The World Business Council for Sustainable Development (WBCSD) and FSR - Danish Auditors have published a first-of-its-kind guidance on how companies can improve the quality of, and confidence in, their environment, social and governance (ESG) information by considering the basic building blocks of internal controls.
It’s important for companies to pursue investment grade ESG data to support decision-making and robust control activities to improve the process of data collection, analysis and reporting.
But companies first need to understand the business case for improving the internal control environment and the quality of ESG data.
The guidance offers a series of questions for a company to use to conduct a gap analysis and understand what needs to be improved.
The guidance also provides practical suggestions aligned to the COSO Internal Control Framework on how changes can be made within an organization - from establishing a chart of accounts and a group ESG data manual, through to training workshops and reports to management to continue to improve and develop the process.
“We can now demonstrate that companies’ ESG profile affects their valuation. Therefore, it is in the interest of shareholders and the management to provide good ESG reporting and targets for the future.” says Niels Granholm-Leth, Head of Equity Research at Carnegie Investment Bank and Chairman of the Accounting Board of the Danish Financial Analyst Association.
“We see the Internal Control Guidance as the standard for improving on internal ESG procedures.” adds Bjarne Pedersen, Chief Strategy Officer at H+H.
To be resilient, successful and sustainable, companies must understand the impacts and dependencies of their business models. They must manage risks and take advantage of opportunities in their operating environment. This demands comprehensive information - which starts with reliable data flowing through the business to support internal decision-making.
Read the guidance (available in English and Traditional Chinese) for more.