Internal Audit
December 15, 2022 • 5 min read
Kristen Sullivan of Deloitte Champions Integrating ESG Considerations Across the Business
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Join Richard Chambers for a new episode of his Agents of Change video series, featuring conversations with internal audit leaders from some of the world’s most prominent organizations about innovation in the profession.
In this episode, Richard sits down with Kristen Sullivan, US Sustainability and ESG Services Leader, Global Audit & Assurance Sustainability and Climate Services Leader, Deloitte, to discuss how internal auditors can seize ESG as an opportunity to become a catalyst driving integration of ESG considerations across the business to provide meaningful insights for strategic decision-making, as well as:
- Leading considerations for internal auditors ahead of the SEC’s proposed climate rule.
- Technology as a leading enabler of high quality, more controlled environment around ESG information.
- ESG talent opening a new universe of competencies and capabilities, both in terms of acquisition and upskilling.
Watch the full conversation, and read the can’t-miss highlights below.
Internal Auditors as Catalysts Driving Integration of ESG Considerations Across the Business
Richard Chambers: Kristen, in my book, “Agents of Change,” I make the case that internal auditors must embrace change and seek to drive value in their organizations. I define agents of change as those internal auditors who are catalysts for transformation in the organizations they serve. What’s your view on internal auditors’ role as an agent of change when it comes to sustainability, and why is it more important now for internal auditors than in the past?
“Kristen Sullivan: When you really step back and think about this whole sustainability and climate transition movement, it is one of the biggest capital market transformation opportunities in a generation. In order for capital to truly be unlocked and allocated towards long-term, value-generating opportunities, there has to be discipline, rigor, and a governance infrastructure within every organization.”
Leading Considerations for Internal Auditors Ahead of the SEC’s Proposed Climate Rule
Richard Chambers: I think you’re right, and to me, it’s probably the most important opportunity in a generation. It’s kind of the convergence of the opportunity and the ability, and it’s great to hear your point of view on that. So, what should internal auditors be considering in advance of the SEC’s proposed rules?
“Kristen Sullivan: Yeah, it’s a really far-reaching proposal. We don’t know where it will land. What is very clear is certainly a direction that puts an emphasis on the need to drive that integration that I mentioned, and really think about how you internalize some of these factors, these evaluations of performance and data that have largely been managed outside of the traditional internal management systems, as well as the monitoring and governance mechanisms within an organization. Regardless of where the final rule lands, the internal audit organization is going to be central to either establishing or enhancing the governance structure, which centers around the control environment.”
ESG Talent: A New Universe of Competencies and Capabilities
Richard Chambers: One of the top challenges that leaders face in 2022 is recruiting and retaining talent. That’s true for internal audit, but it’s also true enterprise-wide. What strategies are you using to attract new talent in ESG and retain the top performers?
“Kristen Sullivan: Talent is the critical priority, I think, for any organization, especially as we see this evolution in expectations of corporate entities, the infrastructure needed to deliver on a strategy that’s going to be resilient. Then when you start to think about the [ESG] capabilities that are necessary, it’s just a different universe of competencies and capabilities than internal audit or even external auditors have tapped into. I think we saw that trend start with investing more heavily into data science, data analytics to drive execution insights. I think that’s no different as we start to expand and better articulate and understand where those capabilities need to come in so that we can actually deliver on performing our services in a high quality way, in accordance with standards.”
Richard Chambers: That’s good to know. I think organizations are waking up to the challenges of recruiting and retaining top talent, particularly with the risks becoming more diverse and the skills that it takes to address them being more diverse.
Technology Enables High Quality, More Controlled Environment Around ESG Information
Richard Chambers: Capacity multipliers is a term I use to talk about how organizations can achieve more capacity without adding a lot of additional resources. One of the most transformative capacity multipliers that can be deployed is technology. I would ask, how are you leveraging technology to help ESG clients and team members become more efficient and effective?
“Kristen Sullivan: I couldn’t agree more. Technology is going to be the avenue to truly accelerate attention, rigor, and professionalization of integrating ESG considerations into management systems, into strategies, into governance, and then, ultimately, into the reporting process. We conducted a survey of over 300 C-suite executives to gain a pulse on the market in terms of preparedness as we start to see regulatory requirements really take shape. Over 90% of the respondents to our survey indicated that in their next reporting year, they will be investing in technology to enable a higher-quality, more controlled environment around ESG information. I completely agree that technology will be central.”
ESG as an Opportunity for Internal Auditors to Take on a Strategic Advisor Role
Richard Chambers: Kristen, I often get asked for my predictions on what the future for internal audit looks like. If you had a crystal ball that you could look into for the future, what do you believe is the biggest challenge and the biggest opportunity for the profession in the next 10 years when it comes to ESG?
“Kristen Sullivan: Boy, do I wish I had a crystal ball. Don’t we all? I think the biggest challenge, quite honestly, is: Can we move fast enough to really meet the moment in the market? We talk a lot within the external audit profession about continuing to solidify and drive the relevance of the profession in the capital markets, understanding what the capital markets and broader stakeholders are expecting.”
Check out more audit leader interviews with Richard Chambers on our Agents of Change video series channel.
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