The environmental, social and governance (ESG) framework aims to help organizations manage risk related to environmental protection, corporate social responsibility (CSR) and governance of business behavior. This risk has existed for a long time, albeit having often been ignored, but in recent years it has become a hot topic, fueled by catastrophes manifested in natural disasters all over the world. The impact is wide, and the damages can be disastrous; therefore, it is a lot more serious of a problem than a lot of people realize or care to admit.
Now that the world is beginning to awaken and is willing to spend on environmental protection, a green audit, expansion and modification of CSR and new guidelines and tools are needed. In short, we need to spend more money. Auditing ESG is a new challenge as it transcends the orthodox dimensions of financial efficiency, legal consistency, technical effectiveness and perhaps ethical acceptability. In addition, there is not really an immediate return from such spending. This creates a dilemma for the auditors because the corporate audit authority may not approve the extra spending. In addition, there is a lack of guidelines and tools for auditors covering this new area.
Addressing these dilemmas is difficult, but it is not impossible. The proposed ethics-based hexa-dimension algorithm aims at enlightening the intertwined factors of ESG and can be a tool for auditors.
The algorithm comprises two major components: the ethical matrix and the hexa-dimension metric. The matrix was originally developed as a decision-support tool for helping users reach sound judgments or decisions about ethical acceptability and optimal regulatory legal and technical controls for the field of food and agriculture, and later adapted to other fields, including IT. It aims to provide a bird’s-eye view of the ethical issues arising from a problem before proceeding to the metric to assess the hexa factors.
The metric was originally developed as a decision-support tool, a checklist for measuring the quality and efficacy of the consequences of actions, decisions or policies in terms of six factors, prompted by the limitations of the extant decision-making models including the Simon model, which assumes rationality and focuses on physical and financial terms. It is an instrument for pragmatically clarifying and determining the ethical and effective in ethical and effective leadership, which all professionals strive for. The six factors are financial viability, technical effectiveness, legal validity, ethical acceptance, social acceptability and ecological sustainability. The algorithm is made up of seven matrix steps, and the five hexa-dimension metric steps.
ESG is auditable, and adapting the hexa-dimension algorithm is a good first step.
Editor’s note: For further insights on this topic, read Wanbil Lee’s recent Journal article, “Developing or Reviewing Information Security Policies Using an Ethics-Based Algorithm,” ISACA Journal, volume 3 2023.