How Environmental Auditing Promotes Good Governance and the Climate Agenda

Environmental auditing assists governments in finding cost-effective ways to sustain environment-related policies and programs, such as managing plastic waste that ends up in oceans and other bodies of water. Photo credit: Vivi Niemenmaa.

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With innovative environmental auditing, auditors can push governments toward better performance in environmental and climate policies.

Introduction

Pressing environmental problems, such as climate change and biodiversity loss, receive increasing attention globally. Since the problems cross borders and the field is developing rapidly, international collaboration is crucial. This also applies to Supreme Audit Institutions (SAIs) that hold their governments responsible for budget spending in various policy areas, including the environment. They have an important role in holding governments accountable for their actions—and inactions. For example, policy incoherence, such as investing in climate measures while providing subsidies to fossil fuels, is a waste of taxpayers’ money. 

International agreements, such as the Paris Agreement on Climate and United Nations Sustainable Development Goals (SDGs), also form useful frameworks for developing audit approaches. 

The SAI of Kazakhstan (Supreme Audit Chamber) has been eager to learn environmental audit practices from other SAIs. A study by the Asian Development Bank’s Knowledge and Experience Exchange program provided the latest insights into key developments in the environmental audit field. It encouraged SAI Kazakhstan to engage in international collaboration, while identifying nationally relevant topics for environmental audits. 

Specific Elements in Environmental Auditing

International experience suggests that most often environmental auditing refers to performance auditing. Most SAIs have no specific organizational unit for environmental auditing.

As environmental auditing is like auditing any other policy field, there is no need for a specific environmental audit methodology. There are, however, some characteristics related to the environment that should be considered when conducting audits.

Reviewing and learning the complexity of environmental systems. The auditors need to pay attention to the dynamics on interlinked but diverse topics. For example, in audits on climate measures, auditors could consider not just emission reductions but also their impact on biodiversity to avoid a situation where tackling climate change would lead to biodiversity loss. 

Reflecting environmental topics as externalities in economics. What is exact the value of clean and healthy air or a beautiful landscape? It is difficult to put an exact price tag on the environment, which is why environmental topics are often considered as unpriced external factors in economics. However, emissions trading systems have created functioning markets for greenhouse gas emissions. There is also a growing understanding of the economic importance of biodiversity, as well as the fundamental role of bees and pollinators supporting ecosystems and food production. 

Applying a long-time perspective. As the impacts of policy actions may not be seen immediately, SAI auditors could question the timeframe against which a government agency makes its assessments. At the same time, they could self-reflect on the time perspective of their own analyses. 

Seeking collaboration with peers. Some problems, like pollution of a border river, can cause regional environmental complications. Other problems, like climate change, are global problems from the outset. In a similar manner, microplastics have spread around the world, even to the Antarctic. Therefore, auditors could look beyond their country borders and collaborate with their peers from other SAIs. 

The umbrella organization of SAIs, International Organization of Supreme Audit Institutions (INTOSAI), has a large and vibrant Working Group on Environmental Auditing, which develops and supports SAIs and their auditors through guidance and training. The working group has provided a platform for peer exchange in the last 30 years. Its work reflects the evolution of environmental policies. Since 2010, it has increasingly addressed climate change besides the more established topics of waste, water, biodiversity, and natural resources. Furthermore, the SDGs have sparked renewed interest in sustainable development and brought a common framework for analysis. The working group has aligned its work with the SDGs and can be selected as audit topics or used as the source of audit criteria. 

Global Best Practice

For SAI starting its first environmental audit, it is important to choose a topic that is nationally relevant. The SAI can build expertise by training the staff, organizing focus group discussions with experts, or commissioning specific tasks to experts. A professional network, like the INTOSAI working group, is also a useful platform for sharing peer experience.

There are good examples around the world for SAIs to use when building or benchmarking their audit frameworks and processes. SAI USA has developed a “High Risk” List to identify and help resolve weaknesses in areas that involve substantial resources and provide critical services to the public. These also include environmental topics, such as toxic chemicals and fiscal exposure to climate change risks. The European Court of Auditors keeps an eye on topical developments and data sources, as each year auditors conduct and update policy scans covering various policy fields, including environment as well as climate and energy.

SAI New Zealand has innovated by asking citizens’ opinions via a survey on their suggested audit topics. SAI Philippines has taken the citizen approach even further by training citizens to assist in audit work.

Scrutiny based on the three pillars of sustainable development (economic, social, and environmental) can also assist auditors in asking governments whether they have analyzed the socioeconomic and environmental impacts of their policies sufficiently. SAI Canada takes the SDGs as well as gender and diversity into consideration in all performance audits, whereas SAI Finland applies facilitated discussions on sustainable development on a voluntary basis.

SAIs embrace their unique position as auditors and advocates for sustainable practices. Applying best practices internationally, they can develop audit methodology, broaden the coverage, and conduct more impactful audits. With high-quality audits, SAIs can contribute to a cost-effective green transition, and assess whether this transition is just and supports the citizens’ wellbeing and a prosperous economy. SAIs' work in enhancing good governance, transparency, and accountability and combating corruption also contributes to better global environmental governance.

Resources

INTOSAI Working Group on Environmental Auditing. 2022. Enhancing Understanding of the Environmental Sustainable Development Goals (SDGS): Summary of INTOSAI WGEA Work on Plastic Waste, Climate Finance, and Sustainable Transport. Helsinki.

V. Niemenmaa. 2023. WGEA’s New Work Plan Reflects the Pressing Problems of Our Time. INTOSAI WGEA.

V. Niemenmaa, K. Leach and S. Aroalho. 2022. Tools for Analyzing Policy Coherence. National Audit Office of Finland. 28 October.

V. Niemenmaa, M. Kaljonen and P. Kivimaa. Just Transition is Embodied in the “Leave No One Behind” Principle. National Audit Office of Finland.

Vivi Niemenmaa
Secretary General, National Audit Office of Finland

Vivi Niemenmaa heads the Secretariat of the International Organization of Supreme Audit Institutions (INTOSAI) Working Group on Environmental Auditing at the National Audit Office of Finland. She is an expert in sustainable development and environmental governance. She has extensive experience in auditing environmental and climate policies, and is an acknowledged trainer. She holds a PhD in Planning Geography and an Executive Master’s in International Relations.

Arystan Galiyev
Project Officer, Kazakhstan Resident Mission, Asian Development Bank

Arystan Galiyev oversees works with the Kazakhstan government and developing partners in education, agriculture, tourism, and environmental, social, and governance. He has more than 15 years of project management experience in various industries and national companies, including in foreign direct investment attraction.

Asian Development Bank (ADB)

The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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