Magazine article Risk Management

Making Sense of Environmental Compliance

Magazine article Risk Management

Making Sense of Environmental Compliance

Article excerpt

During the 1970s and 1980s, the federal, state and local governments in the United States passed hundreds of statutes and promulgated thousands of complex environmental regulations. These laws regulate discharges to the air, land and water; the manufacture, transport, storage and disposal of goods and their byproducts; and the location of plants and other facilities.

The federal regulations include several laws commonly known by their acronyms. These include the Clean Air Act (CAA), Clean Water Act (CWA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, also known as Superfund) and the Resource Conservation and Recovery Act (RCRA). These regulations were soon followed by amendments such as the Hazardous and Solid Waste Amendments to RCRA (HSWA), the Clean Air Act amendments (CAAA) and the Superfund Amendments and Reauthorization Act (SARA).

While the 1970s and 1980s were the era of environmental regulation, the 1990s are shaping up as the period of enforcement of these laws. Attempting to comply with these laws has placed an enormous administrative burden on corporations. Specifically, companies today must strive to comprehend the various subtle facets and nuances of these complex regulations.

Compliance with environmental laws is also costly. Each year, U.S. industry spends tens of billions of dollars on regulatory compliance and remediation of hazardous waste sites. Conversely, the price of noncompliance can be fiscally staggering and personally disastrous. Severe criminal and civil penalties, including fines and jail terms for certain corporate employees, may result. Additionally, litigation based on common law liability for personal injuries and property damage arising out of environmental pollution has increased dramatically.

Using Audits for Compliance

Some corporations have dealt with these mushrooming potential liabilities by systematically assessing their environmental compliance efforts. These programs, known as environmental audits, involve gathering comprehensive data on a company's operations that may affect the environment and comparing this information to the corresponding local, state and federal legal requirements. The audit process results in an environmental profile that shows whether the company satisfactorily complies with regulations and whether the potential for future noncompliance exists.

An environmental audit may cover more detailed issues. These include examining potential areas of concern such as regulatory noncompliance, clean-up costs, third-party bodily injury and/or property damage and waste stream emissions; implementing waste minimization and pollution prevention strategies; conducting analyses of the cost-effectiveness of environmental measures; and determining whether the organization's structure and staff are adequate to ensure ongoing compliance with all applicable laws.

An environmental audit may cover single or multiple sites or processes, or involve an analysis of the company's entire operations. Many people regard the American Society for Testing and Materials (ASTM) standard practice E1527 on environmental site assessment as the foundation for designing an environmental audit. This type of audit is often used as part of a due diligence investigation when an organization acquires a plant or other type of property.

Environmental audits have differing levels of thoroughness. In a Phase I audit, a company or consultant inspects all relevant paperwork, conducts a visual inspection of the site and interviews key officers and employees. These steps verify if the company has obtained the required permits and authorizations to ensure that the site is in compliance with relevant regulations.

A Phase II audit involves a more extensive investigation. This type of audit may involve taking samples of groundwater and soil in suspected areas of contamination as well as analyses of air, surface water or physical samples (such as suspected asbestos-containing material) to verify compliance with permit effluent or emission standards. …

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