Managerial Auditing Journal

Auditing of environmental management systems: alegitimacy theory perspective

Dennis W. Taylor Maliah Sulaiman Michael Sheahan

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Dennis W. Taylor Maliah Sulaiman Michael Sheahan, (2001),"Auditing of environmental management systems: alegitimacy
theory perspective", Managerial Auditing Journal, Vol. 16 Iss 7 pp. 411 - 422
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Auditing of environmental management systems:

a legitimacy theory perspective

Dennis W. Taylor
Curtin University of Technology, Perth, Western Australia
Maliah Sulaiman
International Islamic University of Malaysia, Gombak, Selangor, Malaysia
Michael Sheahan
La Salle Investment Management, London, UK

Keywords

Environmental audit,
Environmental management
strategy, Theory,
International standards,
Stakeholders

Abstract

Provides findings from a survey of

environmental management
systems (EMS) auditors at ISO
14001-certified sites of Australian
enterprises. Taking a legitimacy
theory perspective, this study
investigates the way in which
enterprises with certified sites are
meeting their implied social
contract with stakeholders (also
termed ``relevant publics'') on
environmental conduct.
Investigates whether EMSs, and
related environmental audit
functions, are being treated as
quality assurance tools for the
betterment of environmental
performance, or as impositions to
be complied with so as to maintain
the credential of ISO 14001
certification per se. Seeks to
throw light on this legitimacy
theory issue by providing evidence
about management's motivation
behind, and strength of support
for, the EMS auditing function at
ISO 14001-certified sites. Obtains
evidence about the objectives for
the EMS auditing function, the
resources committed to it and the
perceived benefits arising from
meeting the requirements for
certification. Results point
consistently to the conclusion
that management have
emphasised having enough
compliance to maintain their
site's ISO 14001 certification
credential.

Managerial Auditing Journal

16/7 [2001] 411422
# MCB University Press
[ISSN 0268-6902]

Introduction
There is a worldwide debate on the issue of
environmental management, stemming from
a flow of evidence about ecological
degradation caused by economic
development. The antagonists point to
inadequate legislation and poor corporate
management practices. The International
Organisation for Standards (ISO), a
worldwide body promoting cooperation in
intellectual, technological and economic
activity, responded to this concern by
establishing a technical committee that
produced the ISO 14000 series of standards.
The underlying objective of the ISO in
developing its 14000 series has been to
create a framework for systematic,
standardised environmental management
practices that can encourage a trend
towards continuous improvement in
environmental performance by enterprises.
Public recognition is accorded by the ISO
through a certification scheme for those
enterprises adopting its ISO 14001 standard.
While the 14000 series covers various aspects
of environmental management (e.g. ecolabeling, life cycle assessments) only
ISO 14001 features a certification
(registration) process. This first standard,
the ISO 14001 on establishing, operating and
auditing environmental management
systems (EMSs) released with the ISO 14000
series in September 1996 is the focus of our
study.
Certification of enterprises by the ISO
opens the opportunity for managements to
adopt ISO 14000 standards as much for public
recognition purposes, as for an internal
management tool to be used to improve
environmental performance. The ISO
recognises that indirect market forces are
likely to induce enterprises to obtain
The current issue and full text archive of this journal is available at
http://www.emerald-library.com/ft

certification. These market forces

encapsulate societal norms that set the
boundaries for an enterprise's behaviour,
especially in relation to its impacts on
stakeholders. Under legitimacy theory, an
implicit agreement exists between society
and organisations whereby the latter are
permitted to continue certain types of
operations as long as they are seen to satisfy
specific societal needs (Deegan and Gordon,
1996). From an enterprise's viewpoint, the
incentive for seeking ISO 14001 certification,
a highly visible credential, might be
explained, to some extent, by legitimacy
theory.
Our study provides findings from a survey
of internal auditors of environmental
management systems (EMSs) at ISO 14001
certified sites. Consequently, our
investigation is limited in context to internal
auditing activities within certified
enterprises. While the focus of subjects used
in this study has been directed to the
environmental auditing function at the
site level, wider perspectives by these
subjects of the organisation's internal
auditing function can not been
quarantined. This is because the term
``environmental auditing'' embraces key
characteristics of internal auditing in its
definition. As defined by the International
Chamber of Commerce, environmental
auditing is:
A systematic, documented, periodic and
objective evaluation of how well
environmental organisation, management
and equipment are performing with the aim
of helping safeguard the environment by
(i) facilitating mangement control of
environmental practices and (ii) assessing
compliance with company policies, which
would include meeting regulatory
requirements (cited in Gilbert and Gould,
1998, p. 16).

``EMS auditing'' is a concept that is

underpinned by such a definition of
environmental auditing, but is tied
specifically to ISO 14001's procedures and

[ 411 ]

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective
Managerial Auditing Journal
16/7 [2001] 411422

standards for auditing. These procedures and

standards have evolved from those for
quality management systems auditing
according to Gilbert and Gould (1998). EMS
auditing, they argue, represents an extension
of a cyclic, systems-based management
system approach of the ISO 9000 series. This
systems approach is made clear in ISO 14011's
definition of an EMS audit as:

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A systematic process of objectively obtaining

and evaluating evidence to determine the
reliability of an assertion with regard to
environmental aspects of activities, events
and conditions as to how they measure
established criteria, and the communicating
such results to the client (cited in Gilbert and
Gould, 1998, p. 258).

In order to assess EMS auditing practices

from a legitimacy theory perspective, we
obtain evidence about the espoused
objectives of EMS audits, the financial and
human resources committed to such audits,
and the perceived benefits arising from
ISO 14001 certification.
Our research is significant for two reasons.
First, there is a dearth of empirical evidence
about the impact of the ISO 14000 standards
on the quality of environmental management
and auditing in Australia. Studies by
Campbell (1995) and Maltby (1995) identified
the principles, practices and participants in
the field of environmental auditing prior to
the final release of ISO 14001. Empirical
evidence is needed to gauge management's
motivation behind, and strength of support
given for, the EMS auditing function in
certified enterprises. Secondly, accounting
studies adopting a legitimacy theory
perspective have largely focused on
corporate social and environmental
disclosure (e.g. Guthrie and Parker, 1989;
Patten, 1992; Deegan and Gordon, 1996;
Brown and Deegan, 1998). Our focus on
ISO 14001 certified entities can provide a
new angle on the application of legitimacy
theory that of management seeking to
convey a favourable perception of
environmental performance through site
credentialism as distinct from corporate
disclosures.
This paper proceeds to elaborate on the
pressures for corporate environmental
management and auditing in Australia, the
development of the ISO 14000 series of
standards, and the legitimacy theory
perspective of corporate environmental
responsibility. It then develops the research
questions, explains the research method
and presents and discusses our survey
results.

[ 412 ]

Environmental management and

auditing in Australia, ISO 14000 and
the EMS audit
Environmental management and auditing
in Australia

In Australia, peak employer organisations

and professional bodies (including the
Australian Institute of Company Directors,
the Australian Institute of Management, the
Business Council of Australia, the Australian
Manufacturing Council, the Australian
Institute of Engineers and the Australian
Chamber of Manufacturers) have each
produced guides on corporate environmental
disclosure, performance measures and other
environmental information. In late 1996, the
Mineral Council of Australia released a code
entitled The Australian Minerals Industry
Code for Environmental Management. The
code requires that signatories report on an
annual basis about their environmental
performance by way of a stand-alone report.
In the mining industry, stand-alone
environmental reports have now been
published by WMC Resources Ltd, Pacific
Power, Mount Isa Mines and Orica Ltd.
The accounting profession in Australia has
also recognised the need for closer control
over environmental matters. In 1995, the
Institute of Chartered Accountants in
Australia (ICAA, 1998) created an
Environmental Accounting Task Force
(EATF). Subsequently, the EATF issued a
discussion paper to promote debate about
environmental performance evaluation
issues, reporting and auditing requirements,
and the accountant's role in environmental
matters. For example, the EATF proposed
that a separate conceptual framework be
developed to address environmental
performance reporting and auditing issues
not covered in the present Statements of
Accounting Concepts. Four stages were
proposed:
.
Stage 1. Exploring stakeholder
information needs/the role of accounting
in providing environmental performance
information.
.
Stage 2. Identifying techniques to be used
by an organisation to measure
environmental performance (including
design and implementation of systems and
controls).
.
Stage 3. Establishing formats/guidance
for public environmental performance
reporting.
.
Stage 4. Establishing guidelines in
relation to the audit of environmental
performance information.

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Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

The EATF emphasises the need to audit

environmental performance. In doing so, it
supports the fact that the ISO has made EMS
auditing a prerequisite for ISO 14001
certification.

Managerial Auditing Journal

16/7 [2001] 411422

Development of, and certification under,

the ISO 14001 standard

To promote a common approach to

environmental management, the ISO
established a Strategic Advisory Group on
the Environment (SAGE) in June of 1991. The
catalyst behind the promulgation of the
ISO 14000 Standards was the Global
Environmental Initiative in Rio de Janeiro in
1992. In December 1992, SAGE recommended
that standards be developed to manage
environmental issues. The ISO, in response
to the recommendations of SAGE,
established a technical committee that
produced the ISO 14000 series of standards
(International Institute for Sustainable
Development, 1996). The standards cover five
specific areas: EMS, environmental auditing,
environmental labeling, life cycle assessment
and environmental performance evaluation.
The standards provide organisations with a
framework within which they can establish
environmental management policies,
identify their environmental goals and
obligations, implement procedures and
evaluate progress towards meeting those
goals. Voluntary compliance is the central
principle of the ISO 14000 standards,
although ISO 14001 features a certification
process. While it may be voluntary, ISO 14001
certification may become an indicator of a
company's commitment to environmental
responsibility in future (Tucker and Kasper,
1998).
To achieve ISO 14001 certification, an
enterprise has to give its assurance that its
environmental management system (usually
at site level) conforms to the principles listed
in the standard. This conformity is usually
verified by an accredited independent
organisation such as a large accounting or
management-consulting firm. Although
ISO 14001 essentially limits itself to
reiterating certain traditional management
principles (policy, planning, implementation
and operation, checking and corrective
action, management review and continual
improvement) it is considered the reference
standard in the area of environmental
management (Boiral and Sala, 1998). The
monitoring of the EMS through the
establishment of an environmental auditing
process is embodied in the management
principles under the standard.
To ease the implementation burden and
improve the possibility of acceptance of

ISO 14001, the ISO provides flexible

guidelines on maintaining an EMS that will
assist compliance with local environmental
laws. In particular, the ISO prescribes
minimum performance criteria which have
been initiated to ensure that an entity's
activities can meet the legislative
requirements of its jurisdiction without
difficulty.
An entity may choose to implement an
ISO 14001 program but not seek certification.
However, ISO 14000 certification brings with
it several advantages. These benefits,
according to the International Institute of
Sustainable Development (1996), include
improved public image, increased investor
confidence, improved access to capital,
conservation of materials, ability to express
due diligence, reduced waste, improved
process efficiencies, improved organisational
culture and improved environmental
performance. One objective of our study is to
investigate which type of benefit a public
legitimacy or an environmental
improvement oriented benefit is more
important to certified entities.

The EMS audit and the internal audit

function

The internal audit function is recognised as

integral to the process of effective
management of business strategies and
activities, and particularly for managing
sustainable development strategies
(International Institute for Sustainable
Development, 1996). The Institute of Internal
Auditors (1999) defines internal auditing as
an independent appraisal activity established
within an organisation as a service to the
corporation. It is a control that functions by
examining and evaluating the adequacy and
effectiveness of other controls. An important
element of this definition is that it is not
limited to financial audits.
Prior to ISO 14001, when the emphasis was
on compliance with emission level
regulations in local jurisdictions,
environmental audits were performed
mainly by technically-qualified engineers
and scientists. Vinten (1991) first advocated
that environmental audits be re-focused
towards producing a management system
that could provide information on
environmental performance against predetermined targets. His idea led to a
comprehensive report by the Institute of
Internal Auditors on the role of internal
auditors in environmental issues (Institute of
Internal Auditors, 1993). At the same time, a
consortium of professional accounting bodies
determined that internal auditors should be
expected to have expertise to deal with the

[ 413 ]

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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Managerial Auditing Journal

16/7 [2001] 411422

interrelated components of internal control

systems: the control environment, risk
assessment, control activities, information
and communication and monitoring (COSO,
1992). With the release of ISO 14001 in 1996,
a shift in the strategy for managing
environmental risk to a systems-based
approach became firmly institutionalized. As
a result, the expertise of accounting-qualified
internal auditors has become considerably
more relevant to the conduct of
environmental audits. These skills are
integral to an EMS audit, which at the very
least, serves to verify that the structure of the
environmental management system is in
place and is operating effectively (Tucker and
Kasper, 1998).
Findings prior to ISO 14001, show that the
internal audit department has had limited
involvement in environmental audits. Akers
and Klos (1995) found that only 17 percent of
the companies that they surveyed had their
environmental audits undertaken by the
internal audit department. The majority
(79 percent), engaged staff from ``other''
departments to conduct environmental
audits. Only 4 percent said they used a
combination of staff from the internal audit
and ``other'' departments. The emphasis on
engineering and scientific expertise was
evident in a 1993 PriceWaterhouse survey. In
that survey, 90 percent of respondents
indicated that the objective of their
environmental audits was to detect ecological
violations before government inspectors
detected them. Only 65 percent of
respondents said that environmental audits
included an assessment of their
organisation's EMS (Tucker and Kasper,
1998).

Legitimacy theory and

environmental auditing
Nasi et al. (1997) contend that legitimacy
theory provides a sound theory for
interpreting how and why corporations deal
with issues concerning the environment.
Gray et al. (1995) implicitly support this
contention in arguing that theories which
attempt to explain corporate social and
environmental responsibility within a
systems-oriented view tend to provide more
promising descriptive power. Within a
systems-based perspective, it is assumed that
the organisation is influenced by and, in
turn, influences the society in which it
operates. Thus, in the context of
environmental management and auditing,
the use of legitimacy theory allows us to

[ 414 ]

focus on the relationship between

organisations and society.
Within such a context of both pursuing
economic goals and fulfilling social and
environmental responsibilities, an
enterprise has a broad constituency.
Recognising this fact is part of an
enterprise's survival (Gray et al., 1995).
Legitimacy theory arises from the presence
of an implied social contract between an
enterprise and its broad constituency in
society. It is constituted by the expectations
that are held by the community about the
conduct of an enterprise. Donaldson and
Dunfee (1994) posited three principles of
``micro social contracts'' as the foundation of
interaction between organisations and
society. First, local communities may specify
ethical norms for their members through
micro social contracts. Second, norms
specifying micro social contracts are
grounded in informed consent, buttressed by
a right of exit. Finally, to be obligatory, a
micro social contract must be compatible
with hypernorms or widely acknowledged
rights.
Under legitimacy theory, the aim of an
enterprise is to legitimise its behaviour by
managing the perceptions of its
constituencies (or stakeholders). Strategies
which an enterprise can adopt for its
legitimisation are:
1 seek to educate and inform its relevant
publics about actual changes in the
enterprise's performance and activities;
and
2 seek to change the perceptions of the
relevant publics without having to change
its behaviour (Lindblom, 1994).
We argue that ISO 14001 certification can
provide the means by which either of the
above strategies could be pursued. To
identify which of these two strategies is
emphasised by ISO 14001 certified entities,
evidence is required about the extent to
which EMSs and their audit (as established
under ISO 14001 principles) have been
operated as management tools to improve
environmental performance or merely as
credentials for public recognition
purposes[1]. In the latter situation, while a
corporation may obtain certification, it does
not follow that its environmental
performance improves. For management to
know, or care, about whether its EMS is
meeting its performance objectives, an
effective internal environmental auditing
function is essential. Evidence of a deficient
environmental auditing function would be an
indication that management emphasis is
placed on the credentialism strategy rather

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Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

than the performance strategy for its

legitimisation.

Managerial Auditing Journal

16/7 [2001] 411422

In this study, our first research question

centres on the objectives behind EMS audits.
While the main objective of environmental
audits, prior to the ISO 14001 standard, was to
detect violations of environmental laws and
regulations (i.e. a compliance-based audit
function), the present emphasis is on the
auditing of systems. Such systems-oriented
environmental audits should serve to shift
the focus of management towards continuous
improvement of environmental performance.
The first research question is stated as
follows:
RQ1. Is it the objective of management, in
establishing an internal environmental
audit function under ISO 14001
certification, to ensure a commitment
to the use of an EMS as an effective
system for the pursuit of continuous
improvement in environmental
performance? Alternatively, is it the
objective of management to keep an
EMS in place for legitimacy reasons,
essentially as an end in itself?

Generation of research questions

In relation to the engagement of

environmental audit staff, the norm in a
micro social contract with an ISO 14001certified site would be that the organisation
would only engage audit staff whose levels of
education and experience are commesurate
with competencies expected under the
ISO 14001 standard. In addition, it might be
expected under a social contract that senior
executive support will be provided within an
audit committee framework. An effective
EMS requires not only the support of
qualified and skilled auditors, but also the
commitment of top level management
(Tucker and Kasper, 1998).
The second research question, relating to
support for and resourcing of EMS audits, is
stated as follows:
RQ2. Does management in ISO 14001certified entities commit sufficient
resources to EMS audits, as might be
expected by their stakeholders, in
terms of:
1 the establishment of a generic audit
committee for the entity and, if so,
the seniority and expertise of
committee members;
2 the budget allocated to EMS audit
working hours;
3 the engagement of qualified and
experienced EMS audit team
members at the site level; and

4 the provision of training to EMS

audit team members?
A supplementary issue that arises from RQ2
is the extent to which financial auditing
expertise versus environmental engineering
expertise is deemed adequate to perform
EMS audits. The Institute of Chartered
Accountants in Australia's EATF
emphasised that EMSs are part of an entity's
management control systems, specifically
designed to monitor environmental matters.
Since the primary focus is systems and
control, practising accountants are,
therefore, well qualified to advise on such
matters. Given that internal auditors (with
an accounting background) are trained to
identify risks and evaluate management
systems and internal controls, it would
follow that internal auditors have a major
role to play in the audit of EMSs. While the
accountancy profession may draw such a
conclusion, it is an entity's management that
decides the composition of the EMS audit
team. Evidence of the extent of internal
auditing expertise in the EMS audit team's
profile is included in our study.
A third research question generated in our
study relates to the motivation behind
Australian enterprises seeking ISO 14001
certification. Consistent with the theme of
our study, we ask subjects about perceived
benefits of their organisation having
certification. Our purpose is to identify the
extent to which benefits of self-interest to the
organisation (e.g. gain an increase in
competitiveness; improve the organisation's
image) are more or less important than
benefits to stakeholders (e.g. comply with
customer requirements; improve
environmental performance). The third
research question is stated as follows:
RQ3. How do perceived benefits of having
ISO 14001 certification rank in terms of
serving the organisation's selfinterests compared to the stakeholders
interests?

Method
Research instrument and sampling

The questionnaire developed for this study

adapts some of its elements from instruments
used in two prior studies: Campbell's (1995)
study on the role of the internal auditor in
environmental auditing, and Maltby's (1995)
study of the difference between accounting
and science/engineering sub-cultures in
environmental audits. Specifically, our
questions relating to the objectives of the
environmental audit function are taken from
Campbell's (1995) study, while our questions

[ 415 ]

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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Managerial Auditing Journal

16/7 [2001] 411422

relating to audit fieldwork procedures used

in environmental audits are taken from
Maltby's (1995) study.
The sample for our postal questionnaire
distribution was drawn from the Joint
Accreditation System of Australia and New
Zealand's (JAS-ANZ) register of ISO 14001certified entities. JAS-ANZ is an association
of the Australian and New Zealand Standards
Association. As at November 1998, the JASANZ ISO 14001 register had 156 Australian
certifications. This is not a reflection of the
number of enterprises obtaining certification
because the ISO only certifies specific sites.
Some enterprises have certification for more
than one of their plants, mines or other sites.
Where an enterprise recorded multiple
certified sites, only one site was selected for
sampling in order to avoid the possibility of
duplication of responses from any one
enterprise where a common set of
management motivations and policies might
apply to multiple certified sites. This
approach reduced the sample population to
84 subjects. The JAS-ANZ register contained
the name of the nominated contact person at
each certified site, and we mailed our
questionnaire directly to that contact person.

Profile of respondents

Table I provides a profile of the 42

respondents, representing a 50 percent
response rate. The demographics of the
respondents appear to be representative of
the demographics of the population in the
JAS-ANZ register. A total of 76 percent of
responses were from sites in environmentsensitive industries such as manufacturing

Table I
Profile of respondents
Type of position held at ISO certified site
Internal audit manager/officer
Quality control/Assurance manager/Officer
Environmental manager/Officer
Missing
Total
Sector of organisation
Private sector
Public sector
Total
Industry of organisation
Manufacturing and construction
Mining, oil & gas, chemical processing
Services
Utilities
Total
[ 416 ]

Frequency

Valid percentage

14
12
14
2

35.0
30.0
35.0

42

100.0

27
15

64.3
35.7

42

100.0

16
9
10
7

38.1
21.4
23.8
16.7

42

100.0

and construction, mining, oil and gas,

utilities and chemical processing. All of the
ten (24 percent) respondents from services
industries were also from public sector
organisations. In terms of the position title
held by respondents, there was a fairly even
spread between ``internal audit'', ``quality
control/assurance'' and ``environmental''
managers/officers.

Results and discussions

Objectives of EMS audits (RQ1)

To address RQ1, we presented Campbell's

(1995) five objectives of an internal
environmental audit function to respondents.
Table II presents the result that ``attesting a
site's EMS has been properly maintained'' is
rated the highest in importance of the
objectives, followed by ``determining
conformance of a site's EMS to internal audit
criteria''. Such a result infers that the
emphasis of site management is on keeping
the EMS in place, for certification purposes,
as an end in itself. On the other hand, the
importance of the environmental audit
objective of ``identifying areas for potential
improvement in environmental results
achieved through the site's EMS'' is the
lowest rated. This result indicates a
relatively weaker commitment of site
management to ensuring that the EMS is
achieving continuous improvement in
environmental performance.
To provide a clearer way of interpreting
the results in Table II, a data reduction
procedure was conducted by factor analysing
the data for the five importance scales.
Table III shows that two distinct factors
emerge from this factor analysis. The three
environmental audit objectives loading onto
factor one suggest a concept of ``systems
conformance and due process''. In contrast,
the two environmental audit objectives
loading onto factor two suggest a concept of
``environmental performance effectiveness''.
From a legitigacy theory perspective, the
results in Tables II and III can be interpreted
as supporting the notion that the foremost
purpose of the environmental audit function
is to be a tool for the maintenance of the EMS
certification credential. That is, it serves to
maintain a public perception of good
environmental management, without
necessarily serving to change environmental
performance.
An alternative interpretation of Tables II
and III is that the results appear to be
consistent with environmental audits that
were conducted pre-ISO 14001. As previously
mentioned, in the past, environmental audits

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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Managerial Auditing Journal

16/7 [2001] 411422

Table II
Objectives of the internal environmental audit function
Importance (1-6 scale)
Mean
Min
Max
To attest that a site's EMS has been properly maintained

4.72

To determine conformance of a site's environmental management system (EMS)

to internal audit criteria

4.21

To assess the soundness of site management's process of monitoring the EMS

3.97

To ensure the continuing effectiveness of the EMS in improving environmental

performance

3.18

To identify areas for potential improvement in environmental results achieved

through the site's EMS

3.15

Table III
Varimax rotated factor matrix for the objectives of the internal
environmental audit function
Factor 1

Factor 2

Conformance of EMS to internal audit criteria

Attest that EMS has been properly maintained
Assess management's process of monitoring the EMS
Identify areas for potential environmental improvement
Ensure EMS effectiveness in achieving environmental
performance

0.79623
0.64830
0.90766
0.12841
0.02023

0.21228
0.33573
0.13231
0.85014
0.88533

Eigenvalue
Percentage of variance
Cumulative percentage variance

2.0694
41.4
41.4

1.5074
30.1
71.5

were undertaken primarily to ensure

compliance with local environmental
regulations. Campbell and Byington's (1995),
for example, found that organisations were
inclined to undertake environmental audits
using a inspection approach in order to
verify compliance by their organisation with
the technical requirements of environmental
protection regulations. It is possible that,
while the approach to environmental
systems management would have changed in
the post-ISO 14001 period, the approach to
environmental auditing may have been
substantially retained from the pre-ISO 14001
period.

Resources committed to the EMS audit

(RQ2)

To address RQ2, relating to the issue of

whether ISO 14001-certified entities commit
sufficient resources and senior management
attention to EMS audits, several pieces of
evidence can be provided. This evidence
relates to audit committees, budgets,
qualifications, experience and training of the
EMS audit team.
Audit committees. Top management
inspection is necessary to give the EMS
credibility and to reinforce its diligent
operations (Lally, 1998). The composition and
activities of the enterprise's audit committee

can provide some indication of the extent of

top management participation in, or
commitment to, the environmental auditing
function. The absence of an audit committee
would, to some extent, infer a lack of senior
management commitment. This inference is
based on the assumption that generic audit
committees give attention to environmental
auditing amongst their several areas of
interest revolving around corporate
governance. This may not always be the case.
As shown in Table IV, only 51 percent of
those who responded said their organisation
had an audit committee. While there is
limited support for audit committees,
organisations with these committees have a
consistently high representation of both top
management and the organisation's internal
audit manager. Further, as revealed in
Table IV, the average size of audit
committees is 5.19 members, and an internal
audit manager is respresented in every case.
In 40 percent of cases the internal audit
manager comprises 25 percent or more of the
membership of the commitee. This should
give some assurance that, in organisations
that have an audit committee, the committee
has the numbers, and internal audit
specialist, to devote some of its attention to
the environmental audit function.
The budget for the EMS audit function.
Table IV also reports the amount budgeted
for environmental auditing work as a
percentage of the total internal audit
function at the site level. It reveals that
71.1 percent of sites devote less than 50
percent of their internal audit budget to EMS
audit hours. Of these, 28.9 percent devote
25 percent or less to EMS audit hours. The
impression from the budget results in
Table IV is that there is not much internal
audit budget set aside for direct hours of EMS
audit work at a high proportion of ISO-14001certified organisations. While some of the
sampled sites will, by nature, face lower
environmental risk than others, all sites on

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Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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the JAS-ANZ ISO 14001 register are believed

to have material EMS audit needs.
Qualifications, experience and training. The
qualifications, experience and training of
those appointed to the internal auditor team
at the ISO 14000-certified sites are given in
Table V. The results in Table V concerning
qualifications should be interpreted against
ISO 14012 ``Guidelines for environmental
auditing-qualification criteria for
environmental auditors''. Although the
ISO 14012 guidelines are not mandatory, it
could be expected from a stakeholder's
perspective, that a certified organisation
would require its EMS audit team members
to meet such qualification and experience
criteria. ISO 14012 expects internal
environmental auditors to have at least a
secondary education with five years of
experience or a degree and four years of
experience. For non-degree holders, the
experience requirement may be reduced by
up to one year; for degree holders it may be

Table IV
Support for the internal auditing (including environmental audit) function
Audit committee (at central level)
Existence of an audit committee:
Yes
No
Missing
Total
Types of audit committee members
(for the 21 existing committees in the sample):
CEO
Other top executives/
directors
Internal audit manager
Other
Total
(Mean size of audit committee = 5.19 members)
Internal audit manager as a percentage of the size
of audit committee membership:
Nil
Less than 25
25 > 50
50 or more
Total
EMS audit budget (at the ISO 14000-certified
site level)
Estimated percentage of the total internal audit
budget used for environmental audit work hours:
25 or less
25 > 50
50 or more
Missing
Total
[ 418 ]

Frequency

Valid (%)

21
20
1
42

51.2
48.8

100.0

10
47

9.2
43.2

20
32
109

18.3
29.4
100.1

0
12
5
3
20

0.0
60.0
25.0
15.0
100.0

reduced by up to two years. This reduction is

permitted if an incumbent undertakes
recognised studies in five strategic areas:
environmental science and technology,
technical and environmental aspects of
facility operations, environmental laws and
regulations, environmental management
systems and standards or audit procedures,
processes and techniques. In addition, under
ISO 14012, EMS auditors are expected to
complete on-the-job training totalling 20
working days (or four audits) on
environmental audits, prior to recognition as
an environmental auditor. For promotion to
lead-auditor, there must be an additional 15
working days (on not less than three audits).
If EMS audit team members are well underqualified or under-experienced in terms of
the ISO14012 criteria, then an organisation
could not ostensibly demonstrate an
intention to maintain an effective EMS or to
be able to effectively monitor environmental
performance improvements. As shown in
Table V, almost half (19 organisations or
47.5 percent) indicated that the leader of their
EMS audit team did not have a higher
education. Looking at the other members of
the audit team, we find the percentage of
auditors without a tertiary education to be
much higher. There were 28 organisations
(70 percent) for which the highest
qualification of the audit team members
(other than the leader) was a secondary
education[2].
Turning to environmental audit
experience, Table V shows that the leader of
the audit team averaged only 1.85 years in
internal environmental audit services, while
the other members in the audit team
averaged 1.33 years. These results do not
compare favourably with the
recommendations for length of experience
outlined in the ISO 14012 standard.
Finally, Table V gives evidence of training
undertaken by members of the EMS audit
team. Of particular note is the extent of
formal on-the-job training after their
appointment to an EMS team. The results fall
well short of the 20 working days of on-the-job
training recommended in ISO 14012. There
was 22.5 percent of respondents reporting
they had no training, and 92.5 percent
reporting they had ten days or less of
training.

The discipline of EMS audit team members

11
16
11
4
42

28.9
42.2
28.9

100.0

As raised earlier, a supplementary issue is

the extent to which financial auditing
knowledge versus environmental
engineering knowledge is deemed adequate
to perform EMS audits. The intention of
ISO 14001 is that EMSs are to be part of an

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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Managerial Auditing Journal

16/7 [2001] 411422

entity's planning and control system's

devices, specifically designed to monitor
environmental matters. With a focus on
systems design and monitoring, accountingqualified internal auditors can play a major
role.
Table VI reveals that 34 percent (52) were
said to be accountants, 56 percent (85) were
said to be engineers, scientists and health
and safety inspectors and the balance of 10
percent (14) were in the ``other'' category,
representing systems analysts, economists
and administrators. It should be noted that

Table V
Qualifications, experience and training of those appointed to an internal
auditing team at an ISO 14000 certified site
Educational level

Frequency

Valid (%)

Education level of the leader of the site's audit team:

No higher education
19
Diploma
1
Bachelor degree
17
Master or PhD degree
3
Missing
2
Total
42
Education level of all others in the audit team:
No higher education
77
Diploma
4
Bachelor degree
22
Master or PhD degree
0
Missing
6
Total
109
Relevant experience

Mean

Number of years of accumulated audit experience:

Internal audit services experience of
(a) the leader of the team
2.46
(b) other team members on average
1.74
Internal environmental audit services experience of
(a) the leader of the team
1.85
(b) other team members on average
1.33

Environmental audit training

Frequency

47.5
2.5
42.5
7.5
100.0
74.7
3.9
21.4
0.0

respondents were asked about EMS audit

team members' ``disciplines'', not their
formal qualifications. It would seem that our
results did not support Tucker and Kasper's
(1998) contention that, since EMS auditors
will be auditing a system, the audit team
would tend to include fewer scientists and
engineers and more (accounting-oriented)
internal auditors. They were of the opinion
that internal auditors were better trained to
identify risks, evaluate management systems
and internal controls and value the
company's environmental costs and
obligations.
Findings are also given in Table VI about
the frequency of use of internal audit
procedures at ISO 14001-certified sites. While
this list covers internal auditing procedures
generally, rather than procedures unique
to environmental auditing, it does add
evidence of relevance to an element of the
debate about the use of accountants versus
engineers/scientists in carrying out EMS
audits. It shows that amongst the most
frequently used audit fieldwork procedures
used at ISO 14001-certified sites are
traditional (accounting-based) auditing
procedures viz., systems' documentation,
processes observations and record-keeping
accuracy tests.

Perceived benefits of having ISO 14001certification (RQ3)

100.0
Min

Max

Std Dev

1
1

4
4

1.05
0.82

1
1

4
2

0.93
0.48
Valid (%)

Number of training programmes (in audit procedures/practices or environmental law or

engineering/science) completed prior to being appointed as a member of an ISO 14001certified site's IA team:
Nil
7
17.5
1
11
27.5
2
19
47.5
3
3
7.5
Missing
2
Total
42
100.0
Number of days formal on-the-job training after appointment to work on an
environmental audit:
Nil
9
22.5
1 > 5 days
16
40.0
5 10 days
12
30.0
10 or more
3
7.5
Missing
2
Total
42
100.0

Our third research question, about the

manifestation of legitimacy theory in the
behaviour of enterprises with ISO 14001certified sites, focuses on the motivation
behind having certification. As previously
discussed, legitimacy theory supports the
notion that it is important for enterprises to
be seen to satisfy specific societal norms.
Maintenance of ISO 14001 certification, a
highly visible credential, can help the
enterprise keep a desired public image about
its environmental performance. Our
empirical investigation here focuses on
the extent to which enterprises give
importance to the use of an EMS for their
own self-benefit (including image building)
compared to the importance of generating
benefits for its environmentally-interested
stakeholders.
Table VII gives results of respondents'
beliefs about the degree of importance placed
by their enterprise on alternative types of
benefits arising from the site's maintenance
of ISO 14001 certification. ``Gaining an
increase in competitiveness'' is cited as the
most important benefit. A gain in
competitiveness might be reflected in a
general improvement in public recognition
which certification can bring, or it might be

[ 419 ]

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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Table VI
Audit teams and audit fieldwork procedures used at ISO 14000-certified sites
Disciplines of members

Membership per EMS audit team

Mean
Std dev
Min
Max

Sum

Size and composition of EMS audit team

Accountants/auditors
Engineers, scientists and health & safety officers
Others (e.g., systems analysts, economists, administrators)
Average size of an EMS audit team

1.54
2.49
0.41
4.44

52
85
14
151

Types of procedures

Frequency of use of procedure

High
Medium
Low
Mean

Internal audit fieldwork procedures used

Documentation of site's systems
Observation of site procedures
Interviewing of site's staff
Testing accuracy of site's record keeping system
Interviewing of site's management
Completion of internal control questionnaire
Testing with use of sampling techniques
Table VII
Perceived benefits from ISO 14000 certification

4.95
4.68
4.49
4.15
3.02
2.95

2
1
2
2
2
1

6
6
6
6
5
5

specifically linked to a growing trend

towards major corporate customers insisting
on dealing only with ISO 14001-certified
suppliers. For example, Franklins, an
Australian supermarket chain, responded to
a campaign by shoppers to cut the
distribution of plastic bags by introducing
bio-regradable bags and seeking ISO 14001
certification (Retail World, 1997). For
businesses in Australia, however, the effect
of gaining ISO 14001 certification on
competitiveness seems to be refuted by our
finding that low importance is given to the
benefit of being able to ``comply with
customer requirements''.
The second most important benefit shown
in Table VII is ``improvement in the
organisation's image''. These two highest
rated benefits suggest that the motivation of
creating the desired perception to
stakeholders (i.e., the central theme of
legitimacy theory behaviour), as well as the
motivation of enterprise self-gain, are the
most important drivers of ISO 14001certification. ``Impove environmental
performance'' is cited as the least important
benefit to the enterprise of maintaining an
ISO 14001-certified site.

[ 420 ]

7
13
10
11
11
12
11

0
0
0
1

0
0
3
5
7
13
18

5
9
2
11

2.82
2.67
2.60
2.47
2.21
1.91
1.66

Conclusions

Importance (1-6 scale)

Mean
Min
Max
Gain increase in competitiveness
Improve the organisation's image
Reduce the potential for legal liability
Establish systems that help cost efficiencies
Comply with customer requirements
Improve environmental performance

32
26
27
24
21
10
6

1.08
2.18
1.23
2.12

Conclusions to be drawn are to be treated

with caution because the results in this study
are subject to limitations. The small
population of 84 enterprises with ISO 14001certified sites in Australia and their short
history of no more than four years as
certified sites, makes this study an
exploratory one of an emerging practice. The
small population, coupled with a 50 percent
response rate, has meant that the database
from our questionnaire is not very conducive
to parametric data analysis. Descriptive data
analysis has mainly been used. Underlying
the descriptive data results are limitations
inherent in the fact that our questionnaire
required respondents to self-report facts and
perceptions. While we checked the data and
found no respondent with an unusual
response pattern (e.g. a column of identical
responses or a repetitive zig-zag pattern of
responses), it remains that some responses
are likely to be subject to biases from
leniency, range restriction and halo effects.
Further, subjects sampled were those
officially nominated by their enterprise as
the environmental auditing contact person
on the JAS-ANZ register of ISO 14001certified sites. Some may have had a
tendency to convey the virtues of their site's
certification.
Bearing in mind the limitations of our data
and taking a legitimacy theory perspective,
our results do consistently point to a common
conclusion about the way enterprises are
using ISO 14001 certification to handle
stakeholders. This conclusion is that, during
the emerging years of ISO 14000, enterprises
in environmentally sensitive industries in

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective

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Australia have focused on environmental

credentialism. The evidence suggests that
these enterprises tend to regard the
credential of certification as the key factor
required in order to satisfy their
stakeholders that they are meeting their
implicit social contractual obligation to
manage the environmental effects of their
operations. Our findings tend to support
Lindblom's (1994) argument that enterprises,
in their process of legitimization of their
environmental performance, adopt strategies
that seek to change the perceptions of
relevant publics without having to change
those enterprises' environmental behaviour.
Evidence about the objectives, resourcing
and conduct of an enterprise's EMS audit
function give an indication of the extent to
which this legitimization strategy has been
adopted to date.
We find, first, that the highest rated
objectives of the EMS audit function are
concerned with ``systems conformance and
due process'', whereas the lowest rated are
concerned with ``environmental performance
effectiveness''. Such a result, we contend,
infers that the emphasis of site management
is on keeping the EMS in place, for
certification purposes, as an end in itself.
Second, we find that the resources
committed to EMS auditing are below
reasonable levels in the areas of budgets,
qualifications, experience and training of
EMS audit team members. In relation
budgets, over 70 percent of sites devoted less
than 50 percent of their internal audit budget
to their site's EMS audit work hours. In
terms of qualifications, almost half of the
respondents indicated that the leader of their
EMS audit team did not have a degree, and 70
percent of other members of the audit team
were without a tertiary education. Further,
environmental audit work experience and
continuing training was found to be, on
average, well below the recommendations for
length of experience and training outlined in
the ISO 14012 standard. These results suggest
that enterprises do not provide sufficient
human and financial resources to their EMS
audit function for it to fulfill a role of
evaluating and developing improvements in
systems of enviromental management and
performance. Rather, resourcing seems to be
aimed, at best, at the maintenance of
ISO 14000 compliance requirements.
Because the ISO 14000 series of standards
has only existed since late 1996[3], we may
have collected our data about the resourcing
of EMS audits (and therefore our
conclusions) somewhat prematurely. Prior to
ISO 14001, environmental auditing provided
limited scope for the skills of accounting-

qualified internal auditors. Having recently

gained ISO 14001 certification, many
enterprises in Australia may still be
planning a phase-in to their EMS audit teams
of more qualified internal auditors with
information systems experience.
A final piece of evidence that supports
legitimacy theory relates to the perceived
benefits of establishing an EMS and ISO 14001
certification. Results show that respondents
perceive enterprise-self-interest (i.e. ``gaining
an increase in competitiveness'' and
``improving the organisation's image'') as the
most important type of benefit arising from
their site's certification. The benefit of
``impoving environmental performance'' is
cited as the least important to arise from
maintaining an ISO 14001-certified site.
This latter result may not necessarily
mean that Australian enterprises are
disinterested in improving their
environmental performance. Rather, there
could exist a phenomenon similar to that
identified by Boiral and Sala (1998) in a case
study of a certified plant in Canada. They
found that ISO 14001 certification proved to
be an encumbrance to managers'
effectiveness in improving environmental
performance because it consisted of
extensive documentation and bureauracy
associated with written rules to be adopted
by all site-level employees. Such EMS
methods were seen by plant managers as
having mainly superficial effects on the
improvement of the quality of environmental
performance. The plant managers continued
to pursue their own environmental
improvement targets through their own
previously developed engineering-oriented
methods.
Over the next few years, as more
enterprises gain experience with ISO 14000
standards, more research is needed into
whether ISO 14001-certified EMSs and
associated environmental audits will become
effective tools for environmental
performance improvement. In the ISO 14001
start-up phase, however, our study points to
the fact that enterprises are being driven by a
belief in the legitimizing influence on their
stakeholders of holding the credential of
ISO 14001 certification.

Notes

1 A parallel to this type of evidence is a scheme

in the UK called ``The Investors in People
Scheme'' which is concerned with identifying
companies with a poor record relating to
human resources.
2 An unanswered empirical question is the
extent to which internal auditors'

[ 421 ]

Dennis W. Taylor,
Maliah Sulaiman and
Michael Sheahan
Auditing of environmental
management systems:
a legitimacy theory
perspective
Managerial Auditing Journal
16/7 [2001] 411422

qualifications are positively associated with

the quality of EMS audit work.
3 The earlier British standards on
environmental management which preceded
the ISO 14000 series did not have any known
influence on practices in Australian
organizations.

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Tilton, H. (1996), ``The dawn of ISO 14000'',
Quality, April, pp. 5-6.

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