OPERATIONS AUDITING

G EN VIR O N M
ITIN EN
D SP ON S IB IL IT TA
AU R E Y L

Chapter 21
Group 5
 Group 5
Mendoza, Jane Irish C.
Aquino, Issa May R.
Burdeos, Frances Clarisse D.
Cruz, Ma. Larissa Joyce D.
Francsco, Bongbong M.
Macalla, Ma. Luella L.
Pastidio, Hannahlie N.
Reguindin, Criszha Mae
Villoga, Jasper D.
Learning Objectives
Assess the nature and extent of the risk of harm to
human health or the environment.
To evaluate the company's adherence to laws,
regulations, and relevant obligations.
Establish performance standards to create a foundation
for planning and constructing an environmental
management system.
To encourage effective environmental management
practices.
To sustain public trust and reputation.
Increasing awareness and reinforcing the company's
internal dedication to environmental policies.
To reduce the potential risks to health and safety
arising from environmental concerns.
 Auditing environmental responsibility is a systematic process that assesses an
organization's environmental performance, compliance with environmental
regulations, and commitment to sustainable practices.

Embracing environmental responsibility can unlock new opportunities, especially

in "green" technologies. Companies projecting a caring and concerned image to
customers stand to gain. Ethical investment funds have played a role in shaping
this trend, and it is no longer seen as antithetical to the economic bottom line.

Green technologies," also known as "green tech" or "clean tech," refer to

technologies, processes, and products that are designed with a focus on
environmental sustainability and the reduction of negative impacts on the
environment. These technologies aim to provide solutions to various environmental
challenges, including pollution, resource depletion, and climate change.

Introduction
 THE TRIPLE BOTTOM LINE

01 02 03
ECONOMIC SOCIAL BOTTOM ENVIRONMENTAL
BOTTOM LINE LINE BOTTOM LINE
This is the traditional bottom line, The social bottom line assesses an This component focuses on an
focusing on financial performance organization's impact on society organization's impact on the
and profitability. It includes and its stakeholders. It includes environment. It includes factors
metrics like revenue, profit, and factors like employee well-being, like resource conservation,
return on investment. It community involvement, social pollution control, carbon emissions
represents a company's economic equity, and ethical business reduction, and sustainable
viability and its ability to generate practices. Organizations are practices. Organizations are
financial returns for its evaluated on their commitment to assessed on their environmental
shareholders. corporate social responsibility and responsibility and sustainability
their contribution to social well- efforts.
being.
THE PRINCIPLE OF "THE POLLUTER
PAYS" AND CARBON TRADING

The Polluter Pays Principle is a concept

that holds those responsible for
environmental pollution or damage
accountable for the associated costs and
cleanup. In essence, it means that the
party causing pollution should bear the
financial burden of rectifying the harm Carbon trading, also known as
they've caused. cap-and-trade, is a market-based
approach to reduce greenhouse
gas emissions. It sets a limit (cap)
on the total amount of emissions a
group of entities or a country can
produce.
ENVIRONMENTAL IMPACT
ASSESSMENT

Are more environmentally friendly materials available? (i.e.,

naturally sustainable)?
Can we use renewable energy sources? Can we use less material?
Can the choice of materials influence the useful life of the product
or improve the opportunities for eventual recycling?
Can we make savings by recovering and reusing materials?
Can we adequately protect the product with less packaging
material?
How can waste be minimized?
How can we protect and conserve surrounding land?
ENVIRONMENTAL MANAGEMENT
STANDARDS
Environmental management standards
are a set of guidelines and best practices
that organizations can follow to effectively
manage their environmental
responsibilities. These standards help
businesses and institutions develop
systematic approaches to reduce their
environmental impact, ensure compliance The Eco-Management and Audit
with environmental regulations, and Scheme (EMAS) is a voluntary
promote sustainability. program established by the
European Commission. It provides
a framework for organizations to
assess, report, and improve their
environmental performance.
Environmental
Auditing
What is Environmental Auditing?

An environmental management tool for

measuring the effects of certain activities
on the environment.
Environmental Auditing

Evolution Timeframe
Originate:
Environmental auditing first began in the
United States around the 1970’s.
Environmental Auditing

Environmental Auditing
Development History
How the world gradually promote
environmental audit (1990-2000)
Environmental Auditing

Problems Associated with

Environmental or Quality Auditing
Before ISO 19011
Low Efficiency
Invalidity
Absence of Standards
Instability
Environmental Auditing

Scope of Environmental Auditing

Providing guidance on the principle of auditing, managing
the audit program
Conducting quality management system audits, and
environmental management system audits
Guidance on the competence and evaluation of auditors
Applicable to organizations the need to conduct external
and internal audit or environmental management systems
or to manage an audit program.
The Emergence of
Environmental
Concerns
The Emergence of Environmental Concerns

Environmental legislation and increasing public awareness

were first seen in the industrialized industrial nations.
The Emergence of Environmental Concerns
The Emergence of Environmental Concerns

With this increase, and because only recently more

efforts were taken towards the introduction renewable
energy sources, most of this production came from
fossil fuel consumption, generating with it, known
secondary effects, such as global warming and the
ozone hole and lots of pollution.

A larger awareness and recognition that these facts are

connected, allowed creating the necessary conditions
to raise awareness into the negative impact of the
usage of these resources in our lives and with it, the
necessary political will to start making changes.

https://www.bi4all.pt/en/news/en-blog/the-impact-of-technologies-on-the-environment/
The Emergence of Environmental Concerns

Initial warnings of the consequences of environmental

damage were particularly noticeable in the 1960s,
especially in relation to the widespread use of chemical
pesticides.

https://www.bi4all.pt/en/news/en-blog/the-impact-of-technologies-on-the-environment/
The Emergence of Environmental Concerns

In the United States, the US Environmental Protection

Agency published (in 1969) an outline approach to
environmental auditing which coincided with the
passing of the National Environmental Policy Act, which
required that the environmental impacts of major
projects be properly assessed and addressed.
The Emergence of Environmental Concerns

In Japan where very demanding and rigorously policed

pollution control criteria were established early on.
The Emergence of Environmental Concerns
TRANSPORT
In 2020, the Tokyo Metropolitan
Government launched its Zero
Emissions Tokyo Strategy, a plan to
spend more than 74.6 billion Yen in the
2020 financial year to achieve net-zero
carbon emissions and reduce other
short-lived climate pollutants through
measures such as eliminating marine
plastic waste and food waste.wildlife.
HEATING AND COOLING
2019, Japan revised the Act on Rational
Use and Proper Management of
Fluorocarbons to tighten regulations on
fluorocarbons recovery (which includes
HFCs) with the aim of achieving a recovery
rate of 50 percent by 2020 and 70 percent
by 2030. It requires users of cooling
equipment, demolition operators, and
scrap and/or recycle operators to ensure
that fluorocarbons in the equipment are
properly recovered before the disposal.
The Emergence of Environmental Concerns

AGRICULTURE
In 2019, the basic policy of the Food
Recycling Law was announced to
halve business-related food loss and
waste by 2030. The legislation
mandates a national directive as well WASTE
as action by local municipalities. Japan is working with several countries,
including Brazil and Malaysia, on a
Global Methane Partnership to better
capture and recover methane from
landfills.
EMAS — The European
Eco-Management and
Audit Scheme
EMAS — The European Eco-
Management and Audit Scheme

The intention of EMAS is to recognize and

reward organizations that go beyond
minimum legal compliance and
continuously improve their environmental
performance.
Organizations seeking involvement in EMAS will need to address
each of the following requirements at each site:

01
Establish a company-wide
environmental policy, which
incorporates the environmental
priorities, a commitment to
continuous improvement and
acknowledges compliance with
the relevant environmental
regulations. Any such policy
should be documented and
ratified by senior management.
02
Undertake an environment
review incorporating an
analysis of all inputs, processes,
and outputs for the site. Use
this data to catalogue the
environmental impacts and
issues for management
attention.
03
Using the previous two
stages as a guide and
structural framework, create
an environmental
programme which
documents the targets,
objectives and goals for the
site in question and the
measures to be taken in
order to achieve them.
Organizations seeking involvement in EMAS will need to address
each of the following requirements at each site:
04
Develop an environmental
management system which
incorporates the necessary
operating procedures and
controls to achieve the
successful implementation of
both the environmental policy
and environmental
programme.
05
Having defined and officially
documented your environmental
policies and practices, it is now
necessary to enter the
environmental audit cycle so that
the actual performance is compared
to the standards and objectives. This
level of environmental audit is an
internal review and is aimed at
identifying any specific changes in
order either to confirm compliance
with the required practices or to
generally improve the efficiency or
effectiveness of same
06
Following the audit review (and
every year thereafter) the
organization should prepare an
environmental statement for
each site, which is intended for
publication. The aim here is to
reassure the public and others
that the environmental impacts
associated with the site are fully
understood and subject to
ongoing management
attention.
Organizations seeking involvement in EMAS will need to address
each of the following requirements at each site:

07
At the end of each cycle, the following elements
must be verified by an accredited and independent
environmental verifier in a formal validation process:

the environment statement produced at stage 6

above
the environmental policy (stage 1)
the environmental programme (stage 3)
the environmental management system (stage 4)
the environmental audit procedure (stage 5).
Linking Environmental
Issues to Corporate
Strategy and Securing
Benefits
Linking Environmental Issues to Corporate Strategy and
Securing Benefits

To address environmental issues effectively, they need

to be woven into the business strategy and direction of
the organization. The cynical may say that the
marketing and public relations imagery projected by a
business entity in relation to the environment need
only be skin deep, but here we are more concerned
with ingrained, realistic and responsible processes
which make an effective contribution to the
environment and at the same time generate tangible
benefits for the organization, such as:
Linking Environmental Issues to Corporate Strategy and
Securing Benefits

potential for cost savings

lower cost achieved through improved production processes
improved usage of energy
potential savings in packaging, storage, and transportation cost
the creation of new technologies, product lines, and new
markets
effective marketing exploitation of the current public concerns
over the environment
securing competitive advantages through improved
performance
avoidance of potential environmental liabilities
Environmental
Assessment and Auditing
System Considerations
Environmental Assessment and Auditing System
Considerations

Management and auditors alike will need to consider the

organization’s products and services on a “cradle to grave” or
“lifecycle” basis.
This approach, which can point up those areas of significant
environmental concern, assesses the implications at each stage of the
product life cycle spanning from creation through destruction, for
instance:
1. research and development
2. design and performance criteria
3. selection and sourcing of raw materials
4. methods of production
5. waste materials, emissions, discharges, etc. during production
6. the use of energy
7. product packaging
8. methods of distribution
9. environmental impacts generated by using or applying the product
10. implications for the eventual disposal (or recycling) of the used product.
Environmental Assessment and Auditing System
Considerations

The nature of the business and its operations

will dictate the type(s) of environmental audits
that are applied.
There is some implied synergy between the
approach adopted for the development of an
environmental assessment/audit strategy and
that relevant to the formation of a total quality
management (TQM) culture.
The Role of
Internal Audit
INTERNAL AUDIT
Internal audit functions help both increase
transparency because most companies self-define
environmental, social & governance (ESG) program
requirements on what information is disclosed
publicly, and help directors perform their oversight
duties through the audit committee interaction
with the corporate board.
 THE ROLE OF INTERNAL AUDIT
Internal auditors are increasingly becoming involved in
providing assurance to senior management and to boards on
external aspects of governance, which includes the
accountability of the board to external stakeholders, for
instance in the annual report and accounts. Many companies
are now publishing sustainability reports, either as a section
within their Annual Report and Accounts, or as a separate
report. When a company’s published sustainability assertions
are subject to an audit by independent environmental
auditors, which is a requirement of EMAS, there may be less
need for internal audit to provide assurance to management
and the board on the reliability of their sustainability
assertions.
Example
Programme
Control Objectives for Environmental Issues
1. To provide an authorized and documented policy on environment issues as a
framework for responsibly conducting related business activities.
2. To minimize the impact of the organization’s activities on the environment.
3. To ensure that the organization’s products are environmentally friendly.
4. To ensure that waste is minimized and properly disposed of.
5. To avoid pollution and environmental contamination.
6. To assess, on an ongoing basis, the environmental impacts of business operations and
define the requirements to be adhered to.
7. To ensure that alternative and potentially environmentally friendly processes and
technologies are considered and implemented where justified.
8. To minimize or avoid the use of scarce materials and nonrenewable energy sources.
9. To ensure that harmful or hazardous materials and waste products are safely and
responsibly transported and disposed of.
10. To ensure that all environmental legislation and regulations are fully complied with.
11. To avoid adverse impacts on the organization’s reputation and image.
12. To ensure that environmental issues are subject to monitoring and management
Risk and Control Issues for Environmental Issues

Key Issues
01 02 03

What measures ensure that Have production processes What measures prevent the
the principles of the and other business activities pollution and contamination
environmental policy are been assessed for their of the environment?
complied with, and how environmental impacts (and
would noncompliance be how is the necessary
promptly detected? corrective action evidenced)?
Risk and Control Issues for Environmental Issues

Detailed Issues
01 02 03
Is the environmental policy Is the assessment of Does the design and
supported by the environmental impacts kept development of new
commitment of senior up to date so that products take into account
management and a management action is the potential environmental
suitable staff relevant and targeted? impact of production, and
training/awareness what measures ensure that
programme? such impacts are minimized
and contained?
Thank you!