Sustainability, Business Management and the new generation ISO Management System Standards 

By Koos Gouws 

The appearance of the new generation ISO 9001 and ISO 14001 in 2015 caused a lot of controversy, because of new concepts that were introduced, as well as the fact that they are aimed at the highest levels of management in the organization. The word “sustainability” and the phrase “sustainable development” appear on clause 0.1 of the new standards. Other new concepts appeared in clause 4, where we are introduced to context of the organization, as well as the inclusion of the needs and expectations of interested parties. Quality practitioners suddenly encountered the word “risk” in the ISO 9001 standard. Some said that the new requirements signal the death of ISO 9001, while others said that it will kill smaller businesses. Further confusion was caused by the statement in clause 4.1, Understanding the organization and its context, that the results could affect the strategic planning of the organization.

It is my opinion that the changes to the standards, particularly to ISO 9001, are going to have a profound positive effect, especially on smaller businesses. The standard addresses those things that smaller businesses are often weak at, such as business planning, vision casting, goal setting, identifying and managing risks and opportunities, etc. I believe that it will help business owners to engage with context, strategic planning, tactical planning an to deal with risks and opportunities. If we consider the fact that the same requirements are in ISO 14001 as well, we can see that it will help us to start developing an integrated management system that will include both environmental and business issues at the highest levels of management, and which will included in the strategic planning and direction of the organization. For this reason I am really looking forward to the publication of the new ISO 45001 standard, which will be similar, but the focus will be on health and safety.

There are other standards and codes that were published that focuses, or at leastr includes sustainability as well.
We have:
                                    • SA 8000: Social accountability standard
                                    • King IV report on corporate governance
                                    • UNEP environmental, social and economic sustainability framework
                                    • International integrated reporting framework (<IR> framework)
                                    • Etc
How do these documents relate to the ISO standards? Are they compatible?

Let us 1st look at some definitions:
                                    • Sustainability: The ability to continue a defined behaviour indefinitely
                                    • Environmental sustainability: The ability to maintain rates of renewable resource harvest, pollution creation, and non-renewable resource depletion that can be continued indefinitely
                                    • Economic sustainability: The ability to support a defined level of economic production indefinitely
                                    • Social sustainability: The ability of a social system, such as a country, to function ata defined level of social well-being indefinitely

The new standards roughly correspond with the 3 concepts of sustainability (If ISO 45001 is included in the equation). ISO 9001 deals with economic sustainability, ISO 14001 with environmental sustainability (with a few social undertones), and ISO 45001 will relate to social sustainability. The main reason for this statement is the wording in the new clause 4.1: “The organization shall determine external and internal issues that are relevant to its purpose and its strategic direction and that affect its ability to achieve the intended results of its quality / environmental management system”. I can see a clear link to sustainability here. 

When we determine the context of the organization, we look at internal as well as external issues. Context basically describes the environment in which the organization is operating. It looks at global issues, as well as local and internal issues. When we go through this exercise, we use the available tools and focus on the focal area of each of the standards, in other words, for ISO 9001 we focus on economic and business issues, while for 14001 we focus on environmental issues. Tools and methodologies that are recommended by Harvard, include, for instance, PESTLE analysis.
It focuses on the external environment, looking at the following issues:
                                    • Political issues
                                    • Economic issues
                                    • Socio-cultural issues
                                    • Technological issues
                                    • Legal issues
                                    • Environmental issues

Other tools and methodologies will move the focus to other areas in the external environment (e.g. Porter’s 5 Forces Framework) and the internal environment (e.g. Resource audit and MOST analysis).
Clearly there is a definite link to sustainability from the triple concept point of view.
We use the standards to design and implement management systems that will enhance sustainability and sustainable development. The accountability for the success or failure of these management systems have been clearly escalated to top management and leadership in the organization. The focus is on determining context, identify risks and opportunities, developing strategy, and then to develop the tactical planning (day-to-day operations that will deliver on strategic planning).

King IV defines sustainable development as follows:
“Development that meets the needs of the present without compromising the ability of future generations to meet their needs”. It then goes on to say that that this means that organizations are intentionally interacting with, and respond to, the opportunities and challenges (risks) presented by the dynamic system of the triple concept of sustainability context in which the organization operates.

King IV also refers to the 6 capitals which it defines as the stocks of value on which the organization depends for its success, as inputs into its business model, and which are increased, decreased or transformed through its business activities and outputs. The ISO standards focus on the business activities of the organization within the context of the organization, which in turn helps us to identify the risks and opportunities of the organization.
The 6 capitals are:
                                    • Financial capitals
                                    • Manufactured capitals
                                    • Intellectual capitals
                                    • Human capitals
                                    • Social and relationship capitals
                                    • Natural capitals.

I am of the opinion that the ISO standards are connecting with business management codes, standards and practices like never before. The standards are encouraging the triple concept of sustainability, without which the organization cannot maintain itself in the long term. I also believe that integrated management systems will be essential for the effective and efficient management of the organization.

The King IV report is now available

The King IV report has come into force during April 2017 and replaces King III. The report now has only 17 principles (as opposed to 75 in King III) and is much more inclusive of entities other than big corporates. Sectoral descriptions for application is now included.

Look out for more on King IV in the near future!

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Cape Town. South Africa

Email: Koos
Phone: +27 (0) 83 306 1757

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