JULY 2018 UPDATE
The Final International Standard of the Environmental Management Systems Standard, ISO14001:2015, was published in September 2015. All requirements are now finalised and the rules allow for only editorial adjustments from now on. There are a number of changes to note between the Draft International Standard (DIS) and the final version. Of relevance to this original article below is the change in the definition of “risk” and the use of the prevalence of the word “opportunity”.
In the DIS, risk is defined as “the effect of uncertainty on objectives” but the final standard omits the words “on objectives” from the definition. This has the effect of broadening the concept of uncertainty to cover all types of issues, not just those associated with objectives.
The word “threat” was confusing and was removed from many clauses. Instead the final standard includes a new definition – “risks and opportunities”. These are potential adverse effects (threats) and potential beneficial effects (opportunities).
People usually think of risk as the exposure to danger, harm or loss or the potential for losing something of value. While it is essential that businesses identify and reduce the likelihood of these consequences, it is equally important to consider how they may affect the business as a whole. In the new ISO standards risk is defined as the effect of uncertainty on objectives and this is intrinsically linked to stakeholder expectations.
Objective – a result to be achieved
When you are driving a car an objective or result to be achieved is for you and your passengers to arrive at your destination safely and on time. Other stakeholders, your family and friends at the destination, expect that you will arrive fit and healthy within a reasonable timeframe. But there may be deviations from the expected, positive or negative, impacting on these objectives – typically the amount of traffic congestion, road conditions and weather events. These are the unknowns, uncertainties or what I call “U-Factors”. In the worst case scenario of non-arrival due to serious injury, U-Factors can be considered to be catastrophic.
Applying this thinking to business, all leaders have the overall objective of meeting stakeholder expectations and requirements. Non-fulfilment can represent threats such as loss of an important customer or revocation of the site licence to operate. Typical stakeholders include customers, supply chain partners, regulatory authorities, investors and the general community. Executives who are proactive and improvement-focussed will identify key stakeholders, actively engage with them and develop measurable objectives, programs and initiatives to meet their requirements and expectations. Examples of expectations that relate to the environment are the prevention of pollution, energy and resource efficiency, biodiversity conservation and the minimisation of nuisance impacts – noise, vibration, odour and dust.
Risk – the effect of uncertainty
There are many types of uncertainty or U-Factors. ISO14001:2015 defines uncertainty as the state, even partial, of deficiency or information related to, understanding or knowledge of, an event, its consequences and likelihood.
We are familiar with natural variations in the weather, human error and differences in individual perception. Other types of uncertainty include measurement uncertainty relating monitoring equipment, scientific uncertainty such as the GWP of certain gases and estimation uncertainty due to data handling errors. In GHG accounting an uncertainty assessment estimates the amount of uncertainty in a range of values eg. +/- 0.5.
To properly identify U-Factors one must cover the entire internal and external environment in a broad sense including the political/regulatory situation; economic/financial issues; social/community expectations and technological risks.
What are risks and opportunities?
The environmental aspects, programs, initiatives and risk control mechanisms that companies implement have associated “U-Factors”. I’ll illustrate this with the example of tree removal (a potential threat) and tree planting (a potential opportunity). In both these examples lets assume that the activities are legal, that is, they have been approved by the relevant regulatory authority.
Example 1 – Tree removal
Stormwater pollution is a potential adverse impact associated with the removal of vegetation. In the worst case scenario a significant pollution event may prevent the business from tendering for future lucrative construction projects due to their failure to meet the expectations of regulators (EPA, Department of Planning) and the Principal Contractor (customer). Under the approval conditions the company must, among other things, install and maintain sediment fences, diversion channels and retention basins. Nevertheless these devices may fail during a heavy rain event causing increased turbidity of the river. The ‘U-Factor” of heavy rain means that the company failed to realise the objective of meeting the needs of key stakeholders. The EMS therefore must address this through monitoring weather reports and predictions of heavy rain events.
Example 2 -Tree planting
The increase in storage of carbon dioxide in a forest sink is a beneficial impact providing an opportunity for companies wishing to sell the carbon abatement through recognised schemes such as the Carbon Farming Initiative in Australia or the UN Clean Development Mechanism (CDM) internationally. The likelihood of carbon removal is increased by conservation soil tillage and other sustainable land management practices. Nevertheless some or all of the trees may die through disease, fire or illegal logging resulting in “reversal”. That is, carbon dioxide is returned to the atmosphere at some future time. Any of these ‘U-Factors” could mean that the company fails to realise the objective of meeting the requirements of the UN, investor parties or the Clean Energy Regulator. The EMS therefore must address these U-Factors through constant monitoring of pests and disease and 100 year land tenure agreements.
How we can help
Update July 2018
Organisations holding ISO14001:2004 certification will have to meet the additional requirements of ISO14001:2015 by September 2018. Most Environmental Management Systems (EMS) lack a clear process for stakeholder needs identification, risk and opportunities assessment and the incorporation risk in decision making.
We’ve developed a set of simple tools to help you incorporate these new requirements into your existing management system. Feel free to send an email to me (Suzy) at firstname.lastname@example.org to find out more.