When a company breaks the law, the Environmental Protection Agency (EPA) would really rather it just say so. And many of them actually do. Under the EPA’s Audit Policy, violators who voluntarily report themselves can get certain penalties reduced or waived if they commit to ongoing self-regulation. The companies set up internal compliance procedures and promise never to do it again.

“These firms have agreed to do something above and beyond what’s required by law,” says Jodi Short, an associate...

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