{"id":69616,"date":"2021-11-02T16:41:28","date_gmt":"2021-11-02T16:41:28","guid":{"rendered":"https:\/\/bvssonline.org\/?p=69616"},"modified":"2021-11-02T16:42:15","modified_gmt":"2021-11-02T16:42:15","slug":"laser-focus-on-esg-role-of-internal-audit","status":"publish","type":"post","link":"https:\/\/bvssonline.org\/laser-focus-on-esg-role-of-internal-audit\/","title":{"rendered":"Laser Focus on ESG \u2013 Role of Internal Audit"},"content":{"rendered":"\n

By SHAILESH HARIBHAKTI & THARA TK<\/p>\n\n\n\n

ESG has gained mainstream recognition at a pace faster than digital transformation! ESG is becoming everyone\u2019s business almost at the same time as we learn about it. Volunteer guidelines and frameworks like GRI and SASB converged into the Value Reporting foundation on 1st June 2021. Then regulators like SEBI came up with BRSR and investors pushed disclosures and active action! ESG  theme is now spreading like wildfire across the landscape.<\/p>\n\n\n\n

ESG is at the core of businesses:<\/strong><\/p>\n\n\n\n

ESG clearly intersects with financial decisions, business strategy; business model; products and services; risks and opportunities; governance and reporting. Cutting across responsibilities of internal stakeholders: Board, CXO, CS, CAE, CSR, R&D, procurement and employees have specific roles to play and KPIs to deliver in an organization\u2019s ESG charter. The business of external stakeholders: Government, regulators, investors, community, environment and supply-chain are directly influencing or are impacted by an organization\u2019s ESG actions.<\/p>\n\n\n\n

Influencing business outcomes:<\/strong> ESG strategy is increasingly correlated to financial performance, brand image, market cap, ligations, investments, performance in rating, ranking and indices and other business events. As the ESG thrust pushes the leaders into action within the corporate world, along comes the chaos of numerous confusions; trial and error based solutions; ambiguous reporting;  and greenwashing communications. Corporate ESG Reporting is gaining reasonable amount of clarity and direction as the global standard setters focus on convergence efforts such as  common reporting format and establishment of Value Reporting Foundation. ESG Assurance , rating and ranking methods need standardisation and regularization.  Market and financial regulators across the globe vouch for the need for board and executive management to provide necessary assurance (be it internal or external) on their ESG performance and reporting as their stakeholders take key decisions based on them.<\/p>\n\n\n\n

ESG Audit Standards and Guidelines<\/strong><\/p>\n\n\n\n

Assurance practices and standards are transforming rapidly. Global guidelines shall firm up as IFRS\u2019s (International Financial Reporting Standards) newly established Sustainability Standards Board(SSB) takes shape. IIA (Institute of Internal Auditors) has published a whitepaper this year on \u201cInternal Audit\u2019s role on ESG Reporting\u201d. Additionally, AICPA (American Institute of Certified Public Accountant) and Center for Audit Quality (CAQ) have jointly published ESG Reporting and Attestation: A Roadmap for Audit Practitioners, that provides assistance to accounting professionals to understand and include ESG in their audit function.<\/p>\n\n\n\n

Today, the Big Four accounting firms and \u2018AccountAbility\u2019 provide the vast majority of external ESG assurance.  The level of assurance awarded are \u201cLimited\u201d or \u201cReasonable\u201d.  Technology and establishing standards will positively enable an \u201cAbsolute\u201d assurance level in the coming years.<\/p>\n\n\n\n

ESG INTERNAL AUDIT IS AN EMERGING TREND<\/strong><\/p>\n\n\n\n

ESG consulting providers  combined with internal audit function could provide very valuable internal ESG assurance and advisory that organizations need today. An Internal Audit (IA) function that is relevantly scaled up and supplemented with ESG competencies, is very strongly positioned to deliver ESG assurance services for the following reasons:<\/p>\n\n\n\n