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INTEGRATION OF ENVIRONMENTAL DISCLOSURE INTO REGULATORY

MANAGEMENT: THE CASE OF AKOBEN ENVIRONMENTAL RATING

PROGRAMME

ALLOTEY, JONATHAN1

SEKYI, RANSFORD1

FAABELUON, LAMBERT1

ERQUAYE-TETTEH, ESI NANA1

AFFULL, HARON HARRISON1

SARFO-AFRIYIE, YAW1

FOROCCO, SAEED1

AFSAH, SHAKEB2

1AKOBEN Team, Environmental Protection Agency (EPA), P Box M326 Accra, Ghana

,www.epaghanaakoben.org

2Environmental Rating & Disclosure Specialist, Performeks LLC, Bethesda, Maryland,

US,www.performeks.com

SUMMARY

On November 24, 2011 the Government of Ghana’s Environmental Protection Agency

(EPA) launched an environmental rating and disclosure initiative called the AKOBEN program.

This marked a new trend in environmental transparency and it redefined the regulatory

management model at Ghana’s EPA. Now along with the environmental impact assessment

(EIA) law and the legal compliance system, the AKOBEN program created additional

compliance incentives by leveraging the power of communities and the media through disclosureof environmental rating of companies. Under the AKOBEN program, each participating

company received a color code—Gold for excellent, Green for very good, Blue for good, Orange

for unsatisfactory and Red for poor. These colors are then disclosed to the public through a

formal media event. In this paper we describe the evolution of the AKOBEN program and the

preliminary results on how the companies in the mining and manufacturing sectors have started

to improve their environmental performance. The experience of Ghana shows that the color-

code format for evaluating and rating environmental performance of companies is an effective

approach. It is recommended for consideration and adoption by other countries in Africa.

1 INTRODUCTIONSince the fall of totalitarian regimes in the 1990s, a wave of democratization has swept

across the globe. This has been aided by the spread of information communication technologies

which has brought the world closer. This resulted to openness, transparency in the governance of

nations, institutions and organizations and also at local, national, regional and global levels. This



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trend has resulted with the public demanding accountability and involvement in governance. The

management of the environment has not been left out (Afsah, Laplante and Wheeler 1996).

2 BACKGROUND

In Ghana efforts at environmental regulation begun with the establishment of theEnvironmental Protection Council in 1974, two years after the first United Nations Conferenceon the Human Environment. This Council was primarily an advisory and research organization.

It had no power to enforce any measure for improving the environment or preventing damage tothe environment.

A first attempt to institute the environmental impact assessment system was unsuccessfulas it was feared that it will slow down development. However when the Economic Recovery

Programme was launched in 1983, the economy was in decline due to the combined effects of poor weather, institutional rigidities, inappropriate economic policies and internal and external

shocks. The Economic Recovery Programme resulted in a positive growth but not without socialand environmental cost. This led to a recognition that the sustainability of economic and social

development depends on proper and responsible management of the natural resource base andthe environment.

The Government therefore directed that EIA should be applied to some key sectors in 1989.Prior to this in March 1988, the Government of Ghana initiated a major effort to put

environmental issues on the priority agenda through the preparation of the NationalEnvironmental Action Plan. The Plan called for the urgent restructuring of the Environmental

Protection Council with necessary political backing as well as minimum level of enforcementpowers to enable it carry the additional responsibilities. This call led to the transformation of the

Environmental Protection Council to the Environmental Protection Agency (EPA) in 1994 withregulatory powers.

The EPA put in place an EIA system which required that all new development activities go

through the EIA process and secure environmental permits before start of operations. Also allexisting undertakings were to prepare environmental management plans. With these instrumentsin place, it was incumbent to ensure that the regulations are enforced and complied with. With

the passage of the Environmental Assessment Regulations, LI 1652 in 1999, the EPA consideredenvironmental disclosure as a possible policy tool. This would make the EIA system

comprehensive with a component to ensure that commitments made by developers enforceable.However in developing countries strict enforcing of rules can have serious social and economic

costs thus trade-offs have to be accepted to achieve environmental objectives. Theseconsiderations in addition to the provisions in the National Environment Policy informed the

type of disclosure-with-enforcement regime to adopt. One of the aims of the NationalEnvironment Policy is to put in place appropriate incentives and sanctions to ensure compliance

and enforcement of regulations. It was also guided by the following principles of the NationalEnvironment Policy:

“Use of the most cost effective means to achieve environmental objectives, use of incentives in

addition to regulatory measures and public participation in environmental decision-making.”



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Building on the principles of public participation mandated by the National Environmental

Policy, Ghana’s EPA created the AKOBEN programme, an environmental performance rating

and disclosure. The history of EPA’s effort to launch an environmental disclosure is shown

below.

3 ORIGIN OF THE AKOBEN PROGRAM

The name of the environmental rating program—AKOBEN—has its roots in Ghana’stradition of Adinkra symbols and it stands for vigilance and wariness—a set of behavior that is

pertinent for the issue of environmental conservation. AKOBEN also signifies alertness andreadiness to serve a good cause.

AKOBEN program has strong Ghanaian roots and its rating methodology is tailored toreflect Ghana’s environmental values. It is for this reason that the AKOBEN program

encompasses both physical and human environment in the rating methodology.AKOBEN program recognizes that the environmental rating and disclosure initiative was

first introduced in 1995 in Indonesia through its PROPER program—Program for PollutionControl Evaluation and Rating (World Bank 1995). But AKOBEN program’s rating

methodology for the mining and manufacturing sectors have many unique elements, and itreflects the state-of-the-art in corporate social responsibility assessment. For this reason

AKOBEN program is an important contribution to the ongoing international effort in the field of environmental rating and public disclosure.

The AKOBEN rating methodology incorporates the national regulatory performancegoals as well as the traditional community relationship aspects that are unique to Ghana. At the

same time, it also incorporates the practically feasible aspects of environmental and socialperformance guidelines of the various international organizations including the World Bank and

the IFC (IFC.org), Global Reporting Initiative (GRI) (GlobalReporting.org), PROPER-Indonesia, Australian and World Health Organizations guidelines.

Figure 1: Implementation History of AKOBEN Program



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4 CONCEPTUAL FRAMEWORK OF THE AKOBEN RATING METHODOLOGY

Traditionally an analysis of environmental performance is limited to the assessment of whether or not a quantitative value of an environmental parameter has exceeded its numerical

standards. At other times, regulators check if a business site has followed the proceduralrequirements related to permits and reporting. These approaches are useful but they fail to

adequately capture some of the new concepts of environmental performance that includecorporate social responsibility, voluntary over-compliance and other non-regulatory

environmental objectives. In short, a simple “In Compliance/Not in Compliance” type of assessment is too limited to provide a comprehensive picture of the complex environmental and

ecological conditions one typically finds at mining and manufacturing sites.Therefore, the AKOBEN rating methodology uses an approach that reflects the modern

concepts of corporate environmental and social performance including ideas such as communityrelationships, public participation, conflict resolution and continual improvement. AKOBEN’s

rating methodology maps environmental performance of companies into five color codes that is

easy to communicate to the general public. Further, this rating methodology uses quantitative,qualitative and visual information to comprehensively evaluate the environmental performanceof each company.

AKOBEN aims to strengthen both transparency and public awareness. It also aims toaddress one of the difficult and most challenging areas of impact assessment—the issue of

follow-up and monitoring when projects become operational after the completion of environmental impact assessment (EIA). Therefore, AKOBEN would serve as the key connector

between EIAs and operational environmental performance. AKOBEN’s approach to environmental performance measurement is designed to be

practical, and it also aims to minimize the use of controversial or vague indicators. Though theexisting literature on environmental and social performance measurement is filled with

innumerable ideas and concepts, AKOBEN’s rating system has narrowed it down to only thoseperformance indicators that can be measured, verified and validated by a third party. Further, the

focus of the rating system is on environmental outcomes that indicate various levels of environmental and health risks, the probability of restoration of environmental conditions in the

long-term, and the quality of corporate commitment to social issues.Using these principles, the AKOBEN rating system maps the environmental performance

of companies using a five-color rating scheme. These color categories represent five specificlevels of environmental performance as described in Table 1. BLUE, ORANGE and RED ratings

pertain to regulatory compliance only, and accordingly these colors indicate the performance of acompany relative to the mandatory national regulatory requirements related to environmental

issues and the reclamation bond (applies to mining companies only). In comparison, the GOLD

and the GREEN ratings indicate performance on non-regulatory aspects including the quality of social and community actions undertaken by companies to further enhance its environmental andsocial performance (Afsah and Damayanti.



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TABLE 1: Description of AKOBEN Colors

Rating Level Guiding Principles for AKOBEN Rating

GOLD GREEN + company follows its corporate socialresponsibility policies

GREENBLUE + adopts voluntary initiatives and is responsive topublic complaints

BLUEAdequate compliance with environmental standards andreclamation bond criteria (for mining only)

ORANGE

Exceedance of regulatory standards for non-toxics, weak

environmental monitoring, and incomplete fulfillment of reclamation bond criteria.

RED

Failed to follow environmental regulations (LI 1652),

shows pattern of chronic exceedance, and creates risksfrom toxics and hazardous wastes mismanagement anddischarges.

The highest level of performance—a GOLD rating—goes beyond the requirements of

formal regulations and it signifies that a company applies international best practices andproperly follows its corporate social responsibility policies. In contrast, the worst possible rating

a company could get is a RED rating which is assigned to those businesses that do not have avalid permit or certificate as per an environmental management plan as outlined in the

Environmental Assessment Regulation LI 1652, which is Ghana’s principal environmental

assessment law. A company could also get a RED rating if its discharges and waste managementpractices cause serious risk to physical or human environments.The three intermediate rating categories are GREEN, BLUE and ORANGE. The GREEN

rating signifies that a site has excellent environmental compliance, it applies best practices and isresponsive to public complaints, but there is room for improvement regarding the

implementation of its environment and social responsibility policies. A BLUE rating is also signof good environmental performance showing that a company has complied with the mandatory

environmental regulatory requirements and fulfilled the conditions of the reclamation bond.Failures to meet the operational regulatory requirements related to environmental emissions and

ambient quality, and the reclamation bond (applies to mining only) could demote a company toan ORANGE—an unsatisfactory rating. And if the violations are severe and create a credible

risk of damage to the environment or the human health, the environmental performance of acompany could be downgraded to a RED level, which indicates a poor environmentalperformance.

4.1 How does AKOBEN Handle the Issue of Environmental Complaints

Environmental related complaints, as described solely for the AKOBEN Program,include the following complaints that:



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1. are operation related and do hamper the welfare of the communities in the proximity

of the project area.2. affect water resources of the communities in the catchment area of the project.

3. affect the ambient air quality due to dust and noise.

Non-environmental complaints are those that may be related to crop compensation, landownership issues among others, and other resettlement related issues specifically for mining

companies.Environmental complaints are integral part of the concept of community monitoring of

mining and manufacturing operations, and it complements EPA’s regulatory inspections inimportant ways (Dasgupta and Wheeler 1997). Since it is not feasible for EPA to continually

monitor on-site environmental discharges and emissions, local communities are importantsources of information for regulators. AKOBEN’s rating methodology therefore assigns

considerable importance to environmental complaints received from the public, and views this

channel for equalizing a situation of asymmetric information between companies and regulators.However, AKOBEN’s rating methodology also recognizes that environmental complaints

are not always automatically valid. Given the complexities of the relationship between

companies and its neighboring communities, it is important to screen out frivolous complaintsfrom the genuine ones. For this reason, the management of environmental complaints is a

complex matter that needs to be handled with care. Otherwise it is possible that a normallymanageable complaint can easily escalate into a costly confrontation between communities and

companies. AKOBEN’s rating methodology aims to discourage such a situation from occurring,but at the same time it gives due credence to legitimate environmental complaints.

A company needs a good overall complaints management policy and tracking system toeffectively manage the environmental complaints it receives. Accordingly, AKOBEN assesses

the overall commitment and the policy of a company towards community complaints. ButAKOBEN methodology recognizes that it is not sufficient to just have Standard Operating

Procedure (SOP) for complaints management because the final outcome depends on how wellthe written policies are implemented.

AKOBEN also recognizes that companies that are responsive to public complaints mayattract more complaints compared to those that are comparatively less responsive. Therefore, the

focus of evaluation for AKOBEN would be on the level of responsiveness and successful closureof complaints rather than just the volume of complaints. The evaluation would also take into

consideration the long-term trend of company behavior. And finally, specific incidents of unusual public complaints would be evaluated on a case specific basis by the AKOBEN team.

Evaluation of environmental complaints also includes the process of authentication by EPA

inspectors. The verification process would include field visits, discussions with communities andcompanies, and if deemed necessary even samples would be collected for technical review andanalysis.

To enable the EPA inspectors to conduct a proper review of environmental complaints,companies are required to maintain a comprehensive record of all complaints and their

responses. This information would be checked during the AKOBEN audit of companies.



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4.2 Assessment of Corporate Social Responsibility Actions of Companies

AKOBEN rating methodology encompasses the concept of social performance of companies also. However, unlike environmental performance that can be quantified through

technical and scientific measurements, social performance cannot be measured and expressed insuch numerical terms. It is a real challenge to evaluate the quality of social performance of

companies because there are no quantitative regulatory standards for social performance.Nevertheless, social performance is the highest ranking rating criteria in the AKOBEN program

as it ultimately determines whether or not a company would get a GOLD rating.To evaluate the social responsibility actions of companies, AKOBEN rating methodology

does not impose any mandatory performance standards on companies. Instead it has selected toassess performance of companies solely on the basis of how well each company implements its

own corporate social responsibility policy. In other words, each company would be heldaccountable only on the basis of the policies its corporate headquarters has mandated.

Accordingly, the assessment of social performance of a company would include three aspects.

These are (1) intent of the company towards social issues, (2) expression of intent through acomprehensive social policy, and (3) the actions it undertakes in accordance with its CSR policy.

To conduct this evaluation the AKOBEN team of EPA would collect each company’s

corporate social responsibility policy and review it to develop a checklist of resourcecommitments, and community development projects and activities that its policy recommends

and has implemented during the year of AKOBEN review. Each company’s checklist would beevaluated against the actual community development activities observed at the site of business

operations. Based on this evaluation, AKOBEN team would assess the qualifications for aGOLD rating. Since such an evaluation is expected to be very detailed and labor intensive, only

those companies that have cleared the criteria for the GREEN rating would be subjected to theGOLD level review.

5 DATA COLLECTION AND QUALITY ISSUESAKOBEN rating methodology is a data intensive system, and therefore complete and

reliable data are critical requirements. There are three sources of data for AKOBEN rating. First,the bulk of the data would be compiled from the monthly monitoring reports that each company

is required to regularly submit to EPA. Second, the data collected through site-level inspectionswould also be used for ratings analysis. And finally, AKOBEN team would conduct field audits

to collect the information that are not reported in the regular monthly reports.The quantitative information on environmental parameters would be analyzed by a computer

model that uses various statistical tools to check the accuracy, completeness and trends in thedata, and compute the level of compliance at the site of business operations. All the qualitative

information would be converted into a score and supported by proper documentation to justifythe evaluation.

6 APPLICABLE STANDARDS FOR WATER AND AIR QUALITY

For the purposes of the rating, AKOBEN would apply EPA’s Sector Specific EffluentQuality and Air Quality Guidelines, and where appropriate, guidelines from international

institutions (e.g. WHO,WB/IFC) would also be applied.



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Furthermore the standards and or guidelines will apply to sampling locations that arespecified in each company’s Environmental Management Plan Therefore, it is critical that each

Plan specify all the monitoring points, its appropriate category (compliance, surveillance orreference point) and the applicable regulation and standards. On a case specific basis, other

standards could also be applied.

7 AKOBEN RATING REPORTSAn important goal of the AKOBEN program is to create incentive for environmental

improvement through information. One aspect of this informational incentive is the improvedunderstanding of environmental performance that the AKOBEN program is expected to create

for companies. As part of the AKOBEN program, each company would receive a comprehensiveratings report from EPA. This report would clearly show where performance is strong and where

there are gaps. The ratings report would also provide clear guidance on where a company needsto make improvements in the future.

8 DISCLOSURE OF RESULTSAKOBEN would follow a two-step procedure for disclosing the results of AKOBEN

rating to the public and the media. As a first step, AKOBEN would privately share the results of

the ratings with companies. If there is anissue that requires further review, the company shouldinform the AKOBEN team in writing. Upon receiving the feedback, AKOBEN would review the

ratings and resend the results to the company. The final ratings would be disclosed to the publicon World Environment Day every year.

9 DISPUTE RESOLUTION

AKOBEN program is aimed to be a collaborative effort between EPA and companies.

While EPA would strictly apply the regulatory standards to evaluate the ratings of mining and

manufacturing companies, it would also recognize their social and community developmentefforts. With such an approach, EPA aims to strengthen the environmental and socialperformance incentives for companies, and at the same time improve public awareness.

But AKOBEN’s rating system is a complex process which requires multi-dimensionaldata and information, and it is likely that sometimes there could be a difference of opinion with

companies. Therefore, AKOBEN’s disclosure strategy follows a two-step procedure that wouldallow for any differences to be discussed and resolved. If required, EPA would conduct fresh

data collection and field visits, and also provide documentary and analytical evidence to explainthe basis of its evaluation.

10 AKOBEN LAUNCH AND RESULT

The AKOBEN program was successfully launched and inaugurated by the Office of theVice President of the Government of Ghana and the Minister of Environment, Science and

Technology. Speaking at the function, Hon. Sherry Ayittey, Minister for the Environment,Science and Technology, said the AKOBEN initiative symbolizes government’s resolve to tackle

the challenges of environmental degradation and natural resource management throughtransparency, disclosure, public awareness creation and community participation.



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In the first round of ratings, eleven mining companies and 49 manufacturing enterpriseswere rated. No company received a BLUE or better rating, showing that all the companies had at

least one or more compliance violations. As shown in Figure 2, nearly two thirds of the sixtycompanies from mining and manufacturing sector had serious environmental violations as

measured by the RED rating.Additional analysis showed that regarding the compliance with legal requirements,

mining companies had better baseline performance compared to their peers in the manufacturing(Figure 3).

In the area of environmental best practices, the mining sector outperformed themanufacturing sector (Figure 4). However, in the area of hazardous waste management, themining sector clearly lags behind the manufacturing sector, highlighting the challenge of toxics

and hazardous waste management at mining sites (Figure 5).The AKOBEN program has also had measurable improvements on the site level

monitoring. As shown in Figure 6, both the mining and manufacturing sectors show a trend of

Figure 32: Ratings of Companies

Figure 23: Compliance with Legal Requirements



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continual improvement in their effort to sample, test and report monthly monitoring results to theEPA.

Figure 2: Best Practices Adoption

Figure 3: Hazardous waste Management



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Figure 4: Environmental Monitoring and Reporting Trend



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11 CONCLUSIONS

This paper describes the implementation history of Ghana’s AKOBEN environmental

rating and disclosure program. It shows that it took more than ten years to fully develop thisenvironmental transparency initiative starting from just an idea in 1999, to pilot tests and

ultimately to a full-fledged regulatory program in 2011. Initial results and feedback from

companies show that disclosure is an effective environmental enforcement tool. It works outside

the formal court system through reputational incentives and community and media pressure to

motivate firms to comply with environmental regulations. Additionally, the experience of Ghana

shows that the color-code format for evaluating and rating environmental performance of

companies is an effective approach. It is recommended for consideration and adoption by other

countries in Africa.

12 BIBLIOGRAPHY

Afsah, S., Laplante, B. and Wheeler, D., 1997 “Regulation in the Information Age: Indonesia’sProgram for Environmental Management”, World Bank

Dasgupta, S, and Wheeler, D., 1997, “Citizen Complaints as Environmental Indicators: Evidence

from China”, Policy Research Working Paper # 1704, World Bank

GRI Guidelines, http://www.globalreporting.org/ReportingFramework/G31Guidelines/

IFC/World Bank Guidelines, http://www.ifc.org/ifcext/sustainability.nsf/Content/EHSGuidelines

PROPER Program Indonesia, http://www.menlh.go.id/proper/proper%20baru/Eng-Index.html

World Bank, 1995, “What is PROPER? Reputational Incentives for Pollution Control”,

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