8 essential factors to consider for your sustainability audit
Sustainability often lags in maturity compared with other business units; however, your business should be routinely conducting a sustainability audit. A sustainability audit will serve two crucial functions: 1) identifying important environmental, social and governance (ESG) risks and 2) benchmarking your organisation’s sustainability initiatives against competitors.
There is a lot of guidance out there, but it is not always well publicised. So, here are our essential considerations to help you implement an ESG process or optimise your existing one.
4 reasons your sustainability process needs attention
1) Sustainability risks manifest and grow over time
Unlike more traditional forms of business risk, sustainability risks manifest and grow over a long period of time. As such, the urgency to act can be perceived as lacking and so actions to mitigate these risks are liable to being postponed.
However, although ESG risks are often outside an organisation’s control, they pose a real risk that can harm a business in many ways. In a large study on climate change data and corporations, 8,000 organisations reported on their level of climate risk with 72% stating that climate change presents risks that could significantly impact their operations, revenue, or expenditures.
2) Snowballing regulation is getting tougher by the day
As the climate crisis reaches unchartered territory with the planet changing in front of our eyes, we are in the midst of a sustainability revolution. Governments around the world recognise regulation as the pipeline to achieving necessary change at scale, and COP26 saw the UK mandating climate related company disclosures from April 2022.
3) Investors are increasingly demanding transparency
This increased transparency is being demanded by investors and customers alike. PwC recognise large institutional investors to be the loudest in demanding enhanced corporate transparency due to the potentially significant impact on shareholder value. In fact, one in four S&P 500 companies cited “ESG” when discussing business strategy for 2020 – a figure which is the highest in 10 years.
4) Customers are prioritising sustainable businesses
Compounding these stakeholder and regulatory demands are the ever-increasing customer drivers - all working together to force improvements in the quality and quantity of ESG reporting, data and compliance.
With ESG matters coming increasingly under the spotlight for investors, exec boards and regulators alike, companies must be able to provide more detailed and verified ESG information. As such, Deloitte state “the need for accurate, comparable and robust reporting of information means ESG assurance is even more critical than ever”.
Managing these risks should be a top priority for businesses. However, in our recent survey, businesses reported a major challenge to sustainability to be assessing their current state of play.
It can be an intimidating task to undertake, and for many organisations will require implementing a completely new process. But it doesn’t have to be so daunting; there are simple steps you can take today to start the process of sustainability auditing.
A 4-step sustainability audit example
1) Assemble your key players
Identifying who should take responsibility for the audit can be a difficult task in itself. Establishing the vital skills necessary to conduct a sustainability audit will allow you to first pull together a sustainability committee – a group of influential, motivated people who can help you find the information you need.
Ideagen’s global sustainability report revealed that sustainability is most likely to be owned by top management (thirty three percent), despite the majority of respondents reporting that quality has a key role to play in meeting sustainability initiatives. Assembling the key players and engaging these stakeholders is an important first step in conducting a sustainability audit, as this same group will be well-placed to work on the projects you identify as a result.
2) Data collection
This dedicated team will then be able to compile a comprehensive list of everything that your organisation does already that relates to sustainability, including all processes that evade remakes and waste. The data can then be compared with other companies in your sector and the overall best practices if you can find suitable benchmarks.
3) Clear, measurable goals and KPIs
Once you understand your current state of play, you are in a position to look to the future and determine a clear ESG strategies – one that is made up of specific, measurable steps with actionable goals and KPIs.
4) ESG reporting
ESG reporting is not yet mandated for every organisation, however, the UK recently became the first G20 country to mandate climate related company disclosures from April 2022. ESG reporting is becoming increasingly important in enabling stakeholders to make educated decisions based on their own priorities. Similarly, more and more businesses are integrating sustainability into their business strategy to evidence their ability to survive and thrive – whilst making a positive impact – in a world of constant change.
Measurement. Goal setting. Documentation.
Ideagen partnered with the Chartered Quality Institute (CQI) to ask 30,000 quality and audit professionals whether they think their business is doing enough to protect the environment, what initiatives their business has taken, and to share their examples, ideas and advice for us to share in this report.
We identified “understanding scope” - including assessing the current state of play - to be one of the top three most common challenges quality professionals face regarding sustainability.
Download our report
Download our full report to learn more about how a sustainability audit could help futureproof your organisation against ESG risks, and see exclusive insights into how other quality professionals approach such risks.