auditboard.com1TableofContentsRisingtotheESGChallenge:AcceleratingEffort,MinimizingRisk3PartOne:KeyFindingsFromthe2023ESGMaturityBenchmarkingReport8PartTwo:FiveInitiativestoAdvanceYourESGMaturity19There’sNoTimeLikethePresenttoStartMaturingYourESGPractices22auditboard.com2RisingtotheESGChallenge:AcceleratingEffort,MinimizingRiskInabusinesslandscapeincreasinglyattunedtosustainability-focusedstakeholders,DespitegrowingdemandfrominvestorsandstakeholdersforcommitmenttoESG,consumerdemands,andinternationalregulations,companiesaretakingchargeofmanyorganizationsfaceobstacleswhenitcomestoensuringtheyareaccuratelytheirenvironmental,social,andgovernance(ESG)initiatives.capturingandreportingESGdataanddevelopingeffectiveESGriskmanagementpractices.Thesechallengeslargelyarisefrom1)limitedresourcesandinfrastructureVoluntarydisclosureeffortsrevealthatmanybusinessesareconcernedwithESGtosupportESGdataandmetricstrackingandverification,and2)thedifficultyofoptics:anastonishing96%oftheS&P500self-publishedsustainabilityreportsinnavigatingtheconfusinguniverseofESGstandard-settingorganizations.2021,accordingtotheGovernanceandAccountabilityInstitute.Concurrently,whiletheSEC’sproposedclimatedisclosurerulesremainopentopubliccommentInAuditBoard’sinauguralESGMaturityBenchmarkingReport:AcceleratingESGasofAugust2023,manyanticipatetheywillbeformalizedbyyear’send—andTransformation,wesoughttoexplorethestateofESGmaturityin2023.Tohelphavealreadybegunembracingtheminresponsetomountingpressure.ThesebusinessesseekingtomaturetheirESGeffortsandpractices,we’vebrokenESGdownexampleshighlighttheincreasingpowerthateffectiveESGriskmanagementhastointofourfundamentalareasofcompetencyinordertoassessthematurityofanshapeacompany’sfinancialstandingandreputation.organization’sESGprogram:ESGAreasofCompetencyTheSEC’sproposednewruleamendmentswouldrequirelistedcompaniestodisclose1234climate-relatedinformationintheirregistrationstatementsandperiodicreports,suchasonForm10-K,including:InvestmentBreadthReportingandGovernanceandprocessesanddepthdisclosuresandcontrols•Risksthatare“reasonablylikelytohaveamaterialimpactontheirbusiness,resultsofoperations,orfinancialcondition.”3•Dataonthebusiness’sdirectgreenhousegas(GHG)emissions(Scope1)andindirectemissionsfrompurchasedelectricityorotherformsofenergy(Scope2).•CertaintypesofGHGemissionsfromupstreamanddownstreamactivitiesinabusiness’svaluechain(Scope3).auditboard.comUsingtheseareasofcompetency,AuditBoarddevelopedanESGmaturityscale,whichinformedour2023ESGMaturityBenchmarkingReportsurvey.ThissurveywasconductedfromApril–June2023withover200audit,risk,andcomplianceprofessionalsinvolvedinESGmanagementattheirorganizations.InPartOneofthe2023ESGMaturityBenchmarkingReport:AcceleratingESGTransformation,wewilldiveintosurveyfindingsilluminatinghoworganizationsaremanagingtheirESGprogramstoday.InPartTwo,wewilldiscussstepsorganizationscantaketodevelopESGprocessesandadvancetheiroverallESGmaturity.SurveyDemographicsOver73%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.auditboard.com4ESGMaturityModel(Figure1)auditboard.com52023ESGMaturityAssessmentResults(Figure2)AreaofCompetencyFundamentalEfficientStrategicGroundbreakingInvestment&Processes17%18%33%32%WhatinvestmentshasyourorganizationmadeinESG38%18%headcount,processesandtechnology?50%40%34%10%40%21%Breadth&Depth10%0%Howisyourorganizationengagingstakeholders,determiningmaterialityandcoveringenvironmental,20%19%socialandgovernancetopics?Reporting&DisclosuresWhatpublicreports,disclosures,commitmentsandratingshasyourorganizationpublished?Governance&ControlsHowdoesyourorganizationmanagecompliance,audits,anddatagovernance?auditboard.com6TopTakeawaysFromthe2023ESGMaturityBenchmarkingReport:AcceleratingESGTransformation1.OfthefourareasofESGcompetency,surveyrespondentsdisplayedthemostmaturescoresOfthefourareasofESGcompetency,surveyrespondentsdisplayedinInvestment&Processes.themostmaturescoresinInvestment&Processes.2.ThemosttrackedtopicsineachESGcategorywere:Climatechangeandcarbonemissions65%86%(Environmental,61%),Genderanddiversity(Social,64%),andBoardcomposition(Governance,54%).oforganizationsdemonstratedofourrespondentsreport3.OfthefourareasofESGcompetency,surveyrespondentsdisplayedthelowestmaturityinReportingStrategicorGroundbreakinghavinganESGheadcount&Disclosures.maturity4.ESGisnotincludedaspartofERMinastrategicwayinmanyorganizations.5.ThemajorityofrespondentshavelittletonogovernanceoroversightovertheirESGprogramstoday.Two-thirdsofoursurveyrespondentshavenotimplementedESGcontrols.OfthefourareasofESGcompetency,surveyrespondentsdisplayedESGisnotbeingincludedaspartofERMinastrategicwaytheleastmaturescoresinReporting&Disclosures.inmanyorganizations.50%0%40%35%oforganizationsdemonstratedoforganizationsdemonstratedoforganizationsdon’tincludeoforganizationshavenotFundamentalmaturityGroundbreakingmaturityESGrisksinERMstrategyperformedamaterialityassessmentauditboard.com7PartOne:KeyFindingsFromthe2023ESGMaturityESGInvestments&Process(Figure3)BenchmarkingReportTakeaway#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?2Question:WhichteamorgroupisresponsibleforESGatyourorganization?Base:209.Base:209.AnswerOptions:Wehaveadedicatedsustainability/ESGteam;WehaveadedicatedheadcountthatisAnswerOptions:Wedon’thaveadesignatedperson/teamforESG;Dedicatedsustainability/ESGteam;Anpartofanotherteam;WehaveanESGcommitteewithrepresentativesfromdifferentdepartments;WeESGcommitteewithrepsfromdifferentdepartments;Audit,Risk,orCompliance;Legal;HR;Otherdon’thaveadesignatedperson/teamforESG.8auditboard.comDespitethesepositiveheadcountnumbers,thereissignificantroomforTakeaway#2:ThemosttrackedtopicsineachESGcategorywere:growthbeyondESGtitlesanddepartmentoptics.WhileadedicatedheadcountClimatechangeandcarbonemissions(Environmental,61%)4,Genderanddemonstratesmostorganizationsaretakingaction,theircommitmenttobudgetanddiversity(Social,64%)5,andBoardcomposition(Governance,54%)6.resourcesleavessignificantroomforimprovement.Dependingontheirindustryandgeographicregion,businessestrackedawiderange46%ofourrespondentsreportedthatthereisnodedicatedbudgetallocatedofESGtopics,highlightingthatESGisnotaone-size-fits-allriskcategory.ForforESG.AmongthosewithanESGbudget,only9%haveabudgetallocatedforexample:IndustrialorganizationsrepresentalargeportionofoursurveyrespondentsESGtechnology.3IncreasedbudgetforESGresourcesandtechnologydependsonwhoreporttrackingwaterscarcity,whileGovernment&Educationrespondentstrackedleadershipsponsorship,whichmayexperienceasurgewhentheSEC’sproposedrulefeweroveralltopicsthanothersectorsacrossallcategories.Thisindicatesthatamendmentsbecomeformalized.individualbusinessesmustcatertheirESGresponsestotherisksspecifictotheirbusiness—whichiswhyperformingamaterialityassessmentiscrucialtoeffectiveESGriskmanagement.Smallerorganizations(lessthan1,000employees)tendtotrackclimatechange&carbonemissions(Environmental),humanrights,customersatisfaction,dataprotection/privacy(Social),andexecutivecompensation(Governance).ThisindicatesthatthesemaybeareaswheremanyorganizationsbegintheirESGinitiatives.3Question:HasanybudgetbeenallocatedtogrowyourESGprogram?5Question:Whatsocialtopicsdoesyourorganizationtrack?Base:209.Base:208.AnswerOptions:No,adedicatedbudgethasyettobeallocatedforESG;Yes,wehaveaheadcountAnswerOptions:None;Customersatisfaction;Dataprotectionandprivacy;Genderanddiversity;budgetallocated;Yes,wehaveatechnologybudgetallocated;Yes,wehavebothheadcountandEmployeeengagement;Communityrelations;Humanrights;Laborstandards;Other.technologybudgetallocated.6Question:Whatgovernancetopicsdoesyourorganizationtrack?Base:208.4Question:Whatenvironmentaltopicsdoesyourorganizationtrack?AnswerOptions:Boardcomposition;Auditcommitteestructure;Briberyandcorruption;ExecutiveBase:208.compensation;Lobbying;Politicalcontributions;Whistleblowerschemes;Other.AnswerOptions:None;Climate/Carbon;Airandwaterpollution;Biodiversity;Deforestation;Energyefficiency;Wastemanagement;Waterscarcity;Other.9auditboard.comTopFourEnvironmentalTopicsTrackedTopFourSocialTopicsTrackedTopFourGovernanceTopicsTracked(Figure4)(Figure5)(Figure6)auditboard.com10ESGReporting&Disclosures(Figure7)Takeaway#3:InReportingandDisclosures,halfofrespondentsscoredinthelowest“Fundamental”levelofmaturity,only10%demonstratedauditboard.comStrategicmaturity,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).11TherisingprevalenceofgreenwashingemphasizestheneedtohavestrongESGMakingaccurate,verifiedESGdataavailabletointernalstakeholders—suchasdataverificationmechanismsinplace.Asregulatoryrequirementsbecomemoreexecutiveleadershipandtheboard—iscriticalforobtainingnecessarysupportstandardized,notonlywillcompaniesneedtoreportmoreextensivelyonESGandresourcestomatureyourESGprogram.AsESGbecomesabiggerpriority,climate-relatedrisks,theywillalsoneedtotakeextrastepstoperformassuranceorganizationsmustalsobepreparedtorespondtoRFPsandotherinquiriesfromoncertaindiscloseddataandmetrics.Asitstandscurrently:customersandotherbusinessstakeholders,furtherhighlightingtheimportanceofdataverification.Ourfindingsshow:•Nearly24%ofrespondentsdon’tcollectanyevidencetosupporttheirESGmetrics,while42%collectevidence—butonlyforaportionofESGmetrics.9•While72%ofourrespondentstrackatleastsomeESGdatametricsacrosstheirphysicallocations,offices,andmanufacturingplants,10only17%centralize•90%ofourrespondentsratedinthebottomhalfofmaturitylevelsinESGdatacollectedonaregularbasisandmakeitaccessibletointernalreportinganddisclosures,and0%scoredintheGroundbreakingcategorystakeholders.11—representingsignificantroomforgrowthandimprovement.•Only31%ofrespondentsperformthird-partyassuranceontheirESGdata,12representingroomforgrowthindataverificationaswell.TheseresultspointtoasignificantopportunityfororganizationstofocusonstrengtheningtheirESGmetricsandmechanismsfordatacapture,organization,andverificationtomaturetheirlargerESGreportingcapabilities.9Question:Doyoucollectevidencetosupportyourdatametrics?11Question:WhatisyourprocessforcollectingESGdata?Base:152.Base:209.AnswerOptions:Yes,forallESGmetrics;Yes,butonlyforaportionofESGmetrics;No,butweplantoAnswerOptions:Wecollectdataviaemailonanadhocbasisasneeded(ex.whenapotentialcustomerstartthisyear;No,andwedonotplantostartthisyear.makesaninquiryaboutacertainpractice);WeregularlycollectpredefinedESGdatafromvariousdata10Question:DoyoutrackESGdatametricsfromeachofyouroffices,manufacturingplants,and/orphysicalowners;WecentralizeESGdatacollectedonaregularbasisandmakethisdataaccessibletointernallocations?stakeholders;WehaveautomationinplacetoregularlycollectpredefinedESGdata;Wedon’tcollectESGBase:209.datatoday.AnswerOptions:Yes,formostofourESGmetrics;Yes,butonlyforasmallnumberofESGmetrics;No,weonlycollectdatafromourheadquartersorasinglelocationonly;Wedon’tcollectESGdatatoday.12Question:Doyouhavethird-partyassuranceforanyofyourESGdata?Base:152.auditboard.comAnswerOptions:Yes;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.12Overall,theFinance&InsuranceindustrywasmoreadvancedthanotherindustriesDoyouincludeESGrisksandopportunitiesinyourERMstrategies?(Figure8)inReportingandDisclosures,withthemajorityintheStrategicstageofmaturity.Thismaybeduetothepossibilitythatfinancialorganizationsaremoresavvyatproducingreportsanddisclosuresduetofamiliarity.Forexample,climateinvestorsandventurecapitalfirmsrequirecertaindisclosuresintheprocessofvettingtheirpartners.Asaresult,theymaybemorefamiliarwiththeclimate-relatedandfinancialdisclosurestheyarerequiredtoproduce.Takeaway#4:ESGisnotbeingincludedaspartofERMinastrategicwayinmanyorganizations.Nearly40%ofourrespondentsdon’tincludeESGrisksintheirERMstrategy,13indicatingthatESGisnotyetembeddedasextensivelyinorganizationsasithasthepotentialtobe.Justasriskissomethingthataffectsallareasofabusiness,ESGmustbeembeddedinthebusinessformaximumimpact.While60%ofourrespondentsareconsideringESGrisksintheirERMstrategies,only33%arefocusedonbothESGrisksandopportunities.TheemphasisonESGrisksindicatesthattherearelikelyareasofESGnotbeingsurfacedtodaythatpresentmaterialbusinessopportunities.Matureriskmanagementrequiresconsiderationofupsideaswellasdownsiderisk.AsignofESGmaturityisreachingastagewhereESGisregardedasacompetitivedifferentiatorandastrategicriskareatoinvestin.13Question:DoyouincludeESGrisksandopportunitiesinyourenterpriseriskmanagementstrategies?Base:176.AnswerOptions:Yes,bothrisksandopportunities;Yes,butweonlyfocusonriskstoday;Yes,butweonlyfocusonopportunitiestoday;No,butweplantointhenextyear;No,andwedonotplantointhenextyear.auditboard.com13Howrecentwasyourlastmaterialityassessment?(Figure9)Similartoriskassessments,ESGmaterialityassessmentsarekeytounderstandingwhatisimportanttotheorganization,andwheretherearerisksandopportunitiestoprioritize.Materialityassessmentsareusedtodetermine:1.WhatESGtopicshavethemostimpactonthecompanyandaremostrelevanttostakeholders.2.Howabusiness’sactivitiesimpacttheenvironmentandcommunitiesinwhichitoperates.Nearly45%ofoursurveyrespondentshaveperformedanESGmaterialityassessmentwithinthelast12months,yet35%ofourrespondentshavenotperformedamaterialityassessmentatall—highlightinganeasyareatobegintakingactionin.14auditboard.com14Question:Howrecentwasyourlastmaterialityassessment?Base:176.AnswerOptions:Withinthelast12months;12-24monthsago;2-3yearsago;3+yearsago;Ihavenotperformedamaterialityassessment.14Takeaway#5:ThemajorityofrespondentshavelittletonogovernanceorReportingframeworksleveragedbyorganizations(Figure10)oversightovertheirESGprogramstoday.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).auditboard.com15Whichofthefollowinglaws/regulationsdoyou(Figure11)Interestingly,nearlyone-thirdofourrespondentsreportbeingincomplianceorcomplywith(orwillcomplywithwhenenacted)?planningtocomplywiththeSEC’sproposedclimatedisclosurerule.1674%ofourrespondentsidentifiedthemselvesasworkingatpubliccompaniesthatwillberequiredtocomplywhentheruleisformalizedandadopted.17Moreover,whileprivatecompaniesmaynotbepreparing10-Ks,theymaybeaskedbycustomersorpartnerstodiscloseemissionsdatarelatedtotheirsupplychainecosystemthatcouldpotentiallyhaveanimpactontheirbusiness.Overall,thesplitbetweencompliantandnon-compliantcompanieshighlightsanopportunityfororganizationsthataren’tyetcomplianttoevolve.16Question:Whichofthefollowinglaws/regulationsdoyoucomplywith(orwillcomplywithwhen17Question:Isyourorganizationprivateorpublic?enacted)?(selectallthatapply)Base:151.Base:161AnswerOptions:Private;Public;Idon’tknow/cannotdisclose.AnswerOptions:CSRD;EUTaxonomy;ProposedSECclimatedisclosures;GermanSupplyChainDueDiligenceAct;UKCompanies(StrategicReport)(Climate-RelatedFinancialDisclosure)Regulations2022;Noneoftheabove;Other(pleasespecify).auditboard.com16Two-thirdsofoursurveyrespondentshavenotimplementedESGcontrols,HaveyouimplementedanycontrolsforESG?(Figure12)highlightingalowstateofmaturityinESGdatagovernance.18ThismayberelatedtothevastandconfusingspectrumofESG-settingstandardsandframeworksoutthere,aswellasthefactthatthereisnoformalESGcompliancerequirementintheUnitedStatesyet.However,theSECwillrequireanassurancefactorinduetime.Oncetheproposedclimatedisclosuresbecomeformalized,publiccompanieswillberequiredtohaveESGcontrolsinplacetostreamlinetheprocessofobtainingthird-partyassuranceforcompliancewiththenewrules.18Question:HaveyouimplementedanycontrolsforESG?Base:152.AnswerOptions:Yes,wehavedocumentedcontrols;Yes,andwehavestartedtestingcontrols;No,butweplantostartthisyear;No,andwedonotplantostartthisyear.auditboard.com17DoyouperforminternalESGaudits?(Figure13)However,therearesignsthatESGcontrolsprogramsarebeginningtorampup,basedonauditactivityamongthosesurveyed:auditboard.com•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.18PartTwo:FiveInitiativestoAdvanceYourESGMaturity1:SetyoursightsonmappingyourESGstrategy.“Thebesttimetoplantatreewas20yearsago,thesecondbesttimeisnow.”IntegratingESGintoyourbusinessstrategyislikesettingoutonalongjourney.Startingmayseemdaunting,butwithagoodmapandacleardestination,it’smucheasier.AstheESGlandscapecontinuestoevolve,itisessentialtostartbuildinganESGprogramsoonerratherthanlater.ManyESGissuesrepresentsignificantrisksand•Getyourcompass.First,youmustunderstandwhereyou’restartingfrombycostsifnotproperlymanaged.Considertheexampleofclimatechange:companiesperformingamaterialityassessment,whereyouidentifyandprioritizetheESGthatfailtomanagetheirgreenhousegasemissionsmayfaceregulatoryfines,issuesthataremostrelevanttoyourbusinessandyourstakeholders.reputationaldamage,orthephysicalimpactsofclimatechange.EarlyinvestmentinESGcanmitigatetheserisks—andevencreatenewopportunitiesforgrowthand•Setyourdestination.Onceyou’veidentifiedthekeyissues,youcancreateinnovation.strategicESGgoals.Thisisn’tjustaboutcompliance,butaboutfindingopportunitiestocreatevalue—perhapsbyreducingyourcarbonfootprint,Inthissection,weidentifyfiveinitiativesorganizationscanactontoadvancetheirimprovinglaborpractices,orincreasingboarddiversity.ESGmaturity.Theseactionscanbeadoptedoneatatimeorconcurrently,andtheydonotneedtobeperformedinsequentialorder.Themostimportantpartisgetting•Planyourroute.EmbedESGconsiderationsintoyourriskmanagementprocesses.started.Justasyou’danticipateroadblocksanddetoursonajourney,youshouldbecontinuouslyidentifying,assessing,andmanagingESGrisks(andopportunities).1.SetyoursightsonmappingyourESGstrategy.2.Investinpurpose-builttechnologytosupportyourESGprogramand•Communicatewithyourfellowtravelers.EnsureeveryoneinyourorganizationknowstheroutebyintegratingESGintoyourcompany’sDNA.ESGshouldbeprocesses.embeddedinallaspects,fromprocurementandoperationstomarketingand3.Buildoutyourreportingandmetricsverificationcapabilities.humanresources.4.Buildastrongcontrolsprogram.5.Adoptacreativeapproach.•Checkyourprogressalongtheway.RegularmonitoringandreportingonESGmetricswillhelpyoustayontrack,adjustyourstrategyifneeded,andcommunicateyourperformancetostakeholders.auditboard.com192:Investinpurpose-builttechnologytosupportyourESGprogramand4.Flexibilitytoevolve.NotonlyisitimportantfortechnologytosupportyourESGprocesses.processes,itisequallyimportantthatitisflexibleenoughtoadapttochangingbusinessconditionswithease.Afterall,youdon’twanttogetstuckwithongoingThepowerofESGprogrammanagementtechnologyinmaturingacompany’sESGscopecreep,implementationcosts,orhavingtocontactsupporteverytimeyoucapabilitiescan’tbeunderstated.Dataanalytics,inparticular,playapivotalrolebywanttochangesomething.gathering,analyzing,andmakingsenseofavastarrayofESGdata.TechnologycanhelpthebusinessautomateandstreamlineeffortstoidentifykeyESGtrendsand3:Buildoutyourreportingandmetricsverificationcapabilities.monitortheirprogress.Theseefficienciescanhaveasignificantimpactonhelpingthebusinessmakewell-informed,data-drivendecisions.BeforecompaniescanreportontheirESGperformance,theyneedtofirstdefinewhatESGissuesarematerialtothem,setstrategicESGgoals,putinplacetheInaddition,technologycanenableefficientdatamanagementandsafeguarddatarightprocesses,andgatherdatatotracktheirprogress.Reportingistheprocessofintegrity.GoodqualitydataisessentialforeffectiveESGstrategy,andtechnologicalcommunicatingallofthisworktotheoutsideworld.solutionsensuredataaccuracy,consistency,andeaseofaccess.Moreover,techplatformsarebecomingincreasinglyeffectiveforESGreporting,helpingtosimplifytheBuildingmatureESGdatacollectionandverificationprocessesensuresyoucanprocessofcollecting,aggregating,andreportingESGmetrics.This,inturn,makesconsistentlyandaccuratelymeasure,track,andreportonyourESGperformanceiteasierforcompaniestocommunicatetheirsustainabilityeffortswithshareholders,overtime.Thesecapabilitiesinvolvenotonlytheoutputneededforreporting,butemployees,andthepublic.alsothesystemsandprocessesfordatacollection,datamanagement,anddataanalysis.Withoutthesecapabilities,yourreportmaybeinaccurate,incomplete,orKeyCapabilitiestoLookforinESGProgramManagementTechnologynotcomparablefromoneperiodtoanother,whichcouldmisleadstakeholdersandundermineyourcredibility.1.Centralizesdataandfacilitatesdatacollection.Payattentiontonotonlytheinterfaceusedtocollectdata,butifitimprovesusers’visibilityintokeyinformationInaddition,metricsverificationhelpsvalidatetheaccuracyandreliabilityofliketopics,metrics,locations,etc.theESGdatainyourreport.Thisisessentialbecauseitprovidesbothyouandyourstakeholdersconfidenceinthedatayou’rereporting.Withoutrobustmetrics2.Easytouse,intuitiveinterface.Thisisimportantforuseradoptiontimeandverification,youruntheriskofreportingincorrectdata,whichcouldhavelegalimpactshowlikelyemployeesaretocontinueusingthetechnology.implicationsanddamageyourreputation.3.Quickimplementationtimeframe.Howquicklythetechnologycanbeimplementedisdirectlyconnectedtohowsoonbenefitscanberealized,andagoodindicatorofthetechnology’sabilitytointegrateintoESGprocesses.auditboard.com20Tobuildoutyourdatacollectionandmetricsverificationcapabilities,consider:Step5:Adoptacreativeapproach.•Whataretheoutputsthatyouneed?Anannualsustainabilityreport,timelyInanenvironmentwhereresourcesarelimitedandregulationsarestillevolving,aresponsestoRFPs,dataavailabletointernalstakeholders,etc.areimportanttocreativemindsetcanbeagamechangerforadvancingESGcapabilities.Whilethereconsider.arechallengesinmanagingESG,acreativemindsetcanturnthesechallengesintoopportunitiesforinnovation,differentiation,andleadership.•Whattoolsandsystemsareyouusingtocollect,manage,andanalyzedata?Aretheyreliableandhavetheybeenvettedbyothersintheindustryand/oryourAcreativemindsetcanhelpbusinessesfindvalueinESGthatmaynotbeimmediatelyorganization?obvious.CompaniescanlookatESGnotjustasacompliancerequirement,butasanopportunitytocreatevalueanddifferentiatethemselves.Forexample,theycouldusetheir•Whatformatsdoyouroutputsneedtobein?KeepinmindtheformatthatyourESGeffortstoenhancetheirbrand,attracttalent,ordriveinnovation.marketingagencymayneedtocreatetheannualreportmaterials.ThegoalistohaveverifiedandtrustworthyESGinformationthatcanbeturnedintoimpactfulAdditionally,inthefaceofregulatoryambiguity,creativitycanhelpcompaniesreports—andthatdoesn’topenyourorganizationtoaccusationsofgreenwashing.becomeleadersinsteadoffollowers.Insteadofwaitingforregulationstodefinewhattheyshoulddo,companiescandefinetheirownESGgoalsandstandards.Thisnotonly4:Buildastrongcontrolsprogram.positionsthemasleadersintheeyesofstakeholders,butitcanalsogivethemaheadstartwhenregulationsdobecomemoredefined.BuildingcontrolsandgovernancearoundESGdataisparamountbecauseitenhancestheaccuracy,consistency,andreliabilityofthedata.This,inturn,Finally,acreativemindsetcanalsofosteracultureofresilienceandadaptability.strengthensthecredibilityofyourESGdisclosuresandbuildstrustwithyourAsESGlandscapesevolve,companiesthatareflexibleandopen-mindedarebetterstakeholders.Justasfinancialdatahasrigorouscontrolstoensureitsintegrity,thesamepositionedtoadjusttheirstrategiesandcontinuetomakeprogress.principleshouldapplytoESGdatagivenitsgrowingsignificanceindecision-makingforinvestors,regulators,andotherstakeholders.Ultimately,embeddingESGintoacompany’scultureandoperationstakestime.ReachingastateofESGmaturityisajourneythatrequirescarefulplanning,strategicTocreatecontrolsandgovernanceforESGdata,severalstepscanbetaken:implementation,andaproactivemindset.Thesooneracompanystartsonthis•Developcleardatamanagementpoliciesandproceduresjourney,thesooneritcanreapthebenefitsofreliableandaccurateESGriskdatato•Implementdataqualitycheckssupportbusiness.•Establishaclearchainofcustody•Trainandeducatestaff21•Usetechnologytosupportdatamanagementauditboard.comauditboard.comThere’sNoTimeLikethePresenttoStartMaturingYourESGPracticesThemoretimeandeffortspentonESGinitiativesacrossthebusiness,themoreincrementalimprovementstherewillbe,allowingthebusinesstoadvanceitsESGcapabilitiesovertime.EmbracingESGmaturityisnotonlyaboutbeingagoodcorporatecitizen—it’salsosmartbusiness.WehopethatinsightsandinitiativessharedinthisreportwillhelpenableyourorganizationtochartapathtogreaterESGmaturity.Throughstrategicallocationofresources,expandingthebreadthanddepthofESGprograms,implementingrobustreportingandverificationmechanisms,andstrengtheninggovernanceandoversight,organizationscanunlockthefullpotentialofESGandpositionthemselvesasleadersinsustainabilityandresponsiblebusinesspractices.ThejourneytowardsESGmaturityisanongoingonethatrequiresdedication,continuousimprovement,andacommitmenttocreatinglong-lastingpositiveimpact.Byembracingthistransformativejourney,organizationscandrivemeaningfulchange,shapeamoresustainablefuture,andmeettheexpectationsofstakeholderswhilerealizingthetangiblebenefitsofESGintegration.TolearnhowAuditBoardcanhelpstreamlineyourESGprogrammanagement,visitauditboard.comtorequestatailoreddemo.22AbouttheAuthorsClaireFeeneyArshKaurAshleeHoltSeniorProductMarketingManagerPrincipalProductManagerSeniorManagerofImplementationAuditBoardAuditBoardAuditBoardClaireFeeneyisaSeniorProductMarketingManagerArshKaurisaPrincipalProductManageratAshleeHoltisaSeniorManagerofImplementationatAuditBoardfocusedonESGandRiskOversight.AuditBoardfocusedonESGProductStrategy.atAuditBoard,specializinginESGcustomersuccess.PriortojoiningAuditBoard,ClaireworkedinproductPriortojoiningAuditBoard,ArshworkedinproductAseasonedriskandauditleaderwith16+yearsmarketingatOneTrust,VMware,andInfor.managementatProcoreTechnologies.ofexperienceatorganizationsincludingRegionsFinancialCorporationandFocalPointDataRisk(aCDWcompany),wheresheprovidedauditandriskadvisoryservicesacrossawidearrayofindustries.AboutAuditBoardAuditBoardistheleadingcloud-basedplatformtransformingaudit,risk,andcompliancemanagement.Morethan40%oftheFortune500leverageAuditBoardtomovetheirbusinessesforwardwithgreaterclarityandagility.AuditBoardistop-ratedbycustomersonG2,Capterra,andGartnerPeerInsights,andwasrecentlyrankedforthefourthyearinarowasoneofthefastest-growingtechnologycompaniesinNorthAmericabyDeloitte.Tolearnmore,visit:AuditBoard.com.Copyright©2023AuditBoardauditboard.com23
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