ESG Audit

Hiregange & Associates LLP
Chartered Accountants
Risks related to the environment, society, and governance (ESG) exist in every
industry. However, how these issues are gathered, managed, and reported will
determine if a company is ready or not.
Businesses will incur costs related to ESG issues in some form because the
environment is not an infinite resource that can be used without consequences.
Business owners must therefore consider these risks when making decisions
concerning their operations, goods, and services. The process of assessing the
environmental and social risks associated with a company's operations,
products, or services is known as an ESG audit.
This audit's objective is to locate any dangers so that they can be dealt with now
before they develop into issues later.
Each ESG audit provides insight into the company’s approach to the issues.
Conducting an ESG audit also helps businesses look at the supply chain risks,
risk management, capabilities, and transparency with shareholders.
Why ESG Audit is Important?
ESG audits are important for the public, investors, and the company alike. They
are necessary because more customers are looking for products and services from
companies that have strong environmental, social and governance practices.
 For Investors: ESG audits aid in shedding light on how the business
approaches these problems and how it controls risk. This is because the
information may have an impact on the stock price of the company and, in some
situations, may make it more difficult for the company to obtain more capital.
 For Company: Businesses will be better prepared for any potential new or
upcoming problems. They might also provide light on the risks associated with
CA Nikhilesh Tiriveedhi
Value Added Audit & Advisory
Internal Audit | Operations Audit | Risk Assessment
the company's supply chain and increase shareholder transparency. Better

investors and personnel are attracted as a result.
What is the purpose of the Sustainable Audit?

Quality audits are intended to assist businesses in locating opportunities,
addressing areas of weakness, and monitoring the success of ESG initiatives.
Determine how well they are managing their performance in these areas with
internal departments and external stakeholders, businesses engage in ESG audits
as a type of engagement. For financial reasons, this strategy should be
distinguished from an audit because it has different goals.
An ESG audit Seeks to answer the following questions:

 What environmental issues are directly relevant to the company?
 What are the risks associated with these issues?
 How is the business organised in terms of ESG policies, systems, and
controls?
 How are these issues communicated between senior management,
employees, customers, and other stakeholders?
Because the external environment is constantly changing and has the potential to
impact operations, it is crucial that businesses continuously assess their
performance in relation to ESG problems.
ESG Audit VS Sustainable Audit
ESG audits are separate from financial audits because they have different
objectives. An ESG audit focuses on the environmental and social risks that come
with doing business while a sustainability audit focuses on how companies can
become more environmentally friendly and socially responsible.
Components of the ESG Audit
One crucial factor that has an impact on all organisations is the outside
environment. Because of this, it's critical for businesses to assess their current
performance in comparison to the main ESG threats. This include examining
stakeholders' perspectives, legal and regulatory compliance, as well as the
business's social and environmental policies.
When conducting an ESG audit, it's crucial to follow a methodical procedure that
adheres to international standards. The auditors should preferably be qualified,
unbiased, and have knowledge of either environmental risk, sustainability, or
both.
What is ESG Assurance?

The Assurance component of ESG reporting focuses on how businesses prove
they are committed to CSR and sustainability. It guarantees that present and
potential investors can have confidence in ESG data and research. They can
accomplish this in several ways, such as:
 Third-party certification of the accuracy of the data in the ESG report.
 The release of a justification letter from management.
 Independent confirmation of the reliability and accuracy of data and
analysis.
Who is Responsible for ESG Reporting?

Not every company is required to submit an ESG report but those that must
comply with the requirements of the regulator.
- In India under SEBI’s Corporate Governance Guidelines.
- In the USA under the Securities and Exchange Commission. (SEC)
What is an ESG Disclosure?
A report that offers pertinent information from the company on its ESG
performance is known as an ESG disclosure. This covers how it conforms with
legal requirements pertaining to governance, social, and environmental issues.
This disclosure also includes information regarding the company's ESG risks and
social impacts.
CSR VS ESG
A company's efforts to integrate social and environmental concerns into its

business strategy, policies, and operations are known as corporate social
responsibility (CSR). CSR's guiding principles help businesses behave more
responsibly as members of society. ESG aims to ensure that businesses adhere to
the same values by assessing their effects on the environment and society.
What is the standardization of ESG reports?
The International Organization for Standardization (ISO) acknowledged that

reports on CSR and ESG that were prepared voluntarily would not be as
consistent, as necessary. In response, ISO published an openly accessible
standards framework that offers a global perspective on reporting. Companies
are urged to report on their ESG principles as well as some of the risks and
repercussions that their CSR activities have had in accordance with the ISO 26000
guidelines.
What are the Benefits of an ESG audit?
1) Meet the regulatory requirements for reporting environmental and social

issues
2) Improve their social license to operate by identifying risks, taking effective
corrective action, reporting on progress transparently, and
communicating effectively with stakeholders about ESG issues.
3) Gain market advantages by differentiating themselves from their peers,
building new business opportunities, and demonstrating a commitment
to high environmental and social standards.
What is the value of ESG reports?
Making sure that company actions are sustainable and have no negative effects
on the environment or society is the value of ESG reporting. These reports offer
transparency and make it possible for businesses to take responsibility for their
activities.
In -Summary
ESG audits give businesses the chance to assess the effects of their operations on
society and the environment. With the use of this knowledge, a firm can create
successful, long-term initiatives that will enhance its connections with
stakeholders while enabling it to retain a moral and sustainable business model.
Due to their understanding of and adherence to Environmental, Social, and
Governance Standards, we are seeing increasingly severe weather severe
weather events.
(Disclaimer: These are authors’ views, being shared for knowledge

dissemination purposes only. Your comments and feedback are welcomed at
nikhilesh@hiregange.com)

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Hiregange & Associates LLP

Why ESG Audit is Important?

the company's supply chain and increase shareholder transparency. Better

What is the purpose of the Sustainable Audit?

An ESG audit Seeks to answer the following questions:

ESG Audit VS Sustainable Audit

Components of the ESG Audit

What is ESG Assurance?

Who is Responsible for ESG Reporting?

What is an ESG Disclosure?

A company's efforts to integrate social and environmental concerns into its

What is the standardization of ESG reports?

The International Organization for Standardization (ISO) acknowledged that

What are the Benefits of an ESG audit?

1) Meet the regulatory requirements for reporting environmental and social

What is the value of ESG reports?

(Disclaimer: These are authors’ views, being shared for knowledge

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