Navigating ESG Reporting: Board and Auditor Roles in Ensuring Transparency and Accountability
Author: Destiny Aigbe
November 5, 2024
As Environmental, Social, and Governance (ESG) factors continue to influence corporate performance and investor decisions, companies are increasingly integrating ESG reporting into their governance and auditing practices. This shift not only meets regulatory demands but also aligns with investor and stakeholder expectations for transparency.
Board of Directors and Audit Committee Oversight
The "G" in ESG stands for governance, covering a company's policies, decision-making processes, and accountability structures. Effective ESG oversight begins with the board of directors, often through the audit committee or a dedicated ESG committee, to ensure that governance and sustainability policies align with the company's operational goals. Boards are responsible for developing policies and controls that incorporate ESG into the company’s financial reporting systems and decision-making framework. Many companies are now employing Chief Sustainability Officers, implementing clear ESG guidelines, and linking executive compensation to ESG outcomes.
Boards must consider key factors such as:
- The company's ESG data collection and reporting processes.
- The materiality of ESG factors to financial reporting.
- Internal controls for verifying ESG data and documentation.
- Disclosure procedures to ensure accuracy in public reports.
Auditor Role in ESG Disclosures
Public company auditors now provide assurance on ESG disclosures, supporting company boards in verifying the accuracy of ESG reports. Auditors adhere to AICPA standards in ESG attestations, verifying data reliability and testing controls within the company’s ESG reporting systems. Auditors engaged in ESG reviews must be independent, skilled in the company's business, and able to verify data using established standards from entities like the Sustainability Accounting Standards Board.
Companies can choose between full ESG audits and limited-scope reviews to address deficiencies. Engaging the same firm for both financial and ESG audits can streamline costs and improve audit efficiency due to the auditor’s familiarity with the company’s operations.
With growing regulatory and investor focus on ESG, companies are advised to ensure robust board oversight and auditor involvement in ESG reporting to enhance accountability, transparency, and governance credibility.
About the Author
Destiny Aigbe
Managing Partner
Aigbe Law PLLC | Dark Alpha Capital
A Corporate and Securities Law Firm
With a robust foundation in law and finance, Destiny Aigbe has carved a distinguished career, underpinned by his pivotal role in orchestrating and managing complex transactions that have propelled companies to significant growth and market prominence. As a seasoned attorney and strategic advisor, Destiny has been instrumental in facilitating over $75 million in capital raises, demonstrating a keen acumen for securing funding and fostering investor confidence.
Destiny's leadership in the execution of six successful public listings, through meticulously structured reverse mergers and registration statements, showcases his adeptness in navigating the intricacies of the public markets and his capacity to guide companies through transformative growth phases. His involvement in five mergers as an operator further illustrates his versatile skill set, extending beyond legal expertise to include hands-on management and operational strategy, though these ventures did not involve funding.
Destiny's professional journey is marked by a commitment to excellence and a diverse range of experiences, from representing a wide spectrum of clients including public and private companies, and investment firms, to holding significant roles within the US government. His tenure with the US Department of State and the National Institutes of Health highlights his adaptability and his contribution to the advancement of entrepreneurial ventures in sectors like biotechnology and nanotechnology through strategic funding initiatives.
An alumnus of Vanderbilt University Law School, Destiny focused on Finance and Mergers & Acquisitions, further honing his expertise with a certificate in Law and Business. His foundational education in Finance was obtained with honors from the University of Maryland's Robert H. Smith School of Business, which laid the groundwork for his subsequent achievements in investment banking and legal practice.
Residing in the Washington, D.C. area, Destiny Aigbe continues to leverage his extensive experience and insightful leadership to drive innovation, growth, and success for his clients and the ventures he is involved with.
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