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SBL ACCA Bpp JGP chemical

(b) Explain the three stages in an environmental audit and explore, using
information from the case, the issues that JGP will have in developing these
(9 marks)
Marking Scheme:
3 marks for each of the 3 stages of the audit (1 for explanation of the stage, 2 for exploration)
9 marks
(b) Environmental audit
• Environmental auditing is an evaluation technique often used in the private sector to increase
compliance with environmental law
• Environmental audits allow companies to identify their environmental progress and show steps
made toward a cleaner environment that exceed what is required by law, to promote a company’s
image as a good environmental actor.
• Environmental auditing can lead to significant cost savings within an organization, which identify
the liability problems that can be addresses before an accident occurs or a claim is filed. (P1L3)
• Environmental auditing contains three stages.
Stages in an Environmental Audit
• The first stage is design stage - establishing the metrics involved and deciding on what
environmental measures will be included in the audit.
• This selection is important because it would decide what will be measured, how costly
the audit will be and how likely it is that the company will be criticised for ‘window
• JGP needs to decide, whether to include supply chain metrics as Professor Appo
suggested, which would be a much more challenging audit. (P2L7)
• Given that the board’s preference is to be as ‘thorough as possible’, it seems likely that
JGP will include a wide range of measures and set relatively ambitious targets against
those measures.
Stages in an Environmental Audit
• The second stage is measuring actual performance against the metrics set in the first stage.
• The means of measurement will usually depend on the metric being measured. Whilst many
items will be capable of numerical or financial measurement (such as energy consumption or
waste production), others, such as public perception of employee environmental awareness.
• Given the board’s stated aim of providing a robust audit and its need to demonstrate
compliance, this stage is clearly of great importance.
• If JGP wants to demonstrate compliance, then measures must be established so that
compliance against target can be shown clearly.
Stages in an Environmental Audit
• The third stage is reporting the levels of compliance. The issue here is how to report
the information and how widely to distribute the report. The board’s stated aim is to
provide as much information as possible ‘in the interests of transparency’.
• Preparation of a final report that includes an action plan to address each of the
audit’s findings. Ex . include specific measures and actions to correct non-compliances
and a time schedule.
• This would tend to signal the publication of a public document (rather than just a
report for the board) although there will be issues on how to produce the report and
at what level to structure it.
• Given that it was the desire to issue an environmental report that
underpinned the proposed environmental audit, it is likely that JGP will opt
for a high level of disclosure to offset the concerns of the local community
and the growing number of concerned investors (more confidence)