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Clarity - insights into issues affecting audit committees - The sustainability journey - EY - South Africa

Clarity: insights into issues affecting audit committees

The sustainability journey

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A company cannot walk before it can crawl. You cannot skip any of the steps in making sustainability part of your company." Leading advisor on sustainability

From compliance, to opportunity, to an integrated business strategy, there is more pressure on companies to embrace sustainability.

Investors and equity analysts are building sustainability factors into their analysis and investment decisions. Consumers and Non-Government Organisations (NGOs) are demanding more data regarding companies' environmental and social performance. Regulators and standard-setters are piling on the pressure too.

With more intense stakeholder scrutiny, companies are embarking on a three-stage "journey."

Stage 1: Building sustainability into regulatory compliance and risk

The prospect of non-compliance with regulatory requirements often triggers companies' focus on sustainability. This is driven initially by the requirement to reduce carbon emissions and report on sustainability performance.

Stage 2: Focusing on and reporting the economic benefits

Companies find that as they become more effective at dealing with sustainability risks, potential cost savings and revenue opportunities emerge.

Stage 3: Integrating sustainability into the business strategy

Companies' approaches to their sustainability journey are always evolving. Currently, business leaders strive to fully integrate sustainability into the organization by establishing CEO and board-level commitment to sustainability and incorporating it into top-level decision making.

Audit committees could play a critical role in sustainability

Leading companies are progressing through the three stages of the sustainability journey. Boards should be questioning management on its sustainability strategy, and ensuring stakeholder expectations are met through clear, transparent reporting. Audit committees are well placed to provide oversight, given their expertise in compliance, risk management and reporting.



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