THREE QUESTIONS DIRECTORS SHOULD BE ASKING ABOUT ENVIRONMENTAL LIABILITY

It is becoming increasingly clear that businesses will be required to have an environmental management system which will assist senior management to define the organization's environmental mission and determine the methods needed to accomplish this mission. This article presents a series of questions that the Board of Directors can ask to determine whether or not the organization is in control of its environmental regulatory effort.

1. Has senior management defined the Company's Environmental Policy?

This policy statement establishes and sets corporate goals from which decisions are made within an organization. This statement is the foundation of the environmental management system. The Board can make certain that such a policy exists and that it is reviewed to make certain that it reflects the organization's vision, mission, core values and beliefs, in addition to the environmental aspects of operations. This policy, which is a commitment to comply with relevant environmental legislation and regulations, must be appropriate to the nature, scale, and environmental impacts of the organizations activities, products, and services.

The Board could make certain that discussion of environmental issues/ programs, the financial and technical resources allocated to achieve the stated goals and commitments, and a determination that senior management has established a clear set of goals and expectations regarding environmental performance and what they are (e.g., environmental compliance as a minimum expectation, goals that go beyond compliance, emissions reductions, etc.) at senior management meetings is reported to the Board.

The Board may make certain that senior management has assessed its technical equipment needs to maintain compliance and reduce environmental risk and that management knows whether environmental excursions and non compliance are analyzed to identify whether technology can be improved to eliminate or reduce similar episodes in the future?

It is incumbent on senior management to communicate the organization's environmental goals and expectations to employees. The Board should develop some sense as to typically, how frequently are the goals are communicated and obtain an independent determination of the level of awareness and understanding of environmental policies within the organization.

2. How does the board know that the organization reviewed its own environmental issues and determined the best method of managing them?

The Board should determine that the organization establishes and maintains a procedure or process to identify the environmental issues pertaining to its activities, products and services that it can control and over which it can be expected to have an influence, in order to determine those aspects that have or can have a significant impact on the environment.

Effective plan implementation includes clear assignment of responsibility and authority, training programs that provide employees with the tools to accomplish their responsibilities. Senior management must clearly define the responsibilities of relevant personnel who are responsible and accountable for effective implementation of the plan and environmental performance.

Since environmental planning decisions result from a formal, organized planning process, it is important to define the frequency for formal environmental planning and the planning horizon (e.g., 1 year, 5 years, 10 years). To be successful environmental planning must be viewed as a strategic element in the organization's long-term success. Since the organization must stay current with new and emerging environmental regulations and trends, it is essential that there is a formal system for ensuring that new requirements are defined and incorporated into existing programs, policies, and procedures in a timely manner.

3. Is the environmental management function organized in such a way that managers can effectively implement the organizations environmental policy?

The organizational structure must clearly identify that environmental managers are positioned high enough in the organization (report to senior operations management) and have sufficient organizational stature, independence, and authority to effectively implement environmental programs and to make decisions related to environmental protection. Environmental roles, responsibilities, and accountabilities should be well defined, clearly communicated, and understood by all personnel whose activities may impact environmental performance. It is essential that a program for communicating with external parties such as regulatory agencies, environmental groups, and the local community be set up to provide these "shareholders" with information and solicit their input on issues related to environmental protection.

While many may take the view that these management systems are simply instruments that provide, at considerable cost, order and consistency in organizational compliance practice, I prefer to view these systems as strategic vehicles which can not only save time, money, eliminate/reduce corporate and personal liability, reduce legal and insurance costs, but also develop a strong sense of security for employees, neighbors, stakeholders and shareholders, thus enhancing community image, employee morale and retention levels. This can result in increased profitability and asset value of the company. This latter feature is extremely important in the current climate of mergers and acquisitions.

Daniel F. Liberman, Ph.D., is a Visiting Scientist at the Massachusetts Institute of Technology and a consultant to public and private sector organizations. He has over 20 years of technical and managerial experience in Environmental Health, Safety and Regulatory Compliance. Dan can be contacted at 781/784-2150.

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