Drawbacks Of Ems Standards Accounting Essay

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1.0 Introduction

The market and the consumers are becoming more and more environmentally conscious every day (Czap and Czap, 2010). It is not only an advantage for a company to be aware of its environmental impacts, but now it is a necessity to have policies in place to enforce proper environmental practices throughout the whole production process. The purpose of this paper is to highlight quality management tools, mostly FMEA, and how it can be integrated into an environmental management system.

2.0 Environmental Management System (EMS)

2.1 Short Overview

2.1.1 Description of EMS

Environmental Management System (EMS) is defined by the ISO 14001 standards as the part of management function that focuses on the day to day business practices of an organization keeping the proper implementation, achievement, review and maintenance of the environmental policy. This includes organization wide understanding of the environmental impacts that the product or the process will have, the systematic ways of reviewing the production process to reduce negative impact, to define clear roles for employees in terms to their contribution in reducing the negative impact and an organizational culture to enforce commitment to the environment (Alberti et al., 2000).

2.1.2 Purpose of EMS

The basic purpose behind any EMS is to implement a culture for continuous improvement in terms of environmental performance (Rezaee and Elam, 2000). And one of the most important elements behind an effective EMS is the ability of an organization to identify the environmental aspects of its products and the impact it has to the environment. Those with significant impact has to be monitored, controlled and if needed, improved (Lawrence et al, 2002). Management needs not only to communicate the importance of environmental concerns to the employee, but motivate them so that the drive for improvement comes from the very basic level (Poksinska et al, 2003).

2.2 EMS Standards â€" ISO 14001

Because of the popularity of the concept and practice of EMS, there are few sets standards that an organization can follow to make itself a certified practitioner of EMS. These standards are methodologies and documentations that an organization has to follow in regards to environmental factors (Alberti et al, 2000).One of the most popular EMS standards is ISO 14001. Its popularity is so widespread that by 2000, almost over 13,000 companies has applied for certification by ISO 14001 standards (Corbett and Pan, 2002). Its popularity is making it a pre-requisite for organizations to do business globally (Rezaee and Elam, 2000).

The principle behind ISO 14001 is to improve the environmental performance through identifying and managing the environmental impacts a product may have, in a systematic and well documented method (Poksinska et al, 2003). The standards involved consist of implementation of EMS, audits involving environmental issues, accurate environmental labelling, regular environmental performance evaluations and thorough life cycle assessments (Pheng and Tan, 2005). Given these standards, the benefits of following ISO 14001 ranges from cost savings, better management control, increased customer satisfaction, improved brand image as a result of implementing EMS and being clear of any regulatory and legislative problems (Lawrence et al, 2002).

2.3 Drawbacks of EMS standards

Despite the well recognized fact that implementation of EMS standards has improved environmental accountability to a large extent, there have been recurring issues. The fact that these standards are becoming a pre-requisite to do business is one of the drawbacks. Firms then only focus on the documentation to obtain the certification, and do not vigilantly apply the EMS concepts. Furthermore, they do not pass the regulation down to their suppliers (Poksinska et al, 2003). Another issue is that due to the documentation and audit required for obtaining certification of these standards, there are an abundance of data in regards to environmental aspects and impacts of products and services. But the problem is that there is not enough knowhow in the organizations and also proper guidelines on how the organizations can use this information. This drawback has been looked into further details in the last section of this paper (Corbett and Pan 2002). Finally, one more pressing issue is that R&D investments are taken to be the last step when implementing EMS (Albertini et al, 2000). But considering the fact that at the design phase of any product can there be most important changes made so as to reduce environmental impact, this has been another drawback of the present EMS standards.

2.4 Scopes of Integration of Quality Management Tools and Techniques

The quality management standards and the environmental management standards have recently gained in popularity. Given this fact, some organizations are making an attempt to integrate standards like ISO 9001 and ISO: 14001 to an integrated management system. The logic behind this is that they both have areas common to each other and they actually make a better and effective system together (Poksinska et al, 2003). It leads to considerable cost-saving as well. A combined integrated framework will help organizations achieve quality improvements as well as abide by the environmental requirements. Studies have shown that such integration is possible in areas such as employee awareness and training, documentations, preventive and corrective actions and audits. But in areas such as environmental management programs and control processes, organizations still face challenges (Pheng and Tan, 2005). Finally, it is suggested that total quality management tools can also be used in environmental aspects to come up with total quality environmental management (TQEM) (Corbett and Pan 2002).

3.0 Failure Mode and Effects Analysis

3.1 Short Overview

3.1.1 Concept

FMEA is a quality management tool which focuses on identifying the things that may go wrong in the product and process design and development stages. It not only looks into the possible defects but also analyses what may happen when such failures occur, and also how visible they are to the eyes of the quality inspector. Proper implementation of FMEA leads to reduction in defects, complaints, breakdowns, performance issues and safety concerns. In general, there are two types of FMEA, design and process. Design FMEA checks for failure possibilities at the design phase of the product, whereas process FMEA checks for non-compliances and failures to reach specified product features. The process of FMEA is done on interval basis, but to make it effective, it should be done in small intervals. It provides a systematic approach to document failure modes of any product or service (Aldridge and Dale, 2003). Also it can provide a rank of prioritised risks of failure modes and identifies the level of importance that should be given to an outcome (Franceschini and Galetto, 2001).

3.1.2 Procedure

The generic procedure followed by FMEA, according to Aldridge and Dale, 2003, is as following:

The risk priority number as mentioned in the diagram is a multiplication of the occurrence, detection and severity, each of which is measured in a qualitative scale from 1 to 10 (Aldridge and Dale, 2003).

3.2 Integration of FMEA with EMS

3.2.1 Scopes of integration

EMS systems have one of their drawbacks in the fact that the methodology they suggest are more qualitative than quantitative and so hard to measure and implement (Corbett and Pan, 2002); a fact where the usefulness of the use of FMEA comes into play. One characteristic of design FMEA is to look into possible failures at the start of the design phase, not after the design has been made, as changing that would incur higher costs (Aldridge and Dale, 2003). Eco-design of a product talks about integration of all the possible environmental impacts that the product can have in the earliest possible stages. In fact, there are guidelines in how to integrate environmental aspects in product design and development process, but there is a definite lack in a set of methodology to do so (Bovea and Perez-Belis, 2012). One reason behind the stress on making environmental designs up front is that in this stage the maximum modification is possible (Lindahl, 1999). In this aspect, FMEA can be integrated in the design for a product at its initial phase. Design FMEA looks into all the possible forms of failure and their causes that can occur before the design is finalized, and this helps to reduce the costs to any alterations (Teoh and Case, 2005).

Another logic that can be used to justify the integration of FMEA in the EMS is the fact that most products have different levels of impact to environment in different stages of their lifecycle. So redesigns and the risk priorities need to be set for all the lifecycle stages (Bovea and Perez-Belis, 2012). This is where process FMEA can be brought into action. Also, the fact that FMEA contains documented reports, it can be reused for the failure modes that repeat itself in the across the lifecycle of the product (Teoh and Case, 2005).

Finally, the implementation of EMS requires an organization wide approach to improving environmental performance. And this approach can be reinforced by the use of FMEA, as this tool utilises information that normally comes from the very bottom of the organization. Also, implementation of EMS in an organization requires several changes in the system. This is where FMEA can be used to prioritise these changes (Darnal and Edwards, 2006).

3.2.2 Integrated Tools

Recently, FMEA have been integrated into the EMS to help organizations operate in consideration to environmental aspects. These versions of FMEA are described as follows:

3.3 Drawbacks of the Integration

In general, the drawback with Environmental FMEAs is that they are done after the product has been designed, and this makes changes costly, and nullifies its benefits (Teoh and Case, 2005). Another problem, similar to EMS, is the general drawback of the use of FMEA is that many organizations use the tool only as a paperwork exercise (Aldridge and Dale, 2003). Other than these, problems arise in the situations that are not possible even for an environmental expert to know almost all the hazards that a product or process may pose (Bovea and Perez-Belis, 2012). As such, it is also difficult to estimate the level and depth of analysis that needs to be done (Lindahl, 1999).

4.0 Alternative techniques

4.1 Quality Function Deployment

QFD can be used instead or with design FMEA in the early stages of product planning. The QFD can be modified to represent the voice of the environment instead of the voice of the customer. The tools allow the environmental demands to be integrated and the environmental requirements instead of quality requirements to be deployed. The popular integrated versions of QFDs with EMS are GQFD, EQFD, House of Ecology, QFDE, LC-QFD and EC-QFD (Bovea and Perez-Belis, 2012). These are described in details below:

Source: Bovea, M.D. and Pérez-Belis, V. (2012) ‘A taxonomy of ecodesign tools for integrating environmental requirements into the product design process’, Journal of Cleaner Production, 20, pp. 61-71.

4.2 Statistical Process Control

After the design stage, during the product lifecycle stages, SPC can be used to act as a monitoring and control tool for the environmental impacts and hazards. There has been very little application of this tool. The environmental regulatory bodies can ask from organizations for emission and other SPCs to check on the environmental impacts. In this way, SPC can indicate failure modes in the process FMEA as well (Corbett and Pan 2002).

4.3 Mass Balance

Another methodology that can be used to complement the use of FMEA in an EMS is the Mass Balance approach. This approach focuses on the measurement of all the quantitative data possible in a process. So it can be sued both in FMEA to come up with occurrence ratings as well as in SPC to come up with precise control charts (Lawrence et al, 2002).

4.4 Environmental Audit

This tool can be applied to further ensure that the organization is making the proper effort to be environmentally sound. Trained and certified environmental auditors can be asked to audit the processes of the organization periodically, and the data from the audit can be used to analyze failure modes (Lawrence et al, 2002).

4.5 TRIZ with FMEA

Another tool that can be integrated with FMEA to make its integration with EMS more complete is the TRIZ framework. The methodology is simply that FMEA identifies a failure mode, and then TRIZ framework is used to look into the features that are causing the failure in detail, and fixing the specific features. This methodology goes into engineering detail (Yen and Chen 2005).

4.6 Alternative Calculations

It was mentioned in section 3.2.2 the weakness of EFMA is the additive function. Also the multiplicative function of the normal FMEA process can be seen as a weakness because it gives the same RPN for the different combination of occurrence, severity and detection. The following two sub-sections discuss this issue.

4.6.1 Calculation of EFMEA

As mentioned in section 3.2.2, the calculation of Environmental Priority Number is done by the addition of three factors:

Controlling Documents

Public Image

Environmental Consequences

The problem with the additive function of three variables is that since they are based on parametric scales, they will end up giving results having the same value even though the individual values for the variables are different (Berger, 1977). This scenario can be easily understood from the following table:

Controlling Documents

Public Image

Environmental Consequences

EPN Score

2

5

3

10

8

1

1

10

2

2

6

10

From the table, it can be easily seen that although the EPN scores of all the four scenarios are same, they have completely different implications in the practical life situations. But, given the fact that these may be three of the thousands of EPNs, the person performing the EFMEA may end up looking into the EPNs and ranking them. The situation gets further worse if we consider a simple change in the third scenario:

Controlling Documents

Public Image

Environmental Consequences

EPN Score

2

5

3

10

8

1

1

10

1

2

6

9

Now, based solely on the EPN number, the first two issues are more pressing than the last one. But it can easily be identified as a mistake here, because the table just shows the three numbers and their added sum. But, if this problem is ignored, then the FMEA will be a failure, because it will fail to identify the most important issues, because the third one has the highest impact to the environment. Thus, the above scenario shows the weakness of using an FMEA process which bases its calculation on the additive function.

The better alternative will be to analyse the multiplicative function, which will actually solve this problem. This is the reason that normal FMEA uses multiplicative function. If we calculate the EPN based by multiplying the three numbers, we get the following:

Controlling Documents

Public Image

Environmental Consequences

EPN Score

2

5

3

30

8

1

1

8

2

2

6

24

From the table it can be seen that right now the EPN numbers are different. So they will be given different importance. The second scenario, which has least effect to the environment, is handled with least concern. But yet again the scenario which has the highest impact to the environment is not given the major concern. It can be argued that the low score in the controlling document means that the problem will be identified when checking for regulations, but still the fact remains that if the fault is being ignored, it may end up having a very considerable effect on the environment. And this is where lies the problem of calculating EPN and RPN scores using the multiplication methods.

Another problem with both the additive and multiplicative EPN calculation can be seen in from the following table:

Controlling Documents

Public Image

Environmental Consequences

EPN Score Additive

EPN Score Multiplicative

3

3

3

9

27

3

3

4

10

36

3

3

5

11

45

3

4

3

10

36

3

5

3

11

45

4

3

3

10

36

5

3

3

11

45

3

4

4

11

48

3

4

5

12

60

3

5

4

12

60

4

3

4

11

48

4

3

5

12

60

5

3

4

12

60

4

4

3

11

48

4

5

3

12

60

5

4

3

12

60

4

5

5

14

100

5

4

5

14

100

5

5

4

14

100

5

5

5

15

125

4

5

4

13

80

4

4

5

13

80

5

4

4

13

80

The table above shows the scores of the criteria having different combinations of 3, 4 and 5. And based on this combination, both the additive EPN and the multiplicative EPN are calculated. The following two tables show how many times each score was repeated:

Scores

9

10

11

12

13

14

Additive Count

1

3

6

6

3

3

Scores

27

36

45

48

60

80

100

125

Multiplicative Count

1

3

3

3

6

3

3

1

These two tables show that the EPN scores for both the methods are repeated quite a lot of times. Given the fact that these combinations refer to different situations, the tables show the drawback of both the methods that they end up giving EPNs having the same value which means they will be given equal concern, although their contextual importance is not the same.

To overcome these difficulties, one way of calculating a more reliable EPN can be using indices, which is basically using the formula a^b^c. For the law of indices in application, a lot depends on the choice of the base number, because the base number is given the highest priority (Khalil, 1996). Given the context, environmental consequences can be decided to be given the highest priority among the three criteria, as those with impacts with higher consequences, although they may have less possibility to happen, can lead to catastrophic results not only for the customers or stakeholders, but even to future generations. Then the next factor that can be deemed important is the public image, as damaging this will lead to potential loss of market share and loss in profitability. As such, based on this understanding, the new formula proposed here would be:

Environmental consequence ^ Public Image ^ Controlling Documents

Based on this new formula, and using the same combination of values that were used to show the repetition weakness of the EPN calculation, the following table of counts can be obtained:

Scores

19683

262144

531441

1953125

14348907

16777216

43046721

2.44E+08

1.07E+09

3.49E+09

1.53E+11

1.1E+12

9.54E+13

1.13E+15

2.98E+17

Indices Count

1

1

2

1

2

2

1

2

2

2

1

2

2

1

1

As can be seen in comparison with the other two tables, this new method does have some repetitions, but the highest count of repetition is only two in comparison to six for the other two processes. This suggests that the proposed method of calculation of EPN will actually lead to less repetition. As such, given a practical scenario, there will be less confusion and mistakes of having more than two completely different scenarios getting confused to be having the same EPN and same environmental impact.

One thing to note is that EPN calculated will of very high value. In fact there will be some values that will be peaking much higher than the others. This may be distracting to the eye, but even this high number does have some importance in this method. Because of the way EPN is calculated, high values of EPN will be the result only when the criteria scores are high, especially when the score of environmental consequence is higher. This further stresses the fact that compared to a failure in a commercial product in design or function, which may harm the customer and will lead to lose of some brand reputation, any accidents or product failures that may have considerable environmental impacts will have much larger consequences, affecting the people who may not be at all involved with anything related to the product or the process.

As such, this section of the appendix actually shows the weaknesses of two popular methods of EPN calculations, and suggests a method which can counter for the weaknesses of the other two methods, and also provide both logical and conceptual reasoning behind its implications.

4.6.2 Alternative Calculation

The last section showed an alternate method of calculation of EPN number so that the failure modes having high environmental consequences are highlighted by large numbers and come to management attention more. In this section, the paper shows another method which involves statistical implementation of standard deviation.

In definition, mean of a data set is the average, the value which lies in the middle. And the standard deviation shows a degree to which the datasets values vary (Kvanli, Pavur and Guynes, 2000). Also, in terms of financial portfolio analysis, the standard deviation of stock or even a portfolio is considered to be the risk (Brealey, Allen and Myers, 2006). The method to be proposed here follows this similar logic.

First, based on the fact that FMEA has to be done by a team, a team of 20 employees is considered. The FMEA scoring of one failure mode done separately by twenty different people and their calculation of EPN is shown below:

Controlling Documents

Public Image

Environmental Consequences

EPN Score Additive

EPN Score Multiplicative

1

2

3

6

6

1

4

4

9

16

1

6

1

8

6

4

6

3

13

72

1

4

1

6

4

3

2

2

7

12

1

1

3

5

3

6

6

1

13

36

8

5

4

17

160

1

1

2

4

2

3

1

2

6

6

2

2

7

11

28

2

3

1

6

6

1

2

7

10

14

6

2

2

10

24

3

9

2

14

54

5

1

2

8

10

3

1

3

7

9

3

3

2

8

18

2

5

5

12

50

Average

9

26.8

Std Dev

3.43358

36.82476

This table is essentially a set of numbers generated randomly, but for the purpose of this section, the focus is more into developing a methodology rather than data collection accuracy. As such, these scores are assumed to be given by the twenty members of the team. The last two rows show the average additive and multiplicative EPN scores along with their standard deviation. The last section proved that the multiplicative way of calculating EPN is a better one, as it leads to lesser repetition. Now, if the decision maker considers the average EPN determined as one of the factors, and the standard deviation as another factor, then they will have two sources to make a decision on which processes need immediate attention and which do not. The objective will be to look at the high EPNs with a high standard deviation, which means that the failure mode will not only have a high negative to the environment, but that it also has a high risk. By high risk, it is implied that based on the check of the FMEA team, the EPN value varies a lot, so it may be low, but it also may be very high, which warns the decision maker about the high levels of negative impacts impact.

5.0 Conclusion

This paper introduces the concepts of environmental management systems and failure mode and effects analysis, and then looks into the possibilities of integrating them together for a better implementation of EMS. It shows the reasoning and the scope of the FMEA in EMS, and then goes on to introduce some of the integrated approaches that are in use. The paper also points out the drawbacks of such integration, and in the final section it discusses the use of other tools that can complement the integration of these tools together to have a proper set of tools for implementation of the EMS.

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