Ferma: Boards need risk managers’ help on sustainability

Boards of directors need to work closer with risk managers and internal auditors to meet the sustainability challenges facing corporations. Otherwise, there is an increased risk of not meeting legal obligations and market expectations.

“Risk managers and internal auditors are needed for their expertise when it comes to anticipating the effect of double materiality”, highlighted Béatrice Richez-Baum, director general, ecoDa. 

“The two professions can also help the board in the dialogue with relevant stakeholders. Companies should first assess their level of maturity in terms of overall approach to sustainability.”

New reporting rules

EFRAG has just delivered the first set of draft standards for European sustainability reporting (ESRS) to the European Commission. The standards underline the urgency for European corporations to meet the sustainability challenge.

At board level, more in-depth knowledge of sustainability issues in business operations becomes imperative.

“As a prerequisite, risk management and internal audit must support the Board and senior management so that strategy, risk management, policies, governance and culture fulfill the requirements and expectations”, added Pascale Vandenbussche, secretary general, ECIIA. 

“In turn, the board and the C-suite must give internal audit and risk management the means to do this.”

While new developments regarding enhanced European legislation on corporate sustainability (including EFRAG’s ESRS standards) are emerging, ecoDa representing board members, FERMA representing risk managers and ECIIA for internal auditors describe in a joint paper, why cooperation between the three roles is needed.

“A corporate culture that embraces enterprise-wide risk management is a fundamental factor in determining how organisations approach and deal with sustainability,” said Typhaine Beaupérin, FERMA CEO (pictured).

“Managing sustainability requires a mature risk management function and processes. And, with our maturity matrix in the paper we guide organisations to gain a better sense of their sustainability journey.”

Embedding sustainability into business operations requires boards of directors, risk managers and internal auditors to cooperate. A clear understanding between the risk management and internal audit functions must be developed to support the board, and deliver on sustainability objectives.