The conditions necessary for the reporting of high-quality sustainability information
By Anne Adrain, Head of Sustainability and Reporting
28 February 2022
Anne Adrain provides an overview of a recent report from ICAS setting out the necessary conditions for the reporting of high-quality sustainability information.
Stakeholders, including investors, increasingly expect greater transparency around how entities are embedding sustainability into their activities. The interest in sustainability, in its broadest sense, i.e. environmental, social and governance (ESG), is at an all-time high and this increased focus and awareness can largely be attributed to the existential risk that the climate emergency poses to human kind. The COVID-19 pandemic also put some of the increasing social issues under the spotlight.
With this increased stakeholder demand comes a need for credible, reliable information around what an entity is doing to mitigate the climate change risks to which they may be exposed, and to consider what opportunities the transition to a greener economy may bring.
The ICAS report: ‘Sustainability: The necessary conditions for the reporting of high-quality information’, was produced by an expert working group representing investors, academics, preparers, auditors and non-executive directors. The group was chaired by current ICAS Vice President, Clive Bellingham CA.
Evolution of sustainability reporting
The paper acknowledges that sustainability reporting is still evolving, unlike financial reporting which has developed over many years in response to stakeholder demands, primarily those of investors. Nor are the internal systems and processes for the collection of sustainability-related data as mature as with financial data. Arguably, however, sustainability reporting has a much wider audience and may even extend as far as the public at large, hence the need for greater transparency and accountability in the related reporting.
The report also explores the connection between sustainability reporting and financial reporting and the need to also consider the impact of sustainable development issues on the financial statements.
The establishment of the International Sustainability Standards Board (ISSB) and the relationship between the standards the ISSB and the existing Global Reporting Initiative (GRI) Standards is also highlighted in the paper.
Demand for assurance on sustainability reports
There already exists a demand for assurance of sustainability reports as evidenced in the publication by the International Federation of Accountants (IFAC): ‘The State of Play in Sustainability Assurance’. This report highlighted that around half of the companies reviewed in their global study published sustainability information subject to assurance of some form. This assurance is sometimes provided by a professional accountant but, in many cases, is undertaken by an external consultant.
The need for suitably qualified individuals
For assurance to have value, those who provide it must be trusted. It is therefore in the public interest that providers of assurance should have to meet certain criteria to enable them to be able to issue such reports.
In April 2021 ICAS published the paper ‘A roadmap to the Corporate Auditor profession’ which outlined a model for how experts in fields other than financial reporting could become qualified in providing assurance in accordance with a globally accepted framework and suite of standards.
The adoption of such an approach would enable experts in subjects such as sustainability to gain professional recognition in assurance and provide them with the skills and qualification needed to provide assurance on subject matter information in their area of expertise. Stakeholders would take some confidence from the knowledge that this information has been through a rigorous and robust process and examination.
Working group Chair, and ICAS Vice President, Clive Bellingham CA said: ‘The need for transparency and accountability on sustainability-related information has never been greater. With many organisations now publicly announcing their net zero commitments, stakeholders want to be able to rely on their related reporting and to hold corporates and their leaders to account for achieving their stated commitments.’
