By Maritza Marchant, Consulting Director at CCL Auditores Consultores
In recent years, we have seen how companies have increasingly raised their awareness and concern about the impact they generate on people and the world. In this regard, environmental, social, and governance aspects (ESG) have become key and indispensable in decision-making, and, in the specific case of Chile, even more so following the recent enactment of the Economic and Environmental Crimes Law this year.
Following the enactment of the aforementioned law, it is encouraging to see how these issues have been given greater importance and ultimately placed at the center of attention of boards of directors, shareholders’ meetings, and regulatory bodies. This has even led companies to adapt and reshape their business strategies.
In this context, the role of internal audit is essential in adding value to companies, both from an assurance perspective and as a trusted independent advisor to management.
Thus, a risk-based internal audit function should consider the following aspects to generate value within a company: strategic planning aligned with governance and oversight responsibilities; identification, assessment, and management of ESG risks and opportunities; establishment of a robust Internal Control system for non-financial information; and implementation of a formalized ESG reporting framework.
However, although the level of maturity of each company and the type of organization will determine the scope of the internal auditor’s work in ESG matters, it is advisable to gradually incorporate these criteria into audit programs. This can serve as a solid starting point for internal auditors, both in companies that are already advanced in ESG matters and in those just beginning to address these initiatives.
Ultimately, ESG criteria entail a series of risks and opportunities that pose a challenge to which internal audit must respond with the highest standards, providing assurance to senior management and stakeholders regarding the main risks affecting the company. To achieve this, it is recommended that the audit function understand and analyze the aforementioned aspects that add value to the company, while also identifying the specific risks for each ESG pillar and establishing a focused work approach.