How internal audit helps bring a businesses’ ESG vision to life
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How internal audit helps bring a businesses’ ESG vision to life

4 months ago · 4 min watch

Three years ago, Lori Kaczynski, CPA, CGMA, got together with her company’s head of sustainability to develop a plan to make sure the company would meet its promises related to people, partners and the planet.

Kaczynski is vice president for internal audit and chief audit executive for Graphic Packaging International, an Atlanta-based company that is traded on the New York Stock Exchange. She likes to say that if you eat or drink, you have touched the company’s product, as it provides the packaging for many well-known consumer goods brands.

“We do use resources, and we typically put them back,” Kaczynski said during a session at the AICPA’s ENGAGE 2022 conference in Las Vegas. “We have been leaning in over the last few years directly and trying to make sure we’re well positioned for ESG because we have a recyclable, sustainable product.”

Her efforts to help and advise on processes and controls and with the ongoing implementation of environmental, social and governance (ESG) initiatives exemplifies the work that accountants in internal audit functions throughout the world are doing to serve people and the environment.

At first glance, internal audit might seem to be an unusual function for advising and supporting implementation of ESG strategies and reporting processes, but these tasks are well within Kaczynski’s role in guiding the organization to capture opportunities and reduce risks in obtaining their strategies. In 2019, Graphic Packaging International had created a “Vision 2025” plan describing company objectives that included people- and planet-focused metrics.

The goals included further reducing greenhouse gas emissions, decreasing dependence on fossil fuels and responsibly using water.

Part of internal audit’s job is to make sure the company complies with its own objectives. Internal audit also has a key role in the company’s enterprise risk management (ERM) process, and climate and people issues such as hiring are among the risks that Graphic Packaging International has identified.

So along with the head of sustainability, Kaczynski created a three-year plan to provide support and guidance for the control environment and process improvements through the internal audit department as an internal advisory service. The company’s internal auditors:

  • Reviewed all the company’s policies and processes related to ESG, documenting them and formalizing them.

  • Loaded the company’s greenhouse gas control points into its automated risk and control matrix.

  • Mapped out the ESG governance structure from the board down, reflecting the ownership of responsibilities by the board and management.

  • Hired a firm to provide limited independent assurance over its reporting on greenhouse gas emissions and water use.

  • Began documenting the company’s social measures.

  • Moved to reporting on a better defined and better understood series of ESG measures.

Through it all, the internal audit team has been examining processes, data and controls to make sure they are sound.

“Internal auditors, accountants, CPAs, what are we good at?” Kaczynski asked. “We are very good at making sure data is accurate, making sure we know how to report information, making sure we know where it comes from and making sure controls are there.”

Kaczynski said it’s important for accounting professionals to explain throughout the organization why these processes and controls matter, so that those who are required to collect the data understand the importance of doing it the right way.

She said accountants and controllers on-site can make a difference by making sure that data is accurate. She also said that for smaller companies without their own internal audit departments, public accountants will have opportunities to perform this important work.

The rigor and accuracy surrounding data is important as regulatory requirements increase; although Graphic Packaging International has been reporting sustainability information for many years, the Securities and Exchange Commission’s development of rules for public company reporting will raise the stakes.

Fortunately for company leaders, they are already well positioned to take the necessary next steps in their reporting because they articulated a vision early and because Kaczynski’s team followed through with it.

“When it’s tied to your strategy and your vision as a company and what you’re trying to be, what your reputation is, the kind of investors you want to invest in your company, we need to be good at this,” Kaczynski said. “So we immediately started all these efforts to make sure we were ahead of the game.”

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