March 13, 2006

Debra Phillips American Chemistry Council 1300 Wilson Blvd. Arlington, VA 22209

Subject: Survey of Selected Environmental Management Practices in the U.S. Chemical and Allied Products Industrial Sector, 2002 to 2003

Dear Ms. Phillips:

Attached is the report entitled “Survey of Selected Environmental Management Practices in the U.S. Chemical and Allied Products Industrial Sector, 2002 to 2003” that we discussed last week. The survey was conducted from March 2002 to March 2003. We understand that the attached report may contain some dated information, however, the survey dataset establishes baseline environmental management practices prior to changes within the past several years throughout the U.S. chemical manufacturing industry. Additional analysis of the survey dataset is pending. A future survey, if performed, for the survey respondent population may provide direct evidence of changes that have occurred in the industry.

This project was part of a research grant awarded by the U.S. Environmental Protection Agency to a research team based at the University of Kansas. As a member of this research team, I am providing this report to you to foster communications with the U.S. chemical industry and to promote an improved understanding of environmental management systems and factors affecting environmental compliance. In addition to this electronic communication, we are posting the same report on a web site maintained by the Policy Research Institute under the Center for Environmental Policy; the specific web site is the following: http://www.ku.edu/pri/CEP/EPA. Additional information regarding this research program on environmental policy may be found on this web site.

Please contact me with any questions or comments at 847/695-8855 x125 or via email at tat.ebihara@lfr.com.

Sincerely,

Tat Ebihara, Ph.D. P.E. Senior Engineer

.cc Dietrich Earnhart/University of Kansas

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Survey of Selected Environmental Management Practices in the U.S. Chemical and Allied Products Industrial Sector, 2002 to 2003

Tatsuji Ebihara, P.E., Ph.D.

LFR Inc., 630 Tollgate Road, Suite D, Elgin IL 60123

ABSTRACT

A survey of environmental management practices for over 260 U.S. chemical manufacturing facilities was conducted from March 2002 to March 2003. The survey focused on employee participation in environmental compliance, training, self-audits and other management practices. Survey findings obtained for this project identified industry practices for several key environmental management factors. The sample population was comprised of 46% publicly-owned companies, 11% ISO 14001 compliant facilities, and 38% major facilities with respect to National Pollutant Discharge Elimination System (NPDES) permitted discharges (greater than 1 million gallons per day effluent flow rate). Major facilities were found to have more stringent practices than minor facilities with respect to general employee participating in identifying non-compliance (p=0.002) and the relative importance of environmental goals to other manufacturing goals (p=0.003). A multi-factor regression model indicated that the number of NPDES violations was correlated with audit team composition, type of audit finding classification system, and relative ranking of environmental goals to other facility goals (r2=0.096, p=0.039). A two-factor regression model indicated that the number of enforcement actions was correlated with audit team composition and audit frequency (r2=0.343, p=0.021). This is the first time that quantitative audit practices were associated with improvements in environmental performance for the U.S. chemical manufacturing industry. Though further confirmation is warranted, this study indicated that audit teams consisting of both internal and external personnel, and a priority-based classification system for self-audit findings, may be key factors for improving regulatory compliance at NPDES-permitted facilities.

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INTRODUCTION

The U.S. Environmental Protection Agency (EPA) and the chemical manufacturing industry worked together to identify recommendations for improving compliance and to provide insight into the likely effect of auditing and environmental management systems (EMS) on compliance (EPA, 1999). The survey identified voluntary methods that could be used by industry as substitutes for traditional compliance inspections by government regulatory agencies to improve compliance with environmental regulations. Almost all facility personnel who responded to the survey suggested alternatives involving self-audits, third-party audits, EMS audits, or other forms of self-monitoring to verify compliance. Respondents to the survey ranked environmental audit programs and corporate policies, goals, targets, and guidelines as having the greatest influence on environmental performance (EPA, 1999). Approximately 41% of survey respondents stated that an internal EMS would have contributed to the prevention of non-compliance event. In response to non-compliance events, presumably identified in voluntary audits, more than one-third (38%) of the facilities changed their internal processes or procedures to prevent the recurrence of similar non-compliance events.

Other research identifies key elements of a successful EMS program: employee awareness, employee participation, management support and communication, emphasis on continuous improvement, facility-specific environmental policies and targeted goals, and an effective environmental compliance audit protocol. Shah (1996) and Sultana (1998) identify management support and employee participation as essential components of an effective EMS program. Shah (1996) found that an EMS program conducted without proper cooperation and teamwork in place is not likely to yield improved compliance. Sultana (1998) found that environmental performance criteria should ideally be integrated with an organization’s overall goals and objectives.

The objective of this study was to provide a quantitative description of several key environmental management practices within the chemical manufacturing industry and to identify the most effective management practices associated with improved environmental performance with respect of effluent pollutant discharge and compliance violations. The focus of this study was on employee participation in environmental compliance, training, self-audits in chemical facilities with National Pollution Discharge Elimination System (NPDES) permits for treated wastewater discharges. The goal of the study was identify key differences in environmental management practices between major versus minor facilities and to develop multiple-factor regression models of environmental management practices to predict enforcement actions and amount of pollutant discharges to surface water from major facilities.

METHODS

The methods used for this study included completion of a survey of environmental practices for facilities associated with the U.S. Chemical and Allied Products industrial sector and collection of environmental performance data for survey respondents. Statistical correlation of several specific environmental management practices and

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environmental performance measures were used to identify key factors that may be linked with improved regulatory compliance.

Survey of the Chemical and Allied Products Industry Sector

The survey was conducted from March 18, 2002 to March 11, 2003 for 1,620 U.S. chemical facilities with NPDES permits identified by the U.S. EPA which met the following criterion: facilities holding an active NPDES permit for regulated wastewater discharges to surface water. Facilities using general permits and facilities discharging only storm water were not included in the survey population. Of the 1,620 facilities 736 refused to participate, 214 indicated they no longer had NPDES permits, 38 said the facility was no longer in operation, and 23 were excluded from the study after we contacted the EPA concerning the permit number and the EPA said these facilities were closed or no longer discharging. Another 15 facilities indicated they had already completed the survey and 319 facilities could not be directly contacted using EPA contact information. Respondents from the remaining 267 facilities actually completed 90 percent or more of the survey of which 101 were major facilities and 166 were minor facilities.

After excluding the facilities that did not fit the specific study criteria, the population surveyed was 1,320 facilities. Based on no contact and refusals, the response rate for the survey was 20 percent. Based on refusals to completed surveys, the cooperation rate was 26.6 percent. Response rates were similar to other industrial surveys regarding environmental compliance (Kohut, 2004).

Characteristics of the chemical manufacturing facilities that responded to the survey are summarized in Table 1. The sample population of 267 facilities completing the survey was comprised of 46% publicly owned companies. Approximately 11% of the respondents were ISO 14001 compliant, and 38% of the respondents were major facilities with respect to NPDES-permitted discharges (greater than 1 million gallons per day effluent flow rate). Major facility respondents were located in 30 states across the U.S., and minor facility respondents were located in 34 states.

Environmental Performance Measures

Environmental performance measures (PMs) were obtained from the Permit Compliance System (PCS) database for the 101 major facilities that were survey respondents. The PCS database is a national computerized management information system that automates entry, updating, and retrieval of NPDES data and tracks permit issuance, permit limits and monitoring data, and other data pertaining to facilities regulated under NPDES. Five total variables from the PCS database where analyzed to measure environmental performance. The effluent BOD performance measure (PM1) was a factor calculated by a ratio of the reported BOD effluent discharge value and the permit effluent limit value from 1999-2001. The effluent TSS performance measure (PM2) was a factor calculated by a ratio of the reported TSS effluent discharge value and the permit effluent limit value from 1999-2001.

Survey Topic Survey ID No.

Mean = 251Median= 105Std. Dev.= 491Mean = 259Median= 110Std. Dev.= 485Mean = 266Median= 120Std. Dev.= 473Median= 3,000Std. Dev.= 43,254Range 8 to 450,000

5% Sole proprietorship6% Partnership

46% Publicly-held or traded corporation36% Privately-held corporation

7% Other

Median= 50,000Std. Dev.= 1,700,000Range 18 to 2,300,000,000Median= 58,450Std. Dev.= 2,000,000Range 32 to 2,600,000,000Median= 50,050Std. Dev.= 2,000,000Range 38 to 2,600,000,000

Mean = 1982Median= 1981Std. Dev.= 9.5 yr.

42% No BOD removal technology29% Activated Sludge29% Other BOD removal technologies31% No TSS removal technology23% Sedimentation46% Other TSS removal technologies

Principal TSS removal technology (n=252) 13e

Facility’s total annual product output in 2001 (in tons) (n=201) 4

Facility’s total annual product output in 2000 (in tons) (n=193) 4a

Facility’s total annual product output in 1999 (in tons) (n=184) 4b

Table 1. Survey Data on Facility Characteristics

Principal BOD removal technology (n=254) 13d

Response

Company ownership structure (n=267) 3

2bNumber of facility employees as full-time equivalents (FTE) in 1999 (n=253)

1Year of first NPDES permit (n=235)

Number of facility employees as full-time equivalents (FTE) in 2000 (n=258)2a

2Number of facility employees as full-time equivalents (FTE) in 2001 (n=261)

Number of company employees (n=246) 5c

Overall Employment

Ownership Structure

Product Output

Wastewater Treatment Facilities

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Two additional environmental PMs accounted for NPDES violations based on information from the PCS database. The first measure is the sum of number of months that a facility had one or more NPDES effluent permit violations, divided by the number of months during the sample period (PM3). The second NPDES effluent permit violation performance measure is the average number of violations received per month during the sample period (PM4). The final performance measure used in this study is the sum of all the enforcement actions from regulatory agencies a facility received divided by the number of months in the sample period (PM5). The number of months in the sample period was specific for each facility depending on availability of data.

Correlation of Specific Environmental Practices with Environmental Performance

The selected EMS factors were examined in this study for correlation with the following environmental performance:

• Composition of self-audit teams (F1) • Frequency of self-audits conducted (F2) • Type of self-audit finding classification system (F3) • Relative rank of environmental goals to overall manufacturing goals (F4) • General employee participation in identifying and correcting non-compliance (F5) • General employee participation in minimizing wastewater pollutants (F6)

In order to simplify interpretation of linear regression results, all survey response data were coded to reflect an increasing order of the degree of the stated EMS factor utilized in the correlation. In the statistical correlation analyses performed, positive values for standardized linear regression coefficients for each model reflected a positive correlation between the EMS factor and the environmental PM. Conversely, negative values for standardized linear regression coefficients for each model reflect a negative correlation between the EMS factor and the environmental PM. Environmental PMs for effluent performance (PM1 and PM2) were stated in positive terms: a higher value of PM1 or PM2 was indicative of improved environmental performance. Environmental PMs for violations (PM3 and PM4) and enforcement actions (PM5) were stated in negative terms: a higher relative value for these PMs was considered a greater degree of negative environmental performance.

The type of EMS factor or PM variable (e.g. categorical, interval, ordinal, discrete or continuous) was considered when choosing a statistical test to conduct analysis. In some cases, transformation of discrete variable type (e.g. F2) was performed to facilitate multi-factor regression analysis with other categorical variables. The main types of statistical analysis utilized were: chi-square test (α=0.05), simple linear regression (α=0.10), and multiple linear regression (α=0.10). Trial-and-error selection of factors utilized in multiple linear regression was used to develop statistically significant correlation models (α=0.10) of EMS factors (independent variables) to an environmental PM (dependent

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variable). Statistical analyses were completed using the SAS Version 9.1 and SPSS for Windows Release 11.5.0.

RESULTS

Characteristics of chemical manufacturing facilities and their environmental practices are summarized below for the survey respondent population. Regression analysis of EMS factors and to environmental performance variables are also presented below.

Facility Characteristics of Survey Respondents

The survey obtained general information on chemical manufacturing facilities to determine the characteristics of facilities included in the survey dataset and overall employee resources available to each facility. Specific information was obtained on the year of the first NPDES wastewater discharge permit, number of facility employees, number of company employees, company ownership, annual product output, and principal wastewater treatment technologies employed at the facility. Survey data on facility characteristics is provided in Table 1. The median year of the first NPDES wastewater discharge permit was 1981. The promulgation of effluent standards for a majority of chemical manufacturing industry categories occurred in the 1970s and 1980s. The median timeframe for the issuance of wastewater discharge permits is reasonably consistent with the regulatory timeframe for issuance of permits for pre-existing manufacturing facilities. Manufacturing facilities established after promulgation of effluent standards would have obtained a wastewater discharge permit in a year consistent with its initial wastewater discharge. The median number of facility employees ranged from 105 to 110. The survey dataset included both minor and major chemical manufacturing facilities. The range of facility employees among survey respondents indicated that the potential overall employee resources available to an individual facility for environmental compliance issues were limited for small companies and more abundant for larger companies. A majority of survey respondents were either publicly-held or traded corporations (46%) or privately-held corporations (36%). The remaining 18% of survey respondents were either sole proprietorships, partnerships, or other types of ownership structures. A wide range of total annual product output was indicated in the survey dataset. Total annual product output was placed in a common mass unit of tons. Chemical manufacturing industries produced a range of solid, liquid, and gaseous products. Chemical intermediates produced by one manufacturing process and used for other manufacturing units within the same company may not be represented in the total annual product output reported by survey respondents. The median number of company employees was 3,000. The survey dataset included both minor and major chemical companies. The range of company employees reported by

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survey respondents indicated a wide range of overall personnel resources. These data will be used to normalize environmental employee responses provided by survey respondents. The type of principal wastewater treatment technology used by the facility for biochemical oxygen demand (BOD) and total suspended solids (TSS) removal was compiled by the survey. A range of removal technologies was reported, however, the most prevalent BOD removal technology was the activated sludge process and the most prevalent TSS removal was sedimentation. Approximately 42% of survey respondents indicated no use of BOD removal technologies and 31% of respondents indicated no use of TSS removal technologies. Some industrial cooling waters, rinse waters, and some process wastewaters associated with chemical manufacturing processes may not require BOD or TSS removal technologies to achieve effluent permit limitations.

Environmental Practices of Survey Respondents

The survey obtained specific information on environmental behavior of individual chemical manufacturing facilities. Specific information was obtained on the facility employees allocated to ensure facility compliance with environmental regulations. Additional information was obtained on environmental training programs, environmental consulting expenditures, upgrades performed on wastewater treatment facilities, stringency of treatment process and sewer monitoring, ISO 14001 compliance, self-audit programs, self-ratings of employee and management concern for environmental protection, internal and external environmental communications, and the role of general facility employees in environmental issues. Survey data on environmental behavior is provided in Table 2.

The median work effort of facility environmental employees associated with ensuring compliance with environmental regulations was 20 to 24 person-months or 1.7 to 2.0 full-time equivalents (FTE). The total work effort reported by survey respondents included full-time employees and part-time employees, and could include operators, maintenance staff, clerical staff, and professional staff. Based on our experience, this is a reasonable value for a small-to-medium size manufacturing facility. The maximum work effort reported by a survey respondent was 480 person-months or 40 full-time equivalents which may be representative a very large chemical manufacturing complex.

The median number of company environmental employees was 15. Survey responses indicate that some company or corporate resources were available to for assistance with environmental compliance matters.

The median fraction of facility environmental employees with a college education was 75%, and the median experience level was 12 years. Typical operators and engineering staff in the chemical manufacturing environment or in a regulatory compliance role generally require a rigorous technical background consistent with an associate degree or college degree in the sciences or engineering.

Survey Topic Survey ID No.

Median= 20Std. Dev.= 78Range 0.04 to 440Median= 24Std. Dev.= 76Range 0.04 to 410Median= 24Std. Dev.= 80Range 0 to 480Median= 15Std. Dev.= 308Range 0 to 2,000Median= 75Std. Dev.= 39.3Range 0 to 100Median= 12Std. Dev.= 6.13Range 1 to 30

7% None30% Internal (in-house) only31% External only33% Both internal and external

Median= $10,000Std. Dev.= $91,231Range $0 to $1,000,000Median= 5.0Std. Dev.= 23.1Range 0 to 187Median= 100%Std. Dev.= 23%Range 0 to 100%

Median= 4Std. Dev.= 17.1Range 0 to 180Median= 0%Std. Dev.= 20%Range 0 to 100%

32% No 68% Yes

Median= $10,000Std. Dev.= $62,045Range $0 to $425,000

39% No upgrade completed61% Yes, upgrade completed25% No, pollutant discharges not reduced75% Yes, pollutant discharges reduced21% Effluent monitoring only15% Effluent + process monitoring28% Effluent + process + single pt. sewer monitoring36% Effluent + process + multiple pt. sewer monitoring

ISO 14001 Participation88% No12% Yes

Table 2. Survey Data on Environmental Behavior

Annual expenditures for wastewater consultants (n=148) 11b

Percent of contract wastewater employees (n=254) 11

Has facility used external consultants for wastewater issues? (n=262) 11a

Number of facility wastewater employees (n=250) 10

Annual training budget for environmental employees (n=134) 9a

Annual days of training for environmental employees (n=231) 9b

Percent of environmental employees attending training (n=235) 9c

Average number of years of experience for environmental employees (n=258) 7

Type of training program for environmental employees (n=265) 8Environmental Training Programs

5b

Number of company environmental employees (n=213) 5d

Percent of environmental employees with college education (n=241) 6

Response

Facility environmental employees (person-months) in 2001 (n=248) 5

Facility environmental employees (person-months) in 2000 (n=246) 5a

Facility environmental employees (person-months) in 1999 (n=246)

Stringency of Wastewater Process & Sewer Monitoring (n=249) 13c

Wastewater treatment facility upgrade performed in 1999 to 2001 (n=256) 13

13bIf upgrade performed, were pollutant discharges reduced? (n=155)

16ISO 14001 Compliance (n=240)

Employees Involved in Environmental Compliance Activities

Wastewater Treatment Operations

Survey Topic Survey ID No.

Table 2. Survey Data on Environmental Behavior

Response

4% No audits conducted14% Visiting corporate and/or consultants only27% Team of facility employees55% Team of facility and corporate/consultants43% 1 per year18% 2-3 per year18% 4-8 per year21% 9 or more per year48% 1 per year14% 2-3 per year18% 4-8 per year20% 9 or more per year25% Only non-compliance findings noted30% 2 categories: non-compliance and other28% Findings placed into priority categories17% Findings serially-ranked for non-compliance risk

Mean= 8.9Std. Dev.= 1.3Range 4 to 10Mean= 7.4Std. Dev.= 1.7Range 3 to 10Mean= 8.8Std. Dev.= 1.4Range 4 to 10

1% Not important3% Of minor important

31% Fairly important65% Among the most important

62% Regularly scheduled meetings or briefings48% Regular memorandum, newsletter, or email38% Public display board72% General worker training or orientation60% Review item for design or construction projects12% Other28% Press releases11% Advertising41% Open house32% Focus groups34% Websites or internet messages20% Other

1% Not important8% Somewhat important

22% Important69% Very important2% Not important

11% Somewhat important30% Important58% Very important

General employees role in minimizing wastewater pollutants (n=256) 27

Communication: Environmental Performance Goals to Employees (n=266) (note all that apply)

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Communication: Environmental Performance Goals to External Parties (n=267) (note all that apply)

25

General employee role in identifying and correcting non-compliance (n=260)

Relative rank of environmental goals to overall manufacturing goals (n=261) 23a

26

Self-Rating of General Employee Concern for Environmental Protection (Scale of 1 to 10, 10=very high, n=259)

Self-Rating of Management Concern for Environmental Protection (Scale of 1 to 10, 10=very high, n=261)

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23

Environmental Communications

Employee Participation

Self-Rating of Environmental Employee Concern for Environmental Protection (Scale of 1 to 10, 10=very high, n=260)

21

Type of Self-Audit Finding Classification System (n=235) 19

Self-Audit Program Characteristics

Overall EMS Self-Ratings

Composition of Self-Audit Teams (n=252) 17

Frequency of Self-Audits Conducted in 2001 (n=189) 18

18aFrequency of Self-Audits Conducted in 2000 (n=182)

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A training program was provided to environmental employees for 94% of facilities responding to the survey. The median annual training budget was $10,000 and the median annual days of training provided was 5 days. Approximately 83% of facilities responding to the survey indicated that 100% of environmental employees attended the training provided by the facility. These responses were within the normal range of training resources provided by typical chemical manufacturing facilities according to our experience with individual facilities.

Facilities utilized varying degrees of contract employees and external consultants for wastewater issues. A majority of facilities (82%) did not use contract employees for wastewater operations. A majority of facilities (68%) used external consultants to address wastewater issues. The median annual expenditure for external wastewater consultants by a facility was $10,000.

Wastewater treatment plant upgrades were performed for a majority of the facilities surveyed (68%) in the 1999 to 2001 timeframe. The wastewater treatment plant upgrades performed were reported by 75% of the facilities to reduce the level of pollutant discharges. The wastewater facilities utilized varying degrees of process and upstream sewer monitoring as indicated in Table 2, survey ID no.13c.

ISO 14001 compliance and membership in the American Chemistry Council provided indication of a facility’s involvement in industry-wide environmental initiatives. Approximately 12% of survey respondents were ISO 14001 compliant. Approximately 28% of the survey respondents were members of the American Chemistry Council.

Approximately 96% of facilities conducted some form of environmental self-audit. The survey responses for audit frequency in this study are summarized in Table 2, survey ID no. 18 and 18a. One to three annual environmental self-audits were conducted by 51% of all facilities. Other facilities reported more routine self-audits. Since wastewater compliance is typically assessed monthly via submittal of a monthly discharge monitoring report (DMR) to a state regulatory authority, approximately 20% of facilities performed self-audits at a similar frequency to this compliance reporting activity.

The audit classification protocol used by chemical facilities ranged from simple to priority ranking of risk for vulnerability of non-compliance (Table 2, Survey ID No. 19). The lowest level of findings classification would include placing findings into one of only two categories: "non-compliance" or "other". Approximately 45% of facilities ranked audit findings based on a priority scale.

The degree of environmental concern among environmental employees, general plant employees, and facility management was provided by survey respondents on a 1 to 10 scale (10 being the highest degree of concern). The average self-rating for environmental employees and management was 8.9 and 8.8, respectively. The average self-rating for general plant employees was 7.4. Facilities usually observe that general facility employees have a lower degree of awareness on environmental issues and therefore have a lower degree of relative concern for environmental protection when compared to environmental employees or facility management.

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A self-evaluation of the rank of environmental performance goals relative to overall facility goals for production, quality, and profitability was provided by survey respondents (Table 2, Survey ID No. 23a). Nearly all facilities (96%) ranked environmental goals as “fairly important” or “among the most important” relative to other facility goals.

Facilities used a wide variety of methods to communicate environmental performance goals to employees and external parties (Table 2, Survey ID No. 24 and 25). Methods used to communicate environmental goals to general plant employees included regularly scheduled meetings or briefings, memoranda, newsletters, electronic mail, public display boards, general worker orientation, training sessions, or review items for design or construction projects. Methods used to communicate environmental goals to external parties included press releases, advertising, open houses, community focus groups, and websites or electronic mail.

Facilities responded that the general employee plays a very important role in identifying and correcting conditions that may lead to non-compliance (69%), and minimizing pollutants (58%) as indicated in Table 2, Survey ID No. 26 and 27. Only a small fraction of facilities responded that the general plant employee played an unimportant or somewhat important role in identifying and correcting conditions that may lead to non-compliance (4%) or minimizing pollutants (9%).

Correlation of EMS Factors to Environmental Performance

The association, or correlation, of environmental compliance EMS practices and environmental performance for major facilities in the chemical manufacturing industry was identified in this study. Two levels of correlations were completed using linear regression analyses: (a) correlation of individual audit and EMS practices to individual environmental performance measures, and (b) correlation of multiple audit and EMS practices to environmental performance measures.

The initial screening of potential correlations of single and multiple EMS factors with environmental performance measures was performed for the survey dataset. Six EMS factors were identified to have the highest degree of potential correlation with environmental performance measures: audit team composition, audit frequency, audit finding classification, relative rank of environmental performance goals, general employee role in identifying and correcting non-compliance, and general employee role in minimizing wastewater pollutants.

To provide an increased understanding of EMS factors used in this analysis for major versus minor facilities, Chi-square analysis was completed for major versus minor facility datasets and the following differences were noted.

Audit Team Composition (Factor F1)—Chi-square analysis results (p=0.060) did not indicate a statistically significant difference (α = 0.05) between major and minor facilities regarding audit team composition. However, a potential difference between major and

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minor facilities exists at the α=0.10 level of significance with 65% of major facilities, versus 45% of minor facilities, utilizing teams of facility employees and external staff. Audit Frequency (Factor F2)—Audit Chi-square analysis results (p=0.062) did not indicate a statistically significant difference (α = 0.05) between the number of environmental compliance audits conducted by major and minor facilities in 2001. However, a potential difference between major and minor facilities exists at the α=0.10 level of significance with 55% of major facilities, versus 37% of minor facilities, conducting 1 to 3 self-audits per year. Audit Finding Classification (Factor F3)—Chi-square analysis results (p=0.11) did not indicate a statistically significant difference (α = 0.05) between major and minor facility audit finding classification. Relative Rank of Environmental Performance Goals (Factor F4)—Chi-square analysis results (p=0.003) indicated that there was a statistically significant difference (α = 0.05) between major and minor regarding this EMS factor. Approximately 77% of major facilities, versus 57% of minor facilities, ranked environmental goals as “among the most important.” General Employee Role in Identifying and Correcting Non-compliance (Factor F5) —Chi-square analysis results for factor F5 (p=0.002) indicated that there was a statistically significant difference (α = 0.05) between major and minor facility responses with 81% of major facilities indicating the role of general employees was very important, versus 61% for minor facilities.

General Employee Role in Minimizing Wastewater Pollutants (Factor F6) —Chi-square analysis results for factor F6 (p=0.10) indicated that differences between major and minor facility responses were not statistically significant.

Single Factor Regression Results

A summary of single factor regression results for EMS factors and environmental performance measures is presented in Table 3. Few individual EMS and audit practices were correlated with environmental performance measures at a level of significance less than 0.10. The analysis indicated a weak positive correlation of the rank of environmental goals (factor F4) and NPDES permit violations (PM3 and PM4). A weak negative correlation was identified for employee participation (factor F6) and effluent BOD discharge (measure PM1). The type of audit finding classification (factor F3) was weakly correlated with NPDES permit violations (measure PM4). Single factor regression results indicated that only tentative correlations could be identified for the survey data, necessitating the use of multi-factor regression models.

Multiple Factor Regression Results

Multiple factor regression models identified four primary EMS factors that were found to be correlated with environmental performance measures: (a) audit team composition

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(factor F1), (b) type of audit finding classification system (factor F3), (c) relative rank of environmental goals to other facility goals (factor F4), and (d) audit frequency (factor F2). Table 4 is a summary of two factor and three factor regression results for this study. No statistically significant multiple factor correlations were identified for effluent BOD or TSS performance measures (PM1, PM2). Three factor correlations were identified for performance measures associated with NPDES effluent violations (PM3, PM4). Two factor correlations were observed for EMS factors and the enforcement action performance measure (PM5).

Multiple factor regression models for EMS practices and NPDES effluent violations yielded an improvement in the overall adjusted correlation coefficient over single factor correlations. Correlation coefficients for multiple factor linear regression models were 0.090 to 0.096 versus 0.025 to 0.050 for single factor correlations. Regression coefficients indicate that audit team composition (F1) and type of audit finding classification system (F3) were both negatively correlated with the frequency of effluent violations (PM3, PM4), or improved compliance. The relative rank of environmental goals (F4) was positively correlated with frequency of NPDES effluent violations (PM3, PM4). Among the EMS practices evaluated in this study, audit team diversity and degree of audit finding classification appear to be the most strongly associated with improved environmental performance for the chemical manufacturing industry.

Two factor regression models for EMS factors and enforcement actions generated the highest correlation coefficients among the multi-factor models (r2 = 0.175 to 0.343). Regression coefficients indicate that audit team composition (F1) and audit frequency (F2) were both negatively correlated with enforcement actions (PM5), or improved environmental performance. An alternate two-factor regression model indicated that audit team composition (F1) and type of audit finding classification system (F3) were both negatively correlated with enforcement actions (PM5), or improved environmental performance.

The two regression models (Table 4) that most effectively predicted environmental performance (α=0.05) based on survey responses from this study for major facilities (n=101) were:

PM3 = -0.145*F1 - 0.188*F3 + 0.178* F4 (Eqn. 1)

PM5 = -0.649*F1 - 0.124*F2 (Eqn. 2)

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Table 3. Summary of Statistically Significant (α=0.10) Single Factor Regression Models for the Prediction of Environmental Performance Measures

EMS Practice Performance Measure

Adjusted R2

Standardized Coefficients

Level of Significance

F3. Degree of audit finding classification*

PM4. Average Monthly NPDES Violations 0.025 - 0.191 0.074

F4. Relative rank of Environmental Goals *

PM3. Fraction of Months with NPDES Violations 0.036 + 0.216 0.039

F4. Relative rank of Environmental Goals*

PM4. Average Monthly NPDES Violations 0.050 + 0.246 0.018

F6. Employee participation in minimizing pollutants

PM1. Effluent BOD performance

0.051 - 0.256 0.038

NOTES: *Survey response data re-coded to reflect increasing order of stringency of this EMS factor

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Table 4. Summary of Statistically Significant (α=0.10) Multiple Factor Regression Models for the Prediction of Environmental Performance Measures Performance Measure EMS Factors

Standardized Coefficients

Adjusted R2

Level of Significance

PM3. Fraction of Months with NPDES violations

F1. Audit team composition* -0.145

F3. Type of audit finding classification system* -0.188

F4. Relative rank of facility environmental goals* +0.178

Model 0.096 0.039 PM4. Average Monthly NPDES violations

F1. Audit team composition* -0.182

F3. Type of audit finding classification system* -0.062

F4. Relative rank of facility environmental goals* +0.216

Model 0.090 0.051 PM5. Fraction of Months with Enforcement Actions

F1. Audit team composition* -0.649

F2. Audit frequency in 2001** -0.124

Model 0.343 0.021 PM5. Fraction of Months with Enforcement Actions

F1. Audit team composition* -0.468

F3. Type of audit finding classification system* -0.320

Model 0.175 0.057 NOTES: * Survey response data recoded to reflect increasing degree of stringency for this EMS factor **Audit frequencies were placed in one of four frequency categories

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DISCUSSION

Specific EMS factors should be understood within the context of NPDES-permitted systems and chemical manufacturing facilities across the U.S. prior to identifying the correlation of these factors to environmental performance. In the discussion below, survey responses regarding several specific EMS factors are discussed. The discussion addresses specific aspects of the EMS factors and the nature of the correlation of EMS factors to environmental performance at chemical manufacturing facilities.

Audit Team Composition

Audit team composition, factor F1, was a component in both regression models (Eqn. 1, Eqn. 2). A greater degree of diversity within audit teams was negatively correlated with the number of NPDES violations. Survey results support that a majority (67%) of facilities use either external personnel only or a team of internal and external personnel to conduct self-audits. ASTM specifies that auditors who conducted environmental compliance audits should be independent of the audited entity (ASTM, 2003). Therefore, personnel conducting the audit cannot be closely associated with day-to-day operations of the wastewater treatment facility being audited. Regardless of their organization position with the manufacturing facility, audit personnel must remain neutral and objective when they examine all aspects of environmental management to ensure that the resources, processes, and procedures correspond to the objectives and targets and that the objectives are still applicable and are aimed at continual improvement (Schiffman, 1997). Survey results for this study indicate that 80% chemical manufacturing facilities favor the use of internal personnel on their audit teams. Maintaining competent internal audit personnel within a facility provides quick response, saves travel time and expense, and maintains high level of information specific to the facility. By integrating internal personnel in audit teams, site-specific understanding of treatment systems, and detailed aspects of NPDES compliance programs are not overlooked. Self-audits conducted solely by external personnel are generally understood to be less effective than audits team with internal personnel. However, audit teams utilizing only facility employees are considered to have less independence from the audited operation, and are considered to be less effective than teams comprised of both internal and external personnel.

Audit Frequency

Increased audit frequency (F2) was a factor in the two-factor regression (Eqn. 2) that was negatively correlated with the number of enforcement actions (PM5). Survey respondents identified the frequency of environmental audits conducted at their facilities from 1999 to 2001. Audit frequency for the chemical manufacturing sector depends on the nature of the operations, significant environmental aspects and impacts, results of the monitoring program, past audit results, maturity of the EMS, and the status and importance of the operation (Schiffman, 1997). Regularly scheduled self-inspections of both EMS and underlying compliance program elements contribute not only to stronger overall environmental management but also to more consistent compliance with applicable

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regulations, provided they are undertaken by personnel not otherwise connected with the daily operation of the tasks and procedures of the unit being audited (Wilson, 1998).

It should be noted that a number of factors affect the frequency of self-audits conducted at chemical manufacturing facilities. Most guidelines recommend that environmental self-audits be conducted at least annually and after changes in facility operations or after turnover of key personnel. This study supported the practice that many facilities conduct a single self-audit per year at each facility. If a mature EMS was established and there were relatively few changes in operations and personnel, low audit frequency should be appropriate for the facility. Personnel within facilities within a relatively static manufacturing setting would understand their roles and responsibilities. If there are no changes in personnel there is not a need to continually evaluate their performance.

The survey indicated that 60% of the facilities had undergone a major wastewater treatment facility upgrade, which indicates a major change in operations. The challenge for facilities is to adapt to changes in regulations and manufacturing processes. Higher audit frequency would be expected from facilities where changes are occurring in manufacturing or regulations, and non-compliance issues are self-evident. These facilities would make changes to their EMS to address issues of non-compliance and then need to reevaluate the new procedures to ensure non-compliance events are not repeated. Higher audit frequency for facilities with non-compliance events was also confirmed by participants of the CMA survey (EPA, 1999); 71% of facilities identified, took EMS related actions to prevent recurrence of non-compliance.

While environmental self-audit programs for hazardous waste programs focus heavily on regulatory and documentation review, it should be noted that compliance audits of NPDES-permitted facilities could focus primarily on equipment maintenance and treatment process operations. Approximately 14% of major facilities and 24% of minor facilities responded that they conducted 10 or more audits per year. The definition of self-audit at these facilities was more likely to be associated with routine inspections of treatment facilities conducted by shift supervisors. A limitation of the survey tool used for this study was that the precise definition of “self-audit” by individual survey respondents was not easily distinguished from more routine facility inspections.

Classification of Audit Findings The type of classification system for audit findings was a factor in the three-factor regression model (Eqn. 1). A more stringent degree of priority classification of audit findings was negatively correlated with the number of NPDES violations. This study indicates that type of classification system for audit findings may be very important to improving environmental performance. Classifying findings into categories allows a facility to project requirements and make decisions related to long-term direction and goals. The goal of a ranking system for audit findings is to objectively identify a score for each finding that accurately portrays its relative risks (Sultana, 1998). The objective of environmental compliance audit should be to assure not only that current operations are compliant with all existing regulations, but should also assure that management

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systems exist that will be capable of continuing regulatory compliance into the future (Shah, 1996). More rigorous classification systems for audit findings provide EMS managers with the necessary information to be effective business managers with input on planning and strategic decisions. There are typically costs associated with non-compliance events such as regulatory fines and penalties, emergency equipment repair, and treatment system process changes are generally higher than the cost associated with proactive measures to prevent a non-compliance event. Detailed audit classification systems generate information that permits managers to make plans for proactive measures to minimize the cost of corrective actions for non-compliance events. Relative Rank of Environmental Goals In the three factor regression models identified in this study, the positive correlation of the relative rank of environmental goals (factor F4) with NPDES violations reflects a negative correlation of this EMS practice with environmental performance. It might be expected that a higher relative rank of environmental performance goals compared to other facility goals would be associated with increased environmental performance. However, for major facilities responding to the survey, that the highest environmental performance was associated with facilities ranking environmental goals as “fairly important” rather than “among the most important.” The result regarding the coefficient of factor F4 in Equation 1 may be explained by the survey response distribution for this EMS practice: 77% of major facilities responded that environmental goals were “among the most important” facility goals, while 23% of major facilities responded that environmental goals were “fairly important” relative to other facility goals. No major facilities responded that environmental goals were “of minor importance” or “not important” compared to other facility goals. It is considered acceptable for chemical manufacturing facilities to consider environmental goals as “fairly important” since these facilities must integrate environmental performance objectives with facility goals for productivity, quality, and profitability. It is therefore considered an acceptable EMS practice for facilities to rank environmental goals as either “fairly important” or “among the most important” overall facility goals. General Employee Participation Survey respondents indicated a high degree of involvement of general employees in wastewater compliance. An effective environmental management system requires the commitment and participation of all employees (Shaver, 1999). The concern of the company can be measured by the role of the general plant employee in meeting the requirements of environmental regulations (Brehaut, 1991). Placing an important or very important, 91% of all facilities, role on general plant employees in identifying non-compliance issues shows that companies are concerned with meeting the requirements of environmental regulations. Individuals who produce, ship, or service a product must be able to recognize the environmental aspects of their work (Kirkpatrick, 1996).

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Motivation of personnel begins with their understanding of the tasks they are expected to perform and how these tasks fit into the overall facility's environmental goals. Sponsoring environmental management training and including environmental management responsibilities in job descriptions provides the purpose, direction, and motivation needed to maintain commitment and participation of all employees. SUMMARY AND CONCLUSIONS Typical environmental EMS practices in the U.S. chemical industry, based on this study, include conducting one environmental compliance audit annually, using audit teams comprised of both internal and external personnel, and classifying audit findings into two or more priority categories. In addition, typical chemical manufacturing plants relied heavily on the participation of general plant employees to improve compliance, and ranked environmental goals as among the most important facility goals. In this study, major facilities (greater than 1 million gallons per day discharge) were found to have more stringent practices than minor facilities with respect to general employee participating in identifying non-compliance (p=0.002) and placed higher importance on environmental goals relative to other manufacturing goals (p=0.003). Multiple factor regression models of categorical variables (α=0.10) identified EMS factors that were associated with increased environmental performance with respect to NPDES compliance at major facilities. Categorical EMS factors that were correlated with a lower number of NPDES violations were: diverse audit team composition and priority classification system for audit findings. The relative rank of environmental goals to overall manufacturing goals as “fairly important” or “among the most important” was acceptable for good environmental performance. EMS factors correlated with a lower number of enforcement actions were diverse audit team composition and increased audit frequency. This study is one of the first studies of the U.S. chemical manufacturing industry to identify the correlation of specific EMS factors and environmental performance. The study suggests that the effect of audit team composition and audit finding classification systems are key EMS factors that warrant further detailed study. While this study identified an association of EMS factors with improved environmental performance, it should be understood that a cause-effect relationship was not necessarily identified. Environmental management and environmental performance have been generally associated with complex human behaviors and dynamic wastewater treatment system performance, and should not be oversimplified.

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ACKNOWLEDGEMENTS The author acknowledges the support provided for this project by the STAR Research Assistance Agreement Number R-82882801-0 awarded by the U.S. Environmental Protection Agency. The content of this report does not represent or express the views of the U.S. Environmental Protection Agency. The author also acknowledges the University of Kansas Policy Research Institute for performing the survey used in this project, and the significant contributions of Dietrich Earnhart (University of Kansas, Department of Economics), Donald Haider-Markel (University of Kansas, Department of Political Science), and Robert Glicksman (University of Kansas, School of Law) on this project. REFERENCES 1. American Society for Testing and Materials (ASTM), "Standard Practice for

Environmental Regulatory Compliance Audits" pp. 1-4, (2003). 2. Brehaut, C. H. CIM Bulletin, 1991, 84, 63-66. 3. Kirkpatrick, D.; Pouliot, C. Pollution Engineering, 1996, 28, 62-65. 4. Kohut, A. Survey Experiment Shows Polls Face Growing Resistance, But Still

Representative; The Pew Research Center for the People of the Press, April 2004. 8. Schiffman, R. I.; Delaney, B. T.; Fleming, S. ; Hamilton, E. Chemical Engineering

Progress, 1997, 93, 41-58. 9. Shah, G. C., Hydrocarbon Processing, 1996, 75, 83-86. 10. Shaver, J. A., Textile Chemist and Colorist, 1999, 31, 27-30. 11. Spearot, R. M. Metal Finishing, 1991, 89, 24-26. 13. Sultana, D. G. Chemical Engineering Progress, 1998, 94, 69-74. 14. U.S. Environmental Protection Agency. EPA/CMA Root Cause Analysis Pilot

Project ; U.S. Government Printing Office: Washington, D.C. 1999; EPA-305-R-99-001.

15. Wilson, C. L.; Thomas, W. L. Corporate Environmental Strategy, 1998, 5, 4-17.