The IIA has recently released an advisory report with guidance on the reporting of Environmental and Social impact. The article below summarises the key points.
With increasing pressure on companies to report transparently on environmental, social and other impacts, the Chartered Institute of Internal Auditors (IIA) has called for greater scrutiny of the accuracy and rigour of information reported.
Previously seen as the purview of the media and politicians, reporting on information related to the environment, human rights, diversity and anti-corruption measures has become increasingly important to investors who seek companies with sustainable business models.
An EU Directive setting a 2017 deadline for large companies to start publishing a wide range of non-financial information is pushing reporting of non-financial information up the boardroom agenda. Internal auditors are well-placed to provide assurance to boards in this area.
Dr Ian Peters, IIA Chief Executive said: “The move towards reporting non-financial information poses obvious challenges for companies; it requires them to bring together information on what may be disparate parts of the business.
“Organisations need to ensure that the right things are measured, and that the systems are in place to capture the data needed. But more than that the public needs to know that the non-financial information being reported is fit for purpose.
“Internal auditors possess a broad view across the entire business. They are ideally placed to offer a comprehensive view of how an organisation manages its resources and to provide assurance on data integrity. As companies respond to demands for more non-financial information, internal audit needs to play a central role.”
Integrated reporting aims to address the shortfalls associated with traditional one-dimensional financial reporting. It examines the connections between financial, environmental and social impacts of an organisation to give a more complete picture of its sustainability and long term value.
The role of internal audit is to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively. This broad view across the whole company’s systems and processes means that internal audit is ideally-placed to provide advice and assurance around corporate social responsibility and other information generated for integrated reporting.
Companies are now facing increased demands generally from regulators, politicians and investors for more comprehensive and transparent corporate reporting. In 2013, the UK government introduced new rules under the Companies Act requiring all listed companies to produce a Strategic Report covering a wide range of non-financial information.
Integrated reporting is increasingly viewed by companies as a good way of ensuring compliance with these new regulatory demands. It is also hoped that it will enhance business performance and improve stakeholder engagement by ensuring that businesses increase their focus on non-financial issues.
The IIA’s report outlines the central role that internal auditors have to play in integrated reporting:
Case studies: Non-financial and Integrated reporting- the role of Internal Audit
Marks & Spencer
The Crown Estate