Richard MacLean & Associates, LLC

An integrated approach to governance get the most out of your auditing budget

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As companies continue to look for every opportunity to save money and perform more efficiently, environmental organizations have been under tremendous pressure to cut costs. This column examines an important aspect of every environmental group, namely governance, and explores techniques to raise audit quality while lowering costs.

Governance vs. Auditing

Many business executives, and even some environmental managers, define environmental governance as “good regulatory compliance audit systems.” Wrong. This narrow view is especially prevalent in companies that consider environmental functions as service-type activities. As a result, the rationale behind environmental governance programs is reduced to, “Are we following the regulations?” and “Is someone doing anything that they should not (e.g., falsifying records)?” Not surprisingly, “governance” functions are sometimes outsourced or placed into service organizations while manufacturing sites complain that they do not want or need this intrusive corporate oversight.

Environmental governance, just like business governance, is all about protecting shareholder value. Governance focuses on the assurance that the company’s policies and systems are being implemented according to the instructions of the directors and business executives. Auditing for compliance is one dimension; the more significant dimensions are related to strategic direction and the protection and growth of the corporation. Governance answers the question “Are we in compliance with the regulations and our internal policies?” while it also explores the query “Are our management systems appropriate, and might we be overlooking any issues that may have a material impact in the future?”

Companies could be in 100% compliance but fail miserably on governance, as measured by these other dimensions. Corporations today get evaluated by not only doing what they have to do, but by doing what they should have been doing.

There is a wide spectrum of activities that corporations can be doing to provide environmental governance. Table 1 illustrates the various stages, from pure compliance (Stage 1) to pure business  governance (Stage 4) with the former more checklistoriented and the latter more strategic and ad hoc. The object is to properly cover this complete spectrum with the resources available.

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