The Imperative of Sustainability Audits in Today’s Corporate Environment
It is said that perspective is often the key to happiness. In the same vein, perception breeds goodwill or apathy. When it comes to sustainability, organizations are facing pressure to not only make a profit but to do it ethically or sustainably. With the increasing adoption of sustainability practices and reporting, how do we ensure the correct information is passed across to stakeholders? Organizations can claim they are doing A-Z, whereas they have only started A. Surprising? No, humans are hardly ever consistent with ethical standards. The corporate governance structure today is borne out of the need to solve the agency problem and deal with the information asymmetry between the executive and the owners. To use the proper term for a situation where a company oversells its green practices and claims to be doing more than what is obtainable, Greenwashing provides the appropriate terminology. Similarly, Impact washing can be defined as any marketing claim about a product triggering a change in the real economy that cannot be supported by evidence. This definition by the ISO provides the fundamental reason companies engage in these practices i.e. to look attractive to investors, entice customers, and boost reputation.
Why not attempting to be philosophical, Socrates once opined that an unexamined is not worth living. Organizations must examine their sustainability practices across the ESG metrics. According to ISO 19011, an audit is a systematic, independent, and documented process for obtaining audit evidence and evaluating it objectively to determine the extent to which the audit criteria are fulfilled. To draw a parallel, a sustainability audit seeks to evaluate an organization’s performance against established sustainability frameworks and standards to identify areas of improvement for the organization.
It is a process to check the organization’s sustainability performance and benchmark with peers. Fundamentally, it assesses the organization’s policies, procedures, activities, and operations and checks their conformance with sustainability standards.
A sustainability audit uses audit techniques such as a checklist, observation, document review, and interview to determine what the organization is currently doing regarding sustainability.
Auditing Across the ESG Framework
Sustainability performance can be assessed across the ESG framework. An organization’s sustainability performance can be determined by examining its environmental, Social, and governance performance. By using audit tools to get data on those metrics, reasonable information can be gotten to make informed decisions on the organization’s sustainability performance.
What makes sustainability audit different from EMS or OHS audit by the ISO?
Sustainability is typically broader than Environmental management systems or Occupational health and safety audits. It encompasses EMS and OHS audits and goes beyond to look at human rights, labour issues, supply chain, governance, and others. Sustainability is a multifaceted concept with three dimensions that can be best approached from the stakeholders’ perspective. In other words, if company A says they are doing A-Z, if we engage the external stakeholders, what do they think company A is doing? These offer another perspective on sustainability performance and can provide valuable insights into the organization.
Methodology for Sustainability Audit
While there is no universal framework for sustainability audit, at Parallelpoint Consult, we have extrapolated from the ISO 19011 auditing standard to develop a framework for sustainability audit.
Here are the stepwise procedures for carrying out a sustainability audit:
- Define the purpose and scope of the audit: It is important to specify the purpose and scope of the audit. A good scope is for the audit to cover the material issues that the organization has identified.
- Draft and sign off on the Audit plan: The audit plan communicates the time and date of the audit as well as the methodology for the audit. In this case, the methodology focuses on collecting data from internal and external stakeholders.
- Auditing across the ESG framework: Using relevant standards/frameworks as audit criteria, the organization’s sustainability practices will be assessed to ascertain progress and areas of improvement.
- Prepare sustainability audit report: the audit ends with a report on the audit and its findings. It includes actionable insights and plans to improve the organization’s sustainability performance.
Assessment Criteria: Sustainability Journey Stages
Organizational sustainability journeys can be categorized into distinct stages.
SLEEPING: new to sustainability, not taking advantage of trends
STRUGGLING: trying to find its niche in the sustainability space, but no direction yet
SEEKING: looking for more sustainability opportunities
SUCCEEDING: getting positive returns from the sustainability journey
SOARING: sustainability drives all organization’s activities
This categorization provides a valuable framework for organizations to assess their current position on the sustainability journey and set realistic goals for advancement. It also underscores the dynamic nature of sustainability efforts, emphasizing the need for continuous improvement and innovation to progress through these stages.
What Are the Benefits of Sustainability Audit?
- It identifies where the organization currently operates in its sustainability journey.
- It provides insights into what is currently working within the organization regarding managing environmental and social impacts.
- It highlights areas of improvement for the organization as regards its sustainability efforts.
- It objectively evaluates the gaps in the Environmental, Social, and Governance Management system.
- It provides valuable input for the review of the organization’s sustainability strategies.
Conclusion: The Ongoing Pursuit of Sustainability
Source: World Economic Forum, 2022
The pursuit of sustainability demands transparency, accuracy, and genuine commitment. Doing business sustainably and ethically provides a model that provides value for both the environment and stakeholders. The organization’s sustainability performance must be evaluated periodically to determine progress on targets and commitments and review strategies. Thus, using a stakeholder perspective provides insights into the actual sustainable practices of the organization.
At Parallelpoint Consult, we are well-positioned to deploy our tools and expertise to advance your sustainability journey.