What is an ESG Audit?
An ESG audit is a process that evaluates a company's environmental and social risks relating to its operations and products or services. The goals of ESG auditing are to:
- Identify potential risks and ways to address them proactively.
- Support the organisation's ESG disclosures, ensuring the accuracy of disclosed ESG data.
- Inform stakeholders and leadership about shortcomings in reporting standards or ESG efforts.
- Prioritise critical issues that impact operations, products or services via an ESG materiality assessment.
- Quantify ESG risks, opportunities and impacts, and report their findings.
What does an ESG Audit Entail?
When evaluating and assessing ESG practices and performance, an independent examination is conducted to review the organisation's policies, procedures, systems and activities. The audit also may identify whether the organisation aligns with recognised standards, guidelines, and best practices.
What Are the Benefits of Auditing ESG?
Although not mandatory in South Africa, ESG auditing is fast becoming necessary for organisations as it provides a mechanism for verifying ESG performance. This is important in meeting shareholder expectations. The assessment identifies and evaluates possible responses to risks that enable the organisation to develop and apply the appropriate strategies and controls to mitigate the risks proactively. ESG audits foster greater confidence among stakeholders in the organisation's sustainability and responsible business practices.
The proactive risk management approach helps maintain the company's broader brand reputation as it successfully navigates the torrid waters of ESG. At the same time, verifying ESG disclosures also increases the credibility of an organisation's ESG claims in the public eye and to capital investors.
One of the most significant benefits of ESG auditing is ensuring compliance with industry standards and statutory regulations, further reducing risks.
In addition, there are opportunities to be found in ESG auditing. Organisations may identify areas for improvement in operations, identify improvements to social responsibility frameworks and to strengthen governance processes.
Conducting an ESG Audit for Your Company
It is evident that in today's business landscape, ESG auditing is essential. It enables companies to address ESG related risks and seize opportunities proactively. It helps management to prioritise ESG risk management strategies, and the audits underpin compliance. ESG Audits enhance ESG disclosures' accuracy and provide stakeholders with added assurance.
If you would like to use this valuable tool in your organisation, don't hesitate to contact your nearest
Moore firm today.