Audit committees unprepared for climate change

Over half of audit committees worldwide do not believe that they are well-equipped to fulfil their climate regulatory responsibilities, a survey by Deloitte Global finds

The new survey launched by the Big Four firm has found that nearly 60% of audit committees do not discuss climate on a regular basis and 47% do not consider themselves ‘climate literate’ with the majority, 70%, stating that their organisation has not completed a comprehensive climate change assessment.

The first publication of Deloitte’s Frontier Topics for the Audit Committee series has collected responses from 350 audit committee members in 40 countries that focus on climate change and the role of an audit committee.

The research found that the top internal obstacle cited by 65% of audit committees was the lack of clear strategy, followed by poor data quality which audit committees state can lead to a shortage of actionable insights for climate decision-making.

The survey also found that 42% of respondents say they are currently disappointed in the strength and speed of their organisation’s climate response.

Regarding external issues, 60% of respondents called out the lack of global reporting standards as a significant roadblock in equipping audit committees in

Veronica Poole, vice-chair of Deloitte UK, and global IFRS and corporate reporting leader, said: ‘The business community must address the urgent challenge of climate change. Through greater education and engagement, audit committees can help their organisations take more decisive climate action.

‘This means ensuring their organisations are assessing their own environmental risk profiles, establishing mitigation plans to reduce their carbon footprints, ushering in global environmental social governance standards, and accurately reporting on their progress.’

The research has compiled recommendations that audit committees say that organisations should take so that they are more equipped to handle climate-related challenges in the future.

The overwhelming majority, 87%, of auditors state that companies need to invest in education for their audit committees on climate change issues so they are able to respond quickly and efficiently to problems that could arise.

Around 79% state that ensuring good management as part of regular reporting to the board is vital with the same amount saying that companies need better alignment between the corporate strategy and climate strategy in order to better equip their audit teams to tackle their climate regulatory responsibilities.

Jean-Marc Mickeler, Deloitte Global audit & assurance business leader said: ‘While audit committees are beginning to address how assumptions about the future should be reflected in financial statements and risk assessments, there are steps that can be taken now to improve the decision-making process and put boards and their organisations on a successful track to respond to the climate crisis.’

‘Deloitte recognises the urgency around climate change and continues to invest in its capabilities to assist clients globally with the knowledge and resources to make effective climate-informed business decisions and disclosures.’

Deloitte’s Frontier Topics for the Audit Committee report

Ruby Flanagan |Reporter, Accountancy Daily

Ruby Flanagan is reporter on Accountancy Daily. Contact her on ruby.flanagan@croneri.co....

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