EC eco-audit scheme: An opportunity for voluntary industry action

The European Commission's proposal for an eco-audit scheme has emerged considerably watered down from earlier drafts.1 Participation will now be on a voluntary basis. The legislation will still impose tough demands on companies which sign up - but they may need to do so in numbers if mandatory rules on environmental auditing are to be averted later in the 1990s.

Few items of EC environmental legislation have begun so ambitiously as the European Commission's first draft on environmental auditing - and few have been whittled back so comprehensively by the time they reached the stage of a formal legislative proposal.

Ambitious first draft
Circulated to Member States in December 1990, the Commission's first draft would have required mandatory and annual environmental audits of manufacturing sites in 58 industrial sectors. A public statement of the results would have had to be published. And for the environmentally more significant of these operations, both the self-audits and the public reports would have been subject to external verification by registered environmental auditors (ENDS Report 192, pp 13-16).

A hurricane of industrial protests promptly descended on the Commission, and it was not long before the proposal had undergone a fundamental revision. For a while its birth pangs eased. But then, at the end of 1991, the Commission's Environment Directorate failed to get what it thought was the final draft through a collective meeting of the Commissioners. By then the text had grown to a monster 40 pages in length, and it had to lose an arm and a leg before the Commissioners were willing to let it be issued as a formal legislative proposal.

Eventually published at the end of March, the final version is a very different creature from its oldest ancestor, and quite a bit different even from subsequent drafts. In particular, audits will not be mandatory on anyone; there will not be a mandatory annual frequency of self-assessments for most firms which elect to participate in the scheme; and their self-audits will not be subject to formal verification by an external auditor.

Rules relaxed
Other important elements of earlier drafts have also disappeared. Gone, for example, is a provision for Member States to oblige specific companies to participate in the scheme as a means of improving their environmental performance. And also gone are some detailed specifications for the environmental management systems which firms participating in the scheme would have to establish, as well as some even more detailed rules and procedures on the accreditation and supervision of the community of external verifiers which the Commission hopes the proposal will help to create.

What remains is a less prescriptive but, for most companies, still formidably challenging proposal intended to encourage businesses to set up arrangements dedicated to improving their environmental performance, and to report publicly on their failings as well as their achievements. The lure is not overwhelmingly enticing, taking the form of an eco-logo which firms participating in the scheme would be able to use in their corporate, but not their product, promotions. What the legislators are hoping is that the commercial imperatives for companies to have a clean image are sufficiently strong to provide the extra incentive for them to participate.

The proposal is now a Regulation rather than a Directive. A Regulation is directly binding in its entirety on Member States, and will help to eliminate differences between their implementing laws. The Commission hopes to have the proposal agreed in time to enter into force on 1 January 1993, although the scheme would not take practical effect until 1 July 1994.

The scheme is now known as the "eco-audit" scheme. Its objective is to promote improvements in industry's environmental performance by encouraging the establishment of environmental management systems by companies, periodic evaluations of the effectiveness of those systems, and provision of information to the public on firms' environmental performance.

The scheme would be open only to industrial activities, together with operations involving the production of electricity, gas, steam or hot water, and the waste management industry. An earlier provision enabling Member States to extend it to other sectors on a pilot basis has been deleted. The UK wants this reinstated so that other sectors such as service companies and local authorities can be encouraged to participate.

Companies or sites?
Participation in the scheme will be voluntary. Companies will be able to seek registration either in their entirety, or on a site-by-site basis.

This, as Tony Sims, an official from the Department of Trade and Industry, pointed out at a recent conference, raises an interesting issue. There are respectable arguments, he noted, to require registration on a company basis. "Top-level commitment achieves best results, and we don't want to see companies registering just their easy sites and leaving out all the dirty operations or the difficult ones." On the other hand, obliging a multi-site company to register all of them at one fell swoop may be asking too much even of the greenest of businesses.

Once a company or site had elected to participate in the scheme, it would have to observe all the rules and procedures laid down by the Regulation. These lay down seven steps to which firms must commit themselves when seeking registration.

  • Initial environmental review: This would comprise a "comprehensive analysis of the environmental issues, impact and performance related to activities at a site," including the matters listed in an Annex I. These include the choice and management of energy, raw materials and water, the selection of production processes, the life-cycle impacts of products, waste management, accident prevention, staff information and training, and public information and participation.

  • Environmental protection system: This is to be established in the light of results from the review. "Appropriate" participation by workers and their representatives in the formulation and implementation of the system would be required.

    The environmental protection system would have to include an environmental policy, detailed performance goals, an action programme, and an environmental management system, including an audit programme. It would have to take account of standards which are being developed in this area by the International Standards Organization (ISO).

    A key requirement for environmental protection systems is that they must generate the information needed to evaluate a site's environmental performance against its objectives.

    An earlier draft of the legislation borrowed large chunks from the draft British Standard on environmental management systems, which is to due to be published in April. These have now been deleted following objections from Member States that the legislation was becoming too detailed and prescriptive. Instead, a short check-list of 13 "good management practices" to be taken as reference for companies' environmental protection systems has now been inserted.

    The good practices listed range from top-level reviews of a company's environmental performance to prior assessment of the environmental effects of new products and processes, waste minimisation, and provision of advice to customers on the environmental aspects of product handling and disposal.

  • Environmental audits: Audits to assess the effectiveness of environmental protection systems in delivering on environmental targets would have to be carried out at intervals of between one and three years, depending on whether the site concerned had a "high", "moderate" or "low" environmental impact. The frequency would be left to top management to decide.

    Audits would have to be performed by people independent of the activities they audit, although they could be the company's own personnel provided it had an appropriate system of quality assurance. Alternatively, external auditors could be used. A late insertion, which the UK may oppose, would require external auditors to be accredited by a recognised body. In both cases, audits would have to take account of ISO standards on auditors' qualifications and audit procedures.

    The main objectives of the audit include assessment of the environmental management systems in place, and of the site's compliance with legislation and the firm's own policies.

  • Environmental statement: This would have to be prepared for each site at the same frequency as the audit, and be based on the findings of the audit or, on the first occasion, on the initial environmental review. It would have to be written "specifically for the public in a concise, non-technical form."

    According to the draft Regulation, the statement would have to include a description of the site's activities, a "detailed assessment of all the significant environmental issues", a summary of data on pollutant releases, waste generation, material and energy inputs and "other significant environmental aspects", a presentation of the company's environmental policy and programme for the site, and an evaluation of the performance of the environmental protection system.

  • Validation of environmental statement: Each statement would have to be validated by an accredited environmental auditor, working to professional codes of practice to be developed by the Commission.

    The auditor's tasks are set out in an Annex II. He would have to certify that the company had complied fully with the Regulation, that the methods used to generate the data on which the information given in the statement were technically valid, and that the information was reliable and covered all significant environmental issues pertinent to the site.

    According to Tony Sims, concern has been expressed by manufacturing businesses and trade associations that these provisions could create a consultants' charter if they ended up repeating the work done by companies themselves. The proposal is less prescriptive about the external auditor's validation tasks than earlier drafts, and also includes a specific provision that auditors should avoid "unnecessary duplication of the company's activities and methods." However, as Mr Sims pointed out, the precise limits of the auditors' duties have yet to be defined - a hint that the UK may be seeking to tighten up the legislation still further in this area.

  • Disclosure of environmental statement: Once a statement is validated, it must be "kept at the disposal of the public."

    Once these steps were completed, a company would also have to submit a copy of the environmental statement to the body designated by each Member State as the "competent body" for the purposes of the Regulation. The competent body would keep a list of sites participating in the eco-audit scheme. There is no explicit provision for the competent body to refuse to enter a site on the list even if it believes that a statement is invalid or some other aspect of the Regulation has not been observed - assuring compliance with the Regulation appears to be left entirely to the external auditor.

    Accrediting the auditors
    In addition to the competent body, Member States would have to establish systems for accrediting environmental auditors and supervising their activities within 12 months of the Regulation's entry into force. The procedures and conditions defined at national level for this purpose would be subject to prior approval by the Commission. A list of accredited environmental auditors would be published at EC level.

    The draft Regulation goes on to provide that the competent bodies, trade associations, environmental and consumer groups and trade unions "shall be entitled to participate in setting up and directing" the accreditation systems. In the UK, the debate on accreditation mechanisms for environmental auditors has thus far involved only industrial, accreditation, consultancy and quality assurance interests, and in this respect the Regulation as it stands would bring other interests into the fray.

    Rules on the use of the official eco-audit logo by participating firms are set out in the draft Regulation. It may be used on corporate brochures, headed paper and reports, and in corporate - but not product - advertisements. The logo would always have to be accompanied by a statement of which sites were participating in the eco-audit scheme. Use of the logo for sites in breach of EC or national environmental rules would be forbidden.

    DTI, HMIP in conflict
    One issue in which industry will be particularly interested is how the scheme may help to relieve the regulatory burden. The draft addresses this by providing that Member States may, if they wish, seek to encourage participation in the scheme by "simplifying and/or reducing the practical verification and inspection formalities under certain conditions, in particular for small and medium-sized enterprises."

    Commenting on this aspect of the proposal, Tony Sims observed that HM Inspectorate of Pollution "decide how frequently to inspect on the basis of their assessments of management competence. They may take eco-audit registration into account in deciding how often to inspect, and to inspect eco-audit registered sites less frequently. Decisions on that are not yet taken." This may be because HMIP is understood to be deeply opposed to any suggestion that it should relax its inspection regime at least until the eco-audit scheme has proved its worth.

    Other issues on which the UK will be looking for changes to the draft include the reinstatement of an earlier clause which would have permitted external validation of environmental statements for a random sample of sites in businesses which operate "essentially identical" sites.

    British Standard
    Integrating the provisions of the EC scheme with the new British Standard on environmental management systems will be a major issue within the UK. The Government is satisfied, according to Tony Sims, that the two will be compatible under the current draft EC text. In practice, this means that firms registered under the British Standard will be able to claim that their environmental management systems fulfil the requirements of the EC scheme in this area.

    Nevertheless, some sectors are concerned about the prospect of a proliferation of environmental management standards within Europe. The chemical industry in particular is worried about how its "responsible care" and quality management programmes, as well as the increasingly integrated approach to health, safety and environmental management being adopted by chemical companies, will fit in with the EC eco-audit scheme and the various standardisation programmes now under way. Details of these will be given next month when the new British Standard is published.

    Meanwhile, the eco-audit scheme is expected to be one of the priorities of the UK Government when it assumes the Presidency of the EC Environment Council in July. The official goal is to have the draft Regulation approved by the end of 1992, although this appears optimistic.

    The demands of the Regulation are such that most companies - even those with established environmental management systems - can be expected to think twice before enlisting. But once it is up and running - and provided that the arrangements for assuring the quality of environmental statements are robust and credible - participation in the scheme may come to be regarded as an essential token of companies' commitment to environmental protection.

    Businesses which feel themselves swamped by the tide of environmental regulation have been arguing that they should be given a chance to show that voluntary action by industry can provide effective protection for the environment. But if the eco-auditing scheme fails to attract many participants, the draft Regulation itself provides a warning of what may come in its place. The scheme is to be reviewed four years after the Regulation enters into force, and "if necessary" the Commission is then to propose "the appropriate amendments, particularly to the scope and nature of the scheme." Mandatory eco-audits, in other words, could yet find their way onto the statute book.

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