Private assurance of environmental regulations

Martin de Bree

RESEARCH PROJECT

Specifications

Client: Ministry of Infrastructure and Environment

Contractor: RSM Erasmus University Rotterdam

Occasion: integration of 40 laws (environment, safety, construction)

Planning: June 2012 – May 2013

Research design: case studies, interviews, recent scientific literature

Research objectives:

• Overview laws, field, players, supervision, compliance

• Theoretical model private compliance assurance (PCA)

• Assessment framework PCA & meta-supervision

PROBLEMS

• Who is responsible for control?

• Risks are not zero

• Priority on compliance or risk control?

• Effectivity of public supervision?

MODEL PRIVATE ASSURANCE

Notion: analogy between check and act in Deming cycle and task public supervion. If these two steps are privately organised, public supervision can shift to meta level.

Gather information & judge

Intervene

Public supervision

MODEL PRIVATE ASSURANCE

Source: Malcolm Sparrow

MODEL PRIVATE ASSURANCE

MODEL PRIVATE ASSURANCE

MODEL PRIVATE ASSURANCE

MODEL PRIVATE ASSURANCE

DEFINITIONS

Private assurance means that private parties (regulated and other

private third parties together)

• monitor actual regualtions,

• take measures to comply,

• check if they comply,

• take corrective measures to end violations (if any) and

• take preventive measures to prevent repetition of the violations,

Aimed at sustainable compliance by the regulated company.

DEFINITIONS

Meta-supervision

Assessement by public supervisors of the effectiveness of

private compliance assurance and – as a part of this –

doing reality checks on actual compliance (samples) to

verify this.

DECISION TREE

Four parts:

1. Regulations needed and who designs them?

2. Is the industry promising regarding private

compliance assurance?

3. Are the public supervisors ready for met-

supervision?

4. How can meta-supervision be carried out?

DECISION TREE PART 1

DECISION TREE PART 2

Indicators• Average company size• Level managementsystems and risk management• Frontrunners• Influence 3rd parties on compliance• Commitment for PCA

DECISION TREE PART 3

Conditions • Societal support• Support from politicians• Support supervisor • Competencies public supervisors • Capacity public supervisors • Transparancy / understanding industry • Sufficient trust in industry • In accordance with law • No limitation of competition

Recommendations• Be clear about objectives, policy and practical approach;• Be clear about roles• Timing, phasing• Use leading companies as examples • Learning by doing• Evaluate

DECISION TREE PART 4

Recommendations• Focus on understanding of system of PCA • No details in assessemnt criteria PCA• Focus on check and act functions PCA• Reality checks• Risk control over compliance• Competencies assessment PCA• Communication about interpretation of risks and regulations• Use reports from certifications for own assessment• Cooperate with other supervisors • Do not just trust information from third parties or certificates without understanding the working of the PCA yourself

Recommendations• Intensity of inspections • Periodical assessement of PCA • Reluctant with sanctions if PCA works • Feedback on system level for maximise learning effect • Strict sanctions if trust is abused• Straight back with interventions • Interventions if PCA fails

CONCLUSIONS

1. Chances for PCA?:

(a) is industry capable and willing?

(b) is public supervising agency ready and willing?

2. Meta supervision: the devils in the details

(a) Balanced assessment of PCA by public supervisors

(b) Adjusted intervention policy

3. PCA is not required to be optimal before meta supervision van be

applied, due to learning effect

4. Other 3rd parties than regulated company can contribute to PCA

RECOMMENDATIONS

1. Use decision tree for every occasion where PCA and

metaregulation / -supervision is considered

2. Incorporate assessment framework in general government policy

3. Further research (stimulation of PCA, effect of sanctions on PCA,

importance of competencies and quality assurance of public

supervisors, use of certificates)

4. Develop a practical manual / guideline for PCA/meta supervision

5. Stimulate PCA (Article in law, licensing, paying for marginal

inspections, through 3rd parties, anticipating on importance of

good reputation)