INTERNAL AUDIT’S

CRUCIAL ROLE
IN THIS ERA OF ESG. Author:
KAMRAN IQBAL
CMA, CIA, CISA, CFE, CPA, FMVA, MBA, LLB

Internal Audit: The Gaurdian of Sustainable Future!

FOREWORD
In today's business landscape, the pressure to operate with greater
transparency, sustainability, and social responsibility is stronger than ever.
As companies navigate this complex terrain, the role of internal audit
becomes increasingly crucial. Internal auditors serve as the gatekeepers of
corporate integrity, ensuring that the foundational pillars of
Environmental, Social, and Governance (ESG) are not just rhetoric but are
woven into the very fabric of the organization.

EXECUTIVE SUMMARY
Internal audit acts as a guardian of corporate responsibility. By evaluating
risk, ensuring compliance, and fostering a culture of continuous
improvement, internal auditors play an indispensable role in guiding
companies toward sustainable practices. They are the impartial eyes and
ears that ensure ESG commitments are upheld and provide the assurance
stakeholders seek.

01 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 In my recent article “The Evolution of Internal Audit”, I have highlighted
that Internal audit is more than a compliance checkpoint; it is a strategic
partner in corporate governance. Auditors delve into every aspect of ESG,
from environmental impact assessments to social equity and governance
frameworks, to ensure that a company's promises align with its actions. In
doing so, they build a bridge of trust between the company and its
stakeholders—investors, employees, customers, and the broader
community.

The work of internal audit not only safeguards a company's reputation but
also strengthens its resilience in the face of change. As the corporate world
evolves, internal audit remains at the forefront, adapting and innovating to
ensure that companies do more than meet regulatory requirements; they
lead the way in corporate responsibility. This article underscores the
importance of internal audit and sets the tone for a deeper exploration of
its role in advancing ESG and guiding businesses toward a more
sustainable future.

KEY HIGHLIGHTS
01 The Rise of ESG Considerations

02 Three Primary Dimensions that Influence an

Organization's Sustainability

03 Internal Audit's Role in ESG and Corporate

Responsibility

04 Best Practices for Internal Auditors to Improve ESG

Compliance

05 Conclusion

"Let's continue to Learn, Grow and Elevate our

Audit Practices together!"

Take charge in navigating

ESG Excellence:
It's time to ensure ESG
compliance and drive
sustainable Future!

02 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 THE RISE OF ESG
CONSIDERATIONS
A NEW ERA IN CORPORATE RESPONSIBILITY
In today's rapidly evolving corporate landscape, Environmental, Social,
and Governance (ESG) factors have become pivotal in shaping a
company's strategy and reputation. Companies are increasingly held
accountable for their ESG performance by stakeholders, including
investors, regulators, customers, and employees. Amidst this growing
focus on corporate responsibility, internal audit emerges as a key
player in ensuring that companies meet their ESG commitments and
maintain ethical practices. This article delves into the critical role
internal audit plays as a guardian of ESG and corporate responsibility,
exploring its impact on risk management, compliance, and continuous
improvement. ESG has gained significant traction in recent years,
driven by a growing awareness of the impact that businesses have on
the environment, society, and corporate governance.

Investors, regulators, and stakeholders are now placing greater

emphasis on an organization's ESG performance, recognizing that
these factors can have a significant impact on long-term financial and
reputational success. Governments and regulatory bodies around the
world have introduced various initiatives and guidelines to promote
ESG reporting and accountability. For example, the European Union has
implemented the Non-Financial Reporting Directive (NFRD), which
requires large companies to disclose information on their
environmental, social, and governance performance. Similarly, the Task
Force on Climate-related Financial Disclosures (TCFD) has developed a
framework for companies to report on climate-related risks and
opportunities.

03 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 THREE PRIMARY DIMENSIONS
THAT INFLUENCE AN
ORGANIZATIONS'S SUSTAINABILITY
ESG encompasses three primary dimensions that influence a
company's sustainability and ethical conduct:

01 Environmental
This involves a company's impact on the
environment, including carbon emissions,
waste management, and energy efficiency.
Companies are increasingly expected to
reduce their environmental footprint and
adopt sustainable practices.

02 Social
This focuses on a company's relationships
with employees, customers, suppliers, and
the broader community. It includes issues
such as diversity and inclusion, labor
practices, human rights, and community
engagement.

03 Governance
Governance addresses corporate governance
structures, ethical behavior, transparency,
board diversity, and accountability. A strong
governance framework is essential for
maintaining trust with stakeholders.

As ESG considerations gain traction, companies are under pressure to

align their business practices with sustainable and responsible
principles.

04 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 INTERNAL AUDIT'S ROLE IN ESG
AND CORPORATE RESPONSIBILITY
Internal auditors, with their unique position within the organization, bring
an independent and objective perspective to assessing ESG performance.
Their remit goes beyond merely auditing; they provide a comprehensive
review of ESG practices, verifying compliance, and identifying potential
risks that might hinder sustainability goals.

By examining an organization's operations through the lens of ESG,

internal auditors can identify gaps in compliance, recommend best
practices, and offer strategic guidance to ensure that the company's ESG
framework is robust and effective. This level of scrutiny is vital for
companies aiming to maintain a competitive edge while adhering to
ethical practices. Internal auditors also play a key role in fostering a
culture of accountability by ensuring that ESG commitments are
translated into concrete actions and measurable outcomes.

Through comprehensive assessments, internal auditors help organizations

pinpoint areas for improvement, whether it's reducing environmental
impacts, enhancing social responsibility, or strengthening governance
processes. Their insights are instrumental in guiding companies toward
more sustainable practices, ultimately contributing to a stronger
reputation, enhanced stakeholder trust, and a more resilient business
model. In this context, internal audit serves as both a watchdog and a
catalyst for positive change in ESG performance. Its role in ESG and
corporate responsibility is multifaceted:

INTERNAL AUDITOR’S LEADING THE WAY IN

ELEVATING ESG PERFORMANCE FOR
SUSTAINABLE FUTURE!

05 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

INTERNAL AUDIT'S ROLE IN ESG AND
CORPORATE RESPONSIBILITY (CONT...)
COMPREHENSIVE RISK
01 ASSESSMENT
Internal auditors evaluate the risks
associated with ESG practices. This includes
identifying environmental risks, assessing
social factors that could impact the
company's reputation, and examining
governance-related risks. Through
comprehensive risk assessment, internal
audit helps companies understand their ESG
exposure and develop strategies to
mitigate these risks.

02 CONTROL ASSESSMENT AND

EFFECTIVENESS
Internal auditors review the controls in place
to manage ESG-related risks. This involves
evaluating the processes for data
collection, monitoring, and reporting.
Internal audit ensures that these controls are
effective, reliable, and aligned with best
practices, providing assurance to
stakeholders that the company is managing
its ESG commitments appropriately.

03 CONTINUOUS IMPROVEMENT
AND BEST PRACTICES
Internal audit identifies areas for
improvement in ESG practices and
recommends strategies to enhance
efficiency and align with best practices. This
proactive approach ensures that companies
remain adaptable and responsive to
changing (ESG) trends, fostering a culture of
continuous improvement.

06 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

INTERNAL AUDIT'S ROLE IN ESG AND
CORPORATE RESPONSIBILITY (CONT...)
04 COMPLIANCE AND REGULATION

Companies must comply with various ESG-

related regulations, ranging from
environmental laws to labor standards.
Internal audit ensures that the company
adheres to these regulations, reducing the
risk of legal penalties and reputational
damage. This compliance check involves
reviewing internal policies, examining
external regulations, and assessing the
company's response to any breaches.

05 DATA INTEGRITY AND

REPORTING ACCURACY
Accurate ESG data is critical for
stakeholders to trust a company's
sustainability claims. Internal audit verifies
the integrity of this data by examining data
collection methods, assessing data quality,
and ensuring consistent reporting. This
scrutiny helps build confidence among
stakeholders and supports the company's
ESG reporting efforts.

06 STAKEHOLDER ENGAGEMENT
AND COMMUNICATION
Effective communication with stakeholders is
vital for maintaining trust and demonstrating
corporate responsibility. Internal audit plays
a vital role in ensuring that the company's
ESG reports are transparent, consistent, and
informative. This includes assessing the
communication strategy and providing
feedback on areas for improvement.

07 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 BEST PRACTICES FOR INTERNAL AUDITORS
TO IMPROVE ESG COMPLIANCE
Understanding ESG Scope Stakeholder Expectations
and Framework: and Priorities:
Internal audit must understand the ESG framework ESG is driven by stakeholder expectations, which
that guides a company's practices. This could be a can vary depending on the industry and
specific set of guidelines, such as the Global geographic location. Internal audit should assess
Reporting Initiative (GRI), or a broader industry whether the company's ESG practices align with
approach. Understanding the framework helps these expectations and provide assurance that
internal auditors tailor their assessments to the stakeholder interests are considered.
company's unique context.

Technology and Data Integration with Business

Management: Strategy:
ESG data collection and reporting require robust
ESG should be integrated into the broader
technology infrastructure. Internal audit must assess
business strategy to ensure sustainability is
the reliability and security of these systems to
embedded in the company's operations and
ensure they support accurate and consistent data
values. Internal audit assesses the extent to which
reporting. Additionally, internal audit should
ESG is integrated and provides recommendations
evaluate the use of technology for ESG-related risk
for strengthening this alignment.
management.

Global Perspective and Risk Culture and Leadership

Compliance: Commitment:
Companies often operate across multiple regions An organization's risk culture plays a significant
with varying ESG regulations. Internal audit must role in its ESG success. Internal auditors should
have a global perspective, ensuring compliance evaluate the tone set by senior leadership
and consistency across all locations. This may regarding ESG values and practices. This includes
involve assessing regional regulations and ensuring assessing whether leaders promote a culture of
the company is meeting international standards. integrity, sustainability, and ethical behavior
throughout the organization.

Materiality and Relevance: Cross-Functional

Internal auditors need to understand which ESG
Collaboration:
issues are material to the organization's ESG initiatives often require collaboration across

stakeholders. This involves assessing which different departments, such as sustainability,

environmental, social, and governance factors are human resources, legal, and finance. Internal
most relevant to the company's industry, business auditors should assess how well these teams work
model, and geographic footprint. Focusing on together to achieve ESG goals. Effective cross-
materiality ensures that internal audit's efforts are functional collaboration indicates a more
targeted and impactful. integrated approach to corporate responsibility.

08 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 BEST PRACTICES FOR INTERNAL AUDITORS
TO IMPROVE ESG COMPLIANCE (CONT...)
Crisis Preparedness and
Resilience:
ESG risks, such as climate change and social
unrest, can lead to business disruptions. Internal
audit should examine the organization's crisis
preparedness and resilience strategies.
involves assessing business continuity and disaster
recovery plans, and the company's ability to adapt
to unforeseen ESG-related challenges.
Diversity, Equity, and
Inclusion (DEI):
Diversity, equity, and inclusion are key elements of
the "Social" component in ESG. Internal auditors
should review the company's DEI policies and
This practices, ensuring they align with best practices
and promote a diverse and inclusive workplace.
This includes assessing recruitment, promotion, and
retention strategies to ensure fairness.

Stakeholder Engagement Innovation and

and Feedback Loops: Sustainability Initiatives:
Internal audit should assess the mechanisms for Innovation is crucial for driving sustainability.
stakeholder engagement and feedback. This Internal auditors should evaluate the company's
involves examining how the company gathers input efforts to foster innovation in ESG practices. This
from stakeholders, such as customers, employees, includes assessing research and development
and community members, and how this feedback is projects aimed at reducing environmental impact,
integrated into ESG initiatives. A strong feedback enhancing social responsibility, or improving
loop indicates a responsive ESG strategy. governance structures.

Transparency and Ethics and Compliance

Disclosure: Frameworks:
Transparency is a cornerstone of ESG and An effective ethics and compliance framework is
corporate responsibility. Internal auditors should essential for supporting ESG goals. Internal audit
assess the company's disclosure practices, ensuring should examine the company's code of conduct,
they are clear, comprehensive, and aligned with ethical guidelines, and compliance training
industry standards. This includes reviewing ESG programs. This ensures that employees understand
reports, sustainability reports, and governance the company's expectations regarding ethical
disclosures to ensure accuracy and consistency. behavior and compliance with ESG regulations.

Employee Engagement and Community and

Well-Being Environmental Impact:
A company's social responsibility extends to its Internal audit should examine the company's
workforce. Internal auditors should evaluate the impact on the broader community and
company's initiatives to promote employee environment. This involves assessing community
engagement and well-being. This includes engagement programs, environmental
assessing health and safety programs, work-life conservation efforts, and corporate philanthropy.
balance policies, and employee development An effective strategy demonstrate the company's
opportunities. commitment to positive ESG change.

09 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 CONCLUSION

Internal audit holds a pivotal role in ensuring that companies uphold

their commitments to ESG and corporate responsibility. It acts as a
critical check and balance, ensuring that the ESG framework is not just
a policy document but a living practice within the organization. By
conducting comprehensive risk assessments, verifying compliance with
laws and regulations, and scrutinizing data integrity, internal auditors
provide a vital assurance that a company's ESG initiatives are not only
on track but also continually improving.

Moreover, internal audit’s ability to identify areas for enhancement and

foster a culture of accountability underscores its importance in the ESG
landscape. Its oversight ensures that the values of sustainability, social
responsibility, and ethical governance are deeply embedded in the
company's operations, leading to greater stakeholder trust and
business resilience.

As companies navigate the complexities of modern business with ESG

as a guiding principle, internal audit stands as the guardian of these
commitments. Its role in verifying the accuracy of ESG data,
encouraging transparency, and promoting ethical conduct ensures that
businesses are not merely compliant but also leaders in corporate
responsibility. In this capacity, internal audit contributes significantly to
the sustainable success and ethical reputation of the organization.

10 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 CERTIFIED TRAINERS AND CONSULTANTS

Let's Learn & Grow

Together!
MEET THE
KAMRAN IQBAL
INTERNAL AUDIT PROFESSIONAL, TRAINER AND AUTHOR
CMA, CIA, CFE, CISA, CICA, FMVA, MBA, LLB
AUTHOR
Kamran Iqbal is the Founder of Certified Trainers
and Consultants, a distinguished professional
organization dedicated to providing high-quality
training and consulting services. He holds a CMA,
MBA, and LLB Degrees alongside globally
recognized certifications such as CIA, CISA, CFE, and
CICA. His extensive career spans over 15 years,
focusing on Internal Audit, Compliance, and Risk
Advisory.
He is currently serving as the Chief Internal Auditor
in a prominent public sector organization, where he
is responsible for overseeing internal audit
operations and ensuring compliance with industry
standards. His technical acumen is highlighted by
his status as a Microsoft Certified Expert for Excel
and a Microsoft Certified Data Analyst (Power BI),
showcasing his expertise in data analysis and
technology.
Beyond his professional achievements, he is a seasoned Professional Trainer with over a
decade of experience in conducting engaging training sessions at national and
international platforms. His training portfolio is extensive, covering a range of topics such
as Information Systems Auditing, Fraud Investigations, Internal Audit, Internal Controls,
Governance, Risk Management, Power BI, and Microsoft Excel. He is known for his ability to
convey complex concepts in an accessible manner, helping participants enhance their
skills and knowledge.
His commitment to excellence and continuous improvement is evident in his approach to
training and consultancy. He is passionate about empowering professionals with the
knowledge and tools they need to succeed in their careers. As the author of this article, he
brings his deep understanding of internal audit and ESG risk assessment, providing
valuable insights into the crucial role of Internal Auditors in ESG compliance for a
sustainable future.
.

11 +92-301-4479782 linkedin.com/in/acmakamran www.ctc-global.com

 COPYRIGHT
All content in this article is copyrighted and
intended for educational and informational
purposes. Unauthorized use, reproduction, or
distribution of this content is strictly
prohibited. Permission to use the content
must be obtained from the owner. If you
wish to share or quote portions of this article,
please attribute the source appropriately.
The author and publisher reserve the right to
revoke permissions at any time.

CERTIFIED
TRAINERS
AND CONSULTANTS
Let’s Learn & Grow Together!

+92-301-4479782

linkedin.com/in/acmakamran

www.ctc-global.com

12