State Audit Privilege and Immunity Laws & Self-Disclosure Laws

Several states have enacted environmental audit privilege and/or penalty immunity laws. Some states have enacted statutory revisions, issued a clarifying attorney general's statement and/or entered into a memorandum of agreement with EPA to satisfy the minimum requirements for federally approved environmental programs. For example, Illinois enacted a statute that permits mitigation of a civil penalty when a person or entity self-discloses its noncompliance under a number of specified conditions set forth in the statute.

However, less than half of the states have implemented either privilege and immunity programs or state self-disclosure policies. Even though these programs vary, commentators have suggested that states are moving towards a more uniform environmental compliance scheme.

U.S. EPA Audit Policy

The EPA encourages auditing to improve environmental performance, help communicate effective solutions to common problems and generate procedures for better self management. The most recent EPA audit policy, issued in 2000, is known as the Policy on Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations. Through this policy, facilities can request relief from potential civil and criminal penalties if self-detected violations are voluntarily disclosed with the EPA.

To take advantage of the EPA's audit policy and self-disclosure violations, facilities must meet the conditions of the federal policy. In addition, facilities must determine if a state audit law or policy exists and determine whether it is necessary to satisfy both policies. Also, the EPA recommends reviewing international policies by companies with operations in foreign countries.

Supplemental Environmental Projects (SEP)

Most federal actions against facilities for failure to comply with environmental laws are resolved through settlement agreements. As a part of a settlement, a violator may agree to undertake an environmentally beneficial project related to the violation for mitigation of the penalty to be paid, called a Supplemental Environmental Project.

SEPs have several characteristics. They must have a relationship between the violation and the environmental benefits that will result from the project. In addition, these projects must improve or reduce risks to the public and be undertaken in settlement of an enforcement action as a project that the violator is not otherwise legally required to perform.

SEPs must also meet several guidelines. They cannot be inconsistent with any provision of the underlying statute. Also, they must advance one of the objectives of the environmental statute that is the basis of the enforcement action. The EPA is restricted from playing any role in managing or controlling funds used to perform a SEP. Finally, the type and scope of each project should be defined in the settlement document.

The International Organization for Standardization

ISO developed the ISO 14000 family to address various aspects of environmental management. An environmental management system that meets ISO requirements is a tool that enables an organization to identify and control the environmental impact of its activities, improve its environmental performance and implement a systematic environmental approach to setting environmental objectives and targets.

ISO gives generic requirements for an environmental management system. Because the ISO suggestions are not specific to any one organization, the standards can be implemented by a wide variety of organizations, no matter their level of environmental impact. Implementing ISO can provide assurance to management that it is in control of its environmental processes and assure employees that they work for an environmentally-responsible organization.

The EU Eco-Management and Audit Scheme

EMAS is a voluntary tool that allows companies to evaluate, report and improve environmental performance. Performance, credibility and transparency are the core elements of EMAS. Together, these elements encourage companies to carry out their projected environmental goals, receive third-party verification of their actions and maintain an open relationship with the public. EMAS is available to all organizations in different economic sectors and can be used by companies both in and out of the European Union.

The benefits of EMAS include cost reductions, risk minimization and regulatory compliance. In turn, regulators may choose to relax regulatory requirements. Overall, EMAS can provide a competitive advantage to companies as it leads to improved market access and an increased market share. The cost of EMAS is contingent on the size and sector of the organization. Costs include fixed costs (e.g., registration fees), external costs (e.g., employee training) and internal costs (e.g., internal audits).