How can companies build trust in sustainability reporting?
A major step forward would be to achieve effective internal control over these reports, according to the Committee of Sponsoring Organizations of the Treadway Commission (COSO)'s latest study.
They provide specific guidance in the hope of improving public disclosure and corporate decision-making:
- Organisations must be committed to building internal control capacity and relevant internal assurance before seeking to develop external assurance.
- The report lays out 17 principles for efficient control grouped in 5 categories: control environment, risk assessment, control activities, information and communication, monitoring activities.
- Each company's maturity, industry, resources and requirement will require to adapt and interpret the framework differently, but all of the 17 principles will need to be addressed without exception to reach effective control over key sustainability activities.
- To be improved over time and integrate the newest monitoring and control best practices, the principles must be applied in an automated, efficient and continuous way.
- All stakeholders must be involved, including boards, committees, management, operations, sustainability, compliance, risk management, and internal audit.
- The best control teams are cross-functional, and sustainability control teams can integrate experts in corporate social responsibility, integrated reporting, legal, public relations, and human resources as well as finance and accounting.
- Educating these teams and stakeholders on sustainability topics is critical.