19 Environmental Auditing

Sunil Mittal

1.  Introduction

2.  Origin of Environmental Auditing

3.   Scope of Environmental Audit 

4.   Objectives of Environmental Audit

5.   Methodology

6.   Approaches for Environmental Auditing

7.    Environmental Auditing, Environment Impact Assessment and Environmental Review

7.1  Distinctions between an environmental review and an environmental audit

8.   Benefits of Environmental Audit

9.    Environmental Audit Programme in India

10.   Ministry of Environment And Forests Notification

11.   Form V

1. Introduction

Environmental auditing is an environmental management tool, which measure the impacts of industrial activities on the environment against set standards and criteria. Environmental auditing is a system of integrating the interests of industry and the environment (Fig 1).

The Confederation of British Industry [Negrei, 1999] defines “environmental audit as the systematic examination of interactions between any economic and environmental operations”. These include the effects of air emissions, water & soil pollution on the neighboring areas, landscapes. It also tells about public perception of the company’s activities by the local community. The environmental audit does not analyze all legal provisions, performing a strategic approach of the entity’s activity.

The International Chamber of Commerce in 1989 published a unanimously accepted definition, as “environmental audit is a way of management consisting of a systematic, documented, periodical and objective evaluation of performance, of the management system and the proceedings drafted for environmental protection aiming at facilitating the control of practices with a possible impact on the environment and evaluating the respect of environmental policies, including the achievement of environmental aims” [Meyronneinc, 1994].

In nutshell, Environmental auditing is to

• Investigate
• Understand
• Identify

Environmental audit helps to improve environment by the regulation or reduction of existing industrial/human activities which harm the environment. An environmental audit report comprises the effects of organizations or industries on environment in a systematic and documented manner.

2.  Origin of Environmental Auditing

Environmental auditing originated from the United States in 1970s. The pollution caused by oil and chemical companies on that time was the reason behind the need of environmental auditing. In 1979, the US Environmental Protection Agency (EPA) first time issued a draft report and called to independent, certified third-party auditors‟ to visit plants, collect samples, perform analyses and submit report to government authorities”. This governmental auditing concept received significant attention and was strongly opposed by industry.

In Europe, environmental auditing started due to the reflection of environmental hazards at large scale by chemical and petrochemical industries.

The concept of environmental auditing have been widely accepted by the industries since 1980s as a common management tool in developed countries and is increasingly being applied in developing countries. The environmental auditing was a result of commitment of implementation of Agenda 21. Currently, several factors are responsible for increased awareness about environment audit:

Industrial calamities: The several major industrial accidents such as the Bhopal gas tragedy, Chernobyl and Exxon-Valdez disasters have got significant attention which created need for environmental auditing under set corporate policies and standards. Environmental audit reduces the risk of accidental environmental damages and protect environmental health and safety.

Public awareness: Public awareness is another major factor contributed to the need for environmental audit about environmental and safety issues.

3.  Scope of Environmental Audit

The prime aim of audit is to analyze the performance of existing management system. It performs a fundamentally different role from the monitoring of environmental performance. Depending upon the scope, audits can address one issue or whole range of issues. The audit team size, time period and depth of investigation depend upon the scope of audit. If scope is greater, the size of audit team will be also be bigger with more time spent onsite as well as greater depth of investigation. The environmental auditing is applied not only to environmental, health and safety management in company’s operations, but also to product safety, quality, management and to areas such as loss prevention. Table 1 shows the scope of environmental audit Environmental protection, Safety, Occupational Health and Product Safety.

4.   Objectives of Environmental Audit

The extent of audit can vary from country to country and company to company depending on resources available and management’s commitment to carry out an effective “environmental audit”. But the basic objectives of “environmental audit” are same all over the world as follows:

a.  To determine the mass balance of various materials used and performance of various process/ process equipment to identify usage of materials in excess than required,

b. To review the conversion and accordingly fix up norms for equipment/operations performance and minimization of the waste.

c.  To identify the areas of water usage and wastewater generation and determine the characters of wastewater.

d.   To determine the air emissions, their sources, quantities and characteristics.

e.    To determine the solid and hazardous wastes generated, their sources, quantities and characteristics.

f.     The possibilities of waste minimization, recovery and recycling of wastes.

g.    To determine the performance of the existing waste treatment/control systems so as to modify or install additional or alternative control equipment accordingly.

h. To determine the impact on surrounding environment (ground water, stream, residential area, agricultural area, sensitive zone etc.) due to the disposal of wastewater, air emissions and solid wastes from the industry and accordingly identify suitable preventable measures, if necessary.

i. To verify compliance with the standards and conditions prescribed by different acts, notifications, amendments etc. and check the effectiveness of:

i. Organizational set up of the industry for decision making and environmental managements with special reference to their “technical” view point, “attitudinal” view point and training.

ii.   Environmental policy of the company

5. Methodology

6. Approaches for Environmental Auditing

Environmental auditing essentiality consists of three main phases

(i). Pre-Audit Activities

(ii). On-Site Activities

(iii). Post-Audit Activities

(i). Pre-Audit Activities:

• Full of management promises
• Set overall goals, objectives, scope and priorities
• Select team to ensure objectivity and professional competence

An environmental audit programme cannot be successful without the clear commitment of the management. The programme should be initiated by the management and must provide all the resources necessary for the programme. The plant personnel should be directed to provide access and to cooperate with the authors during their work. The management should also have explicit commitment to follow-up audit findings and correct the irregularities that the audit will uncover. Once the objective of the audit is finalized, preliminary information about the industry should be obtained through a questionnaire. The information includes:

a. Location of the plant and the surrounding land uses

b. Climate conditions

c. Product (s) manufactured

d. Raw Materials

e. Details about the manufacturing process

f. Details about the water utilization

g. Waste water generation and disposal

h. Gaseous/air emissions

i. Waste generation

j. Hazardous waste generation

k. Organizational setup of the company

l. Polices of the company with respect to environmental management

The data so obtained helps in identifying the areas of the concern and thus in the selection of members of the audit team. The team members should be selected carefully and might include corporate staff, operating staff and even experts from the outside. The audit team should have knowledge in environmental regulations, in plant operations and processes, pollution control technologies but should essentiality be independent.

Once the audit team is constituted, the objective of the audit should be formalized and specific tasks should be assigned to each member. The team should ensure that their visits to the plant should not be treated as raids by the staff. The staff should not feel that the audit would unearth the problems and hence they would be the targets of criticism by the management.

(ii). On-site activities:

• Well defined protocols or checklists
• Review of documents and previous records
• Review of policies & plans
• Interviews
• Site inspection

On-site activities include reviewing documents maintained at the plant, to interview the operating staff, identifying waste generation and waste flow line, evaluating performance of the pollution control equipments etc. in the plant, to interview the operating staff, identifying waste flow line, evaluating performance of the pollution control equipments etc. in the Plant. Once, the audit team is familiar with the manufacturing process, layout of the plant and process operations and possible impact on the environment, the team should work out the material balance in each unit operation. From the material balance, the sources and quantities of generation of generation of wastewater, gaseous emissions and solid wastes should wastes should be identified. Locations of possible leakages, spills and overflows should also be identified.

Parameters to be analyzed for pollution control can be determined from the material balance. Not, only the effluent and emissions, but also the ground water, ambient air as well as other surface water in the vicinity and agricultural land should also be monitored to determine the impact due to the industry. In any event, the audit team should collect the samples of their own and should not depend upon the industry to do it. Subsequently a draft report should be prepared which should include:

a. Material balance in each unit operation

b. Identification of locations generating the wastes

c. Analysis of various samples

d. Field observations

e. Findings and possible recommendations

(iii). Post-audit activities:

• Evaluation of findings
• Reporting with recommendations
• preparation of an action plan
• Follow-up

The mass balance of the materials in each process should be compared with the stoichiometric requirements and the excess usage of the materials are to be brought to the notice of the management and a norms should be fixed for performance in each unit. Similarly the data in regard to the performance of pollution control equipments should be analyzed and reasons if any of the failure should be identified. Suggestions in regard to the segregation, neutralization, equalization, detoxification etc. might also be given to achieve the desired pollution control.

Finally, all the aspects as discussed above are to be documented and compiled, along with recommendations, in a formal “Final Report”. The recommendations might include measures for best practicable environmental management, annualized capital cost of the pollution control measures and their operating cost and action plans with time frame and priorities there in. Action plan should be developed by the management after the submission of the Final Audit Report. The management should ensure implementation of the recommendations of the audit.

7.     Environmental Auditing, Environment Impact Assessment and Environmental Review

Environmental auditing should not be confused with environmental impact assessment (EIA). However, both are environmental management tools and share some similar terminology, like impact, effect and significant. But both have differences between them.

Environmental impact assessment acts as an anticipatory tool and action takes place before starting of project (ex ante). EIA attempts to predict the impacts of projects on the environment for future action to sustainable development. Environmental auditing is carried out whenever development is already in progress. It is used to check current existing practices and assessing the current environmental effects (ex post). Environmental auditing therefore provides a ‘snap-shot’ of looking at what is happening at that point in time in an organization.

Environmental auditing covers a variety of management practices, which are used to evaluate an environmental performance of company. Environmental auditing refers to strict checking systems and procedures against set standards or regulations, whenever used to cover the gathering and evaluation of any data with an environmental review. The difference between environmental relevance, an environmental audit termed and    an environmental review has given in Table 2.

7.1. Distinctions between an environmental review and an environmental audit

The term ‘audit’, comes from the financial sector termed as financial audits similar to environmental audits. The difference between are highlighted in the Table 3:

8. Benefits of Environmental Audit

If environmental auditing is implemented in a constructive way, there are many benefits that can be derived from it. Some of the benefits are:

• To safeguard the environment and natural resources used in the plant/project
• To verify compliance with domestic and international environment laws
• Address current or potential future problems that may arise during the course of action
• Assess training programs and provide data to assist In training to poor people’s skill development initiatives
• Enable companies to build on good environmental performance, give due credit where appropriate and highlight deficiencies
• Identify potential cost savings from waste minimization and other activities
• Facilitate exchange and comparison of information between different plants or subsidiary companies of the parent company
• Demonstrate company’s commitment to environmental protection to employees, the public and the authorities

9. Environmental Audit Programme in India

INDIA was the first country in the world to implement environmental audit as mandatory process. In India, the concept of environmental auditing came under discussion in the beginning of the 1990s. This process was made reality by gazette notification on 13 March 1992 by Govt. of India. This notification made the submission of environmental audit reports mandatory. Comptroller and Auditor General (CAG) of India (Supreme Audit Institution (SAI)) is the constitutional authority in this regard, which examines government expenditure and revenues. The CAG of India derives his mandate from Articles 148 to 151 of the Indian Constitution. The audit conducted by CAG is broadly classified into three categories:

Ø   Financial,

Ø   Compliance

Ø   Performance Audit.

The gazette notification of Ministry of Environment and Forests dated 13th March 1992 is attached herewith as Appendix-1.

This laid down broad guidelines to enable SAI India’s auditors to examine whether the auditee institutions gave due regard to the efforts of promulgating sustainability development and environmental concerns, where warranted. SAI India has designated the office of the Principal Director of Audit (Scientific Departments) as the nodal office for Environmental Audit. This office exclusively undertakes environmental audits of central government. To impart training to officers and staff of SAI India on environmental auditing, a Regional Training Institute in Mumbai has been designated as the nodal training center. In last 25 years, SAI India has conducted more than 100 specialised environmental audits. The audits can be divided into five categories —(i) Air issues (ii) Water issues (iii) Waste (iv) Biodiversity (v) Environment Management System.

In India, submission of an environmental statement by 30th September for the previous financial year by polluting units seeking consent under following acts/rules has been made mandatory through a Gazette Notification issued under the Environmental (Protection) Act, 1986.

i) the Water (Prevention and Control of Pollution) Act, 1974

ii)  And/or the Air (Prevention and Control of Pollution) Act, 1981

iii) And/or the authorization under the Hazardous Wastes (Management and Handling) Rules, 1989 to the concerned State Pollution Boards

If the polluting unit fails to comply with the rules, it may invite punishment with imprisonment for a term which may extend to five years or with fine which may extend to one lakh rupees or both. The form V to be used by the industries for environment auditing is reproduced in Appendix 1.

Appendix-1

MINISTRY OF ENVIRONMENT AND FORESTS

NOTIFICATION

New Delhi, the 13th March, 1992

G.S.R.329 (E)- In exercise of the powers conferred by sections 6 and 25 of the Environment (Protection) Act, 1986 (29 of 1986), the Central Government hereby makes the following rules further to amend the Environment (Protection) Rules, 1986, namely: –

(1)   These rules may be called the Environment (Protection) Third Amendment Rules, 2005.

(2)    They shall come into force on the date of their publication in the Official Gazette or otherwise as mentioned.

1. In the Environment (Protection) Rules, 1986

(a)  After rule 13, the following rule shall be inserted, namely: Submission of environmental audit report.

Every person carrying on an industry, operation or process requiring consent under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 (6 of 1974) or under section 21 of the Air (Prevention and Control of Pollution) Act, 1981 (14 of 1981) or both or authorization under the Hazardous Wastes (Management and Handling) Rules, 1989 issued under the Environment (Protection) Act, 1986 (29 of 1986) shall submit an environmental audit report for the financial year ending the 31st March in Form V to the concerned State Pollution Control Board on or before the [thirtieth day of September] every year, beginning 1993.

(b) In appendix ‘A’ after Form IV the form -V shall be inserted:

FORM – V

(See rule 14)

Environmental Audit Report for the Financial year ending the 31st March ……..

PART – A

I. Name & address of the owner/ occupier of the industry, operation or process.

II.  Industry category Primary (STC Code), Secondary (STC Code)

III.Production Capacity- Units

IV. Year of establishment

V.   Date of last environmental statement

PART – B

(Water and Raw Material Consumption)

(i)   Water Consumption m³/day

Process

(ii) Raw Material Consumption

PART – F

Please specify the characteristics (in terms of concentration and quantum) of Hazardous as well as solid wastes and indicate disposal practice adopted for both these categories of wastes.

PART – G

Impact of pollution control measures on conservation of natural resources and consequently on the cost of production

PART – H

Additional investment proposal for environmental protection including abatement of pollution