Eco-Auditing or Environmental Audit: it’s Benefits and Types!
Eco-auditing or environmental audit is a process of extracting information about a company that provides a realistic assessment of how the company affects the environment and also a set of environmental objectives and targets to reduce the effects.
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Eco-auditing is a systematic multidisciplinary method used periodically to assess the environmental performance of a project. Eco-auditing evolved as a management tool in the USA in 1980s. It has been promoted in Europe by the International Chamber of Commerce and by some multinational corporations as a means of getting effective environmental management.
But, in developing countries, the eco-auditing concept is still a theoretical concept. However, India has modified its Companies Act to include a requirement for eco-audits.
The benefits are as under:
(i) It is a means for ensuring the continual improvement in environmental management;
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(ii) It is a good method of monitoring;
(iii) It can assist efforts for sustainable development;
(iv) It can help involve the people in environmental management;
(v) It may reduce the need for government inspections;
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(vi) It may help identify cost recovery through recycling and sale of by-products, etc.; and
(vii) It may generate valuable data for regional or national environment reports.
During the course of company’s quest for an environmental system, two audits are done. The first is the environmental audit, which is done to know what a company actually does and how it affects the environment. The second audit is conducted to see whether an environmental system works according to its procedures and that objectives and targets are being achieved.
The eco-audit includes the following:
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(i) Internal audit;
(ii) External audit;
(iii) Aspects and impacts analysis;
(iv) Applicable legislations;
(v) Environmental objectives and targets;
(vi) Environmental policy statement; and
(vii) Corporate environmental plan.
The internal audit is the first step to list the key factors that the internal analysis might encompass and then conduct an internal appraisal. The results of this internal analysis are used to form the basis of aspects and impacts analysis.
The factors and areas of the internal audit are:
(a) Financial:
1. Liquidity and profit margins
(b) Personnel:
1. Management
2. Training and education
3. Motivation and attitudes
4. Workforce skills
(c) Research and development (R&D) and design
(d) Engineering and production
(e) Environmental management
The external audit encompasses all the forces and factors and factors outside a business that have some impact on it but that cannot influence or control it.
In this audit, following points are taken into consideration:
(a) Environmental pressure groups
(b) Consumers:
1. Economic growth
2. Income levels
3. Interest rates
4. Exchange rates
5. Employment
6. Credit policies
7. Income distribution
8. Savings and debt
9. Taxation
(c) Competitors:
1. Age structure of population
2. Attitude towards health and lifestyle
3. Changing work pattern
4. Culture, etc.
(d) Operational policy:
1. Automation
2. New methods of travel
3. New materials
4. Improved communication
Aspects and impacts analysis is another phase of eco-auditing. ISO 14001 guidelines describe an environmental aspect as “… an element of an organisation’s activities, products or services that can have a beneficial or adverse impact on the environment …” similarly an environmental impact is “… the change that takes place in the environment as a result of the aspect…”
This analysis is done with the help of well-prepared matrixes. The result of the analysis indicates:
1. Those areas of company’s operations that may harm the environment;
2. The different aspects of the company’s operations have been classified into levels of environmental impact, i.e., low, medium or high;
3. A scale 1-5 has been used to determine each impact’s probability of occurrence; and
4. A matrix has been created to calculate the impact scores of each aspect.
A register of environmental legislations is a fundamental part of the planning and implementation process. In this, all those regulations are mentioned that apply to the environmental aspects of the company activities.
The setting of Environmental objectives and targets is the main way in which a company’s environmental performance can be improved. The environmental management plan is designed to be dynamic and open-ended list of objectives and goals for a company to achieve in accordance with its stated objectives and targets. The environmental plan should be regularly revived and updated by the environmental manager in consultation with the environmental working group.
Environmental policy statement states the company’s commitment to the protection of the environment, prevention of pollution and continuous improvement of company environmental performance.
For example, these aims could be to reduce:
1. consumption of energy and water,
2. generation of waste, and
3. Emissions.
The corporate environmental plan is the culmination of the auditing process. Having identified, listed, analysed and prioritised the operational aspects of the company, the environmental impacts, emergent targets and objectives will form the basis of the corporate environmental plan. Its prime objective should be the achievement of an environmental management standard.
The environmental audit will provide an insight into how a company operates. If an auditing process is already in place, it should be applied in environmental context. An audit is a natural management tool and it will become more effective when environmental audit is added to it. The need of the time is that all the developed and developing countries should adopt the eco-auditing system.
For eco-audit, the establishment of standard is a prime task and most of the developed countries and a few developing countries have already established the ‘standards’ for the environmental protection, pollution management as well as for quality of life. In early 1992, the world’s first eco-audit standard was published by British Standards Institute.
A number of countries have adopted it which was revised in 1993 and 1994 to make it more compatible with the more recently introduced Eco-Management and Audit Scheme (EMAS). The International Standards Organisation (ISO) has also developed standards broadly compatible with EMAS. The need is that the system of eco-audit should be implemented as a part of environmental management.