The audit committee’s role in overseeing ESG reporting and mitigating reputational risks

August 2023

Public companies are bracing for new mandatory environmental, social, and governance (ESG) reporting requirements in the European Union and United States. When fully implemented, the new reporting standards will significantly change the way many companies report nonfinancial information related to ESG. Those companies that have not begun preparing for the new requirements from the European Commission (the European Sustainability Reporting Standards, or ESRS), International Sustainability Standards Board (ISSB), and the US Securities and Exchange Commission (SEC) (as applicable) urgently need to do so. There are many challenges related to ESG reporting, and communicating ESG performance poses significant reputational risks for companies.

On July 12–13, 2023, members of the European and North American Audit Committee Leadership Networks (EACLN and ACLN) convened to discuss how audit committees oversee ESG reporting and mitigate reputational risks. Guests Olivier Lebleu, head of ESG at Edelman Smithfield, and Guy Turner, founder and CEO of Trove Research, shared their perspectives.
This ViewPoints summarizes key themes that emerged during the meeting and in premeeting conversations:

  • Convergence of ESG reporting standards remains a top concern for audit chairs of global companies

  • Audit committees have a critical oversight role to play

  • Communicating ESG performance poses new and potentially significant reputational risks