AFTER THE ENVIRONMENTAL AUDIT
Environmental audits are new and their impact on an organization's practices and operations are only now becoming understood. Many seminars have been given and articles written on why environmental policies, compliance programs and audits are necessary.
Some organizations have shunned independent audits. This may be so because the audit may find something that has to be reported to the Ministry, or what is found will prove to be expensive to correct in terms of both time and money. The potential outcome is that the value of pledged assets and/or equity may be sharply reduced and interfere with loan convenants.
Companies And Their Executives Fined
The recent court cases of Bata and Erie Battery have shown that the lack of an environmental policy and compliance program can be very expensive. In Bata's case, it resulted in $144,000 in fines including $24,000 non-indemnifiable fines to the President and Plant Manager. In addition, Bata is spending $450,000 on the cleanup. The company, together with the executives involved, have legal expenses well into 6 figures, all because they failed to initially spend some $60,000 to remove 80 drums of environmentally hazardous waste.
In Erie Battery's case a $25,000 non-indemnifiable fine was levied against an executive. The lesson learned is that the environment ranks ahead of profits. In bankruptcy cases, it has already been established that environmental concerns rank ahead of secured creditors.
The first step is for the directors to firmly state the company's environmental policy. Then management must devise a compliance program, including a plan with a time table for eliminating environmental hazards.
Unlike the Bata case where there was an obvious disregard for Environmental Regulations, most organizations can work out a remediation plan which is acceptable to both the Ministry and the company. Dow Chemical has a plan to rebuild three of its nine units in Sarnia over a 10 year period. Alcan has a similar plan for the replacement of its Arvida smelter, but is reducing the time to complete the project.
After the Audit
After the environmental audit/or assessment comes planning and priorities. Where there are concerns about hazards, the company can retain an environmental solicitor to protect the audit documents with solicitor/client privilege, at least for a period of time. With external environmental auditors, it is easier to limit the distribution of information.
The initial report is marked "draft" so that it cannot be mistaken for the final report. The final report is discussed and revised so that it is compatible with the company's long range plans and cash flow, without compromising the finding s of the auditors. It has been found in court that once a recommendation is made, the due diligence defense can be imperiled if the recommendation is not acted upon. The final report becomes a company document but it needs to be clearly identified "For Abatement Purposes Only". This was another outcome of the Bata trial, where documents obtained by the MOE abatement officers could not be used by the enforcement officers for prosecution.
At Walters Consulting we are experienced in environmental audits and understand the sensitive nature of their impact on the companies involved. Yet we are able to assist in developing an environmental strategy that will comply with regulations in a reasonable and acceptable way.
|The information contained in this web site is intended for marketing purposes only. It is not all-inclusive, and does not fully describe the many and varied services that the company provides, nor does it completely describe the education, training, skills, or expertise of our staff.|
Walters Forensic Engineering | 277 Wellington
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