auditboard.com1auditboard.com2TableofContentsRisingtotheESGChallenge:AcceleratingEffort,MinimizingRisk3PartOne:KeyFindingsFromthe2023ESGMaturityBenchmarkingReport8PartTwo:FiveInitiativestoAdvanceYourESGMaturity19There’sNoTimeLikethePresenttoStartMaturingYourESGPractices22auditboard.com3RisingtotheESGChallenge:AcceleratingEffort,MinimizingRiskInabusinesslandscapeincreasinglyattunedtosustainability-focusedstakeholders,consumerdemands,andinternationalregulations,companiesaretakingchargeoftheirenvironmental,social,andgovernance(ESG)initiatives.VoluntarydisclosureeffortsrevealthatmanybusinessesareconcernedwithESGoptics:anastonishing96%oftheS&P500self-publishedsustainabilityreportsin2021,accordingtotheGovernanceandAccountabilityInstitute.Concurrently,whiletheSEC’sproposedclimatedisclosurerulesremainopentopubliccommentasofAugust2023,manyanticipatetheywillbeformalizedbyyear’send—andhavealreadybegunembracingtheminresponsetomountingpressure.TheseexampleshighlighttheincreasingpowerthateffectiveESGriskmanagementhastoshapeacompany’sfinancialstandingandreputation.DespitegrowingdemandfrominvestorsandstakeholdersforcommitmenttoESG,manyorganizationsfaceobstacleswhenitcomestoensuringtheyareaccuratelycapturingandreportingESGdataanddevelopingeffectiveESGriskmanagementpractices.Thesechallengeslargelyarisefrom1)limitedresourcesandinfrastructuretosupportESGdataandmetricstrackingandverification,and2)thedifficultyofnavigatingtheconfusinguniverseofESGstandard-settingorganizations.InAuditBoard’sinauguralESGMaturityBenchmarkingReport:AcceleratingESGTransformation,wesoughttoexplorethestateofESGmaturityin2023.TohelpbusinessesseekingtomaturetheirESGeffortsandpractices,we’vebrokenESGdownintofourfundamentalareasofcompetencyinordertoassessthematurityofanorganization’sESGprogram:TheSEC’sproposednewruleamendmentswouldrequirelistedcompaniestodiscloseclimate-relatedinformationintheirregistrationstatementsandperiodicreports,suchasonForm10-K,including:•Risksthatare“reasonablylikelytohaveamaterialimpactontheirbusiness,resultsofoperations,orfinancialcondition.”•Dataonthebusiness’sdirectgreenhousegas(GHG)emissions(Scope1)andindirectemissionsfrompurchasedelectricityorotherformsofenergy(Scope2).•CertaintypesofGHGemissionsfromupstreamanddownstreamactivitiesinabusiness’svaluechain(Scope3).ESGAreasofCompetencyInvestmentandprocesses1234BreadthanddepthReportinganddisclosuresGovernanceandcontrolsauditboard.com4Over73%ofourrespondentswerefrommedium(1,000-10,000employees)tolarge(over10,000employees)sizecompanies.74%wereatpubliccompanies.55%ofourrespondentsheldpositionsinInternalAudit,and21%heldrolesinESG,Sustainability,orCorporateSocialfunctions.Sampletitlesofourrespondentsincluded:VP,CorporateSustainability,SVPInternalAudit&ERM,GlobalDirector,ESG,DirectorofRiskManagement,Sr.Manager,FinancialCompliance.Usingtheseareasofcompetency,AuditBoarddevelopedanESGmaturityscale,whichinformedour2023ESGMaturityBenchmarkingReportsurvey.ThissurveywasconductedfromApril–June2023withover200audit,risk,andcomplianceprofessionalsinvolvedinESGmanagementattheirorganizations.InPartOneofthe2023ESGMaturityBenchmarkingReport:AcceleratingESGTransformation,wewilldiveintosurveyfindingsilluminatinghoworganizationsaremanagingtheirESGprogramstoday.InPartTwo,wewilldiscussstepsorganizationscantaketodevelopESGprocessesandadvancetheiroverallESGmaturity.SurveyDemographicsauditboard.com5ESGMaturityModel(Figure1)auditboard.com6(Figure2)AreaofCompetencyFundamentalEfficientStrategicGroundbreakingInvestment&ProcessesWhatinvestmentshasyourorganizationmadeinESGheadcount,processesandtechnology?17%18%33%32%Breadth&DepthHowisyourorganizationengagingstakeholders,determiningmaterialityandcoveringenvironmental,socialandgovernancetopics?38%18%34%10%Reporting&DisclosuresWhatpublicreports,disclosures,commitmentsandratingshasyourorganizationpublished?50%40%10%0%Governance&ControlsHowdoesyourorganizationmanagecompliance,audits,anddatagovernance?40%21%20%19%2023ESGMaturityAssessmentResultsTopTakeawaysFromthe2023ESGMaturityBenchmarkingReport:AcceleratingESGTransformationoforganizationsdemonstratedStrategicorGroundbreakingmaturityoforganizationsdemonstratedFundamentalmaturityoforganizationsdon’tincludeESGrisksinERMstrategyoforganizationshavenotperformedamaterialityassessmentofourrespondentsreporthavinganESGheadcountoforganizationsdemonstratedGroundbreakingmaturityOfthefourareasofESGcompetency,surveyrespondentsdisplayedthemostmaturescoresinInvestment&Processes.OfthefourareasofESGcompetency,surveyrespondentsdisplayedtheleastmaturescoresinReporting&Disclosures.ESGisnotbeingincludedaspartofERMinastrategicwayinmanyorganizations.65%50%40%35%86%0%7auditboard.com1.OfthefourareasofESGcompetency,surveyrespondentsdisplayedthemostmaturescoresinInvestment&Processes.2.ThemosttrackedtopicsineachESGcategorywere:Climatechangeandcarbonemissions(Environmental,61%),Genderanddiversity(Social,64%),andBoardcomposition(Governance,54%).3.OfthefourareasofESGcompetency,surveyrespondentsdisplayedthelowestmaturityinReporting&Disclosures.4.ESGisnotincludedaspartofERMinastrategicwayinmanyorganizations.5.ThemajorityofrespondentshavelittletonogovernanceoroversightovertheirESGprogramstoday.Two-thirdsofoursurveyrespondentshavenotimplementedESGcontrols.auditboard.com8PartOne:KeyFindingsFromthe2023ESGMaturityBenchmarkingReportTakeaway#1:OfthefourareasofESGcompetency,surveyrespondentsdisplayedthemostmaturescoresin“Investment&Processes.”65%ofourrespondentsscoredintheStrategic(33%)andGroundbreaking(32%)tiersforESGInvestmentandProcesses.RespondentsinthesetierswhodisclosedtheirindustrywerepredominantlyrepresentedbytheIndustrialandFinance&Insurancesectors,whichreflectstheheavilyregulatednatureofbothindustries.Mostcompanies’initialESGeffortsbeginwithallocatingheadcountandbudgettowardESG.86%ofourrespondentsreporthavinganESGheadcount.1Ofthis86%:•61%haveadedicatedESGteamorcommitteewithrepresentativesfromaudit,compliance,legal,and/orrisk.•10%reporttheirESGheadcountsitswithintheaudit,risk,orcomplianceteamintheirorganization.21Question:WhoisresponsibleforESGatyourorganization?Base:209.AnswerOptions:Wehaveadedicatedsustainability/ESGteam;Wehaveadedicatedheadcountthatispartofanotherteam;WehaveanESGcommitteewithrepresentativesfromdifferentdepartments;Wedon’thaveadesignatedperson/teamforESG.(Figure3)ESGInvestments&Process2Question:WhichteamorgroupisresponsibleforESGatyourorganization?Base:209.AnswerOptions:Wedon’thaveadesignatedperson/teamforESG;Dedicatedsustainability/ESGteam;AnESGcommitteewithrepsfromdifferentdepartments;Audit,Risk,orCompliance;Legal;HR;Otherauditboard.com9Despitethesepositiveheadcountnumbers,thereissignificantroomforgrowthbeyondESGtitlesanddepartmentoptics.Whileadedicatedheadcountdemonstratesmostorganizationsaretakingaction,theircommitmenttobudgetandresourcesleavessignificantroomforimprovement.46%ofourrespondentsreportedthatthereisnodedicatedbudgetallocatedforESG.AmongthosewithanESGbudget,only9%haveabudgetallocatedforESGtechnology.3IncreasedbudgetforESGresourcesandtechnologydependsonleadershipsponsorship,whichmayexperienceasurgewhentheSEC’sproposedruleamendmentsbecomeformalized.3Question:HasanybudgetbeenallocatedtogrowyourESGprogram?Base:209.AnswerOptions:No,adedicatedbudgethasyettobeallocatedforESG;Yes,wehaveaheadcountbudgetallocated;Yes,wehaveatechnologybudgetallocated;Yes,wehavebothheadcountandtechnologybudgetallocated.4Question:Whatenvironmentaltopicsdoesyourorganizationtrack?Base:208.AnswerOptions:None;Climate/Carbon;Airandwaterpollution;Biodiversity;Deforestation;Energyefficiency;Wastemanagement;Waterscarcity;Other.5Question:Whatsocialtopicsdoesyourorganizationtrack?Base:208.AnswerOptions:None;Customersatisfaction;Dataprotectionandprivacy;Genderanddiversity;Employeeengagement;Communityrelations;Humanrights;Laborstandards;Other.6Question:Whatgovernancetopicsdoesyourorganizationtrack?Base:208.AnswerOptions:Boardcomposition;Auditcommitteestructure;Briberyandcorruption;Executivecompensation;Lobbying;Politicalcontributions;Whistleblowerschemes;Other.Takeaway#2:ThemosttrackedtopicsineachESGcategorywere:Climatechangeandcarbonemissions(Environmental,61%)4,Genderanddiversity(Social,64%)5,andBoardcomposition(Governance,54%)6.Dependingontheirindustryandgeographicregion,businessestrackedawiderangeofESGtopics,highlightingthatESGisnotaone-size-fits-allriskcategory.Forexample:Industrialorganizationsrepresentalargeportionofoursurveyrespondentswhoreporttrackingwaterscarcity,whileGovernment&Educationrespondentstrackedfeweroveralltopicsthanothersectorsacrossallcategories.ThisindicatesthatindividualbusinessesmustcatertheirESGresponsestotherisksspecifictotheirbusiness—whichiswhyperformingamaterialityassessmentiscrucialtoeffectiveESGriskmanagement.Smallerorganizations(lessthan1,000employees)tendtotrackclimatechange&carbonemissions(Environmental),humanrights,customersatisfaction,dataprotection/privacy(Social),andexecutivecompensation(Governance).ThisindicatesthatthesemaybeareaswheremanyorganizationsbegintheirESGinitiatives.auditboard.com10(Figure4)(Figure5)TopFourEnvironmentalTopicsTrackedTopFourSocialTopicsTrackedTopFourGovernanceTopicsTracked(Figure6)auditboard.com11Takeaway#3:InReportingandDisclosures,halfofrespondentsscoredinthelowest“Fundamental”levelofmaturity,only10%demonstratedStrategicmaturity,andnonescoredintheGroundbreakingcategory—thehighestlevelofmaturity.TheselowmaturityscoresinReportingandDisclosuresindicateroomforimprovementinESGdataverificationandreportingpractices.64%ofrespondentsreportedthattheirorganizationshavepublishedasustainabilityreport,7andnearly70%havemadeESGdisclosuresorpubliccommitments.8Whiletheannualsustainabilityreportisapositiveoutput,itshouldnotbetheonlyfocusofyourESGprogram–especiallyasmorecompliancerequirementsarrive.Inparticular,businessesthatpublishreportsanddisclosuresmusttakegreatcaretoensuretheirESGdataisaccurateandreliable.ReportinginaccurateESGdataorworse,greenwashing—purposefullymakingfalseormisleadingclaimsabouttheenvironmentalbenefitsofabusiness,product,orpractice—canleadtoreputationaldamagewhenexposed,andisneverworththerisk.7Question:Hasyourorganizationpublishedasustainabilityreport?Base:160.AnswerOptions:Yes;No,butweplantointhenextyear;No,andwedonotplantointhenextyear.8Question:Hasyourorganizationmadeanypubliccommitmentsordisclosuresaligningtothefollowing?(selectallthatapply)Base:160.AnswerOptions:Notapplicable;Net-zerocarbonemissions;Science-BasedTargetsInitiative;Carbonfootprintreduction;Waterusagereduction;Increaseinminoritiesinyourworkforce;Volunteerhoursloggedbyemployees;Monetarypledges;Other(pleasespecify).(Figure7)ESGReporting&Disclosuresauditboard.com12TherisingprevalenceofgreenwashingemphasizestheneedtohavestrongESGdataverificationmechanismsinplace.Asregulatoryrequirementsbecomemorestandardized,notonlywillcompaniesneedtoreportmoreextensivelyonESGclimate-relatedrisks,theywillalsoneedtotakeextrastepstoperformassuranceoncertaindiscloseddataandmetrics.Asitstandscurrently:•Nearly24%ofrespondentsdon’tcollectanyevidencetosupporttheirESGmetrics,while42%collectevidence—butonlyforaportionofESGmetrics.9•90%ofourrespondentsratedinthebottomhalfofmaturitylevelsinreportinganddisclosures,and0%scoredintheGroundbreakingcategory—representingsignificantroomforgrowthandimprovement.9Question:Doyoucollectevidencetosupportyourdatametrics?Base:152.AnswerOptions:Yes,forallESGmetrics;Yes,butonlyforaportionofESGmetrics;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.10Question:DoyoutrackESGdatametricsfromeachofyouroffices,manufacturingplants,and/orphysicallocations?Base:209.AnswerOptions:Yes,formostofourESGmetrics;Yes,butonlyforasmallnumberofESGmetrics;No,weonlycollectdatafromourheadquartersorasinglelocationonly;Wedon’tcollectESGdatatoday.Makingaccurate,verifiedESGdataavailabletointernalstakeholders—suchasexecutiveleadershipandtheboard—iscriticalforobtainingnecessarysupportandresourcestomatureyourESGprogram.AsESGbecomesabiggerpriority,organizationsmustalsobepreparedtorespondtoRFPsandotherinquiriesfromcustomersandotherbusinessstakeholders,furtherhighlightingtheimportanceofdataverification.Ourfindingsshow:•While72%ofourrespondentstrackatleastsomeESGdatametricsacrosstheirphysicallocations,offices,andmanufacturingplants,10only17%centralizeESGdatacollectedonaregularbasisandmakeitaccessibletointernalstakeholders.11•Only31%ofrespondentsperformthird-partyassuranceontheirESGdata,12representingroomforgrowthindataverificationaswell.TheseresultspointtoasignificantopportunityfororganizationstofocusonstrengtheningtheirESGmetricsandmechanismsfordatacapture,organization,andverificationtomaturetheirlargerESGreportingcapabilities.11Question:WhatisyourprocessforcollectingESGdata?Base:209.AnswerOptions:Wecollectdataviaemailonanadhocbasisasneeded(ex.whenapotentialcustomermakesaninquiryaboutacertainpractice);WeregularlycollectpredefinedESGdatafromvariousdataowners;WecentralizeESGdatacollectedonaregularbasisandmakethisdataaccessibletointernalstakeholders;WehaveautomationinplacetoregularlycollectpredefinedESGdata;Wedon’tcollectESGdatatoday.12Question:Doyouhavethird-partyassuranceforanyofyourESGdata?Base:152.AnswerOptions:Yes;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.auditboard.com1313Question:DoyouincludeESGrisksandopportunitiesinyourenterpriseriskmanagementstrategies?Base:176.AnswerOptions:Yes,bothrisksandopportunities;Yes,butweonlyfocusonriskstoday;Yes,butweonlyfocusonopportunitiestoday;No,butweplantointhenextyear;No,andwedonotplantointhenextyear.Overall,theFinance&InsuranceindustrywasmoreadvancedthanotherindustriesinReportingandDisclosures,withthemajorityintheStrategicstageofmaturity.Thismaybeduetothepossibilitythatfinancialorganizationsaremoresavvyatproducingreportsanddisclosuresduetofamiliarity.Forexample,climateinvestorsandventurecapitalfirmsrequirecertaindisclosuresintheprocessofvettingtheirpartners.Asaresult,theymaybemorefamiliarwiththeclimate-relatedandfinancialdisclosurestheyarerequiredtoproduce.Takeaway#4:ESGisnotbeingincludedaspartofERMinastrategicwayinmanyorganizations.Nearly40%ofourrespondentsdon’tincludeESGrisksintheirERMstrategy,13indicatingthatESGisnotyetembeddedasextensivelyinorganizationsasithasthepotentialtobe.Justasriskissomethingthataffectsallareasofabusiness,ESGmustbeembeddedinthebusinessformaximumimpact.While60%ofourrespondentsareconsideringESGrisksintheirERMstrategies,only33%arefocusedonbothESGrisksandopportunities.TheemphasisonESGrisksindicatesthattherearelikelyareasofESGnotbeingsurfacedtodaythatpresentmaterialbusinessopportunities.Matureriskmanagementrequiresconsiderationofupsideaswellasdownsiderisk.AsignofESGmaturityisreachingastagewhereESGisregardedasacompetitivedifferentiatorandastrategicriskareatoinvestin.(Figure8)DoyouincludeESGrisksandopportunitiesinyourERMstrategies?auditboard.com14Similartoriskassessments,ESGmaterialityassessmentsarekeytounderstandingwhatisimportanttotheorganization,andwheretherearerisksandopportunitiestoprioritize.Materialityassessmentsareusedtodetermine:1.WhatESGtopicshavethemostimpactonthecompanyandaremostrelevanttostakeholders.2.Howabusiness’sactivitiesimpacttheenvironmentandcommunitiesinwhichitoperates.Nearly45%ofoursurveyrespondentshaveperformedanESGmaterialityassessmentwithinthelast12months,yet35%ofourrespondentshavenotperformedamaterialityassessmentatall—highlightinganeasyareatobegintakingactionin.1414Question:Howrecentwasyourlastmaterialityassessment?Base:176.AnswerOptions:Withinthelast12months;12-24monthsago;2-3yearsago;3+yearsago;Ihavenotperformedamaterialityassessment.(Figure9)Howrecentwasyourlastmaterialityassessment?auditboard.com15Takeaway#5:ThemajorityofrespondentshavelittletonogovernanceoroversightovertheirESGprogramstoday.Whenitcametogovernanceandcontrols,oursurveyrespondentsdemonstratedawiderangeofalignmentwithdifferentESGreportingframeworks.OfthemanyESGstandard-settingorganizationsthatprovideguidance,thetopframeworksthatoursurveyrespondentsalignwithare:•SASB(28%)•TCFD(25%)•GRI(25%)Nearly80%ofoursurveyrespondentsperformbenchmarkingtoguidetheirESGefforts:15•36%performad-hocresearch,24%workwithaconsultancy,and18%utilizeratingcomparisons.WebelievethesenumberswillonlycontinuetogrowasdemandforESGassuranceincreases.15Question:DoyoucurrentlydoanybenchmarkingtoguideyourESGprogram?Base:160.AnswerOptions:Ad-hocresearch;Ratingcomparison;Workwithaconsultancy;Notapplicable;Other(pleasespecify).(Figure10)Reportingframeworksleveragedbyorganizationsauditboard.com16Interestingly,nearlyone-thirdofourrespondentsreportbeingincomplianceorplanningtocomplywiththeSEC’sproposedclimatedisclosurerule.1674%ofourrespondentsidentifiedthemselvesasworkingatpubliccompaniesthatwillberequiredtocomplywhentheruleisformalizedandadopted.17Moreover,whileprivatecompaniesmaynotbepreparing10-Ks,theymaybeaskedbycustomersorpartnerstodiscloseemissionsdatarelatedtotheirsupplychainecosystemthatcouldpotentiallyhaveanimpactontheirbusiness.Overall,thesplitbetweencompliantandnon-compliantcompanieshighlightsanopportunityfororganizationsthataren’tyetcomplianttoevolve.16Question:Whichofthefollowinglaws/regulationsdoyoucomplywith(orwillcomplywithwhenenacted)?(selectallthatapply)Base:161AnswerOptions:CSRD;EUTaxonomy;ProposedSECclimatedisclosures;GermanSupplyChainDueDiligenceAct;UKCompanies(StrategicReport)(Climate-RelatedFinancialDisclosure)Regulations2022;Noneoftheabove;Other(pleasespecify).17Question:Isyourorganizationprivateorpublic?Base:151.AnswerOptions:Private;Public;Idon’tknow/cannotdisclose.(Figure11)Whichofthefollowinglaws/regulationsdoyoucomplywith(orwillcomplywithwhenenacted)?auditboard.com17Two-thirdsofoursurveyrespondentshavenotimplementedESGcontrols,highlightingalowstateofmaturityinESGdatagovernance.18ThismayberelatedtothevastandconfusingspectrumofESG-settingstandardsandframeworksoutthere,aswellasthefactthatthereisnoformalESGcompliancerequirementintheUnitedStatesyet.However,theSECwillrequireanassurancefactorinduetime.Oncetheproposedclimatedisclosuresbecomeformalized,publiccompanieswillberequiredtohaveESGcontrolsinplacetostreamlinetheprocessofobtainingthird-partyassuranceforcompliancewiththenewrules.18Question:HaveyouimplementedanycontrolsforESG?Base:152.AnswerOptions:Yes,wehavedocumentedcontrols;Yes,andwehavestartedtestingcontrols;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.(Figure12)HaveyouimplementedanycontrolsforESG?auditboard.com18However,therearesignsthatESGcontrolsprogramsarebeginningtorampup,basedonauditactivityamongthosesurveyed:•60%oforganizationsdonotperforminternalESGaudits,but26%plantointhenextyear19—indicatingthatorganizationsintendtobuildouttheirESGassuranceefforts.•ThemajorityofsurveyrespondentscollectevidenceforESGmetrics:34%collectevidenceforallESGmetrics,while42%collectforaportionoftheirESGmetrics.20DuetothedataassuranceprovisionsintheSEC’sproposedclimatedisclosurerule,wemaysoonseethesenumbersstarttoincreasewhentherulebecomesformalized.Overall,asstakeholderdemandforESGcontinuestoincreaseandcompliancerequirementsbegintobecomemandatory,weexpecttoseemorecontrolsandincreasedassuranceeffortswillbeputintoplaceacrossmoreindustries.Naturally,thiswillcontributetothedevelopmentofmorematurereportingpracticesandinfrastructuretosupportESGprograms.19Question:DoyouperformESGaudits?Base:152AnswerOptions:Yes;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.20Question:Doyoucollectevidencetosupportyourdatametrics?Base:152.AnswerOptions:Yes;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.(Figure13)DoyouperforminternalESGaudits?auditboard.com19PartTwo:FiveInitiativestoAdvanceYourESGMaturity“Thebesttimetoplantatreewas20yearsago,thesecondbesttimeisnow.”AstheESGlandscapecontinuestoevolve,itisessentialtostartbuildinganESGprogramsoonerratherthanlater.ManyESGissuesrepresentsignificantrisksandcostsifnotproperlymanaged.Considertheexampleofclimatechange:companiesthatfailtomanagetheirgreenhousegasemissionsmayfaceregulatoryfines,reputationaldamage,orthephysicalimpactsofclimatechange.EarlyinvestmentinESGcanmitigatetheserisks—andevencreatenewopportunitiesforgrowthandinnovation.Inthissection,weidentifyfiveinitiativesorganizationscanactontoadvancetheirESGmaturity.Theseactionscanbeadoptedoneatatimeorconcurrently,andtheydonotneedtobeperformedinsequentialorder.Themostimportantpartisgettingstarted.1.SetyoursightsonmappingyourESGstrategy.2.Investinpurpose-builttechnologytosupportyourESGprogramandprocesses.3.Buildoutyourreportingandmetricsverificationcapabilities.4.Buildastrongcontrolsprogram.5.Adoptacreativeapproach.1:SetyoursightsonmappingyourESGstrategy.IntegratingESGintoyourbusinessstrategyislikesettingoutonalongjourney.Startingmayseemdaunting,butwithagoodmapandacleardestination,it’smucheasier.•Getyourcompass.First,youmustunderstandwhereyou’restartingfrombyperformingamaterialityassessment,whereyouidentifyandprioritizetheESGissuesthataremostrelevanttoyourbusinessandyourstakeholders.•Setyourdestination.Onceyou’veidentifiedthekeyissues,youcancreatestrategicESGgoals.Thisisn’tjustaboutcompliance,butaboutfindingopportunitiestocreatevalue—perhapsbyreducingyourcarbonfootprint,improvinglaborpractices,orincreasingboarddiversity.•Planyourroute.EmbedESGconsiderationsintoyourriskmanagementprocesses.Justasyou’danticipateroadblocksanddetoursonajourney,youshouldbecontinuouslyidentifying,assessing,andmanagingESGrisks(andopportunities).•Communicatewithyourfellowtravelers.EnsureeveryoneinyourorganizationknowstheroutebyintegratingESGintoyourcompany’sDNA.ESGshouldbeembeddedinallaspects,fromprocurementandoperationstomarketingandhumanresources.•Checkyourprogressalongtheway.RegularmonitoringandreportingonESGmetricswillhelpyoustayontrack,adjustyourstrategyifneeded,andcommunicateyourperformancetostakeholders.auditboard.com202:Investinpurpose-builttechnologytosupportyourESGprogramandprocesses.ThepowerofESGprogrammanagementtechnologyinmaturingacompany’sESGcapabilitiescan’tbeunderstated.Dataanalytics,inparticular,playapivotalrolebygathering,analyzing,andmakingsenseofavastarrayofESGdata.TechnologycanhelpthebusinessautomateandstreamlineeffortstoidentifykeyESGtrendsandmonitortheirprogress.Theseefficienciescanhaveasignificantimpactonhelpingthebusinessmakewell-informed,data-drivendecisions.Inaddition,technologycanenableefficientdatamanagementandsafeguarddataintegrity.GoodqualitydataisessentialforeffectiveESGstrategy,andtechnologicalsolutionsensuredataaccuracy,consistency,andeaseofaccess.Moreover,techplatformsarebecomingincreasinglyeffectiveforESGreporting,helpingtosimplifytheprocessofcollecting,aggregating,andreportingESGmetrics.This,inturn,makesiteasierforcompaniestocommunicatetheirsustainabilityeffortswithshareholders,employees,andthepublic.KeyCapabilitiestoLookforinESGProgramManagementTechnology1.Centralizesdataandfacilitatesdatacollection.Payattentiontonotonlytheinterfaceusedtocollectdata,butifitimprovesusers’visibilityintokeyinformationliketopics,metrics,locations,etc.2.Easytouse,intuitiveinterface.Thisisimportantforuseradoptiontimeandimpactshowlikelyemployeesaretocontinueusingthetechnology.3.Quickimplementationtimeframe.Howquicklythetechnologycanbeimplementedisdirectlyconnectedtohowsoonbenefitscanberealized,andagoodindicatorofthetechnology’sabilitytointegrateintoESGprocesses.4.Flexibilitytoevolve.NotonlyisitimportantfortechnologytosupportyourESGprocesses,itisequallyimportantthatitisflexibleenoughtoadapttochangingbusinessconditionswithease.Afterall,youdon’twanttogetstuckwithongoingscopecreep,implementationcosts,orhavingtocontactsupporteverytimeyouwanttochangesomething.3:Buildoutyourreportingandmetricsverificationcapabilities.BeforecompaniescanreportontheirESGperformance,theyneedtofirstdefinewhatESGissuesarematerialtothem,setstrategicESGgoals,putinplacetherightprocesses,andgatherdatatotracktheirprogress.Reportingistheprocessofcommunicatingallofthisworktotheoutsideworld.BuildingmatureESGdatacollectionandverificationprocessesensuresyoucanconsistentlyandaccuratelymeasure,track,andreportonyourESGperformanceovertime.Thesecapabilitiesinvolvenotonlytheoutputneededforreporting,butalsothesystemsandprocessesfordatacollection,datamanagement,anddataanalysis.Withoutthesecapabilities,yourreportmaybeinaccurate,incomplete,ornotcomparablefromoneperiodtoanother,whichcouldmisleadstakeholdersandundermineyourcredibility.Inaddition,metricsverificationhelpsvalidatetheaccuracyandreliabilityoftheESGdatainyourreport.Thisisessentialbecauseitprovidesbothyouandyourstakeholdersconfidenceinthedatayou’rereporting.Withoutrobustmetricsverification,youruntheriskofreportingincorrectdata,whichcouldhavelegalimplicationsanddamageyourreputation.auditboard.com21Tobuildoutyourdatacollectionandmetricsverificationcapabilities,consider:•Whataretheoutputsthatyouneed?Anannualsustainabilityreport,timelyresponsestoRFPs,dataavailabletointernalstakeholders,etc.areimportanttoconsider.•Whattoolsandsystemsareyouusingtocollect,manage,andanalyzedata?Aretheyreliableandhavetheybeenvettedbyothersintheindustryand/oryourorganization?•Whatformatsdoyouroutputsneedtobein?Keepinmindtheformatthatyourmarketingagencymayneedtocreatetheannualreportmaterials.ThegoalistohaveverifiedandtrustworthyESGinformationthatcanbeturnedintoimpactfulreports—andthatdoesn’topenyourorganizationtoaccusationsofgreenwashing.4:Buildastrongcontrolsprogram.BuildingcontrolsandgovernancearoundESGdataisparamountbecauseitenhancestheaccuracy,consistency,andreliabilityofthedata.This,inturn,strengthensthecredibilityofyourESGdisclosuresandbuildstrustwithyourstakeholders.Justasfinancialdatahasrigorouscontrolstoensureitsintegrity,thesameprincipleshouldapplytoESGdatagivenitsgrowingsignificanceindecision-makingforinvestors,regulators,andotherstakeholders.TocreatecontrolsandgovernanceforESGdata,severalstepscanbetaken:•Developcleardatamanagementpoliciesandprocedures•Implementdataqualitychecks•Establishaclearchainofcustody•Trainandeducatestaff•UsetechnologytosupportdatamanagementStep5:Adoptacreativeapproach.Inanenvironmentwhereresourcesarelimitedandregulationsarestillevolving,acreativemindsetcanbeagamechangerforadvancingESGcapabilities.WhiletherearechallengesinmanagingESG,acreativemindsetcanturnthesechallengesintoopportunitiesforinnovation,differentiation,andleadership.AcreativemindsetcanhelpbusinessesfindvalueinESGthatmaynotbeimmediatelyobvious.CompaniescanlookatESGnotjustasacompliancerequirement,butasanopportunitytocreatevalueanddifferentiatethemselves.Forexample,theycouldusetheirESGeffortstoenhancetheirbrand,attracttalent,ordriveinnovation.Additionally,inthefaceofregulatoryambiguity,creativitycanhelpcompaniesbecomeleadersinsteadoffollowers.Insteadofwaitingforregulationstodefinewhattheyshoulddo,companiescandefinetheirownESGgoalsandstandards.Thisnotonlypositionsthemasleadersintheeyesofstakeholders,butitcanalsogivethemaheadstartwhenregulationsdobecomemoredefined.Finally,acreativemindsetcanalsofosteracultureofresilienceandadaptability.AsESGlandscapesevolve,companiesthatareflexibleandopen-mindedarebetterpositionedtoadjusttheirstrategiesandcontinuetomakeprogress.Ultimately,embeddingESGintoacompany’scultureandoperationstakestime.ReachingastateofESGmaturityisajourneythatrequirescarefulplanning,strategicimplementation,andaproactivemindset.Thesooneracompanystartsonthisjourney,thesooneritcanreapthebenefitsofreliableandaccurateESGriskdatatosupportbusiness.auditboard.com22There’sNoTimeLikethePresenttoStartMaturingYourESGPracticesThemoretimeandeffortspentonESGinitiativesacrossthebusiness,themoreincrementalimprovementstherewillbe,allowingthebusinesstoadvanceitsESGcapabilitiesovertime.EmbracingESGmaturityisnotonlyaboutbeingagoodcorporatecitizen—it’salsosmartbusiness.WehopethatinsightsandinitiativessharedinthisreportwillhelpenableyourorganizationtochartapathtogreaterESGmaturity.Throughstrategicallocationofresources,expandingthebreadthanddepthofESGprograms,implementingrobustreportingandverificationmechanisms,andstrengtheninggovernanceandoversight,organizationscanunlockthefullpotentialofESGandpositionthemselvesasleadersinsustainabilityandresponsiblebusinesspractices.ThejourneytowardsESGmaturityisanongoingonethatrequiresdedication,continuousimprovement,andacommitmenttocreatinglong-lastingpositiveimpact.Byembracingthistransformativejourney,organizationscandrivemeaningfulchange,shapeamoresustainablefuture,andmeettheexpectationsofstakeholderswhilerealizingthetangiblebenefitsofESGintegration.TolearnhowAuditBoardcanhelpstreamlineyourESGprogrammanagement,visitauditboard.comtorequestatailoreddemo.auditboard.com23ClaireFeeneyisaSeniorProductMarketingManageratAuditBoardfocusedonESGandRiskOversight.PriortojoiningAuditBoard,ClaireworkedinproductmarketingatOneTrust,VMware,andInfor.ArshKaurisaPrincipalProductManageratAuditBoardfocusedonESGProductStrategy.PriortojoiningAuditBoard,ArshworkedinproductmanagementatProcoreTechnologies.AshleeHoltisaSeniorManagerofImplementationatAuditBoard,specializinginESGcustomersuccess.Aseasonedriskandauditleaderwith16+yearsofexperienceatorganizationsincludingRegionsFinancialCorporationandFocalPointDataRisk(aCDWcompany),wheresheprovidedauditandriskadvisoryservicesacrossawidearrayofindustries.ClaireFeeneySeniorProductMarketingManagerAuditBoardArshKaurPrincipalProductManagerAuditBoardAshleeHoltSeniorManagerofImplementationAuditBoardAbouttheAuthorsAboutAuditBoardAuditBoardistheleadingcloud-basedplatformtransformingaudit,risk,andcompliancemanagement.Morethan40%oftheFortune500leverageAuditBoardtomovetheirbusinessesforwardwithgreaterclarityandagility.AuditBoardistop-ratedbycustomersonG2,Capterra,andGartnerPeerInsights,andwasrecentlyrankedforthefourthyearinarowasoneofthefastest-growingtechnologycompaniesinNorthAmericabyDeloitte.Tolearnmore,visit:AuditBoard.com.Copyright©2023AuditBoard
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