Challenges Of Audit In Climate And Diversity Reporting Assignment Sample

Audit Issues in GRI 405 Diversity and Climate Disclosures

Part A:-Introduction

This report determines the way Woolworths, Commonwealth Bank, CSL Limited and Fortescue Metals Group connected to the GRI 405, Diversity and Equal Opportunity standards of 2016,  which required to contrast their 2023 social reports with the particular needs of GRI 405. The main areas need to focus are discussed in this knowledgeable report.

1. Four companies' disclosures analyzed: 

 a) Consistent Reporting:

1. Woolworths: Woolworths has reported frequently on gender diversity in the workplace, including in the management of senior and board throughout the year. The company also stresses on equal opportunity and it also has programs for the diversity at the workplace, both in employment and promotion. These disclosures connected well to GRI 405-1, which needs essential and important details of the governance bodies and the employees.
2. Commonwealth Bank: The Commonwealth Bank has reported the various statistics on gender distribution of employees, especially on equal remuneration to men and women. The bank also provides information to shareholders regarding measures to support diversity employing mentoring and recruitment (Abdelfattah, et al, 2021). This is in line with GRI 405-2, which mainly focuses on the proportion of the basic salary and remuneration paid for women to that paid for men.
3. Fortescue Metals Group: Concerning the Indigenous people's employment, Fortescue Metals Group has provided several Overviews in its online Reports directly on its Employment of Indigenous people, including essential data reflecting particular employment goals and objectives. This meets the GRI 405 element that allows reporting of diversity characteristics that go beyond Gender like, minor groups, and Age.
4. CSL Limited: CSL Limited has a good format of diversity report for reporting of findings on age distribution and gender among the staff members of the firm. Diversity management is also reflected in the presentation of activities carried out by the company to support employees with disabilities (Alhababsah and Yekini, 2021). The information included in these disclosures corresponds to the GRI 405-1 specification.

b) Inconsistent Reporting:

1. Woolworths:  It is obvious Woolworths, although there are separate reports on gender diversity, other types of diversity, including age and minority membership, which are mandated under GRI 405-1 are not as emphasized. Some might even consider this as a ‘gap’ in their reporting process.
2. Commonwealth Bank: While the Commonwealth Bank has relatively good results of gender reporting, further development is to be observed in terms of diversity other than gender, for instance, age, disability status, and ethnicity (Al and Elgharbawy, 2020). This can be due to a more specific approach that does not cover all the aspects of diversity indicators mentioned in GRI 405.
3. Fortescue Metals Group: Fortescue Metals Group has a strong and very commendable representation of employment for the indigenous people, their reporting is somewhat lacking in other areas of diversity which are deemed very important under GRI 405, inclusive of gender and especially age diversity. This implies that they only choose to report matters or information relating to diversity that is in their mainstream society’s domain.
4. CSL Limited: CSL Limited has good disclosure on gender and age diversity but not very specific on the minority group representation most especially in the board of Directors. This can be seen as a violation of GRI 405 with regard to the choice of a more extensive range of aspects related to diversity.

2. Reasons for Inconsistent Reporting

Inconsistent reporting among the organization or companies can be attributed to many factors:

1. Organizational Priorities: Businesses may focus on some areas of diversity more than others depending on the nature of strategic direction, industry dynamics, or expectations of the stakeholders (Ebirim, et al, 2024). For example, while, the employment of Indigenous employees could be well understood by the operational locations of Fortescue Metals Group within regions that have large Indigenous employees population, the other diversity may not be given as much attention.
2. Regulatory Environment: The regulatory needs that are mandatory in various countries or regions in which these organizations undertake their operations may determine the areas and depth to which they undertake diversity reporting. The companies might bring their reporting practices into compliance with the local legislation of the country which might not be in compliance with the GRI 405 standards.
3. Stakeholder Expectations: There are many perspectives on diversity disclosures, that is, investors and customers may have a different approach as well as employees (Gulluscio, et al, 2020). Some firms may report in a way that will address the expectations of their key stakeholders, and that indicates an inconsistency in the reporting at the time of compared to the GRI 405.
4. Data Collection Challenges: The consolidation of data about diversity in all its aspects may therefore prove difficult, especially for giant organizations operating globally. Problems with data privateness, and accessibility possibly resulting in inaccurate data could hamper complete reporting hence resulting in inconsistencies.
5. Cultural and Organizational Differences: The power, culture, politics, and social identity of an organization determine methods of practicing diversity and how it is reported. The problem is that the organizations focused on some aspects of diversity may not pay attention to some other aspects or even hide them because of the company’s cultural values.

Figure 1: Reasons for Inconsistent Reporting

(Source: Self-created)

3. Recommendations for Improvement

Depending on all aspects of the four companies’ disclosures and the needs of GRI 405, the following recommendations are essential:

1. Expand the Diversity Reporting Scope: Organisations must extend the Diversity Reporting model and involve an indicators range beyond gender (Krasodomska, et al, 2021). This involves the presentation of statistics on age, disability, ethnic background, and other minority groups within the workforce and in the boards and management teams. This corresponds to GRI 405-1 and provides for a more appropriate and accurate view of diversity in the company.
2. Implement Consistent Reporting Frameworks: Companies should use a comprehensive framework for diversity reporting that will be in compliance with GRI 405 standards. This includes having key performance indicators and goals on the different aspects of diversity, and ensuring that there is a review of the progress made on these goals.
3. Enhance Data Collection and Transparency: In this regard, it is necessary to develop an effective system of data collecting that will allow to gather diversity data of companies. Reporting transparency, involving the essential challenges as well as the limitations of the result can also upgrade the trust and capability of the business stockholders.
4. Incorporate Stakeholder Feedback: Business organizations should consult with other stakeholders with a view of establishing what they expect when it comes to diversity and equal opportunity reporting (McLaughlin, et al, 2021). This feedback ought to be applied for the course of improving and developing the reporting process to justify that covers the requirements of each relevant stakeholder.
5. Promote a Holistic Approach to Diversity:  Diversity and equal opportunity reporting should contain an appropriate view of the company’s anti-discrimination policy. These involve integrating diversity into the firm’s values, processes, and structures and guaranteeing that diversity reporting is not only an exercise of compliance but an appropriate commitment refraction to the principals.

Conclusion

This paper compares the consistency in diversity and equal opportunity reporting in Commonwealth Bank, CSL Limited, Woolworths, and Fortescue Metals Group.  Although the company is relatively close to the GRI 405 standard when it comes to gender, other aspects of diversity are not reported. Implementing the recommended actions can reduce these gaps and improve the quality and scope of diversity reporting to meet these standards and promote these organizations’ contribution to the creation of more diverse and equal workplaces.

Part B:Introduction

The Federal Government’s updated CFD Paper (Climate-related Financial Disclosure Consultation Paper) over­emphasises the need for reliable climate-related information with reference to the recently launched International Sustainability Standards Board‘s (ISSB) Sustainability Standards Scope1 and Scope2. The practice of such disclosures is crucial to their authenticity though the industry has multiple challenges not least for data such as GHG emissions. These challenges are outlined in this report, and Transurban Group’s FY23 Sustainability Data Pack is used with reference to GHG emissions.

1. Challenges for Assurance Providers

1. Difficulty in collecting and verifying GHG emissions data: Data Assurance providers experience so many difficulties due to what they find as the complicated and volatile nature of GHG emissions data. S1 and S2 emissions are stated for Transurban with separate analysis for the market-based and location-based accounting. These variations imply different handling and assumptions about assurance processes which can hardly be standardized.
2. Data Integrity and Accuracy: The integrity and accuracy of the non-financial data like GHG emissions are difficult to achieve (Sonnerfeldt and Pontoppidan, 2020). Transurban emitting profile The following is the annual emitting pattern of trans urban; This shows that emissions have little variations over the years with a significant reduction of the FY23 scope 2 emissions. Such entities require affirmation of the underlying cause of such variations, along with quantitative assessments including requisite calculations, offsets for the acquisition of renewable power, and emission coefficients all of which are susceptible to calculation errors or even misunderstanding.
3. No Standard Framework: The actual calculation and reporting of the emissions have no standard procedures across the industries. Frameworks such as the GHG Protocol do offer insights, yet the nature of their implementation may vary among different organizations.
4. Sample Selection Procedures: It is always very difficult to select usable samples for assurance especially when handling large and diversified data that are normally present in sustainability reports. Decisions then need to be made as to which data points or facilities require the focus on the part of the assurance providers, which cannot be easy when emissions data, for example, may be reported at multiple sites and operations (Tingbani, et al, 2020). For Transurban, it is therefore important to employ a selected sample so that in order to arrive at a proper assurance opinion, it adequately represents the rest of the data.

Figure 2: GHG emissions

(Source: https://www.transurban.com/investor-centre/reporting-suite)

2. Relating the Challenges to Transurban’s Statement of GHG Emissions

1. Advanced Data and Complication: The data of Transurban indicates the complication of measuring and reporting of the organization’s GHG emission through market-based and location-based emission. For example, assurance providers need to know these different reporting formats and make sure that they are appropriately deployed.
2. Changes in Emissions: there is considerable variation in the Scope 2 emissions from FY21 to FY23 in Transurban’s emission data, it is suspected that it may be due to changes in the energy procurement strategies during this period or other organisational operational efficiencies (Ud, et al, 2021). These explanations have to be substantiated; therefore, assurance providers have to have a good insight of the business and the factors that might be contributing to emissions.
3. Methodological Variability: The case of comparing Scope 2 emissions calculated based on market price and location also demonstrate another complexity of the exercise that is methodological variability. This means assurance providers have to make sure that the chosen methodology is persistent in its application and genuinely representative of the company’s environmental footprint, which is far from obvious.

3. Solutions to the mentioned assurance challenges

1. Development of Industry Standards: This problem calls for initiatives by industry bodies toward formulating industry standards on the kind of methodologies to be used in the computation of the GHG emissions. This would help to minimize the various approaches that could be used in the assurance process thus minimizing on the inconsistency.
2. Increased quality control and credibility of Training and Technical Expertise: Assurance providers should aim for having specialized training relating to the methodology and workings of the emissions of GHG and other non-financial information (Venter and Van, 2021). It will be useful for them to more effectively analyze Simple Statistics such as those in Transurban’s Sustainability Data Pack.
3. Improved Data Collection and Reporting Systems: Transurban and other similar entities should improve on the sorts of data collected and reported in a better way. This could entail investing in other advanced software tools or seeking to engage the services of third parties to check on such information prior to its presentation for assurance.
4. Explicit Steps for Sample Selection: The authors suggested that clearer guidelines in sample selection in assurance processes might enable providers to understand better the issues of large datasets (Zaman, et al, 2021). Such guidelines should take into consideration the peculiarities of non-financial data and should ensure that only good samples are selected in that they represent the rest of the population.

Conclusion

The attempt to assure non-financial information, for instance, GHG emissions is not without significant challenges among them being the complexity of the information, data integrity, and absence of well-established methodologies. In this regard, assurance providers are in a position to address these challenges, collaborate with industries, and improve training and data systems to support the credibility of climate risk disclosures, whilst offering an example of Transurban Group’s GHG emissions reporting.