Organisations preparing reports in line with international sustainability standards are faced with the prospect of ‘learning by doing’ – which will make the job of assurance providers more challenging, an expert has said.
Assurance providers must “obtain sufficient appropriate evidence to support the assurance conclusion” – which relies on companies having robust reporting processes, according to Willie Botha, technical director of the International Auditing and Assurance Standards Board (IAASB) standard-setting body.
Organisations have been encouraged to report in line with standards such as those by the International Sustainability Standards Board (ISSB) at the same time as ramping up internal processes and expertise. This ‘learning by doing’ approach could make the task of assurance providers harder, Botha suggested.
Several respondents to the IAASB’s recent consultation on a standard for sustainability-related assurance called for “qualified assurance conclusions as companies learn by doing … that's a reality that the market and regulators has to be prepared for”, he said.
“Assurance professionals, it is now on them to make sure that they deliver assurance engagements that truly contribute to enhancing trust and confidence of users in the sustainability information that is reported,” Botha said.
“It is critically important to recognise that reliable reporting starts with the diligence and care with which the entity prepares its sustainability information, in accordance with technical criteria or standards, like, for example, the ISSB standards.
“Assurance practitioners cannot compromise on having to obtain sufficient appropriate evidence to support the assurance conclusion.”
He said IESBA’s International Standard on Sustainability Assurance (ISSA) 5000 General Requirements for Sustainability Assurance Engagements incorporates consideration of challenges that auditors or assurance providers may face, including “obtaining sufficient appropriate evidence, taking into account the nature and characteristics of sustainability information, systems of internal control groups and consolidated information in the value chain”.
It also plans to release “first time implementation guidance” to help assurance practitioners.
Meanwhile, Laura Leal, principal at the International Ethics Standards Board for Accountants (IESBA) standard-setting body, warned of the potential for inadvertent greenwashing by organisations that are ill-equipped to compile sustainability-related reporting.
IESBA published an Exposure Draft on International Ethics Standards for Sustainability Assurance for consultation in January.
“Greenwashing can come from just clear fraud and intention to mislead – but it can also come from simple error or lack of understanding or lack of competence, which can stem from higher uncertainty or subjectivity of sustainability-related information.
“In any case, both sources of greenwashing are behavioural issues,” she said.
While standard setters are doing their best to issue technical standards that are clear, precise and easy to understand and apply, she said, “even the most perfect standards will be eventually applied by imperfect people”.
“For instance, we can think about situations where preparers are pressured to manipulate information to misrepresent alignment with the company's sustainability goals, or when a preparer is gathering information from a value chain entity and they have financial interests or other type of interests in that value chain entity.
“These are situations that are addressed by the proposed IESBA standards and that can actually make a difference in terms of the application of the reporting standards, because abiding by principles such as integrity or professional competence and due care and objectivity just to name a few of the fundamental principles that we have in our IESBA code, help ensure that the reporting standards are applied correctly.”
Read a feature on assurance of sustainability-related information here.
