Under growing pressure to be "green," companies are turning to self-audits of environmental programs as a way of catching potential problems -- before someone else does.
When Allied-Signal ran into environmental difficulties in the mid-1970s because of kepone, coke oven emissions, and other pollution sources, the company's board of directors decided to take action.
Recalls Ralph Rhodes, director of surveillance for the Morristown, N.J., manufacturing firm, "The board of directors decided that they wanted an independent source of information on environmental programs. They were familiar with auditing from a financial perspective and after a thorough review of our programs by Arthur D. Little, it was suggested that we develop a continuing audit program. The board wanted to prevent any more problems. They understood the link between the environment and the bottom line."
Since then, Allied-Signal's board has been joined by a growing group of senior executives in high-risk industries -- primarily chemical and petrochemical -- who have realized the tremendous financial and social impact of environmental problems, including public outrage, more stringent regulation, massive lawsuits, and expensive and complex remediation. Proactive companies realized the benefits not only of developing systems for checking on environmental compliance, but also of catching potential problems before they became actual problems.
"The trend has been that more and more companies are taking a proactive approach," says Halley Moriyama, vice president, ENSR Consulting and Engineering, Acton, Mass. "They really can't afford not to be.... You are reducing exposures and liabilities by catching them early on and preventing a more costly situation. You are reducing the likelihood of regulatory action, avoiding negative publicity, and increasing employee awareness of the company's environmental responsibilities."
The increased popularity of environmental auditing over the past 15 years can be attributed to a number of forces. For one, says Moriyama, there is public pressure. In the 1980s, he notes, industry lost a lot of the public's trust. He points to catastrophic accidents such as Bhopal and the Exxon Valdez as major contributors to this phenomena.
Coupled with this is the fact that right-to-know laws have expanded the public's ability to track a company's environmental performance. At the federal level, the Community Right-to-Know Act of 1986 requires facilities to report their release of toxic chemicals to the environment. Several states have expanded on these reporting requirements.
With such open disclosure, says Joe Mayhew, director, environmental programs, Chemical Manufacturers Assn. (CMA), it becomes increasingly important that companies find and correct any compliance problems they may have through the auditing process. Mayhew further predicts that right-to-know laws are likely to expand over the next few years.
Just as the public is demanding more of industry, so is the government. Each year, Congress, EPA, and state governments issue new and more complex laws and regulations. In the first two days of the 103rd Congress, 16 environmental bills were introduced in the House of Representatives alone. EPA's six-month regulatory agenda, published in the Federal Register last November, contains close to 80 pages of rules and regulations that the agency hopes to act on.
Keeping abreast of all this government activity is difficult at best, according to Maryanne DiBerto, manager of Arthur D. Little's (ADL) worldwide environmental, health, and safety auditing business. To help ensure that their firms are continually in compliance, she explains, corporate executives have broadened the scope of audits to include a critical analysis of their environmental management systems.
"Periodic system and compliance audits are critical control elements," says Jim Baker, environmental program director, Law Environment Inc. …