The International Sustainability Standards Board (ISSB) has recently issued its inaugural global sustainability disclosure standards, marking a significant development in the field of sustainability reporting.
The standards, IFRS S1 and IFRS S2, aim to provide a common language for disclosing sustainability-related risks, opportunities, and climate-related factors. These standards will have far-reaching implications for internal auditors, as they will play a crucial role in ensuring the effectiveness and accuracy of sustainability reporting within organizations. In this blog post, we will explore the implications of these standards for internal auditors and discuss how they can prepare for the upcoming changes.
- Enhanced Trust and Confidence: The ISSB’s sustainability disclosure standards aim to improve trust and confidence in company disclosures related to sustainability. Internal auditors will have an important role in assessing the reliability and accuracy of these disclosures. They should be prepared to evaluate the completeness, consistency, and transparency of sustainability information, ensuring that it aligns with the new standards. By providing assurance over sustainability reporting, internal auditors can enhance stakeholders‘ trust in the information provided.
- Expanded Scope of Auditing: With the introduction of IFRS S1 and IFRS S2, the scope of internal auditing will expand beyond financial statements to include sustainability-related disclosures. Internal auditors will need to develop a deep understanding of the standards and the associated reporting requirements. This may involve collaborating with sustainability teams and acquiring knowledge about sustainability frameworks and reporting methodologies. Internal auditors will also need to adapt their audit methodologies and procedures to accommodate the evaluation of sustainability information.
- Collaboration and Coordination: To effectively audit sustainability reporting, internal auditors will need to collaborate closely with various stakeholders within the organization, including sustainability officers, risk management teams, and finance departments. This collaboration will facilitate the identification and assessment of sustainability risks and opportunities and ensure that the reporting aligns with the standards. Internal auditors should foster strong relationships with these stakeholders and promote a culture of transparency and accountability throughout the organization.
- Compliance and Risk Management: The ISSB’s standards incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Internal auditors should be prepared to assess compliance with these standards and the associated climate-related disclosures. They should evaluate the organization’s risk management processes to ensure that climate-related risks and opportunities are appropriately identified, assessed, and disclosed. Internal auditors can provide valuable insights into the effectiveness of risk management practices and contribute to the organization’s resilience in the face of climate-related challenges.
- Training and Professional Development: Internal auditors will need to enhance their knowledge and skills in sustainability reporting to effectively fulfill their responsibilities. Professional development programs and training sessions should be arranged to equip internal auditors with the necessary competencies. This may involve attending workshops, webinars, or pursuing relevant certifications. By staying abreast of developments in sustainability reporting and auditing, internal auditors can provide valuable guidance to organizations and ensure compliance with the ISSB’s standards.
The ISSB’s inaugural global sustainability disclosure standards, IFRS S1 and IFRS S2, mark a significant milestone in the field of sustainability reporting. For internal auditors, these standards present both challenges and opportunities. By preparing for the upcoming changes, internal auditors can play a vital role in ensuring the reliability, accuracy, and transparency of sustainability disclosures. By collaborating with stakeholders, enhancing their skills, and adapting their audit methodologies, internal auditors can contribute to building trust and confidence in sustainability reporting, ultimately supporting informed investment decision-making and promoting sustainable value creation.