ISO14001 certification and operating performance: A practice-based view

Abstract

Despite the growth of ISO 14001 a lot is still unknown about the impact of environmental management systems on firms' operating performance with much of the academic literature focusing on the financial, market and environmental benefits of ISO 14001. The research in this paper employs the practice-based view along with the event study methodology to determine whether firms can enhance operational efficiency through adopting replicable management practices prescribed under the ISO 14001 standard. This research involved examining performance for both certified and non-certified firms in the UK and Ireland. Whilst ISO 14001 was shown to have a positive and prolonged effect on certified firms' manufacturing cost efficiency, employee productivity, and return on assets, the sample firms' operating cycle displayed evidence of diminishing returns in the long-run. This study advances upon previous ISO 14001 research studies by applying the event study methodology and measuring the effect of environmental management system adoption through utilising operating performance metrics rather than relying on subjective measures of firm performance. Moreover, this research is important as few firms actually quantify the benefits of the ISO 14001 standard. However, the findings come with the caveat of diminishing returns for some operating indicators emphasising that firms can become overly efficient to the detriment of the initial operating speed gains.