With the world getting increasingly environmentally conscious, companies and businesses are under a microscopic vision with regard to their environmental and social practices. Running an enterprise can no longer be just about making a profit. Businesses have been arm-twisted into considering the environmental and social effects and impacts of their commercial operations, and rightly so! Rules and regulations have been put in place to ensure that corporations and businesses take effective measures to mitigate any concerns and risks associated with their business operations and investments, that too well in advance. Therefore, companies and businesses across the globe can be seen investing in environmental and social due diligence practices to ensure regulatory compliance. One such critical aspect is resorting to environmental auditing services. In this article, we will delve into the detailed understanding of environmental audit, the need to conduct it and discuss the technicalities surrounding environmental audit services.
Environmental Audit as a concept gained attention during the 1970s-1980s, and its origin can be traced back to the United States. It was coherently argued by the environmentalists and the concerned stakeholders that these corporate businesses must bear some ethical and moral responsibility for their commercial enterprises. The conventional and already existing accounting systems did not account for non-commercial effects and impacts; therefore, there was a need to devise a new system to evaluate the environmental and social risks attached to these commercial operations as well and hence, this gave rise to environmental audit.
But what do we mean by Environmental Audit? An environmental audit is a methodical, organised, documented, and systemic process used to assess an enterprise’s activities and operations in order to gauge its environmental effects and ensure compliance with regulatory requirements. This allows an enterprise to demonstrate its responsiveness towards ethical and moral responsibility and ensures that systems are in place to protect against the hidden or potential risks associated with any project or activity. At the same time, it helps businesses and companies to exhibit compliance with the multiple rules and regulations that are applicable to them. In simpler words, an environmental audit intends to:
The concept of environmental auditing was first introduced in India in the 1990s to assist the industries treading on the path of sustainable development by optimising their production and manufacturing and reducing their waste and environmental pollution. It was developed as a tool by the Ministry of Environment and Forests (MoEF), which led to various discussions and deliberations around the topic, and ultimately, in 1992, the government of India mandated environmental auditing for all industries, with an aim to ensure that these industry operators assess their environmental performance, along with their financial performances.
The concept of sustainable development demands that environmental concerns be addressed along with the pursuit of economic development. Furthermore, hiring environmental auditing services becomes even more important because of the increasing environmental and social concerns and many investors, consumers and concerned stakeholders are now paying attention to these parameters while making their choices. There are various benefits of investing in environmental auditing services, such as:
Customers, nowadays, want to know about the environmental footprint of the brand or the business they associate with. The customer preferences can be seen shifting towards ‘environmentally-friendly’, ‘eco-friendly’, ‘cruelty-free’, and ‘organic’ products. Many studies have established that customers are not only willing to make a shift towards more sustainable brands but also willing to pay more for the goods and services that align more with their environmental, social and ethical values. Therefore, sustainability is no longer a mere trend; it is here to stay; hence, big brands and companies across the world can be seen investing in environmental auditing services.
The ethical practices adopted by a business play a key role in investment-making decisions as many venture capitalists and investors across the world can be witnessed selecting brands and businesses that have incorporated environmental and social metrics in their business strategies, as opposed to those that haven’t. These performance metrics are also considered significant and are a key criterion along with other commercial factors while deciding where to put their money.
Many environmental rules and regulations have been introduced and put in place to ensure that these businesses and companies bear some responsibility for their actions and make efforts to reduce their carbon footprint and adverse environmental and social effects. With time and changing scenarios, these rules and regulations also keep changing. Different industries, different sectors and different regions are governed by different rules. It is quite understandable that it becomes quite important to keep track of all these laws in place, and one cannot afford to ignore or even inadvertently fail to comply with these as they may lead to adverse legal and financial consequences. Therefore, by investing in environmental auditing services, businesses can ensure these regulatory compliances and stay abreast of any changes and amendments.
Initially, investing in environmental auditing services may seem like an additional financial burden as the same would require various resources like time, money, human personnel, etc., thereby making it seem like a big investment; however, these audits help businesses and companies identify cost recover by assessing any hidden and potential risks involved and provide with saving opportunities by developing plans for waste management, resource conservation, effective waste disposal, promoting recycling & reusing, saving energy, etc. In addition to this, investing in environmental auditing services helps companies save themselves from potential fines, penalties and lawsuits.
Long story short, performing environmental auditing services ensures that businesses and companies do their absolute best to keep the environment safe and figure out ways how they can improve their business practices.
Environmental auditing services can generally of 3 types, which are:
Under an environmental compliance audit, it is ensured that a specific checklist is ticked off by the organisation. Under this, it is ensured by the environmental auditing services providers that the organisation adheres to the applicable rules and regulations and obtains necessary approvals and licenses, such as ones pertaining to waste management, waste disposal, air or water quality controls, etc. In simpler words, environmental auditors check whether the organisation has been following the prescribed rules and regulations and make a compliance report, which is then submitted to the concerned competent authority.
Environmental management audits are performed to see whether the business or the enterprise is complying with the environmental policies and objectives that have been set in place by the management itself. This type of audit is essentially meant to evaluate the various management systems in place and to check whether they have been working efficiently or not. For reference, ISO 14001 Standards are followed as a general practice to ensure and evaluate whether a company’s environmental management audit system is working efficiently or not. Apart from ensuring that environmental management systems work properly, this kind of audit also helps organisations identify new opportunities for improvement and further ensures that the organisations continuously make efforts to improve their environmental sustainability.
In functional environmental audits, auditors are concerned with a specific targeted area, for instance, energy efficiency, resource conservation, waste management, pollution prevention, etc., with an objective to improve ways to enhance performance in that particular area. By conducting functional environmental audits, the organisations can ensure all required compliance before regulatory bodies get to their own inspections.
As stated earlier, environmental auditing services are performed in a systematic manner, which involves the assessment of a business’s operations to analyse their environmental impacts and ensure regulatory compliance. Here is a guide to help you understand what environmental auditing entails:
As discussed, companies and businesses cannot just worry about making revenue or profit anymore without sparing a second thought about the repercussions of their actions. The growing environmental consciousness and awareness have forced these commercial enterprises to incorporate environmental and social metrics into their strategic business planning to ensure the public and concerned stakeholders that they are taking proactive measures, like investing in environmental auditing services, to ensure that they take responsibility of the impacts their business operations can have on the environment and society. Environmental Auditing Services, as discussed, are of various kinds, and each caters to the specific aspects and needs of businesses, depending on their industry, scale and area of work. Investing in environmental auditing services has proven to help many brands, companies, and businesses enhance their environmental performance, increase the sustainability of their business operations and products, reduce any potential risks and increase accountability and transparency. All of this has ultimately helped their business grow by attracting a more loyal and devoted customer base and attracting sound investments.
An environmental audit is a methodical, organised, documented, and systemic process used to assess an enterprise’s activities and operations in order to gauge its environmental effects and ensure compliance with regulatory requirements. This allows an enterprise to demonstrate its responsiveness towards ethical and moral responsibility and ensures that systems are in place to protect against the hidden or potential risks associated with any project or activity.
Examples of environmental audits can be conducting air quality or water quality audits or performing waste audits to ensure compliance with rules concerning safe and proper waste management.
Environmental audits are conducted or performed independently by Environmental Auditors and in-house Auditors to ensure all necessary environmental compliance.
An environmental auditor assesses and identifies any potential or hidden risks involved with the business operations that may cause adverse environmental and social effects and further ensures that the organisation complies with all regulatory norms.
Environmental audit is also known as Green Audit.
Yes, India was amongst the first countries to mandate environmental audit back in the early 1990s.
At the central level, in India, the environmental audit is conducted under the framework of Compliance Audit and Performance Audit and at the state level by the State Accountant General (Audit).
While performing an environmental audit, generally, auditors try to identify any potential environmental risks involved with the business operations, assess the existing business practices and procedures, ensure environmental compliance and further analyse if there is any room for improvement.
The three main types of environmental audits are Environmental Compliance Audit, Environmental Management Audit and Environmental Functional Audit.
Investing in environmental auditing services allows companies and businesses to ensure regulatory compliance, increase their environmental performance, enhance sustainability, reduce pollution and waste, improve their overall performances, attract a loyal customer base and investors and reduce long-term costs.
The first step in an environmental audit involves Planning, which includes planning the activities and responsibilities. Defining the scope, aim and objective of such an environmental audit, identifying all legal and regulatory requirements, gathering a team of qualified auditors, setting a timeline and assigning a budget for the environmental audit.
While conducting environmental auditing, various challenges can be encountered, such as difficulty in data accuracy, complex legal compliance and requirements, resource and time constraints, managing stakeholder expectations, etc.
ISO 14001 is the applicable standard for any business to assess the approach to managing concerned environmental issues and performance.
EMS audit stands for Environmental Management System, which is placed with the aim of reducing the adverse environmental effects of an organisation.