Introduction
Environment, Social, and Governance (ESG) is a framework for assessing risks to a company’s operations related to large-scale, long-term environmental, social, and governance issues. ESG covers a wide range of issues, from environmental threats like climate change, to social issues related to diversity, equity, and inclusion, to social responsibility in investing and production, to governance issues related to executive pay and financial reporting. These risks, however, are also opportunities for growth – to become the ethical, inclusive, and sustainable workplaces that not only manage risk, but proactively increase their stakeholders’ quality of life. An ESG audit will also substantiate the accuracy of any ESG-related data your organization discloses to employees, stakeholders, and regulatory entities.
What Is an ESG Audit?
An ESG audit is an assessment of the risks an organization faces related to environmental, social, and governance domains. ESG audits can be internal or external; KPMG suggests that third-party auditors and assurance specialists who are well-versed in ESG assessments will become increasingly important for companies who wish to assure their stakeholders that their ESG claims are accurate. An ESG audit will likely align with other dimensions of your risk management plan and compliance requirements, as well, and can prepare you to file reports with regulatory agencies. As Deloitte notes, internal audit’s “role includes validating the effectiveness of ESG-related controls and activities to help organizations manage those risks and foster resilience.”
What Is an ESG Risk?
ESG risks are exactly what the acronym lists – environmental, social, and governance risks. While some argue that the “G” in ESG should be considered separately, these three risk categories are interdependent. We may well see the acronym for ESG evolve in the future, but the SEC’s move to prioritize climate-related disclosures may be a precursor to regulations that codify ESG to law. Most ESG specialists see governance issues, which include board quality and executive pay transparency, as important to managing both environmental and social risk. Here’s a bit more detail about each category:
Environmental risk includes potential for pollution of the air, water, or soil due to production or distribution of goods, climate impact, carbon footprint, and energy use.
Social risk includes risk to the well-being, reputation, or privacy of one’s customers, employees, or supply providers, including accessibility in the design and distribution of goods, employee welfare, human capital, and issues related to diversity, equity, and inclusion (DEI).
Governance risk includes issues related to financial reporting, fraud prevention, executive pay, and organization of the company.
Why ESG Audit in Higher Educational Institutions.?
Managing risk has become an intrinsic part of leading a higher education institution, and not just because the pandemic has disrupted colleges and universities for more than two years. Preparing for potential consequences of geopolitical risk; keeping up with the rapid evolution of emerging technologies; and addressing environmental, social, and governance (ESG) issues such as climate change have also been on the radar of administrators and deans.
“Our industry is changing in some important and fundamental ways,” says Jeffrey Brown, dean of Gies College of Business at the University of Illinois Urbana-Champaign. “There are myriad global issues that are beyond our control but that have a first-order effect on the world in which we operate.”
“There are many innovative ideas to explore and address risk and environmental sustainability at colleges and universities,” According to Norean Sharpe, dean of the Peter J. Tobin College of Business at St. John’s University. “Some institutions have been successful in their efforts to improve curricular content of academic programs, specifically around corporate social responsibility, ESG, sustainable development goals, and environmental sustainability.”
How Higher Education Institutions can help to address the issues related to ESG and nudge learners to be more aware about the concern and create entrepreneurs to mitigate the risk related to ESG.
Why ESG Audit in Higher Educational Institutions.?
The HEI’s goals in meeting these obligations include: Each of the following bullets must be addressed by the Higher Education Institution in 300 to 500 words with required evidences.