My first post for 2023! Finance/accountancy auditor VS Sustainability auditor

Today I will be writing my own personal opinions on a job career called Auditing. I'm not talking about finance and/or accountancy auditing (which is the most typical and well known auditing jobs). No, today I will be talking about my auditing career in the sustainability area. 

"Huh? Sustainability audit? What is that? Does it exists?"

You'd be surprised that "sustainability" is currently becoming more and more demanded in every industry.

Before I go on talking about sustainability audit, let me briefly explain to you what sustainability is all about. 

Most might have the knowledge of sustainability but majority (from my experience interviewing and giving webinars) many would say, sustainability = protecting the environment which means, no deforestation, protect the wildlife and so on and so forth. Well, if I were to tell you that Sustainability is actually a larger picture and it is part of your daily life and/or job too.

"Really??"

Yes! Sustainability is not only about the environment, but social and business aspect as well.

"Social? Business?"

Sustainability in social consists of two things, workers and the communities. Workers aspects consists of fair labour, no forced labour, no recruitment fees, rights of workers and etc. Communities aspects consists of rights of communities, FPIC (Free, Prior, Informed, Consent), Respecting communities rights and etc.

Sustainability in business concept is whether the operation that is operating could generate the required revenue in order to sustain the business. 

"What about sustainability in our daily life?"

Well, how's work life balance sounds? Are you currently balancing out your personal life and your career? Do you find yourself having trouble sleeping due to stress (thinking about work, issues with the kids and etc). Sustainability is huge. And sustainability is long term. There are no short term in sustainability. It is how you manage and sustain the outcome with minimal impact in the long run, which is beneficial for you or your business at the end of the day.

.................

Now on to the main topic. Sustainability audit. To name a few schemes and standards on sustainability. Roundtable on Sustainable Palm Oil (RSPO), Forest Stewardship Council (FSC), Malaysian Timber Certification Scheme (MTCS), Malaysian Sustainable Palm Oil (MSPO), International Sustainability & Carbon Certification (ISCC) and etc.

There are not many auditor's in the world that are competent and qualified to conduct sustainability audit. Easy example, lets take RSPO P&C (Upstream), there are roughly 175 or less, qualified auditors. And there are approximately, 533 Certified Mills worldwide under 124 companies as of June 2023. Mind you, one RSPO P&C Certificate, the audit process takes an average 5-6 days. The longest audit can take up to one and a half week. Plus, it is not a 1 man audit show. Average team members for one audit is 3-4 auditors in a team. 

The difference between finance/accountancy auditing and Sustainability auditing is quite big. The only thing remains the same in auditing despite what area you are in is basically the basic in auditing. Which is the audit triangulation. 

In finance/accountancy audit, auditor's will mainly be at the office, looking into documents and past records hoping that the ins and outs are tallied with the statement as well as no hanky panky being done. Whereas sustainability audit, if you are auditing forestry, palm oil, Biofuel and etc yes there are still documentation review, but that is half a day at most. The rest are site visits, site verifications, stakeholder consultation and interviews. 

"What do you do when visiting the sites?"

Well, a lot! I'll try to summarize it briefly. To name a few, we look at environmental aspect such as clear borders between estates and community lands and/ or Forest, no observed deforestation, no encroachment of area, no open burning, Wildlife sightings (especially rare, threatened and endangered species - RTE) and etc. On Social aspect, we look into illegal workers, forced labour, child labour, mercenary sightings, workers quarters, clinics, canteen, community visits, stakeholder consultation and etc. And not to forget best management practices (BMP), proper PPE usage, OSH, Risk Matrix, Waste management, blanket spray, house keeping, Palm tree situation (if the tree is sick what does the site do to manage it?) and etc. Most important are the interviews that is conducting during site visits.

Quite different compared to finance/accounting auditing right?

"Is sustainability auditing hard?"

Compared to finance/accountancy audit, I would say yes. This is because companies are being deeply monitored by NGOs and audit reports from sustainability audits are being heavily scrutinized not just by NGOs, but communities, governments, accreditation body and even scheme owners. It is not easy. If you are working in a certification body, your ethics, Mental, Moral and honesty are always being tested from left and right, up and down. Be strong in those aspects. Being in a sustainability auditing industry is a huge high risk. It is not for everyone. The experience is valuable, but to become a qualified one, you need to go though a rigorous qualification requirement that takes years. 

"Can a finance/accountancy auditor become a sustainability auditor?

Unfortunately no. This is because the requirement to become one needs someone with above 5 years of experience in the sustainability industry that is exposed and experienced to sustainability compliances. Compared to finance and accountancy auditor, anyone with a diploma or degree can apply for a work at any finance sector or auditing firm and you are trained there. Whereas to become a sustainability auditor, your educational background can be anything... but the requirement is that you will need to get the necessary experience in relevant sustainability industry (palm oil/forestry/biofuel/etc) only then can you apply to become one. Not to mention it is not easy to get into these sort of industry.

Now to address the big elephant on this matter, the big big question on this... How effective are these sustainability schemes?

There are 50-50 opinions on this. Some say it is worthless because there are still companies running rampant on deforestation and social issues. Some say it is effective to curb the issues. Some say they are in between. 

Yes, there are still issues surrounding sustainability and the commitment to sustainability. But if there are no monitoring and compliance audit being done on these companies then who will do it? The government? The country? Are you 100% percent sure this will be effective? Because these companies are also contributing a lot to the economy by providing job opportunities to those in need. At least with these sustainability scheme (with cooperation from all parties such as the country itself, governments and NGOs) there is something to hold a grip on them and ensuring their commitment to sustainability. If not... and if let them be, the situation will be much much more worst then what is happening now. 

"What about boycotting the product made from those companies?”

Are you sure boycotting is sustainable in the long run? We take palm oil for example. Are you 100% sure that other agriculture that is going to replace palm oil will be sustainable and could meet the demand and flexible yield derivatives of palm oil since it has the highest yield in the world despite being planted in a small area compared to other crops?. 

Estimated calculation can be made, but don't take this as it is since each crop has their own calculation which is different. And some crop yield very much depends on the season, type of soil, Fertilizer used and etc.

For example, we take a minimum average yield per Ha of Palm oil Fresh Fruit Bunch of 1Ha - 10MT/FFB, and average OER (Oil Extraction Rate) of 20%. If 1 Ha produces 10MT FFB per Ha, the amount of Palm Oil (CPO) you'll get is 2MT. To get 100MT of Palm oil, you will roughly need around 50HA of land. (But this is only a figure. Some companies I know can get up to 18-30MT of FFB per Ha). Therefore, the total Ha area to get 100MT of Palm Oil is lesser than 50Ha with palm oil tree planted about nine meter's apart resulting in 128 to 140 trees per hectare.

Now if we were to replace Palm oil with Olive Oil, you will need approximately roughly around 400-600 olive trees per Ha and estimated to produce around 40 Quintal of Olives. 1 Quintal of Olives is equivalent to 100KG. So 40 Quintal of Olives is equivalent to 4,000KGs of Olives and if we were to convert it to MT, it would be around 4MT. 

More trees to plant, the larger the areas to be cleared and more emissions are released. 

That said, each of us has our own opinions about sustainability. And each industry should have their sustainability goals in place. 

Going back to my main point here is the distinct difference of auditing between finance/accountancy auditing and sustainability auditing. Everyone can become an auditor, but it takes skills to become a good one. And not everyone are keen, brave enough and mentally capable of becoming a sustainability auditor.

Sustainability is becoming more and more demanded and the awareness for sustainability is getting bigger. 

And with that, I will end my blog by saying, the world needs more qualified and competent sustainability auditors!! 

Till then, stay tuned.

:3