After 1950's, due to increasing pollution, the concept of Environmental Protection was first developed in a number of economic developed countries, and then environmental management surfaced, environmental auditing as the further monitoring of environmental management was then placed on the agenda by governments around the world. After half a century of development environmental auditing is increasingly playing an irreplaceable role in global environmental protection. This paper through introduction of the emergence and development of environmental auditing cites some examples and introduced related concepts to depict a more comprehensive picture of environmental auditing and related systems in order to stimulate the reader's understanding and concerns in environmental audit and promote environmental auditing work. In order to understand the impact of environmental audit on the company, we made analysis on the Sainsbury and Shell respectively.
Emergence of environmental audit
Environment is the material basis and constraints for human survival and development. However, along with the development of human society, global environmental problems are increasingly prominent: global warming, ozone depletion, acid rain, water resources crisis, energy shortages, sharp reduction of forest resources, land desertification, accelerated species extinction, waste disaster, toxic chemicals and many other pollution issues have threatened the survival of mankind. Environmental Protection became a consensus in 1970's and environmental auditing had begun to be used in environmental management by enterprises of a number of countries.
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Due to further deterioration of environmental problems, after 1990's the world launched a climax of environment governance and environment protection. After 1992 United Nations Conference on Environment and Development, people reached broad consensus that the economic, social, demographic, environmental and ecological development should maintain the sustainable development and driven by the United Nations, many countries of the world have developed environmental laws and regulations, and then audit and supervision have joined the list of government environmental management. (Drury, Colin. 2000)
In 1995, 15th General Assembly of International Organization of Supreme Audit Institutions (INTOSAI) for the first time set the theme of environmental auditing and in its "Cairo Declaration" clearly states: "In view of the importance of environmental protection and improvement, INTOSAI encourages the highest audit institutions of all countries in the exercise of their audit responsibilities should consider the environmental issues." (Drury, Colin. 2000) Subsequently, the environmental audit has increasingly received widespread attention from countries in the world and all countries based on specific conditions carry out environmental audits of various forms, varying degrees, so that environmental audit has made great development, and increasingly become an important development direction of modern audit.
Sainsbury announced the released Sainsbury environmental audit must include such information: 1) accuracy and authenticity; 2) verifiability; 3) relevance; 4) representation; 5) comprehensibility; 6) the importance in general environment impact and other requirements. In Britain, investors (especially institutional investors) in decision-making factor not only need to consider Sainsbury's financial indicators, but also because of the impact from British Insurance Association and other groups need to focus on Sainsbury's performance in environment, society and other relevant aspects, which undoubtedly has brought pressure to Sainsbury in disclosing information. Perhaps Tony Blair's request is a sign. That is, if Sainsbury does not want to disclose their environmental information automatically, then he will with the legal aid force Sainsbury to do so. And this point in the draft terms of Corporate Law announced in July 2002 changed into a reality. Article 73,75 and 81 provide that Sainsbury will be required to release annual financial report through a comprehensive audit and examination of the operation and finance, and the Sainsbury directors were asked to make comments on whether the annual report included the specific issues that should be included. (Lehman G, 2005) These matters are mainly: 1) Sainsbury's staff employment policies; 2) Sainsbury policies in environmental issues and operating activities; 3) Sainsbury policies related to business activities and social and community issues; 4) Sainsbury's implementation of established policies in fiscal year.
Consistent with requirements of environmental protection and rational use of environmental resources: From the perspective of economics, the root cause for environmental problems is irrational development and over-utilization of natural resources and environmental resources by human in production and consumption, and the waste discharged from this process to the natural environment. When the production and consumption's consumption of environmental resources exceeds the supply of resources under rational exploitation, it will affect and damage the natural environment. Conducting environmental audits can monitor and evaluate whether the government and enterprises implement environmental laws and fulfil their responsibilities for environmental management, and also enables companies to proactively contact the enterprise development and environmental protection together, to maximize the unity between economic and environmental effectiveness.
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Shell has further recognized that economy and society-related events are closely linked with environmental issues and begun to publish "sustainability reports." "Sustainability" and "sustainable development" are two terms presented in "Our Common Future" report the World Environment and Development Committee published in 1987 and are increasingly concerned by international community. (Mauriello A J, 2007) The report noted that development of human society not only needs to meet the needs of the present generation, but also should not compromise the future generations' needs. In corporate environmental audit, "sustainability" is mainly used to specify the subject of the report including the environmental, economic and social issues with impact on future development. Sustainability reporting has its own process of development with aim to give a more comprehensive "triple bottom line" in order to clear the responsibility of the shareholders. It should be emphasized that although only a small number of typical large organizations publish such reports, the number of such organizations is increasing.
Adapt to Shell's own development. Shell is the carrier of social and economic activities that in the production and reproduction process on the one hand provides products to the society and on the other hand continues to consume a variety of raw materials and products. Meanwhile, Shell in the production process is continually discharging waste to the surrounding environment, resulting in Shell's external diseconomies. Shell for long-term development must receive direct economic benefits, while making the effort to eliminate this external diseconomy to internalize the costs of waste management. The purpose of carrying out environmental audits is to promote Shell's economic responsibility and environmental responsibility to blend with each other and to better achieve this transformation. Environmental audit is an important part of environmental management system. When people's requirements on environment become laws and regulations and the national will, when people realize that environmental issues will become potential risks of their own production and management, people in the production and trade will surely take into account the existence of environmental risks. They need to assess the environmental risk, or conduct reasonable circumvention, but the small and medium enterprises or organizations themselves do not have the specialized staff, and large enterprises or institutions may have some experts of this aspect, but these experts are employed by themselves, do not have the independent status, so their assessments, particularly during the transaction, are not legally effective, while the state environmental protection agencies and audit authorities do not have such functions. (Dickinson, John P. 1997) Therefore, there is an urgent need for intermediary services in this area in the society, thus giving birth of environmental audit intermediary services.
Impact of development of environmental auditing on environmental management systems in company
Since the inception of environmental auditing, countries continue to expand practices in the field of environmental auditing, while focusing on the environmental audit research. Although the definition, of environmental audit has not yet reached agreement, from its meaning and expression constantly enriched and developed, we can also see the development of environmental auditing. In 1995, the "Cairo Declaration" in the definition of the environmental audit only statements the following framework: 1. environmental audit and the general audit the government carries out have no significant difference, but it is different from internal organization's more professional environmental reviews; (Drury, Colin. 2000) 2. environmental audit may include various types of audit (finance, compliance, performance), the liabilities caused by poor environmental management can be reviewed in the financial audit; 3. Performance audit includes 3E, and general 3E can include environmental audit authority; 4. The concept of sustainable development should not play an independent role in environmental auditing. "International Audit" published in 2002 after citing statements on environmental audit in various meetings, organizations and publications attributed it to "activities of monitoring, evaluating and verifying regularly and systematically the authenticity, compliance and effectiveness of the audited units' environmental activities, environmental financial information and environmental management systems organized by relevant audit organizations according to environmental regulations, policies and standards, following the auditing standards the systematic, and reporting the audit results to the client. " Accordingly, we can form the following framework for environmental auditing: 1. implemented by certain audit organizations; 2. according to auditing standards and procedures; 3. objective access audit evidence and drawing conclusions based on certain standards; 4. independent monitoring and evaluation on the management activities of environmental protection and the results. The formation of the above definition is inseparable from the continuous development of environmental auditing practices of all countries. In practice, environmental management (system) is the object of environmental auditing and its sophistication is restricting the depth of environmental audit. Environmental management as a functional system to implement environmental protection consists of environmental protection organization, regulations, environmental standards, environmental policies, environmental planning, programs, projects, control systems, resources budget, performance appraisal, environmental reports and other components. The development and implementation of environmental protection laws, standards, policies and reporting system directly restricts the country's environmental audit form, scope, content, effects and risks. Therefore, all long, due to the gap between the work of environmental management, environmental audit is carried out to different extent in the world and there is greater distance in terms of content, form and effect.
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For instance, the Netherlands is the earliest country to carry out environmental auditing as well as chairman of INTOSAI Working Group from 1992 to 2001. In 1989 the government published the "National Environmental Planning Policy", established environmental management regulations requiring enterprises solely responsible for environmental protection. (Lexa J F, 2005) In 1990 the central government introduced the internal environmental audit, covering 23 government agencies under 13 ministries and forest, water supply, public facilities and other public administration departments, mainly to investigate and evaluate the performance of these departments and institutions in energy conservation, internal environmental management and reduction of the flow and so on. At present the Netherlands Court of Auditors' environmental audit is mainly performance audit with very extensive content. It focuses on following environmental issues: the reduction of biological diversity, climate change, overexploitation of natural resources, the threat to health and degradation of physical environment, etc. In determining the specific projects, three factors are mainly considered: First, the status of implementation of environmental agreements, such as whether there is phenomenon not inline with the agreement; second, whether the characteristics of environmental agreements are conducive to audit, such as whether there is clear standard to judge the implementation status; third, whether it is closely related with the country's major events and public life. Court of Auditors in the audit attaches great importance to communication with the relevant departments and make full use of external experts.
The Netherlands Court of Audit has conducted audit on greenhouse gas emissions in recent years with the purpose to check whether the target of greenhouse gas policies is clear and feasible, whether the information on the policy formulation and implementation effect is sufficiently and creditably provided and coordination of related policies, etc. The audit scope covers the main social policy, economic sectors involved by greenhouse gas emissions policies, such as the industry, energy, transportation, agriculture and personal families, etc. The Court researched and analyzed policy measures of various sectors, reviewed general financial instruments used the implementation of climate change policy and inspected the various policies Netherlands committed to develop according to the "Kyoto Protocol".
Ministries the audit involved included Ministry of Housing, Spatial Planning and Environment, Ministry of Economic Affairs, Ministry of Transport, Public Works and Water Management, Ministry of Agriculture and Environment Management and the Ministry of Finance. Audit results included policy objectives, policy development, policy implementation, policy implementation effect, audit findings, etc. and were disclosed, arousing wide attention from various government departments.
As financial report is the main carrier of general audit, environment report (also known as environmental information disclosure, including the environmental value information reporting, environmental physical information reporting and environmental level information reporting) is also the main carrier of the environmental audit. Foreign corporate environmental report was first appeared in the mid-80s of 20th century, mainly reflected in multinational companies' annual report. After 1990's with the "green awareness" growing stronger, many countries and organizations have been committed to the development of standards for corporate environmental management and reporting. (Lexa J F, 2005) For instance, the AICPA that in June 1995 enacted specific document its environmental accounting unit proposed, making explicit requirements on the accounting and auditing issues in environmental report and developed a series of operational requirements; IFAC in June 1997 published a document on "considerations of environmental issues in financial report auditing", proposing corresponding views on environmental laws, environmental risk assessment and related internal controls; British Association of Chartered Certified Accountants (ACCA) in 1997 issued" Environmental Report and Energy Report Preparation Guidelines"; Institute of Management Accountants of Canada issued in 1998 the file on "understanding and implementing international standards on environmental management ISO14000" and set up environmental reporting system, which has boosted the country's environmental accounting research and promoted the development of environmental auditing. Meanwhile, according to the survey of an international accounting professional services agency, the proportion large multinational companies with disclosure of environmental information in 1994 was 65%, in 1995 grew to 77%, in 2002 reached 85%.(Lexa J F, 2005) This shows to some extent that increased and multi-faceted and enterprise competition make non-economic factors including corporate social benefits, sense of public responsibility and self-discipline capabilities and so on increasingly become an important part of business competition.
In summary, today as we are advocating the harmonious development between man and nature and sustainable development, should further develop environmental audit, in order to better promote the coordinated development of economy and environment. In short, environmental protection and governance and curbing environmental degradation to realize social and economic sustainable development strategy is a large and complex systematic engineering, and environmental auditing as an important part of the system should constantly expand the main body and content of environment, and strive to explore performance audit field, strengthen international exchanges and cooperation on environmental auditing in order to speed up the development of environmental audit work and promote audit to function better in the field of environment.