By: Ayman Abdelrahim, Master in Quality Management (MQM), Certified Internal Auditor (CIA), Certified Fraud Examiner (CFE) and Certified Self-Assessment Supervisor (CCSA).

Hands earth

“Green” is a description of all that is concerned with protecting the environment and supporting sustainable development. This description has been used to show that organizations are concerned with environment and support sustainable development. They also adopt goals, policies and action procedures to achieve that. Examples of using “Green” description include green marketing, green technology, green economy, green buildings, green cars, green bonds, green chemistry and green knowledge. …. In this article, I would like to be the first to initiate a new term into this long list, which is “Green Internal Audit”.

 

Green Internal Audit?

After this brief introduction, the definition of green internal audit will not be beyond the traditional scope of internal audit where internal auditors play a role in strengthening the green character of the organization they work for, as they are not involved in direct initiatives in this area. Green internal audit is “to provide assurance on the effectiveness of practices adopted by organization to support the environment and sustainable development in order to add value to the organization and improve its reputation.”

 

Pay Attention to Earth Planet

Earth, the planet in which we live, needs care and attention to ensure a suitable life environment for future generations. News releases from the United Nations News Center on Environment and Climate indicate that some governments care about the environment, climate and sustainable development. In contrast, the News Center also points at many facts that show increase in environmental pollution where pollution has spread to the atmosphere, oceans, rivers, land and air that we breathe.  One of these facts is the increase in carbon dioxide emissions (CO2) of around 50 per cent since 1990 and the acceleration of emissions growth between 2000 and 2010, to more than any of the previous three decades.

By 2050, it is likely, at least one person in four, would be living in a country that suffers from chronic or recurring shortages of fresh water.

If the world’s population reaches 9.6 billion by 2050, almost three times the size of the planet may be needed to provide natural resources in order to sustain current lifestyles. Such facts require setting up of sustainable development initiatives by organizations to ensure their continuity. A simple example illustrating such importance:  a fishing company can increase its profit by catching as many fish as possible; forgetting such fishing activity would lead to extinction of fish.  Hence, it must have some initiatives to protect those fish from extinction and increase their reproduction to ensure a continuous profit.  The same applies to paper manufacturing companies that rely on trees to produce paper.

 

Sustainable Development Goals

In 2016, the Organization for Sustainable Development has set 17 goals for sustainable development to transform our world into a better one. Those include ensuring sustainable consumption patterns and production, taking urgent action to address climate change and its impacts, establishing a sustainable infrastructure that is able to withstand, stimulating inclusive and sustainable industrialization and promoting innovation.

 

Many of the sustainable development goals are applied at government level, but various organizations contribute and have a major role in achieving those goals. The achievement of those goals requires applying the simplest rules of management, i.e. to promote efficiency in use of resources, energy and innovation in work and to search for solutions that reduce cost, also search for Initiatives for business sustainability. Those goals are not binding for governments and organizations, but rather could be guidance and may open the door to consider the importance of protecting and preserving environment. Translating such goals into action would be achieved by imposing laws and guidelines that are binding for organizations to protect the environment and maintain sustainable development.

Green Internal Audit is“to provide assurance on the effectiveness of practices adopted by an organization to support the environment and sustainable development in order to add value to the organization and improve its reputation.”

 

Corporate Governance and Social Responsibility

Corporate governance practices call for corporate ethical commitment as well as social commitment, environmental support and sustainable development. In a my previous article titled “Corporate Governance, Ethics and Leadership,” I mentioned that the King’s four report has brought about fundamental changes, most notably, governance of ethics, importance of evaluating soft controls, and considering that the organization is part of the society and sustainability of development as one of the factors to develop performance. The principles of corporate governance have become a social dimension where organizations must have a long-term view of positive results for society and environment through improving their resources and developing skills of workers.

 

Social responsibility, on the other hand, is one of the components of any effective governance system. Such social responsibility consists of three pillars: environment, society and economy.  For example, environment focuses on reducing carbon footprint, waste and water consumption, while society focuses on community and stakeholder support, and economy focuses on sustainability of profit. In addition, under the economy pillar comes having compliance, risk management and effective governance, while this pillar can’t be considered alone in isolation without taking into considerations the other pillars as they complement it and have future positive impact.

 

Role of Internal Audit

Internal audit should be instrumental in activating organizational corporate governance practices related to sustainability and social responsibility. It is an opportunity for internal audit to add value by maintaining the organization’s reputation and walking away from traditional auditing while showing to senior management the importance of maintaining the organization’s reputation and business sustainability at the same time.

Internal audit’s interest in this regard begins by including risks related to environment and sustainable development within the risks assessed for setting up the audit plan.  It may be important to include an audit within the annual plan, which may include audit programs within its scope to cover, some aspects of sustainable development individually.

Moreover, it is important to assess adequacy of initiatives undertaken by our organization in this area. Keeping in mind that this requires developing auditors’ knowledge in this area to meet stakeholders’ expectations and add value to the organization we work for.

In addition to this, the consulting role of internal audit is the largest one, as it should assess the extent and impact of an organization’s efforts in that scope. The consulting role also lies in advising on the importance of having both a clear strategy and policy in this regard. Organization goals should include a goal related to supporting the environment and sustainable development. This goal should include the three pillars, environment, society and economy;

It can also highlight the importance of adopting relevant initiatives, indicators and performance measures related to this. In addition, it is necessary to demonstrate the importance of adopting organization practices in a way that helps achieve those goals, for instance, the organization may impose some contract terms to suppliers, contractors and service providers, to ensure commitment to sustainable development goals. Internal audit may recommended to adopt comprehensive periodic reports on compliance with relevant standards and legislation related to this goal, benchmark comparisons of environmental practices such as practices of environmental impact reduction, reduced energy consumption, emitted pollution, packaging waste percentage, increasing recyclable products, increasing the use of technical systems and reducing paper use.

In the end, it is our duty towards the planet “Earth” we have to fulfill so as to ensure a decent life for our children and future generations.

Green Internal Audit is an opportunity for each internal auditor to demonstrate his/her professionalism through non-traditional auditing, adding value and achieving what is expected from us as internal auditors. Finally, we must achieve the requirements of internal audit principles by having a forward-looking vision as sustainable development goals call for a better future for humankind.

References:

United Nations Website – Sustainable Development Goals http://www.un.org/sustainabledevelopment/