Some audits are sponsored by parties outside the organization or are intended for use by parties outside the organization.  ESG audits can provide external stakeholders some comfort on how ESG issues are managed, or on ESG performance.  However, the wide range of ESG issues, criteria, and stakeholder expectations poses challenges and risks.  The experience, credentials, approach and rigor of ESG audits varies.  Audit objectives, scope, criteria, and other key parameters must be clearly understood by the auditee and the auditor.  Audits intended for external consumption should make these clear, to reduce misinterpretation or misuse of audits.

DHC leads or supports ESG audits sponsored by external stakeholders, or intended for use by external stakeholders, including those listed below.

• Financial reporting (ESG specialist for contingent liabilities)
• ESG disclosures in financial filings (SASB parameters)
• ESG/ Sustainability reports
• ESG audits in multi-party contracts, clean-ups, or litigation
• Monitorships
• Customers or suppliers
• ESG audits for insurance carriers

There’s a difference between doing the same audit 100 times, and doing 100 audits that are fit for purpose, and the need and risk at hand.  DHC is fortunate to offer a breathtaking array of experience to our Clients.  DHC draws from 40+ years’ experience of auditing in the ESG space.  The experience in different types of audits (including developing techniques as the ESG audit profession matured), as well as different lines of governance. The breadth of experience enables DHC to tailor audits to specific needs.

Mr. Hileman taught Environmental Auditing at university extension for many years.  He has mentored colleagues, clients, and other audit professionals – and still does.  “I learn something from every audit; Doug really is the auditor ‘here to help us’” is a frequent comment.

Mr. Hileman has been in the forefront of developing auditing practices and techniques for several types of audits involving ESG:  compliance audits (early 1980s); business transaction assessments (early 1980s); industrial property transactions (mid 1980s); environmental impairment liability (1990s); environmental liabilities per new Sarbanes-Oxley requirements (2002 – 2008); Sustainability reports (2000s); and conflict minerals (2013) and conflict minerals, to name a few.

Mr. Hileman has been the go-to person for “special purpose audits”, such as audits to terms of contracts, consent decrees, or project plans.  In the IIA’s widely referenced “Three Lines” governance model, he has experience in environmental, health & safety, and sustainability audits reporting to Management (“second line”), and Internal Audit (“third line”).  The IIA’s Three Lines model mentions external assurance, but fails to assign it a category – in reality, this is a “fourth line” of governance. DHC has worked them all.

ESG audits may be sponsored by external stakeholders, such as customers or insurance carriers. These audits are typically for specific purposes and are conducted under intense cost pressure. They may not be much of an “audit” at all, but more of a “check the box” exercise. Companies can face substantial consequences of a poor audit, such as burdensome additional requirements from customers, increased insurance premiums, reduced coverage, or lost sales. An investment in audit readiness can pay dividends during and after the audit. DHC has encountered clients who fared poorly on customer ESG audits, wiping out hard-earned competitive advantages from top quality and product delivery. DHC has also encountered clients that scored well on ESG audits, but failed to leverage this to competitive advantage.

Audit findings matter – especially in audits visible to external parties. Audit sponsors and users will expect auditees to take corrective measures per the audit report. DHC has seen auditees spend time, money, and operational resources to address “recommendations” that were not in scope, not supported, did not address the underlying problem, and/or not aligned with the organization’s goals. Auditees can challenge findings that don’t make sense. Auditees can even vet or select their auditors to obtain a quality product, learn from the exercise, and actually improve their ESG performance.