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Standards are boring? Think twice...

Standards are usually seen as constraints rather than dynamic tools to disseminate innovation and best practices and facilitate market access. There is a lot of confusion between regulation and standards. With the globalization of trade and of many other issues, the need for and the production of international standards has significantly increased. They should form an integral part of the overall management and strategies of companies and organizations. If you ignore it, you could well be out of the game...

June 2010
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Executive Summary

Standards: basic tools for technology and business

Standards, as referred to in this article, are documents, based on various degrees of consensus (industry wide, national, regional or international), which lay out rules, practices, metrics or conventions used in technology, trade and society at large. From proprietary standards, exploited by a company or a consortium, based on patented technologies, to fully fledged formal international, consensus-based standards such as those produced by ISO, the International Organization for Standardization, the spectrum is broad. It is also broad with respect to the issues addressed: terms and definitions, such as: the SI units of measurement or graphical symbols), codes and nomenclatures (cf. the ISO country codes or the ISBN numbering for books or the ISIN coding for financial instruments), data formatting and exchange (such as PDF, STEP standards for product model data used in industrial automation or the MPEG standards for video recording), dimensions (think of paper formats or containers), physical interoperability (such as screw threads or pallets), measurement and test methods (e.g. crash tests for cars), product and service quality and safety requirements, management standards (cf. the ISO 9000 and 14000 series or IASB accountancy standards), conformity assessment practices (e.g. ISO 17021 on requirements for systems certification bodies) or, more recently standards addressing social responsibility (cf. the upcoming ISO 26000).

The scope of standards cross cuts all areas of economic, environmental and social issues. They impact directly the dissemination of innovation, trade relations as well as consumer, patient, workers and environmental protection. Without standards for information coding and exchange, wireless connections or security protection, the World Wide Web could not function. Together with intellectual property and patent issues, standards are basic tools to be considered in any business venture to support competitiveness, market access and sustainability.

A major and global economic and societal impact

The globalisation of trade, and of many other issues such as climate change, tensions on energy and natural resources, information technologies, security or health, has significantly increased the need for and production of international standards based on consensus amongst countries and stakeholders, involving, as relevant, industry, public authorities and the civil society. The three apex international standards organizations, all based in Geneva, IEC, ISO and ITU, propose a total of more than 40 000 standards and have over 7 000 work items in progress. Increasing interest has been taken to qualify and quantify the economic and social benefits of standards. A study in the UK by the Department of Industry and BSI has estimated that standards make a contribution of GBP 2.5 billion to the UK economy and attributes to standards 13% of the labour productivity improvement in recent years. DIN, the German member of ISO, has determined that the benefits of standards represent 1% of the gross domestic product. Similar studies in the USA, Australia or Canada corroborate these findings. In a study commissioned by ISO to Roland Berger and released in 2010, the estimation of benefits of standards for the automobile industry alone is in the range of € 25 to 50 billion per year.

An opaque and inextricable jungle?

Seen from the outside, and even often from a managerial standpoint, the development and content of standards appear as an opaque world and a jungle of acronyms (e.g. in addition to those already given above and amongst hundreds: ASTM, IEEE, UL, ASME, API, CEN, CENELEC, ETSI, AFNOR, IETF, …); and, for that matter, a jungle reserved for specialists and possibly at the origin of technical and organisational constraints, rather than dynamic tools for disseminating innovation and accessing new markets. It would however be a serious mistake to neglect their strategic macro and micro-economic interest. Indeed, they are present in all major industries.

In addition to being already ubiquitous in all basic and manufacturing industries, themselves adjusting to pervasive digital technologies and environmental constraints, major developments are taking place in international standardization to pave the way to emerging industries as diverse as nano- and bio-technologies, information and communication technologies, health informatics, electrical and hybrid vehicles, intelligent transport systems, intelligent and sustainable building design and operation, smart grids or energy efficient technologies and renewable energies. Standards development to support sustainable agro-food production and its value chain are thriving (organic agriculture, crops management, sustainable forest management or fishing, bio fuels, carbon footprint…).

The service sector has been a new frontier for a decade, as international trade thereof increases. Globalisation of service standards started with the boom of IT services at the turn of this century with the Y2K syndrome, requiring the spelling out of requirements and performance metrics, and is further boosted by the current urge to secure ethical financial practices, by combining regulations and good practice standards. ISO has embarked in new areas such as tourism, water distribution and sewage, financial services, IT services or health services. Global supply chains benefit from international standards optimising inter-modal transportation (e.g. containers), security (e.g.: biometric identification, RFID, electronic seals) or traceability management.

Complementarity between regulations and standards: an instrument of good public governance

There is often confusion between regulation and (consensus based) standards. But Europe has been a precursor to clarify this relationship, with the implementation since the 80’s of the “new approach” to technical harmonization of product regulations, in order to support the fluidity of the internal market while abiding to international commitments. Indeed, on one hand Europe, being a major exporter, cannot create a “fortress Europe” by erecting unjustified technical barriers to trade. But on the other hand, a harmonized level of safety, environmental integrity and health protection is needed to meet the aspiration to a better quality of life for the European people. All the members of the EU and EFTA are members of the World Trade Organization and therefore signatories of its Agreement on Technical Barriers to Trade, which addresses specifically the issue of regulations and standards. This agreement encourages the use of open and consensus based international standards as tools for designing and implementing regulations. It also encourages the international acceptance of test results and certificates, based on good conformity assessment practices for which ISO has progressively developed a comprehensive toolbox of international standards. Technical harmonization in the EU and EFTA has therefore been built on the concept that product regulations should be limited to “essential requirements”, justified by safety, environmental or health considerations, and leave it to consensus based, harmonized standards to spell out the technicalities.

This has boosted the production of European standards (“ENs”), both in the regulated and in the non regulated sphere, produced by the three European Standards Organizations: CENCENELEC and ETSI, which, together, have more than 25 000 standards in their collections. A significant proportion of these standards are European adoptions of international standards. Agreements are in place with the corresponding international standards organizations to secure that standards development and approval are well coordinated. The EU Commission is considering proposing to expand this “new approach” to the service sector, based, i.a., on the recommendations of a group of high level experts on a “vision 2020” for European standardisation (see bibliography) finalized in January 2010.

This practice of referencing standards in regulations is an instrument of good public governance. Projected at the international level, it can be seen as an efficient mechanism to tackle global challenges, requiring a multi-stakeholder approach. Indeed the regulator is in its role in fixing the levels of safety, environmental or health protection in terms of objectives. The economic actors collaborate with the public authorities in designing the appropriate implementation standards, in a way that allows industry, the academia and other relevant social actors to provide an orderly input, using a process that enables consensus building and regular updating, in particular to take stock of the evolutions of requirements and technology. At the international level, this consensus is achieved in ISO and IEC by combining national representation and liaisons with regional and international governmental and stakeholder organizations, giving to their standards a high level of acceptance and take up.

With the assistance of IT tools and the Internet to organize the collective work and voting, delays for the production of international standards have been significantly reduced, now standing on the average below 3 years, and often much less. This eventually leads to a more effective implementation of public policies, by allowing those subject to regulations to be involved actively in designing the technical modalities and providing standards applicable in real life. It is therefore not surprising that ISO, with its multi-sector scope, has increased its collaboration with international governmental organizations such as the UN and its specialized agencies involved in harmonizing technical regulations, WTO, for which the development of international consensus-based standards is key for facilitating global trade or OECD, i.e. for connecting R&D policies and standardization. ISO alone has formal liaisons with over 700 governmental and private international and regional organizations.

The standardization scene is now global

Clearly, the trend is towards standardization work being conducted at the world level. It is significant that the yearly production of ISO standards has increased by 30% since 2003, amounting to approx. 100 new or revised standards published each month. Influencing this work is a major strategic venture and requires both technical expertise and diplomacy, as illustrated by the current manoeuvres around the standards needed to deploy electric vehicles or to support the advent of smart grids for electricity distribution and energy optimisation. ISO, IEC, the big US sector-based standards organizations (IEEE, SAE, UL), but also China and Japan, are some of the major actors of the show, with huge industrial stakes.

It is also emblematic that the big emerging economies have taken an increasing interest in international standardisation, with China and Brazil in the forefront, as their affluence and potential for leadership in fostering innovation increase and as their own multinational companies gain weight on the world scene. They wish to become part of the “standards setters”, not just “standards takers”. Considering the growing contribution of these countries to the world economy, this is good news and should be encouraged, lest they should go done a protectionist track. China is now one of the six permanent members of ISO and has gone in 5 years from holding 1% to having 5% of the secretariats of its technical committees, covering major sectors such as ships and marine technologies or textiles, in partnership with Germany and Japan respectively: this is already halfway to the current positions held by France, Japan or the UK. Brazil is in the lead for food products, bio fuels, energy management and social responsibility, partnering in twinning arrangements with respectively France, the USA and Sweden.

More generally, standards are seen as tools for building trade capacity, transferring technology and disseminating good business practices in developing countries, thus contributing to bridging the development gap. ISO has now a membership of 162 countries and has enhanced its training programmes, while major donor agencies and institutions financing development take national and regional quality and standards infrastructure as key factors to support sustainable development. More than 1 million ISO 9001 certificates are currently in force in some 174 countries. ISO 26000 on social responsibility is being developed with the participation of 95 countries and the upcoming ISO 50001 on energy management is expected to be another hit in the standards success stories

What’s in for a CEO or a manager?

First of all, standards are tools to interact effectively with suppliers, customers, public authorities and stakeholders at large. Then, being aware of the standards environment and perspectives is central to the economic intelligence needed for most businesses. They provide means for market access, and help acquire and disseminate new technologies and best practices.

Consciously selecting and implementing the standards most relevant to an organization’s strategy and aspirations is the next step. Standards are the bridge between innovation and the market: who holds the bridge holds a key position. Influencing the content of standards can therefore be critical. It can be done by participating selectively in collective industrial and national activities, possibly even getting involved at the regional or international level, if a company wishes to remain in the lead, and also mix with its most performing competitors and major customers. This requires finally that standardization be included in the overall strategy, as well as in the quality, environmental and compliance management of the organization itself.

Where is standardization in the curricula?

As for future business and technology managers, clearly, standardization should be included in their curricula, as it should be more broadly for engineers, marketing professionals or even lawyers and scientists. This is far from being the case currently, and yet most will use standards in their professional life, some even daily. Ask any audience of CEOs or academics how many have even heard anything about standards during they studies, and you will not get an overwhelming positive answer. Not only some notions should be injected in curricula on what standards are, how they are developed and used and what impact they have on technical and commercial ventures, but standards can also be used as educational tools. They indeed imbed the collective wisdom and the state of the art of technology and management practices.

Fortunately, as awareness of the economic and social impacts of standards grows, and academic interest in the substance increases correspondingly, this gap is progressively filled. ISO has presented its first Award for higher education in standardization in 2007 to the Jiliang University of the People‘s Republic of China. The 2009 award was given to the Rotterdam School of Management. An International Cooperation on Education in Standardization (ICES) has been launched, with some 50 renowned universities and technical schools involved worldwide. The first Academic week dedicated to education in standardization and organized under the auspices of the World Standards Cooperation (a policy body formed by IEC, ISO and ITU) will be held in Geneva the first week of July 2010. No doubt that the ParisTech network will become increasingly involved, as standardization forms an integral part of technology management and is a central component of business life.

So, if you still believe standards are boring and do not concern you: Think twice!

Alan Bryden
General Mining Engineer, former Secretary General of ISO (2003-2009)