Freeport pioneers green audit

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.