave during the pre-implementation, implementation and post-implementation stages of EMS. Furthermore, it indicates as to in which period the break even point is expected to occur. This study is based on the experiences of all the 5 companies in Singapore (Lianhe Zaobao, 7 Nov 1996) which had acquired ISO 14001 certification.