Recently, I posed a question to our Advisory Board, who represent a range of perspectives and experiences in ESG: how do you determine what ESG information or data is “correct,” best to use/rely on and – how do you prepare to defend that when others bring forward information, data and reports that contradict your position? Regardless of the ESG topic, it is easy to find credible yet conflicting information about it. This presents a real problem for CSOs, staff and ESG advisors. Doug Chia’s comments on the topic are here.
Rhonda Brauer offered the following thoughts related to the role of Audit Committees in relying on and disclosing ESG information:
“The Audit Committee seems destined to be the Committee back in the hot seat. ESG disclosures with ‘assurances’ are coming. This could come directly to companies via, e.g., CSRD, CS3D, the SEC, California, or ISSB. It could also arrive indirectly through their customers, suppliers, and others in their value chains – both in the U.S. and abroad — who first become subject to these new disclosures. It makes good business sense to be prepared for these new disclosures. Right now, Audit Committees should have oversight as appropriate for their companies, including getting updates on (i) ‘gap analyses’ between current and expected disclosures, (ii) how their independent auditors are preparing for those assurances — as a profession, and with similar client companies in their industries, and (iii) how the expected disclosures are in alignment with their corporate strategies and financial statements.”
Audit Committees play an important role in the governance of ESG disclosures and should help pressure test underlying data – both internal and external. But it is incumbent upon in-house ESG/sustainability staff to do their own data due diligence and verification before presenting anything to auditors or the Audit Committee. While boards and their committees act as the adult in the room, that shouldn’t be seen as license for others to ignore the rules of the house.
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