Board-level oversight of sustainability initiatives and disclosure is up for grabs at many companies. A PwC memo discusses reasons audit committees might be best positioned to take on oversight responsibilities for sustainability disclosures. Granted, some companies have established a board-level sustainability committee. Audit committees always seem to have a full plate and with more attention focused on sustainability reporting, PwC suggests they take on even more. Here’s an excerpt from PwC’s memo:
Public disclosure of ESG metrics requires appropriate policies, controls and governance, similar to other elective financial metrics, such as non-GAAP metrics. Companies should have processes and controls around the development of those disclosures to support the accuracy of the data.
The audit committee has deep skills in overseeing internal controls, policies and procedures, and reporting. Audit committees can play a role by understanding the methodologies and policies used to develop the metrics, as well as the internal controls in place to ensure accuracy, reliability, and consistency of the metrics period over period.
The memo references the SEC’s interpretive guidance issued in February regarding key performance indicators in the MD&A saying “we encourage audit committees to be actively engaged in the review and presentation of non-GAAP measures and metrics to understand how management uses them to evaluate performance, whether they are consistently prepared and presented from period to period and the company’s related policies and disclosure controls and procedures.”
Not long ago, John wrote about how the SEC’s MD&A guidance heightens the stakes for ESG disclosures.
-Lynn Jokela, TheCorporateCounsel.net March 17, 2020
