Performance-Based Auditing: A Different Approach to Enhancing Your EMS SESHA Hill Country Chapter Meeting June 2, 2005 J

1. Performance-Based Auditing: A Different Approach to Enhancing Your EMS SESHA Hill Country Chapter Meeting June 2, 2005 Jeanne Yturri, Principal Zephyr Environmental Corporation

2. EMS Implementation Focuses on Results Documentation Your EMS is not procedures! When well-defined, understood, and implemented, your EMS documents will support and achieve your organization’s Environmental Policy. The effectiveness of your EMS is demonstrated through measurable results, not procedures on a shelf. Implementation & Results

3. Performance-Based Approach Focus on what is seen. Understand the underlying causes.

4. Why Do An Audit? Traditional Reasons: • To identify the organization’s compliance position • To identify how to fix compliance gaps • To be able to report on compliance position to others • To support ISO14001 registration Better Reasons: • To identify environmental risks and potential for pollution. • To determine opportunities for improvement. • To assess conformance or compliance with: • Regulatory requirements • Operating procedures • International standards

5. Auditors Must Have: • Knowledge of applicable regulatory requirements (current and emerging). • An understanding of the processes and activities their auditing. • Experience with operational controls (best practices) that support continual improvement.

6. How is an EMS Best Audited?

7. 4. Management methods 5. Why it is 3. Personnel behaviors 2. How it is 1. On the ground observation Performance-Based Audit Approach

8. Audit Process Pre-Audit Planning: Records and document review.Agree to logistics and schedule. Opening Meeting: Decision makers present. Bottom-up Analysis: How it is Site Survey: Physical observations (photos with permission), employee interviews. Causal Analysis: Scheduled interviews with managers. EMS Analysis: Environmental aspect/impact and goals review. Top-down Analysis:Why it is Review Performance Improvement Business Review Meeting with Senior Person Closing Meeting Audit Report Plan Audit Corrective Action

9. Audit Process Steps • 1. Pre-Audit Planning • 2. Opening Meeting • 3. Site Survey • 4. Causal Analysis • 5. EMS Analysis • 6. Review Performance Improvement • 7. Business Review • 8. Meeting with Senior Person • 9. Closing Meeting • 10. Audit Report

10. Step 1: Pre-Audit Planning • Get a sense of organization’s activities, products and services. • Obtain and review relevant records and documents. • Understand applicable legal/regulatory requirements. • Understand general structure of organization. • Understand elements of the system to be audited. • Agree to audit logistics and schedule. • Provide advance notice of scope and agenda to management personnel that will be interviewed.

11. Step 2: Opening Meeting • Introduce audit team • Present audit plan and schedule • Discuss ground rules and logistics

12. Step 3: Site Survey • Walk the entire site to gain familiarity with operations. • Observe the site’s environmental performance. • Identify evidence of nonconformance... focus on areas that have/could have: • environmental impact, including non-routine and emergency situations, • environmental compliance concerns, and/or • greater opportunities for improvement in compliance and performance. • Take photos to document work practices and conditions. • Interview personnel to understand and evaluate practices. • Document evidence of nonconformance. • Determine root cause through additional interviews, document review, and observations.

13. Traditional Compliance Questions • How do you track chemical use? • How do you determine emission rates? • How do you perform/document waste stream classification determinations? • Have you conducted required PPE risk assessments? • Have you had any wastewater permit limit exceedances? • Can I look at your records?

14. Traditional EMS Questions • How do employees use the Environmental Policy in their work? • How is the Policy communicated to outside stakeholders? • What process did you follow to identify and rank your environmental aspects? • How do you train employees about the EMS?

15. Performance-Based Questions • Understand what the employee understands and does about environmental performance. • Watch behaviors, and determine if good behaviors are taught and encouraged. • Look for training problems, resource problems, and/or management problems when observing behaviors and conditions, and asking: • What goes on in this area? • What do you do with that? Why? • What do you do if xyz? • Is this normal? If not, why is it this way today?

16. Step 4: Causal Analysis Is the situation (observed practice/condition) the result of: • Error/behavioral problems, • Resource problems (e.g., improper tools, insufficient time, etc.), • Training problems (e.g., never/poorly taught), and/or • Management problems (e.g., not noticing poor behaviors, not enforcing policies, not holding employees accountable).

17. Step 5: EMS Analysis Identify the degree of nonconformance = a condition that is contrary to the EMS or an environmental requirement. • Major: A serious deficiency that could adversely affect the EMS or the environment. A systemic failure… no system or a flawed system. • Minor: Temporary or isolated instance of failure to conform with EMS or environmental requirement. An isolated failure. • Concern: Undesirable situation that could result in a nonconformance in the future if not addressed. An opportunity for error or improvement.

18. Examples of a Major Nonconformance A systemic failure… no system or a flawed system. • Evidence of negative environmental impact • Evidence of unidentified risk and/or safety hazard • Evidence of failure to adequately train personnel • Compliance requirement not identified and/or not adequately addressed • A required document does not exist • A documented procedure exists but is not implemented • Employees permitted to disregard work instructions without corrective action • Required records not being maintained • Obsolete procedures are being used

19. Examples of a Minor Nonconformance • An isolated failure. • Evidence of potential negative environmental impact • Safety or environmental hazard associated with poor housekeeping • Occasional failure to follow documented procedure • Documented procedure requires minor clarification/amplification

20. Examples of a “Concern” An opportunity for error or improvement. • Poor housekeeping • Procedures are complicated and/or many pages long, making them hard to follow • A key activity is dependent on one or two specific people, one of whom is near retirement • A monitoring or measurement method is cumbersome or difficult to perform

21. Step 6: Review Performance Improvement Look for evidence of “the good stuff”: • Reduction in environmental impact • Reduction of liabilities for known issues and for others that may emerge • Improving compliance with environmental regulations • Stakeholder (community, customer, etc.) involvement • Participation in community outreach • “Beyond compliance” controls and programs

22. Step 7: Business Review • Interview management staff (operations, human resources, finance, etc.) to determine their knowledge of environmental aspects and involvement in EMS. • Assess certain aspects of the EMS to see how they fit in with the organization’s operational, financial, and other business systems. • Discuss environmental objectives/targets and process for achieving those continuous improvement goals.

23. Step 8: Meeting with Senior Person • Interview senior person (“top management”) to determine his/her knowledge of environmental aspects and involvement in EMS. • Assess how the EMS is considered compared to other business programs. • Identify the extent of resource allocation for environmental performance and improvement. • Understand how upcoming operational changes are evaluated for potential environmental issues.

24. Step 9: Closing Meeting • Show photos and discuss observations and findings. • Provide organization with an opportunity to clarify or provide additional explanation. • Facilitate discussion regarding corrective/preventive actions and closure dates.

25. Step 10: Audit Report The report should document the following: • Dates at site • Names of audit team and management personnel that were interviewed • Positive observations • Findings of nonconformance • Root cause determinations • Recommendations for corrective action

26. A Different 80/20 • 80% of auditing should assess management and employee behaviors to drive environmental performance and improvement. • 20% should be validating plans through document and records review.

27. Collecting Evidence: Observation • Start from the fenceline and work in. • Don’t just rely on what you are told, see it for yourself. • Don’t be “locked on” a checklist… keep your mind/eyes open for any and all issues. • Watch for risks which can’t be easily seen. • Always look in “forgotten corners” and don’t be led away.

28. Collecting Evidence: Interviewing • Ask open-ended questions. • Don’t lead or consult. • Question people at all levels. • Focus on the people responsible, but get information from other relevant persons. • Ask about low frequency activities which often lead to highest impact. • Consider actual and potential emergency scenarios.

29. Collecting Evidence: Documents and Records • Look for evidence of “audit preparation.” • Review records to check that current situation is constantly maintained. • Track through records – sample according to significance and frequency of recordkeeping. • Does a lack of recording mean a lack of action or just no supporting paperwork? • Are procedures that should be documented (e.g., high risk, low frequency activity, complicated activity, significant impact potential)

30. Traditional Audit Example… Waste Management • Interview • What waste is generated here? At what rate? • How is it handled and by whom? • Where is it stored? Where is it disposed? How often? • What records are used during generation, handling, or storage? • Review Documents and Records • Waste management procedures • Waste logs and inventory records • Waste manifests/shipping documents • Waste registrations/permits • Transporter/disposer licenses • Training records • Observe • Inspect waste containers – labeling, conditions, etc. • Look at accumulation/storage areas

31. Performance-Based Audit Example… Waste Management • Start with Observation • Look at the obvious… waste containers, generation points, accumulation and storage areas, etc. • Look at the big picture (context, quality, quantity, etc.) • Understand the processes that generate waste • Consider how waste is managed • Address compliance and performance (minimization, pollution prevention, best management practices) • Then Conduct Interviews • Tell me about this… who, what, when, where, how, why? • Lastly, Review Documents and Records • When you see something that doesn’t look right • To verify what someone said • To see if behavior matches procedure

32. Work from the “Outside In” • Inspect the site to validate the environmental aspects are controlled. • Recognize safety hazards, housekeeping problems, etc. as indicators of a nonconforming EMS. • Do employees see and elevate opportunities to improve the operation or reduce cost? • Track interview responses up the chain of command. • Dig deep for evidence: • Inform vs. communicate? • Correction vs. corrective action ? • Ask probing questions: • Why are you doing things the way you are? • Are there other or better ways to do that? • What contingencies are you prepared for?

33. Photo Show and Tell Look at the following photographs and: • Describe the situation you see. • Recognize the environmental risk(s) and/or safety hazard(s). • What questions could you ask to better understand the situation. • What documents/records could you review to verify and or better understand the situation. • Conduct causal analysis. What behavior, training, resource, or management problem(s) may have lead to the situation? • Identify operational control(s) that would improve the situation. • Determine potential regulatory issues triggered or affected by the situation.

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