ENVIRONMENTAL AUDIT

Background

Environmental auditing originated in the United States in the 1970s. At first reactive in focus,
environmental considerations were dealt with by 'end of pipe' solutions. Control measures were
heavily influenced by the need to reduce remediation costs and fines which might stem from
industrial accidents, and from the need to manage environmental liabilities.

Environmental auditing was introduced to the UK and elsewhere mainly by multi-national

companies who began to apply the audit procedures corporately and via subsidiaries
(horizontally). It is now being encouraged down the supply chain when large companies demand
that their suppliers have green credentials (vertically). Environmental auditing has also become
more proactive as organizations have recognized potential market and stakeholder benefits,
efficiency gains, financial savings, and the importance of improved public relations.

Historically, environmental auditing has been developed for industrial (chemical and
manufacturing) applications but is increasingly being extended to operations other than
industrial, like commercial establishments, office complexes etc.

Furthermore, many companies combine environmental audits with health and safety audits.
These combined audits are known as EHS or HSE audits.

Objectives and types of environmental audits

Environmental auditing has been variously defined as:

'A management tool comprising a systematic, documented, periodic and objective evaluation of
the performance of the organization, management system and processes designed to protect the
environment with the aim of: (1) facilitating management control of practices which may have
impact on the environment, and (2) assessing compliance with regulations and company
policies'. and

‘The systematic examination of the interaction between any business operation and its
surrounding. This includes all emissions to air, land and water, legal constraints, the effects on
the neighboring community, landscape and ecology and the public's perception of the operating
company in the local area'

Many types of audit have been carried out by companies

• Compliance audit - the most common type of audit consisting of checks against
environmental legislation and company policy; This type of audit compares the
operations to the legal requirements to which it is subject. Auditors gather information
through visual observations at the site, document reviews and interviews of staff. This
 data is then compared to the applicable permits, regulations, ordinances, enforcement
agreements, etc to evaluate how well the operation is conforming to those applicable
legal requirements. The importance of compliance auditing is clear - to assist the site and
management in identifying legal risks to be corrected. In the absence of audits,
companies generally have no structured review or oversight of environmental compliance
activities.
• Issues audit - an evaluation of how a company's activities relate to an environmental
issue or (e.g. global pollution, energy use) or an evaluation of a specific issue (e.g.
buildings, supplies);
• Health and safety audit - an assessment of risks and contingency planning (sometimes
merged with environmental auditing because of the interconnected impacts of industrial
processes and hazards);
• Site audit - an audit of a particular site to examine actual or potential environmental
problems;
• Corporate audit - an audit of the whole company and its polices, structures, procedures
and practices;
• Due diligence audit - an assessment of potential environmental and financial risks and
liabilities carried out before a company merger or site acquisition or divestiture (e.g.
contaminated land remediation costs);
• Activity or operational audit - an assessment of activities that may cross company
departments or units (e.g. energy or waste management) and
• Product or life cycle audit - an analysis of environmental impacts of a product
throughout all stages of its design, production, use and disposal, including its reuse and
recycling (cradle to grave).
• At the current time, other forms of environmental audits are becoming popular. Some of
these include industry-specific “green certifications” (such as in the forest products
industry) and supply chain greening reviews/assessments/audits.

The more specific type of environmental audit involves the collection, collation, analysis,
interpretation, and presentation of information which is used to:

• assess performance against a set of requirements or targets, related to specific issues;

• evaluate compliance with environmental legislation and corporate policies; and
• measure performance against the requirements of an environmental management system
standard.

The systematic, periodic, documented and objective aspects of environmental auditing are
fundamental to effectiveness. It is fast developing as an important and powerful tool in the
corporate environmental assessment and management toolkit. The requirement periodically to
repeat audits ensures that there is an ongoing commitment and a systematic process to improve
environmental performance. The scope of repeat audits can also broaden to become more
comprehensive as experience and expertise are accrued or as new issues or legislation emerge.

Assessments and Reviews

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Sometimes the terms assessment, appraisal, monitoring or review have been used
interchangeably with audit. Audit implies detailed statistical verification with a periodic cycle
between audits. An assessment or review is usually a one-off event which is carried out in less
detail and with less direct checking of data.

Environmental Reviews provide a baseline overview of current environmental effects or impacts,

relevant environmental legislation and a statement of existing environmental performance. The
Reviews provide a basis for establishing a management action plan. They can become part of an
environmental management system to help implement the plan. When they are undertaken as the
first of a series of periodic environmental audits they have been referred to as a 'Baseline
Environmental Audit'.

Conducting an environmental audit

In most situations, environmental/EHS audit programs are voluntary programs. However, they
could be mandatory in certain cases. Audits are normally conducted by an audit team that
consists of an audit team leader and one or more audit team members. Many organizations have
corporate audit departments or functions and the audit team leader is usually from this function.
The remaining team members may be either from the corporate audit function or from another
facility belonging to the organization or an external consultant.

Environmental audits should be appropriate to the particular circumstances. As environmental

auditing draws upon various methodologies, each organization will define its own system
depending upon its size, its activities and its corporate culture. The scope and style of audits
vary, but common stages and activities include:

Pre-audit stage

Objectives of the pre-audit stage include

• To develop an audit plan for the on-site activities

• To make the necessary preparation and arrangements for the on-site audit
Typical activities at the pre-audit stage include

•Development of an audit plan (which should address)

o Where: audit site & boundary with overview
o What: scope & objectives
o How: site personnel interview, site inspection, audit protocols; site logistics and
administrative arrangement
o Who: audit team and site facilitation arrangement
o When: audit schedule and milestones

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•Development of a pre-audit questionnaire which needs to be filled up by the facility being
audited. The questionnaire could typically include elements like
o Overall environmental management
o Procurement policy
o Energy management
o Materials management
o Water and wastewater management
o Waste management
o Noise monitoring and control
o Air quality monitoring and control
o Emergency response procedures
o Transportation and travelling
o Staff awareness and training
o Publicity of environmental information
o Response to public enquiries and complaints

•Review of background information

o Site layout plan(s)
o Site history, use and activities
o Blue prints/as built drawings
o Organisational structure at audit site(s)
o Internal environmental policies, procedures and guidelines

•Review of operational information

o Operational activities and process descriptions
o Management system policies, procedures and program documentation
o Relevant records (compliance, monitoring, training, maintenance, calibration etc.)
o Other relevant information pertaining to environmental management practices
Note: In some cases provision for an initial site visit is included
•Develop on-site questionnaire and audit protocols

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 o Compliance with pertinent legislative and regulatory requirements
o Conformance with internal environmental policies,
o procedures and guidelines
o Status of current environmental practices
o Staff awareness of internal environmental policies,
o procedures and guidelines

•Review audit plan and arrange logistics

o Audit scope
o Audit schedule
o Audit protocols
o Allocated resources
Output of the pre-audit stage will include
• Audit Plan

• Package of background information

• Completed Operational Information Questionnaire and Audit Checklists

• On-site Questionnaire and Audit Protocols

On-site audit
Objectives of the on-site audit include
o Verification of legislative and regulatory compliance
o Assessment of internal policy and procedural conformance
o Establishment of current practice status
o Identification of improvement opportunities
Typical activities during this stage include
•Opening meeting -Conduct on-site audit Opening Meeting with Office manager and site
personnel to:
o Introduce audit team members
o Present audit scope and objectives

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 o Outline the audit approach and methodology
o Address questions or concerns of site personnel
o Rally staff support and assistance

•Document Review -Audit Team members to undertake a review of relevant documents /

records such as:
o Management policy
o Management system documentation
o Operational procedures
o Records (legal, utility, inventory, monitoring, calibration, transportation, training
etc.)
o Previous audit reports
o Minutes of EHS committee meetings
o Environmental suggestions from employees

•Detailed site inspection -Conduct detailed site inspections with aid of on-site audit protocols
to look for evidence on:
o Compliance with legislative and regulatory requirements
o Conformance with internal policies, procedures and guidelines
o Status of operational practice
o Staff participation in management system implementation

•Staff interview-To obtain information on

o Actual practices (current and past)
o Compliance with/or deviation from statutory and departmental requirements
o Awareness of requirements and expectations
o Ideas to do it better
o Comments and suggestions

•Review audit evidence-Ensure adequacy of audit evidence at the conclusion of on site audit
by:
o Reviewing information gathered
o Collecting additional information as needed

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 o Substantiating audit findings
o Summarizing and documenting all findings and observations
o Identifying issues requiring immediate attention/mitigation
o Noting outstanding issues requiring follow-up
o Preparing debriefing material for the Closing meeting

•Closing meeting-The Closing Meeting provides an opportunity at the conclusion of on-site

audit to:
o Debrief the senior site management
o Summarize the audit activities and findings
o Highlight system strengths and weaknesses
o Discuss preliminary findings and recommended corrective actions
o Bring up findings requiring immediate attention
o Clarify any outstanding issues
o Address staff questions or concerns
o Agree on reporting schedule and chain of communication
Output of the on-site audit stage
•Documented audit findings and supporting evidence

•Basis for evaluating conformance status in relation to statutory and internal

•requirements

•Basis for assessing performance status and improvement recommendations

Post audit
Objectives of post audit stage include
•To produce an Audit Report with audit findings and recommendations

•To contribute towards formulation of an Action Plan for continual performance

improvement
Typical activities during the post audit stage include
•Collate information and follow up outstanding issues-Information to be organized should
include:

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 o Completed pre-audit questionnaire, operational document checklists
o Completed on-site survey questionnaires, on-site audit protocols
o All relevant correspondence, memoranda, reports, diagrams and drawings
o Copies of records, photographs, and other information collected during the site
visit
o Detailed inspection and interview notes and summaries

•Prepare the audit report-The Audit Report should include:

o An Executive Summary
o Introduction and background to the audit
o Audit scope and objectives
o Description of audit approach and methodology
o Summary of audit findings and recommendations
o Conclusions

•Circulate draft audit report for comments-Will usually include the following parties on the
circulation list:
o The Audit Management Committee
o Senior site management of the audit site
o Site Facilitator(s)
o Site personnel with responsibilities for implementing the major recommendations
o Other parties included on the agreed circulation list

•Final Reporting
o Incorporate or resolve all comments received before producing the Final Report
o Issue the report to the Audit Management Committee and site senior management
for endorsement
Output of the post audit stage-Final Audit Report addressing
•Environmental Legislation compliance status

•Environmental policies, procedures and guide lines conformity status

•Status of current environmental performance

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 •Recommendations for performance improvement

Following up on an environmental audit

An environmental audit needs to be following up by developing an action plan covering
•Action objectives;

•Specific actions required;

•Responsible party(ies);

•Budget allotted; and

•Implementation program
This will be followed by implementation of the action plan, checking and monitoring and
reviewing the plan as well as deciding the scope and schedule of the next audit

Benefits of environmental auditing

While environmental audits are designed to identify environmental problems, there may be
widely differing reasons for undertaking them: compliance with legislation, pressure from
suppliers and customers, requirements from insurers or for capital projects, or to demonstrate
environmental activities to the public. The benefits of environmental auditing include:

• ensuring compliance, not only with laws, regulations and standards, but also with
company policies and the requirements of an Environmental Management System (EMS)
standard;
• enabling environmental problems and risks to be anticipated and responses planned;
• to demonstrate that an organization is aware of its impact upon the environment through
providing feedback;
• increased awareness amongst stakeholders; and
• more efficient resource use and financial savings.

The utility of environmental audits vary from organization to organization. It is likely that audits
will be used increasingly to:

• provide baseline information to enable organizations to evaluate and manage

environmental change, threat and risk;
• form the basis for initiating and monitoring the performance of Environmental
Management Systems;
• contribute to environmental management approaches which become integrated with
environmental impact assessment and the management of predicted impacts, mitigation
and monitoring measures;
• support the implementation and management of integrated pollution control procedures
and assist in the definition of 'best practicable environmental options' (BPEO);

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 • tackle external off-site impacts which consider the broader environmental footprint of an
organisation's activities; and
• pass environmentally responsible approaches down the supply chain.

An interesting paradox in environmental/EHS compliance audit programs comes with success of

the audit programs. The goal of the program is to reduce risks, with an ultimate goal of having no
audit findings. However, in instances where no audit findings are discovered over a period of
time, management frequently calls into question the value of EHS audit programs and expenses.
In these cases, companies may choose to implement a metric that demonstrates the economic
value of EHS risk reductions, such as Return on Investment of Loss Avoidance (ROIaTM)

Disclosure of environmental audit information

Environmental compliance audit information frequently rolls up into senior management reports
and initiatives. Environmental compliance information is many times included in the
Management Discussion and Analysis section of Annual Reports published for publicly traded
companies in the US. Companies that publish stand-alone environmental/sustainability reports
also include a summary of environmental compliance audit information to communicate audit
activities and results to the stakeholders. Environmental compliance information from audits is
also used in the context of Sarbanes-Oxley, Enterprise Risk Management and Internal Audit
programs.

Discussion topics / activities

• The pre-audit phase of an environmental audit is critical and often determines the overall
effectiveness of the audit
• Development of a pre-audit questionnaire for an environmental audit of an industrial site

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