Three ways to deal with sustainability auditors

In a recent Forbes article, The Auditors are Coming to Corporate Sustainability Reporting, Enhesa’s Expert Services Strategy Director Mary Foley offered several best practices companies will need to address the upcoming landscape of evolving sustainability reporting requirements.  

As sustainability is transforming from a nice-to-have brand ideal to a strictly regulated corporate compliance process, the pain of that transformation is starting to show: “Starting in 2025,” Foley writes, “companies in the scope of the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD) will need to not only disclose information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment; they will also need to have that information assured by an independent third-party.”

The impact of (sustainability reporting) noncompliance

For thousands of companies in the EU, mandatory sustainability reporting requirements mean being prepared for the independent assurance process in addition to regulatory oversight. This “game-changing level of scrutiny,” Foley writes, promises to transform organizational culture, escalating issues like climate, DEI (diversity, equity, and inclusion), and human rights to the level of non-financial risk management and reporting for the very first time. But these issues could have far-reaching financial impacts for businesses too.  

Traditionally, noncompliance can result in very real business risks – fines and penalties, disrupted supply chains, unplanned and unbudgeted costs in time, effort and resources, and loss of consumer confidence. The potential development and implementation of new policies, product and process changes, and employee retraining all carry a financial impact, as well. In more extreme cases, businesses may experience blocked market access, they may be banned from public procurement opportunities, and in some cases, they may even have revenues seized or ultimately experience the winding up of their businesses.  

Even a small infraction can have big consequences in the public’s eye. It can damage a brand’s reputation and reduce market share due to a tarnished image for consumers and shareholders alike – a pretty big black eye on the glossy marketing brochure where the corporate sustainability message was once relegated to in former years.

So how will businesses tackle sustainability reporting?

“Business leaders are going to want to make sure their audited and assured reports match their marketing messages,” Foley writes. And how they’ll operationalize that? Foley elaborates on three key ways in her article:

1. Understand your materiality assessment process: inputs and outputs

Once you’ve carried out your Materiality Assessment, you can use the findings to map to your legacy and current EHS compliance metrics. This data will form a foundational part of your corporate sustainability reporting. So start there.

2. Manage, aggregate, and consolidate the flow of information across the company

Making sure there is a cross-functional team – including, e.g.: procurement/supplier management, EHS, finance, HR, legal affairs, corporate risk, and IT – will help to ensure that the vast amounts of data required for both compliance reporting and the setting and management of strategic objectives are all aligned.

3. Know what’s coming

Just like this transformation of sustainability from a sometimes-aspirational marketing tagline to a financial-level reporting standard with its requirements for associated investment-grade level data, compliance standards around the world are also changing rapidly. Stay ahead of what’s coming to ensure that you know what you need to comply with; monitor and measure your ongoing compliance status; and reduce the potential impacts of noncompliance by proactively adapting to what’s coming next, leveraging your expert network to do so.

Getting started: Practical steps

In addition to reading her full article in Forbes, join Mary Foley for a live webinar on Feb 14 – Managing EHS risk in changing regulatory landscapes – where she’ll talk more about: 

• How companies get ahead of evolving trends in EHS
• How businesses address the challenges of changing trends in compliance requirements
• The solutions they can leverage to manage compliance data across the company from the facility to the corporate level