Environmental Leader

Risks associated with implementing corporate social responsibility (CSR) initiatives into strategic and operating plans need to be closely controlled and monitored, according to new guidance from The Institute of Internal Auditors (IIA).

Some of those issues include conflicting global laws and regulations that pose potential risks when organizations implement CSR initiatives. While IIA notes that board and senior management is ultimately responsible for the assessments of upside and downside risks and the implementation of controls to manage them, internal auditors can significantly help companies with these efforts.

The 24-page practice guide, “Evaluating Corporate Social Responsibility/Sustainable Development,” aimed at internal audit executives and their stakeholders, evaluates upside and downside CSR risks that should be considered when developing their audit plans and procedures. It also provides alternative approaches to evaluating CSR activities including auditing, facilitating and consulting. IIA members can download and non-members can purchase the report here.

CSR risks fall into six categories: reputation, compliance, operational, stock market, employment market, and external business relationships.

As an example cited in the report, violations of laws, errors or emissions in CSR disclosure and under-performance compared with goals can all hurt an organization’s brand or reputation.

Other risks may include failure to comply with regulations, and failure to integrate CSR objectives into manufacturing processes, products or services. Companies could also lose investors if they don’t qualify for socially responsible investment and reduce their pool of potential employees who don’t want to work for organizations without social and community commitments. In addition, organizations could be associated with customers, suppliers or other partners that violate CSR principles.

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