ISO 14001 Implementation Return on Investment (ROI)

[Randy]

OK boy's and girl's it's time for ol' Randy to ask something serious...

I'm needing to dig up information (actual numbers) on Return on Investment information from ISO 14001 implementation.

What I need is:
How much did it cost to implement?

How much has been saved?

Savings can be from anything i.e., cost reduction, waste reduction, recycling, labor reduction, energy savings, water savings etc... Any positive (+) cash flow from the system being implemented.

Also the time required to make a 100% Return on the Investment for the implementation of ISO 14001.

The cost should include the actual registrar's costs (don't name registrar), consulting costs (if any), training costs (this should include any awareness training for general employees) and any other costs.

This is the type of stuff I need to help finish my MBA and I'd appreciate any help. You can privately Email me any info.

For you folks that may be wanting to consult on 14K, this type of info is what interests the money guys, not protecting the Red-headed Wood Duck.

Thanks in advance

[Marc]

If you get enough responses I hope you post the results. That's a sticky one. I've seen this done after ISO9K and QS registrations - try to figure out how much you spent vs. how much you've saved and how you have 'improved'. The numbers are always suspect to me. How many people diverted hours internally is only one of many factors that are hard (and in many implementation impossible) to break out.

[Dean P.]

Bad news - at my previous company, we ended our three year auditing cycle with a loss of ~$25,000 (invested $50K into the system, documented savings of $25K). Please note that this is an example of what happens when you DO NOT have management committment. We entered the project with the belief that we would have adequate funds to make projects work and show real savings, but once we were registered, our management team changed their tune. We did what we could internally, but the auditors noticed right away that we had no support, thus, a system that was a cost center.

Good news - I have an EMS Launch Meeting today at my new company, which will be attended by all the Managers. Feedback so far is that they are committed to this system and they will provide me the resources required to make it work (this was a big question during my interview!!). I will keep you informed of my results, but there seems to be much room for savings right now, thus, a profit center.

[tomvehoski]

One additional cost/benefit you may want to look for is the waiving of fines by the EPA and/or state DEQ for 14001 as a supplemental environmental project. I have one client that was fined for reporting violations. They can reduce their fine 50% if they implement 14001 and install some recycling equipment which will generate savings down the road due to less hazardous waste. Sorry I don't have numbers on this one.

Tom

[Marc]

Does anyone else have any feedback on this? Surely more than a few here are doing the 14001 dance... What say ye?

[Sam]

The only cost we have invested in the program is the cost for the registrar.
Benefits; too early to tell. Although we did satisfy our customer (Ford) requirement to be registered by Dec. 2001.

[Randy]

Marc,

Apparently everyone is missing the boat here. If planning and implementation are taking place there is cost out the "Wazoo". There are man-hours involved (which is a cost boys and girls).

A training class may cost $1,000 to put on, but you still have to consider the cost in man-hours of the students to the organization. That's where you get the total. Start thinking outside the box.

If you want to make a proposal to implement a Capitol project (which as far as I'm concerned any management system is) you need to be able to supply all financial info, including intangibles such as man-hours.

I'm going to be submitting a proposal to a MAJOR tire manufacturor on 14K implementation, and I guarantee you I will do more than tell them they will be protecting fish and birds and the air. I'm going to show them dollars and cents of costs and savings to best possible degree I can, and try to provide some ROI info.

Env Safety & Quality professionals need to get away from the procedural crap and start talking in a language understood by Top management. Start broadening your horizons. Toss away the "Tun-opia (tunnel vision + myopia) syndrome" that plagues our career field.

[Marc]

This is the hardest thing to factually do. I know I don't have any data which is firm. I fully understand the overall implications of an implementation project. As you noted, you have 'man hour' issues internally. What I do in quotes is discuss the issue and give approximate 'manday' requirements and I try to make them 'worst case'. I also cite a range for my costs with the discussion of why I give a range. I also give them a powerpoint file which discusses implementation and consultant issues.

I bid a project last February which the company just 'closed on' today (!). It's a combo - 9001 plus 14001. In it I cited a certain number of 'internal mandays'. Well, they sent me their quality manual in prep for a gap analysis in 3 weeks. It was complete - more than complete. It reads like the old military QAPP's (Quality Assurance Program Plan) but an up-to-date version. I made an initial evaluation this evening and e-mailed it to them with revised 'manday' estimate (dramatically lowered).

But as far as Return On Investment I can't cite numbers. That is in large part because despite the figures I have seen (such as in magazine articles) which praise ISO 9K (I've seen little on ISO 14001 ROI) my experience has been that few of the companies which I have done implementations for have seen any significant savings and in many cases it was no less than a new recurring business expense which neither internal costs savings nor increased sales pay for. I explain this to clients at the very first meeting because it is the reality I know. I don't try to sell a company on implementation and I don't believe I could honestly say that there will be a ROI associated with their registration.

It may be that the majority of companies I have worked with were pretty well run to begin with. The ones I have worked with that were not well run really weren't interested in the first place - they were being forced to register by a customer. In such cases I don't expect to see a significant ROI as their effort was minimal anyway.

I will say that there are only a couple of companies I have worked with which, after the implementation, didn't 'admit' that the process its self was beneficial. But I've never seen any firm $$$ numbers.