CHAPTER 6 THE SIGNIFICANCE OF ISO 14000 IN ENVIRONMENTAL ENFORCEMENT AND LITIGATION
Jurisdiction | United States |
(Apr 1997)
THE SIGNIFICANCE OF ISO 14000 IN ENVIRONMENTAL ENFORCEMENT AND LITIGATION
Arnold & Porter
Denver, Colorado
Judy S. Becker
Arnold & Porter
Washington, D.C.
I. INTRODUCTION
A. ISO 14000
The International Organization for Standardization ("ISO"), a private organization formed to promote the use of uniform standards in international trade, has spearheaded the development of a series of six voluntary environmental standards known generally as ISO 14000. Essentially, the ISO 14000 series of environmental standards is a set of tools and systems intended to place a higher priority on environmental considerations in day-to-day corporate decision-making. While the ISO 14000 series identifies the core components of an Environmental Management System ("EMS"), which are required to be registered to the standard, ISO 14000 does not specify required levels of environmental performance. Instead, it establishes a framework in which a company can evaluate environmental aspects of its operations. Aside from the minimum requirement of complying with applicable laws and regulations, the company defines for itself what environmental goals it will attempt to meet. Thus, adherence to the standards does not necessarily assure environmental excellence; rather, it merely assures that the company has engaged in a disciplined process to set goals, and has established defined procedures for attempting to meet them.
ISO 14001, which contains the specification for an EMS, is the only requirement that will be audited for registration purposes. ISO 14001 requires a company to adopt an EMS containing the following five elements: an environmental policy stating the company's commitment to environmental compliance and improved performance; a plan to identify environmental aspects of the company's activities and setting environmental objects and targets based on those factors; the development of a program for implementing procedures, such as personnel training and external communication, necessary for achieving its goals; the measurement and evaluation of the company's environmental performance against its objectives and targets; and the continual review and improvement of the EMS.
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B. ISO and Environmental Audits
Of particular interest is the requirement to establish and maintain procedures for periodic audits. ISO 14001 encompasses both EMS audits, which evaluate a company's conformance to its own internal EMS audit criteria, and compliance audits, which evaluate a company's compliance with external requirements. The distinction is important in analyzing the implications of the adoption of ISO 14000, because U.S. environmental audit policy is based on compliance audits. Although audits may be conducted by either external or internal auditors, in order to be "registered", a company must use an accredited external auditor.
C. Litigation Implications of ISO 14000 Registration
Companies considering ISO 14000 registration should be aware of both the positive and negative implications of such registration for potential litigation. In a domestic scenario, these are likely to arise in the context of environmental litigation, particularly litigation involving hazardous waste. This paper will concentrate on the potential use of ISO 14000 registration for: the reduction of civil or criminal penalties for environmental violations; equitable consideration in cost-recovery litigation; and participation in EPA pilot projects. Additionally, included in this paper will be a discussion of the privilege implications for documents generated through ISO 14000 implementation.
II. GOVERNMENT INCENTIVES FOR ENVIRONMENTAL AUDITING
A. EPA Audit Incentives
The 1986 EPA "Environmental Auditing Policy Statement" ("Audit Policy") defined EPA's position on environmental auditing, and encouraged the use of both auditing and EMSs.1 However, the Audit Policy did not offer many concrete incentives for instituting these procedures. The Audit Policy states that "EPA will not promise to forgo inspections, reduce enforcement responses, or offer other such incentives in exchange for implementation of environmental auditing or other
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sound environmental management practices."2 However, EPA noted that to the extent that compliance performance is considered in setting inspection priorities, facilities with a good compliance history may be subject to fewer inspections.3 The Audit Policy also acknowledged EPA's policy not to routinely request environmental audit reports.4
In December 1995, EPA issued its final policy on "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations."5 The purpose of the Incentives Policy was to enhance the protection of human health and the environment by encouraging regulated entities to discover voluntarily, disclose, correct and prevent violations of federal environmental law.6 The Incentives Policy contains three provisions:
1. Elimination of Gravity-Based Penalties
Under the Incentives Policy, EPA will not seek gravity-based civil penalties for violations found through auditing that are promptly disclosed and corrected.7 Gravity-based penalties will also be waived for violations found through any documented procedure for self-policing, where the company can show that it has a compliance program that meets certain enumerated
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criteria for due diligence.8 This provision for due diligence programs would presumably encompass an EMS established under ISO 14000.
2. No Recommendations for Criminal Prosecution
EPA will not recommend criminal prosecution for a regulated entity that uncovers violations through environmental audits or due diligence, and promptly discloses and expeditiously corrects those violations.9 However, this will not apply where corporate officials were consciously involved in, or willfully blind to violations, or concealed or condoned noncompliance.10 Additionally, EPA reserves the right to recommend prosecution for the criminal conduct of any culpable individual.11
3. Conditions
In order for the above-described incentives to apply, many conditions are enumerated in the Incentives Policy. The company must have discovered the violations through an environmental audit or due diligence; the violation must have been discovered voluntarily and disclosed promptly; it must have been discovered and disclosed independently of the government or a third-party plaintiff; it must be corrected and remediated; measures must be taken to prevent recurrence; it cannot be a repeat violation; it cannot result in serious
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actual harm or present imminent and substantial endangerment to public health or the environment; and the regulated entity must cooperate as required by EPA and provide information necessary to determine the applicability of the policy, including assisting in determining the facts of any related violations suggested by the disclosure.12
Moreover, in order to obtain the benefit of reduced penalties, EPA may require a company to make its due diligence efforts public.13 If the Agency requires a company eligible for penalty reductions to enter into a written agreement, administrative consent order, or judicial consent decree, such an accord will also be made available to the public.14
4. No Routine Requests for Audits
In the Incentives Policy, EPA affirmed its policy to refrain from routine requests for audits.15 Under the Audit Policy, however, which remains effective, EPA retains authority to request audit material on a case-by case basis. Examples where such reports are likely to be requested are when audits are conducted under consent decrees or other settlement agreements; a company has placed its management practices at issue by raising them as a defense; or state of mind or intent are a relevant element of inquiry, such as during a criminal investigation.16
B. Other Government Incentives For ISO 14000 Implementation
The use of self-audits and the voluntary disclosure of environmental violations have been cited as mitigating factors in three different criminal enforcement documents:
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1. DOJ Enforcement
In 1991 the Department of Justice issued a guidance setting out DOJ's policy on environmental auditing.17 The document indicated that self-auditing, self-policing, and voluntary disclosure of environmental violations would be viewed as mitigating factors in the Department's exercise of criminal enforcement discretion. According to the policy, DOJ should consider the "existence and scope of any regularized, intensive, and comprehensive environmental compliance or program,"18 including an environmental compliance or management audit. The document suggests, in particular, that whether an organization's compliance program contains sufficient measures to identify and prevent future noncompliance may be viewed as a significant factor.19 Other relevant factors cited include whether the organization has a strong institutional policy of compliance; has implemented safeguards beyond those required by law; relies upon regular procedures to identify, prevent, and remedy circumstances like those that led to noncompliance; and evaluates employee and corporate departmental performance against a standard of environmental compliance.20 The DOJ policy emphasizes, however, that these criteria are meant to provide internal guidance to DOJ attorneys, and gives no assurance that the implementation of compliance programs will be regarded as a mitigating factor in a decision on whether to prosecute.21
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2. Sentencing Guidelines
The Final Draft Environmental Sentencing Guidelines (1993)22 contained provisions regarding environmental compliance programs. Although the Commission decided not to adopt the proposal in 1994, such provisions could emerge in future amendments to the Sentencing Guidelines.23
The proposal provided for...
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