Environmental Audit: Concept, Setting and Process

After reading this article you will learn about:- 1. Concept of Environmental Audit 2. Setting up an Audit Programme 3. Scope and Frequency 4. Typical Audit Process 5. Benefits 6. Environmental Audit Programme.

Concept of Environmental Audit:

Environmental auditing is a management tool designed to provide information on environmental performance to the right people at the right time. This audit encompasses all kinds of activities related to environmental measures of an organisation.

An environmental audit is a systematic means of providing environmental management information:

(a) To all levels of management;

(b) For a variety of purposes.

The term ‘environmental audit’ is, therefore, used to refer to a number of different information and assessment activities.

These can be categorized as:

(a) A technical review:

Such an audit will involve the systematic collection of information about the existing and potential impact of the organisation’s activities on the environment; it will normally cover compliance with pollution control and waste management legislation. It will not cover management practices.

(b) A management review:

This will focus more on the management procedures and record- keeping and will also gather information on compliance with legislation. It may also review procedures in the context of company policies, programmes and other requirements. It will not examine the existing or likely impact of the operation on the surrounding environment from a technical standpoint.

(c) Due diligence review:

This will examine the likely cost of implementing pollution control and site remediation actions and will take account of existing and future legislation. Such liability reviews are normally carried out in the context of mergers, acquisitions and long range company planning.

An environmental audit thus represent a management tool comprising a systematic, documented, periodic and objective evaluation of the performance of the organisation, management system and processes designed to protect the environment with the aim of:

(i) Facilitating management control of practices which may have an impact on the environment;

(ii) Assessing compliance with company environmental policies.

The Regulation specifies that an audit should include at least the following steps:

i. Planning of the audit activities, including definition of responsibilities for the audit;

ii. Review of the environmental protection policy of the company:

iii. Assessment of the organisation, management and equipment;

iv. Gathering of data and of all relevant information;

v. Evaluation of the overall performance;

vi. Identification of areas for improvement;

vii. Internal reporting to the top management;

An outline of Environmental management cycle is shown in Fig. 38.1:

Setting up an Audit Programme:

Developing an audit programme requires decisions to be taken on:

i. The scope of the audit: what information is to be collected;

ii. The frequency with which each site (or issue) is to be audited;

iii. Who is to carry out the audit;

iv. What, if any, information is to be made available to the public.

It is also necessary to develop an audit protocol: that is, the detailed plan to be used by each auditor when carrying out the audit.

Scope and Frequency of the audit:

The scope of the audit will depend on the information that is required by management to monitor environmental performance.

A full environmental audit will cover:

(i) Compliance with environmental regulations,

(ii) Implementation of company’s environmental policies and procedures,

(iii) Good environmental management practice, and

(iv) Past activities.

In so far as it provides the information to determine an organisation’s environmental performance it may be expected to cover not only waste streams from plants but also wider management and operational issues.

The Eco-Management and Audit Regulation suggests that the following should be covered within the framework of the wider environmental protection system:

i. Assessment, control and prevention of the impact of the activity concerned on the various sectors of the environment;

ii. Energy management, savings and choice;

iii. Raw materials, management, savings, choice and transportation; water management and savings;

iv. Waste avoidance, recycling, reuse, transportation and disposal;

v. Selection of production processes;

vi. Production planning (design, packaging, transportation, use and disposal);

vii. Prevention and limitation of accidents;

viii. Staff information, training and participation in environmental issues;

ix. External information, public participation and handling of public complaints.

In their guidance on environmental auditing the CBI (Confederation of British Industries) includes a similar listing, amplified into more detailed questions.

So, for example, on wastes and transport the detailed questions include the following:

Wastes:

How and where is waste of all types generated? Can it be minimised/eliminated/recycled? Where production of waste is unavoidable, would it provide a suitable raw material for another organisation, either business or voluntary group? Are you losing recycling opportunities or increasing disposal costs by not segregating different types of waste? Who removes your waste—is it carried and disposed off responsibly?

Transport:

Are you using the most efficient and environmentally sound systems for transporting your goods and materials? Would alternative systems make less demands on the environment? Do staff traveling on business use the most efficient system or merely the most ‘convenient’?

Would use of public transport bring about cost savings without significant increase in traveling times? Do you encourage staff to travel to work by public transport and could you increase availability of communal transport by providing additional company funded services?

Who should carry out the environmental audit?

To be of maximum value an environmental audit should be objective and the environmental auditor should be free from pressure from within the organisation; in other words it is important that the audit report should be objective and the auditor should feel able to make critical comments without fear of the effect of such comments on his future career within the organisation.

A number of major companies have established audit teams within their corporate environmental health and safety department.

In some cases, the staffing of these teams relies on secondment from different departments within the company. In so far as individuals are then auditing different parts of the company this has a benefit that they understand the business but have no internal line of responsibility to the activity being audited.

Some organisations have used external consultants to carry out some or all of the audits; in this case it is often valuable for the external auditor to work with the company’s team.

Environmental auditing requires an understanding of the activity to be audited (this may be a plant, an abandoned site or a corporate headquarters); an understanding of management systems, environmental regulations and permitting procedures; and also a broad understanding of environmental impacts.

A qualified auditor will, in addition, need to be systematic, able to deal in a constructive way with a range of management and technical staff.

The Audit Protocol:

The protocol represents the plan to be used by auditors in conducting an audit. It establishes what information is to be collected it provides a systematic basis to the audit; and it also gives a step-by-step guide to the environmental auditor on how evidence is to be collected.

The protocol is an important tool in so far as it not only serves as the auditor’s guide to conducting the audit but also acts as a record of the audit procedures and the notes completed by the team. In addition, a completed audit protocol provides a record for the rationale for any changes in audit procedures or deviations from plan if these prove necessary during the audit.

Specifically the protocol:

(a) Contains a basic questionnaire covering each environmental topic;

(b) Provides the hard copy record to assist the auditors as the work progresses and provides a basis for referencing working papers and copies of documentation collected during the audit;

(c) The completed protocols with the supporting documents are the record of the audit and form the basis for the formal audit report.

The protocol is therefore the key step in establishing the audit programme in so far as it informs managers and others about the scope of the audit and provides the opportunity to request that the changes are made either to collect additional information or to delete information that will not be used.

Typical Audit Process:

The following typical audit process reviews the work required prior to the audit; activities at a site; and post-audit activities. It is specifically applicable to a manufacturing site rather than, for example, a corporate headquarters. The issues that are likely to be addressed in the audit are shown in Table 38.1.

Pre- Audit Activities:

(a) Select and schedule facility to audit based on:

I. Selection criteria

II. Priorities assigned.

(b) Select audit team members:

I. Confirm their availability

II. Make travel and lodging arrangements

III. Assign audit responsibilities.

(c) Contact facility and plan audit:

I. Discuss audit programme

II. Obtain background information

III. Administer questionnaire (if necessary)

IV. Define scope

V. Determine applicable requirements

VI. Note priority topics

VII. Modify or adapt protocols

VIII. Determine resource needs

IX. Identify facility staff to be interviewed, confirm availability.

Activities at site:

Step 1:

Identify and understand management control systems:

I. Review background information

II. Opening meeting

III. Orientation tour of facility

IV. Review audit plan

V. Confirm understanding of internal controls.

Step 2:

Assess management control systems:

I. Identify strengths and weaknesses of internal controls

II. Adapt audit plan and resource allocation

III. Define testing and verification strategies.

Step 3:

Gather audit evidence:

I. Apply testing and verification strategies

II. Collect data

III. Ensure protocol steps are completed

IV. Review all findings and observations

V. Ensure that all findings are factual

VI. Conduct further testing if required

VII. Liaise with regulatory authorities.

Step 4:

Evaluate audit findings:

I. Develop complete list of findings

II. Assemble working papers and documents

III. Integrate and summarise findings

IV. Prepare report for closing meeting.

Step 5:

Verbal report of findings to facility:

I. Present initial findings at closing meeting

II. Discuss findings with plant personnel.

Post-audit Activities:

(i) Issue draft report

a. Corrected closing report

b. Determine distribution list

c. Distribute draft report

d. Allow time for corrections.

(ii) Issue final report

a. Corrected draft report

b. Distribute final report

c. Highlight requirement for action plan

d. Determine action plan preparation deadline.

(iii) Action plan and preparation and implementation

a. based on audit findings in final report.

(iv) Follow-up in action plan.

Carrying Out the Audit:

a. Collecting Information:

Environmental auditing requires the auditor to develop a full understanding of the controls, procedures and practices that are in place or are thought to be in place. These are likely to include formal procedures and practices; all forms of records (including monitoring); existing inspection and maintenance programmes; physical controls and other measures to contain spills and other incidents, etc.

The auditor will need to understand how responsibilities are defined; how personnel are trained and how competent those on the site appear to be; how procedures are carried out and other standard management issues.

In addition to the use of the detailed questionnaire (forming part of the protocol) the auditor will gain information through observation, interviewing individual staff, reviewing specific documentation and speaking to the appropriate regulatory authorities.

b. Audit Interviews:

Since interviewing is one of the primary techniques used in gathering audit information, good interviewing skills are essential to the successful completion of the audit. Attention to the following elements of interviewing skills during the audit process will assist in establishing a good rapport with the facility personnel as well as obtaining the information required:

Take notes during the interview and record the name, title and job description of the person interviewed; be alert and responsive to the interviewee when asking questions and listening to responses; control the interview, but ensure that you appear relaxed and that your interviewee feels relaxed; go to the interviewee’s workplace/office where possible; plan the interview so that you introduce yourself, explain the purpose of the interview and gather the appropriate information; know when to end the interview and thank the interviewee; end the interview on a positive note.

c. Documentation:

It is a central principle that the audit should be fully documented; there should, therefore, be a clear, written, audit trail. The working papers from an audit will include completed protocols, associated questionnaires, auditor notes and copies of documents collected during the audit itself.

It is important that each auditor ends the audit with a complete set of field notes and papers for each protocol step assigned to that auditor; that there is documentation:

(1) To ensure that an adequate audit was conducted and,

(2) To substantiate compliance and non-compliance issues, both with respect to regulatory requirements and company procedures; that there is a record of reference copies of documents collected during the audit; and there is the data to support the audit report, which may be helpful in subsequent follow-up.

The working papers should, therefore, contain all the information that the auditor believes may be necessary to support the audit findings and should contain a description of environmental management and control systems—including flow charts, diagrams, copies of documents, etc.; a description of the action taken to complete each step of the audit protocol; details of answers to questions in the protocol and other questionnaires used; details of any ‘tests‘ conducted during the audit (e.g., checking that consignments of hazardous waste had the relevant documentation for each disposal).

d. Public Disclosure:

Unlike financial audits, environmental audits are not carried out for the purposes of providing information to the regulatory authorities or the public at large. They are intended to assist management understand the impact their operations are having upon the environment and to provide a basis for taking action to remedy any problems.

To this extent companies are likely to be unwilling to make the results of their environmental audits public; or, if the audit is carried out with this objective, it is likely that it will be a far less valuable management tool.

The ICC (Indian Chamber of Commerce) has noted that if environmental audits are to be successfully used as part of company policy ‘it is essential that the procedure should be seen as the responsibility of the company itself, should be voluntary and for company use only’.

The Eco-Audit proposal does however propose that certain information should be made available to the public on the environmental performance of the company. This would be an ‘environmental statement’ specific to each site audited and prepared with the same frequency as the environmental audits.

Such a statement would:

a. Describe the company’s activities at the site;

b. Provide a detailed assessment of all the significant environmental issues of relevance;

c. Summarise the figures on pollutant emissions, waste generation, raw material, energy and water consumption and other significant environmental aspects;

d. Include the company’s environmental policy programme as well as the specific objectives for the site considered;

e. Include an evaluation of the environmental performance of the environmental management system and note the date for the submission of the next statement;

f. Publish the name of the accredited environmental verifier for the Statement: this requirement for external, independent evaluation is a crucial component of the Regulation.

Simplified statements must be drawn up for the intervening years in the audit cycle. These must draw attention to significant changes from the previous statement and include details of pollutant emissions. Where no significant changes have occurred, no further statement is required until the completion of the next audit.

It will be appreciated that for many plants and processes within the UK information on emissions, wastes and environmental effects is already on the public register (through the provisions of the Environmental Protection Act, 1990) and increasingly the larger companies are providing a clear statement of their environmental policies and programmes in order to make it clear to the public that they are aware of their environmental responsibilities.

So while the environmental audit remains the internal document (like management accounts) companies may wish to provide a general summary in order to demonstrate to the public that they are carrying out audits and are happy to make some of the information more widely available.

It should perhaps be noted that such internal systematic reviews may also become public that, should there be a serious pollution incident at the plant or a civil action with the result that the documents are placed before an inquiry or any other form of legal hearing.

Benefits of Environmental Auditing:

A properly implemented environmental audit plan provides a range of benefits for an organisation.

These are:

(a) It provides a framework for measuring (and therefore managing) environmental performance.

(b) It reinforces accountability for the environmental dimension of the business: the audit process requires managers to be clear about their responsibilities and how these are being implemented.

(c) It raises awareness of the importance of professional environment management throughout the organisation.

(d) To the extent that external reporting will be required, it provides a sound basis that enables companies to feel sure that what is included in the reports is an accurate record.

(e) It provides valuable information for future planning. This includes the future design of processes and products as well as inputs into future financial plans where pollution control and other investments are to be made.

(f) It allows senior managers to feel secure that all the environmental aspects of their business are being professionally managed:

It will not remove all possibility of environmental incidents but will at least reduce their likelihood.

Environmental Audit Programme in India:

The concept of environmental auditing in industrial facilities in India, appears to have first got into meaningful discussions in the beginning of the nineties 1990s. Efforts were initiated to see the practicability of this programme before it could be mandatory.

This process finally resulted in the issuing of a gazette notification on 13 March 1992 through which submission of the environmental audit reports has been made mandatory. The industries are now required to submit their audit reports to the concerned state pollution control boards on or before 15th day of May every year beginning 1993.

A good number of polluting industries were identified for submission of regular environmental audit report.

These are:

(a) Cement factories (above 200 tonnes per day production capacity)

(b) Thermal power plants

(c) Fermentation/Distillery factories

(d) Sugar factories

(e) Fertilizer and sulphuric acid plants

(f) Integrated iron and steel plants

(g) Pulp & paper Industries (above 30 tonnes per day production)

(h) Oil refineries

(i) Caustic soda plants

(j) Petrochemicals plants

(k) Pesticide formulation and manufacturing plants

(l) Leather processing industries including tanneries

(m) Basic drugs and pharmaceuticals manufacturing plants

(n) Dye and Dye intermediates

(o) Zinc smelting industries

(p) Copper smelting industries

(q) Aluminium smelting industries

(r) Lead smelting industries.

On the whole, the environmental audit studies were not intended for completing any regulatory requirements, but with the basic philosophy that at least those industries which need priority attention in the sense of pollution control, should know what it is, as well as why and how it is to be done, before the industries actually arrange to set it done on their own as a mandatory requirement, as per the GOI’s notification of 13 March 1992.

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