Environmental Auditing

Environmental auditing started developing at the beginning of 70s of the past century in the United States of America and in the Western Europe. In that period the developed countries were adopting the environmental legislation in order to reduce the harmful consequences of the companies' actions that had affected the environment. At the beginning the environmental auditing involved reviews of independent experts assessing whether companies operated in line with the demands of the environmental legislation. Presently the companies decide to undertake environmental audits in order to obtain an independent external assessment whether the management has created efficient environmental policy and provided for acceptable environmental attitude. The most important results of the environmental audits are recommendations how a company can reduce the damaging impacts on the environment in an efficient and cost-benefit manner, and how it can in a long-term save funds by using environment friendly technology. The implementation of the environmental audits is not obligatory for the companies never the less it shows high awareness of the companies on their social responsibilities and an overall attitude towards the environment. Greater awareness and understanding of environmental issues have led the supreme audit institutions (SAI) to recognise the key role of the state in defining appropriate measures for reducing the damaging consequences for the environment; for the efficient and effective solutions of environmental problems. The increasing concern has influenced the

SAIs to introduce the environmental auditing in the public sector. Environmental auditing in the public sector encompasses independent and objective assessments whether: the governments implement the international agreements on environmental protection, there is a complete and appropriate institutional framework for the efficient protection and preservation of the environment, there is an efficient control over the implementation of the national legislation in order to realise the set strategic objectives of protection and preservation of the environment, there is provided for the appropriate use of public funds for the assessment and for solving of the environmental problems. Environmental audit is a general term that can reflect various types or evaluations intended to identify environmental compliance and management system implementation gaps, along with related corrective actions. In this way they perform an analogous (similar) function to financial audits. There are generally two different types of environmental audits: compliance audits and management systems audits. Compliance audits tend to be the primary type in the US or within US-based multinationals.

Environmental compliance audits

As the name implies, these audits are intended to review the site's/company's legal compliance status in an operational context. Compliance audits generally begin with determining the applicable compliance requirements against which the operations will be assessed. This tends to include federal regulations, state regulations, permits and local ordinances/codes. In some cases, it may also include requirements within legal settlements. Compliance audits may be multimedia or programmatic. Multimedia audits involve identifying and auditing all environmental media (air, water, waste, etc.) that apply to the operation/company. Programmatic audits (which may also be called thematic or mediaspecific) are limited in scope to pre-identified regulatory areas, such as air. Audits are also focused on operational aspects of a company/site, rather than the contamination status of the real property. Assessments, studies, etc. that involve property contamination/remediation are typically not considered an environmental audit.

ISO 14001 ISO 14001 is a voluntary international standard for environmental management systems ("EMS"). ISO 14001:2004 provides the requirements for an EMS and ISO 14004[ gives general EMS guidelines. An EMS meeting the requirements of ISO 14001:2004 is a management tool enabling an organization of any size or type to: Identify and control the environmental impact of its activities, products or services; Improve its environmental performance continually, and Implement a systematic approach to setting environmental objectives and targets, to achieving these and to demonstrating that they have been achieved. Organizations implementing ISO 14001 usually seek to obtain certification by independent Certification Bodies. Certification indicates that the documentation, implementation and effectiveness of the EMS conform to the specific requirements of ISO 14001. In 2002, the ISO organization also published ISO 19011, the standard for auditing quality and environmental management systems (ISO 19011:2002), which was used for internal audits and certification audits of EMS until it was updated in 2011.The 2011 version on ISO 19011 restricts its use in first and second part audits, while third part audits (certification audits) are now covered in ISO/IEC 17021

A common misconception is that ISO 14001 certification automatically implies legal compliance. Certification under ISO 14001 does not directly reflect compliance with any legal requirements, although ISO 14001 demands the organization to evaluate its compliance with legal requirements. If there is no compliance with some legal requirement, ISO 14001 requires that the organization sets specific targets related to the non-compliance(s) and establishes, implements and maintains programmes to achieve compliance. Therefore it is possible that, at the time of audit, the organization fulfils the requirements of ISO 14001, yet there are one or more non-compliances with specific requirements, which are identified and which the organization actively works to correct. Specific guidance on this subject is provided by the European co-operation for Accreditation.

Audit tools and technology The term "protocol" means the checklist used by environmental auditors as the guide for conducting the audit activities. There is no standard protocol, either in form or content. Typically, companies develop their own protocols to meet their specific compliance requirements and management systems. Audit firms frequently develop general protocols that can be applied to a broad range of companies/operations. Current technology supports many versions of computer-based protocols that attempt to simplify the audit process by converting regulatory requirements into questions with "yes", "no" and "not applicable" check boxes. Many companies and auditors find these useful and there are several such protocol systems commercially available. Other auditors (typically those with many years of environmental auditing experience) use the regulations/permits directly as protocols. There is a long standing debate among environmental audit professionals on the value of large, highly detailed and prescriptive protocols (i.e., that can, in theory, be completed by an auditor with little or no technical experience) versus more flexible protocols that rely on the expertise and knowledge of experienced auditors and source documents (regulations, permits, etc.) directly. However usage of structured and prescriptive protocols in ISO 14001 audits allows easier review by other parties, either internal to the Certification Body (e.g. technical reviewers and certification managers) or external (accreditation bodies). In the US, permits for air emissions, wastewater discharges and other operational aspects, many times establish the primary legal compliance standards for companies. In these cases, auditing only to the regulations is inadequate. However, as these permits are site

specific, standard protocols are not commercially available that reflect every permit condition for every company/site. Therefore, permit holders and the auditors they hire must identify the permit requirements and determine the most effective way to audit against those requirements. During the past 20 years, advances in technology have had major impacts on auditing. Laptop computers, portable printers, CD/DVDs, the internet, email and wireless internet access have all been used to improve audits, increase/improve auditor access to regulatory information and create audit reports on-site. At one point in the 1990s, one major company invested significant resources in testing "video audits" where the auditor (located at the corporate headqarters) used real-time video conferencing technology to direct staff at a site to carry live video cameras to specific areas of the plant. While initially promising, this technology/concept did not prove acceptable. The current "disruptive technology" in environmental auditing is Apple Computer's iPad. At this time, one audit consulting firm is using the iPad extensively for environmental audits,[8] which includes specific protocols for the new technology.

Related types of assessment Phase I Environmental Site Assessment ("ESA") are generally done in relation to mergers, acquisitions or financing activities. The intent of ESAs is to identify potential sources/existence of property contamination for purposes of clean up costs/liability under US law. ESA's rarely contain a compliance audit component and should not be confused with audits.

Environmental auditing in India 1. Auditing in India The Supreme Audit Institution (SAI) in India is headed by the Comptroller and Auditor General (CAG) of India who is a constitutional authority. The CAG of India derives his mandate from Articles 148 to 151 of the Indian Constitution. The CAGs (Duties, Powers and Conditions of Service) Act, 1971 prescribes functions, duties and powers of the CAG. While fulfilling his constitutional obligations, the CAG examines various aspects of government expenditure and revenues. The audit conducted by CAG is broadly classified into Financial, Compliance and Performance Audit. Environmental audit by SAI India is conducted within the broad framework of Compliance and Performance Audit. 2. Environment protection in India The Ministry of Environment & Forests is the nodal agency in the administrative structure of the Central Government of India, for the planning, promotion, coordination and overseeing the implementation of environmental and forestry programmes. The Ministry is also the Nodal agency in the country for the United Nations Environment Programme (UNEP). In the states, the Department of Environment and Forest is the main agency for implementation of environment programmes.

INDIA is the first country in the world to make environmental audits compulsory. The government of India, by its gazette notification [No. GSR 329 (E)] of March 13, 1992, made it mandatory for all industries to provide annual environmental audit reports of their operations, beginning with 1992-93. This required industries to provide details of water, raw materials and energy resources used, and the products and wastes generated

by them. These audit reports were to be submitted to the concerned State Pollution Control Boards or before September 30 every year.

Environmental Audit can be defined as a basic management tool comprising a systematic, documented, periodic and objective evaluation of how well environmental organisations, management systems and equipment are performing. The aim of the audit is to facilitate management control o environmental practices and to enable the company to assess compliance with its policies including meeting regulatory requirements.

This scheme was expected to promote proper monitoring of industrial activities, adoption of low cost technology and minimisation of resource consumption. But though it has been in force for more than two years it has not made much headway. Out of the lakhs of industries that exist in India, only 2,995 audit reports were filed by December 1993. It has also become obvious that the deadline of September 30 is not adhered to . Due to widespread non-compliance, this deadline has been extended a number of times.

Champions of this regulation fee that the government has adopted a proactive approach to the conservation of natural resources, instead of observing the usual command and control method. Its critics feel that this notification was hurriedly implemented without the prior creation of necessary infrastructure/experts which would enable its appropriate implementation.

This novel concept of environmental audit was distorted , surprisingly, by the government, when on April 22, 1993, by a revised notification [No. GSR.386 (E)] the term Audit Report was replaced by Environmental Statement. This change inevitably toned down the impact of the regulation.

The industries were now to fill a form and submit it to the concerned Pollution Control Boards (PCBs). It made it easy for industries to make statements to the effect that they have taken the requisite steps in compliance with existing pollution control regulations.

These statements might not be based on actual audit reports. If this becomes a rule, the whole purpose of the environmental audit regulation would be defeated.

Industries have a list of grouses against environmental audits. They are opposed environmental audits. They are opposed to the disclosure of their modus operandi to the public, who they feel are not mature enough to follow the importance of such data. They fear it would lead to legal wrangles and litigation and that the data would be used by Pollution Control Boards for prosecution. Publishing details of raw materials used and processes might reveal their trade secrets.

Another factors which hampers environmental audits in India is the lack of specialised environmental auditors. Only three or four agencies exist which are qualified to conduct environmental audits. The setting up of an institute of environmental auditors like the Institute of Chartered Accountants of India, would have been an apt preamble to the adoption of this regulation.

Moreover, small industries cannot afford to hire the services of existing environmental audit agencies. First time environmental auditing will cost an industry between Rs. 75,000 to Rs. 200,000 and 15 months to complete.

The Pollution Control Boards have no follow up plans. The reports submitted are not double-checked to find out whether the forms hold the correct data. One report has been examined and acted upon till date. The industries do not get any feedback.

An environment audit programme, if designed and implemented conscientiously, can enhance an industrys environmental performance. If an industry sets up its own system in compliance with existing laws, then conducting audits would be a normal and considerably easier procedure. It will expose problems that require action. It improves the material and energy efficiency of production processes, conserves resources, minimises wastes, provides direct economic benefits to the industry and stimulates growth of the industry as well as the national economy.

Despite the above most industries are apprehensive about audit reports since pollution control boards are regarded by them more as an enforcer, a policeman, than as an advisor. The government has to assure them that an audit report will not be used to instigate prosecution or litigation.

There is yet another angle to this gamut of environmental auditing. We know that industries can be taken to court if prescribed pollution limits are exceeded. But after submitting this audit statement the industries may contend that they cannot be sued since their audit report has been accepted by the SPCBs. Does the government have any way to counter this?

Environmental audits are vital not just for a clean environment but also because their use is the best way to correct different problems detected at their source and to minimize

wastes and foresee conservation and maintenance measures needed to prevent major pollution problems.

Industries in developed countries conduct audits as part of their overall drive for quality assurance to establish a green edge over competitors in environmentally sensitive markets. Moreover, green audits are asked for by investment banks before they pour in money. With the Indian economy opening up, industries have no option but o go green if they want to remain in the race.

Benefits of environmental auditing An environmental audit of a site provides people with confidence as to what a site can be used for and to determine what, if any, costs may apply in managing it into the future. Since the audit system commenced in 1990, more than 3000 audits have been completed, underpinning some of the most significant urban-infill and building projects across the state. As an example, the Docklands precinct was able to be transformed into the safe, vibrant place that you see today, through the undertaking of several 53X audits. Without this system, many sites may not be developed for future use or may pose unacceptable risks to human health and the environment projects that ultimately benefit the wider community.

Environmental auditing practice and procedures The more specific type of environmental audit involves the collection, collation, analysis, interpretation, and presentation of information which is used to: assess performance against a set of requirements or targets, related to specific issues; evaluate compliance with environmental legislation and corporate policies; and measure performance against the requirements of an environmental management system standard.

The systematic, periodic, documented and objective aspects of environmental auditing are fundamental to effectiveness. It is fast developing as an important and powerful tool in the corporate environmental assessment and management toolkit. The requirement periodically to repeat audits ensures that there is an ongoing commitment and a systematic process to improve environmental performance (Grayson, 1992). The scope of repeat audits can also broaden to become more comprehensive as experience and expertise are accrued or as new issues or legislation emerge.

Sometimes the terms assessment, appraisal, monitoring or review have been used interchangeably with audit. Audit implies detailed statistical verification with a periodic cycle between audits. An assessment or review is usually a one-off event which is carried out in less detail and with less direct checking of data.

Environmental Reviews provide a baseline overview of current environmental effects or impacts, relevant environmental legislation and a statement of existing environmental performance. The Reviews provide a basis for establishing a management action plan. They can become part of an environmental management system to help implement the plan. When they are undertaken as the first of a series of periodic environmental audits they have been referred to as a 'Baseline Environmental Audit'.

Environmental audits should be appropriate to the particular circumstances. As environmental auditing draws upon various methodologies, each organisation will define its own system depending upon its size, its activities and its corporate culture. The scope and style of audits vary, but common stages and activities include: Environmental Auditing and Environmental Management Systems (EMS)

An EMS is a tool designed to enable organisations to target, achieve and demonstrate continuous improvement in environmental performance. It is one integrated management process with a number of stages, which includes an environmental audit. There are a number of standards (e.g. the British Standard BS7750 (BS11992), the European EcoManagement and Audit Scheme for Industry (CEC, 1993) and the DoE Eco-Management and Audit Scheme for UK Local Authorities (DoE,1995)). These consist of most or all of the following elements depending on the standard, to:

1. adopt an environmental policy to confirm and promote commitment to continual improvement in environmental performance; 2. undertake an environmental review to identify significant environmental issues and effects; 3. set up environmental programmes of objectives, targets and actions;

4. establish an environmental management system to ensure the implementation of the necessary actions to achieve these objectives; 5. undertake periodic environmental audits to assess the performance of such components; 6. prepare an environmental statement on environmental performance; and 7. obtain independent verification of the environmental statement. 5.2 Many companies have set up internal environmental standards which are applied world-wide. These may be more stringent than local legislation.

6. Public sector environmental auditing 6.1 Increasingly, public sector bodies and local authorities are adapting auditing methods to establish baselines of environmental performance. These then inform management action. 6.2 Interest and action was stimulated in the late 1980s by the Friends of the Earth (1989). A number of authorities prepared environmental charters, follow-up environmental strategies and action plans, which are generally referred to as Green Plans (Raemaekers et al.. 1991 and Raemaekers, 1993). It was not long before leading authorities also realised the greater corporate performance and environmental benefits of the broader and deeper approaches of the internal and external auditing (COSLA, 1992). In 1989, the first local authority environmental audit was undertaken by Kirklees District Council with the assistance of Friends of the Earth. Since then a number of Scottish local authorities have produced environmental audits, notably Fife and Grampian Regional Councils, Ross and Cromarty, Gordon, Falkirk, Clackmannan and Dundee District Councils. The scope of public sector audits is different from that of the industrial sector in that the effects of service provision are considered as well as the direct effects of the activities of the local authority:

Direct effects - environmental impacts that result from the way in which day to day activities are undertaken. Direct effects are covered by internal management audit.

Service effects - environmental impacts that result from the organisations efforts in implementing environmental policies and objectives. They would be covered by the Policy Impact Assessment type of audit.

6.4 Additionally, audit techniques have been adapted to prepare State of the Environment Reports. After several authorities, including Fife Regional Council and Ross and Cromarty District Council, piloted the approach, the DoE published a guide to implementing environmental management systems within local authorities. It is referred to as UK-EMAS, as it was derived from the European Eco-Management and Audit Scheme (DoE, 1993).

6.5 Typically public sector audits cover a number of target areas such as: 1. 2. 3. 4. 5. 6. 7. energy use; recycling; hardwoods from sustainable sources; environmental education; habitat conservation and creation; green purchasing; and traffic calming.

Inevitably there are issues which may have been overlooked or might be misinterpreted, and further and clearer guidance will be necessary. SNH along with the Countryside Commission and the Countryside Council for Wales have commissioned guidance on the treatment of countryside and conservation issues within State of the Environment Reports (SNH, in prep).