IN AN IMPERFECT WORLD
Why An Environmental Self-Audit Makes Sense
Facts are unyielding things and here are six that explain the need for an environmental
self-audit
privilege in Florida.
1. With limited financial and personnel resources, government cannot be everywhere,
monitoring every single business all day every day.
2. Despite strict regulations and best efforts, accidents and unintentional violations
of environmental permitting standards will occur.
3. Because of limited resources, many of these violations, which might cause
environmental damage, will go undetected.
4. The pure purpose and objective of environmental regulation and activism is to
provide for a cleaner, safer environment; treating industry as ecological criminals or
allowing government to profit from violations does not fulfill that purpose and objective.
5. Given appropriate incentives, regulated entities will use private resources to
police themselves, identify violations, and perform immediate cleanup.
6. Active, ongoing assessment and cleanup is preferable to punitive regulations that
encourage litigation and delay cleanup.
An environmental self-audit law encourages industry to tackle its own pollution
problems before they become matters for federal or state lawsuits. Environmental self
audits allow companies to voluntarily conduct good faith inspections of their own
operations for compliance with environmental statutes and regulations, without fear of
legal repercussions.
There is no great mystery surrounding the mechanics of an environmental self-audit
privilege. In exchange for putting the environmental regulatory agency on notice of any
self-discovered violation--and promptly remedying it--the disclosing company is granted
immunity from civil penalties, and the audit report receives a limited privilege. Without
that protection, few companies would voluntarily conduct audits and produce reports for
fear that the findings would be used against them by parties more interested in harassment
than in working cooperatively for a cleaner environment.
Legislative enactment of a self-audit privilege would allow a business to conduct a
candid assessment of its own compliance with environmental regulation. The public good
would be served if a company could improve its performance without creating evidence that
would put it in jeopardy in future proceedings and litigation. Which is the better option:
protecting the environment or protecting lawsuits?
Past Failures
In 1995, a coalition of business and industry groups tried to get a self-audit
privilege bill through the Legislature. Opponents quickly--and inaccurately--dubbed it the
"Pollution Secrets Bill" and the "Toxic Immunity Act." Intense
lobbying by environmental groups, plaintiffs’ lawyers, and others doomed the measure.
The self-audit movement was dealt another blow with the appearance of a report on the
matter in 1996 by Florida’s Office of Program Policy Analysis and Government
Accountability (OPPAGA). OPPAGA concluded that environmental self-audit legislation was
unnecessary because Florida’s regulatory climate was not "overly punitive in
nature" and the primary goals of an environmental self-audit bill can be partly
achieved without privilege and immunity laws.
OPPAGA’s findings, however, ignored the benefits that follow a self-audit
privilege. The goals of an environmental regulatory program are identical to the results
of a successful self-audit program: the immediate cleanup of otherwise undiscovered
environmental violations, reporting of those violations, and, ultimately, greater
compliance with all applicable environmental regulations. The idea that no further
incentives are needed because environmental goals can be "partly achieved" under
current law deserves rejection. Why accept less when an environmental self-audit privilege
offers the potential to do more?
Furthermore, Florida’s regulatory climate may or may not be "overly
punitive," but that’s not the point. What matters is finding ways to improve
environmental compliance. Why not provide incentives, rather than punishment, if the
incentives produce better results?
Opponents of a Florida self-audit policy also plead Florida’s unique Sunshine Law
as an argument against allowing companies to keep certain documents secret. With a
correctly drafted self-audit law, however, no document that would otherwise be available
to the public will be given a privilege. Thus, the public loses no access to information.
In fact there is only gain because, as it stands now, the regulator or the public get no
information from self audits. Neither do regulators have the opportunity to measure the
adequacy of any cleanup undertaken as a result of a self audit conducted under current
law.
Other States
Despite the lack of success in Florida, other states have recognized that the
self-audit privilege leverages scarce public financial resources by providing incentives
to private businesses to police themselves.
In 1993, Oregon became the first state to enact an environmental self-audit law. Since
then, at least 23 other states have followed suit. As a result of state environmental
privilege and immunity legislation, more and more companies today feel confident about
conducting environmental self audits. Hundreds of regulated entities use audits to reduce
the risk of liability by regularly monitoring environmental compliance. Companies also use
audits to evaluate internal environmental management systems.
The model for other states is the Texas Environmental Health and Safety Audit Privilege
Act of 1995. The Texas act encompasses more than environmental audits alone; it also
covers occupational health and safety regulations. The act places reasonable limits on
access to reports produced from environmental health and safety audits that are
voluntarily performed by regulated entities.
In Texas, voluntary self-audit reports are privileged and inadmissible in a civil,
criminal, or administrative proceeding, unless a regulatory agency is required to collect
the information. The act further provides limited immunity from administrative and civil
penalties for violation of an environmental or health and safety law discovered in a
voluntary audit and duly disclosed to an appropriate regulatory agency.
Texas included safeguards in the law to prevent misuse of the audit privilege or the
immunity gained from voluntary disclosure. The privilege applies only to information
gained in an actual audit, not for violations uncovered through routine observations.
There is no immunity for violations that are committed intentionally, knowingly, or
recklessly.
There’s Always Room for Improvement
A typical environmental self audit centers on a comprehensive examination by a team of
qualified inspectors, either by in-house personnel or outside consultants. Using
checklists and audit protocols, and relying on professional judgment and evaluations of
site-specific conditions, the team appraises the effectiveness of the company’s
environmental compliance programs and assesses the environmental risk associated with the
operation.
According to the Environmental Protection Agency (EPA), an effective self-audit program
includes the following:
- objective, knowledgeable, and well-trained auditors
- supervision and review of thoroughness of audits by company management
- explicit written objectives for the audit
- follow-up procedures
- audit assessment of the company’s compliance status
- a process to collect and interpret audit results sufficient to achieve audit objectives
- written reports to management officials
- procedures to determine what audit results are reportable to state and federal agencies
- formal management commitment to correcting violations discovered through an audit
A company conducting a self audit must notify the regulatory agency before the audit
begins; usually several months of advance notice is required.
The company must fully document the evidence of
any non-compliance discovered during the audit process. It must also prepare a prompt and
permanent plan of action to remedy the non-compliance for approval by the regulator. The
regulator must also confirm that the company has achieved compliance.
In return for voluntarily working to improve environmental performance, non-compliance
does
not result in the imposition of civil or administrative penalties against the regulated
entity. The company receives a qualified limited legal privilege against the disclosure of
company documents and records contained in the self audit report.
There are certain safeguards that can be written into law to protect against abuse of
the self-audit privilege. For instance, self audits do not replace regular state and
federal environmental inspections; investigative efforts continue, augmented by the
company’s own self-correcting efforts. Companies continue reporting all of the
information currently required by statute or regulation and those reports remain in the
public domain. Thus, none of the current environmental regulatory framework is dismantled.
The public loses
no protection or information; it merely gains by allowing companies to improve their
compliance
with environmental regulations.
Furthermore, no privilege or immunity attaches to criminal actions. A self-audit
privilege would offer no shield to those who intentionally, knowingly, or recklessly
violate the law. Additional protection is provided to the public in that habitual
violators cannot benefit from this legislation.
A party alleging a substantial personal injury has the power to request an in camera (in the privacy of the judge’s chambers) review of audit documents by a judge to
determine whether there was an intentional violation of an environmental law or if there
was an attempt to use the privilege for a fraudulent purpose.
Federal and state whistleblower laws afford protection to the individual who discloses
a violation to law enforcement authorities.
Pursuant to EPA guidelines, the self-audit legislation must make provision for citizens
to challenge the privilege and obtain access to information in a report. To do this,
legislation should provide for a court to require disclosure of any portion of an audit
report if it finds clear and convincing evidence of substantial personal injury or a clear
and present danger to the public health or environment. This protects the individual
citizen’s right to redress its grievances against a company or entity for
environmental violations.
Environmental self-audit legislation must be--and can be--designed so that it does not
interfere with enforcement authority in the event of a potential substantial danger to
public health or the
environment.
Improving the Imperfect
The logic of the self-audit legislation is inarguable. Enforcement authorities should
not be focusing enforcement resources on companies that are actively attempting to comply
with environmental laws. Neither should regulated entities fear necessary reviews of their
compliance efforts because such reviews might produce evidence that could be used against
them in civil and administrative proceedings.
There will never be enough governmental resources to monitor every plant and every
factory in every industry. That’s why environmental regulation already relies heavily
on self-policing and self-reporting. An environ-mental self-audit privilege will only make
that self-policing more effective.
The self-audit privilege gives business the confidence it needs to share audit
information with regulatory agencies and to solicit advice on how to avoid environmental
damage or hazards. It encourages the disclosure of problems that regulatory agencies would
probably never have discovered because of their limited resources. The self-audit
privilege provides incentives for business and regulatory agencies to work together for a
cleaner environment.
The desired results would be the aggressive investigation of possible violations and
the correction of any violations without creating a self-incriminating record and evidence
of liability. Without the privilege, companies will continue to avoid documenting the
effectiveness of compliance--undermining their ability to correct violations--just to
protect themselves against litigious environmental extremists.
With the successful implementation of self-audit privilege legislation in almost half
of the states, why sh ould Florida continue to overlook the opportunity to fully leverage
governmental resources? Doesn’t the promise of just one additional cleanup, which
would otherwise be overlooked, render worthy re-examination of the self-audit privilege?
Do we really want an environmental policy that sacrifices environmental protection just so
that it can more harshly punish industry?
If perfection were possible, policies and procedures would never need review and
assessment because they could not be improved. But we live in an imperfect world.
Remembering that, enacting an environmental self-audit privilege to allow candid
self-evaluation without the fear of litigation is superior to the alternative of doing
nothing.
Martha Edenfield is a partner in the law firm Pennington, Moore, Wilkinson,
Bell & Dunbar, P.A., and an environmental consultant to Associated Industries of
Florida
Nov/Dec 1998 -- Florida Business Insight, PO Box 784, Tallahassee, Fl 32302
(850)224-7173, insight@aif.com
