Get ready for the upcoming SEC Climate Disclosure Rules by checking out this practical guide to preparing audit-ready sustainability data.
In today’s business landscape, it’s no longer enough to simply focus on financial performance. Environmental, social, and governance (ESG) is increasingly becoming an integral part of how businesses operate due to increased pressure from investors and stakeholders, more governments implementing regulatory disclosure requirements, and the growing evidence of the many benefits of operating in a sustainable and socially responsible way.
The growth of ESG has led to a need to assess and ensure the accuracy of an organization’s sustainability performance, but consolidated and quality data continues to be a major challenge for many. And as climate-related disclosure and ESG regulation come into play across the globe, companies must transition their sustainability initiatives to meet new requirements. The key to compliance is audit-ready data, and the time to start preparing is today.
This guide explores ESG audits and key components, what it means to be disclosure and audit-ready, why it matters for your organization, and how you can prepare for sustainability disclosures including the SEC ESG reporting requirements.
An ESG audit is an evaluation of an organization’s ESG program, the accuracy of its data and disclosures, and the overall effectiveness of the program. ESG audits help organizations assess ESG risks, identify areas for improvement, and ensure compliance with applicable
regulations and industry standards. Audits can be conducted internally or externally by third-party auditors.
ESG audits are often conducted for the purposes of:
The FigBytes Platform can simplify data preparation for future audits and climate reporting disclosures like the SEC and CSRD. Questions on preparing your climate disclosures? Connect with a Solutions Advisor today.
A well-conducted ESG audit can provide a comprehensive analysis of a company’s environmental, social, and governance practices. Here are a few examples of what an audit can examine for each component of ESG:
Environmental:
The environmental aspect of an ESG audit evaluates a company’s impact on the environment. This includes assessing the company’s carbon footprint, water usage, waste management practices, and more.
Social:
The social component of an ESG audit looks at a company’s relationships with its employees, customers, suppliers, and the broader community. This may involve examining the company’s labor policies, human rights records, charitable giving, and other factors.
Governance:
The governance component of an ESG audit assesses a company’s leadership and decision-making structures. This can include evaluating the diversity of the company’s board of directors, its executive compensation practices, and its policies around ethics and corruption.
By conducting an ESG audit, companies can better understand their impact on society and the environment and identify areas where they can improve their sustainability practices. An ESG audit can also be used by regulators, investors, stakeholders, and the public to make informed decisions about an organization’s sustainability practices and overall impact.
ESG audit-readiness is becoming increasingly important in today’s business landscape as regulators, investors, and stakeholders are placing greater emphasis on transparency and a company’s impacts and risks. Being ESG audit-ready refers to being prepared to undergo an assessment of a company’s ESG practices and disclosures. This includes having accurate and complete data, policies, and procedures in place to measure and report on ESG performance, as well as being transparent and accountable to stakeholders.
Technology can make the entire process easier by centralizing ESG data, reports, and performance to a single platform that manages your entire ESG and sustainability program and provides transparent audit trails. This makes it easier for both internal and external auditors by streamlining the manual and often tedious data collection step. By utilizing a single solution for your sustainability and ESG program you can save time and resources every time audit season rolls around.
Every organization is different, but a stakeholder can be anybody who is directly or indirectly affected by the actions of an organization. Consider the below lists when identifying your stakeholder groups.
Internal Stakeholders include people who are in a direct relationship through employment or ownership with the organization. They may include:
External Stakeholders include people who may be affected by the actions of the organization, either intentionally or unintentionally. They may include:
By prioritizing ESG audit-readiness, companies can not only enhance their reputation and attractiveness to investors but also contribute towards a more sustainable, socially responsible, and equitable future. Being ESG audit-ready can also help organizations reap the multiple benefits that come with being prepared.
Do you have questions on how to best prepare for future audits and reporting disclosure requirements? Connect with a FigBytes advisor to learn more and see how we help streamline sustainability and climate reporting programs.
Besides ensuring your organization is ready for regulatory disclosure or an audit, being ESG audit-ready can provide several benefits. Check out some of the benefits to being ESG audit-ready in the slideshow images to the right.
By implementing sustainable practices and reporting their efforts transparently, companies can gain a competitive edge and contribute to a more sustainable future.
ESG Risk is an environmental, social, or governance variable that can have an impact on a company’s performance and reputation. These risks can arise from a variety of factors, such as climate change, supply chain management, labor practices, board diversity, ethics, and more.
Organizations can leverage ESG audits to identify and prepare for these risks. Common types of ESG risk factors include:
Transition Risks – related to the transition to a more sustainable, lower-carbon economy such as increased emissions reporting
requirements, stakeholder concern, and exposure to lawsuits.
Physical Risks – related to the physical impacts of climate
change as the frequency and severity of extreme weather
events increase and sea levels rise, such as facilities susceptible to flooding or reduced crop production.
Supply Chain Risks – connected to procurement and suppliers, such as human rights and labor standards.
Ensure your organization is prepared for climate-related disclosure regulation like the SEC ESG regulations and future ESG audits with our readiness checklist. Set up your organization for audit and program success.
Being fully prepared for an ESG audit while managing a sustainability program can be difficult to manage, especially for small sustainability teams.
Save time and resources by streamlining your entire program from data collection to audit readiness, with the FigBytes all-in-one sustainability platform. Request a meeting below to see how the FigBytes Sustainability Platform can support your program.