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The audit committee’s role in sustainability/ESG oversight
The board and ESG oversight
Because ESG encompasses strategy, risk, and opportunity, the board plays a vital role. But ESG is a broad topic, and the board should consider assigning various aspects of oversight to specific committees.
Here we outline the role the audit committee can play in overseeing ESG disclosures.
Sustainability, also known as environmental, social and governance (ESG), is not a new concept. But for a long time, sustainability efforts existed in silos, were not integrated into the company’s core business model, and were not disclosed. So, what has changed? Why is this topic shaping today’s business world?
In this paper we answer those questions and outline the audit committee’s role in sustainability reporting.
Sustainability, also known as environmental, social and governance (ESG), is not a new concept. But for a long time, sustainability efforts existed in silos, were not integrated into the company’s core business model, and were not disclosed. So, what has changed? Why is this topic shaping today’s business world?
In this paper we answer those questions and outline the audit committee’s role in sustainability reporting.
Disclosures
Audit committees overseeing management’s process for determining ESG disclosures may want to ask the following questions:
- What has management identified as the company’s ESG risks and opportunities?
- Which ESG frameworks or standards are they using? Why have they chosen a particular framework?
- And more...
Read more about other disclosure oversight related questions audit committees may want to ask.
Processes and controls
To oversee ESG processes and controls, the audit committee may want to ask the following questions:
- How is the company collecting ESG information?
- What are the data collection policies?
- What controls are in place to ensure that ESG information is reliable and complete?
- And more...
Read more about other processes and controls related questions audit committees may want to ask.
Assurance
To better oversee ESG assurance, the audit committee may want to ask the following questions:
- Have investors or other stakeholders requested assurance over the ESG reporting?
- If so, have they indicated what level of assurance they prefer?
- And more...
Read more about other assurance related questions audit committees may want to ask.
How audit committees can stay ahead of the curve
As companies continue to integrate ESG into their strategies, they will need input from the full board. Boards that leverage the audit committee’s financial disclosure oversight expertise by assigning them the responsibility to oversee ESG disclosures can get ahead of the growing demand for this information. Enhanced ESG disclosure is a trend that’s only going to intensify in the coming years as regulators respond to rising concerns about the impact of environmental and social issues on business operations and performance.
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