02 Nov 2017
IS0 14001 is an international standard that provides guidance for the establishment and monitoring of environmental management system (EMS) implementation. It is a tool that enables organizations to achieve and systematically control their objectives aimed at resolving the environmental problem. This study investigates the relationship between ISO 14000 Environmental Management System (ISO 14000 EMS) and the business performance of the Malaysian contractors. This study tries to empirically investigate how the implementation of ISO 14000 EMS significantly affects the improvement of the business performance of a company. Lastly the paper also reviews the major problems in the implementation of ISO 14000 EMS in the Malaysia construction industry.
Keywords: construction, environmental management, ISO 14000, business performance, Malaysia
For a developing country, development is necessary; especially the physical development and there are always the linkages between developments with economic and environment, rapid development will bring to the economic growth but in another hand it may affect to the environment. As an example, a housing development in reclamation waterfront will bring the income to shareholder, to the country and boost the economic growth but it may harm to the environment and impact to the future generation. As S.Abdullah (1993)  mention, the increase urbanization on the coastal cities adds more problem in term of water pollution, coastal erosion, wetland degradation, ecosystem disruption and fisheries problem.
Existing studies indicated that Malaysia is facing an increase in construction waste material generation, energy waste, decimation of water catchment, soil erosion, deforestation and landslides and destruction of endangered fauna and flora.  Thus, the sustainable approach has been rise up and it continues to be one of the important agendas of the government. Sustainable development been intro since 1970s and in the UN Stockholm Conference on the Human Environment, 1972 marked on how human activities were harming the environment and putting humans at risk. Sustainable become a popular and importance term in maintaining human needs while preserving the environment for future generation.
Over the last decade, the relationship between environmental and economic performance, and more recently the interaction between sustainability performance and business competitiveness, have received considerable attention in both theory and practice.Â The interactions between sustainable performance and business competitiveness have received considerable attention (Schaltegger, 2006)  . For the profit maximizing company it is a challenger because shareholder value thinking is often considered to clash with environmental management, for the profit-maximizing company, profit is the most importance value for them and the environmental performances require managerial time, capital investment and operating expenditure, and thus increase production cost then the revenues will also decrease.
With the growing economic relevance of environmental issues, the question arises as how environmental management influences shareholder value (GEMI, 2004)  and attract them in create a dynamic, sustainable, quality and is in balance with a healthy and safe environment, towards creating a prosperous and viable community . This study attempts to investigate the relationship between ISO 14000 Environmental Management System (ISO 14000 EMS) and the business performance of the Malaysian contractors. This study tries to empirically investigate how the implementation of ISO 14000 EMS significantly affects the improvement of the business performance of a company. Lastly the paper also reviews the major problems in the implementation of ISO 14000 EMS in the Malaysia construction industry.
The construction industry is one of the most important industries that contribute to the Malaysia economy, which over the last 20 years, the industry has been consistently contributing between 3%-5% of the national GCP (CIBD,2000) but compared with other industry, it also considered as a major contribution to environmental problem (UNEP, 2007)  . One of the corporate which established the main function of developing, improving and expanding the Malaysia construction, CIBD has identified the environment and the sustainable-related issues as one of the top issues of the construction industry (CIBD, 2000) 
Ofori, 1992  already mention that the concept of sustainable should be absorbed into construction to influence the manner in which a project shall be conducted to strike a balance between conserving the environment and maintaining prosperity in development but in Malaysia, the concept of sustainable development are still new for the developer and developerâ€™s awareness to the sustainability in construction also in the low level. There are many factors that impede an active implementation such as lack of knowledge, poor enforcement of legislation, education vs. experience, passive culture and also the cost. For all of the factors, cost is the main factor because it is the main priority of any development while sustainable construction will increase project cost (Nazirah, 2009). 
Sustainability in construction is still new in Malaysia and it may become a risk for developer when practice it. Shareholder will always look at the economic performance and what their consideration is about the profit, so how was the environment management for sustainability in construction can bring the benefit to the company and increase the shareholder value become a challenger and consider point for developer when involve in sustainable construction.
The construction industry is one of the most important industries that contribute to the Malaysia economy, it creates a multiplier effect to other industries, including manufacturing sector, financial and banking, agriculture, mining and professional services and has predicted by many as the catalyst of economic recovery and as a driver for the modernization of Malaysia. The industry has been consistently contributing between 3%-5% of the national GCP (CIBD, 2000). The industry provides job opportunities for 800,000 people who represented 8% of total workforce but compared with other industry  , however it also considered as a major contribution to environmental problem (UNEP, 2007)  .
However, one of the corporate which established the main function of developing, improving and expanding the Malaysia construction, CIBD has identified the environment and the sustainable-related issues as one of the top issues of the construction industry (CIBD, 2000)  . Construction industry is a major consumer of non-renewable resources and a massive producer of waste, and the operation of buildings is responsible for around half of the total CO2 emissions. Based on recent study in developed countries, 30-40% of natural resources were exploited by building industry, 50% of energy used for heating and cooling in buildings, almost 40% of world consumption of materials converts to built environment and 30% of energy use due to housing  .
There are huge amount of resources and energy consume in the building life-cycle, let alone the usage of resources and energy during the construction phase. It was recorded that more than six million tons of waste has been generated which quarter was produced in the Klang Valley alone, the most affluent area in Malaysia  and today, solid waste issue is one of the biggest environmental problems in Malaysia  .
Government Malaysia has realized that sustainable developments are becomes a critical issues in leap towards Vision 2020 and the issues of sustainable development has emerges as one of the top issues in the Eight Malaysia Plan (2001-2005). According to the plan, the government gave high priority to research and development as one of their strategy for sustainable development.  Besides that the housing in Malaysia also developing in line with the goal of Habitat Agenda as well as the principles of Agenda 21 which is sustainable construction.  Besides that, the body always taken proactive action to address the issue of sustainability construction is Construction Industry Development Board (CIDB) and CIDB had established a technical committee (TC9) to look into developing good environmental practices in the construction industry.
Six working groups have been established under the TC9 are  :
WG1: Development of strategic plan and programmers for good Environment Practices
WG2: Development of best practices on prevention and control of soil erosion and sedimentation in construction
WG3: Development of good environmental practices in storm water management
WG4: Development of accreditation scheme for EMS for contractor under D.I.Y Scheme and it is toward the contractorâ€™s certification to ISO 14001 on EMS
WG5: Developing guideline on EMS for construction industry (EMSCI). This guideline aims to assist contractors to be ISO 14001 certified and that look into the proper EMS in the construction industry
WG6: Development of training module on waste management at construction sites and guideline on good practices in construction waste management.
To make sure that sustainability in construction can successfully carry out in our country, the respond of the developer to this policy must be find out.; What are they actually respond to this policy, it is they willing to make changes or not and why they canâ€™t accept this changes. With the result, government can solve the problem directly and may support or incentives to prompt interest among construction players.
This study tries to answer the following research questions:
Are there any differences between ISO 14000 certified contractors and non-ISO 14000 certified contractors in terms of perceived business performance?
How can ISO 14000 EMS affect the perceived business performance of Malaysian contractor?
What is the major problem in implementation of ISO 14000 EMS?
The objective of the research:
To investigate whether there are differences between the ISO 14000 certified contractors and non-ISO 14000 certified contractors in term of perceived business performance.
To investigate whether there are significant relationship between the environment management and business performance.
To review the major problems in the implementation of ISO 14000 EMS in Malaysia construction industry.
The research method will in both qualitative and quantitative method. The primary date will be collected with distribution questionnaire and face to face interview. Distribution of questionnaire will be limited to the contractors that are registered in Malaysia with the CIDB. As of September 2012, there are 69,586 registered contractors in Malaysia in various grades of classification, Grade G01, G02, G03, G04, G05, G06 and G07. However, in this study only considers the largest grade, G07 contractors which there is unlimited amount of project can be undertaken.
The format of questionnaire will comprise into 4 sections:
Section A: Companiesâ€™ background information
Section B: Question regarding management responsibility in implementing environment management system in the company
Section C: Questions of the implementation of measurement, analysis and improvement in the company
Section D: Statement that reflect the perception of respondents on the business performance of their company
Chapter 1 â€“ Introduction
Introduce the research title and background. Problem statement and research objective are stated to make sure that the study that conducted is correct. Research scopes are listed in brief as to give the scope of study matters to be examined. Significance of the study also state in this chapter to tell about why it is so importance to conduct this study. Lastly is the organization research and briefly explain the research content of each chapter.
Chapter 2 â€“ Literature Review
This chapter will focus on the theory about the linkages between environment and economic performance. In this chapter also define the definition of the sustainable development, environment, economic performance, construction industry and other that related with this study. The existing situation of the study area also will be associated with the theory that stated, and this will help in further strengthening the arguments will be discussed in the next chapter.
Chapter 3â€“ Methodology
Chapter 3 is about the method of sampling, collect data and analysis. How the primary and secondary has been collected and after collect the data, what is the method that used to analyses the data.
Chapter 4 â€“ Data Analysis
In chapter 4, all the primary data from site inventory, questionnaire and interview also secondary data will be analyses detailed. The analysis will shown the respond and workability of the sustainable construction in Malaysia. The analysis can be the guidelines or references for the authorities or related industry to developing sustainable construction.
Chapter 5 â€“ Conclusion
The last chapter is about the research finding and the conclusion.
The objective of this study is to identify the relationship between the ISO 14000 Environmental Management System practices and business performance of contractors in Malaysia. Therefore, this chapter concentrates on the theoretical and empirical development of environmental management and ISO 14000 Environmental Management System practices that are related to construction industry and review of business performance measures.
The Malaysian construction industry is generally separated into two areas. One area is general construction, which comprises residential construction, non-residential construction and civil engineering construction. The second area is special trade works, which comprises activities of metal works, electrical works, painting works, carpentry, tiling and flooring works and glass works.
The construction industry could be described as a substantial economic driver for Malaysia. In 2011, the construction-related cluster expanded by 14.7% (2010: 18.9%) and was a major contributor to the growth of the domestic-oriented industries. (Department of statistic, Malaysia) A study conducted by Standards and Industrial Research Institute of Malaysia (SIRIM) for Department of Standards Malaysia (DSM) in 2002 cited that Malaysia is still catching up to international level of development in the areas of standards for building and construction materials, and building and civil engineering.
In the track of positioning strategic direction of Malaysian construction industry, CIDB has key out that quality and environment of Malaysian construction industry vision. CIDB targeted that by 2015, 90% of the total number of construction companies obtain ISO9001, ISO 14001, OSHMS, or OHSAS 18001 certification. As a strategic recommendation, CIDB further emphasis on quality management (ISO 9001), occupational safety and health, and environmental management (ISO 14001) that it considers to include them as criteria for contractorsâ€™ license renewal.
The ISO 14001 certification which is regard as an Environmental-friendly Practice is targeting especially in the projects which require Environmental Impact Assessment (EIA).  Construction activities are disturbing and generate environmental nuisance in the form of noise, dust, muddy runoffs, and etc. Construction activities are inherently disturbing to the environment. They generate environmental nuisance in the form of noise, dust, muddy runoffs, and improper disposal of chemical waste. Fragmentation within the industry characterize by numerous individual interests on a project-by-project basic inhibited proper consideration of issues such as environmental performance. 
Environment management is the process by which environmental health is regulated. Human beings cannot aspire to manage the environment itself, but it is the process of taking steps and behavior to have a positive effect on the environment.
Environmental management is therefore not the conservation of the environment solely for the environmentâ€™s sake, but rather the conservation of the environmental for humankindâ€™s sake. Environmental management involves the wise use of activity and resources to impact the world.
As with all management functions, effective management tools, standards and systems are required. An environmental management standard or system or protocol attempts to reduce environmental impact as measures by some objective criteria.
The ISO 14001 standard is the most widely used standard for environmental risk management and is closely aligned to the European Eco Management & Audit Scheme (EMES). 
ISO 14000 Environmental Management System (or ISO 14000 EMS) has been introduced in 1996 as the international environmental performance standard. ISO 14000 refers to the whole series of environmental management standards and ISO 14001 is the EMS standard.
ISO 14000 is a tool that enables organizations to achieve and systematically control their objectives aimed at resolving the environmental problems. It intends to provide and establish the basic systems which lead to effective environmental management for any organization and these systems can be integrated with other management requirement.
The primary objective of the ISO14001 EMS is to help companies to reduce their environmental impact though a systematic control system. Such system can also help reduce product costs and enhance the competitiveness of products in the international market, and thus increase the profit margin of the company.
The European Union has all of them in addition, the eco-management and audit regulations. ISO 14000 can be applied to any parties in the construction industry, such as clients, architects, main contractors, sub-contractors. However, construction companies may adopt the ISO 14001 EMS first, since the environmental effects significantly contributed by the construction processes. 
According to ISO, every ISO 14001 requirement must be built into every EMS. However, the size and complexity of EMS may vary quite a bit. The size and complexity of EMS, the extent of documentation, and the resources allocated to it will depend on many things.
According Praxiom Research Group Limited, 2004  , to meet each of the ISO 14001 requirements, depends on many factors, including:
The size of organization
The location of organization
The scope of organizationâ€™s EMS
The content of environmental policy
The nature of activities, products and services
The environmental impact of the environmental aspects
The legal and other requirements that must be met
The ISO 14000 family is designed to be implemented according to the Plan-Do-Check-Act (PDCA) cycle model underlying all ISO management systems standards.  This model make sure that environmental issues are systematically identified, controlled, and monitored, using this approach also help to ensure that performance of the EMS improves over time.
There are 17 key elements included in the ISO14001 EMS: (Figure 1 shows the approach of ISO 14001EMS)
Figure 1: Approach of ISO 14001 EMS
Source: ISO, 1996 
Environmental Policy- develops a statement of your organizationâ€™s commitment to the environment. Use this policy as a framework of planning and action
Environmental aspects- Identify environmental attributes of your products, activities and services. Determine those that could have significant impacts on the environment.
Legal and other requirements - Identify and ensure access to relevant laws and regulations (and other requirements to which your organization adheres).
Objectives and targets - Establish environmental goals for your organization, in line with your policy, environmental impacts, views of interested parties and other factors.
Environmental management program - Plan actions to achieve objectives and targets.
Structure and responsibility - Establish roles and responsibilities and provide resources.
Training, awareness and competence - Ensure that your employees are trained and capable of carrying out their environmental responsibilities.
Communication - Establish processes for internal and external communications on environmental management issues.
EMS documentation - Maintain information on your EMS and related documents.
Document control - Ensure effective management of procedures and other system documents.
Operational control - Identify, plan and manage your operations and activities in line with your policy, objectives and targets.
Emergency preparedness and response - Identify potential emergencies and develop procedures for preventing and responding to them.
Monitoring and measurement - Monitor key activities and track performance.
Nonconformance and corrective and preventive action - Identify and correct problems and prevent recurrences.
Records - Keep adequate records of EMS performance.
EMS audit - Periodically verify that your EMS is operating as intended.
Management review - Periodically review your EMS with an eye to continual improvement
The General approach of ISO 14001 EMS (Praxiom Research Group Limited, 2004)
Develop an environmental policy for organization. The policy should make it clear that the organization supports the establishment of an environmental management system. It should also make it clear that committed to protecting the environment and improving organizationâ€™s environmental performance.
Establish an EMS. An EMS is a network of interrelated elements. These elements include responsibilities, authorities, relationships, functions, processes, practices, procedures, and resources.
Identity the most significant aspects of organizationâ€™s past, present and future activities, products and services. An environmental aspect is any feature or characteristic of an activity, product, or service that has or could have an impact on the environment.
Clarify and respect the legal and other requirements that apply to organizationâ€™s environmental aspects. ISO 14001 wants to identify and meet these requirements.
Set environmental objectives and targets for all relevant functions and levels within organization. The objectives and targets should address significant environmental aspects and be consistent with environmental policy.
Create programs to implement environmental policy and achieve environmental objectives and targets. Make sure that the programs allocate responsibility for implementing environmental policy and achieving environmental objectives and target.
Evaluate EMS in order to identify opportunity for improvement. ISO 14001 require monitor, measure, audit, and review EMS in order to identify corrective and preventive actions and to improve overall environmental performance. It also expects to make sure that environmental policy is appropriate and being applied, and that environmental objectives and targets are being achieved.
EM in construction has received more and more attention since the early 1970s. The expression come out in the early 1970s after the U.S. National Environmental Policy ACT of 1969 was enacted (Warren 1973), and the concept of EM in construction was introduces in the late 1970s, when the role of environmental inspector was defined in the design and construction phases of projects to provide advice to construction engineers on all matters in EM (Spivey 1974a,b; Henningson 1978). There are two important standards, BS7750 (issued in 1992) and the ISO 14000 series (issued in1996) were promulgated to guide the construction industry from passive construction management on pollution reduction to active EMS for pollution prevention. 
In order to assess the extent of EMS implementation within the construction industry, several investigations have been conducted. Among the benefit of ISO 14000 are: (Tse, 2001) 
ISO 14000 EMS saves money as energy efficiency and waste minimization. For example, the recycling of material waste is a typical illustration of the financial benefits of ISO 14000 EMS in the construction industry.
ISO 14000 EMS encourages healthy competition. ISO 14000 can increase the competitive edge of a firm in a new market where registered companies are restricted.
ISO 14000 EMS reduces the amount of chemicals and hazardous waste on-site so that the number of employees injured by these substances will decrease.
ISO 14000 EMS reduces insurance premium due to the lower environmental liability and risk. For example, the World Bank takes the environmental performance of a company as one of the criterion for a bank loan.
Improve upper management attention. The process of obtaining ISO 14000 certification will give the upper management an increased and positive appreciation of environmental management.
The other importance contribution from the survey is the researchers have gained useful insights into the problems and difficulties of implementing the ISO 14000 series. For example, Tse (2001) has found 4 major obstacles in implementing the ISO 14000 series in Hong Kongâ€™s construction Industry, including lack of government pressure, lack of client requirement or supports, expensive implementation cost, and difficulties in managing the EMS with the current sub-contracting system. 
This section outlines the business performance measurement of contractors, and development of theoretical framework. Business performance measurement literature and the relationship between ISO 14000 EMS and business performance are reviewed.
The concept of business performance seems to be rather fuzzy and imprecise as it is abstract concept rather than a concrete concept (Otley, 1999)  . The existing literature reveals that there are two other terms associated with business performance, i.e." Performances" and "Organizational Performance".
Performance equals "achievement" (Merriam-Websterâ€™s Collegiate Dictionary, 1993)  . Also, the same dictionary defines performance as "how well it does or how successful it is". It seems that the term "performances" has a broader meaning with the involvement of many aspects of success including business performance as well.
Business performance measurement (BPM) has a variety of uses. Bititci, Carrie and Turner (2002)  list the following reasons companiesâ€™ measure business performance:
To monitor and control
To drive improvement
To maximize the effectiveness of the improvement effort
To achieve alignment with organizational goals and objectives
To reward and to discipline
Simmons (2000) looks  at business performance measurement as a tool to balance five major tensions within a firm:
Balancing profit, growth and control
Balancing short term results against long-term capabilities and growth opportunities
Balancing performance expectations of different constituencies
Balancing opportunities and attention
Balancing the motives of human behavior
In general, the measurement of business performance consists of two aspects which are financial aspect and non-financial aspect. (Otley, 1999)  According to Sun (2000)  , performance involves 5 dimensions, which are: (1) Product quality and customer satisfaction, (2) Productivity and profitability, (3) Market position and competitiveness, (4) Employee satisfaction, and (5) Environment protection. However when compare with other meaning and dimension of organizational performance, the environmental impact/ environment protection was not considered as a dimension of organizational performance. Table 1 shows the comparison of the meaning of organizational performance.
Table 1: Comparison of the Meaning of organizational performance
Ahmad, Montagno and Firenze (1998)
Market: market share and shale volume
Product: product quality, new and improved product introduction, productivity and ability to improve
Economies: annual earnings, profitability and return on investment
Employee: improvement in employee skills and employee flexibility
Product quality and customer satisfaction
Productivity and profitability
Market position and competitiveness
Employee satisfaction, and
Singels, Ruel and van de Water (2001)
Number of customers
Sources: Adapt from Ilias, 2006 
According to the Jabatan Kerja Raya (JKR), the contractorsâ€™ performances are base on 5 criteria: (1) Financial Standing, (2) Completion Period, (3) Quality of Experience, (4) Local Company, and (5) Companyâ€™s Workload. Table 2 shows the contractorsâ€™ performance evaluation criteria by JKR.
Table 2: Contractorsâ€™ Performance Evaluation Criteria
1. Financial standing
Expected receivable payments
2. Completion period
The projectâ€™s completion period as compared to the consultantâ€™s estimate
3. Quality of experience
Number of years in the industry
Number of projects awarded as compared to experiences in the industry
Average of awarded contract in one year
Value of projects in 3 years as compared to the proposed project
4. Local contractor
The locality of the contractor
5. Companyâ€™s workload
Number of the current projects
Cost of current projects
Percentage of current projects
Source: Pekeliling JKR (2000)
While some have argued that there is no reason why the two should be connected, tens of studies have been conducted by a number of researchers since the 1970s to establish whether the relationship is positive or negative. The possible positive and negative economic outcomes that have been suggested to result from environmental performance improvement are presented. (L. Lankoski, 2000)  Table 3 shows the types of suggested links between environmental management and economic performance.
Table 3: Types of suggested links between environmental management and economic performance
EMS requires managerial time, capital investment and operating expenditure, and thus increases production costs.
EMS harms productivity, thus requiring more inputs to produce the desired amount of outputs.
EMS adversely affects product quality, thus reducing sales revenue.
EMS results in increased efficiency, thus reducing production costs.
EMS improves relations with environmental authorities, thus reducing regulatory costs.
EMS reduces risk and thus the costs of capital and insurance.
EMS improves relations with the employees and the local community, thus reducing related costs.
EMS improve general company image, thus increasing revenue.
EMS allows the company to charge a price premium or increase market share in environmental conscious markets.
EMS results in higher product value for customers, thus increasing revenue.
EMS opens opportunities in the market for environmental goods and services.
Source: L. Lankoski, 2000
The concept of theoretical framework illustrates the relationship between the variables in this study (Sekaran, 2000).  The development of the theoretical framework is done after reviews of literature on the environmental management theories and concept and empirical research on environmental management and business performance. Figure 2 illustrates the theoretical relationship of variable in the study. The ISO 140001 EMS as independent variable and the dependent variable is business performance.
Figure 2: Theoretical Framework of the study
Source: Adapt Schaltegger and Figge, 2000 
It is clear now that relationship between the variables, environmental issues can be relevant for all the main management decision in the area off investments, operations, financing and strategy. At a very basic level, management decisions are targeted at the levers of economic success such as sales price, sales, expenses and risk. These economic levers influence competitiveness and the value drivers of shareholder value simultaneously.
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