!ave to e financial in nature. )!e criteria may or may not include cost.

&or an audit to e an Chapter 1: Introduction to Environmental Auditing 1environmental audit1 it must !ave environmental o 0ectives or evaluate environmental systems. Introduction 2eactive Environmental #udits In 1992, New York City faced a deep financial crisis. Environmental programs were eing Environmental auditing egan as a voluntary compliance tec!ni+ue in t!e 1934$s. cut, since t!ey were seen as non"essential government activities. In response to t!ese cuts many 5tarting in t!e late 64$s, t!e 75 Congress passed many new significant environmental laws o servers wondered if t!ere were ways to save money and improve t!e environment. # review of including t!e Clean #ir #ct, t!e Clean .ater #ct, and t!e National Environmental 8olicy #ct. t!e city$s operations wit! an eye to environmental performance revealed several areas w!ere Criminal enforcement of t!ese laws egan in t!e late 34$s. 7nder t!e t!reat of enforcement, etter application of environmental practice mig!t save t!e city money %&risc! and Commoner, companies wanted to assess t!eir degree of compliance. #uditing was a way to assess !ow t!e 199'(. )!e review was called an environmental audit. In !indsig!t, t!is review can e called laws applied to a site, and t!e e*tent of any non"compliance pro lems. )!ese environmental environmental audit only in t!e loosest application of t!e term. audits are known as compliance audits. )!is study e*pands upon t!is earlier effort. In it, I e*amine t!e general practice of )!e passage of CE2C9# %t!e 5uperfund legislation( led to anot!er form of environmental environmental auditing and in particular, !ow environmental auditing tec!ni+ues developed in t!e auditing. 7nder CE2C9#, regulators assign lia ility of !a-ardous waste sites. Companies egan private sector mig!t e applied in t!e pu lic sector. I !ope t!is study uilds t!e t!eoretical asis to perform environmental audits in order to assess t!eir e*posure to t!ese lia ilities. )!ese audits for more environmental auditing practice in t!e pu lic sector. )!e widespread usage of t!e ecame known as lia ility audits. practice in t!e private sector clearly indicates its enefits. ,any of t!e most important :ot! compliance audits andare lia in ility are lic reactive. performing t!ese organi-ational functions in society t!eaudits local pu sector.Companies If t!e use of private sector audits are responding policies e*ternal to t!eir own organi-ation. response is typical of evaluation tec!ni+ues to will improve environmental compliance, save)!is money and lead to etter t!e 1command and approac! to environmental .!en a new regulation is decision making, I control1 elieve t!at t!ose tec!ni+ues s!ould management. e locally adopted. passed, companies work to control emissions y adding pollution control devices rat!er t!an In t!is c!apter, I introduce t!e concept of environmental auditing and identify t!e enefits c!anging production processes. 5uc! an approac! increases costs per unit of output. In suc! a of performing environmental audits. Yet, t!ese enefits are only accruing to t!e private sector. mode of operation, compliance or lia ility audits are used to identify w!ere t!e control systems Cities and towns perform environmental management functions, ut t!ey do very little need to e installed. environmental auditing. )!is leads to t!e central +uestion addressed y t!e t!esis. 8roactive Environmental #udits In t!e 19;4$s and 1994$s many companies initiated more proactive approac!es to environmental management. )!ese include t!e esta lis!ing of environmental management .!at Is Environmental #uditing/ systems, adopting pollution prevention strategies, incorporating environmental #n environmental audit is an evaluation wit! environmental o 0ectives. accounting #s an evaluation, procedures developing corporate sustaina ility goals. Companies use environmental an audit !asand clear o 0ectives and defined criteria. )!ere are few formal audit procedures audits eyondto evaluate and to improve t!eseevaluative proactive information. programs. ,ost people perceive auditing as a w!at is necessary to produce procedure t!at is more formal t!an it actually is in practice %Cairncross, 1992(. #udits do not

<ften in response to an environmental disaster %e.g. t!e kepone spill in t!e case of #llied C!emical or t!e disc!arge of c!emicals into t!e C!arles 2iver in t!e case of 8olaroid( companies developed t!eir own environmental policies and management infrastructure to implement t!ese policies. )!ese management systems are designed to prevent similar incidents from recurring and to document positive corporate environmental accomplis!ments. Environmental management system audits can e used to assess t!e effectiveness of t!ese systems and to generate data t!at can t!en e used to improve t!e company$s image. &or e*ample, ICI uses t!e results of t!ese audits in corporate environmental reports %ICI, 199'(. #n alternative to a 1command and control1 approac! is pollution prevention. In a pollution prevention approac!, a company will seek to eliminate emissions at t!eir point of production rat!er t!an at t!e point of emissions. )!us, instead of a pollution control device eing added, production processes and procedures are c!anged. 7nder a pollution prevention approac!, costs do not necessarily rise, ut vary depending upon t!e individual situation at t!e plant. 5ome corporations use environmental audits !ave een used to assess t!e potential for pollution prevention at a site %=ottlie , 199'(. <t!er companies are e*perimenting wit! environmental accounting systems. <ne suc! system is full"cost accounting. In suc! a system, costs t!at would traditionally e grouped toget!er are roken down according to environmental criteria. &or instance, a company may e paying lia ility insurance since it uses a very to*ic material on"site. 7nder a traditional accounting system t!is cost would e classified as an insurance cost rat!er t!an a cost due to an environmental factor. In a full"cost accounting system t!is e*pense would e included in environmental accounts in order to assess t!e environmental costs of current production %5avage and .!ite, 199>(. Environmental audits may e used to generate t!e information necessary for proper classification of costs under suc! a system. &inally, in t!e last ten years, companies !ave egun to respond to t!e idea of sustaina ility. <ne suc! response was t!e :usiness C!arter for 5ustaina le ?evelopment produced y t!e International C!am er of Commerce %ICC, 1991(. )!is c!arter includes a call for companies to improve environmental performance and audits are seen as one way to ac!ieve t!is improvement.

5i* types of environmental audits !ave een identified. )!is variety of audit types !as led to some efforts to standardi-e t!e definition of audits. In t!e ne*t section t!ree definitions of environmental audits are compared. )!e ICC ?efinition Efforts to encourage environmental auditing !ave led to formal definitions of environmental audits. In 19;6 t!e International C!am er of Commerce issued a position paper on environmental auditing t!at defined an environmental audit as follows@ # management tool comprising a systematic, documented, periodic and o 0ective evaluation of !ow well environmental organi-ation, management and e+uipment are performing wit! t!e aim of !elping to safeguard t!e environment y@ %i( &acilitating management control of environmental practicesA #ssessing compliance wit! company policies w!ic! would include meeting%ii( regulatory re+uirements. %ICC, 19;6( 5everal of t!e environmental audit types descri ed previously would fit wit!in t!e ICC$s definition. )!e E8#$s ?efinition In a policy statement issued in 19;6, t!e E8# defined an environmental audit as@ 1a systematic, documented, periodic and o 0ective review y a regulated entity of facility operations and practices related to meeting environmental re+uirements1 %75 E8#, 19;6(. )!e main difference etween t!e two definitions is t!at according to t!e E8# t!e performer of t!e audit is a 1regulated1 entity, w!ereas in t!e ICC$s terms t!e performer of t!e audit is undefined. In t!e E8#$s view, t!ere would e little or no prete*t to do audits wit!out regulation. #udits are seen as a voluntary compliance measures. Counter to t!is view, many developing countries are now re+uiring auditing as t!eir primary compliance measure %.oolard, 1996(. It remains to e seen if auditing alone can produce compliance. )!e I5< ?efinition #s a part of its standards for environmental management %t!e I5< 1'444 series(, t!e International 5tandards <rgani-ation is developing a standard for environmental auditing. 7nder its proposed definition, an environmental audit is@

# systematic, documented, periodic, and o 0ective review of environmental operations, management systems, performance, or practice, carried out t!roug! a rigorous process of o taining and evaluating evidence regarding a verifia le o 0ective or assertion a out an environmental matter, to ascertain t!e degree of correspondence wit! esta lis!ed criteria and t!en communicating t!e findings to t!e appropriate recipient. %I5<, 199>(. Bere, t!e word 1o 0ective1 now appears twice, once as a ad0ective and once as a noun. )!e su 0ectivity of an audit, and for t!at matter, accounting, derives from t!e category and criteria definition. <nce goals are set and evaluative criteria developed % ot! ased on knowledgea le ut su 0ective 0udgments( t!e review can take place. < 0ectivity is created y making t!ese su 0ective 0udgments e*plicit. )!e addition of t!e +ualification of verifia ility in t!e I5< standard is a reaction to t!e various activities now eing called environmental auditing. Eac! of t!e trends in environmental management presented earlier leads to t!e use of environmental auditing as a tec!ni+ue of evaluating implementation. Bunt and Co!nson c!aracteri-e t!is as 1a confusingly wide range of activities.1 )!ey descri e si* specific types of environmental audits@ 1. 2. D. '. >. 6. legislative compliance audits lia ility audits minimi-ation audits product lifecycle audits policy compliance audits environmental management system audits.

=iven t!is wide range of activities t!ey attempt to systemati-e auditing practice@ 1only t!ose activities w!ic! involve a systematic gat!ering and evaluation of evidence to test a $verifia le assertion$ can e classified as audits1 %Bunt and Co!nson, 199D(. Bunt and Co!nson apply a financial audit criteria to t!e definition of an environmental audit. #n environmental audit is a met!odical review of operations andEor sites according to specified criteria. It contrasts wit! an environmental impact assessment in t!e following manner. #n environmental impact assessment is an analysis of w!at will !appen against a standard of w!at s!ould !appen. Environmental impact statements estimate t!e impacts of facilities, policies, and programs and t!ey are produced for pu lic use. Environmental audits measure w!at is actually occurring and are produced for internal management use. )!us, audits could verify t!e accuracy

of estimates in environmental impact statements %=ardner 19;9(. )!e evaluative function of environmental audits is discussed in C!apter >. )!e :enefits of Environmental #uditing Environmental auditing is now a common practice. Indicators of t!e increased level of acceptance are detailed in C!apter 2. )!e widespread and multiple uses of environmental audits indicate t!e degree t!at t!e private sector enefits from t!eir use.. Improved compliance wit! environmental laws is cited at t!e most important enefit of environmental audits %75 E8#, 19;6(. #udits identify compliance pro lems efore t!ey ecome apparent to regulators. <nce a pro lem is identified, remedial action may e taken. If t!e regulatory agency identifies t!e compliance pro lem, t!e company can use t!e environmental audit and any steps toward implementation of audit recommendations as proof of due diligence in solving t!e pro lem %2eed, 1994(. 5imilarly, environmental audits allow companies to identify t!eir environmental progress. #n audit may go fart!er t!an compliance and s!ow steps made toward a cleaner environment t!at e*ceed w!at is re+uired y law. )!ese results can e used to promote a company$s image as a good environmental actor. 5ince t!e pu lic places a relatively !ig! value on environmental issues, t!e reporting of company performance information may e an effective promotion device %=elfund, 199>(. #n environmental audit demonstrates some concern on t!e part of t!e company for environmental issues and values. )!e audit process re+uires communication and interaction wit!in t!e organi-ation on environmental issues. )!ese interactions increase workers$ education level on environmental priorities ot! as re+uired y law and as set y t!e company itself %,orino 1996A :org!esani, 1996(. &inally, environmental audits can lead to significant cost savings wit!in an organi-ation. Environmental audits can identify lia ility pro lems t!at can e addressed efore an accident occurs or a claim is filed. )!e process of ringing a company into compliance reduces potential costs of noncompliance. <ften, c!anges in process operation can e developed t!at avoid producing emissions at all, t!us reducing t!e need for e*pensive pollution"control e+uipment.

.!y 5!ould Cities and 2egions 8erform Environmental #udits/ Environmental management is not only a private company function. Cities and regions perform environmental management functions, too. )!ey operate water and sewerage systems, arrange for solid waste collection and disposal, and develop and maintain parks and transportation systems. )!e pu lic sector is often one of t!e largest single contri utors of pollution in a region. Cities and regions !ave compliance and lia ility pro lems, and t!ey potentially mig!t apply pollution prevention and environmental accounting tec!ni+ues to t!eir operations. #s environmental managers, cities and regions must comply wit! environmental laws. 5ome o servers t!ink t!at t!e pu lic sector resists complying wit! environmental regulations more t!an t!e private sector. .ilson and 2ac!al point out t!at government agencies apply a less stringent noise pollution standard to t!eir own activities. )!ey argue t!at governmental odies are not sufficiently autonomous of eac! ot!er for efficient regulation %.ilson and 2ac!al, 1933(. If cities and regions resist traditional compliance measures, per!aps voluntary compliance met!ods suc! as environmental audits are t!e way to go for cities and towns. Even t!e non"environmental functions of government re+uire some environmental management. # social service agency re+uires !eat and electricity. #gencies often !ave t!eir ve!icle fleets. =oods and services are oug!t y t!e agency. )!ese operations must comply wit! environmental standards. )!us, environmental management is a part of government operation. .!ere environmental policies affect day"to"day operations, t!ere is a role for environmental audits. )!e si-e of t!e pu lic sector makes it an important target for environmental management tec!ni+ues. In diversified economies, t!e various sectors of government are often t!e largest single purc!asers of any particular type of item. #s t!e largest single agent of demand in many markets, governments can greatly influence t!e markets for t!ese goods and services. =overnment purc!asing is usually done t!roug! a competitive idding process. 5pecifications are developed for individual products. Companies must certify t!at t!eir product meets t!ese specifications w!en t!ey id for t!e supply contract. )!us, if t!e government specifies a type of office paper produced wit! a non"c!lorinated leac!ing process, it increases t!e demand for t!is

type of paper. =overnments make up a su stantial portion of t!e office paper markets. 8urc!asing decisions suc! as t!is may rever erate t!roug!out t!e economy. =overnmental influence on market demand contrasts strongly wit! t!e influence of individual consumers. )!e purc!ases for one !ouse!old will !ave a very small effect of t!e types of goods and services availa le in t!e marketplace. <ne consumer mig!t convince a store manager to keep one item in stock and discontinue anot!er item. <nly in a larger campaign, suc! as some of t!e 1green1 purc!asing campaigns of t!e last decade, can t!e actions of an individual !ave an effect. In contrast, government purc!ases are on t!e order of magnitude to affect systems of distri ution, and capital investment. Cities and regions can collectively decide to c!ange t!eir specifications to include environmental considerations. )!is was done, for e*ample, for office paper y t!e Council of =reat 9akes =overnors %&risc!, 199'(. =overnment purc!asing can play a key role in t!e inclusion of non"monetary environmental values in t!e marketplace. Environmental audits of government purc!ases could provide t!e information necessary for greater use of government purc!asing power to t!ese ends. )!e potential of environmental audits to save money is a crucial factor for local governments. In t!e 7nited 5tates, &ederal grants to state and local governments for environmental and natural resources agency functions in 199' were at only '>F %in real terms( of t!eir level in 19;4 %75 :ureau of t!e Census, 199>(. )!is loss of funding for environmental functions of state and local governments !as increased t!e fiscal strain on local governments. In times of fiscal crisis, some of t!e environmental roles of local governments are often seen as e*traneous and as lu*uries. .!en a city$s udget is in deficit, t!e non"essential functions are cut first. )!is !appened in New York City$s fiscal crisis earlier t!is decade. 8arks and recycling were seen as less essential t!an police and fire protection %NYC <ffice of t!e ,ayor, 1991(. Environmental audits !ave t!e potential to increase t!e efficiency of environmental management wit!in government and identify areas w!ere government can influence environmental performance outside of its own operations. 7ltimately, government s!ould conduct environmental audits ecause of t!eir role in everyone$s life. If t!e government is not complying wit! its own regulations, w!y s!ould anyone else/ )!is non"compliance leads to cynicism. In terms of environmental compliance, t!e fact

t!at ot! New York City and :oston violated t!e Clean .ater #ct for years does not encourage ot!ers to meet t!e clean water standards. Environmental laws are political e*pressions of our s!ared environmental values %5agoff, 19;;(. City and regional governments s!ould demonstrate compliance as an e*ample of w!at can e done and to encourage ot!ers to fully comply. Cities and regional governments perform environmental management functions. #s environmental managers, t!ey face compliance issues and !ave significant environmental lia ilities. 8ollution prevention approac!es may e applied to city and regional operations. Environmental accounting systems mig!t e set up. 5ustaina ility may e applied to pu lic management of cities and regions. Environmental audits could e used to improve decision"making in eac! of t!ese areas. If applied, t!e enefits of environmental auditing found in t!e private sector mig!t e captured in pu lic sector management. )!is leads to t!e central researc! +uestion of t!is study@ Bow can t!e practice of environmental auditing as developed in t!e private sector e est applied to t!e pu lic sector/

Chapter 2: The Rise of Environmental Auditing in the Private Sector )!is c!apter e*amines t!e practice of environmental auditing in t!e private sector. &irst, general trends in environmental auditing are noted. 5urveys indicate t!at t!e ma0ority of medium and large companies now !ave an environmental auditing program in place. )!is widespread acceptance of t!e practice !as led to t!e development of a discipline presently esta lis!ing environmental audit standards. )!e 2ise of Environmental #uditing")!e Case of #rt!ur ?. 9ittle %?i:erto, 1996( #s measures were taken to enforce environmental laws, companies faced t!e issue of compliance. 8rivate sector environmental auditing egan in t!e 1934$s as a reaction to t!ese enforcement measures. #rt!ur ?. 9ittle %#?9( ecame a leader in t!e field w!en it was approac!ed y t!e #llied C!emical Company in 1933 %?i:erto, 1996(. #t t!e time, #llied was facing a G1D.; million fine for a kepone spill in Hirginia. #larmed at t!e si-e of t!e fine, #llied$s oard of directors asked #?9 to assess its e*posure to similar incidents at t!irty"eig!t ot!er facilities. &or t!is evaluation, #?9 developed protocols ased upon standard procedures in financial audits. #?9 reported ack t!at w!ile kepone pro lems were under control, ot!er potential compliance pro lems e*isted at t!eir plants. In response to #?9$s assessment, t!e company developed 1a Bealt!, 5afety, and Environmental 5urveillance 8rogram1 to address t!ese deficiencies %8laut, 19;9(. )!is program includes five disciplines@ product safety, pollution control, occupational !ealt!, loss prevention and environmental auditing. )!e program evaluates operations and implements remediation measures according to t!e goals set y corporation policy to@ I design, manufacture and distri ute all products and to !andle all materials safely wit!out creating unaccepta le risks to !ealt!, safety and t!e environmentA I esta lis! and maintain programs to assure t!at laws and regulations are o eyedA I adopt its own standards w!ere laws or regulations may not e ade+uately protective. %Jent, 19;9(

#t #llied"5ignal, #?9 assists in corporate policy development, participates in environmental auditing, and consults on environmental management issues %?i:erto, 1996(. #fter its work wit! #llied C!emical, ot!er c!emical companies approac!ed #?9 to perform environmental compliance audits. )!is led to t!e formation of t!e environmental auditing practice in t!e consulting firm. )!e 75 government also approac!ed #?9 to study t!e new practice. In t!e mid"eig!ties, #?9 wrote t!e first t!ree E8# pu lications on environmental auditing including t!e study t!at supported t!e development of t!e 19;6 8olicy 5tatement on Environmental #uditing %75 E8#, 19;6(. )oday, #?9$s environmental auditing staff consists of t!irty"two full time employees. #?9 draws on ot!er staff w!en relevant tec!nical e*pertise is not availa le in t!e environmental auditing staff )!e unit !as conducted over >,444 audits since t!e 1934$s and continues to conduct D>4 audits a year. 2ecently t!e focus of environmental auditing activities is s!ifting from compliance auditing to environmental management systems auditing. #?9$s work !as ecome increasingly international wit! recent environmental audits conducted in C!ina. #s most medium and large companies now !ave environmental auditing programs in place, #?9 !as s!ifted its focus y providing environmental audit program management assistance, training of environmental auditors, and value"added products suc! as ready"to"use environmental audit protocols and software %?i:erto, 1996(. )!e 8ractice of Environmental #uditing in t!e 8rivate 5ector. )!e practice of environmental auditing in t!e private sector as a w!ole mirrors t!e e*perience of #rt!ur ?. 9ittle. :efore t!e late 34$s, internal audits wit! environmental o 0ectives were only occasionally undertaken. I)) reports a +uality auditing program in t!e 1964s wit! some environmental o 0ectives %.ooley, 19;9(. 8etroc!emical companies were t!e first to turn to environmental auditing as a part of an environmental compliance program. &or e*ample, :ritis! 8etroleum reports its first environmental audit in 1932 %Cowell, 19;9(. Initially, environmental auditing was often 0ust a site evaluation and not connected to a formal program of environmental auditing and management. 8olaroid occasionally conducted audits t!roug!out t!e 19;4$s ut didn$t egin a compre!ensive program until 19;9 %:org!esani, 1996(. In t!e mid"to"late 19;4$s

environmental auditing spread to ot!er types of companies. &or e*ample, 2ayt!eon started its program in 19;; %,erino, 1996(. # 199' survey of environmental accounting and reporting practices of 75 companies found t!at 3DF of responding companies !ad implemented environmental auditing programs %8rice .ater!ouse 998, 199'(. In a similar survey 0ust two years earlier, only '4F of respondents !ad an environmental auditing program in place %I idK( )!e growt! of environmental auditing in private industry in Canada follows a pattern similar to t!e 7nited 5tates. # 19;' Canadian =overnment survey found t!at 2>F of survey respondents !ad environmental auditing programs in place %2eed, 1994(. # follow"up survey designed to collect compara le information in 1991 found t!at t!e num er of private"sector respondents wit! environmental auditing programs in place !ad increased to 36F %)!ompson and .ilson, 199'(. )!e practice of environmental auditing may !ave spread earlier in Canada t!an in t!e 7nited 5tates.1 Environmental auditing did not spread to ot!er parts of t!e world until t!e late 19;4$s and early 94$5.2 International su sidiaries of 75 companies %suc! as &ord and =E( were t!e first to apply environmental auditing practices in Europe %.oolard, 1996(. .!ile compliance wit! environmental laws and corporate policies seems to e t!e main motivating force in t!e 7nited 5tates, t!e issues of corporate environmental reporting and sustaina ility are additional motivations for environmental auditing in ot!er parts of t!e world %?i:erto, 1996(. #n International #uditing 8ractice")!e Case of E2, %.oolard, 1996( Environmental 2esources ,anagement Inc. !as een conducting environmental audits since 19;'. )!is work started in t!e 7nited 5tates ut spread to t!e 7nited Jingdom and Europe around 19;9"94. )en employees are directly involved in its auditing unit and t!e company conducts 244 to D44 audits a year involving '44 to >44 sites. )!e ig growt! in E2,$s work !as come from financial transactions related to privati-ation in Eastern Europe and t!e former 5oviet 2epu lics and from li erali-ation of foreign investment policies elsew!ere. )!e ulk of E2,$s environmental auditing work is in Europe, ut audits of sites in 2ussia, C!ina and India !ave een

conducted. ?ue diligence and compliance audits comprise 34F of E2,$s audit work. #udits of environmental management systems account for t!e rest %.oolard, 1996(. )!e 2ise of Environmental #uditing 5tandards )!e road acceptance of environmental auditing in t!e private sector is reflected in t!e development of standards for auditing practice and regulatory review of audits. In t!e 7nited 5tates, E8# !as issued two policies on environmental audits and t!e ?epartment of Custice !as addressed t!e use of environmental audits in prosecutorial procedural rules. Canada started wit! a similar environmental audit policy and discusses auditing wit!in t!e conte*t of sustaina ility. )!e European Community !as developed standards on environmental management systems and t!e International 5tandards <rgani-ation is developing an environmental management series %I5< 1'444( t!at includes standards for environmental audits. I will riefly descri e t!ese standards. 75 5tandards )!e E8#$s 19;6 5tatement on Environmental #uditing !as some elements of practice standardi-ation. )!e 5tatement defined w!at an environmental audit is and noted t!e elements of a successful environmental auditing program. )!e statement encouraged t!e use of environmental audits, w!ile stating t!at t!e #gency 1will not promise to forego enforcement activity1.)!e 5tatement noted t!at routine E8# re+uests for audit reports in enforcement actions would 1in!i it auditing in t!e long"run1 %75 E8#, 19;6(. 5ince t!e 19;6 E8# 5tatement, governmental standardi-ation activity in t!e 7nited 5tates !as een in t!e form of regulatory policy on t!e use of environmental audits in compliance actions. In 1991, t!e ?epartment of Custice issued new sentencing guidelines %75 ?<C, 1991(. )!ese sentencing guidelines committed t!e ?epartment of Custice to recommending reduced fines in cases w!ere violations were identified t!roug! a company environmental audit and t!en self" reported. &actors contri uting to t!e leniency of ?<C actions on cases of self"reporting include@ t!e pervasiveness of non"compliance, t!e internal disciplinary system, preventative measures, t!e timeliness of cooperation, remediation efforts and t!e aid given to t!e government in t!e investigation %.eisen eck and Casavec!ia, 1992(.

)!e E8# adopted a new policy on self"reporting of noncompliance incidents found t!roug! environmental auditing in Canuary 1996. )!e E8#$s policy committed to seeking reduced fines for companies t!at self"reported violations found t!roug! environmental auditing %75 &ederal 2egister, 12E22E9>(. Canadian 5tandards Canada actively promotes environmental auditing in private industry and in its own operations. In 19;;, It issued a position statement similar ut s!orter t!an E8#$s 19;6 statement %Environment Canada, 19;;(. )!is statement commits t!e agency to promoting t!e use of environmental audits to increase compliance. #n environmental auditing development guide and sample protocol !as also een written y t!e &ederal government. %Environment Canada, 1992a, 1992 (. Canada was a very active participant in t!e 1992 Eart! 5ummit. Conferences and commissions !ave raised t!e issue of sustaina ility at t!e national, provincial and local levels %N2)EE, 199D(. Environmental auditing is seen as a way to evaluate progress toward locally generated sustaina ility goals. :ritis! 5tandards Environmental auditing standards in :ritain arose from several sources. )!e &riends of t!e Eart! !ad a campaign t!at promoted green practices in usinesses and government. 5econd, t!e :rundtlund report increased awareness of t!e ideas of sustaina le development %.CE?, 19;6(. 9ocal government activists influenced y t!is report applied t!ese ideas to t!eir own communities. )!e development of environmental auditing standards came after t!e &ederal =overnment$s .!ite 8aper on t!e Environment in 1994. )!e :ritis! 5tandards Institute developed :5 33>4 as an environmental management systems standard to encourage environmental practices and auditing. )!ese re+uire companies to document compliance wit! 1legislative and regulatory re+uirements,1 environmental effects produced y t!eir operations, e*isting environmental management practices and procedures, and investigations of previous noncompliance incidents. Independent auditors perform periodic environmental audit to verify t!e documentation. %Ball and )ockman, 199>(

<t!er Countries Newly industriali-ed and developing nations are also initiating environmental auditing policies. 5ingapore actively promotes environmental auditing %Co!nson, 199>(. Environmental self"audits are mandatory in India and :ra-il %?i:erto, 1996(. )!e re+uirement of environmental audits in t!ese nations may e a way to encourage compliance wit!out developing t!e same degree of environmental regulatory infrastructure on t!e part of government. I do not elieve t!at audits alone will lead to compliance. )!ese programs raise interesting researc! +uestions. )!e European 7nion 5tandards@ Eco",anagement and #udit 5c!eme %E,#5( )!e European 7nion !as developed its own standards for environmental audits under t!e Eco",anagement and #uditing 5c!eme %E,#5(. 7nder E,#5, sites can register for certification if t!ey provide 1credi le environmental performance information for pu lic scrutiny1 %Billiary, 199>(. )!ese standards re+uire reporting of a significant amount of environmental information. )!is environmental performance information must e t!e product of regular on"site environmental and t!e reporting itself s!ould e audited as proof of verification. )!e European standards for environmental management arise out of :ritis! 5tandards :5"33>4. )!ey differ from t!e :ritis! standards in t!at sites are audited in E,#5 and companies are audited in :5" 33>4 %Ball and )ockman, 199>( )!e I5< 1'444 5tandards )!e International 5tandards <rgani-ation is an international ody t!at develops standards to promote trade of goods and services. )!e 7nited 5tates is represented in t!is organi-ation y t!e #merican National 5tandards Institute. )!e I5< traditionally developed tec!nical standards for manufacturing. ,ore recently t!e organi-ation !as een developing standards on +uality control %I5< 9444( and environmental management systems %I5< 1'444(. )!e I5< 1'444 standards include recommendations for environmental auditing %:ell, 199>(. Environmentalists are concerned t!at t!e I5< standards 0ust re+uire an environmental management system wit!out detailing t!e re+uirements. Companies t!at !ave already developed significant environmental management systems may e at a disadvantage since t!eir standards may e more stringent t!an t!e I5< standards %8rince"2o erts, 1996(. )!e I5< is developing standards for environmental audit performance and for environmental auditor +ualifications %Ball and )oc!man, 199>(.

# ?eveloping ?iscipline of Environmental #uditing )!e practice of environmental auditing com ines t!e skills of several professions including accounting and engineering. )!e engineering professions are very active in t!e international standards organi-ation. 8rofessional accounting groups !ave recently egun to address t!e topic of environmental accounting in terms of !ow environmental issues are included wit!in an internal review. )!e Canadian Institute of C!artered #ccountants produced one of t!e earliest reports from t!is perspective. )!ey e*amined to w!at e*tent environmental auditing fit t!eir definitions of auditing. )!ey concluded t!at most environmental audits would not fit t!eir financial audit definition, ut t!ird"party verification audits of environmental management systems comes closest to meeting t!e traditional accounting standards of good audit practice %CIC#, 1992(. 5everal of t!e largest accounting firms, including Coopers"9y rand and 8rice".ater!ouse, now provide environmental management systems auditing services. Environmental auditing !as its own professional organi-ation, separate from t!ese professional accounting groups. )!e Environmental #uditing 2oundta le !as een in e*istence since 19;2 and !as grown from twelve mem ers to over one"t!ousand mem ers %E#2, 1996(. )!e organi-ation !olds meetings, develops policies and is drafting auditor standards. .!ile an independent academic 0ournal of environmental auditing does not e*ist, articles on t!e topic appear in t!e 0ournal Environmental ,anagement, and in t!e periodicals@ )otal Luality Environmental ,anagement and :usiness 5trategy on t!e Environment. )!e Controversy over 5!ielding of Environmental #udits 5!ould environmental audits e s!ielded from use in environmental prosecutions/ #s seen in t!e discussion of t!eir standards, ot! t!e 75 E8# and t!e 75 ?epartment of Custice are committed to finding ways to encourage self auditing. Yet, ot! entities reserve t!e rig!t to su poena environmental audit documents in rare cases w!en t!ese documents will add to proof of willful violations. )!is +uestion !as een t!e most controversial issue wit!in t!e emerging practice of environmental auditing. 5uccessful environmental audits will find and document instances of noncompliance wit! environmental laws and regulations. In normal operations, once a pro lem is discovered, it

re+uires time to fi*. )!e prosecution of companies making good fait! efforts to resolve t!eir noncompliance pro lems may defeat t!e purpose of environmental auditing. )!e t!reat of prosecution may e more t!an companies are willing to risk. )!e most famous e*ample is t!e Coors case %=errard, 1996(. )!roug! an environmental audit, Coors discovered 1a significant level of volatile organic compound %H<Cs( emissions1 at one of its plant sites. #t t!e time H<Cs were not a recogni-ed as a common air pollution pro lem in eer rewing processes y t!e Coors company and t!e eer industry in general. )!e company reported its results to Colorado enforcement aut!orities. Coors tried to argue t!at t!e fact t!at t!ey did t!e audit s!ould e*empt t!em from prosecution. )!e audit was used y environmental aut!orities to 0ustify an enforcement action for t!e violation. )!e company ended up paying a fine of G2D3,444 for t!e violation %:N# Environmental 2eporter, 6"2'"9'( )!e 2esponsi le Corporate <fficer ?octrine )!e standards of proof necessary for an environmental enforcement action depend upon t!e type of violation. Issues addressed y t!e courts include various degrees of knowledge and intent. =enerally, environmental prosecutions re+uire some degree of knowledge ut a very low degree of intent. 7nder t!e responsi le corporate officer doctrine, corporate officers can e !eld responsi le for activities t!at were t!e responsi ility of t!eir employees as long as t!ere was some internal notice of conditions. )!is doctrine !as een incorporated into enforcement provisions of t!e Clean #ir #ct and t!e &ederal .ater 8ollution Control #ct %Cooney et. al., 199> ( ?ue ?iligence/ # successful environmental compliance audit will identify areas w!ere violations may e taking place. #n officer w!o receives t!e environmental audit ecomes a responsi le corporate officer under t!is enforcement doctrine. )!e concept of due diligence comes a out in terms of t!e degree of t!e response to t!e knowledge t!at a violation may e*ist. 5ome violations can e corrected rig!t awayA ot!ers may take a capital investment. If a corporate officer ordered t!e e+uipment necessary to correct a pro lem as part of an environmental audit implementation plan, does t!at constitute due diligence/ ?ue diligence is t!e concept t!at taking measures to ensure

compliance is t!e reasona le e+uivalent of eing in compliance. .!ile not in compliance now, suc! measures %under due diligence( must lead to compliance. #udit 5!ielding 9aws In response to t!ese lia ility concerns, companies !ave een lo

ying states to pass

s!ielding laws. )!ese companies include paper, c!emical, energy, and waste management companies. 5everal coalitions are also involved@ 1Compliance ,anagement and 8olicy =roup,1 1 Corporate Environmental Enforcement Council,1 and t!e 1Coalition for Improved Environmental #udits.1 Eig!teen states !ave now passed suc! laws. )!e net impact of t!ese laws is t!at t!ey allow companies to wit!!old information. 5everal 5tate #ttorney =enerals !ave egun lo ying against t!ese laws as t!ey limit t!eir aut!ority to enforce environmental legislation. 7nder t!e new E8# policy on environmental audits, self"reporting leads to reduced penalties rat!er t!an protection from prosecution %75 &ederal 2egister, 12E22E9>(. &ifty companies !ave now come forward and few !ave faced any fines. E8# is also t!reatening to wit!draw environmental law enforcement aut!ority from states w!ose s!ielding laws 1undermine enforcement of &ederal laws1 %1,any 5tates =ive 8olluting &irms New 8rotections1 New York )imes 'E3E96 p. 1, 16.( If a company$s sole purpose in doing environmental audits is compliance, audit s!ielding is a ig issue. Yet according to ot! E2, and #?9, and as s!own in t!e 2ayt!eon case study in t!e ne*t C!apter, corporations now perform audits of environmental management systems t!at include muc! more t!an compliance goals. )!e e*tent of controversy over any prosecution of self"reported incidents may reveal t!e e*tent t!at fear of criminal prosecution motivates environmental auditing in t!e private sector.

Chapter 4: The Emerging Pu lic Sector Environmental Auditing Practice )!e practice of environmental auditing is still new to t!e pu lic sector. In t!is c!apter, I first look at precedents to pu lic sector environmental auditing. )!en trends in pu lic sector auditing are identified. 2elatively little pu lic sector auditing practice is taking place. I present two e*amples of t!is emerging field. )!e first e*ample is from t!e 7nited Jingdom and takes a road approac! to pu lic sector auditing. )!e County of 9ancas!ire conducted an environmental audit of t!e county in 19;9 leading to t!e report@ 9ancas!ire " # =reen #udit %9ancas!ire County Council, 1991(. )!e second e*ample is from t!e 7nited 5tates. In 1992"9D, t!e Center for t!e :iology of Natural 5ystems conducted an environmental audit of t!e udget of t!e City of New York wit! support of t!e Cessie 5mit! Noyes &oundation and t!e 5urdna &oundation. )!e report, #n Environmental #udit of t!e New York City :udget was released in &e ruary 199' and comprises a review of internal environmental management activity %&risc! and Commoner, 199'(. )!ese audits pose two different approac!es to environmental auditing in t!e pu lic sector. #fter descri ing eac! case, I analy-e t!e differences etween t!ese e*amples of audits in t!e pu lic sector versus successful environmental auditing in t!e private sector. )!e ?eveloping 8u lic 5ector #uditing 8ractice 8u lic sector environmental inventories and plans !ave een around for a long time alt!oug! environmental auditing is only a decade old.. 2egional surveys were essential parts of t!e met!ods of early planners suc! as 8atrick =eddes w!o wrote and worked in t!e early twentiet! century %Ball, 19;;(. Environmental data were often collected in t!ese plans and initiatives, ut e*isting environmental practices were not evaluated. 8lans wit!out a continuous feed ack loop of evaluation and implementation will only end up sitting on t!e s!elf Environmental audits are an evaluative tool t!at can assist in integrating information collected in regional surveys, inventories and plans, and actual environmental operational practice. )!e 75 Council on Environmental Luality, an agency working under t!e E*ecutive <ffice of t!e 8resident, was esta lis!ed under NE8# in 1969. 8art of t!e Council$s role is to pu lis! an annual Environmental Luality 2eport. 8art of t!is report was to include@

a review of t!e programs and activities %including regulatory activities( of t!e &ederal =overnment, t!e 5tate and local governments and nongovernmental entities and individuals wit! particular reference to t!eir effect on t!e environment and on t!e conservation, development, and utili-ation of natural resources %75 Congress, 1969. )itle II sec. 241( #ccording to t!e law, t!e report s!ould include 1a program for remedying deficiencies1 %I id.( )!is report as defined y law s!ould e a survey of programmatic data t!at allows for an evaluation of environmental progress. )!e Environmental Luality 2eport !as een issued wit! 6 5everal cities and states !ave issued reports wit! similar format relative fre+uency since 1934. and tone since t!at time. Evaluative tec!ni+ues suc! as energy audits and property lia ility audits !ave een in use in t!e pu lic sector since t!e seventies. Environmental auditing may encompass t!e use of t!ese tec!ni+ues. In an environmental audit, t!ere is a stated goal of environmental improvement. If eit!er an energy audit or a property lia ility audit is performed wit! stated environmental improvement goals, t!en t!ey may also e considered environmental audits. Energy or property lia ility audits performed efore t!e standardi-ation of t!e term 1environmental audit1, mig!t meet today$s criteria of an environmental audit. In t!e 7nited 5tates, environmental auditing of federal facilities egan s!ortly after t!e presentation of t!e E8# environmental auditing policy statement in 19;6. In t!at same year E8# developed a protocol for environmental auditing of E8# facilities. Environmental auditing in ot!er parts of t!e &ederal government is mostly limited to facilities of t!e ?epartments of Energy and ?efense. )!e discovery of large"scale pollution pro lems at nuclear weapons facilities and t!e large e*pense of remediation is t!e driving force e!ind t!ese audits. Environmental audits of t!ese facilities are now incorporated as part of t!e clean"up program %2iedel, 1996(. Environmental audits in t!e &ederal =overnment outside of t!e ?epartment of Energy and t!e ?epartment of ?efense are still rare %75 =#<, 199>(.

In New York 5tate, =overnor Cuomo signed an e*ecutive order suggesting t!at all New York 5tate ?epartments conduct environmental audits. .!en t!e state ?epartment of Environmental Conservation later surveyed t!e ot!er agencies, it found t!at none of t!e ot!er agencies !ad egun an environmental auditing program. )!e =overnor responded y ordering t!at every department develop environmental auditing protocols %:N# Environmental 2eporter, 199'(. # recent action y =overnor 8ataki !as rescinded all of =overnor Cuomo$s e*ecutive orders, leaving t!is effort in lim o. # 1991 survey of environmental auditing practice in Canada found t!at only two of nineteen responding pu lic sector departments !ad an environmental audit program in place. #t t!e same time, fifty"seven out of seventy"five responding private sector firms !ad environmental auditing program in place. )!e two positive pu lic sector responses in t!is survey were from agencies at t!e &ederal level of Canadian government %)!ompson and .ilson, 199'(. ,ore recent efforts at pu lic sector auditing are arising out of local sustaina ility efforts arising out of local and regional government participation in t!e 1992 Eart! 5ummit in 2io ?e Caneiro %N2)EE, 199D(. 8u lic sector environmental auditing is muc! more advanced in t!e 7nited Jingdom, partly due to t!e wide pu licity of t!e pu lic sector auditing process illustrated in t!e first case study presented in t!is c!apter. )!e activism of local government in places suc! as 9ancas!ire led to an advisory compilation on pu lic sector auditing efforts y t!e 9ocal =overnment ,anagement :oard in 1991. 9ocal government activists in :ritain %as in Canada( were active in t!e Eart! 5ummit and !ave formed 9ocal #genda 21 efforts. )!ese efforts call for pu lic sector auditing as a part of local government sustaina ility efforts. )!e practice of environmental auditing in t!e pu lic sector is still new. )!e earliest efforts in t!e 7nited 5tates are less t!an a decade old. )!e concept is now in :ritain w!ere significant pu lic sector activity is occurring %,asser and 8rtic!ard, 199'( )!e two cases studies t!at follow reflect t!is early stage of environmental auditing practice in t!e pu lic sector.

Chapter !: Planning for Successful Pu lic Sector Environmental Auditing Practice )!is c!apter e*amines issues related to planning for successful environmental auditing practice at t!e local municipal level. )!e first section compares motives for auditing in t!e private sector to t!e motives in t!e pu lic sector. )!e differing motives for pu lic sector environmental audits leads to some considerations on w!ic! audits oug!t to e performed. 9astly, I recommend ways to initiate environmental auditing programs in local government. )!e ,otivation for #uditing .!y do organi-ations do environmental auditing/ In t!e private sector, auditing is driven y many factors including compliance, lia ility reduction, environmental pu lic relations and cost reduction. In t!is section, I e*amine t!e reasons to conduct audits emp!asi-ing t!ose reasons t!at will e most convincing to top management of cities and towns "pu lic officials. Environmental Compliance and Enforcement ,any companies egan environmental auditing as a way to increase compliance wit! environmental !ealt! and safety laws. )!e pressure to comply egan wit! t!e passage of environmental laws in t!e late 64$s and 34$s and t!e development of enforcement measures for t!ese laws. Enforcement of t!ese laws !as proven to e comple*. Enforcement re+uires some system of inspection and reporting com ined wit! a system of penalties for non"compliance. ?i,ento %19;6( identifies t!ree formal types of enforcement measures@ criminal sanctions, civil sanctions, and administrative orders. Criminal sanctions are detailed in t!e penalties included in environmental laws. &or e*ample, t!e Clean .ater #ct makes it a crime to pollute naviga le waters. )!e penalties for t!is crime, including imprisonment and fines, vary wit! t!e degree of seriousness of t!e pollution incident %9ocke, 1991(. <t!er criminal laws, suc! as racketeering statutes, may e applied to environmental cases. Criminal enforcement actions egan in earnest in 193; w!en #ttorney =eneral Cames ,oorman announced t!at prosecutions of environmental law violations would soon egin and t!at grand 0uries were currently in session %Cooney, et. al 199>a(. .it! t!e 1responsi le corporate officer doctrine1 %descri ed in C!apter 2(, top management in t!e private

sector !as an incentive ot! to avoid non"compliance and to use environmental auditing as a way to prove due diligence in correcting instances of non"compliance %Bartman and ?e ,onaco, 199D(. 8u lic officials are protected from criminal sanctions. Criminal sanctions for violations of environmental laws under t!eir tenure of environmental management of a locality are not allowa le. 8u lic officials en0oy a road degree of legislative immunity from criminal acts committed in t!e fulfillment of t!eir pu lic 0o s %5mit!, 1991(. .it!out t!is immunity, few people mig!t engage in pu lic service and risk prosecution. )!us, t!e t!reat of criminal prosecution under t!e responsi le corporate officer doctrine does not provide a motive to increase auditing in cities and towns. Civil sanctions are ased upon concepts of nuisance or civil statutes. Civil actions may include fines and in0unctions. Critics of civil sanctions complain t!at civil actions do not communicate t!e seriousness of an environmental transgression. &ines and in0unctions may e answered wit!in an organi-ation wit! no organi-ational c!ange to address !ow t!e transgression occurred %?i,ento, 19;6(. )!ese criticisms may e true for ot! t!e private and pu lic sector. #dministrative orders are t!e t!ird type of enforcement measures %?i,ento, 19;6(. #dministrative orders are conditions imposed directly upon a usiness suc! as t!e suspension of an environmental permit ecause of an environmental violation. #dministrative orders, suc! as consent decrees, are a primary means of enforcing environmental laws in t!e pu lic sector. )!ey suffer from t!e same deficiencies in c!anging organi-ational e!avior t!at occur wit! civil sanctions. ,y findings on compliance as a motivation for environmental audits s!ow t!at fear of criminal sanctions motivates many private sector companies to do environmental auditing. Yet, ot!er forms of enforcement are less successful. 5ince officials in t!e pu lic sector do not face criminal sanctions, increased compliance is a weak motivation for auditing in cites and regions. 9ia ility <ne of t!e ma0or motivations of environmental auditing in t!e private sector is t!e reduction of lia ility under 5uperfund. <wners!ip of property may lead to assignment of lia ility

under t!is law. Companies perform audits of property efore t!ey ac+uire parcels in order to assess t!ese lia ilities. Cities and regions do not face lia ility for 5uperfund on land t!ey ac+uire t!roug! eminent domain or t!roug! involuntary means including esc!eat %Jolker and ?owden, 199>(. Cities and regions face lia ilities for e*isting !a-ards on land owned y t!e local municipalityA sites suc! as closed municipal landfills are listed as 5uperfund sites. )!e pressure to audit to reduce lia ilities is less strong for cities and regions t!an for t!e private sector. Cost 2eduction Cost reduction may or may not motivate environmental auditing in t!e private sector. ,arket forces may lead to more efficient operation and management in t!e private sector. )!ese competitive pressures may lead to significant efforts to cut down on unnecessary costs. &or some companies, cost reduction is ot! an implied and an e*plicit motivation for auditing. Companies !ope t!at t!ey are avoiding t!e e*pense of legal and criminal sanctions y finding and correcting areas of noncompliance efore an enforcement action is taken. Neit!er 8olaroid nor 2ayt!eon !ad estimated t!e cost savings due to environmental auditing in t!eir company %,arino, 1996A :org!esani, 1996(. )!e reduction of t!ese costs is implied since companies can not measure w!at t!e costs of compliance mig!t !ave een. Environmental audits conducted to identify pollution prevention andEor energy conservation measures use a uilt"in cost effectiveness function. ,easures are c!osen in suc! audits ased upon t!eir cost"effectiveness over t!e lifetime of t!e measure. &inally, many companies conduct audits to protect top management from criminal prosecution. In t!ese cases, auditing does not !ave to save money@ it is an e*pense of doing usiness. Cost reduction may motivate some private sector audits, ut ot!er auditing programs are seen as a necessary e*pense. 8u lic sector cost reduction is su 0ect to different forces. )!e pu lic sector is c!aracteri-ed as wasteful and capa le of more efficient operation. ,any pu lic operations are s!ielded from market forces %5avas, 19;3(. #s descri ed in C!apter 1, cities and regions face fiscally difficult times as e*penses rise and availa le revenues drop. 9ocal governments uild, operate, and maintain large amounts of environmental infrastructure. )!ese infrastructure costs lead to large amounts of environmental capital e*pense in local udgets. In t!e audit of t!e New York City udget, environmental management functions accounted for ;4F of t!e City$s capital

udget %&risc! and Commoner, 199'(. &inally, cities and regions do not !ave t!e same criminal enforcement pressures t!at private sector organi-ations !ave. )!us, any environmental auditing program must e cost"effective. )!us, cost reduction is ot! a stronger motivation for and a more necessary component of pu lic sector environmental auditing programs. Environmental #uditing for Improved 8u lic 2elations ,any companies use environmental audits to identify positive efforts toward environmental improvement wit!in t!e company. 8olaroid started its compre!ensive auditing program after eing t!e target of environmental enforcement. In t!e future, audits will e used to prove t!at company operations are managed in accordance wit! generally accepted environmental standards suc! as I5< 1'444 and E,#5 %see C!apter II(. .!en t!is information is deemed necessary in t!e market, t!is motivation for auditing will increase. =iven t!is potential of environmental auditing to identify positive steps toward environmental improvement, w!y is t!ere so little environmental auditing in t!e pu lic sector/ 8art of t!e answer may e t!at evaluations are always political %8atton, 19;3(. 8u lic"sector administration may e !ig!ly politici-ed. )!e negative results of an environmental audit cannot e kept confidentially in t!e pu lic sector to t!e same e*tent t!at it can e in t!e private sector. In t!e minds of pu lic officials, t!e t!reat of negative results may outweig! any potential for positive gain. )!e amount of trust necessary for top administrators to initiate an evaluation process may not e*ist in pu lic organi-ations. :ot! t!e 7nited Jingdom and Canada appear to !ave more pu lic sector environmental auditing activity.$ 4 )!is activity may originate from t!e local #genda 21 efforts. 9ocal governments from ot! of t!ese countries sent delegations to t!e Eart! 5ummit in 2io and came ack energi-ed to e*amine w!at local sustaina le development meant in t!eir own communities. #ccording to ?i:erto, sustaina ility is a motivation for auditing outside of t!e 7nited 5tates %?i:erto, 1996(. 5ome of t!e cross"national difference may e due t!e lack of participation on t!e part of t!e 7nited 5tates in t!e Eart! 5ummit.

)!e effectiveness of generating positive stories of pu lic sector environmental practice varies y location. Citi-ens in some places view environmental management as a priority for everyone, including local government. <t!ers see t!e environment as an elitist issue. ,any people still assume t!at environmental improvement will re+uire yet more e*pense as it did under t!e regime of t!e 1command and control1 approac! to environmental management. Environmental audits conducted wit! t!e same purpose of t!e New York City audit may e done to s!ow t!at environmental improvement does not always lead to increased cost. 8u lic sector environmental auditing needs to overcome t!is perception. )!e potential e*ists for cities and regions to use environmental audits in a manner similar to private companies. Cities could pu lici-e t!e positive ac!ievements in environmental improvement as a measure to increase t!e attractiveness of t!e community. 5ome companies, after receiving negative press a out t!eir environmental activities, seem to e motivated to use environmental audits in t!is manner. Cities and regions also face negative press. ,any inner cities are perceived as eing dirty and contaminatedA audits could e used to c!ange t!is perception. #udits in t!e Conte*t of )otal Luality ,anagement Environmental auditing is an evaluative tec!ni+ue of environmental management. )!e trend toward 1entrepreneurial government1 and 1total +uality management1 in government may lead to more environmental auditing. <s orne and =ae ler call for 1mission"oriented government1 and for +ualitative and +uantitative measurement of t!e results %<s orne and =ae ler, 1992( #n environmental auditing program would re+uire setting goals and adopting local government environmental policies. In total +uality management, continuous improvement is stressed %Co!en and :rand, 199D(. )!e measurement of improvement in terms of environmental success could e ac!ieved t!roug! environmental auditing. Environmental audits may start wit! an o 0ective, suc! as compliance wit! a specific organi-ational environmental policy. )!en auditors c!eck to see if operations meet t!e o 0ective. )!ey collect +uantitative and +ualitative data in order to provide an opinion a out w!ic! operations are in compliance. )!ey go on to suggest improvements in operational procedures to

correct identified compliance pro lems. )!ese procedures are t!ose necessary to conduct w!at 8atton calls a formative evaluation. #ccording to 8atton@ &ormative evaluation serves t!e purpose of improving a specific program, policy, group of staff, or product. &ormative evaluations aim at $forming$ t!e t!ing eing studied. &ormative evaluators want to !elp to improve !uman endeavors. ... )!e purpose of t!e researc! is to improve effectiveness wit!in t!at setting. %8atton, 1994, p. 1'6( Environmental audits reports also fit t!e reporting style of formative evaluations. 8atton identifies pu lication modes of formative evaluations w!ic! include@ oral riefings, conferences, and internal reports wit! limited circulation %I id., p. 161(. #udit reports may take all of t!ese forms %5avit-, 1996(. &ormative evaluations aim to improve program performance. Improved performance implies eit!er a reduction in total costs or t!e production of more goods and services for t!e same cost. Improved efficiency and cost reduction are t!e primary motivations for environmental auditing in t!e pu lic sector. 5ummary of ,otivations )!is preceding section e*amined t!e motivation for auditing in t!e pu lic sector. Cost reduction was found to e t!e primary motivation for auditing in t!e pu lic sector. Cost reduction includes reduction of current e*penses, reduced capital e*pense, and improved efficiency found via t!e adoption of total +uality management tec!ni+ues. =enerating positive pu licity !as some potential to motivate auditing, ut t!ere is a common incorrect assumption t!at environmental improvement leads to increased e*penditures. )!is assumption must e c!allenged. Cities and regions face some compliance and lia ility pressure. :ut t!ese pressures are lig!ter t!an t!ose faced in t!e private sector. Compliance and lia ility pressures are monetary in t!e pu lic sector. )!us, w!atever pressure municipalities feel in t!is area also relates to cost reduction. C!oosing .!ic! Evaluation .!en/ If city management is initiating an environmental auditing program, it makes sense to start wit! a limited cost"reduction approac!. )!e process of auditing re+uires t!e setting of goals, and

t!e development of protocols t!at produce data. #s t!e amount of auditing increases, staff in various operations ecome more familiar wit! environmental management priorities %:org!esani, 1996(. )!e process itself of doing t!e evaluation often leads to program improvement. Evaluation !as goals t!at will conflict wit! administration. #ccording to 8alum o, evaluators try to do t!ree t!ings concurrently. )!ey !elp administrators understand w!at is going on. )!ey t!emselves try to figure out t!e w!ole picture of w!at is occurring including negative aspects. )!ey try to improve evaluative and administrative practices %8alum o, 19;3(. )!is creates tension etween evaluators and administrators. )rust must occur for evaluation to e successful. .ildavsky comments 1acceptance of evaluation re+uires a community of s!ared values1 %.ildavsky, 1939(. )rust may e uilt t!roug! s!ared e*perience. )rust can only e uilt up over time. In t!e New York city e*ample, trust !ad to e generated y performing 1free1 work y C:N5 for t!e ?epartment. In t!e 2ayt!eon case, trust is created y making local site management part of t!e auditing process %,arino , 1996(. #dministrators developing environmental management policies will consider formative evaluations 1more friendly.1 5uc! evaluations provide information useful to t!e implementation process %:ryson and Cros y, 1992(. )!us, w!en cities and regions start t!eir own environmental auditing programs, t!ey need to start slow to allow trust to e uilt. #s auditing programs gain e*perience and egin to tackle proactive issues of environmental management, more trust will e necessary. #ddressing issues of noncompliance in pu lic sector management will re+uire an open process wit! a large degree of community commitment to environmental improvement. <t!erwise t!ere is no reason for a pu lic official to risk raising t!e issue. 2ecommendations for Initiating Environmental #uditing 8rograms in Cities and 2egions I make nine recommendations for initiating environmental auditing practice at t!e level of city and regional government. )!ese recommendations are ased upon t!e analysis of t!e previous two c!apters. I !ope t!at t!ese measures would lead to t!e development of

environmental auditing programs in t!e pu lic sector t!at replicate enefits found from t!e practice in t!e private sector. 2ecommendation <ne"5tart 5mall"8lan to #udit .!en an environmental auditing program is initiated, t!ere is a temptation to inventory all of t!e data necessary for t!e development of a good aseline. )!is leads to t!e 1first audit1 pro lem addressed in t!e last c!apter. ,uc! of t!e compre!ensive data necessary could e compiled as part of an environmental planning process. )!e development of an environmental inventory, survey, or plan would provide t!e aseline for later audits. Information from past environmental assessments and environmental impact statements could e compiled into suc! a plan. #udits could t!en e used to verify specific categories of information wit!in suc! a plan. )!e results of t!e audits s!ould inform t!e overall planning process and t!e results of t!e planning process s!ould inform t!e development of audit goals and audit protocols. Instead of auditing an entire city, a new program s!ould pick a particular media, function, department, or site to e audited. In New York City, t!is mig!t entail an audit of t!e ?epartment of =eneral 5ervices, or an audit of an office uilding. :y starting small, environmental auditors can gain e*perience and test protocols for effectiveness.1 Environmental audits will not solve local government udgetary pro lems. .eiss$s admonition to put t!e goals of evaluation in 1sensi le perspective1 is important %.eiss, 193D(. #n initial small auditing program !as t!e advantage of !aving more clearly defined goals, and !as a !ig!er c!ance of producing usea le results. 2ecommendation )wo"Clear =oals Consider cost reduction as t!e initial goal. #s efforts proceed, t!e implication t!at environmental improvement necessitates increased costs will e c!allenged. #fter t!e municipality !as some practical e*perience, roader non"economic environmental goals could e roug!t into t!e program. )!is depends upon t!e e*tent t!at environmental values !ave een articulated pu licly as important goals for city and regional management. <nce t!ese future

policies !ave een developed, auditing can e used to evaluate t!e e*tent of operational compliance wit! t!ese more environmental policies. 2ecommendation )!ree " 5taffing 5taffing a new municipal program may e !ard. )!ere are e*isting municipal employees wit! e*pertise in t!e assessment of environmental, !ealt!, and safety issues at particular sites. )ap into t!ese positions. 8romote t!ese people w!ile e*panding t!eir 0o assignment to t!is roader function. Initially, cities and regions could audit eac! ot!er %:org!esani, 1996(. )!is sort of process would ring in people w!o are e*perienced wit! t!e day"to"day operation of t!ese functions ut w!o are independent of t!e particular site eing audited. 5uc! an e*c!ange would increase communication and allow for increased cooperation etween municipalities. <utside consultants could e roug!t in to train new auditing staff or to oversee t!e development of protocols. #s it is important to uild up organi-ational commitment to auditing, t!us, t!e entire audit s!ould not e contracted out. ,unicipalities s!ould address t!e degree of independence t!e t!ink is necessary for t!eir locality. 2ecommendation &our"8rotocols 8rotocols are necessary in order to create data sets t!at allow for veracity of audit findings and replication of audit work. )!ese can e ased upon E8# guidance documents for t!e auditing of federal facilities %75 E8#, 199>( or purc!ased from t!e private sector providers suc! as #rt!ur ?. 9ittle %?i:erto, 1996(. &ollowing well"made protocols will assist in insulating t!e audit from t!e !ig!ly politici-ed environment of pu lic sector management. 2ecommendation &ive"Clearly .ritten #udit 2eports #udit findings s!ould e presented in an audit report. It is !arder to !ide t!ings in t!e pu lic sector t!an in t!e private sector, so careful attention s!ould e paid to w!at is said in t!e report. =iven t!e tig!tness of pu lic sector udgets, it is even more important t!at findings e prioriti-ed as to t!eir importance. )wo important considerations@ 1. .!ic! findings need immediate attention/ and 2. .!at findings s!ow operations t!at cost more t!an t!eir remediation/ )!ese two considerations would e of immediate import to local officials.

In t!e audit report it is important to provide alance. .!at are t!e successes of t!e present management system/ )!ese must e addressed along wit! t!e e*ceptions to good environmental practice. 2ecommendation 5i*"Implementation 8lan )!e identification of failures wit!out a remediation plan would e risky and politically unwise. # successful implementation plan would provide a concrete e*ample of government taking positive action for t!e environment. )op management in cities and are politically motivated and t!is sort of information may e politically potent. Identification of e*ceptions in an environmental audit t!at go uncorrected is evidence of a non"productive administration. 2ecommendation 5even")op ,anagement 5upport. Initiating an auditing program will entail taking some risks. )!ese risks include uncovering compliance pro lems, recogni-ing lia ilities, and finding cases of mismanagement. ,anagement must e committed to remediating any pro lem t!at is found. 2emediation may take funds t!at are not readily availa le in t!e udget or t!at re+uire a commitment of capital funds over a period of years. )op city and regional management s!ould e knowledgea le a out t!e risks efore starting an audit program. In t!e case of a City suc! as New York, an environmental auditing program s!ould !ave t!e support of t!e ,ayor. #s c!ief e*ecutive of t!e city, t!e ,ayor appoints top agency officials w!o oversee operational aspects of city administration. # ill aut!ori-ing t!e program and committing t!e City to an environmental management policy s!ould e roug!t to t!e City Council. )!e Council !as some oversig!t over udget matters, and some level of t!eir support is necessary in order to fund any necessary remediation pro0ects. )!e Comptroller of t!e City presently !as auditing power over City operations, ut t!ese audits tend to e !ostile. )!e Comptroller$s <ffice mig!t audit t!e auditing program for consistency and to ensure t!at findings are addressed in some manner. I used a very loose definition of environmental auditing in t!is report. Cities and regions need to e a le to define w!at t!eir environmental audit is and w!at t!ey e*pect to come from it. 9ancas!ire$s green audit is more a compilation of environmental data wit! parallels to t!e CEL

Environmental Luality reports. It remains to e seen w!et!er or not t!eir follow"up reports take more of t!e form of environmental audits in t!e private sector. )op administration needs s!ould determine t!e definition of environmental auditing used y an individual in cities or region. 2ecommendation Eig!t"Communication Communication s!ould e maintained etween t!e top management and t!e level of operation eing audited. )!e reasons e!ind t!e audit s!ould e e*pressed. 5ome ve!icle for adding input into auditing functions from t!e level of operation eing audited is necessary. #n audit oversig!t committee made up of stake!olders in t!e evaluative process mig!t e set up as a forum for suc! input. 5take!olders mig!t include t!e municipal union, departmental management, e*ecutive management and t!e director of auditing staff #n e*ternal group of stake!olders could also e set up parallel to t!e 9ancas!ire Environmental &orum. New York City already !as issue specific environmental planning advisory odies. <ne could e set up to assist in Citywide environmental planning and management. <versig!t of t!e City$s internal environmental auditing process would e only one function of suc! a ody. 2ecommendation Nine"=ain Commitment to t!e #uditing 8rocess at t!e <perational %9ine( 9evel. )!is is pro a ly t!e !ardest recommendation to implement. )!is re+uires outreac! to t!e workers wit!in t!e city or region. )!e connection etween t!e environmental impact of city activities and workers$ lives must e made. )!is connection is most apparent in t!e !ealt! and safety concerns of City workers. #reas for &urt!er 2esearc! )!is work raises several ot!er +uestions. &irst, are t!e pu lic and private sectors similar enoug! t!at t!e enefits of environmental auditing found in t!e private sector would actually accumulate to t!e pu lic sector/ )!is !as een assumed in t!is work. ,ore work could also e done on analy-ing t!e enefits of environmental auditing to ot! sectors. ,ost descriptions of t!e enefits of environmental auditing seem to reference t!e list of enefits produced in t!e first E8# policy on environmental auditing.

I t!ink t!e role of evaluation in government and planning is still an open +uestion. )!e field of policy researc! is full of evaluations of ineffective programs t!at continue to operate. Bow good are our new plans, if t!ey are not acked up y evaluations of t!e few plans t!at actually get implemented/ Increased pu lic sector environmental auditing mig!t e used to test out t!e premises of t!e audit privilege argument wit!in an open conte*t. ?o environmental audits need to e confidential in order to e useful/ Could audits e accomplis!ed in a very open way/ E*plicitly open environmental audits may e raise too many instances of non"compliance. If t!ese incidents of non"compliance ecome well known, t!ey mig!t lower people$s trust in pu lic administration. Bowever, I t!ink it may work t!e ot!er way. <pen acknowledgment of pro lems is t!e first step to correcting t!em. )!e post"audit implementation plan mig!t increase pu lic trust. &inally, !ow internali-ed are environmental values in pu lic management/ I !ave assumed t!at as companies develop policies and evaluate t!eir performance t!ese values are some!ow transmitted to employees t!roug!out t!e organi-ation including 1line1 employees. I$m not sure if I can successfully 0ustify t!is assumption and I don$t know !ow t!e assumption mig!t c!ange w!en applied to t!e administration of a city or a region. It was a ma0or priority of t!e 9ancas!ire internal auditing effort. It would e interesting to assess t!eir success. Conclusions I !ave s!own t!at environmental auditing is a recogni-ed discipline in t!e private sector. )!e practice of environmental auditing is ecoming more defined and speciali-ed. )!e pu lic sector is 0ust eginning to apply environmental auditing tec!ni+ues. Cities and regions may e a le to enefit from t!e application of auditing tec!ni+ues t!at are successful in t!e private sector. 7ntil t!e practice is more esta lis!ed, cities and regions s!ould start small and uild up t!e trust necessary to make evaluations suc! as audits work. Consultative odies of stake!olders may improve communication and provide significant oversig!t in t!e pu lic sector. 5ince compliance is a weak motivation for pu lic sector audits, cities and regions s!ould start wit! an emp!asis on cost"reduction.