The ABCs of ESG
Articles Internal Auditor Magazine Staff Aug 08, 2022
Whether or not an organization looks at environmental, social, and governance risks within its anti-bribery and corruption program may depend on where it is in the world. A study by Kroll found that compliance leaders in North America and the Middle East are less likely to conduct ESG-related due diligence than their counterparts in other parts of the world.
In the 2022 Anti-Bribery and Corruption Report, 57% of respondents from Asia Pacific and 52% in Europe and Latin America say they review ESG metrics compared to 43% in the U.S. and Canada and 38% from the Middle East.
The type of ESG issues organizations focus on also varies by region. In Europe, labor rights and climate change mitigation have become more of a priority — with coverage increasing in that region by 17% and 15%, respectively, from 2021 to 2022. In the Americas, respondents are focused on modern slavery and human trafficking, with the U.S., Canada, Mexico, and Brazil reporting a 16% increase in coverage over 2021.
Overall, more organizations worldwide now include ESG risks within anti-bribery and corruption programs, with the Kroll report affirming that “much progress has been made in 2022.”
For instance, 36% of compliance leaders say they include air and water pollution in their due diligence compared to 24% in 2021. Similarly, more respondents also cover labor rights issues (34%) and human right abuses such as slavery and human trafficking (35%), compared with 22% and 24%, respectively, in 2021. —C. Janesko
35% OF WORKPLACE INJURIES occur during a worker’s first year on the job.
“Now look at the current job market, where we’ve got so much turnover and people changing jobs frequently, and that risk goes up even more.”
— Chris Hayes, assistant vice president, Travelers Risk Control.
Source: Travelers, The Traveler’s Injury Impact Report
Energy in Transition
IEA recommends long-term actions to reduce emissions, oil dependence.
Gas prices remain at or near historic highs worldwide, the result of several factors, including four-decade-high inflation and the conflict in Ukraine. Governments have begun taking action to not just mitigate the energy crisis in the short term — as Germany is doing by temporarily increasing coal consumption — but also to jump-start a transition toward a greener, more energy-efficient world economy, according to a recent International Energy Agency report.
To guide policymakers in this task, the IEA’s 7th Annual Global Conference on Energy Efficiency report outlines the broad steps necessary to deliver net-zero global emissions by 2050. Chief among its recommendations is fast-tracking efforts to reduce global annual emissions by at least one-third by 2030. The IEA urges nations to deploy more energy-efficient equipment in homes, buildings, vehicles, and industrial operations; encourage the adoption of smart energy controls; and motivate individuals and organizations to move from gas-powered to electric vehicles.
Equally critical, the IEA says, is encouraging people to adopt better behaviors, such as lowering thermostats, changing commuter and travel patterns, and transitioning to more remote work environments. These measures, especially in the wake of rising gas prices, are “already cost-effective and pay for themselves” and would constitute 20% of the one-third global emissions reduction goal, according to the report.
These issues were among the priorities discussed at the third Major Economies Forum on Energy and Climate, an online event in June. In a speech at the forum, U.S. President Joe Biden urged countries to accelerate actions to cut methane emissions, adopt ambitious targets for zero-emission vehicles, and strive to clean up global shipping. He also called on countries to spend a collective $90 billion to speed the commercialization of clean technologies and develop new fertilizers that cut agricultural emissions and boost food security. —L. Wamsley
Risk, Compliance, and Audit Professionals on The Upside of Risk
22% are realizing benefits from defining or resetting risk
appetite and thresholds.
56% are investing in risk culture in 2022.
47% are very confident they can build a more risk-aware culture.
Source: PwC, 2022 Global Risk Survey
Ask an Expert: Regulating Cyber Risk
Why are governments around the world regulating how organizations manage cybersecurity?
Cybersecurity is without doubt the biggest non-financial risk public and private sector organizations face — a risk U.S. and European Union regulators are turning to regulatory enforcement to manage. The average cost of a cyberattack increased in 2021 to $4.24 million from $3.86 million in 2020. Also in 2021, ransomware became the predominant cyber threat confronting businesses of all sizes. Recent cyberattacks on SolarWinds, JBS Meat, Kaseya, Colonial Pipeline, and Toyota have demonstrated the impact of cybercrime on supply chains, and the cyberattacks by the Lapsus$ group demonstrated that low-level hackers can successfully disrupt major brands. Moreover, the Ukraine crisis is the world’s first geopolitical conflict using cyber alongside conventional weapons. In response to this level of risk, the U.S. and EU have begun to regulate cybersecurity risk management, requiring the boards of impacted organizations to manage cybersecurity and cybersecurity risks with board oversight, assurance, and regulatory compliance attestation and reporting.
What is internal audit’s role in supporting cybersecurity compliance?
In its third-line role, internal audit provides senior management and the board with independent and objective assurance on governance, risk management, and controls. This includes assessing and attesting to the overall effectiveness of the cybersecurity activities performed by the first and second lines. Internal audit provides independent oversight and assurance of cybersecurity risk management, physical and logical assets, and the organization’s policies, processes, procedures, and controls. Only internal audit is qualified to undertake these tasks ahead of boardroom regulatory reporting.
The global workplace
21% of employees are engaged at work.
44% of employees experience stress daily.
45% of employees think now is a good time to find new employment.
Source: Gallop, State of the Global Workplace: 2022 report
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