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The benefits of environmental management systems for small and medium enterprises

Sackey Bennin, of Defra’s Sustainable Business and Environmental Reporting team, describes the findings of a recent study commissioned by Defra into the benefits of environmental management systems for small and medium sized enterprises.

Defra’s recent evidence-based study into the benefits of environmental management systems for small and medium sized enterprises (SMEs) presents new evidence of the financial benefits of green business. Four companies involved in the study agreed to showcase their experiences through case studies, which have been published alongside the main report.

What is the study about and why is that significant?

The study provides new evidence of the financial benefits to SMEs of developing an accredited environmental management system (EMS) to assess and manage their environmental impacts, and help use resources more efficiently. This supports Defra’s view that embedding resource efficiency across business operations brings benefits to the whole organisation. While not statistically significant, the sample of 31 SMEs used in the study is still the largest group of small and medium sized enterprises to undergo a detailed investigation of its certified EMS in the UK.

Defra encourages all organisations to implement an environmental management system, which is a structured framework for managing an organisation’s significant environmental impacts. Similar to quality and safety management systems, an EMS can be a practical tool to help organisations manage, evaluate and improve their environmental performance in a verifiable way as well as meet their legal obligations concerning the environment.

Organisations can demonstrate their commitment to meeting their environmental responsibilities by getting their EMS certified to ISO 14001, BS 8555, or the EU Eco-Management Audit Scheme, all of which are standards accredited by the UK Accreditation Service (UKAS).

What are the key findings of the study?

Two thirds of businesses surveyed either increased sales, or expected to do so, since implementing an environmental management system.  This breaks down into just over a third of SMEs in the study attributing their new business sales to implementing a certified EMS, and quoting an average value of £14,961 per £1m turnover in the year following certification, suggesting a payback period of 1 month for the new business sales alone versus EMS costs. Another third confirmed that they expected new sales to be achieved as a result of their EMS, but could not put a value on it.

Commercial and marketing opportunities were by far the most important initial trigger for the SMEs’ decision to adopt an EMS, suggesting that this is more important than cost savings in converting SMEs to the benefits of EMSs.

Nevertheless, certified EMSs delivered cost savings for the majority of the 31 SMEs, with an annual average saving over 2 years of £4,875 per £m turnover. The costs of certifying and implementing the EMS were calculated at £1,362 per £m turnover (annual average over 2 years), suggesting a payback period of 3 months for the cost savings.

What was the reason for the study, and what problems did it seek to address?

Small and medium sized enterprises (SMEs) are a vital part of the local and national economy accounting for 99.9% of all enterprises in the UK, and providing 59.8% of all private sector jobs in 2009. Due to their sheer number (about 2.9 million), SMEs collectively have the potential to exert significant pressures on the environment, but face a number of obstacles to addressing these pressures including lack of resources, specific expertise, information and awareness. Despite the vast number of SMEs in the UK only a very small proportion hold a certified environmental management system (EMS).

The purpose of this study was to deliver robust evidence on the environmental and financial benefits of certified EMSs for SMEs by surveying selected SMEs from both manufacturing and service sectors. The subsequent aim was to use this evidence to increase SME uptake of accredited EMSs as a method of unlocking the latent environmental and financial savings that are believed to exist in the SME sector as a whole.

How was the study conducted, and how robust was it?

The study was conducted by WYG, a  global multi-disciplinary consultancy, whose researchers measured the effectiveness of EMS implementation by a sample of SMEs taken from the manufacturing and service sectors. They investigated the level of environmental and cost savings the SMEs had achieved, including any new business sales. The international EMS standard ISO 14001 dominated the study’s sample of 31 SMEs, which tallies with the market dominance of this standard in the UK. Six of these had used the BS 8555/Acorn approach to reach ISO 14001, while 3 had remained at a particular BS 8555/Acorn phase.

Numerous methods were used to recruit SMEs for the study, however the SMEs were not randomly selected and each chose to participate in the study so were therefore ‘self-selecting’. Therefore the results should be viewed as a series of case studies from which useful data can be drawn to raise awareness of the potential benefits of an accredited EMS for an SME

What other interesting findings came out of the study?

There was considerable variation in the savings seen. Not all SMEs in the study achieved savings but those SMEs that invested more in implementing the EMS upfront achieved the highest savings.

All but one of the SMEs in the study had received requests for information from customers about their EMS and over a half of the SMEs had in turn contacted their suppliers.

The study showed, the environmental issues that delivered the highest cumulative cost savings were energy, raw materials and business travel.  Waste to landfill contributed the highest average savings at 28 percent in year one and 43 percent in year two. Furthermore, 28 SMEs made an average cumulative saving in carbon dioxide equivalent (CO2e) of 38.9 tonnes per £m turnover per SME and that the carbon savings improved over time (Year 2 figures up 59% on Year 1 figures).

Environment Minister Richard Benyon underlined the link between environmental management and sustainable growth:

“All businesses should be planning green and growth together – thinking strategically about environmental management leads to more sales, bigger profits and a more attractive business to clients and investors.

“It’s one of Defra’s top priorities to build a strong and sustainable green economy that is resilient to climate change. With business, we are working to green and grow our entire economy, protecting our environment and creating new investment, technologies and opportunities for trade.”

What are the next steps?

One of the aims of the study was to use the evidence to increase SME uptake of accredited EMSs as a method of unlocking the latent environmental and financial savings that are believed to exist in the SME sector as a whole. As part of this, Defra and WYG are in the process of disseminating the results of the study as widely as possible to the SME community, through their trade associations, stakeholder organisations and media channels.

Further information

For more information about the study, please contact Sackey Bennin, Sustainable Business and Environmental Reporting, Defra on 0207 238 4653 or Sackey.EA.Bennin@defra.gsi.gov.uk

The research was commissioned by: Defra Sustainable Consumption & Production Evidence Base, 2010/11 – Ref Number EV0440

Full reference: Burr, P., Hillary, R., An Evidence-based Study into the Benefits of EMSs for SMEs, 2011, WYG Environment for the Department of Environment, Food & Rural Affairs (Defra)

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User comments

  1. Frank says:

    Is a Certified EMS still expected of government departments in 2012?

    • Sackey Bennin, Sustainable Business and Environmental Reporting, Defra says:

      To support the reporting requirements under the Greening Government Commitments, organisations (including government departments) are encouraged to publish information on whether they have implemented an EMS such as ISO14001, EMAS or BS8555. This can include information on whether an accredited certified EMS has been applied to their whole estate, or in selected buildings only, or plans for getting a certified EMS in the future. This could be in small but recognisable stages, and where appropriate may include the adoption of the IEMA ‘Acorn’ based on BS 8555 or equivalent staged approach.

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