Environmental Management Systems and SMEs Motivations, Opportunities and Barriers Related to EMAS and ISO 14001 Implementation * Vittorio Biondi, Marco Frey and Fabio Iraldo Institute for Energy and Environment Economics (IEFE), Bocconi University, Italy The need of small and medium-sized enterprises (SMEs) for reliable means of man- aging environmental issues has become increasingly felt over recent years. SMEs have in fact been forced to fulfil the expectations of an increasing number of demanding stakeholders: public opinion, consumers, customers, local communities, public author- ities, environmental NGOs, and so on. Environmental management systems have become a powerful and diffuse instrument, capable of supporting enterprises in man- aging, monitoring and effectively improving their environmental performance. Since their official launch, both the EU Eco-management and Audit Scheme (EMAS) and the ISO 14001 standard have been taken up by a wide range of companies with widely varying profiles. We propose an evaluation of the efficiency and effectiveness of these key management tools from SMEs’ point of view, by analysing the barriers and problems inhibiting participation in these schemes, as well as identifying related motivations and benefits. Vittorio Biond is a recarch fellow at he Instat for Energy and Environment Economics (FE), Bocconi Univeniy, Milan. Hei abo an exteral constant to 'DG XI working en co-ordination of EMAS plot projec sponsored by the European Commission. He lectures on envionment, health and safety ‘management at SDA Bocconi and on several pengradaue counes, [Marco Frey is asociate profesor in management atthe Univensty of Casino and Environment Economics (IEFE), Bocconi University, Milan, Hei alo an external consultant to DG XI working on the co-ordination of EC pilot projects on EMAS; "J 51 IEFE, Environmental Di ‘Vice-Director of the Environmental Division at che Inticte for Energy and Universita Commerc vialeFlippet 9, 20122 Mi esues emus (© European Union © Pilot projects © Cooperation © Networking (52 EFE, Environmental Division, Universita Commerciale. Boceoni, Viale Filippetg, 20122 Milan, Italy vitoria biondi@unt-boccont.t a B _wowieeuntboceonit and is alo resporsible for several projects promoted by the EC. He lectures on D__ maco.frey@uni-bocconi.it environment eh and fey management t SDA Bocconi and on svt nae ne Pomgrdaeconmes S Fabio Ino i rosach flow athe note fr Energy and Environment [""ZEMMH G5 \EFE, Environmental Dison, economics (IEF), Boeconi Univer, Min, ad PRD sen in Publ Pls ieee conmeeee Cesar for Environment, Land ad Cay Pating atte Inte for Architect, Wak Tapa aes ene ‘Venice. He is also an external consultant to DG X1 working on a project for the Viale Filippetti 9, 1-20122 Milan, Italy ‘Promotion an didsin ofthe EU Ecole He lcs on caaronent I ticireldo@uniboccontt ‘management at SDA Bocconi and on several postgraduate courses, @_woiefenibocconit * This papers the result of number of research projects carried out by TEFE-Bocconi in recent years in the field ofenvironmental management. Most of the dats information and recommendations contained inthis paper are based on our joint experience as Co-ordinators ofthe European Commision DG X1 pilot projects ‘on EMAS, a5 well as on our direct experience in supporting SMEs in EMS implementation within three pilot projects conducted by our research group and promoted, respectively, by EC DG Xtand EC DG XXII, ‘We would like to thank all the EC representatives with whom we usefully co-operated during this time. {A first version ofthis paper was presented at the United Nations Conference on Trade and Development (UNCTAD) Expert Meeting on Trade and Investment Impacts of Environmental Management Standards, held in Geneva, 29-31 October 1997. GMI 29 Spring 2000 55VIFTORIO BIONDI, MARCO FREY AND FABIO IRALDO 56 N INCREASING NUMBER OF SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs) ARE showing interest in environmental management systems (EMSs). Today, environmen- tal management standards are beginning to permeate among the vast constituency of ‘medium-sized, small and micro enterprises, which represent more than 80% of the total number of enterprises operating in Europe and are therefore the backbone of its industrial system, How are SMEs facing the new challenge of environmental manage- ment? What difficulties do they face and what benefits can they expect fom the implemen- tation of an EMS? This paper proposes some early answers to these questions. ‘Managing the environmental aspects of their activities according to a systemic and pre~ ventative approach implies, for most SMEs, a considerable effort in terms of human, financial and technical resources, regardless of their industrial or geographical context. Constraints in availability of resources could compromise SME participation in voluntary programmes, such as the European Eco-management and Audit Scheme (EMAS), as well as their adop- tion of the ISO 14001 standard. These voluntary schemes have already proved their efficacy in the field in bringing about significant improvement in environmental performance for many enterprises. However, in order to assess the success of ISO 14oot and EMAS, we also have to investigate their capacity for involving SMES. ‘The main focus of this paper is an attempt both to identify barriers for SMEs on an empirical basis and also to identify solutions to the barriers. Suggestions for effective tools, solutions, incentives and achievable benefits have now emerged from the first significant evidence ever gathered on EMS implementation by SMEs in the EU. The suggestions pro- posed in this paper are based on the results of a research programme evaluating the pilot projects instigated by the European Commission (EC) DG X1 to promote the diffusion of EMAS. This programme was carried out by the authors within the Istituto di Economia delle Fonti di Energia (1EFE), Bocconi University, Milan, from the beginning of 1995 to the end of 1997. The research involved 39 pilot projects, managed by more than 8o private and public actors as promoters or co-promoters (e.g. chambers of commerce, local agencies [consortia], universities, consultants) and involved 358 companies in various kinds of on-site activities aimed at supporting them in the implementation of an EMS according to EMAS requirements. ‘The research group carried out two main activities: > Co-ordinating the EMAS pilot projects by enabling contact and information exchange between them, in order to promote the sharing of experiences; creating networks involving the promoters and the instigators of the pilot projects and the ‘Commission, with the aim of enabling continuous interaction; collecting and sorting, the results of the completed pilot projects > Evaluating the results of the pilot projects on two different levels: on a general level by focusing on the most interesting issues and common problems from the various cases and identifying areas for further research by the Commission; on a specific level by conducting a breakdown analysis of the results according to industrial sector, size and resources (particularly with respect to small enterprises) or geographical region “The fandamental variation that exists among the cases analysed with respect to objectives, typologies of enterprises involved, methodology and operational approach made analysis all the more difficult. Such heterogeneity, in many instances, prevented the authors from ‘comparing situations on similar bases and from establishing consistent relations between economic and strategic factors and enterprise behaviour. On the other hand, the variety of projects is a strong positive aspect of the DG XI action programme, as it has enabled GMI 29 Spring 2000ENVIRONMENTAL MANAGEMENT SYSTEMS AND SMEs the discovery of new issues, and allowed examination of the ways in which the same aspects of EMS implementation have been tackled in different situations. ‘Asa part of the evaluation, a questionnaire was used, which was given to all 39 promoters of the pilot studies, asking questions about the methodologies and tools used by participating companies, as well as problems encountered in implementing an EMS. Some questions also related to what motives had prompted these companies to apply for EMAS, and to the benefits or competitive advantages that had emerged. Only 28 of the 39 returned the questionnaire, but with many of the others a telephone interview was carried out. Figures, 1 and 2 provide a sector and country breakdown of the 358 companies involved in the 39 projects (differentiating between those companies directly covered by the question- naire and those for which information was provided only by direct analysis or by examining the promoter’s report documentation). Barriers and constraints for SMEs ‘As we have indicated, SMEs are most certainly struggling against a lack of resources and are required to bridge a cultural gap as regards awareness of environmental matters in their organisations. At firs glance, the main problem for SMEs would seem to be that of finding the money needed to invest in improvement of environmental performance. There- fore, costs connected with the implementation of an EMS and with the adoption of a voluntary scheme could be regarded as a frst possible barrier for SMES. According to the empirical evidence collected by 1EFE-Bocconi within the pilot projects, financial costs are, however, not the most relevant barrier for the participating SMES. We Figure #: BREAKDOWN BY INDUSTRIAL SECTOR OF THE 358 COMPANIES. INVOLVED IN THE DG XI PILOT PROJECTS 80. 70 EB Data on the 28 questionnaires returned s Ts] [EE] bata on the remaining 1 projects (=39 in total) 850 3 = 2 ” w 330 PS GMI 29 Spring 2000 37