Auditing the ESG Process

Day 1

The Pillars of ESG

• Environmental, Social and Governance responsibility
• The need to demonstrate responsible business processes
• The ESG cycle
• The benefits of ESG
• Improved environmental performance
• Improved employee health and wellbeing
• Increased stakeholder engagement
• Access to additional funding
• Improved transparency of supply chain risks
• Attracting ‘ethical consumers’

The Internal Audit role in ESG

• Raising ESG risk awareness with audit committees and boards.
• Promoting opportunities to improve efficiency and effectiveness.
• Assisting the organisation to achieve its strategic ESG goals
• Assisting delivery of risk management solutions in the ESG arena
• Promoting awareness of transition risk to assist the organisation to beat the curve as ESG policy implications become more apparent.
• Ensuring climate-related risks receive attention
• Meeting with functional management to discuss the ESG audit
• Determining sources of information
• An ESG audit checklist will be shared
• Exercise 1 – Pre-Meeting with management: Role Play

The Environmental audit

• Overview of current environmental thinking
• Structure and requirements of ISO 14001
• Key environmental concepts and essential terminology
• Key focus areas for auditing core environmental processes
• Overview of current environmental legislative requirements and relevance to auditing
• Objectives and types of environmental audits
• Processes and techniques for planning, conducting & reporting audits
• Ensuring consistency
• Is there a Departmental Environmental Policy?
• Has a Department Environmental Coordinator been formally appointed?
• Exercise 2 –Challenges of environmental audit

Energy and Water management

• Are there defined maintenance programmes to ensure all equipment is operating at optimum efficiency?
• Is there a written commitment to reduce energy use?
• Are there formal arrangements to replace energy inefficient equipment/fixtures?
• Are there formal procedures to consider energy efficiency when purchasing new equipment?
• Are there records of energy use for the Department’s premises (e.g. break down by floor)?
• Have there been reviews undertaken to identify energy use and minimisation opportunities?
• Water management and economy of use
• Is any wastewater recycled? If so, describe briefly (i.e. treatment and use).
• Licences or applications on file pertaining to water pollution control regulations
• Criteria for reviewing the premises discharge strategies
• Exercise 3 –The energy/water management audit

Waste management

• Dangerous waste
• Chemical waste
• Biological/infectious waste
• Solid waste (including obsolete equipment)
• Radioactive waste
• On-site waste or disposal systems
• Waste recycling programmes
• Off-site facilities used for waste treatment and storage

Ethical and sustainable purchasing

• Are key suppliers located in emerging markets with high social, human labour, environmental risks?
• Is the supply chain part of an industry with high social and, environmental responsibility?
• Does the business have a responsible purchasing policy/Code of Conduct for suppliers?
• Are ESG criteria included in the selection and monitoring of key suppliers?
• Compliance with health and safety regulations and/or Departmental guidelines
• Packaging materials (quantity, biodegradability, recyclability etc.)
• Exercise 4 –Ethical and sustainable procurement

Other key environmental topics

• Air emissions and indoor air quality
• Noise Control
• Transportation and travelling practices
• Environmental information publicity
• Dangerous goods
• Environmental site audit
• Sustainability audit
• Environmental emergency prevention and preparedness
• Exercise 5 – Select a topic and brainstorm the issues

Auditing Reputation

• The rise of reputation as a key risk
• The increasing importance of a positive image – the need to be admired
• Where does reputation come from?
• How do you measure it?
• The magnifying effect on reputation of business failures
• How to judge reputation
• Identifying Reputational Risks
• A checklist for reviewing reputational risk will be provided to all delegates

Day 2 Social responsibility and Governance

Social Responsibility and ethics

Social Responsibility evaluation

The key aspects of Corporate Governance

Corporate Governance and the Internal Audit Role

Analysing and assessing the effectiveness of Governance

Meeting Stakeholder expectations