The Committee of Sponsoring Organizations of the Treadway Commission released a
COSO believes use of the framework and new guidance will help build trust and confidence in environmental, social and governance reporting, public disclosures, and enterprise decision-making surrounding sustainability issues.
COSO was originally formed in 1985 and is jointly sponsored by the American Accounting Association, the American Institute of CPAs, Financial Executives International, the Institute of Management Accountants, and the Institute of Internal Auditors.
The new guidance introduces the term "internal control over sustainability reporting" (ICSR) into the internal control lexicon. The study references and expands on a 2017 study by three of the co-authors, "Leveraging the COSO Internal Control—Integrated Framework to Improve Confidence in Sustainability Performance Data," which helped encourage the move to agreeing on consistent standards and frameworks to achieve sustainability goals.
"Companies will now have a clear roadmap for applying COSO's internal control principles to sustainability reporting, facilitating the disclosure of high-quality sustainability information," said AICPA chief auditor and COSO board member Jennifer Burns in a statement. "Taking a familiar control framework and applying it to sustainability reporting will be beneficial not only to companies, but to their stakeholders as well."
The supplemental guidance stresses several themes as organizations and practitioners begin or continue establishing and maintaining an effective system of internal control over financial and sustainable business information. Although the concept of ICSR is not yet well established in practice, the paper discusses crucial insights that can be gained from the experiences of those organizations that are leading the way. In the new study, each of the 17 principles in ICIF-2013 is explained and interpreted for application to sustainability. In addition, "points of focus" from the ICIF are included in the guidance along with practical insights and application of the supplemental guidance.
"More companies are now in various stages of implementing controls and governance processes over the collection, review, and reporting of sustainability information, including creating multifunctional teams that bring together a company's sustainability, finance and accounting, risk management, legal, and internal audit professionals," said COSO chair Lucia Wind in a statement. "In many ways, sustainable business reporting is still subject to evolution and innovation. As a result, it will be a process of continuous improvement including building internal capacity and relevant assurance."
The main authors of the guidance are:
- Robert Herz, former FASB chair, founding member of the IASB and former SASB Foundation board member;
- Robert Hirth, senior managing director at Protiviti, former COSO chair and former vice-chair of the SASB;
- Douglas Hileman, consultant, ESG specialist, and member of [former] ESG Leadership Knowledge Group;
- Shari H. Littan, IMA director, Corporate Reporting Research and Thought Leadership;
- Brad Monterio, IIA executive vice president of member competency and learning and member of the IFRS Foundation's IRCC; and
- Jeffrey C. Thomson, president and CEO of IMA and former COSO board member and lead director.
COSO chair emeritus Paul Sobel also provided oversight and leadership of the project during his term as chair.
