Perfecting Sustainability Information Management Internal Controls: How Can Companies Meet New Regulations and Ensure Compliance?

With the gradual implementation of IFRS Sustainability Disclosure Standards (ISSB Standards), corporate Sustainability Information Internal Control (SIIC) has transformed from optional implementation to mandatory regulation. The Financial Supervisory Commission (FSC) revised the "Regulations Governing the Establishment of Internal Control Systems by Public Companies" in April 2024, requiring companies to incorporate sustainability information management into internal control and internal audit plans starting from 2025. This transformation not only improves information disclosure transparency but also brings higher standards for corporate financial information integration, internal process optimization, and enterprise risk management.

However, this new regulation is not merely a formal adjustment for companies but involves systematic engineering of cross-departmental collaboration, data management, internal control review, and compliance risk prevention. How can companies ensure information disclosure accuracy? How can they enhance internal control mechanisms to meet IFRS standards? How can they strengthen sustainability information management through internal audit? This article analyzes how companies should gradually implement and optimize sustainability information management internal control systems to ensure compliance and enhance competitive advantage.

Global Sustainability Information Management Trends: From Regulatory Requirements to Corporate Competitiveness

Major global economies have actively promoted sustainability information management standardization in recent years to improve corporate information disclosure transparency and consistency. These regulations not only require corporate compliance but also affect corporate market evaluation and trustworthiness.

• IFRS Sustainability Disclosure Standards (ISSB S1 & S2) — Global standards requiring companies to disclose financially-related sustainability information and ensure information is auditable and comparable.
• EU Corporate Sustainability Reporting Directive (CSRD) — Requires companies to use "Impact Materiality" and "Financial Materiality" as the basis for sustainability information disclosure and mandates third-party verification of sustainability reports.
• Taiwan FSC Internal Control System Regulations Revision — Starting from 2024, requires companies to incorporate sustainability information management into internal controls, supervised by audit committees and boards of directors.

These trends show that sustainability information is not just a compliance requirement but has become an important indicator of corporate governance, financial decision-making, and market competitiveness. Companies that deploy early and establish robust internal control systems will gain advantages in sustainable finance markets and attract more institutional investor attention.

Challenges and Pain Points Facing Companies

1. Establishment and Adjustment of Sustainability Information Management Internal Control Systems

New regulations require listed companies to establish "Sustainability Information Management Internal Control Systems," but many companies face the following challenges:

• Incomplete internal control systems: Existing internal control frameworks primarily target financial and operational risks, lacking effective management of ESG information.
• Cross-departmental collaboration difficulties: Sustainability information involves multiple departments including legal, finance, supply chain, and ESG units, making information integration highly difficult.
• Increased audit and compliance pressure: Companies need to submit sustainability information internal control frameworks to board review to ensure regulatory compliance.

2. Impact of IFRS Sustainability Disclosure Standards Implementation

Starting from 2026, listed companies with capital exceeding NT$10 billion will be the first to implement IFRS sustainability disclosure standards, with future expansion to all companies. This brings the following pressures on corporate internal data management and reporting mechanisms:

• Increased data quality requirements: Sustainability information must be consistent with financial data, ensuring information traceability and verifiability.
• Internal control process optimization: To ensure information disclosure accuracy, companies need to re-examine sustainability information collection, verification, and reporting processes to ensure internal controls have appropriate oversight and review mechanisms.

3. Sustainability Information Internal Control Management for Corporate Groups

For corporate groups with multiple subsidiaries, management challenges are more complex:

• Cross-border regulatory compliance pressure: Each subsidiary must simultaneously comply with local regulations and parent company internal standards, increasing management difficulty.
• Internal control consistency issues: If subsidiaries each establish their own internal control processes, it may lead to inconsistent sustainability information management standards, affecting overall group disclosure quality.

How Can Companies Perfect Sustainability Information Management Internal Controls?

Facing IFRS sustainability disclosure standards implementation, companies need not only to meet compliance requirements but also establish sustainably operational internal control systems to ensure sustainability information accuracy and reliability. According to the Regulations Governing the Establishment of Internal Control Systems by Public Companies, the FSC reminds listed companies that starting from 2025 they should establish "Sustainability Information Management" internal control systems and incorporate them into audit plans, referencing TWSE and TPEx published internal control reference items, and make rolling adjustments to internal management mechanisms. Based on various implementation plan stages, companies can adopt the following strategies:

1. Establish Strong Internal Control Framework

• Form a project team: Organize cross-departmental project teams to ensure finance, ESG, and IT units can collaborate, with board oversight of progress.
• Identify major differences and impacts: Initially inventory differences between current sustainability information and IFRS sustainability disclosure standards, analyze impacts on financial reporting, and formulate effective internal control strategies.
• Establish reporting entities and implementation plans: Clarify reporting scope to comply with consolidated financial statement frameworks and develop detailed implementation plans to ensure feasibility.

2. Implement Sustainability Information Internal Control Processes

• Identify key risks and opportunities: Assess how sustainability risks affect corporate finances and establish internal review mechanisms to ensure information disclosure completeness.
• Adjust internal corporate processes: Make corrections to financial and non-financial information collection, supply chain management, and internal control operations to comply with IFRS sustainability disclosure standards requirements.
• Establish data management and internal audit mechanisms: Ensure sustainability information data sources, calculation methods, and reporting processes comply with internal control standards and are incorporated into annual audit plans.

3. Pilot and Optimize

• Pilot annual report sustainability information chapter: According to IFRS sustainability disclosure standards, conduct preliminary trial compilation to test information disclosure applicability and completeness.
• Continuously improve internal control operations: Through internal testing and performance evaluation, modify processes and audit mechanisms to ensure information disclosure accuracy.
• Promote company-wide education and training: Regularly hold IFRS sustainability information related internal control training to ensure all department personnel are familiar with internal control standards and disclosure requirements.

Action Recommendations and Future Outlook

Short-term Actions (Within 1 Year): Establish Internal Control Mechanisms and Compliance Foundation

• Organize cross-departmental project teams to initiate IFRS sustainability disclosure standards implementation plans.
• Initially identify major differences between sustainability and financial information to ensure reporting scope and internal control system consistency.
• Establish internal control processes and data management mechanisms, incorporate into internal audit plans to ensure information accuracy and verifiability.

Medium-term Actions (1-3 Years): Pilot Implementation and Optimize Audit Processes

• Pilot annual report sustainability information chapter to verify IFRS sustainability disclosure standards applicability.
• Evaluate and adjust internal control processes to ensure high consistency between financial and sustainability information.
• Strengthen risk management and supply chain information control to ensure internal and external corporate information can be effectively linked.

Long-term Actions (3+ Years): Comprehensive Optimization and Strategic Integration

• Closely integrate sustainability information management internal controls with corporate business strategy, making it part of corporate decision-making.
• Continuously update internal control operation manuals and ensure education and training are institutionalized, internalizing internal control culture into corporate DNA.
• Make periodic rolling adjustments based on international trends and regulatory changes to ensure corporate competitiveness and compliance.

Leverage Information Technology to Strengthen Sustainability Reporting Quality and Efficiency!

IFRS sustainability disclosure standards have become the new corporate standard. Early deployment and optimized internal controls are key to ensuring compliance and enhancing competitiveness. Sustaihub's digital sustainable development consulting team is dedicated to exploring how to effectively achieve corporate sustainability management goals!

Three key features of Sustaihub Syber Sustainability Management System enable companies to ensure sustainability information accuracy:

1. History records, approval workflows, multi-level access controls: Improve data reliability
2. Cross-departmental data aggregation, solving data dispersion issues: Accelerate data integration
3. Automated project management and AI collaboration: Reduce manpower burden

The Syber Sustainability Management System helps companies achieve compliance while improving internal efficiency without expending significant manpower and time, providing comprehensive support for sustainable development as the best corporate sustainability report collaboration platform.

References:

1. FSC reminds listed companies to establish "Sustainability Information Management" internal control systems - Financial Supervisory Commission Global Information Network, 2025/01/16
2. IFRS Sustainability Disclosure Standards Related Internal Control Practices - TWSE Corporate Governance Center, 2024/08/27
3. Accountants' View of Current Events / Perfecting Sustainability Information Management Internal Controls - UDN United Daily News, 2024/11/15