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Internal Auditing for Compliance & EMS Performance
By: Susan Graff and John Pierson
Many companies today conduct their own environmental
audits to monitor compliance and keep management
informed of environmental performance. Why is this
important? If you ask these companies, you will
generally hear this reason –
Risk management
The liabilities resulting from noncompliance with
environmental regulations can be severe, and include
both monetary penalties and personal exposure at top
management levels.
However, industry leaders in both manufacturing and
utilities have discovered two other reasons to optimize
environmental performance-
Internal efficiency
Waste is product lost to the environment, and the cost
savings associated with pollution prevention are
significant. Companies are reporting saving millions of
dollars over a period of a few years.
Competitive advantage
Marketplace conditions have changed. Consumers,
customers, and even investors want to know what
companies are doing to manage environmental issues and
grow a sustainable business. These concerns are a buying
influence that are rapidly mounting due to global
changes in political structures, societal demand, and
deregulation.
One of the most useful elements of an environmental
management strategy is a proactive internal audit
program that reports how a company’s environmental
management program or system is working before
regulatory agencies and other stakeholders detect
problems.
Companies start auditing themselves to collect objective
evidence of meeting their environmental goals related to
compliance and EMS performance. Both the U.S. EPA and
the International Organization for Standardization (ISO)
have policies and guidance related to environmental
self-auditing or internal auditing. How are these audits
conducted? They are typically performed by trained
personnel from within the company, external consultants,
or a mixture of both depending on in-house resources and
competencies. Regardless of who performs the audit, it
is important that the auditors strive for objectivity
while conducting the audit. The internal audit typically
involves document and data review, followed by on-site
interviews and observation of plant activities.
Effective communication with the auditee is essential
before, during, and after the audit to ensure complete
information and results are obtained that are useful for
management decisions. While available environmental data
may be reviewed, environmental sampling is not a part of
the auditing process.
What’s the difference between auditing compliance and
EMS performance? Compliance is only one component of
environmental performance, and focuses strictly on
meeting environmental regulations and requirements of
federal, state and local agencies. Compliance is
frequently measured in numbers of violations. While
compliance auditing is essential to risk management, it
does not guarantee optimal internal efficiency or
necessarily meet the environmental concerns of consumers
and customers. EMS performance requires going beyond
being "in compliance" to consider significant
environmental impacts at their source, and targeting
these sources for reduction. Optimal environmental
performance may eventually involve complete reuse of
materials in industrial processes to approach zero waste
generation.
According to ISO 14001, the internal audit program
should define procedures that cover:
- The activities and areas to be audited
- The frequency of audits
- The responsibilities associated with managing and
conducting audits
- The communication of audit results
The audit program and schedule are based on the
environmental importance of a particular activity and
the results of previous audits. For example, a shipping
and receiving department may have the potential for
significant environmental impacts depending on the
procedures followed to handle certain types of cleaning
solvents or R&D materials. The rest of the materials
received may be inert or non-toxic. If the company’s
environmental objective’s were waste minimization and
accident reduction, it may be important to audit the
department’s procedure for handling these materials, and
check records of previous audits to see whether these
procedures had historically been followed.
Tools
A multi-media checklist has proven to be a valuable tool
for conducting internal audits. When designed correctly,
the checklist serves the dual purpose of providing a
consistent format for evaluating compliance and
environmental performance and establishing a baseline to
be measured against during subsequent audits to track
progress and report results.
Checklists are tailored to industry issues and the
facility’s environmental compliance program or
management system to be relevant and concise.
Resources
The resources required to conduct audits will depend on
the company’s size and complexity of operation. The
following factors will increase the resources required:
- an initial audit vs. follow-up surveillance
- number of employees and departments
- geographical layout
- organizational structure and complexity
- level/type of technology and variety of products the
company’s record
Management Commitment
Equally important to resources is the management support
demonstrated regarding the importance of the internal
audit. Senior managers tend to pay major attention to
audit results, given the concerns of customers and other
key stakeholders.
Management commitment, resources, and audit tools such
as checklists are the keys necessary to running an
effective internal audit program. A customized checklist
that auditors use to consistently evaluate the
environmental management program or system will reduce
the time required to conduct the audit and be audited.
These checklists vary greatly in content and detail
depending on the goals management expects to accomplish
via auditing. Some companies believe a very detailed
audit is necessary to evaluate their programs. These
companies implicitly subscribe to a "management by
inspection" approach to ensure employees are doing what
they are supposed to be doing to manage the
environmental aspects of the operation. The advantage is
a thorough evaluation, but the down side is a
significant investment of employee time, both auditor
and auditee, to answer the detailed questions. Employees
can also be resentful of others "looking over their
shoulder" to ensure work is being done the right way.
Alternatively, a growing number of companies are
realizing that environmental performance is enhanced
where employees are involved in setting environmental
objectives, delegated responsibility and held
accountable for meeting environmental targets. Audits
then focus on evaluation of the system and procedures to
set and meet the objectives. These companies are able to
accomplish audits using simpler checklists that reduce
auditor and auditee time, shortening the duration and
frequency of audits.
One easy-to-use audit checklist was developed by the
auto service and body repair industry. A national group,
the Coordinating Committee for Automotive Repair (CCAR™)
originally developed the checklist, which is currently
available at the
www.ccar-greenlink.org website.
The checklist is simple and concise, question and answer
– two pages broken down into four major categories of
environmental impacts:
- Waste management
- Wastewater management
- Air pollution control
- Underground storage tank, spill prevention and emergency
response procedures
Each major category is then further subdivided into more
specific sources of impacts. For example, waste
management impacts are first characterized as hazardous
or nonhazardous for compliance estimation; then each
waste stream is evaluated. For the auto repair industry,
this meant 20 questions regarding the handling of used
oil, used oil filters, used antifreeze, used solvents,
batteries, rags, tires, and absorbents. Responses were
in the form of yes/no or multiple choice to facilitate
analysis of results.
The checklist served to estimate compliance and
sensitize shop owners to their current environmental
management practices. It highlights areas where
alternative management practices would enhance
environmental performance through pollution prevention.
Internal auditing is beneficial. The biggest expense is
employee time, and time can be saved if a systems
approach is employed and employees are delegated
responsibility for developing and implementing the
system.
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