You thought that the audit you completed months earlier went well, and you feel good about it. Then the phone suddenly rings — it’s the auditee screaming that he just got inspected by OSHA, and they cited his company for several things that you didn’t find when you audited the facility months earlier. He demands that you meet him at his office tomorrow with an explanation. That warm fuzzy feeling that you had is gone. Your mouth is dry, and beads of sweat appear on your forehead.

Placing the word “disclaimer” in an audit report sounds like an auditor might not be completely confident that the findings in the report are accurate or reliable. The auditee, upon seeing this word, may believe that they didn’t get their money’s worth if the auditor can’t stand behind his or her work.

Nevertheless there are some limitations and conditions that auditors should be clear about when proposing to conduct an audit. Perhaps referring to these limitations as “representations” would be better than the word “disclaimer.” Whichever word is used, these issues should be spelled out both verbally and in writing in audit proposals and audit reports so the auditee understands fully the audit process and its inherent limitations. 

There are four major “representations” that an auditee should acknowledge before an audit is started.

1. Representative Samples

By definition, an environmental audit is an independent, objective review of a representative sample of data, information, records, documents, and files. It also includes interviews with a representative sample of knowledgeable facility staff and an inspection of a representative sample of equipment, operations, activities, rooms, and locations at the audited facility.

It’s always possible that some issue outside of the representative sample used by the auditor will hold a non-compliance issue that could be identified by a regulatory agency inspector after the audit is completed. If the auditor did not pick those particular records in the representative sample used during the audit, is the auditor at fault?  No. As long as the auditor has exercised due professional care in picking a valid, representative sample, the auditor should not be held accountable for missing the non-compliance issue. This is an acceptable limitation of the auditing process and should be communicated to the auditee. Representative sampling is a time-honored principle of auditing, and it should be part of the audit methodology.

2. Accuracy and Completeness

Auditors draw conclusions on the compliance status of the audited facility based in part on available information sources. Many issues in the scope of a typical audit involve reviewing reports, analytical testing results, performance test data, disposal verification records, and other similar information prepared by external parties such as consultants, laboratories, contractors, and other outside vendors. 

An auditor cannot reasonably be held accountable for the accuracy or completeness of available audit information prepared by other external parties, for example, laboratory reports indicating that a solid waste is or is not a hazardous waste. The auditor has no choice but to accept the documented results shown on the available records as accurate and complete assuming the sampling and testing were conducted by a qualified laboratory. If subsequently the validity of the information or data prepared by the external party is called into question and deemed to be inaccurate, the auditors who relied on that information should not be held accountable for any consequences. 

This of course does not include compliance information prepared by the auditee staff that is reviewed by auditors.  An auditor is responsible for verifying that the associated regulatory compliance information and documentation prepared by the auditee staff is accurate and complete. 

In a like manner, the veracity or accuracy of information obtained by auditors through interviews with facility staff must be assumed to be truthful. If it turns out that an individual was intentionally untruthful or deceptive during an interview and an auditor based his or her audit findings on that interview, the auditor should not be held accountable for the consequences.

An auditor is entitled to assume interviewees are trustworthy and are being honest to the best of their ability in their responses to the auditor’s questions.

3. Snapshot in Time

An audit is a snapshot in time. Auditors will draw conclusions on the compliance status of the facility based on conditions observed and information provided by facility staff during the period of time the auditors are on site. Auditors are not responsible nor can they be held accountable for activities, conditions, operations, actions or failure of actions by facility staff that may occur or not occur after the auditors leave the facility.

Auditors should make clear to the auditee that audit findings are based only on observations made and information obtained during the period of the on-site audit.

4. Regulatory Sanctions & Audit Findings

Auditors should not be held liable for any fines, penalties, or other sanctions that may be assessed against the audited facility by any state, county, city or other local regulatory authority for any findings reported by the auditors in the audit report.

This is particularly important if the auditee has not established a proper audit protection process such as Attorney Client Privilege or other method to prevent disclosure of the audit findings to third parties.

Auditors should communicate this exposure to the auditee early in the audit process and ensure the auditee understands that the auditor will not be accountable for consequences resulting from inadvertent disclosure of audit findings to third parties (unless through fault of the auditor). 

Similarly, auditors should communicate to the auditee that the auditors are not accountable for regulatory sanctions that may be assessed due to failure of the auditee to correct the audit findings documented in the audit report in a timely manner. 

Conclusion

The representations listed above are not intended to be legal opinions about these audit issues but rather advice to auditors on typical misunderstandings that often arise between auditors and auditees. It is suggested that auditors prepare an abbreviated summary of these four issues as “Auditor Representations” or a “Disclaimer” statement (if not troubled by that word).

Placing this concise statement in audit proposals and in audit reports will foster clear communication between auditors and auditees regarding the generally accepted limitations and constraints inherent in the audit process.

Many auditees are simply not aware of these limitations and constraints. Responsible auditors have an ethical obligation to inform auditees of the potential limitations of the audit.

About the Author

Raymond W. Kane P.E. CPEA, now retired and living in Naples, Florida, had a 35-year career as a consultant in the auditing and environmental management field. He currently serves as a special consultant to the The Auditing Roundtable, a professional organization devoted to the practice of environmental, health and safety auditing, where he assists with the organization’s auditor training programs.

Photograph: Japanese Water Garden 5 by Paulo Oliveira Santos, Rotterdam, Netherlands.

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The marketplace for environmental, health, and safety (EHS) consulting services has changed dramatically in recent years. Highlighted below are seven post-recession game changers that have re-shaped the playing field for the EHS market.

1. Recovering Markets are Different

Encouraged as we are by every sign of improving economic news, we are kidding ourselves if we expect things will pick up to where they left off in 2007. The global recession has left deep changes in its wake, many of which are structural and game changing, not just cyclical. 

Many global clients now project a much lower tolerance for risk and greater cost sensitivity than they did before. They face lower trust from the public, regulators, and investors. They are confronted by tremendous pressures on cost and availability of resources such as energy, water, and raw materials. Supply chains continue to extend in some industries while others face the challenges of reshoring as global cost differentials begin to compress.

Pressure from the public and regulators on things such as carbon and resource management (largely missing during the recession) will likely return but will focus more on efficiency then altruism. Consultants that don’t actively consider their clients’ business goals in light of new and changing realities will find themselves out of sync and at a competitive disadvantage for all but the most commoditized service lines.

2. Follow the Money

To paraphrase an old line about the weather, “everyone talks about the environment, but not that many people do anything about it.” Most clients understand the challenges of running more sustainable businesses on an intellectual level. They get that they should consider life cycle impacts in the design of their products. They recognize the connection between their brand reputation and a sustainable business posture, and in their hearts they know that high efficiency, low waste, and low carbon operations are the path to long term success. However, that doesn’t always mean clients are ready to spend money on it.

While there are clearly some companies that have invested heavily in a green image or even green products, many more find moving from “talking about” EHS performance and sustainability to actually “doing something” about it depends on a clear and short term link to enhanced corporate revenue and profit. Gaining or maintaining a strategic involvement with clients will depend much more on the ability to contribute to their achievement of favorable business outcomes linked to revenue improvement and cost reduction.

3. Business Organization

Simply put, clients don’t care about your internal business organization unless it’s annoying them. Clients want you to provide them with seamless, consistent, best-in-class services anywhere you work with them. If you’re a regional firm, they want it regionally. If you’re a global firm, they expect it globally. They want your service to be user friendly. They don’t want to worry about getting the best or most appropriate person in your organization, resolving issues around contracting or invoicing, or educating every consultant working on their projects about their way of working, tolerance for risk, deliverable formats, and all the rest. 

If they can’t get that from you, they can and will go somewhere else. They don’t care about your internal divisions, profit center structure, sales or revenue tracking methodologies, or any of the other conventions by which you manage your business.

But good consultants know that their internal metrics and management and reward schemes do have the potential to negatively impact the way even their best people interact with clients and each other. To effectively deliver to clients across geographic boundaries, organizational structures and business management systems need to account and respond to client relationship and service delivery needs, but in a way that is transparent to the client.

4. Sustainability is Not a “Service Line”

Sustainability is not a service line or a “thing” that consultants can sell. It can be part of a client’s vision for their business, a philosophy, a posture, a strategic underpinning…call it what you want. For consultants to succeed in selling into a client’s view of sustainability requires an individualized understanding of that client’s markets, products, business goals and stakeholder relationships. 

If you ask well-informed corporate managers what their biggest challenges are, they will seldom say “sustainability.” They will say things like product development and introduction, product take back, new market entry and geographic expansion, asset and liability management, supply chain and business continuity, or reputational protection and enhancement.

Challenges like these (if managed wisely) will support your client’s success and allow them to make contributions to a sustainable business. These are the types of assistance we can focus on and sell services into. Selling sustainability itself is like selling success – every client wants it but they are not likely to believe that they can get it out of your briefcase.

5. Traditional Services are Still Critical

To be the kind of company that clients value, consultants need to be able to provide several kinds of support and service at the same time. 

On the one hand, we are expected to be innovators and advisors as to “what’s next.” These are exciting times to be working with clients on product strategies, energy challenges, green buildings, supply chain management or digital applications to data and knowledge management. On a percentage basis, these are and will be fast growing parts of our businesses.

But they are not the entirety or even the biggest part of what most EHS and sustainability firms do. Service lines such as investigation and remediation, due diligence for transaction support, compliance assurance and auditing, impact assessment, and waste management still make up the lion’s share of most companies’ revenue streams and profits. 

This was never as starkly visible as during the recent global recession when many clients cut back significantly on elective spending while continuing ongoing projects or regulatory-driven commitments. So while EHS firms continue to move towards the introduction of exciting new service areas to respond to market changes and shifting client needs, well managed consulting firms recognize the need to tend, update, and invest in the bread and butter service lines that built the industry.

6. Implementation Matters

Today’s firms increasingly need to be implementers. The kind of firm that leaves a report and says “good luck with that” as they depart the client’s office really doesn’t have that much of a play in today’s market. Clients need to show that they have received quantifiable value for consulting services, and that generally means that we as consultants need to actually help them do something to achieve a successful result rather than just tell them what they should do.

This requires pairing the strategic with the scientific, engineering, operational, and business disciplines that are critical to the implementation of our most responsive and innovative approaches to client success. Take a look at who is hiring who today and you will see this philosophy reflected in many firms from the global management consultants to regional players.

7. Your Customer is Changing

Over the past 25 or so years most client organizations of any size developed a management function containing some combination of the letters E, H, and S, often with an executive or a number of executives who controlled their spending and contracting. Getting to the decision makers in those departments and maintaining those relationships was a key to our success as consultants. In some client organizations that is starting to change. Perhaps it’s a case of be careful what you wish for, but EHS and sustainability issues are increasingly becoming integrated into many different entities within our clients’ organizations. 

Engineering and product development people are savvy about product stewardship issues — operational leaders understand that permitting is key to facility expansion, procurement is getting smarter about supply chain liabilities, and marketing executives get that “green” matters to some stakeholders. In some client organizations this is resulting in contraction of both the size and influence of the EHS function.

The bottom line is that clients still need us, but our buyers are a dynamic and more diverse audience than in the past.

About the Author

Robert Kloepfer serves as a Director with 2020 Environmental Group, advising U.S. and international EHS and sustainability consulting firms on strategic growth, new market entry and expansion, operational and organizational restructuring, and mergers and acquisitions. Bob also brings expertise in international markets for EHS, product stewardship, supply chain management, and corporate sustainability practices in the UK, Europe, and Asia.

About 2020 Environmental Group

2020 Environmental Group brings together a new perspective in management consulting aimed at helping environmental businesses open new paths to success. Focus areas include helping consulting companies expand into new markets, grow through mergers and acquisitions, build brand name visibility, sustain growth, and maximize shareholder value.

Photograph: Harbour by Phillip Collier, Sydney, NSW, Australia

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According to a new report released by Ceres, nearly half of more than 25,000 oil and gas wells evaluated in the United States are in water basins with high and extremely high water stress. Future growth of the unconventional resources sector in the U.S. depends on better water management planning and accelerated water recycling.

“These findings highlight emerging tensions in many U.S. regions between growing hydraulic fracturing activity and localized water supply needs,” said Ceres president Mindy Lubber, in announcing the report at Ceres’ annual conference in San Francisco.

Concerns for Colorado, Texas, and Pennsylvania

The report, Hydraulic Fracturing & Water Stress: Growing Competitive Pressures for Water, shows that a significant portion of this activity is happening in water stressed regions of the United States, most prominently Texas and Colorado, which are both in the midst of prolonged drought conditions. In Colorado, 92 percent of the wells were in extremely high water stress regions. In Texas, which accounts for nearly half of the total wells analyzed, 51 percent of the wells were in high or extremely high water stress regions. In some Texas counties, water use for hydraulic fracturing accounted for more than 20 percent of the region’s total water use. In Pennsylvania, 70 percent of the wells were in medium to high water stress water basins, and 2 percent were in high water stress basins.

“Given projected sharp increases in shale oil and gas production in the coming years, competition over water should be a growing concern to energy companies, policymakers, and investors,” the report concluded, noting a projected doubling of oil and gas fracturing production in the coming years. “Shale energy development cannot grow without water, but in order to do so the industry’s water needs and impacts need to be better understood, measured, and managed.”

Improving Water Use Practices

As the report outlines, the industry has made progress in boosting the use of recycled water and other alternative water sources for fracturing wells. Operators are starting to use non-freshwater alternatives such as wastewater, saline water, seawater, and acid-mine drainage. “Overall water recycling and the use of non-freshwater sources must increase considerably to have a significant impact,” the report says.

Report Recommendations

The report includes key recommendations for companies and regulators, among those:

• Implementing mandatory standards for companies to report data on water use, discharges, and disposal.
• Requiring companies to set quantifiable water use targets, including recycling and non-freshwater use targets.
• Ensuring that sufficient water management planning is conducted by companies and local regulators.
• Maintaining a robust stakeholder engagement process for water issues.

About the Report

The report, released in May 2013, is based on well drilling and water use data from FracFocus.org and water stress indicator maps developed by the World Resources Institute (WRI). The research was based on FracFocus data collected on 25,450 wells in operation from January 2011 through September 2012.

This report is part of a larger, more comprehensive study Ceres is undertaking to analyze water risks across the entire hydraulic fracturing lifecycle — from water sourcing to final treatment and disposal of wastewater — across different regional basins in North America. The research is aimed primarily at investors who have financial stakes in operators and support services in these regions.

FracFocus.org was launched in 2011 as a voluntary national hydraulic fracturing chemical registry. The database provides the location and date that each oil and gas well was developed and the chemical additives and total volume of water injected down each well.

WRI’s water stress indicator maps are part of a recently launched Aqueduct Water Risk Atlas, which provides a comprehensive, high-resolution picture of water-related risks worldwide. The baseline water stress indicator maps show the level of competition for water in different U.S. regions by measuring total annual water withdrawals against the percentage of water that is available.  Extremely high water stress means over 80 percent of available water is already being allocated for municipal, industrial, and agricultural uses.

By linking the two datasets together through matching latitude and longitude coordinates, the report provides valuable insights about the extent and distribution of well production activity in regions with water competition challenges.

About Ceres

Ceres is an advocate for sustainability leadership. Ceres mobilizes a powerful coalition of investors, companies, and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy. Ceres also directs the Investor Network on Climate Risk (INCR), a network of 100 institutional investors with collective assets totaling more than US$ 11 trillion.

Photograph: Fountain by Gavin Spencer, Lancing, West Sussex, United Kingdom.

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Welcome to the EHS Journal. This international online magazine was designed for and by environmental, health and safety professionals for the purpose of sharing knowledge and facilitating discussion within our profession. Since our launch in January 2010, we have published articles and images from more than 100 contributors in 30 countries.

We are actively seeking new articles! See the Submission Guidelines for more information and submit your articles and comments to the EHS Journal today.

Photograph: Burning Match by Stephen Davies, Cardiff, South Wales, United Kingdom

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Take a break and watch this short video of forklift mishaps. The music makes it sounds as if these accidents are supposed to be funny, but we all know how tragic they could have been.

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Does it feel like your corporate world is on “pause,” waiting for something beyond your control to be resolved? Many companies seem to be waiting for something, unwilling to expand or contract, go forward or backward.  Which raises the question — how do you lead your EHS/Sustainability (EHS/S) program if you don’t really know what the company is doing or going to look like?

Strategic Limbo

The macro-economic factors are wreaking havoc on business strategy.  If you sit in the C-suite and look at the macro dashboard, all the lights are amber.  Maybe even a few flashing red now and then.  Certainly no solid green lights.

The United States? The recovery is shaky. Consumers are hesitant and businesses even more so with public policy spanning the range from doing nothing to doing something embarrassing and frustrating.  China? Concerns with new leadership, inflation, and slowing growth. Even worse, when China hiccups, every mining economy from Australia to Argentina has angina.  Europe?  The only question here is how many more crises-du-jour will it take to turn the amber light red. Brazil?  Hesitation.  India?  Not so fast.  The “next 11” never quite caught on like the BRICs, and many seem to be caught in geopolitical disputes and uncertainties.  Economically, the daily range seems to run from no news to bad news with little cause for optimism.

So what are companies doing in this strategic limbo? Simple: they’re trying to keep flexibility up and costs down.  They’re not stopping all investment, because after all, those dashboards are amber, not red.  Businesses still need to grow.  There are still opportunities, and companies need to be ready.  A huge amount of equity remains in the global marketplace.  That money is looking for investments that will provide attractive returns, whether flowing through record-setting stock exchange levels or through the private equity markets.  The odds are your company is going to grow (or be bought) — you just don’t know what, where, how, and when.  Other than that, it’s all clear.

In some companies the limbo is masked by success.  As Yves Doz and Mikko Kosonen wrote in their 2008 book Fast Strategy:

Companies naturally become victims of their own success: as they grow and become successful they lose some of their adaptive capacity.  The search for efficiency drives flexibility out.  Success dulls strategic sensitivity.  The legitimate short-term challenges of scaling up, and of managing fast, profitable growth from quarter to quarter, reaping economies of scale in the process, lead to a narrow focus on core growth businesses, a mix of tunnel vision and strategic myopia. [page 6]

In these companies, there’s a high “limbo denial” factor.  On the surface, people want to keep everyone focused and hope that the limbo passes.  Underneath, the cost cutting continues, and it’s considered disloyal to talk about rethinking or just refreshing the strategy.

Breaking out of Limbo

So how do you manage your EHS/S strategy at a time like this?  Do you base your actions solely on those amber signals:  be ready to stop, cut costs, and don’t rock the boat?  (And hope that you don’t look like a tempting cost to cut?)  Do you hold your breath, figuring that this can’t last too long and then everything will be clear?

Or do you use this as an opportunity to take a deep breath and prepare for the future — including a future in which limbo may be a very common state?

EHS/S leaders are realizing that this is an opportunity — maybe the first one since the recession — to take stock and prepare for the future while taking care of the present.  They are using this “pause” as an opportunity to refresh their programs and teams.  They’re calibrating this carefully, not making too big a deal of it.  But without drawing too much attention to themselves, they are quietly following a process that cleans up the recent past and prepares for possible futures.

This “refreshing” has five steps:

• Regroup from your transactions.  Look backward: catch up with the changes that came at you too quickly. Coming out of the recession, an extraordinary number of companies bought, sold, spun off, merged, etc.  Few took the time to regroup on the EHS/S side — to really look at the best practices and best people from each side and determine how a dramatic change in scale, geographic focus or core business could transform the EHS/S landscape. This is the time for EHS/S leaders to set common expectations, standardize programs, and integrate teams.(Note: regrouping is NOT a euphemism for reorganizing, although that may be one outcome.  It has a lot more to do with rethinking what you do and who does what, rather than which box goes where on the org chart!)

• Rethink your scenarios. Look forward: think about what’s coming. None of us have guaranteed insight into the future, but we can all build scenarios of alternative possible futures and see how we might prepare for those.  Some of the best strategies have come from looking at alternative scenarios and realizing that one or two are substantially “less unlikely” than the others and are worth preparing for.  In this market, post-recession but without a robust recovery, many people find that the possible, unlikely, and less unlikely scenarios look different than they did five or even three years ago.What scenarios are you really preparing for?  After years of assuming that all growth is in Asia and Latin America, are you prepared for a world where growth may be in the United States and Africa? Do you have a scenario for “reshoring” or “inshoring” and for developing the EHS/S skills and capacity that you may need back home or in challenging new geographies, for example? This is the chance for EHS/S leaders to develop two or three specific scenarios for internal planning.  It’s the time to develop Plans A, B and C: what would you do if your boss came in right now and said, “Give me your plan if we grow 15%”; or “Give me your plan to cut 10%”; or “How would you fit in three new programs without adding costs?”

• Refine your growth support.  Look to the bottom line: think about how you help the company make money. Regardless of past transactions or future uncertainties, one thing is certain: your company will have to generate more revenue.  To do that, your company will have to launch new products or services, get existing products and services into new markets, or invest capital to create new capacity. These actions all face growing risks that can increase costs, reduce revenue, or just take more time.This is painfully evident in the sectors that are still making major capital investments during this strategic pause. Capital discipline is replacing capital recklessness, and investments are being made with greater caution.  To get needed return on capital, companies must make smarter decisions that consider a wider range of risks. Getting permits reactively is no longer good enough for your business.  Your company needs to understand “license to operate” requirements (includingpermits) well in advance and prepare for them.Helping your company understand and manage these risks to revenue growth probably wasn’t the basis for building your EHS/S program.  It may be time to consider how your program helps your company make smarter investment decisions and get better returns on its investments. EHS/S leaders should review and update their programs for product stewardship and major capital support to ensure they are sufficient to meet their company’s current and future needs.

• Retool your processes. Look inside your program: in light of the past transactions, future scenarios, and bottom-line impacts, what does your program need to do? Does your assurance program drive performance or just document conformance?  Does it tell you whether people are complying with legal requirements and corporate commitments, or does it just tell you that they are taking required compliance steps (checking boxes and completing forms)?  Does your data management system actually provide the information that you need in the form you require?  None of these are strategic or exciting, but they do provide the foundation for all of your future activities. EHS/S leaders should seek to improve the effectiveness of their audit programs and management systems.  They should also update information management systems to meet current and future needs. Take a hard look at the EHS/S culture of your company and the supporting management systems and tools; streamline, prune, standardize, and improve these systems where possible.

• Retool your team. Look at your people: all of these actions may give you new insight into what your group needs to do and, therefore, what you need out of your team.  You may have a new sense of purpose — but with that in mind, is your team still fit-for-purpose?  Limbo makes this even more of an issue.  Some of us have tried not to disrupt our teams in the post-recession limbo; you didn’t know if you could replace people or would just lose jobs, and you hated to put people on the street without knowing if that’s the right thing to do.  Others have had few options — we lead teams we inherited, not teams we created.  With all the uncertainties of limbo, it hardly seemed worth the effort to rock the boat.  But at this point, does your current team and its limitations just lock you into limbo more by limiting your options?  Now is the time to begin the lengthy process of retooling your team: review and change assignments, change processes, change people if there are no alternatives, enhance skills or collaboration.  Act now to create a team that is better able to support your function and company.

And that’s the bottom line.  As an EHS/Sustainability leader, you can’t end the limbo.  But you can help your company, your function, and yourself by facing the realities of strategic limbo and using it as an opportunity to refresh your program, refresh your career, and prepare for the future.

About the Author

Scott Nadler is a Partner in the Chicago, U.S.A. office of Environmental Resources Management (ERM). He helps companies integrate environmental and sustainability issues with business strategy. Mr. Nadler speaks on a number of EHS, sustainability, and strategy topics, and his writing has appeared in The Wall Street Journal, Sloan Management, and Safety and Health Practitioner, as well as in the EHS Journal and The Palladium Group Executing Strategy sites online.  He teaches at Northwestern University in the undergraduate program in Environmental Policy and Culture, and currently serves on the Executive Committee of the U.S. Business Council for Sustainable Development.

Other Articles by Scott Nadler in the EHS Journal

• VP EHS: Endangered Species or Emerging Hybrid?
• Geographic Mismatch: Coping with Dislocation in the Global Economy
• Agility: The New Core Competency for EHS and Sustainability
• Managing Product Risks and Opportunities (with Salvatore Giolando)

Photograph: Chess 2 by Patrick Hajzler, Seine et Marne, France.

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[Opinions in this article are solely those of Scott Nadler and do not necessarily represent views of ERM, its partners or clients.]

The prospect of your facility undergoing a compliance audit is unlikely to evoke excited anticipation. There are certain things we do – such as going to the dentist or conducting compliance audits – because they benefit us in the long term. Despite often being viewed with dread, an audit is a valuable tool in a compliance management toolbox. An impartial evaluation of compliance programs is critical for a company to ensure it is meeting regulatory requirements. Perhaps more importantly, an effective audit will determine potential underlying, or root causes, for deficiencies, which is a necessary step to prevent reoccurrence of issues.

Therefore, once the decision has been made to conduct an audit, proper planning, preparation, and execution are essential to maximizing its benefits. While this article focuses on environmental compliance audits, the concepts discussed also apply to health and safety, management system, or other audits. In addition, the suggestions outlined are in the context of voluntary, internal audits and may not apply to audits conducted by regulatory agencies. The different goals and potential consequences of a regulatory agency audit may alter the approach and response of the entity being audited.

Defining the Scope

Planning and preparation are integral to conducting an effective audit. Time spent up front in these efforts can result in a more comprehensive audit and yield more meaningful results.

Regulatory Scope

The first place to start is to define the regulatory scope. Will you conduct a multi-media environmental compliance audit, or will you focus on a particular program? The answer will likely depend on what your motivation is for conducting the audit. Are you attempting to identify compliance obligations and establish a baseline, or do you suspect you have a problem program that needs attention? Whatever the answer, define the programs (e.g., solid and hazardous waste, pesticides, or air) and the related regulatory citations. This will eliminate any confusion over terminology or vague references and will help maintain focus toward the audit objective.

While most environmental compliance audit scopes will focus on U.S. Environmental Protection Agency and state environmental agency regulations, you may want to consider including related program areas that can be overlooked. For example, U.S. Department of Transportation hazardous materials regulations or U.S. Drug Enforcement Administration controlled substance regulations can align closely with environmental requirements at some facilities, so including them in the audit may be beneficial.

Physical Facilities

Once the regulatory scope of the audit is established, the physical scope of operations and facilities must be defined. If your company has multiple locations, should they all be audited? If you have not previously performed audits or several years have passed, consider auditing more than one location to identify potential systemic issues and avoid audit reports for multiple facilities that largely read the same. Then, initiate a full audit program once you have implemented any necessary programs across the company. Alternatively, if you are unsure of where to begin to understand your facilities’ compliance requirements, individual comprehensive evaluations may be more helpful.

Another potential consideration is whether to include all departments or business divisions in the audit. Large corporations or universities sometimes have distinct internal divisions with relatively independent management systems. It also is important to consider contracted operations, such as custodial, grounds-keeping, or food service, that may take place on site. It is becoming increasingly common for facilities to contract routine operations that have environmental compliance implications for which the facility remains responsible.

Extent of Review

With the regulatory scope of the audit established and the facilities to be included in the audit identified, a final scoping consideration is to determine the extent of locations and records to be reviewed. This will largely depend on the audit goals and the size and scope of the subject operations. For example, if this is the first audit of a newly acquired facility, you will likely want to conduct a thorough audit of the entire facility to identify all regulated activities and the associated level of compliance. If the facility has numerous similar operations, it may not be necessary to evaluate every space. While an auditor should inspect all unique operations, representative sampling may be appropriate for other areas. For instance, a large university may have 30 biochemistry research labs. An auditor should be able to effectively evaluate hazardous waste management practices and program implementation by inspecting 25 to 30 percent of labs with similar operations. While inspecting all of the labs may provide more examples of non-compliance, it is less likely to identify additional issues.

In addition, it may be appropriate to apply a similar representative sampling strategy for records review. A location with 50 aboveground storage tanks, each undergoing monthly inspections, the records of which must be maintained for three years, generates 1,800 inspection forms. It is probably not the best use of an auditor’s time to review all 1,800 tank inspection records. In these situations, applying a representative sampling strategy (e.g., random, block, or systematic) can be useful. When doing so, however, it is important to understand the facility’s system for conducting inspections. If different personnel or departments are responsible for conducting and documenting the inspections, it is important to review some records from each entity to identify potential procedural and program implementation differences.

It is well-known that good communication is integral to the success of any program requiring coordination, input, or involvement of multiple people. Audits are no exception. Beginning with planning and continuing through implementation and reporting results, effective communication can dramatically improve the value and usefulness of audit results.

As “inspections” can unnerve employees, inform staff in advance that an audit will take place and explain the purpose and goals of the audit. Employees will be more likely to buy into the process if they understand it and feel a part of it. It may be helpful to frame the audit as an evaluation of how well environmental programs are being implemented, as opposed to a search for non-compliance. This may allow staff to feel less threatened, increasing the level of cooperation and candor with the auditor. In addition, let staff know what is expected of them. Do they need to prepare in advance, gather documents, or be available at a certain time? Let them know that an auditor may inspect their work area or interview them.

Finally, provide feedback to staff on the audit results. Of course, any areas with non-compliant situations will need to be notified so the issues can be addressed, but let everyone know how the facility faired. Even if you cannot share details, provide a high level summary of what the facility is doing well, as well as the opportunities for improvement.

At the completion of the audit process, a report will be generated that outlines findings and opportunities for improvement. While everyone wants to receive a good report card, some of the actions that you may be tempted to take prior to or during an audit to limit the number of issues identified can be counterproductive to audit goals. While the ostensible goal of an audit is to identify instances of non-compliance, the more meaningful goal should be to discover the causes of non-compliance. An improper label on a container can easily be corrected, but if the lack of training that caused it is not identified, the issue is likely to occur again. An ineffective audit that fails to identify issues is simply a lost opportunity to improve programs.

Further, it is important to note that the discovery of non-compliance during an audit does not necessarily mean that someone is not doing their job. Non-compliance may be indicative of insufficient resources, staffing, equipment, training, or other site-specific factors. An audit can be an effective means of highlighting these needs.

With the goal of maximizing the benefits achieved through an audit, following are five actions to avoid:

1. Don’t set unrealistic expectations for management. While we certainly want to strive for total compliance, it is unlikely that an environmental compliance audit will result in no findings. A manager expecting a clean report may not react well to one with even a few findings.
2. Don’t “clean house” prior to the audit. For example, an auditor cannot learn much about hazardous waste management practices from a storage area that contains no waste. Eliminating a routine regulated activity from the site prior to the audit eliminates the opportunity to review it.
3. Don’t conduct a pre-audit in advance of the scheduled audit and “fix” the issues identified. Allow the issues to come to light during the audit so the root causes can be ascertained and necessary resources obtained to implement sustainable corrective actions.
4. Don’t avoid known problem areas and steer the auditor to solely compliant areas. To accurately assess the compliance status of a program, an auditor must see the bad along with the good.
5. Don’t fail to prepare. A little preparation will allow you to make the most of an auditor’s time on site. As discussed above, share details of the audit program with employees so they know what to expect. Gather and organize records for review, set a tentative schedule, and ensure the auditor will have access to all necessary locations.

Conducting an audit in this very open and comprehensive manner may result in a report identifying more instances of non-compliance than desired. However, by initially identifying and addressing as many issues as possible, succeeding audits should yield significantly fewer findings. More importantly, you will feel more confident in the compliance status of your environmental programs.

Rebecca A. Corbin, CHMM, CPEA is a project manager in the environmental, health, & safety (EHS) compliance group at O’Brien & Gere. She has an extensive background leading and conducting multi-media environmental, health and safety compliance audits for a variety of clients, including industrial facilities, municipalities, higher education institutions, and hospitals. She has participated in more than 90 audits with responsibility for auditing compliance with numerous federal, state, and local laws and regulations.

Photograph: Clematis by Claudia Meyer, Paris, France.

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Welcome to the EHS Journal. This international online magazine was designed for and by environmental, health and safety professionals for the purpose of sharing knowledge and facilitating discussion within our profession. Since our launch in January 2010, we have published articles and images from more than 100 contributors in 30 countries.

We are actively seeking new articles! See the Submission Guidelines for more information and submit your articles and comments to the EHS Journal today.

Photograph:  Splash by Reggio Emilia, Emilia Romagna, Italy.

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On December 27, 2012 the EHS Journal published an article of mine entitled “Lessons Learned on International Assignments”.  The feedback has been extremely positive, especially from young professionals who anticipate the eventual need to travel internationally during their careers.  As a consequence I have racked my brain to come up with a few more experiences that have taught me different, but equally important, work and life lessons.  After a nearly 40-year career and coming up on retirement it’s rather fun to reflect on my experiences, both good and bad.  I encourage others to do the same.

1.         The Mexico Respirator

Some years ago I was working at a chemical plant in the outskirts of Mexico City.  We were auditing the plant from top to bottom.  One task was to enter a major process building and climb internal stairs to the roof.  This seemed pretty straightforward until the site staff issued us half-face respirators as we stood at the building entrance.  They told us that the respirators were required for building entry.  So each of the visitors climbed the five flights of stairs donned with a respirator.  I don’t mind telling you that I was pretty winded when we reached the roof.  It then occurred to me that I had just used personal protective equipment in an unsafe manner (e.g., no training, no fit testing, etc.).  What was I thinking?  I guess I wasn’t.

Lesson Learned:  Safety first, always!

2.         The Singapore Culture

In my travels I have been to Singapore at least a half-dozen times.  It is one of the prettiest and cleanest places I have ever been.  For those who don’t know, Singapore is a city-state located off the southern tip of the Malay Peninsula, about 90 miles north of the equator.  English is one of four official languages and is the language used in business, unusual for Asia.  I was told on one of my trips that Singapore is about the same size as Los Angeles but has more McDonalds.  It is a very westernized environment, which can be very comforting to Americans.  On one of my trips, there was some controversy over the “caning” of young men for what most would view as minor transgressions.  For example, one of the local laws prohibited spitting on the sidewalk and if one was caught this was considered a canable offense.  Now, I’m not normally a spitter but as I walked along the main sidewalks in the business district one day all I could think to myself was “don’t spit, don’t spit, please don’t spit!”

Lesson Learned: Be aware of and obey the local laws and customs.

3.         Masks in South Africa

Today’s economy is truly global.  You can find expensive Italian shoes in the local mall; you don’t have to travel to Rome.  So what type of souvenir can you bring back that is truly unique to the country you visited and can’t be found easily in the States?  Well I learned that there are at least two: Hard Rock Café tee shirts and tribal masks.  When my two sons were growing up they had enough HRC shirts to fill a closet; and indeed, because of that their mother finally put a halt to that practice.  But collecting masks proved very fulfilling.  I have some twenty masks on my office walls from pretty much everywhere.  Each one is a special memory; one in particular.  That one came from a street vendor in Johannesburg.  I was there with a local colleague and decided on a particular mask that I really liked.  My friend then began negotiations with the vendor in Swahili.  Things got pretty heated and I felt the need to step in.  I asked my friend what the issue was and he told me that the vendor wanted the South African equivalent of a dollar for the mask and, on principle, he wasn’t going above 50 cents.  I quickly gave the vendor the dollar-equivalent and we went on our way.

Lesson Learned:  Perspective is everything.

4.         Lost Luggage at Charles de Gaulle Airport

I was working in Anzio, Italy for a consumer goods company.  Anzio is a coastal city about 35 miles south of Rome and was a city of great significance to the Allies during World War II.  During the visit the team was staying in Rome and commuting daily to Anzio.  Having never been to Rome, I decided at the last minute to change my plans and stay an extra couple of days to visit the sites, and I’m glad I did, sort of.  My new plan was to return home to Philadelphia via Paris’ Charles de Gaulle Airport.  All was going smoothly until I reached the departure gate at Charles de Gaulle.  There was my plane, all set to go.  And then the agent proceeded to tell me that my revised ticket had not been properly processed and I could not board even though there were seats available.  Sadly, I sat down and watched my ride home depart.  I spent the next 12 hours in the airport and took a flight that evening not to Philadelphia but to New York’s JFK airport.  My luggage followed me home, 12 days later!

Lesson Learned: Be careful about making last minute travel adjustments when travelling internationally.

5.         Returning from Australia

I was returning to the United States via San Francisco from a two-week long trip to Australia.  The flight from Sydney to San Francisco is about 16 hours non-stop.  That’s two full work days sitting on a plane.  I can assure you that there is nothing glamorous about that even if you’re sitting in business class as I was.  As I recall, we landed early in the morning and I was prepared for the typical customs re-entry hassle.  But this time the hassle was like none other.  As I handed the customs agent my passport he screams out at the top of his lungs – “YOU’RE THE ONE WE’VE BEEN LOOKING FOR!!”  If I weren’t so exhausted from the trip I probably would have run for my life.  But thankfully I did not; I just stood there with a blank expression on my face.  The agent then simply stamped my passport and told me to move along.  To this day I’m not exactly sure what happened and why.

Lesson Learned: Keep your wits about you at all times.  You never know.

6.         Being Safe in South Korea

We were evaluating a chemical plant in South Korea.  Our preparation was flawless or so I thought.  We had all the appropriate personal protective equipment to be safe in the plant; hard hats, safety glasses, hearing protection, safety shoes, and so on.  However, there was one process area of the plant that required fire-retardant clothing, or Nomex®.  Not to worry as the site had plenty of spare uniforms for visitors.  There was one problem however.  There were no uniforms large enough for one person on the team, namely me.  As a consequence, I was not allowed to enter that portion of the plant.  So embarrassing in so many ways.

Lesson Learned: Preparation down to the very last detail is paramount.

7.         Ordering Train Tickets in Paris

I had three years of French in high school.  Mind you it was far from conversational French.  It was more about learning vocabulary and syntax.  So I figured that buying a train ticket by myself to Rouen at Paris’ Gare du Nord, the busiest railway station in Europe, would be a challenge but not impossible.  I was instructed by my French colleagues that I should go to the ticket window and say “première classe billet pour Rouen, s’il vous plaît?” or in English “first class ticket for Rouen, please?”

The agent behind the window just shrugged his shoulders, implying he had no idea what I was requesting.  I must have said the same phrase ten times with different pronunciations, with no success.  There was now a long line building up behind me, with many becoming quite impatient, though none offered to help.  Finally I wrote down the statement on a piece of paper and gave it to the agent who now immediately understood what I needed.  I was done in about a minute.  Was it really my lousy pronunciation or was I being “punk’d”?  Who knew?

Lesson Learned: Be ready to communicate your needs in more than one way.

8.         A Difference of Opinion in Thailand

Our team was conducting an evaluation of a chemical plant in Bangkok, one of my favorite cities in the world.  Part of the review was to evaluate the performance of the on-site wastewater treatment plant.  We discovered that the average daily biochemical oxygen demand (BOD) discharge concentration from the wastewater treatment plant was about 40 mg/l.  The effluent standard listed in the permit was 30 mg/l.  They were out of compliance and revising the permit was not an option.  The site manager told us that the plant is considered a model for the region and they have never been cited by the City of Bangkok.  We also discovered that other companies up and down that stretch of the river, which is basically an open sewer, are discharging without treatment and BOD effluent concentrations were as much as several hundred mg/l.  The local environmental agency had issued an environmental citizenship award to the site (a plaque was mounted in the lobby) and the agency director routinely brought other companies’ management to the site to show them “how it should be done.”  It was going to cost about $250,000 to upgrade the plant to meet the 30 mg/l limit.  As auditors we had a dilemma.  Do we report this as a finding to corporate management and recommend that the capital be spent to upgrade the facility?  The plant manager was definitely opposed to spending the money on what he believes to already be a “best in class” operation for his City.  It was not a comfortable situation but we did record the issue in the report.  Like most U.S. companies this one had a corporate policy that they would operate in compliance with all environmental regulations wherever they operate in the world.  Needless to say, the plant manager did not become my best friend.

Lesson Learned: Tell it like it is, regardless of the consequences.  You will sleep better at night.

About the Author

Lawrence B. Cahill, CPEA (Master Certification) is a Technical Director at Environmental Resources Management in Exton, Pennsylvania, U.S.A.  He has over 30 years of professional EHS experience with industry and consulting.  He is the editor and principal author of the widely used text, Environmental, Health and Safety Audits, published by Government Institutes, Inc., and now in its 9th Edition.  He has published more than 60 articles and has been quoted in numerous publications including the New York Times and the Wall Street Journal.  Mr. Cahill has worked in over 25 countries during his career.  He holds a B.S. in Mechanical Engineering from Northeastern University, an M.S. in Environmental Health Engineering from Northwestern University, and an MBA from the Wharton School of the University of Pennsylvania.

Images:Evening at Trieste by Michaela Kobyakov, Leonding, Upper Austria, Austria; Tribal Mask by J. T. Johnson, U.S.A.; Eifel Tower, Paris by Gregory Runyan, Olathe, Kansas, U.S.A.

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Return to the EHS Journal Home Page

Welcome to the EHS Journal. This international online magazine was designed for and by environmental, health and safety professionals for the purpose of sharing knowledge and facilitating discussion within our profession. Since our launch in January 2010, we have published articles and images from more than 100 contributors in 30 countries.

We are actively seeking new articles! See the Submission Guidelines for more information and submit your articles and comments to the EHS Journal today.

Photograph: Right Touch by Asif Akbar, Mumbai, India.

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