Green audit


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Green audit By guru,prasad

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Green audit

  1. 1. Green Audit Planning & Reporting By CA Guru Prasad M GURU & JANA Green audit – Planning and reporting CA Guru Prasad – Guru & Jana, Chartered Accountants
  2. 2. <ul><li>1 Green Audit </li></ul><ul><ul><li>Necessity of Green Audit </li></ul></ul><ul><ul><li>External audit vs. Internal Audit. </li></ul></ul><ul><ul><li>Internal Audit vs. Green Audit. </li></ul></ul><ul><li>2 Audit Planning </li></ul><ul><ul><li>Things to be considered. </li></ul></ul><ul><ul><li>Audit Program. </li></ul></ul><ul><ul><li>AA1000, </li></ul></ul><ul><ul><li>Questions to be asked </li></ul></ul><ul><li>4. Areas of concern </li></ul><ul><ul><li>Areas of concern. </li></ul></ul><ul><ul><li>Questions to be asked </li></ul></ul><ul><li>5. Audit Reporting </li></ul><ul><ul><li>Reporting in India. </li></ul></ul><ul><ul><li>Need of reporting </li></ul></ul><ul><ul><li>Benefits </li></ul></ul><ul><ul><li>GRI Guidelines </li></ul></ul><ul><ul><li>Various Indian Companies Reports. </li></ul></ul><ul><ul><li>Statistics. </li></ul></ul><ul><li>6. How to implement it in personal life </li></ul>CONTENTS <ul><li>3 Financial Implications </li></ul><ul><ul><li>Things to be considered. </li></ul></ul><ul><ul><li>Questions to be asked </li></ul></ul>
  3. 3. <ul><li>To comply wit h </li></ul><ul><li>More than 3,000 companies worldwide issue sustainability reports. </li></ul><ul><li>More than two-thirds of the Fortune Global 500 companies publish some form of sustainability or corporate responsibility report with a long-term trend Although reporting is voluntary, the broad trend is toward greater disclosure. </li></ul><ul><li>The risk for those not communicating their climate change data is that their stakeholders will seek this information from potentially less-reliable third party sources. </li></ul><ul><li>Companies that do not report face challenges in ensuring that their reports are an effective communication tool. </li></ul>Necessity of Audit Legislations Organization Policies
  4. 4. <ul><li>The information needs to be relevant, complete and in line with the expectations of stakeholders. Done well, it provides a company with the opportunity to present a clear picture of the measures it is taking to meet the challenges and opportunities of climate change. </li></ul><ul><li>Some leading organizations are beginning to include their integrated financial and nonfinancial data in a single report. </li></ul><ul><li>Stakeholder demand for transparency. </li></ul>Necessity of Audit
  5. 5. <ul><li>An assessment of the condition of the local environment, usually resulting in a State of the Environment Report. </li></ul><ul><li>Internal audit   - consisting of two areas: </li></ul><ul><li>Policy Impact Assessment - a review of the activities (objectives, services, practices and policies) of the authority' and </li></ul><ul><li>Management Audit  - a review of the procedures and structures by which environmental policies are managed by the authority' </li></ul>EXTERNAL AUDIT INTERNAL AUDIT TYPES OF AUDIT
  6. 6. <ul><li>Internal Audit needs to assure the management of a company about the integrity, consistency and timeliness of its externally reported information. </li></ul><ul><li>Executives and boards are acutely aware of the growing demand for more transparent reporting of climate change and sustainability business strategies, initiatives and performance. </li></ul><ul><li>Therefore, companies are now using many voluntary reporting channels, including external sustainability and annual reports, external websites, the Carbon Disclosure Project and the Climate Registry. </li></ul><ul><li>Internal Audit can assist in evaluating the accuracy and credibility of sustainability reporting in advance of the increasing scrutiny this information is attracting from external stakeholders. </li></ul>Internal Audit vs. Green Audit
  7. 7. Audit Planning
  8. 8. Audit Planning: <ul><li>The Auditor should consider the following: </li></ul><ul><li>(ISAE3000) </li></ul><ul><li>Engagement circumstance: </li></ul><ul><li>- Reasonable Assurance engagement(or limited assurance engagement) </li></ul><ul><li>- Attestation Engagement(or Direct engagement) </li></ul><ul><li>Engagement Risk: </li></ul><ul><li>Engagement team: </li></ul><ul><li>Intended users: </li></ul><ul><li>Subject matter of information: </li></ul><ul><li>Subsequent events: </li></ul>
  9. 9. <ul><li>Audit Program </li></ul><ul><li>Designed to verify that the regulatory compliance programs are in place, exist, in use and comply with regulatory requirements </li></ul>Audit Planning:
  10. 10. <ul><li>What an audit program should address </li></ul><ul><li>Confirmation of compliance with environmental rules and regulations </li></ul><ul><ul><li>Reporting and monitoring systems </li></ul></ul><ul><ul><li>Structure of system, including layout and personnel </li></ul></ul><ul><ul><li>Response to emergencies and changes </li></ul></ul><ul><ul><li>Investment in compliance equipment, etc. </li></ul></ul><ul><li>Identification of potential and current problem areas </li></ul><ul><ul><li>Weaknesses </li></ul></ul><ul><ul><li>Solving problems internally </li></ul></ul><ul><ul><li>Protecting company assets </li></ul></ul><ul><ul><li>Strengths in programs to provide positive reinforcement </li></ul></ul><ul><ul><li>Recognizing potential areas of opportunities at the facility and other facilities </li></ul></ul><ul><ul><li>Potential to commercialize processes </li></ul></ul>Audit Planning:
  11. 11. <ul><li>Accountability's AA1000 series are principles-based standards to help organizations become more accountable, responsible and sustainable. </li></ul><ul><li>The standards are developed through a multi-stakeholder consultation process which ensures they are written for those they impact, not just those who may gain from them. They are used by a broad spectrum of organizations -- multinational businesses, small and medium enterprises, governments and civil societies. </li></ul><ul><li>The following principles must be applied in an assurance process undertaken using the AA1000 Assurance Standard: </li></ul><ul><li>Principle 1. (P.1.) Materiality </li></ul><ul><li>Principle 2. (P.2.) Completeness </li></ul><ul><li>Principle 3. (P.3.) Responsiveness </li></ul>Audit Planning:
  12. 12. Audit Planning:
  13. 13. <ul><li>Does the company currently have adequate controls and processes in place in anticipation of the possibility that proposed regulations may require the inclusion of climate change information in annual reports? </li></ul><ul><li>Is Internal Audit working with the organization’s external auditors to create transparent reporting of non-financial data? </li></ul><ul><li>Has the company’s management discussed with its board the importance of a climate change and its sustainability strategy ? </li></ul><ul><ul><ul><ul><li>(continued…….) </li></ul></ul></ul></ul>Audit Planning:
  14. 14. <ul><li>Does the organization fully grasp the strategic implications of climate change risk to it and are enterprise-wide programs in place to define, monitor and assess these risks? </li></ul><ul><li>Does the Internal Audit team have the necessary skills and people to evaluate these new risks? </li></ul><ul><li>Are climate change and sustainability risks captured in the company’s enterprise-wide risk-assessment process? </li></ul>Audit Planning:
  15. 15. Financial Implications:
  16. 16. <ul><li>Has the organization decided on what is material for its non-financial reporting purposes? </li></ul><ul><li>Are key performance indicators (KPIs) and assignment of risk responsibility measures in place in the company? </li></ul>Financial Implications:
  17. 17. <ul><li>Greatest challenge is implementing the strategies across their operational units and key functional areas. </li></ul><ul><li>Climate change and sustainability-related issues are associated with physical risks linked to the physical impact of climate change. </li></ul><ul><li>Value chain risk associated with customers and suppliers is a growing operational risk area. </li></ul>Areas of Concern
  18. 18. <ul><li>Questions Internal Audit should ask? </li></ul><ul><li>What standards are being used for measurement in the company with respect to, </li></ul><ul><ul><ul><li>Safety </li></ul></ul></ul><ul><ul><ul><li>Waste management. </li></ul></ul></ul><ul><ul><ul><li>Improvement in the supply chain management . And etc </li></ul></ul></ul><ul><li>Has the company estimated how a small long-term change in its weather-related patterns or energy costs would affect its entire supply chain and margins? </li></ul><ul><li>Are there adequate project management measurements in place in the organization? </li></ul><ul><li>Has it completed a lifecycle greenhouse gas assessment of its products and/or services? </li></ul>Areas of Concern
  19. 19. REPORTING
  20. 20. <ul><ul><li>India has no mandatory environmental or social reporting requirement for public companies. </li></ul></ul><ul><ul><li>The Securities and Exchange Board of India (SEBI) does not make any mention of environmental or social reporting requirements in its “Disclosure and Investor Protection” guidelines. </li></ul></ul><ul><ul><li>India’s National Environmental Policy (NEP) 2006 has recommended the use of “standardized environmental accounting practices and norms in preparation of statutory financial statements for large industrial enterprises.” To date, no such standards have been introduced. </li></ul></ul>Reporting In India
  21. 21. <ul><ul><li>Section 217 of the companies act requires a report by its Board of directors, with respect to the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed </li></ul></ul><ul><ul><li>According to the survey report released by GRI 24 companies in India have published their sustainability reports. </li></ul></ul>Reporting In India
  22. 22. <ul><li>Reporting is now the norm, not the exception among the worlds largest companies. Since motivation for the reporting have shifted away from reactive and risk management factors and toward aspiration and innovative ones, reporting to become more common at the national level and in smaller companies in the near future. </li></ul>Reporting
  23. 23. <ul><li>An organization that reports on its sustainability practices is expected to show not only where it has succeeded, but where it may have fallen short. </li></ul><ul><li>This creates an element of reputational risk in the short term . But over the long term, the risk is out weighted by significant benefits: </li></ul><ul><ul><ul><li>Better measurement of the organization’s “triple bottom line” performance; </li></ul></ul></ul><ul><ul><ul><li>Greater stakeholder trust; improved risk management; and increased operational efficiency. </li></ul></ul></ul>Reporting
  24. 24. Financial Strategic If a company can demonstrate good environmental performance and an acceptable level of environmental liability to its stakeholders, it may benefit financially in that its share price may increase Potential strategic benefits include improving the company image and building better relations with relevant stakeholder groups. BENEFITS Reporting
  25. 25. Reporting <ul><li>GRI Guidelines: </li></ul><ul><li>GRI has been supported by United Nations Environment Programme ( UNEP). Most developed nations follow GRI Guidelines. Further, it is the most comprehensive standard available on environmental reporting. </li></ul><ul><li>GRI suggests some guidelines for ensuring that reports are of acceptable quality. They should be timely, for example, and clearly understandable to non experts. They should be balanced, and they should be accurate, meaning that certain types of oversight or assurance are necessary. </li></ul><ul><li>Most of the organizations develop key performance indicators(KPI) on which to report. </li></ul>
  26. 26. GRI Reporting Framework
  27. 28. <ul><li>In deciding what to disclose the following four factors should be considered </li></ul><ul><ul><ul><ul><li>Materiality </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Stakeholders Inclusiveness </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sustainability context </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Completeness </li></ul></ul></ul></ul>Reporting
  28. 29. <ul><li>1)Materiality : In defining material topics, take into account the following: </li></ul><ul><li>Reasonably estimable sustainability impacts, risks, or opportunities (e.g., global warming, HIV-AIDS, poverty) identified through sound investigation by people with recognized expertise, or by expert bodies with recognized credentials in the field. </li></ul><ul><li>Main sustainability interests/topics and Indicators raised by stakeholders (e.g., vulnerable groups within local communities, civil society). </li></ul><ul><li>The main topics and future challenges for the sector reported by peers and competitors. </li></ul><ul><li>Relevant laws, regulations, international agreements, or voluntary agreements with strategic significance to the organization and its stakeholders. (Continued…….) </li></ul>Reporting
  29. 30. <ul><li>Materiality : </li></ul><ul><li>Key organizational values, policies, strategies, operational management systems, goals, and targets. </li></ul><ul><li>The interests/expectations of stakeholders specifically invested in the success of the organization (e.g., employees, shareholders, and suppliers). </li></ul><ul><li>Significant risks to the organization. </li></ul><ul><li>Critical factors for enabling organizational success. </li></ul><ul><li>The core competencies of the organization and the manner in which they can or could contribute to sustainable development. </li></ul>Reporting
  30. 31. <ul><li>2) Stakeholder Inclusiveness : : the following factors should be considered </li></ul><ul><li>The organization can describe the stakeholders to whom it considers itself accountable. </li></ul><ul><li>The report content draws upon the outcomes of stakeholder engagement processes used by the organization in its ongoing activities, and as required by the legal and institutional framework in which it operates. </li></ul><ul><li>The report content draws upon the outcomes of any stakeholder engagement processes undertaken specifically for the report. </li></ul><ul><li>The stakeholder engagement processes that inform decisions about the report are consistent with the scope and boundary of the report. </li></ul>Reporting
  31. 32. <ul><li>3) Sustainability Context : : the following factors should be considered </li></ul><ul><li>The organization presents its understanding of sustainable development and draws on objective and available information as well as measures of sustainable development for the topics covered in the report. </li></ul><ul><li>The organization presents its performance with reference to broader sustainable development conditions and goals, as reflected in recognized sectoral, local, regional, and/or global publications. </li></ul><ul><li>The organization presents its performance in a manner that attempts to communicate the magnitude of its impact and contribution in appropriate geographical contexts. </li></ul><ul><li>The report describes how sustainability topics relate to long-term organizational strategy, risks, and opportunities, including supply-chain topics. </li></ul>Reporting
  32. 33. <ul><li>4) Completeness : : The following factors should be considered </li></ul><ul><li>The report was developed taking into account the entire chain of entities upstream and downstream, and covers and prioritizes all information that should reasonably be considered material on the basis of the principles of materiality, sustainability context, and stakeholder inclusiveness. </li></ul><ul><li>The report includes all entities that meet the criteria of being subject to control or significant influence of the reporting organization unless otherwise declared. </li></ul><ul><li>The information in the report includes all significant actions or events in the reporting period, and reasonable estimates of significant future impacts of past events when those impacts are reasonably foreseeable and may become unavoidable or irreversible. </li></ul><ul><li>The report does not omit relevant information that would influence or inform stakeholder assessments or decisions, or that would reflect significant economic, environmental, and social impacts. </li></ul>Reporting
  33. 34. <ul><ul><li>The important challenges of corporate environmental reporting today can be summarized in three words </li></ul></ul><ul><ul><li>Continuity, </li></ul></ul><ul><ul><li>Comparability and </li></ul></ul><ul><ul><li>Credibility </li></ul></ul>Reporting
  34. 35. Three pillars of sustainability Reporting
  35. 36. Sustainability report of Wipro- FY2009-10
  36. 37. Sustainability report of BPCL- FY2009-10
  37. 38. Sustainability report of ONGC- FY2009-10
  38. 41. Green Audit Reporting Step By Step Step-1 Decide to Report
  39. 42. Step-2 Identify the Audience for the Report Green Audit Reporting Step By Step
  40. 43. Review and identification Environmental impacts. Step-3 Green Audit Reporting Step By Step
  41. 44. Green Audit Reporting Step By Step Step-4 PREPARATION OF ENVIRONMENT POLICY
  42. 45. Green Audit Reporting Step By Step Step-5 GATHER DATA AND PREPARE INFORMATION
  43. 46. Green Audit Reporting Step By Step Step-6 ASSURANCE
  44. 47. Green Audit Reporting Step By Step Step-7 Finalize and publish the report