Uniac - July 2022

12 We note that scope 3 disclosures3 are bizarrely not mandatory for reporting within the new framework. While these regulations might not extend to all providers, we would recommend reviewing and adopting some principles on a good practice basis. This legislation is similar to other regulatory drivers relating to sustainability in that there is a distinct focus on reporting, without any framework for legislative or financial intervention if targets are not met / climate action is not achieved. We anticipate more interventionist measures being developed as the associated risks become more likely - this may start with the regulator recognising the risk to the sector and highlighting statements of expectation or codes of practice that could spark regulatory intervention. As with all strategic change, there are key barriers to providers achieving an ideal sustainable end state. Most of these stem from culture issues, from executives and management teams that through no fault of their own, may not understand the nature of the risks, or how to deal with the issues. This often results in sustainability being siloed, or driven purely by estates functions, when a more cross working, whole provider approach would be more appropriate. Similarly, there is sometimes an over-keenness to be seen to be taking action - this results in ill 3 Scope 3 refers to Carbon emissions that occur in business chains but are not directly produced by day-to-day operations (e.g., staff travel, procurement, investments). thought-out plans, such as commitment to net zero goals, without consideration of key steps to achieve this, or of wider impacts and risks. To date (and from our experience), sustainability rarely appears in annual sector audit programmes. Where it is captured, the scope is often limited to reviews of carbon zero targets / projects and sponsored by estates departments. We believe there is potential to further the use of audit as a tool to assist with sustainable aims. The audit function is placed in a unique position, having easy access to teams across the range of the provider’s operations, and also to senior management and nonexecutives. This enables us to provide holistic assurance on sustainable aims and the supporting projects and communicate key messages across the institution. This position also allows the audit function to review climate strategy integration across key business areas, verifying existing processes and controls, and bringing in best practice for a rapidly changing risk environment. The role of the audit function does not, however, need to be limited to providing assurance. Relevant expertise can assist senior executives in understanding the key risks, and the threat posed to the provider – for example, through digesting recent policy briefings and communicating key messages. If however, providers fail to acknowledge wider sustainability risks and continue to only Internal audit’s role Barriers