Industries that perform environmental audits do so for a variety of reasons: by law, voluntarily, and as part of other audits. These audits can disclose whether a particular plant is in compliance with environmental laws, areas of cost savings in environmental compliance, and multifacility environmental compliance measures. Industries want audits kept secret, or privileged. Small and medium-sized businesses especially want this legislation because they want to level the playing field with large industry, which can use its own lawyers and hide information within attorney–client privilege. This secrecy prevents communities, environmentalists, and others from knowing about the environmental audit and any information that would relate to local environmental impacts or risks. Industry is concerned about environmental lawsuits and, if not protected by some legal privilege, would not perform any type of environmental audit. Since most U.S. environmental information about industry is self-reported, an independent audit carries much more credibility than the usual industry and government reports. Access to accurate environmental information is the crux of this controversy.
I. Environmental Audit Privileges
II. New State Laws on Environmental Privilege
III. How Broad Is the Industrial Privilege?
Environmental Audit Privileges
More than 20 states have enacted environmental audit privilege legislation. It takes different forms and is usually controversial. Regular audits should become a normal business management tool that assists compliance with complex environmental regulations and avoids unnecessary waste. Such audits provide valuable information about potential environmental noncompliance, suggest methods for reducing or eliminating waste streams, inform shareholders and customer queries regarding off -site liability, and can be used to create a green corporate image.
Self-auditing programs generate evidence that could be used against a company in an enforcement action. Any noncompliance reported in such a document may create a paper trail available to both enforcement agencies and private plaintiff s. Consequently, although numerous businesses undertake self-audits, many do not want information suggesting environmental noncompliance to be circulated or written down. The fear that this information will be discovered by a private party or a governmental agency discourages self-auditing programs at various companies. To environmental policy makers, this fear is problematic because it distorts environmental information. Many communities distrust this secret audit process, preferring clear and transparent transactions.
Large industry has always relied on the common-law attorney–client privilege, the work-product doctrine, and, more recently, common-law self-evaluation to argue that audit documentation is privileged. These legal arguments give privileged protection to large companies with environmental self-audit programs. The claim of attorney-client privilege will start a discovery dispute that results in an in-camera review by a judge, who will determine whether to allow the government to use the audit document against the regulated business. In contrast, a small business does not have the financial and strategic capacity to engage a lawyer for an expensive judicial fight for secrecy. The primary controversy between large and small industries here is who gets to privilege environmental information. This is not a controversy shared with communities or environmentalists.
New State Laws on Environmental Privilege
More than 30 states have considered legislation involving environmental audit privilege, and 20 have enacted such laws, including Arkansas, Colorado, Idaho, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Mississippi, New Hampshire, Ohio, Oregon, South Carolina, South Dakota, Texas, Utah, Virginia, and Wyoming. These state laws essentially codify discovery-dispute procedures that large businesses have always enjoyed. By eliminating the requirement of hiring an attorney, small companies can afford to engage in the same type of self-audit process that most large companies currently take for granted when this legislation is enacted.
The environmental privilege is limited by law and not universally applied or available. A common legislative intent is to encourage owners and operators to conduct voluntary environmental audits of their facilities by offering a limited privilege to audited information. Proponents point out that it is infeasible and unnecessary for state and federal regulators to police each and every business in the state, and therefore self-auditing should be encouraged. Generally, a number of conditions must be met. Some of the conditions that are necessary for the state law on environmental audit privilege to apply are as follows:
- All noncompliance identified during the audit is corrected in a reasonable manner.
- The privilege is not asserted for fraudulent purposes.
- Information in the audit is not otherwise required to be reported.
Some legislation also provides that a person or entity making a voluntary disclosure of an environmental violation is immune from any administrative, civil, and criminal penalties associated with that disclosure. As discussed further on, the compliance focus of environmental law allows for rapid reduction of penalties in return for quick compliance and disclosed and remedied harms.
How Broad Is the Industrial Privilege?
Proponents of audit privilege legislation state that it does not compel secrecy, because no privilege exists unless there is prompt disclosure and correction of the violation. Furthermore, unless the information falls within the very narrow scope of privileged information, it is decidedly vulnerable.
Many states that favor privileging environmental information argue that environmental protection efforts require that businesses, municipalities, and public agencies take self-initiated actions to assess or audit their compliance with environmental laws and correct any violations found. By getting to know all the industries affecting the environment and protecting their information better, compliance with the intent of environmental laws results.
Communities and environmentalists respond that most if not all industrial emissions are self-reported in a context of very weak enforcement. They argue that environmental information is a common good to be shared. Keeping it secret promotes a high degree of distrust and breeds controversy.
Advocates of sustainability and environmentalists want full and complete disclosure of all environmental impacts. The controversy continues to unfold in state and local legislatures and in federal environmental agencies like the EPA. The relationship between states and the EPA on this issue is a developing and somewhat contentious one.
Robert William Collin
- Dietz, Thomas, and Paul C. Stern, eds., New Tools for Environmental Protection: Education, Information, and Voluntary Measures. Washington, DC: National Academies Press, 2002.
- Martin, Channing J., Voluntary Disclosure of Environmental Violations: Is Mea Culpa a Good Idea or a Bad Move? Washington, DC: Environmental Law Institute, 2002.