the success and sustainability of a country’s ...119.92.161.2/portal/portals/21/eia...

Validating ECC Compliance with Third Party Audits Jesus Reyes, Jose Reynato Morente & Mark Tom Mulingbayan

Environment Committee Philippine Chamber of Commerce and Industry

The success and sustainability of a country’s Environmental Impact Statement

System does not solely rest on the proper issuance of Environmental

Compliance Certificates to project proponents, but in ensuring that environmental

safeguards work for projects are actually done and validated. Currently the

standard mode of monitoring the environmental safeguards work is done through

a Multi-partite Monitoring Team (MMT). A Third Party Audit is an alternate option

but has not been used extensively due to the absence of operating guidelines. It

can be shown that this alternative offers a more efficient and effective way of

monitoring compliance as it makes use of a set of skills and experience not

necessarily readily available to the members of a newly formed MMT. However,

some mechanisms need to be put in place such as making third party audit

reports available to interested stakeholders, and ensuring that third party auditors

are qualified and their integrity unquestioned.

The authors are officers of the Environment Committee of Philippine Chambers

of Commerce and Industry who promotes of environmental awareness in the

Philippine Business Sector.

Actual Environmental Audit Third Party Environmental Audit Result Presentation

Validating ECC Compliance with Third Party Audits

Jess Reyes, Rene Morente & Mark Mulingbayan

Environment Committee

Philippine Chamber of Commerce and Industry

The success and sustainability of a country’s Environmental Impact Statement System does not solely

rest on the proper issuance of Environmental Compliance Certificates to project proponents, but in

ensuring that environmental safeguards work for projects are actually done and validated. Currently

the standard mode of validating compliance with ECC conditions is done through the convening of a

Muti-partite Monitoring Team (MMT) composed of the project proponent, regulators and relevant

stakeholders. Engaging a Third Party Auditor is also a DENR-accepted mode under the IRR of P.D. 1586,

and many ECCs in the past have indeed been issued with Third Party Audits as the prescribed method of

validating compliance. However, the Philippine EIS system has not yet seen the proliferation of third

party audits primarily due to the absence of operational guidelines .

Reviewing the functions of an MMT

According to the Revised Procedural Manual for DAO 2003-30, an MMT has the following specific

functions:

1. Validate project compliance with the conditions stipulated in the ECC and the EMP;

2. Validate Proponent’s conduct of self-monitoring;

3. Receive complaints, gather relevant information to facilitate determination of validity of

complaints or concerns about the project and timely transmit to the Proponent and EMB

recommended measures to address the complaint;

4. Prepare, integrate and disseminate simplified validation reports to comm8unity stakeholders;

5. Make regular and timely submission of MMT Reports based on the EMB-prescribed format.

Upon cursory review of these five functions of an MMT, it can be seen that four of these – covering the

monitoring of environmental safeguards and communicating the results – can also satisfactorily be

undertaken by a competent third party auditor. A duly-accredited third party auditor may present a

less expensive and more efficient alternative.

Advantages of a Third Party Audit

A common concern among project proponents is the technical competence of the members of an MMT.

In many cases, for relatively inexperienced MMTs, some form of capacity building needs to be

undertaken and invariably it is the project proponent who is expected to bear the cost, thus increasing

project cost. The timetable of MMT operations is also extended and the deliverables may have to wait a

little longer. A competent third party auditor does not have these constraints. Upon engagement of

the auditing team, defining the audit criteria and performing the desk and field work may be completed

in a shorter period of time compared to the mobilization, capacity building and actual work of an MMT.

Because of the inherent readily-available technical skills of a third party auditor, it is quite certain that

the audit criteria will be focused, comprehensive and at times may even identify relevant parameters

not identified in the Environmental Management Plan, but within the confines of what is required by

regulation.

One characteristic of that third party auditor that an MMT does not necessarily have is objectivity.

Because a third party auditor is not an interested stakeholder of a project – unlike the members of an

MMT – its credibility is not as questionable. However, safeguards need to be in place to ensure that

third party auditors are competent and have integrity.

Addressing complaints as an MMT function

One function of an MMT that a third party auditor is unable to discharge is receiving and addressing

complaints related to a project, and making recommendations to EMB. Even some MMT members

themselves have been known to comment that this is essentially a government function which seems to

be conveniently passed on to an MMT to manage despite the potential lack of familiarity and

technical/legal competence of many MMT members to make valid recommendations on disputes, and

that they fear being held accountable for such recommendations. Project proponents may also allege

that this could be a source of harassment if not managed properly.

The Case of Manila Water’s Third Party Audit Implementation for MTSP

For the projects of Manila Water under the Manila Third Sewerage Project (MTSP), the ECC issued

specified that the project proponent may utilize the MMT of the Manila Second Sewerage Project

(MSSP) or secure the services of a Third Party Auditor to monitor and validate compliance with ECC

conditions. Since the MSSP MMT had long since ceased operations, and because the MSSP is a multi-

agency program – not entirely Manila Water’s – a request to implement third party audits was granted

by EMB, with the intention of collecting best practices and lessons learned from the experience.

Although Manila Water has secured ISO 9001, ISO 14001 and OHSAS 18001 certification for several of its

operating facilities, not all wastewater facilities covered by MTSP were certified then.

An EMS-qualified third party auditor was engaged by Manila Water for several six-month engagements.

The audit criteria was developed by the auditor using draft guidelines provided by DENR EMB as well as

ISO 19011standards (Guidelines for Auditing Management Systems). The criteria covered the

implementing rules and regulations of all existing environmental laws as well as peripheral concerns

such as those related to sanitation, safety and social safeguards. With the absence of specific DENR

EMB guidelines in reporting results for third party audits, the consultant and project proponent agreed

on a numerical algorithm for determining the overall compliance score, based on compliance, partial

compliance and non-compliance for each deliverable, incorporating timeliness and quality. The audit

exercise was composed of both desk reviews as well as site visits with interviews of plant managers.

Preliminary audit results were presented to the project proponent for challenging and validation, after

which the final reports are prepared and submitted to DENR EMB. Initially, the final reports would be

submitted to DENR EMB several weeks after the end of the audit period. In time, the project proponent

and auditor agreed that audit work may commence a few weeks before the end of the audit period, in

order to make possible a report submission to DENR within days instead of weeks.

During the early cycles, compliance and operational risks were constantly identified and opportunities

for improvement were recommended. At one point, the findings led to a policy clarification on a new

regulator from a non-DENR agency, and identified the need to amend the entire or certain provisions in

existing environmental permits. After more than a half dozen audit cycles, a trend in the increase of

compliance score and overall environmental performance was realized.

The semi-annual Third Party Audit reports were submitted to DENR EMB as part of compliance with ECC

provisions. DENR EMB acknowledged these reports and made comments and suggestions for

improvement.

The need for additional safeguards

While a third party audit may present a reasonable or even more efficient alternative to MMTs, some

safeguards need to be put in place in order for this option to be truly responsive to the objectives of an

EIS system.

1. A system for accreditation of third party auditors needs to be set up, to avoid the proliferation

of unqualified consultants that can be dictated upon by project proponents.

2. It also must be acknowledged that disclosure of monitoring and validation results to

stakeholders remains an essential element of the EIS system, and a public disclosure mechanism

for doing this must be set up as well, such as town hall meetings or making the reports available

online. It should be recognized that the members of an MMT may be stakeholders of a project,

but they do not necessarily represent all the stakeholders of the project, thus the MMT

operations itself does not necessarily constitute public disclosure.

Conclusion

For the Philippines to be a country that is truly competitive in the world economy, all sectors must find

ways to be efficient, and this responsibility does not rest in the private sector alone. A government that

is responsive to the mission of protecting the environment and enhancing natural resources while

maintaining a streamlined set of regulatory requirements such as those pertaining to the Philippine EIS

System also contributes to this overall efficiency. Using a third party audit in validating the

environmental compliance work of a project proponent presents a more efficient and objective

alternative to an MMT, provided some additional safeguards are set in place, is worth looking into. The

development of standard third party audit criteria and reporting metrics to operationalize Sec 9.2 of

DAO 2003-30 remains a key dependency and major and minor regulatory decision points still need to be

made, and the experience with implementing third party audits will contribute to developing these.

End.

ABSTRACT

The success and sustainability of a country’s Environmental Impact Statement System does not solely rest on the

proper issuance of Environmental Compliance Certificates to project proponents, but in ensuring that

environmental safeguards work for projects are actually done and validated. Currently the standard mode of

monitoring the environmental safeguards work is done through a Multi-partite Monitoring Team (MMT). A Third

Party Audit is an alternate option but has not been used extensively due to the absence of operating guidelines. It

can be shown that this alternative offers a more efficient and effective way of monitoring compliance as it makes

use of a set of skills and experience not necessarily readily available to the members of a newly formed MMT.

However, some mechanisms need to be put in place such as making third party audit reports available to

interested stakeholders, and ensuring that third party auditors are qualified and their integrity unquestioned.

Validating ECC Compliance with Third Party Audit



1st National Convention on the Philippine EIS System

19-21 June 2013; Manila Hotel

Mark Mulingbayan, Jess Reyes & Rene Morente

Environment Committee


Philippine EIS System

Environmental Impact

Assessment

EIS Review & ECC Issuance

Monitoring, Validation & Evaluation


Why monitor/validate? To ensure…

• Project compliance with ECC conditions

• Project compliance with Environmental Management Plan (EMP)

• Effectiveness of environmental measures on managing impacts

• Continual updating of EMP


Project

DENR-EMB

Multi-partite

Monitoring

Team


Functions of an MMT

Monitor compliance with ECC conditions

Validate proponent’s self-monitoring

Receive & validate complaints,

make recommendations to proponent and EMB

Simplified monitoring report to stakeholders

MMT report to EMB


DAO 2003-30 Section 9. Monitoring of Projects with ECCs

Sec. 9.1 Multipartite Monitoring Team

Sec. 9.2 Self-monitoring and Third Party Audit


Project

DENR-EMB

Multi-partite

Monitoring

Team


Project

DENR-EMB Third Party

Audit


Experience with Third Party Audit

• Granted to Manila Water for the Manila Third Sewerage Project (MTSP) in lieu of an MMT

• Semi-annual audit by a qualified auditor guided by ISO 19011 (Guidelines for Auditing Management Systems)

• Not all facilities are ISO 14001 certified, but all operations are ‘certifiable’

• Audit Process

– Documents review

• ECC and conditions

• Environmental laws and regulations and their updates

• Relevant permits and conditions

• Environmental monitoring reports

• Communications with environmental regulators and stakeholders

• Previous audit report

– Interview of responsible personnel

– Site inspections

– Audit results review and validation


• Audit Criteria

– Philippine EIS System, PD 1586

– Clean Air Act, RA 8749

– Clean Water Act, RA 9275

– Ecological Solid Waste Management Act, RA 9003

– Toxic Substances and Hazardous and Nuclear Wastes Control Act, RA 6969

– Appointment and Designation of PCOs

– Self Monitoring Report System

– Sanitation Code

– LLDA Board Resolutions


• Evaluation of Audit Findings

Rating Definition

Color Rating

Compliant Clear demonstrated compliance to audit criteria; all requirements fulfilled completely and on time

Partially compliant Incomplete fulfillment of requirements, or; late compliance; or requirements under process with the regulator

Non-compliant Non-conformity w/ specific requirements



0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

ECC Conditions

LLDA Clearance

RA 9275

RA 6969

RA 8749

RA 9003

DAO 1992-26

DAO 2003-27

A less than 100% rating does not necessarily mean there’s a violation.

• Outcomes – Identifies the smallest non-conformities, even for

non-environmental requirements

– Triggers the need to amend certain permits or conditions when necessary

– In one instance, triggered a policy clarification from a regulator

– Identifies compliance and operational risks and

recommended areas for improvement

– Resulted in increasing ‘compliance score’ and overall environmental performance every audit period


Advantages of Third Party Audit

• Readily available technical skills – No need for capacity building

• Speed

• Focused and comprehensive in scope

• Objectivity

• Continuity


Major concerns with Third Party Audit

How do we know if the third party auditor is qualified to perform the validation work?

How do we know if the third party auditor cannot be dictated upon by the proponent?

Does this exclude stakeholder involvement?

How should ‘compliance score’ be determined?


Dependencies

• Standard for auditing and reporting compliance score

• Ensuring integrity of TPA results – System of accreditation/accountability of consultants

• Communicating TPA results to stakeholders Not all stakeholders are represented in an MMT anyway

Need for effective public disclosure mechanisms


Key Message Third Party Audit as an alternative to MMT…

– More efficient; better quality of monitoring/reporting

– Need to provide operating standards, mechanisms to ensure integrity of results and keep stakeholders informed
