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What company executives and audit committee members should focus on
Companies should carefully align their sustainability reporting efforts to support corporate strategies. Both directors and employees need to embrace sustainability and recognize that it is now tied to the very success of their organizations. Sustainability reporting is not a compliance program; it collects, analyzes and interprets data to provide both internal and external stakeholders with useful information on sustainability performance to enable more informed decision-making.
To achieve this objective, many companies will need to implement new systems and processes within a limited timeline. Getting this work started early and making available suitably qualified professionals with the right experience will be vital for project management, especially when the relevant expertise is likely to be in short supply.
Companies will also need to provide training and educational courses to many of their employees in addition to those responsible for financial reporting given that sustainability reporting cuts across corporate functions. For example, sustainability will represent a significant element in stakeholder communication in addition to financial and other reporting. Companies will need to revamp or build infrastructure, controls and procedures to support the initiatives.
There is also increasing pressure from investors and other stakeholders, such as regulators in some jurisdictions, for more consistent and reliable information on sustainability. Companies in many jurisdictions will need to report in line with the sustainability reporting standards and provide external assurance of sustainability information in the near future.
This means that there will be increased responsibilities for the audit committee to ensure the effectiveness of the company’s internal quality control and risk management systems as well as the assurance of sustainability reporting. Sustainability reporting will be subject to the scrutiny of securities regulators, and so an appropriate governance structure needs to be put in place to provide oversight on the implementation and subsequent reporting on sustainability.
With continued efforts by all parties, global sustainability reporting standards will come into effect, requiring companies to apply them, sooner than many people think. This will have significant impact on a company from its strategic direction to its operation, bringing new challenges and even more opportunities. Company executives and audit committee members need to act now and plan ahead in order to reap the full benefits from this journey.