Compliance with environmental laws and regulations benefits both companies and the environment. Individual companies that implement programs to comply with local, state and federal regulations not only lessen their impact on the environment, they also avoid enforcement actions that can include fines and sometimes criminal charges. Lawsuits from employees and neighbors can also be prevented through compliance initiatives. Incorporating compliance issues into the company’s corporate policy also enables a chemical manufacturer to demonstrate to the public its commitment to the protection of the environment. One of the most effective ways for a company to ensure that it is meeting its environmental compliance obligations is to conduct an environment self-audit of its facilities and operations.
Monitoring compliance with environmental regulations through a self audit can provide several benefits. Firstly, management of the risks associated with non-compliance is of tremendous value both from an environmental standpoint and a health safety perspective. Secondly, self-audits can identify where additional pollution prevention activities are required. Implementation of appropriate pollution prevention measures results in waste minimization, which can provide significant cost savings associated with waste management. Thirdly, companies that are proactive in ensuring compliance with regulations may develop a competitive advantage, as consumers, customers and investors today look for products from companies that have clearly demonstrated a commitment to minimizing their impact on the environment.
It is important to note that simply complying with local, state and federal regulations will not provide the maximum possible pollution prevention and competitive advantage benefits. Companies that manage overall environmental performance through the implementation of an environmental management system (EMS), of which compliance is just one part, will realize much greater rewards. Auditing of compliance with regulations together with the effectiveness of the entire EMS will provide the most value to a company looking to enhance its environmental performance.
An EMS typically involves the planning, implementing, reviewing and improving of processes and actions designed by the company to meet its environmental goals. The most common EMS model follows the Plan-Do-Check-Act (PDCA) cycle. The first step is developing an environmental policy, which is then followed by planning of the EMS and then implementing it. The self-audit is how the EMS is checked, and recommendations for improvement generated through the audit are then acted on, and the cycle begins again. Success of an EMS is based on commitment from top level managers on down through all levels of employees and also requires a continuous improvement approach that involves constant review and revision.
ISO 14000 refers to a family of voluntary standards and guidance documents issued by the International Standards Organization that are designed to assist companies in implementing an EMS. The American Chemistry Council recently developed a Responsible Care® Management System (RCMS) that all of its members, and members in Partner companies, must implement. In Europe, the Eco-Management and Audit Scheme (EMAS) was introduced by a European Union (EU) council which required its implementation in all EU Member States. BS7750 has been the EMS Standard in the UK since 1992. A key aspect of these management systems is the use of third-party verification to ensure that companies have met all of the requirements of the EMS. The self-audit can play a critical role in not only ensuring compliance with environmental laws and regulations, but also in preparation for receiving third-party certification of an EMS.
The Environmental Protection Agency (EPA) and many state environmental agencies have policies and guidance material relating to environmental self audits. It is important for a company to be familiar with these policies before conducting an audit. The EPA has two key policies that relate to self-audits conducted by small businesses. The policy “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations” is typically referred to as the ‘Audit Policy.’ The “Compliance Incentives for Small Business Policy” applies to companies with fewer than 100 employees. Most states have adopted statutes, policies or rules that encourage environmental self-auditing. Some are referred to as privilege and immunity laws which allow companies to keep audit information confidential.
Under EPA’s Audit Policy, companies can avoid relief from penalties if they report violations that they have discovered and corrected. Nine conditions must be met in order to achieve 100% elimination of penalties, including the use of an environmental audit or as part of EMS activities. The company may still have to pay a fine equivalent to any economic benefit realized as a result of non-compliance. In addition, repeat violations and violations that result in serious harm to the environment are not covered by the Policy. Written disclosure must be sent to the EPA within 21 days of the discovery of the violation.
The Small Business Compliance Policy is designed specifically for companies with under 100 employees. It is similar to the Audit Policy in that penalties can be eliminated if certain conditions are met. It differs in that small businesses need only have made a good faith effort to comply with applicable environmental regulations through on-site compliance assistance programs, mentoring programs, or voluntary audits). Economic gain as a result of the violation may be collected, but this action is expected to be infrequent. Repeat violations, and violations that are criminal in nature or have or could cause serious harm, are not covered. Corrective action must be taken within six months of discovery.
Several states have issued audit policies that are similar to EPA’s policy. Some have adopted most of the EPA policy with only minor changes, while others have made significant alterations and/or additions. Other states have adopted self-audit privilege and/or immunity laws that protect the disclosure of audit reports. Privilege laws allow self-audit reports to remain confidential, except information that is required to be reported by exiting regulations. Immunity laws protect companies from fines and criminal penalties if violations are disclosed and quickly addressed. In many cases companies are required to implement pollution prevention or EMS programs. The EPA opposes state privilege and immunity laws and believes that they “undermine law enforcement, impair protection of human health and the environment, and interfere with the public’s right to know of potential and existing environmental hazards” as stated in the Audit Policy.
Deciding whether or not to participate in a compliance incentive program can be a challenging proposition for companies. Familiarity with all of the federal and state programs that apply is necessary. Knowing which regulations are covered, whether or not guidance information and future compliance assistance is available, and what information becomes public is also important. Some companies choose to rely on attorney-client privilege to avoid the uncertainties that can be associated with self-audits. Outside attorneys hire consultants through their law firms, and the consultants keep the results confidential. The use of attorneys also allows a company to conduct an audit that addresses a specific issue rather than completing a full scale review.
Careful planning will have a significant impact on the level of success achieved with an environmental audit. Before beginning the self-audit, a company should ensure that management is committed to the project and recognizes that any noncompliance must be immediately addressed, which often requires expenditure of both human and financial resources. The management must also consider whether or not the company will participate in any federal or state compliance incentive programs. The objectives of the audit should be clearly established, and everyone involved must be aware of the regulations (federal, state and/or local) that apply to the company as well as any corporate policies that are to be reviewed. Having trained personnel that are familiar with how to conduct an environmental audit is also valuable.
In addition to having clear objectives and well trained audit personnel, there are several key aspects of an environmental audit program that will help ensure that a company’s audit efforts are effective. Audits should be conducted by walking through the facility and using visual inspection and interviews with employees to assess current activities. A knowledgeable environmental manager should be responsible for reviewing the thoroughness of completed audits and for tracking the results of audits. A comprehensive report of the organization’s compliance status including specific action items for correcting noncompliance is critical. Follow-up procedures to ensure that actions items are implemented and for identifying which noncompliance results are reportable to regulatory agencies are also important.
Many companies find that checklists can provide valuable assistance when conducting an environmental self-audit. Off-the-shelf checklists are available from a variety of resources including state and federal government agencies, trade associations, ISO and ACC EMS guidance materials, commercially available books and consulting companies. Some checklists are very general, while others are designed to address compliance with specific regulations for specific market sectors. Checklists will also vary according to the type of facility that is being audited (warehouse, manufacturing plant, administrative offices, etc.).
Along with its Audit Policy, the EPA offers several audit protocols. Chemical manufacturers will find protocols for the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Emergency Planning and Community Right-to-Know Act (EPCRA), the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), and the Resource Conservation and Recovery Act (RCRA). These protocols include checklists for auditing a facility against the requirements of the specific regulation. Links to the Audit Policy, the protocols and other EPA information on self-auditing can be found at http://www.epa.gov.compliance/incentives/auditing.
A general checklist covering the major steps that should be completed when preparing for an environmental self-audit is included below. Following this checklist will help companies ensure that their self-audit program will be effective.
Chemical manufacturers of all sizes can benefit by conducting environmental self-audits. In order to have a successful program, companies need to be aware of and understand the potential risks associated with conducting an audit as well as the benefits that can be gained. Thoughtful planning, resource allocation and commitment from all levels within the organization will enable audits to run smoothly. Implementation of procedures for audit reporting and follow up of action items will ensure that the program is also effective and results in improved environmental performance and management.
Environmental Self-Audit Preparation Checklist
- Know what federal, state and local regulations apply to your facility.
- Be familiar with federal and state compliance incentive and privilege/immunity programs.
- Identify the reason for the audit.
- Gain commitment from top executives.
- Decide whether or not to participate in federal and/or state compliance incentive programs
- Review company’s existing environmental programs and past performance.
- Clearly identify the scope and objectives of the audit Identify personnel to conduct the audit and ensure that they have the appropriate training; consider using outside consultants to retain objectivity.
- Develop or gather existing checklists appropriate to the aspects of the environmental program that is being audited.
- Make sure procedures are in place for documenting any noncompliance and reporting the information to management.
- Make sure procedures are in place for determining whether noncompliance is reportable or not and if so, what time period is available for reporting and corrective action.
- Make sure procedures are in place for assigning and tracking implementation of corrective actions.
- Plan to do visual and physical inspections of your facility, systems and documentation
- Plan to interview employees.
- Make sure procedures are in place to review the audit process and identify areas for improvement.
About the Author
Cynthia A. Challener (challener@vtlink.net) is Principal Consultant at C&M Consulting (www.candmconsult.com). C & M Consulting offers technical writing, editing and research services to the chemical and allied industries. Services include the development of marketing brochures, technical bulletins, presentations, and feature articles. In addition to her work for ChemAlliance, Dr. Challener has provided services to a wide variety of chemical industry clients, including Chemical Market Reporter, ACS, and SOCMA.
References and Links
Self-Auditing Resources
EPA’s Audit Policy page. Includes links to EPA’s Audit Policy, Corporate Auditing Agreements, and “Audit Policy Update” and “Enforcement Alert” newsletters:
http://www.epa.gov/compliance/incentives/auditing/auditpolicy.html
Introduction to Audit Protocols. Includes links to the protocol documents for conducting audits under the various federal environmental laws:
http://www.epa.gov/compliance/incentives/auditing/protocol.htm
Environmental Health & Safety Online article on Environmental Auditing with specific discussion about EPA policy and protocols, including links:
http://www.ehso.com/selfaudit.htm
Paints and Coatings Resource Center general article on self-auditing with specific discussion about EPA policy and protocols, including links:
http://www.paintcenter.org/audit.cfm
Green Business Network article “Compliance Incentives for Business: Self-Policing, Self-Auditing, and Self-Disclosure Policies”:
http://www.greenbiz.com/toolbox/tools_third.cfm?LinkAdvID=24074
Environmental Audit Checklists from the Minnesota Pollution Control Agency:
http://www.pca.state.mn.us/programs/audit_p.html
Board of Environmental, Health and Safety Auditor Certification (BEAC):
http://www.beac.org
EPA Environmental Assistance Services for Small Businesses – a resource guide covering small business legislation, assistance and compliance support programs offered by the EPA:
http://www.epa.gov/sbo/pdfs/ea-resourceguide.pdf
EPA Resource Directory of Small Business Environmental Assistance Providers – covers federal, state and private resources:
http://www.epa.gov/sbo/pdfs/sba-directory.pdf
EPA Compliance Incentives for Small Business Policy:
http://www.epa.gov/compliance/incentives/smallbusiness/index.html
Environmental Management Systems Resources
North Carolina Division of Pollution Prevention and Environmental Assistance EMS FAQ:
http://www.p2pays.org/iso/emsisofaq.asp
Article, “Internal Auditing for Compliance and EMS Performance” from Environmental Resource Services
http://www.envsource.com/resources_internaudit.htm
Responsible Care® Management System (RCMS). Includes information and technical specifications for the new RCMS:
http://www.rctoolkit.com/pdfs/RCMSTech_012504.pdf?opendocument&Login
