Private compliance assurance and system based supervision

1. Private assurance of
environmental regulations
Martin de Bree

2. RESEARCH PROJECT
Specifications
Client: Ministry of Infrastructure and Environment
Contractor: RSM Erasmus University Rotterdam
Occasion: integration of 40 laws (environment, safety, construction)
Planning: June 2012 – May 2013
Research design: case studies, interviews, recent scientific literature
Research objectives:
• Overview laws, field, players, supervision, compliance
• Theoretical model private compliance assurance (PCA)
• Assessment framework PCA & meta-supervision

3. PROBLEMS
• Who is responsible for control?
• Risks are not zero
• Priority on compliance or risk control?
• Effectivity of public supervision?

4. MODEL PRIVATE ASSURANCE
Notion: analogy between check and act in Deming cycle
and task public supervion. If these two steps are privately
organised, public supervision can shift to meta level.
Public
supervision
Intervene
Gather
information &
judge

5. MODEL PRIVATE ASSURANCE
Source: Malcolm Sparrow

6. MODEL PRIVATE ASSURANCE

7. MODEL PRIVATE ASSURANCE

8. MODEL PRIVATE ASSURANCE

9. MODEL PRIVATE ASSURANCE

10. DEFINITIONS
Private assurance means that private parties (regulated and other
private third parties together)
• monitor actual regualtions,
• take measures to comply,
• check if they comply,
• take corrective measures to end violations (if any) and
• take preventive measures to prevent repetition of the violations,
Aimed at sustainable compliance by the regulated company.

11. DEFINITIONS
Meta-supervision
Assessement by public supervisors of the effectiveness of
private compliance assurance and – as a part of this –
doing reality checks on actual compliance (samples) to
verify this.

12. DECISION TREE
Four parts:
1. Regulations needed and who designs them?
2. Is the industry promising regarding private
compliance assurance?
3. Are the public supervisors ready for met-supervision?
4. How can meta-supervision be carried out?

13. DECISION TREE PART 1

14. DECISION TREE PART 2
Indicators
• Average company size
• Level managementsystems and
risk management
• Frontrunners
• Influence 3rd parties on
compliance
• Commitment for PCA

15. DECISION TREE PART 3
Conditions
• Societal support
• Support from politicians
• Support supervisor
• Competencies public supervisors
• Capacity public supervisors
• Transparancy / understanding industry
• Sufficient trust in industry
• In accordance with law
• No limitation of competition
Recommendations
• Be clear about objectives, policy and
practical approach;
• Be clear about roles
• Timing, phasing
• Use leading companies as examples
• Learning by doing
• Evaluate

16. DECISION TREE PART 4
Recommendations
• Focus on understanding of system of PCA
• No details in assessemnt criteria PCA
• Focus on check and act functions PCA
• Reality checks
• Risk control over compliance
• Competencies assessment PCA
• Communication about interpretation of
risks and
regulations
• Use reports from certifications for own
assessment
• Cooperate with other supervisors
• Do not just trust information from third
parties or
certificates without understanding the
working of the
PCA yourself
Recommendations
• Intensity of inspections
• Periodical assessement of PCA
• Reluctant with sanctions if PCA
works
• Feedback on system level for
maximise
learning effect
• Strict sanctions if trust is abused
• Straight back with interventions
• Interventions if PCA fails

17. CONCLUSIONS
1. Chances for PCA?:
(a) is industry capable and willing?
(b) is public supervising agency ready and willing?
2. Meta supervision: the devils in the details
(a) Balanced assessment of PCA by public supervisors
(b) Adjusted intervention policy
3. PCA is not required to be optimal before meta supervision van be
applied, due to learning effect
4. Other 3rd parties than regulated company can contribute to PCA

18. RECOMMENDATIONS
1. Use decision tree for every occasion where PCA and
metaregulation / -supervision is considered
2. Incorporate assessment framework in general government policy
3. Further research (stimulation of PCA, effect of sanctions on PCA,
importance of competencies and quality assurance of public
supervisors, use of certificates)
4. Develop a practical manual / guideline for PCA/meta supervision
5. Stimulate PCA (Article in law, licensing, paying for marginal
inspections, through 3rd parties, anticipating on importance of
good reputation)