Challenges when Auditing Sustainability Information
slides 2
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auditing is always about assessing risk
- find risks -todo which risks
- set up plan to mitigate those risks
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specialized knowledge
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objectivity
- dependability of the data disclosed
- management bias (as always in reporting)
- big bath accounting
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- even alterations must be traceable
- comes from accounting software
- Excel sheets don’t have traceability
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- not stable over time - can change quickly over time by change in stakeholder preferences
- fast-paced changes
- investments cannot be adapted to quickly - hard tradeoffs
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technological - cybersecurity
- sustainability data is valuable to competitors - lot’s of information on production capabilities and actual production amounts
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technological - documentation
- most costs are internal - auditing company is the cheap part
- a lot of change which needs to be documented well
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third party data
- reasonable assurance - supplier needs to be audited to be trustworthy
- not trustworthy until proven otherwise
- trust issue - untrustworthy data may through off complete report
- reasonable assurance - supplier needs to be audited to be trustworthy
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controversies and reputational risks
- legal implications
- auditors need to self-assess whether they have the competences to do a sustainability report assessment
- is it even enough for limited assurance?
- learning by doing currently
- legal implications
Conclusion VW Dieselgate
- Dieselgate
- accountability
- management
- supervisory board
- auditors
- risk management
- interrelation to Risk Management and Scenario Planning
- stakeholder trust
- in tune with Legitimacy Theory - legitimacy violated
Guest: Climcyle
- Fabius Lenhart
- KPMG - their software solution is “outsourced” to a new company
- because of independence - independence conflict
- RegTech - Regulatory Tech
- Customers are banks - evaluating their portfolio based on European Green Deal
- thresholds for what is green and what is not is dropping every 5 years
- what is green today might not be in a few years anymore
- where do you get data for:
- hail chance
- flooding possibility
- temperature ranges
- necessary inputs
- address
- energy certificate
- copernicus - space and satallite data
- recommendation from EU
- assumptions shape the results
- only top 1% of precipitation or top 0.1% is relevant for you
- one has to explain that to auditors afterwards
- currently no personal incentive for a green deal
- if there was a discount on interest rate on green loans banks could refinance cheaper and therefore prefer a green loan over a non-green loan
- good auditor needed then - cheating must be impossible