If NFR data and information is so important to so many stakeholders … shouldn’t it be right? As stakeholders make more – and more important – decisions based on ESG data, audits can add confidence to the quality and reliability of the information.

Auditing is an excellent tool to get greater comfort over processes, controls, data, information – whatever is identified as areas of risk, and for audit objectives. Assurance (always done by an external entity) provides even greater comfort to external stakeholders.

 

DHC has performed many audits of NFR, each tailored to be fit for purpose.

• Audits (“second line”) for EHS, systems & controls, and/or contents of Non-Financial Reports (ESG)
• Advisor to Internal Audit (“third line”) with ESG focus
• Lead or advise to external assurance (“fourth line”) of NFR, including conflict minerals
• Senior advisor (ESG, audit) to monitorships working on behalf of the US Department of Justice

DHC supports external assurance firms as an ESG specialist.

The Institute of Internal Auditors developed the “Three Lines (of Governance)” model over 15 years ago; it has become widely adopted and referenced.  Mr. Hileman has experience in all three lines – plus a bonus fourth! – unmatched by few in the professional services field.  Second line is corporate management and internal topical (EHS) auditing; third line is Internal Audit (reporting to the Board).  DHC suggest that external assurance (e.g., financial audits) are yet another wave of governance – a “fourth line.”  Mr. Hileman has supported financial audits, and conducted external assurance per the SEC’s conflict minerals rule.  Mr. Hileman served as the senior environmental management and audit specialist on the Volkswagen Monitor Team; this is yet another type of governance.

Throughout it all, DHC retains the perspective from roots in facility operations and compliance – the first line.  The hands-on experience on night shifts and weekends provides distinctive experience to drive simple, practical solutions and procedures.  Applying these perspectives to the complicated and dynamic area of NFR helps clients go further, faster, and more efficiently.

DHC’s experience on all sides of this issue make for distinctive perspectives that add value.

• Environmental, Health & Safety
• Non-financial reporting and financial reporting and disclosures
• Program design and implementation
• Advisory and (external) assurance
• Compliance and risks

What’s an audit?  An audit is a comparison of an “actual” to any “standard” using a structured, documented process, with the intention of looking for conformance or gaps.  Identifying the “standard” (also “audit criteria”), understanding the “actual”, and defining and documenting the process are easier said than done.

The very notion of “compliance” has changed, with ESG compliance changing fast.  This poses risk – to operations, compliance, content of [financial and non-financial] reports, and business reputation.  Climate change, ecosystems and biodiversity, product content, microplastics, circular economy, human rights – these issues and more have increased in visibility and importance.  Governments have passed new laws and regulations.  These may be the most visible (and pose the risk of enforcement), but they are hardly the end of the story.  Industry groups, customers, investors, and other stakeholders have established their own standards and expectations.  Losing market share can be more costly than a regulatory fine.

Co-sourcing adds value.  Audits cost money; as much as Management wants to mitigate risk, they would usually prefer to devote this money to operations.  In co-sourcing arrangements, DHC leverages our experience, bringing perspectives from different types of audits, collecting and evaluating evidence, reporting methods, and options for corrective measures.  Co-sourcing also serves as a coaching opportunity.

When you’re ready for an audit, you’re ready for anything.  DHC helps clients prepare for high-profile, high-stakes audits.  Audit results can make the difference between hefty fines and penalties, or a clean bill from regulators.  Or the difference between closing out onerous obligations under a contract or agency enforcement agreement, and requirements for additional actions and an extension of oversight.  Or the difference between acceptance and rejection by a prospective new customer, or a socially-screened investment fund.  DHC has helped Clients achieve successful outcomes, allowing them to return to their business – which often runs more efficiently based on our input.