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:
- 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 Companys 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?
- 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- Companys 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.
- 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?