There was a worldwide debate on the issue of environmental management for number of years. This was mainly to the difficulties in obtaining objective evidence about ecological degradation resulting from economic development. Inadequate legislation and poor business practices has triggered ISO to issue ISO14000 series of standards (1996).
The main objective of it was to provide a systematic framework for environmental management system practices. This was to encourage businesses in continual improvement in environmental performance.
Today, market forces encourage businesses to seek the certification. Certification in ISO14001 become a highly desirable credential and proof of legitimate environmental business efforts.
Dennis W. Taylor ( 2001) provides findings of a survey from environmental management system auditors and how the certified sites met the objectives of their systems as well as the expectations of its stakeholders.
The main question of the study was on whether the businesses are truly looking for improvements and doing the "right thing", or the main aim is ONLY to obtain the certification to improve the public image?
Before we start on the findings, we need to clarify the meaning of environmental auditing. It is "a systematic, documented, periodic and objective evaluation of how well environmental organisation, management and equipment are performing with the aim of helping safeguard the environment by (i) facilitating management control of environmental practices and (ii) assessing compliance with company policies, which would include meeting regulatory requirements (cited in Gilbert and Gould, 1998, p. 16).
There is a number of standards and procedures developed for the process of environmental auditing.
There is also a lot of evidence in academic and business literature of the benefits of the standard proving better environmental performance of those organisations who adopted it. Additionally, the financial departments are gaining more understanding of the obligations of social and environmental disclosure.
Some countries have developed relevant guidance on corporate environmental disclosure, performance measures and other environmental information. Generally, the code requires signatory report on an annual basis about their environmental performance in an annual statement. The accounting discipline, therefore, stress the importance of stricter environmental reporting controls.
There are also propositions for separate reporting for environmental performance:
Stage 1: Exploring stakeholders needs
Stage 2: Identify techniques used by organisations to measure environmental performance I including systems and controls)
Stage 3: Establishing formats for public environmental performance reporting
Stage 4: Establishing guidelines in relation to the audit of environmental performance information
ISO14001
The standard cover five main areas:
* EMS
* Environmental auditing
* Environmental labelling
* Life cycle assessment
* Environmental performance evaluation
Organisations can establish environmental policies, develop their goals and obligations, implement procedures and evaluate the progress towards those goals.
To easy the implementation burden and make the acceptance easy, ISO provides flexible guidelines on maintaining EMS that will allow for compliance with environmental regulations. It prescribes minimum performance criteria so that an organisation can meet legislative compliance.
Organisations may choose to self-declare the compliance to the standard. However, certification has number of benefits. For example, improved public image, investor confidence, access to capital, reduced waste, improved process, improved culture and environmental performance.
The audit function
The internal audit function plays important role in the process of effective management of strategies for sustainable development. It acts as a service to the business and give an appraisal for its credibility. Before that, environmental audits related to environmental emissions were only performed by scientists and specialised engineers. Today, internal auditors are expected to have expertise to deal with: the control environment, risk assessment, control activities, information, communication and monitoring.
The legitimacy
Other studies find (Gray et al., 1995) that "theories which attempt to explain corporate social and environmental responsibility within a system-oriented view tend to provide more promising descriptive power". It allows to focus on the relationship between the organisation and the society. A "social contract" exists and is executed by the organisations conduct towards the environment. The aim of the business, therefore, is to legitimise its behaviour by managing the expectations and perceptions of its stakeholders.
Businesses seek to educate the stakeholders on the changes in the environmental performance and activities, or seek to change the perception.
The question arises: Will a company pursue ISO14001 certification to indeed improve its environmental performance, or merely as credentials for public recognition?
For management to know on whether the EMS meets its objectives, a comprehensive internal auditing process is required.
Dennis W. Taylor (2001) stress that "deficient environmental auditing function would be an indication that management emphasis on the credentialism strategy rather then the performance strategy".
The main objective of the environmental audits is the detection of violations of environmental laws and regulations. This are called a compliance based environmental audits. However a system should serve the shift the focus towards the improvement of environmental performance.
According to the standard the audit staff level of education and expertise shall be commensurate with the expectations of the standard requirements. The top management support should be provided with the framework.
Here another question arises, on whether the internal audit functions gain relevant recognition and relevant resources are provided to meet the expectations of the stakeholders?
There should be sufficient budget allocated for EMS audit working hours. The auditing staff should be properly qualified and training for them should be provided.
Internal auditors should be well qualified on such matters. They need to be trained to evaluate risks and evaluate internal systems as well as the controls in place.
The study
To answer those questions, Dennis W. Taylor (2001) developed a questionnaire to define the role of internal auditors in the environmental auditing, as well as the difference between the accounting and science/engineering backgrounds in environmental auditing. The questionnaire was sent to 156 registered Australian organisations. Sample population was, however, decreased to 84 sites to avoid duplication when sites belonged to the same cooperate group.
76% of the respondents were from sites in environment-sensitive industries such as manufacturing and construction, mining, oil and gas, utilities and chemical processing.
From the findings, the main functions of the environmental audits were presented:
attesting a site's EMS has been properly maintained
determining conformance of the sites EMS to internal audit criteria
This two most important functions determined indicate that the focus is on keeping the EMS in place for certification purposes.
The next set of functions consist of:
3. to assess the soundness of the processes of monitoring of the EMS
4. to ensure continuing effectiveness of EMS in improving the environmental performance, and
5. identifying areas for potential improvement in environmental results achieved by the EMS.
This results indicate relatively weaker commitment to ensure that site is achieving continual improvement in the environmental performance.
The resources
Dennis W. Taylor (2001) concluded that in order to determine whether the organisations commit sufficient resources several pieces of evidence can be provided. The author explains, that it relates to audit committees, budgets, qualifications, experience and training of the EMS team.
Top management participation to the auditing function is necessary. However, only 50% of the study respondents answered that they had an audit committee. The results also found that there is little internal audit budget hours allocated to support the function.
In terms of training, stakeholders would expect auditors to meet the requirements of ISO 14012 ``Guidelines for environmental auditing-qualification criteria for environmental auditors''.However, additional five strategic areas of education were presented:
* environmental science and technology,
* technical and environmental aspects of facility operations,
* environmental laws and regulations,
* environmental management systems and standards,
* audit procedures, processes and methods.
It is therefore, necessary for the auditors to have formal qualifications. The auditors should be trained to assess risks, evaluate management systems and value the company's environmental costs and obligations.
The perceived benefits
The study respondents believed that one of the main benefits was the gaining of competitive advantage. This was citied as the most important benefit.
The second most important benefit was the improvement in the organisation's image.
The two motivators insinuate that the certification is gained with a purpose of desired perception to the stakeholders.
The improvement of environmental performance was cities as the least important benefit to the organisations.
Summary
As the study was subject to limitations, the conclusions are to be treated with caution. Some responses may be subject to bias and halo effects. However, the results consistently point to a common conclusion that the certification is gained for stakeholders and environmental credentialism.
Organisations seek to change the social perception about the business without having to change their behaviour. The high level objectives are concerned with the system conformance as opposed to environmental performance.
Additionally, the resources committed for internal auditing are below the reasonable levels in the areas of budget. Qualifications and training are also neglected. Businesses do not provide sufficient resources to continuously develop and improve the environmental performance.
Bibliography
Gilbert, M. and Gould, M. (1998), Achieving Environmental Standards, 2nd ed., FT Pitman Publishing, London.
Gray, R., Kouhy, R. and Lavers, S. (1995), ``Corporate social and environmental reporting: a review of literature and a longitudinal study of UK disclosure'', Accounting, Auditing & Accountability Journal, Vol. 8 No. 2, pp. 47-77. Guthrie, J. and Parker, L.D. (1989),
Taylor D, (2001) "Auditing of environmental management systems: a legitimacy theory perspective" accessed from https://www.emerald.com/insight/content/doi/10.1108/02686900110398331/full/pdf?title=auditing-of-environmental-management-systems-alegitimacy-theory-perspective ( accessed on 16/07/2022)
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