2 May 2012
Implementation of an environmental management system (EMS) has helped SMEs to realise an average annual cost saving of £4,875 per £m of turnover.
According to new research undertaken by global multi-disciplinary consultancy, WYG, 27 of the 31 SMEs taking part in the study realised an average annual cost saving of £4,875 per £m turnover for the first two years of their EMS. In addition, just over a third of SMEs achieved new business sales, quoting an average value of £14,961 per £m turnover in the year following certification.
Working on behalf of the Department for Environment, Food and Rural Affairs (Defra), WYG’s researchers measured the effectiveness of EMS implementation for SMEs, from the manufacturing and service sectors, in terms of the level of achieved environmental and cost savings, and new business sales. The study used ISO 14001, BS 8555/Acorn and EMAS as qualifying standards, with 28 of the 31 SMEs holding ISO 14001 certification and the other three being registered to either phase three or phase five of BS 8555/Acorn. None were registered to EMAS for the qualifying period.
The average annual costs of implementing and certifying an EMS were calculated at £1,362 per £m turnover, suggesting a payback period of three-months for the cost savings alone and just one-month for the new business sales. This demonstrates that the costs were strongly outweighed by the benefits, with the savings alone quickly repaying the investment in the EMS.
Paul Burr, Project Manager for WYG said: “The UK’s 2.9 million SMEs are a vital part of the local and national economy accounting for 99.9 percent of all enterprises and providing 59.8 percent of all private sector jobs in 2009. Collectively, SMEs have the potential to exert significant pressures on the environment including the use of limited resources and generation of pollution and waste, but face a number of obstacles to addressing these pressures including lack of resources, specific expertise and awareness.”
Despite the vast number of SMEs in the UK, only a small proportion currently hold a certified EMS, partially due to a lack of awareness of the environmental and financial benefits. This study therefore aimed to assess whether SMEs benefit from EMS implementation and provide evidence that can be used to raise awareness. The results of this study provide evidence that SMEs who had implemented a formal EMS typically managed to reduce their environmental impact and reap the associated market benefits and cost savings.
According to the research, the environmental issues which delivered the highest cumulative cost savings were energy, raw materials and business travel, whilst in percentage terms, waste to landfill contributed the highest average savings at 28 percent in year one and 43 percent in year two. The study also showed that the SMEs made an average cumulative saving in carbon dioxide equivalent (CO2e) of 38.9 tonnes per £m turnover and that the main contributor to this was energy efficiency with 86 percent of the total.
Dr. Ruth Hillary, Project Director for WYG, said that: “Despite the potential for cost savings, the study’s qualitative findings confirmed that commercial and marketing opportunities were easily the most important initial trigger for an SME’s decision to implement an EMS. However, once the decision to implement an EMS had been made, different drivers to retain an EMS were identified, with legal compliance an important driver for manufacturing SMEs, and sales and marketing opportunities important drivers for service sector SMEs.”
One of the participants in the research was Warren Board Sales Ltd whose Operations Director, David Whitaker, stated that: “The EMS certification process proved to be a surprisingly positive experience for the company and ISO 14001 is one of the very few externally certified standards that the company would not hesitate to recommend to other organisations.”
Paul concluded: “For the first time we have a complete picture of SMEs’ experience with EMSs with quantitative data complementing qualitative findings on the drivers, benefits and barriers. Taken as a whole, the findings clearly suggest that EMSs can play an important part in helping to unlock the latent environmental and cost savings potential within the SME sector.”