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Modern environmental audit impacts on a wide scope of business performances, strategies and ethics; as well as potential investors, consumer, and external stakeholders are increasingly demanding on eco-friendly businesses. Therefore, a large number of enterprises endeavours for improving environmental performance, in order to have a decent reputation via environmental audit. Some companies participate by having periodic or non-periodic inspections of key issues of operation, physical, and compliance review regarding environmental audit.
The history of environmental audits is that it was originated in the U.S.A in 1970s, in order to improve industrial accidents and environmental liabilities. Further, The Netherlands established a Green Plan in 1989 for relieving and recovering environmental problems. As a consequence, European Commission founded European Eco-Management and an Audit Scheme for industry in 1993 which detailed in chapter 4.
As a consequence, many relevant regulations and standards towered up since its creation; and it greatly assists companies' environmental performances, activities, and audits currently.
Moreover, this paper scrutinizes environmental audits by reviewing legislation and standard, case studies, techniques, and other useful information. Further, this paper provides recommendation for improvement of environmental audits at the last stage.
2. Definition of Environmental Audit
This stage covers the definitions of environmental audits. Environmental auditing has had an impact on a wide scope of areas; therefore this paper divided two broad areas which are private and public sector, in order to clarify different aspects.
In public sectors, Local Government Management Board (1991) defined environmental audit can be formed by external audit and internal audit. External audit assesses the condition of the local environment, and generally produces the result in environmental report. Internal audits consist of 'policy impact assessment' and 'management audit'. 'Policy impact assessment' is a review of the authority's policies, services, practices, and objectives; on the other hand, 'management audit' is an assessment of procedure and structure by authority's environmental policies.
According to Thomson, S. and Therivel, R. (1991), environmental auditing in private sectors is a management tool which consists of a documented, periodic, systematic, and objective evaluation of the organisation's accomplishment. Environmental auditing designed to secure the environment, along with the practice of the company's facilitating control. Environmental auditing concerns all emissions to air, water, land, and other legal constraints which occurred by operating companies in the local area.
Moreover, European Commission defined general environmental auditing as "A management tool comprising a systematic, documented, periodic and objective evaluation of how well a project, organisation or equipment is performing with the aim of helping to safeguard the environment. The audit should facilitate management control of environmental practices and assess compliance with policy objectives and regulatory requirements."
As described on above three definitions, environmental auditing is a control and assessment tool of organisations' performances along with environmental concerns. Environmental auditing also observes relevant legal restriction and standardisation, in order to secure an environment.
3. Environmental Audit Practice and Procedure
According to the Environmental Protection Agency (EPA), environmental audits get more and more significant now a days; thus the EPA enquires to the company for their environmental audit's procedure. Further, companies have been educed many types of audits in the past, such as a compliance audit, corporate audit, life cycle audit, activity audit, due diligence audit, site audit, issue audit, and health and safety audit (See. Appendix A); in order to make well and warrantable results in environmental performance.
Moreover, environmental audit practice and procedure should aim on compliance with regulatory codes, assistance in acquisition and disposal valuations, and corporate development towards green missions. The compliance environmental audit conforms to the relevant laws, and anticipates conformity with liability for new regulations. The compliance environmental audit has to include a review of mitigation and improvement for upgrading its programmes.
Furthermore, the environmental audit generally can be divided by three stages, which are pre-audit, audit, and post-audit stage.
In pre-audit stage, companies set overall goals, objective, and priorities, in order to make strategies for making well results. Companies also prepare the commitment from management that they are willing to perform. Further, companies organise a team to ensure objectivity and environmental audit results and make documents and record for auditing. On the other hand, auditors get ready for assessing companies with new standard and legal requirements; as well as review the previous year's audit reports.
In audit stage, auditors make well defined and systematic check lists, and do review on relevant documents, records, and policy; along with application of eight elements. (See. Appendix A) Further, auditors do interview and site inspection for genuine, accurate, complete of the audit report.
In post-audit stage, auditors evaluate the found date, and make comments and recommendation on the audit report. After preparation of genuine, accurate, and complete audit report, the audit report published. After publication of environmental audit report, companies need to go back to action plan for covering weaknesses and ensuring strengths.
4. Impact of Environmental Audit on Business
The adoption of environmental audit significantly affects to all the activities of business; for instance, small business may still have opportunity to make low cost products, however, if small company concerns about environmental audit and management programmes, it may be hard to maintain their business. Moreover, the environmental audit makes company to change their environmental policy, it may reflect companies' operational strategies and performances, while companies have to spend time and finance for new environmental strategy, due to taking the full procedure of environmental audit without taking a risk.
Furthermore, in order to make well outcome in environmental audit, companies have to observe relevant standard and law, and International Organisation for Standard (ISO) who constituted basis of environmental standard frames under its 14000 series. Further, ISO 14001 encourages companies to have the 'Environmental Management System' by themselves, and ISO 14004 provides the guideline for Environmental Management System. Moreover, European Commission awards EMAS logo to companies who are successfully completed environmental management system and environmental auditing.
4.1 Relevant legislation and standards
The British companies influenced by British Standard, Environmental Protection Act, and International Organisation for Standard regarding environmental audit.
Firstly, British standard regulated in March 1994, British Standard 7750 for companies' operating the environmental management system; and organisations should be internally audited and evaluated on a regular, pre-determined basis. Environmental audit also should be assessed by independent auditor and reporting directly to management. Further, there is British standard 5750 which formulated in 1987, and it is about quality system. Those BS 7750 and 5750 are interrelated in companies' environmental management and production. For example the selling of product, TESCO retails a beef in plastic package. If they apply both BS 7750 and 5750 in the retail of a beef, the management should concern about plastic package and its recycling consideration with their production. It is one way of satisfying both standards; also they need to cover many things more regarding environmental friendly management and production.
Secondarily, environmental protection act (EPA) 1990 framed neighbourhood nuisance, it is the one of usual environmental issue between companies and its surroundings. Emblematically, emission, noise, waste, and other factors that may disturb surrounding area are restricted by EPA 1990; therefore, it may cause irritation to companies, and make companies spend money, human resource, and time for covering such issues.
Thirdly, International organisation for standard formed the ISO 14000 series which gives various aspects of environmental management. Especially, ISO 14001 and 14004 is about environmental management, ISO 14001 can help to build internal and external objectives. Firstly, ISO 14001 provide an assurance to top management by serving EMS to control organisation's environmental activities and processes internally; as well as it helps external stakeholders by observation of company in environmental regulation. On the other hand ISO 14004 specifies the requirement and principles for EMS, so organisation can complete successfully. The detail of EMS specified in the next stage.
4.2 Environmental Management System
An Environmental management system (EMS) is a systematic, comprehensive, and documented environmental programme of an organisation's management. Thus, organisation can improve environmental performance and management by applying EMS. Further, an EMS gives the aspect of overall environmental management structure; as well as it is under ISO 14001, while organisations required to have an EMS for continuously revising and review for organisation and its surrounding, and environment.
Moreover, the procedure of environmental management system commonly schemes with plan-do-check-act recurrence. (See. Appendix _) The PDCA cycle designed to keep monitoring and acting on environmental performance, it also constantly helps for improving companies' environmental management. However, supply of financial, physical, and human resource may require for the environmental compliance test; therefore, it can burden companies financially.
Consequently, companies required to have an environmental management system for safeguarding environmental and companies' surrounding areas. Furthermore, it may give influence on shareholders' investment decision; so some investors prefer the companies who are performing with environmental management system.
4.3 Eco-Management and Audit Scheme
Eco-management and audit scheme (EMAS) is a supplementation of environmental management system and environmental audit. It has operated since 1995 by European Council Regulation under its No 1836/93. EMAS designed to carry out and evaluate companies' environmental policy targets and action annually; if the companies have successfully done EMAS, they will have EMAS logos which will be proof of the verification of an environmental statement. Further, the following sequences are the main procedure of EMAS.
To construct companies' environmental policy with all relevant environmental legislation and standard. It should be continuously performed for improving environmental performance.
To assist environmental review regarding all the activities of organisations with compliance tests.
To create suitable an environmental management system to accomplish the top management's environmental policy. Further, the top management needs to set an effective environmental policy.
To assess the management system using an environmental audit with compliance regarding all relevant environmental regulatory and standards.
To produce a statement of environmental performance, which includes all successful and unsuccessful environmental policy; and recommendation, in order to continuously improve environmental performance of the organisation.
Give an award the EMAS Logo to organisations who are approved by accredited EMAS verifier. The EMAS verifier needs to send the validated statement to EMAS body, in order to publish to the public.
As described above, those procedures should be confirmed by accredited EMAS verifier, to successfully acquire EMAS logo. Many businesses try to achieve the EMAS logo, because the consumers and shareholders highly prefer the environmental friendly products and services. Environmental concerned management and activities are not only important for companies' philosophy, it also greatly has impact on investment schemes and business sustainability. (European Commission, 2011)
5. Environmental Audit in the Public sector
Environmental audit in the public sector is considerably different from the private sector. Government agencies are in charging of set and enforce environmental standards and legislations; therefore, they are more likely environment protectors compare with private sector. They are usually encouraging and forcing the production of environmental audit in both public and private organisation by setting relevant audit standards. For instance, National Rivers Authority (NRA) in U.K., they are legalising water quality in environmental protection act for environmental audit purpose.
Furthermore, Public sector does environmental audit in below areas:
Environmental structure (climate, lands, geology, and etc)
Air, water quality
Open space and recreation
Waste, disposal, and treatment
Energy maintenance, consumption, and protection
As shown above, those elements reflect on environmental audit in public sector are generally available to public. It is contrasted with private sector audits' confidential saving for commercial issue.
According to Ledgerwood G (1992), environmental audit in public sector is not mandatory requirement. However, it is handy practice of government to improve compliances with legislation and standard for environmental audit.
6. Case study
This stage provides private and public sectors case study below; the case studies have different aspects depending on business types, industries, and sectors.
6.1 Chemical production facility
This case study has investigated in May 1990, by Travers Morgan. A senior environmental engineer and three environmental scientists of Travers Morgan were undertaken the audit in chemical production facility in the north-west of England. The main assessment includes the on-site auditing, chemical testing, meetings with various statutory and regulatory authorities, and other current activities of the facility; as well as, the details of site operation assessment processed by review of historic site data. Further, a key part of the audit was a test of compliance in both historical and current legislative controls regarding emission, environmental media, and health and safety issues.
As a result, the obtained samples from the facility may affect permanence of buildings and infrastructure and may release of pollutants from the site to the local environment. However, no compliance and legislative problem was identified. Thus, the acquisition was completed without problems. Further, the facility recommended use of remedial measure for preventing from potential factors.
6.2 Waste transfer station
The waste transfer station at Hendon, London had comprehensive site audit by Shanks and McEwan Ltd. The audit aimed to assess the environmental quality monitoring and controlling at the site and local areas, based on relevant regulatory standards and the company code of practice. The sites were approximately 2.6 hectares; and the place processed up to 1,200 tonnes per day of solid industrial, household, and commercial wastes. Moreover, in order to undertake environmental audit, the auditors were required elements (See. Appendix B) to the site manager. After the elements received, auditors visit the site and assess to identify aspects of the operation warranting detailed scrutiny during the visit. The reconnaissance also should undertake in the surrounding area, in order to monitor environmental issues. After environmental audit, the inspection has revealed, the fact was detected that they had been made trouble at minimum level of environmental disturbance, especially in the east site. Further, the auditors identified the oil deficiency in the surface drainage system in the site yard. All detected issues had informed to the site manager with initial conclusions and recommendation of the audit team. Therefore, the site manager could excuse warranted about such issues. Moreover, the detailed report included the site and its surrounding, and all the environmental control, operation and monitoring procedures, along with recommendation for improvement to the surface water drainage issue and noise level at sensitive locations.
Above two studies are private sectors' environmental auditing, whereas the environmental audit proceeded with compliance test, in order to figure out any disturbances in environmental issue.
6.3 The National Trust
According to Rob Jarman (1991), the national trust is the United Kingdom's charity which established in 1895. The charity started to create their own environmental policy in 1989, in order to practice for their environmental impact and make recommendation for other organisations. As a consequence, the Trust could set up the environmental audit with £50,000 of projected finance. The environmental audit was the identification the range of activities carried out by the National Trust such as building's energy conservation, materials, and wastes; vehicle's emission; and other relevant issues from the National Trust's management and office departments. Further, the Trust finally built up the tasks for environmental audit such as preparation of guidelines for septic tanks husbandry; review problem; modify sewage management by surveys; review potential for wastes recycling; and conduct a regional survey of sewage discharges and prepare an interim report on management strategy. As a result, the Trust successfully established a full-time environmental audit section within its own department by hiring environmental audit advisor and assistant for advising the Trust's environmental impact and activities; as well as this event made a recommendation for other organisations' environmental management for sewage discharge and other environmental consideration.
The case study of the National Trust is a good model of public sectors' environmental audit; the public sectors' environmental audit produces many recommendations for other organisation and improving relevant legislation and standards.
Thus, private sectors' environmental audit mainly aims on observing standard and legislation. On the other hand, public sectors dedicate the improvement of relevant legislation and standard for environmental audits.
7. Relevant Audit Techniques
This stage proposes some useful techniques, in order to carry out the environmental audit genuinely, accurately, and completely.
Firstly, there is characterising and describing impacts, with the intention of help decision makers understand regarding environment policy, operation, and production. Thus, it includes data on energy and material exchanges between industry and environment; compliance with legislation and standards; important disturbance and complaints; and review of all environmental systems. (See. Appendix _ p 135)
Secondarily, a matrix analysis of information is good practice of environmental audit. It simply shows the components of environmental operation (See. Appendix_p137). As shown in the appendix _, the matrix illustrates evaluation of environmental issues; whereas, it allows users to easily recognise environmental issue.
Thirdly, identifying and assessing alternatives include mitigation, compensatory option, and improvement (See. Appendix_p141). Thus, companies can minimise or counterbalance negative impacts; as well as enhance positive impacts. However, monitoring and follow-up are required to maintain its function.
Fourthly, the verification of audit quality is a key issue of environmental audit, due to satisfying potential stakeholders' consideration and production of successful environmental audit report. Therefore, companies have to corroborate environmental quality measurement and performance internally by carrying out peer review procedures; annual and quarterly reporting environmental performance; inter-organisational comparative studies; and other relevant techniques. Further, external verification has to be made, in order to substantiate application of environmental regulation and standard on companies' environmental audit.
Furthermore, there are many other techniques can assist to carry out environmental audit efficiently.
8. Conclusion and Recommendation
As a conclusion, environment audits are well regulated by international standard, legislation, and practice of public sector. However, there are lacking of potential un-measureable factors and limitation, for instance of impact on climate change by steal manufacturer's operation activities; scientists or engineers can guess or provide possible taint, but they cannot measure actual influences on the climate changes; therefore, the environmental audit reports have a broad field, whereas user's understand such a warrantable issue required for its improving.
Moreover, there is EMAS logo for the companies who are well managed their environmental performance and audit; nevertheless, there are still companies who are not honest with their environmental programmes, because environmental audits treat as practice of environmental performance. Therefore, if governments regulate baseline for relevant emission and usage, and tax on high rates; as well as public disclosure with durable reporting; consequently, companies' environmental performance and audit may improve much better than current situation.
Furthermore, the environmental audit may press companies spending high cost in order to operate and precede environmental friendly activities in production of goods and services. Thus, government may need to exempt tax or liability for the companies well managing their environmental activities, so other company can motivate by such an advantage. Additionally, more professional bodies need to be established for monitoring companies' environmental performances and environmental management systems. Thereby, public sectors' environmental audit can be enhanced in the meantime.