Strengthen your climate disclosure practice with sustainability assurance
At a glance
There’s an obligation and a persistent expectation for companies to walk the talk in the sustainability space. Wherever you are in the world, mandatory or voluntary reporting is fast becoming a must-do practice given the increased emphasis on accountability and transparency of environmental, social and governance (ESG) performance. However, reporting alone isn’t enough; there is a prologue to the process that organisations should not be overlooking.
Sustainability assurance is often the missing piece in the framework for supporting information that companies communicate about their commitments and progress towards a more sustainable future. Sustainability assurance confirms the accuracy, reliability and consistency of disclosures, helping organisations foster trust and confidence from investors, customers, employees and the broader community. Intense scrutiny of data and initiatives — or possible scepticism of stakeholders — stresses the need to validate the thoroughness and accuracy of sustainability claims.
What is sustainability assurance?
Sustainability assurance is the independent verification of a company’s sustainability-related data and activities to assess and demonstrate the trustworthiness and dependability of reported information. It’s the step before you can begin gathering greenhouse gas inventories, carbon data, sustainability policies and outcomes.
Climate disclosures help tell your sustainability story to stakeholders, and sustainability assurance confirms that the data lives up to the claims. Organisations undergo assurance either to comply with evolving regulations and industry standards or to voluntarily demonstrate their commitment to transparency and accountability. This contributes to building confidence, mitigating risks and providing a competitive advantage.
Organisations may fall under one of two assurance categories, just like in a financial statements audit: reasonable (sufficient, appropriate evidence is gathered that the sustainability information is free from material misstatement) or limited (sufficient, appropriate evidence is gathered to indicate that presented sustainability information may be materially misstated).
Build credibility by moving from limited to reasonable assurance
A lack of assurance is a liability. The International Federation of Accountants' research reveals that low-quality assurance is an emerging investor, financial and operational risk. Also, reputation is underpinned by trust. Stakeholders now expect the same reliability of sustainability disclosures as they do for company financial statements. Companies finding themselves at a point of limited or no assurance risk widening the trust gap between them and their customers.
Governance in this space will be reinforced later this year when the proposed International Standard on Sustainability Assurance (ISSA) is approved. Regulations are projected to mandate companies to move from limited to reasonable assurance. This involves following more rigorous steps to enhance the level of scrutiny and confidence in the disclosed information.
There are no cutting corners to get to the level of reasonable assurance. It requires a deep technical understanding of a company’s ESG performance and true exposure. In addition, it is vital to establish a firm basis of technical viability, which quantifies risks and identifies opportunities, in tandem with adopting a financial lens to the sustainability framework.
The case for pre-assurance
Organisations can benefit from taking several technical pre-assurance steps to help ensure more thorough and reliable disclosures. This means understanding your current sustainability and ESG practices, including any certifications or adhered standards to better establish a baseline of existing efforts and commitments. Working through any existing metrics and data sources to determine how they align to your overall corporate strategy and business plan is important to the process. Analysis from this will help to gauge your climate objective measurements and reporting mechanisms, including any key performance indicators you use to assess your tracking and disclosure capabilities – crucial elements of pre-assurance.
Get started on your sustainability assurance journey
GHD Advisory guides clients in their journey to achieve high-quality reporting and ESG performance. The team develops roadmaps to support regulatory alignment. The team also provide recommendations for short-term, pragmatic applications and longer-term agility amid evolving reporting obligations.
Sustainability reporting is subject to global or jurisdiction-specific requirements. Starting the conversation with an external assurance provider about where you are helps identify gaps and priorities. Most importantly, it equips your organisation with the right metrics and tools to get to where you need to be.
Connect with our team and learn how our tailored guidance can support your sustainability journey.