The Center for Audit Quality (CAQ) released a new report, Audit Committee Practices Report: Common Threads Across Audit Committees, showing interesting year-over-year changes in how Audit Committees address ESG matters. Generally speaking, ESG dropped down the priority ladder for many companies this year:
“Only 14% of respondents said that ESG reporting was overseen by the audit committee. Forty percent indicated that the nominating and governance committee had oversight of ESG reporting, while 30% said the board did. The bulk of respondents said the audit committee devoted adequate time (69%) to this topic over the past year. Interestingly, a notable minority felt that ESG reporting was an area where the committee spent too little (17%) or too much (11%) time.
Last year’s survey identified ESG disclosure and reporting as among the top-three audit committee priorities, with 39% indicating it as such – behind cybersecurity (63%) and ERM (45%). This year, only 22% of respondents included ESG reporting in their top-three priorities for the next 12 months, dropping it to sixth on the list, behind cybersecurity, ERM, finance and internal audit, compliance with laws and regulations, and finance transformation.”
The report offers context for the change – which isn’t bad news when you think about it:
“All these developments seem to have prompted a need to reassess ESG strategies and measurement processes, matters that this year appear to be more in the hands of the board than the audit committee. Last year, 34% of respondents indicated ESG disclosure and reporting was under the audit committee’s oversight versus just 14% this year.”
This could indicate more companies are comfortable with disclosure aspects and see ESG as programmatic initiatives beyond just reporting – which should please most ESG/sustainability professionals.
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