The Competitive Advantage of International Standards

Many of our current quality management and environmental management systems are reactive—that is, they have been developed in response to federal, state, or local regulations. We need to ask ourselves, is this a competitive way to work? When we are in this reactive mode, are we really listening to our customers? Are we able to seek out innovative means of getting the job done?

International standards force companies to look at their processes in a new light and to take a more active approach to management. For example, if a company wishes to pursue the new environmental standard, ISO 14000, its environmental management system's pollution control policy will have to be revamped to focus on prevention rather than command-and-control. As the company moves in that direction it will truly become more competitive, and will do so on a global basis.

First published in 1987 and revised in 1994, ISO 9000 is a series of standards and guidelines related to quality management and quality assurance. Because the standards are neither industry- nor product-specific, they may be used by either manufacturing or service industries. According to a December 1995 survey by Mobil Inc., more than 130,000 companies worldwide have been registered to ISO 9000.

While ISO 9000 does not specify precisely what kinds of quality processes must occur, or how, it does require that appropriate quality activities be defined, that processes be documented, and that proof be supplied that the company consistently adheres to both. ISO 9000 registration does not ensure a defect-free or quality product or service, but it does indicate that a basic quality system is in place, and that the registered organization is at least capable of providing its customers with quality products and services.

To become registered to ISO 9000, a company must hire an independent third party (known as a registrar) to conduct an on-site audit of its operations and verify that it is in compliance with the requirements of the standard. In the United States, it is recommended—though not required—that the registrar be accredited by the Registrar Accreditation Board (RAB).

The main strength of the ISO 9000 standards, and the reason they have been adopted worldwide, is that they assure customers who do business with registered firms that fundamental quality systems are in place within those organizations. For many international companies, ISO 9000 is seen as a key to doing business in global markets and improving competitiveness, particularly since for many regulated products in the European Union, ISO 9000 registration is a requirement.

The advantages of ISO 9000 registration, whether perceived or real, are nonetheless marked. For example, in a survey conducted by Dowling College of Long Island, about 41% of ISO 9000–registered companies in the New York City metropolitan area reported an increase in their European market share after registration.¹

In another survey, conducted by the newsletter Quality Systems Update, approximately 85% of companies claimed they had experienced external benefits as a result of registration to ISO 9000, and 95% noted internal benefits.² The most significant external benefits reported in the survey were:

Whereas ISO 9000 deals with quality management, ISO 14000 is designed to provide a structure for the management of environmental compliance. The ISO 14000 series comprises numerous individual generic standards, which may be broadly classified according to the following six categories: Environmental Management Systems (EMSs), Auditing, Labeling, Performance Evaluations, Life Cycle Assessment, and Environmental Aspects of Product Standards.

The most familiar standard in the 14000 series is ISO 14001, entitled "Environmental Management Systems, Specification with Guidance for Use." Before being published in its final form, 14001 was widely distributed and closely studied as a draft international standard. Organizations will be able to register only to this one standard; all other standards in the series are guidelines to help companies set up, audit, and improve their environmental management systems.

Like ISO 9000, ISO 14000 is neither industry- nor product-specific. The anticipated benefits of registration to this new international standard include:

Even before the environmental standards were published in their final form last spring, some companies had already begun to think about how ISO 14000 would fit into their existing systems. In a survey of companies with more than $1 billion in sales conducted by the Arthur D. Little consulting firm, 62% of respondents said that ISO 14000 certification would be essential to their future business success, while 70% felt that the most useful benefit of certification was as a demonstration of due diligence.³ Sixty-one percent thought it would offer companies a potential competitive advantage in certain markets; 48% feared that lack of certification might be a nontariff barrier; and 35% believed it might improve quality and reduce costs.

These survey results suggest a few of the ways in which international standards can help a company gain a competitive advantage. In encouraging companies to focus on continuous improvement and to develop a forward-thinking operating paradigm, the standards could have a revolutionary impact on the world's business community.

By implementing ISO 14000, any company can become truly competitive by:

Now that ISO 14000 has become a reality, another international standard—this one focusing on occupational health and safety (OHS) issues—is under consideration. Although it will likely be several years (at least) before such an OHS standard is published, a number of companies are already formulating their EMSs to include health and safety provisions in anticipation of international standards development by the International Organization for Standardization (ISO) as well as the American National Standards Institute (ANSI).

According to the chief executive of the RAB, an ANSI-sponsored public forum held in the spring of 1996 to solicit feedback on this topic found no great interest in an OHS standard among attendees. The consensus seemed to be that it was too soon. But consider this: there is a certain logic to the idea of integrating quality, environmental, and OHS management systems, and it is not likely that such integration will occur at some point in the future.

The future of business is closely tied to the development and implementation of international standards such as ISO 9000 and ISO 14000. A mutual commitment to environmental and quality management systems may be expected to serve as a prerequisite for many business relationships. Internally, companies must be aware that certain system efficiencies, as well as opportunities, may be realized through the adoption of voluntary quality and environmental system standards.

So what can companies do now to prepare for upcoming ISO 14000 registration? Many are conducting gap analyses—that is, evaluating their existing EMSs in relation to the requirements of the current ISO 14001 draft international standard. This enables them to develop road maps for achieving registration by effectively integrating ISO 14001 into their present environmental, quality, and corporate management systems. Of the companies that have already performed gap analyses, roughly 41% feel that their existing EMS is either close or very close to meeting the ISO 14001 standard, according to a survey carried out by ML Strategies Inc.⁴

A number of companies in almost every industry are adopting a wait-and-see attitude, holding off on seeking registration until such time as industry conditions demand it. As a result, the first of these companies to register will be those whose customers insist on it. But while these organizations delay taking action, many others will gain competitive advantage and get a jump on the future by registering before their customers require it.

1."New York Finds More Customer Satisfaction If Not Market Share," Quality Systems Update (December 1995): p 9.

2.The ISO 9000 Survey, 1996. Conducted by Quality Systems Update and copublished by Irwin Professional Publishing and Dun & Bradstreet Information Services (Fairfax, VA: January 1996).

3.Arthur D. Little survey of environmental, health, and safety managers, U.S. and Canada (Cambridge, MA: Arthur D. Little, 1995).

4.ISO 14001 Implementation Survey (Boston: ML Strategies, February 1996).