Deloitte Global has released the results of a September 2021 survey of audit committee members to determine their readiness to response to climate-related issues. See The Audit Committee Frontier – Addressing climate change. In a separate paper summarizing the survey findings, Deloitte characterizes the results as “sobering” and notes that “much work remains to be done in many of today’s boardrooms in order to come to grips with the climate emergency.” Forty-two percent of the audit committee members that participated in the study “believed that their organizations’ climate responses are too slow and lack strength.” Further, nearly 50 percent reported that “they did not have the information, capabilities, and mandate to fulfill their climate related responsibilities.”
The report is based on survey responses from 353 audit committee members from the Americas, Asia-Pacific, and Europe, Middle East, and Africa. The majority of respondents serve as audit committee chairs, and 67 percent serve on the audit committee of a publicly listed company. The largest group of respondents was from financial services (27 percent), followed by energy and manufacturing (15 percent).
Some highlights of the survey include:
Nearly 60 percent of respondents said their audit committee does not discuss climate change at all or as a fixed agenda item. Only six percent said that they discuss the topic at every meeting.
Nearly half of audit committee members did not consider their committee climate literate. Fifty-two percent said that some or all of their audit committee members are climate literate, while 48 percent said their committee was not climate literate or relied on just one committee member.
Only eight percent of respondents said that their audit committee had overall responsibility for sustainability and climate. When asked to identify the aspects of climate related matters for which the committee had oversight responsibility, the top five topics mentioned were:
Risk management – the effectiveness of the processes for identification and assessment of climate-related risks (64 percent).
Corporate reporting outside the financial statements – the integrity of narrative reporting on climate risks, opportunities, and uncertainties (63 percent).
Corporate financial reporting – reflecting the impact of addressing climate risks and opportunities in the financial statements, including in relation to judgments and estimates in valuations and impairments (60 percent).
External audit – oversight of the approach taken by the external auditor to identifying and responding to climate-change related financial statement risks (56 percent).
Assurance – the effectiveness, independence and objectivity of assurance obtained over climate-related information and disclosure (48 percent).
Seventy percent of respondents said their company had not completed a comprehensive climate change assessment; 52 percent believe the issue has no material impact on the company.
When asked for advice they would offer to other audit committees regarding climate challenges, respondents suggested: More education on climate (87 percent); good management information (79 percent); internal alignment around the company’s climate strategy (78 percent); dedicated internal resources (67 percent); published plan on the company’s position for investors (63 percent); and new board members with climate expertise (41 percent).
In addition to the survey results, The Audit Committee Frontier – Addressing Climate Change includes a discussion of the relationship between the work of the audit committee and climate change and guidance on improving committee climate performance. The report concludes with a set of questions to assess audit committee climate change reporting oversight and whether the company’s annual report conforms to the principles of the Task Force on Climate-Related Financial Disclosures.