The Emerging Role Of Internal Audit In ESG

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 The role of internal audit in ESG (Environmental, Social, and Governance) is becoming increasingly important as companies in India are at different stages of ESG adoption. While larger multinational corporations have integrated ESG requirements into their audit plans, smaller companies are still new to ESG standards and frameworks. 


In India, ESG is currently viewed more as a regulatory obligation rather than a corporate responsibility towards the environment and society. However, ESG reporting is expected to become more widespread across larger businesses soon.


Regulators, investors, customers, third-party affiliates, and society are placing greater emphasis on ESG performance. By implementing effective ESG strategies, companies can enjoy several benefits, such as improved access to capital, talent, and business opportunities. 


Challenges Faced For Internal Audit


ESG Internal audit functions that are embarking on their ESG journey face several challenges, including the following:

  • Lack of a uniform framework: The absence of a uniform framework that can be used to assess and report on the effectiveness of ESG strategic advisory is a huge barrier. This can make it difficult for auditors to check and report on the results of their ESG initiatives.

  • New ESG topics: ESG topics like climate change and decarbonisation, which were not traditionally included in audit plans, pose a challenge for internal auditors to review. These topics require specialized knowledge and skills, which may be lacking in the audit team.

  • Data collection: ESG reporting data is often scarce, unavailable, or dispersed across multiple departments, making it difficult to collect for review. This can make it challenging for auditors to collect the data they need to assess ESG performance accurately.

How To Mitigate These Challenges?

There are ways to mitigate the challenges faced by ESG internal audits. Here are some possible solutions:


  • Training and Education: ESG Internal auditors need to be familiar with various ESG-related terms and concepts, such as greenhouse gas (GHG) calculation frameworks, to be able to effectively review and report on their organisation's ESG strategies.

  • Collaboration: To enhance their understanding and review of the underlying documents related to ESG reporting, internal auditors should collaborate with subject matter experts within their organisation.

  • Technical Expertise: ESG Internal auditors should gain expertise in testing various IT systems and reading relevant non-financial data to overcome the challenges of dependency on various departments. 

Sustainable ESG Consulting With Internal Auditors: 


ESG Internal auditors at Deloitte can play a critical role in developing and implementing an effective ESG framework. Let’s discuss ESG’s internal audit scope. Here are some possible areas where internal auditors can assist in ESG review:


  • Assess ESG Maturity: Internal audits can evaluate an organisation's current ESG maturity level by comparing it with others and identifying areas for improvement. This can help raise awareness about ESG priorities and implications at the board and senior leadership levels.

  • Governance and Oversight: Internal audits can assess the governance and oversight of a company's ESG strategy by reviewing the assigned roles and responsibilities and monitoring ESG issues. This can help ensure proper governance structure and oversight of ESG initiatives.

  • Validate ESG Risk Management Goals: ESG Internal audit at Deloitte can ensure that the goals set for ESG risk management are realistic, measurable, included in the company's strategic objectives, and discussed regularly at board meetings.

  • Collaborate with Enterprise Risk Management: Internal audit can assist in mapping ESG risks and incorporating them into the organisation's enterprise risk management plans to identify, assess, and manage ESG risks.

  • Document ESG Policies and Procedures: Internal audits can review and ensure proper documentation of ESG policies and procedure manuals to communicate the organisation's strategy, goals, and activities undertaken to mitigate ESG risks.

  • Perform ESG Risk Assessments: Internal audits can determine whether ESG measures are significant to the organisation and aligned with investor, customer, and stakeholder expectations. This can help identify potential risks and opportunities for improvement in the organisation's ESG strategy.

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