Tag: Sustainability reporting

The International Auditing and Assurance Standards Board issued an exposure draft of General Requirements for Sustainability Assurance Engagements – International Standard on Sustainability Assurance (ISSA) 5000, inviting comments by December 1, 2023.  Douglas Hileman Consulting LLC (DHC) submitted comments, with two topics of interest to preparers and users of these reports. 

Why the push for assurance standards?          Sustainability reports have been around for over 25 years. Sustainability factors affect companies’ prospects for obtaining capital, delivering financial performance, as well as their effect on the environment and society.  They have matured over the years.  Even so, the scope, content, metrics, and rigor leave much to be desired by users – notably investors.  Some regulations, including the EU’s Sustainability Reporting Standards (ESRS) and California’s SB 253 (disclosure of greenhouse gas emissions) will require external assurance within a few years.  Read More

“This is Not Fine” Says LA Controller’s office.  Alas, it applies to the report itself.  A report can be impactful or a missed opportunity.  For how NOT to write a report, read more. 

The International Sustainability Standards Board (ISSB) released two Sustainability disclosure standards on June 26, 2023[1].  With many developments in the Sustainability/ ESG space – and more on the horizon (notably an SEC climate disclosure rule), ISSB standards have received scant attention.   Some companies may think it doesn’t apply to them – but they could be surprised.

Who’s In?

The International Accounting Standards Board (IASB) developed International Financial Reporting Standards IFRS) for financial reporting and disclosures.  IFRS has been adopted by 168 jurisdictions worldwide (not including the United States).  ISSB[2] is an independent body that was formed to meet the demand for global sustainability standards.  (read more)

The Institute of Internal Auditors released an exposure draft of Global Internal Audit Standards (“draft GIAS”).  These standards will affect the Internal Audit profession and all who rely on it – the board, management, investors, and the public.  Here are six areas I suggest for improvement. 

Public interest. objectives of organization:  The draft GIAS mentions “public interest”, including the premise that GIAS are set in the public interest.  This has aroused spirited comments on social media.   (Read More)

The Institute of Internal Auditors has released an exposure draft of Global Internal Audit Standards (“draft GIAS”).  These standards will affect the Internal Audit profession and all who rely on it.  Here are five things I liked – at least, mostly. 

1. Necessity and Timing: It has been six years since the International Professional Practices Framework (IPPF) was revised.  The world has changed, other relevant standards have changed, and more is expected of Internal Audit.   For example, COSO released supplemental guidance “Achieving Effective Internal Control over Sustainability Reporting (ICSR)” in March 2023[1].  This document highlights roles for Internal Audit. It introduced “ICSR” into the lexicon. People are already talking about “sustainability SOX testing”.  The timing is good.   (Read More)

[1] I was a principal author of this supplemental guidance.  The document can be accessed on the COSO website, as well as from the home page of www.douglashileman.com. 

IIA’s GAM session was SRO, with more online. Doug and Edward Olson (Partner and [Canadian] National Leader for ESG) offered takeaways. Read more.

IIA Los Angeles 2022 Fall Conference Session: Takeaways

I presented “Internal Controls over Sustainability Reporting” (ICSR) at the Institute of Internal Auditors – Los Angeles Chapter – 2022 Fall Conference in October 2022.  This long-running, marquee event attracts hundreds of attendees from across the Southland.  My latest installment was another successful session on hot topics related to Sustainability/ ESG.  Reporting, disclosures, and even expectations of assurance are on the rise.  Here are key takeaways from the session, where Internal Auditors learned how to add value to their organizations. 

• Sustainability reporting: Sustainability/ ESG reporting is done to meet the needs of many stakeholders.  Investors – and analysts supporting them – have been leading the charge, demanding accurate, reliable, decision-useful reporting and disclosure on sustainability topics.   (Read More)

Time to wrap up your company’s performance for year-end. You’re focused on sales, profits, changes over the last year, and preparing for financial auditors. It’s also a good time to do exactly the same for Sustainability reporting. Small- and Medium-sized enterprises (SMEs) and private companies, in particular, may still be developing bits and pieces of Sustainability programs. Annual Sustainability reporting and planning takes a back seat to financial reporting and planning.

These five tips make great New Year’s Resolutions for Sustainability reporting and planning.

Begin with what you’ve got. Environmental, Safety, Homeland Security, and other regulations require reporting. Specific industries are subject to additional regulations, such as the Public Utilities Commission for utilities. Your industry may have an industry standards group or code of conduct that requires external reporting. If your company already reports this information somewhere, why not use it in your Sustainability report? Stakeholders do not see the totality of all this information – and it may be helpful for you to see it compiled all in one place. The basis for this reporting may differ, such. For example, some reporting may include manufacturing, office, and sales fleet, whereas other reporting includes operations only. Some reporting may include the company-owned operations only, and other reporting includes companies, investments, and franchises. Take care that the basis for all Sustainability reporting is consistent.

Use a cross-functional team. People in different roles will know about existing reporting, or other company programs or projects that other people don’t know. Staff from Purchasing, Sales, Operations, Environmental, Investor Relations, Human Relations, Safety, and Communications will bring different perspectives. This needn’t be a big, time-consuming effort for everyone – just get their input. If your company doesn’t have individuals in each of these functions, then scale your team appropriately; in any case, use more than one person. An external perspective can also help you. An outside resource has experience with many companies, reporting metrics, stakeholders’ expectations, and mistakes others have made in Sustainability reporting. Some consultants will perform a full-blown verification audit of the Sustainability report. Auditing is great, but your company may not be ready for it. There are many other ways to use a consultant in a supporting role and at reasonable cost.

Use common frameworks. There are several reporting frameworks for Sustainability. Customers, investors, and non-governmental organizations (NGOs) all have their own. The Global Reporting Initiative is perhaps the most commonly-used framework for comprehensive Sustainability reporting. It is scalable, and suitable for SMEs. The Carbon Disclosure Project (CDP) has a reporting framework for greenhouse gas (GHG) emissions only. CDP data from publicly-traded companies is available via Bloomberg to traders on the floor of the New York Stock Exchange. The CDP also has a prototype “water footprint” reporting framework. Using a common framework saves analysts time and money (and saves you from responding to many of their questions). It also makes your Sustainability report look more professional.

Only report what you know. Systems, procedures, controls, and the quality of data and information for Sustainability may not be as complete or as reliable as the systems you have for operations or financial performance. This is normal. Report only the data and information that can be supported by calculations, back-up data or information. Don’t guess. Consider an example where your company wishes to report on the total amount of fuel used by your company’s sales force. If you don’t have this information, don’t blindly guess “1000 gallons”. However, if the company has records that show $2100 was spent on fuel, and you can estimate the average price of fuel was $3.50 per gallon, then you have support for an estimate of 600 gallons.

Look ahead. As your company compiles your year-end Sustainability report, you’ll think “gee, I wish we had done ‘x’” or “it would be great to have data on ‘y’.” Yes, it would. While it’s fresh on everyone’s mind, and while you can create the best business case, make these improvements now. Gathering data for new reporting metrics (such as the number of gallons of fuel purchased) can take a while to implement. Work out the kinks early, so you have good data for next year. Don’t say the same thing next year – say it about something else.

“Sustainability” can be difficult to include in annual budget planning. If you’re lucky enough to have a full-time Sustainability Manager, s/he may have priorities for your company’s 2015 budget. More likely, because Sustainability means so many things to so many stakeholders, s/he has probably overlooked some things. Here are five things that should be in your 2015 Sustainability budget:

Conferences & Education: The Sustainability field continues to evolve at a fast pace. There are many conferences addressing different facets of Sustainability. Conferences fulfill many needs. If you have a line of “green” products or services, you can meet potential customers. You can monitor competitors’ activities. You can network with other Sustainability professionals, perhaps developing collaborative relationships. You can see what’s not out there, and could be an opportunity for your company. There are so many conferences, attending them could be a full-time job. Be discriminating in what you attend, what you exhibit at. Education is available in many forms. Webinars are available on a variety of topics, and many are free. Many groups offer free email lists; www.environmentalleader.com and www.greenbiz.com are two organizations that offer insights on many topics, and occasionally offer free webinars. Several colleges and universities offer Sustainability curricula for working professionals. For example, the University of California at Los Angeles Extension offers a certificate program in Sustainability; some courses are offered online. Conferences and education can keep you informed of trends, opportunities – even mistakes being made by others – and help you plan your company’s business strategy.

Communications and Reporting: Sustainability involves considerable communication. Internal communication is needed to enlist support, convey expectations, and gather Sustainability information. External communications typically takes much more effort. Your company may publish a Sustainability report (typically annually). You probably do other Sustainability communication via product or service bulletins, website information, presentations to industry associations or other groups, social networking, or other means. Your company may need to respond to requests from customers, investors, financial institutions, analysts, or other stakeholders. These requests are rarely consistent with each other. Handling these incoming requests may involve several iterations of communications with these stakeholders. Communications about Sustainability may be “pure Sustainability” communications (as in response to a Sustainability questionnaire), or may be embedded in more general communications (the CEO’s description of the company’s performance and market position to a group of potential investors). The same type of effort is required for all Sustainability communications: understanding the need/ request; drafting responses; verifying accuracy of communications; evaluating communications channels; and measuring effectiveness of communications.

IT Systems & Data Management: As Sustainability programs mature at companies, they involve more and more data. You may collect data on waste reduction, energy efficiency projects, water use reduction efforts, supply chain monitoring programs, community outreach efforts, or any of dozens of other metrics. IT systems and controls developed for tracking sales and inventory may not be suitable for Sustainability data. It is important to have systems and controls to collect and assure the accuracy and reliability of this data. Whether you are using Excel spreadsheets or using Sustainability software, it always pays to devote some resources to ensuring the quality and timely reporting of Sustainability data.

Time: Budget some time for Sustainability – for you, other managers, and all staff. If there is no charge code for employees’ time for Sustainability, it suggests that it’s not important. It also doesn’t give you the opportunity to track just how much time, effort (and cost to your company) that Sustainability efforts really take. This can be the first step in setting priorities, or developing or improving business processes to manage Sustainability.

Resources: Even large corporations enlist support for Sustainability, often for topics where they don’t have in-house expertise. They may also value or require independent perspectives, such as for a greenhouse gas (GHG) emissions inventory audit, or for an audit of their Sustainability reports. Many companies have seen the value of an external “pre-audit”, where they gain the value of independent perspectives, get suggestions for improvement – without committing to an audit report. New issues arise where it is more cost-effective to use external resources. Dodd-Frank includes a provision on due diligence for conflict minerals; California is considering a law requiring due diligence for suppliers who may use forced labor. You may want some help to calibrate your company’s conformance to the Federal Trade Commission’s proposed revisions to the Green Guides. At some time in 2015, you’ll encounter a Sustainability issue where it’s best not to go it alone. Even if it’s a modest budget, set something aside so you can respond as quickly as possible to meet your company’s needs.