COSO drafts guidance for managing environmental risks

The Committee of Sponsoring Organizations of the Treadway Commission, in collaboration with the World Business Council for Sustainable Development, released draft guidance Wednesday for applying COSO’s enterprise risk management framework to environmental, social and governance risks.

The committee is jointly sponsored by five prominent accounting organizations, including the American Institute of CPAs, the Institute of Management Accountants, the Institute of Internal Auditors, Financial Executives International and the American Accounting Association. COSO’s enterprise risk management framework, along with its internal control framework, are widely used by many companies around the world. It recently teamed up with the World Business Council for Sustainable Development to help companies apply the ERM framework to environmental, social and governance risks. They released a draft version of their guidance Wednesday at the GreenBiz 2018 conference.

The supplemental draft guidance aims to help organizations around the world respond to the increasing prevalence and severity of ESG-related risks, ranging from extreme weather events to product safety recalls. It includes methods to overcome ESG-related risk challenges, including identifying and assessing the severity of risks with uncertain financial, along with responses to addressing ESG-related risks and opportunities.

“As ESG-related risks are becoming more widespread, organizations need to ensure they have processes in place for identifying, assessing and managing these complex entity-level risks and opportunities. We believe ERM is the most powerful way to achieve this,” said newly appointed COSO Chairman Paul Sobel in a statement. “As with any group of risks, integrating ESG-related risks into ERM enables organizations to realize long-term value.” He took over the committee last week (see COSO names Paul Sobel as new chairman)

The draft guidance and a previously released executive summary of it can be found at www.COSO.org. COSO and WBCSD are asking for comments on both documents by June 30.