1. 1 A Practical Toolkit for the Design and Implementation of Environmental Performance Rating and Public Disclosure Programs Beijing, December 15 2007 ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

2. 2 2. Purpose of the toolkit Outline 3. Different Parts of the toolkit 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles

3. 3 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

4. 4 Environmental issues are best handled with the participation of all concerned citizens, at the relevant level. At the national level, each individual shall have appropriate access to information concerning the environment that is held by public authorities, including information on hazardous materials and activities in their communities, and the opportunity to participate in decision-making processes. State shall facilitate and encourage public awareness and participation by making information widely available. Effective access to judicial and administrative proceedings, including redress and remedy, shall be provided. Agenda 21, Principle 10 General Background

5. 5 Immediate Background In recent years, a number of Asian countries have implemented In recent years, a number of Asian countries have implemented environmental performance rating and public disclosure environmental performance rating and public disclosure programs (occasionally limited to pilot phases): China, India, programs (occasionally limited to pilot phases): China, India, Indonesia, Korea, Philippines, Thailand, Viet Nam. Indonesia, Korea, Philippines, Thailand, Viet Nam. On April 6 and 7 2006 in Beijing, AECEN and the World On April 6 and 7 2006 in Beijing, AECEN and the World Bank sponsored the International Workshop on Environmental Bank sponsored the International Workshop on Environmental Performance Disclosure for Developing Countries. Performance Disclosure for Developing Countries. Participants expressed the need to develop specific guidelines or Participants expressed the need to develop specific guidelines or ‘toolkit’ for the design of environmental performance rating and ‘toolkit’ for the design of environmental performance rating and public disclosure programs. public disclosure programs.

6. 6 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

7. 7 Purpose of the toolkit This toolkit is: This toolkit is not: A guide for regulatory agencies in designing environmental A guide for regulatory agencies in designing environmental performance rating and public disclosure programs; performance rating and public disclosure programs; A set of instructions and information when undertaking the A set of instructions and information when undertaking the design and implementation of such programs. design and implementation of such programs. An extensive discussion of the rationale of these programs; An extensive discussion of the rationale of these programs; An extensive review, evaluation, or analytical assessment of An extensive review, evaluation, or analytical assessment of these programs. these programs.

8. 8 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

9. 9 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

10. 10 Meaning Environmental performance rating and public disclosure program Performance Rating ComponentPublic Disclosure Component

11. 11 Meaning Environmental performance rating and public disclosure program Performance Rating Component Example: Viet Nam: List of polluters (Decision 64 (2003)); Thailand: Environment Truth.

12. 12 Meaning Environmental performance rating and public disclosure program Public Disclosure Component Example: USA: Toxics Release Inventory

13. 13 Meaning Environmental performance rating and public disclosure program Performance Rating ComponentPublic Disclosure Component Performance is assessed against a set of criteria Performance is publicly disclosed

14. 14 Key principles One instrument among others: Belongs to the portfolio of instruments available to Belongs to the portfolio of instruments available to regulators and should be used in combination with other regulators and should be used in combination with other tools and policies. tools and policies. Understandable to all: The public must know and understand what is it for which The public must know and understand what is it for which the firm’s performance was rated, and understanding the the firm’s performance was rated, and understanding the rating scheme. rating scheme. Performance indices built across media may be difficult to Performance indices built across media may be difficult to understand. understand.

15. 15 Key principles Credibility and reliability: The rating system upon which the environmental performance is The rating system upon which the environmental performance is assessed must be credible, reliable, and provide a correct assessed must be credible, reliable, and provide a correct assessment of the firm’s environmental performance. assessment of the firm’s environmental performance. Ratings based on a limited set of objective, measurable and Ratings based on a limited set of objective, measurable and practical criteria are more likely to yield credibility and practical criteria are more likely to yield credibility and reliability. reliability. There cannot be mistakes. Ratings that are established, reviewed, and approved by a Ratings that are established, reviewed, and approved by a technical committee made a broad group of stakeholders are technical committee made a broad group of stakeholders are more likely to yield credibility and reliability. more likely to yield credibility and reliability.

16. 16 Key principles Timely: Ratings must be based on recent data so as to depict Ratings must be based on recent data so as to depict performance as it stands at the time of disclosure, not as it performance as it stands at the time of disclosure, not as it once was. once was. Sustainability and updating: It is more likely that the program will generate incentives for It is more likely that the program will generate incentives for pollution control if it is sustained over time and if changes in pollution control if it is sustained over time and if changes in environmental performance are also rated and publicly environmental performance are also rated and publicly disclosed. disclosed.

17. 17 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

18. 18 Environmental performance rating component Purpose: To assess the environmental performance of the selected To assess the environmental performance of the selected facilities against a set of criteria. facilities against a set of criteria. All programs are different and suited to specific issues that All programs are different and suited to specific issues that the agency wants to target and objectives that it wants to the agency wants to target and objectives that it wants to achieve. achieve.

19. 19 Environmental performance rating component Common elements across South East Asian programs: Almost all programs focus mostly on conventional pollutants Almost all programs focus mostly on conventional pollutants rather than discharges of toxics pollution. rather than discharges of toxics pollution. Conventional pollutants: Use of national regulatory standards: National regulatory standards are core to the rating system. National regulatory standards are core to the rating system. International standards are used only to refine the rating (e.g. International standards are used only to refine the rating (e.g. delineate the ‘very good’ from the ‘good’). delineate the ‘very good’ from the ‘good’). Few rating categories: Generally 5 rating categories. Generally 5 rating categories.

20. 20 Environmental performance rating component Steps: Step 1Determine the overall scope of the rating system; Step 2Select the program’s coverage; Step 3Design the rating methodology; Step 4Collect, verify and analyze data; and Step 5Determine ratings

21. 21 Environmental performance rating component Steps: Step 1Determine the overall scope of the rating system; Step 2Select the program’s coverage; Step 3Design the rating methodology; Step 4Collect, verify and analyze data; and Step 5Determine ratings

22. 22 Environmental performance rating component Step 1: Determine the overall scope of the rating system Identify clearly the major environmental issues that the Identify clearly the major environmental issues that the program aims to target (e.g. air quality, water quality, etc.), and program aims to target (e.g. air quality, water quality, etc.), and be able to justify this choice based on existing environmental be able to justify this choice based on existing environmental strategies or action plans; strategies or action plans; Establish clear and realistic goals and objectives of the Establish clear and realistic goals and objectives of the program on the basis, where possible, of legal and/or policy program on the basis, where possible, of legal and/or policy foundations; foundations; Consult extensively at the outset with interested and Consult extensively at the outset with interested and potentially impacted parties and stakeholders, both public and potentially impacted parties and stakeholders, both public and private, both governmental and non-governmental; private, both governmental and non-governmental;

23. 23 Environmental performance rating component Step 1: Determine the overall scope of the rating system Establish a technical review committee with members Establish a technical review committee with members representing all relevant parties, who will be responsible to representing all relevant parties, who will be responsible to advise and oversee the design and implementation of the advise and oversee the design and implementation of the program. program. Identify the resources and capacity (people, equipment, and Identify the resources and capacity (people, equipment, and data) available for program design and implementation: What data) available for program design and implementation: What you are going to do depends on both what you want and what you are going to do depends on both what you want and what you can. you can. Establish the key milestones which will guide the Establish the key milestones which will guide the implementation of the program. implementation of the program.

24. 24 Environmental performance rating component Key milestones (Indonesia PROPER)

25. 25 Environmental performance rating component Steps: Step 1Determine the overall scope of the rating system; Step 2Select the program’s coverage; Step 3Design the rating methodology; Step 4Collect, verify and analyze data; and Step 5Determine ratings

26. 26 Environmental performance rating component Step 2: Select the program coverage Geographical coverage. Will the program be implemented Geographical coverage. Will the program be implemented nation wide or only in a region (province or municipality; nation wide or only in a region (province or municipality; watershed or airshed)? watershed or airshed)? Source coverage. Will the program cover all sources within the Source coverage. Will the program cover all sources within the selected location or only some sources (large sources; or selected location or only some sources (large sources; or industry specific sources)? industry specific sources)? Key issues that will impact geographical and source coverage: Resource availability; and Resource availability; and Fairness. Fairness.

27. 27 Environmental performance rating component Step 2: Select the program coverage Pollutants coverage. Which pollutants will be included Pollutants coverage. Which pollutants will be included for rating purposes? for rating purposes? Key issue: Single medium or multi media?

28. 28 Environmental performance rating component Steps: Step 1Determine the overall scope of the rating system; Step 2Select the program’s coverage; Step 3Design the rating methodology; Step 4Collect, verify and analyze data; and Step 5Determine ratings

29. 29 Environmental performance rating component Step 3: Design the rating methodology All rating methodologies are different. PROPER 1995

30. 30 Environmental performance rating component Zhenjiang 2002

31. 31 Environmental performance rating component Step 3: Design the rating methodology The core component of all rating methodologies is whether or not the facility complies with the national regulatory standards (for those pollutants covered by the program). All rating methodologies are different….but: And always: Compliance with standards is a necessary condition to achieve Compliance with standards is a necessary condition to achieve status of adequate or superior environmental performance, but status of adequate or superior environmental performance, but not a sufficient condition; not a sufficient condition; A lack of compliance with standards is a sufficient condition to A lack of compliance with standards is a sufficient condition to achieve status of inferior environmental performance achieve status of inferior environmental performance

32. 32 Environmental performance rating component Steps: Step 1Determine the overall scope of the rating system; Step 2Select the program’s coverage; Step 3Design the rating methodology; Step 4Collect, verify and analyze data; and Step 5Determine ratings

33. 33 Environmental performance rating component Step 4: Collect, verify, and analyze data There cannot be mistakes. In addition to existing data provided for implementation of ‘traditional’ command-and-control program: Surveys and visits of targeted facilities to fully understand the Surveys and visits of targeted facilities to fully understand the nature of the effort (or lack thereof) undertaken by the facility in nature of the effort (or lack thereof) undertaken by the facility in terms of pollution control; terms of pollution control; Additional, frequent, and numerous samplings of the facilities’ Additional, frequent, and numerous samplings of the facilities’ pollution discharges in order to assess as accurately as possible pollution discharges in order to assess as accurately as possible the true status of compliance relative to regulatory standards; the true status of compliance relative to regulatory standards; Discussions with local residents and communities to better Discussions with local residents and communities to better understand the local residents’ perception of the facility’s understand the local residents’ perception of the facility’s environmental performance. environmental performance.

34. 34 Environmental performance rating component Step 4: Collect, verify, and analyze data Important issue: Should the rating methodology use the most recent data and Should the rating methodology use the most recent data and rates the performance as it stands at one point in time? rates the performance as it stands at one point in time?or Should the rating methodology includes data analysis over a Should the rating methodology includes data analysis over a longer period of time? longer period of time?or Should a new rating be announced when the performance Should a new rating be announced when the performance change? change? Step 3: Design the rating methodology

35. 35 Environmental performance rating component Steps: Step 1Determine the overall scope of the rating system; Step 2Select the program’s coverage; Step 3Design the rating methodology; Step 4Collect, verify and analyze data; and Step 5Determine ratings

36. 36 Environmental performance rating component Step 5: Determine ratings According to rating methodology. According to rating methodology. But: There will be disputes and disagreements. There is a need There will be disputes and disagreements. There is a need to think about how such disputes will be resolved. to think about how such disputes will be resolved. Site visits may be needed to resolve disputes. Site visits may be needed to resolve disputes.

37. 37 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

38. 38 Purpose: To disclose to a wide audience the rated environmental To disclose to a wide audience the rated environmental performance. performance. Public disclosure component All programs are different and suited to specific issues that All programs are different and suited to specific issues that the agency wants to target and objectives that it wants to the agency wants to target and objectives that it wants to achieve. achieve.

39. 39 Common elements across South East Asian programs: All programs have used color coding to publicly disclose the All programs have used color coding to publicly disclose the assessed rating. Black and Red are normally used to indicate assessed rating. Black and Red are normally used to indicate inferior performance (bad, very bad); Blue, Green or Yellow inferior performance (bad, very bad); Blue, Green or Yellow (Gold) are normally used to indicate adequate or superior (Gold) are normally used to indicate adequate or superior (good or very good) performance. (good or very good) performance. Color coding: Communication with rated facilities: Almost all programs have maintained close communication Almost all programs have maintained close communication with facilities even to the point of informing the facilities in with facilities even to the point of informing the facilities in advance of their rating, and giving them a ‘grace period’ to advance of their rating, and giving them a ‘grace period’ to improve their performance. improve their performance. Public disclosure component

40. 40 Public disclosure component Step 1Prepare the ratings for public disclosure; Step 2Determine the media strategy; Step 3Determine the timing and frequency of public disclosure. Steps:

41. 41 Public disclosure component Step 1Prepare the ratings for public disclosure; Step 2Determine the media strategy; Step 3Determine the timing and frequency of public disclosure. Steps:

42. 42 Public disclosure component Step 1: Prepare the ratings for public disclosure For this purpose, it is of utmost importance that the disclosed information be: Simple, limited, and non-technical; Simple, limited, and non-technical; Clear and precise; and Clear and precise; and Unambiguous as to its meaning. Unambiguous as to its meaning. Colors seem to work.

43. 43 Public disclosure component Step 1Prepare the ratings for public disclosure; Step 2Determine the media strategy; Step 3Determine the timing and frequency of public disclosure. Steps:

44. 44 Public disclosure component Step 2: Determine the media strategy Important to recognize: A large variety of individuals, groups, organizations, and A large variety of individuals, groups, organizations, and associations at the local, national, and international levels associations at the local, national, and international levels (some of whom may not even have been identified) may have (some of whom may not even have been identified) may have direct or indirect interest in the rated environmental direct or indirect interest in the rated environmental performance; performance; Different individuals, groups, organizations and associations Different individuals, groups, organizations and associations have different means of accessing information made available have different means of accessing information made available by environmental regulators or agencies. by environmental regulators or agencies.

45. 45 Public disclosure component Step 2: Determine the media strategy Consider: Having the public disclosure done by the highest ranking Having the public disclosure done by the highest ranking government official to maximize media value; government official to maximize media value; Disclosing the ‘good performance’ at a different time than the Disclosing the ‘good performance’ at a different time than the ‘bad performance’. If at the same time, experience indicates ‘bad performance’. If at the same time, experience indicates that the media focuses mostly on those facilities with ‘bad that the media focuses mostly on those facilities with ‘bad performance’. In doing so, those with ‘good performance’ do performance’. In doing so, those with ‘good performance’ do not fully benefit from the public disclosure. not fully benefit from the public disclosure.

46. 46 Public disclosure component Step 1Prepare the ratings for public disclosure; Step 2Determine the media strategy; Step 3Determine the timing and frequency of public disclosure. Steps:

47. 47 Public disclosure component Step 3: Determine the timing and frequency of public disclosure Timing: Frequency: Changes in environmental performance should be announced Changes in environmental performance should be announced as they occur. as they occur. Sufficient to maintain public interest and pressure on targeted Sufficient to maintain public interest and pressure on targeted facilities; facilities; Economic crisis may not be good timing to announce poor Economic crisis may not be good timing to announce poor ratings; ratings;

48. 48 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

49. 49 Conclusions

50. 50 Conclusions Thoughts on the role of environmental performance rating and public disclosure programs: Impact on firms’ environmental performance; Impact on firms’ environmental performance; Impact on environmental agencies’ governance; Impact on environmental agencies’ governance; Impact on public participation. Impact on public participation.

51. 51 2. Purpose of the toolkit Outline 5. Part II: Environmental performance rating component 6. Part III: Public disclosure component 7. Part IV: Conclusions 8. Part V: References 1. Background 4. Part I: Meaning and key principles 3. Different Parts of the toolkit

52. 52 References Divided into two parts: Literature on rationale, principles, and existing programs Literature on rationale, principles, and existing programs (not only South East Asian programs but all environmental (not only South East Asian programs but all environmental performance rating and/or public disclosure programs; performance rating and/or public disclosure programs; On the impact of public disclosure programs. On the impact of public disclosure programs.

53. 53 A Practical Toolkit for the Design and Implementation of Environmental Performance Rating and Public Disclosure Programs Beijing, December 15 2007 ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK