What is an ESG Audit?

ESG Audit is the examination and evaluation of a Company’s level of compliance and ethical behavior in matters relating to a sound environmental, social, and Governance environment.

This can be categorized into three parts as follows:

  1. Environmental– You should consider the following aspects when assessing the relevance of the topic:
  • Regulatory Compliance- Regulatory breaches regarding environment made or serious incidents
  • Natural hazards- Is the Company subject to flood, seismic or natural hazards?
  • Carbon emissions- Does the Company operate in an energy intensive sector?
  • Air emissions- Can the Company operations originate significant emissions?
  • Energy and water management- Are there any plans in place to reduce energy consumption in the Company’s energy mix?
  • Hazardous substances handling & supply chain- Are chemical/hazardous substances used in the production process?
  • Waste Management- What are the waste management initiatives?
  • Soil & ground water- Is there risk of soil contamination resulting from the activities of the Company?
  • Biodiversity impact- Does the production process have an impact on bio diversity?
  • Green products- Does the Company offer ‘green’ or ‘low impact’ product lines?
  • Packaging- Are sustainability criteria considered in the design of the packaging?
  1. Social- You should consider:
  • Human resources- Do all employees have a formal contract of employment? What is the turnover rate and talent retention?
  • Health and safety-Is the Company classified as a major risk facility?
  • Community involvement- Community investments, sponsorships, product donations.
  • Customer privacy- Company’s data security policy and IT security management system, breaches in cyber security within the last years, and sensitivity of information in possess of the Company.
  • Consumer safety- Actions taken to ensure health and safety of consumers, and product specific regulations.
  • Fair disclosure and labelling-Incidents of non-compliance concerning product and service information
  • Innovation-R & D investment plans, patents, innovative products and services.
  1. Governance-You should consider:
  • ESG systems and processes- Has an ESG committee been established? Are ESG values and principles clearly communicated? Is there a sustainability section on the website?
  • Corruption and business ethics- Are there any anti-trust issues? Does the Company make financial or in-kind political contributions?
  • Supply chain- Does the Company have a reasonable purchasing policy?

Leave a Reply

Your email address will not be published.