A new leaf in environmental auditing.

Compliance is now only one element in a broadened environmental auditing landscape. Environmental management systems have created five new realities that affect every auditor.

For the past 25 years, environmental auditing has been driven by governmental "command and control," especially

While this program helped repair the collective damages that accumulated during the environmental mismanagement of the industrial revolution, it has run its course in terms of effectiveness and efficiency. Now that the air and the water have been cleaned up, organizational strategy for managing environmental risk has shifted from compliance to systems that continually reduce the organizations overall impact on the environment. Organizations today fully integrate environmental management into the design, operation, and maintenance of every process, service, and product.

The result is a set of dynamic systems whose efficiency and effectiveness can be assessed by internal auditors. These systems are designed to sustain and promote environmental advances while utilizing far fewer resources than a compliance approach requires. They create opportunities for improvement and consider such important aspects as cost and public awareness. Examples range from an environmental policy that spells out the company's responsibility and philosophy for managing environmental risks, to incentive programs designed to reward employees for environmental progress and improved safety records.

As management strategies shift, environmental auditors also must adjust their approaches to maintain the relevance of their positions. This new emphasis on environmental management systems is changing the environmental auditing scene in five significant ways.

1 BROADER AUDITS

Companies have found that regulatory compliance in itself does not effectively mitigate environmental risk. The organization may be in 100 percent compliance with the law today, but what if the government determines tomorrow that current levels of a substance are not safe and lowers the allowable emissions level? Then, if a cancer cluster is found, the company will be liable. In addition, environmental risks not covered by legislation - public perception and the sustainability of raw materials, for example - impact business success as significantly as do costly penalties for non-compliance.

As a result, environmental audits no longer focus solely on compliance. The primary role of today's auditor is to assess how effectively an organization's systems (1) identify the process points that impact the environment, (2) measure the potential for damage, and (3) mitigate the risks represented.

Compliance assessment remains an important component of environmental management, but k is merely a small piece of a larger process. Increasingly, compliance assessment is performed by line personnel using automated self-assessment tools. Instead of conducting compliance audits, the role of the auditor has been changed to looking at the system in place for measuring compliance - studying reports, for example, generated by the compliance self-assessment software and determining whether problems were addressed in a timely manner.

2 INTEGRATED ENVIRONMENTAL AUDITS

Environmental auditors have traditionally been viewed as external to the "real" business of the organization. Unlike internal auditing, which is responsible for reviewing systems that ensure the accomplishment of business objectives, environmental auditing has not been concerned with the overall goals of an organization. It has operated more as an ad hoc function that basically just reported "yes, we are in compliance" or "no, we are not in compliance." Environmental auditors were not responsible for taking a holistic look at the organizations approach to environmental management, nor were they responsible for helping management devise better processes that would reduce the impact on the environment.

As such, the independence and objectivity of environmental auditors has never been a priority. Often they have reported to the very departments responsible for the areas they audited - engineering, legal, human resources. In fact, one of the most common findings of consultants called in to assess the quality of an environmental auditing department is that the function is situated incorrectly, and objectivity and independence are impaired as a result.

The emphasis on environmental management systems is changing this scenario. While some environmental auditors still perform the traditional role, many are finding themselves much more integrated into the business as a whole. Because they assess how effectively business process systems manage environmental risk, environmental auditors' work directly impacts the business cycle. Reporting structures are also being redesigned, so that environmental auditors are answering to individuals farther up the corporate ladder, even to the board of directors in some instances.

3 WIDESPREAD INVOLVEMENT

Personnel throughout the organization are becoming more involved in environmental management. In addition to performing compliance self-assessments, operating personnel also participate in life-cycle assessments. To identify the potential impact of business processes on the environment, it's essential that the organization look at the entire life cycle of the process, from acquiring and processing the raw material used to make the widget, to distributing the widget, to the final disposal of the widget by the customer. The risks at every step must be listed and ranked, and a decision must then be made about how to eliminate those risks.

No one knows a process and its impact better than the people who run the process. If opportunities for environmental improvement exist, the personnel on the floor are in the best position to discover them. Making line personnel responsible for environmental risk management means that eight hours a day someone is thinking about the environmental implications of business processes.

4 EMPHASIS ON CERTIFICATION

As the responsibility for ensuring adequate environmental management is transferred from the government to industry, stakeholders will demand high-quality assessments of environmental systems. In all probability, publicly held companies in the coming years will need to issue documented attestations regarding environmental performance. The role of the environmental auditor will become so critical that those practicing in the field will need to be certified.

Thousands of environmental auditors exist, with skills ranging from inadequate to first-class. Until the formation of the Board of Environmental Auditor Certifications (BEAC) by The Institute of Internal Auditors and the Environmental Auditing Roundtable, there was no system for measuring an environmental auditor's professionalism. Now stakeholders can hire a Certified Professional Environmental Auditor (CPEA) and increase their assurance that the individual conducting their assessments possesses the skills, knowledge, and integrity necessary to perform them.

5 MERGING ROLES

Currently, many organizations are supported by an internal auditing function that is responsible for assessing all organizational systems except the environmental management system. A separate environmental auditing department also exists. Companies frown upon such duplication of effort; and, as a result, the role of the internal auditor and the environmental auditor are slowly merging into one.

Since environmental audits were traditionally concerned with whether or not the organization was legally complying with complex, technical regulations, neither the legal, engineering, nor internal audit departments were comfortable with the idea of internal auditing taking on that role. Now that the focus has shifted to environmental management systems, functional rather than legal responsibilities are the central issue. This change in emphasis makes it much easier for internal auditing to accept responsibility for environmental audits. A few internal audit departments - IBM and Caterpillar, for example - have already merged the two functions. This trend will continue.

Much can be gained by melding the two roles. Internal auditing is well established. The profession has developed structured processes and standards for measuring the effectiveness of systems, and it boasts an independent reporting structure to the board of directors - qualities lacking in the relatively youthful environmental auditing field. Yet, internal auditors do not possess the technical knowledge necessary to assess environmental systems. Companies will find it extremely valuable to combine their environmental and internal auditing functions to take advantage of the strengths of each.

RON BLACK, CPEA, is National Director of the Strategic Environmental Systems practice at McLaren/Hart, Inc. in Albany, New York and Chairman of the Board of Environmental Auditor Certifications. You may reach him via e-mail at Ron_Black@Mclaren-Hart.com.