For many companies including those from SMSE sector and also for investors audit ESG becomes an essential tool to making conscious decisions about investment and business.
ESG is an abbreviation for ”Environmental, Social, Governance” which means balanced approach to business including environmental, social and corporate governance aspects.
Audit ESG is a process of review and testing actions of the company in terms of three areas, identifying areas to improve and assessment of risk and opportunities related to it. Currently ESG audits are not only chosen by companies subject to non-financial reporting obligations, but also by smaller companies that want to increase their competitive advantage and manage risk.
How is ESG audit performed?
- Collecting data- first step in audit ESG is collecting data related to company’s actions in terms of environmental, social and corporative areas. Data can come from internal systems of management as well as from external sources.
- Analisys and assessment-Next the data is analyzed and assessed in terms of compliance with ESG practice and industry standards and provisions.
- Identification areas for improvement – auditors are identifying areas in which the company can improve its practice related to ESG on the base of analysis. This may include areas like reduction of CO2 emission, improving working conditions or implementation of anti-corruption practice.
- Raporting and recommendations -For the end of the audit there will be prepared a report containing the results of the analysis recommendations for corrective and implementation actions and suggestions for the long-term strategy of ESG and ESRS standards-compliant development.
The duration of the ESG audit may vary
It depends on many different interior and exterior factors f ex.
- Size of the structure and company
- The number of documents and information subject for the examination
- Availability to data and documents
- Degree of integration of ESG standards in the company (companies that already have developed processes related to ESG management, might need less time for Audit, comparing to those which are just beginning to integrate these practice and collect data)
- Tools used (e.g calculation of carbon footprint) and data collecting and analysis technologies
- expectations od stakeholders, investors, customers, local communities
- Legal and regulatory requirements (e.g be a subject to non-financial reporting)
- company goals and priorities in ESG areas
There is no clear answer to the question how long the audit should last- it may be few weeks or months. It is crucial to adapt the audit process specific needs and situation of a given organization, ensuring the balance between assessment accuracy and effective use of resources. ASG audit should serve as a tool for implementation of company’s balanced development practice. Implementation of ESG standards also for companies from SMSE sector can bring variety of benefits, including increasing of the operative efficiency, impact on company’s image, improving risk management processes and increasing the involvement of employees and contractors. Therefore regardless of the costs associated with implementation of ESG standards, many companies consider it a profitable investment in long-term development and business success.
ESG Compliance is an expert team operating at the Regional Chamber of Commerce in Katowice, which includes experts from KBZ Żuradzki Barczyk & Wspólnicy and the Żyglicka i Wspólnicy Law Firm.
Joanna Boroń
Katarzyna Hiller
ESG Compliance is an expert team operating at the Regional Chamber of Commerce in Katowice, which includes experts from KBZ Żuradzki Barczyk & Wspólnicy and the Żyglicka i Wspólnicy Law Firm.
The article was published in the June issue of „Business HUB”.