Freeport pioneers green audit

By Otto Soemarwoto

JAKARTA (JP): Minister of Environment Sarwono Kusumaatmadja has recently announced the results of PT Freeport Indonesia's environmental audit conducted by Dames & Moore. This was the first time that an environmental audit was made public.

An environmental audit is a new tool in environmental management, making its debut in the early 1990s, but an increasing number of businesses are already implementing it. Generally, an environmental audit is not required by law, but businesses carry it out voluntarily.

What is an environmental audit?

Under government regulation PP No. 29, 1986, large companies which were already operational but had not carried out an Analysis of Environmental Impact were required to carry out an environmental study (SEL) and PEL, a simplified version of SEL.

PP No. 29, 1986 was replaced by PP No. 51, 1993, in which the SEL and PEL were abolished. Environmental audits were introduced in Indonesia by Ministerial Decree No. KEP-42/MENLH/11/94. According to the language of decree, its implementation is also not mandatory for businesses in Indonesia.

Many people consider an environmental audit as being the same as a SEL or PEL. This is incorrect. A SEL attempted to study and evaluate the environmental impacts of a project. An environmental audit, however, goes beyond that.

It also examines whether the management has the commitment to seriously manage the environment, because without such a commitment, no long-term improvement of the environment can be achieved.

The commitment should be reflected in the attitude and behavior of the management, the structure of the company, the number and quality of the environmental personnel and the budget allocated to environmental management.

In other words, an environmental audit also assesses the environmental system of the company and its environmental policy. This is more important than merely assessing the environmental impacts, since it reveals the willingness and capability of the company to achieve long-term results.

With such commitment, the management becomes proactive rather than reactive. This means that it will take preventive measures rather than curative ones. Preventive measures are generally more effective and less expensive than curative ones, but the former require an awareness and long-term vision.

Economic theory calls environmental management in general, and waste management in particular, the internalization of external costs. This means that companies must pay the costs of the negative impacts of wastes, which are being felt by society.

The polluters pay principle should be applied. Hence, this will increase production costs. Because of this, experience has shown that it has not been easy to enforce the regulations which govern pollution abatement.

Particularly in developing countries -- which includes Indonesia -- law enforcement is generally still very weak. Therefore, in addition to the so-called command-and-control approach, in which the government issues regulations and forces companies to comply with them, companies should also be encouraged to regulate themselves.

But companies will only be prepared to regulate themselves if they realize that it is in their own interest to do so. This can be achieved by economic instruments, such as tradable emission, where companies are allowed to work together to reduce emissions at the lowest cost.

Fortunately, companies have also realized that nowadays, in order to survive, they cannot abuse the environment. The World Business Council for Sustainable Development (formerly the Business Council for Sustainable Development) has developed the concept of eco-efficiency. According to this concept, wastes are materials which do not end up in the final product.

By increasing production efficiency, more materials should end up in the final product. In other words, less materials would be wasted. Consequently, less materials would be needed per unit product and at the same time, less wastes would be produced per unit product.

In the broader concept, eco-efficiency also encompasses minimization of energy and toxic wastes. Therefore, a company which diligently applies the eco-efficiency concept would gain more profit and hence, would enhance its competitiveness. The company would also gain the image of being environmental friendly, which is now of great importance.

Better housekeeping, improved production processes, and recycling and reusing of materials are some of the tools in eco- efficiency. Since there are many examples which show that financial gains can indeed be achieved, the eco-efficiency concept has become a strong force for companies to regulate themselves.

The most salient findings of the Dames and Moore environmental audit are that at the beginning, PT Freeport Indonesia was reactive. A large tract of tropical rain forest along the Ajkwa river, covering an area of 30 square kilometers, was damaged by the deposition of tailing.

However, the tailing was found to be non-toxic and the biodiversity of the river does not significantly differ from the other non-affected rivers. In the highlands, Lake Wanagon suffers from acidification caused by the leaching of acid from the overburden of toxic waste in the lake. In addition, the lake contains a high concentration of copper.

The retreat of the glaciers at Puncak Jaya is not related to Freeport activities, but to global warming. In the last few years, Freeport is changing from being reactive to being proactive. A large budget has been allocated for the construction and maintenance of levees to contain the tailings, liming of Lake Wanagon and rehabilitation of the tropical rain forest and revegetation in the highlands.

The Overburden Management Plan is being revised to minimize oxygen diffusion. Experiments on rehabilitation in the lowlands are showing good results and the forests are quickly regrowing. An indication of Freeport's commitment is also that 24 of the 33 recommendations have been implemented. However, Freeport still has a long way to go.

It is important to note that although the audit's report contains serious criticisms, Freeport was willing to make it public. This showed that Freeport has become transparent. Dames and Moore also recommended that an environmental advisory board with independent members and a visiting scientists program be instituted.

The implementation of these recommendations would make Freeport even more transparent. Furthermore, although disagreements between Freeport and its adversaries would still continue, the debate would be changed from being highly emotional -- often without sound scientific data for support -- to one which would be objective, rational and scientific.

All parties should be willing to subject their data to scrutiny to determine its validity. This would result in the maturation of social control and democracy.

The audit also provides Freeport with new inputs for improving the eco-efficiency of its management, that is reducing wastes while at the same time cutting costs by better housekeeping and processes, with more recycling and reusing of materials. The environment would be transformed from a liability to an opportunity.

From the national point of view, the government will also gain benefits. The audit has shown that it is a valuable tool for environmental management. Among other things, it will induce companies to regulate themselves and serve as an input to formulate a post-mine policy, which would be applicable to all mines in Indonesia.

This would prevent mining towns from becoming ghost towns following mine closures, thus ensuring the sustainability of development of the mining areas. Hence, Freeport's environmental audit would become a milestone in the development of environmental management in Indonesia.

The writer is professor emeritus at Padjadjaran University, Bandung.

Window: A company which diligently applies the eco-efficiency concept would gain more profit and hence, would enhance its competitiveness.