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Building an ESG risk-auditing best practice framework for our continent

Environmental, social and governance (ESG) best practice has been growing in importance and urgency across various spheres of business over the past few years. A crucial theme that emerged from the international One World, One Future conference run by the Institute of Internal Auditors in Amsterdam this year, is how crucial ESG is from an internal audit perspective.

Whilst this is largely uncharted territory, with many countries and organisations coming to grips with the regulatory landscape and how it impacts their bottom line and reporting requirements, at Andile we have an exciting opportunity to partner with our clients and build best practice around a risk-auditing framework for ESG on our continent. We call on all responsible corporate citizens to join us on this journey. In doing so, internal auditors on this continent will be able to effectively assess and manage environmental impacts, ensure compliance with regulations, and drive sustainable practices in organisations doing business in Africa and the rest of the world.

And the timing is right. Of the 2,200 delegates at the international conference, 309 were from Africa, including representatives of South Africa’s leading corporates and academics from three universities. The appetite for implementing strong ESG-aligned internal audits suggests that our call to engage in the development of best practice in this sphere is both well-timed and already widely embraced.

Organisations may well have strong ESG-focused external audits annually to help with compliance, but our focus is on the needs and perspectives of organisations and the development of frameworks that provide year-in and year-out assurance of not just compliance, but of sustainable practices across the board. This is a journey that most organisations are planning to embark on and in doing so, you need to ask whether your internal audit function is positioned and equipped to provide assurance that your organisation’s ESG risks are mitigated sustainably or not? If not, do you have a partner who can assist you on this journey collaboratively?

Outside of the highly topical impact of carbon footprint and climate change, no conference – not least in the arena of internal audits – would be abreast with current trends without highlighting, discussing and deliberating upon disruptive technology such as artificial intelligence-driven automation. Discussions and implementations that pay special attention to ethical and responsible use and application are, frankly, non-negotiable for organisations traversing this new world.

What is this new world? Not only in Africa but globally, many companies are starting to investigate the use of blockchain technology to tokenise and trade in real world financial assets or cryptocurrencies, but there is no universal best practice in how to approach an internal audit framework for this emerging sector, given the subject-matter knowledge and maturity of application per country, per regulator and per entity. It is absolutely crucial that best-practice frameworks are defined and there is no better way to achieve this than in a collaborative manner.

If we look back over the key themes to emerge at the conference and the wonderfully insightful presentations by thought leaders from across the world, spanning issues from AI and other emerging technologies, to stakeholder engagement and accountability, risk management and resilience, supply chain and third-party risks, and reporting and disclosure, it is clear that the world of internal audits is rapidly shifting towards a commitment to the environment, social responsibility and diversity, and robust and emerging technology led governance best practice.

Overall, the conference underscored the significant importance of ESG considerations in organisations and the role of internal auditors in driving sustainable practices, promoting social responsibility, managing risks, and ensuring transparent and reliable reporting. Thought leaders at the conference encouraged internal auditors to take a proactive approach to integrating ESG themes into their work and to contribute to a more sustainable and responsible future. The closing keynote highlighted that without risk, there is no reward but within an ever-changing risk landscape the question needs to be asked: How can internal audit become more agile and resilient in shaping its core?

Naturally, no shift to our shared future is possible without conscious and intentional leadership, and the building and nurturing of a supportive corporate culture. What is the internal attitude towards reducing the carbon footprint, towards diversity and inclusion, and as importantly, towards transparency and compliance? How are we building the framework to nurture and institutionalise a responsible corporate culture?

It is abundantly clear, from the opportunity to engage with organisations based in South Africa and the rest of the continent, that there is a growing appetite for a new approach – with tailored solutions – to help organisations develop the auditing agility required to not only ethically navigate this new terrain but also to be part of the solution in plotting new, best practice in ESG and technology-driven internal audits.