Progress on a global standard for sustainability assurance is gathering pace, with the body leading the development of ISSA 5000 saying it is on track to deliver an approved version in September this year.

Speaking at ICAEW’s recent Audit and Assurance conference, Josephine Jackson, the Vice-Chair of the International Audit and Assurance Standards Board (IAASB), said the body had received very strong support from stakeholders after issuing an exposure draft on ISSA 5000 six months ahead of schedule, with a strong plea to meet the September 2024 deadline.

However, Jackson said the IAASB was approaching the project with “a sense of humility” due to the many unknown factors at play. “We can’t predict every issue or matter that may turn up, but we are making informed judgments and the exposure draft has benefitted from a lot of input.” 

The standard, which will supersede ISAE 3410 (the standard for assurance engagements on greenhouse gas statements) for all sustainability-related engagements, addresses limited assurance and reasonable assurance engagements. 

“As a principles-based standard it can be applied for assurance across a broad range of sustainability topics, using any suitable reporting framework,” Jackson explained. She said the standalone nature of the standard – the “soup to nuts approach to a sustainability assurance engagement” as she described it – was considered critical by most stakeholders. 

There was support among stakeholders for the standard to be underpinned by strong ethics and quality management standards, and full transparency over which quality management standards or ethics standards are being applied should be included in the assurance report, Jackson said. 

Attempts to move away from traditional environmental, social and governance (ESG) terminology and incorporate terms used in some of the reporting frameworks have been abandoned. “The board agreed to move back to a definition that focuses simply on ESG and making sure it’s clear in the standard that you’re looking to the reporting framework first for definitions of sustainability information.” 

Jackson also highlighted a new requirement in the planning and performance section of the engagement for the practitioner to get an understanding of the entity's process to identify sustainability information to be reported, in order to address concerns by some stakeholders that there wouldn’t be an independent review of that work. 

“We know implicitly if the entity has identified topics to report that the completeness of those topics to be reported would be covered in the assurance engagement. But some stakeholders felt it wasn’t explicit enough,” she said.

“Practitioners must determine if the reporting framework applied by the preparer is a double materiality framework. Irrespective of the framework, if you are in a double materiality regime, it is also something practitioners need to think about when developing their own materiality or making your own materiality decisions. We recognise that this is not an easy task and needs further education.”

The standard has addressed group reporting given that, initially, most entities captured by mandatory reporting assurance would be at the larger end of the scale and most likely groups, and the engagement team and the resources used on these engagements are likely to extend beyond the likes of traditional single entity and into a group assurance engagement. 

Jackson said that respondents to the consultation highlighted that the concept of the service organisation report is likely to grow beyond the traditional financial reporting controls that auditors are already familiar with, particularly as preparers need to collect data from entities in the value chain outside of their operational control and may need some assurance over that information. The concept of the one-to-many report is now included in the requirements and guidance, Jackson said.

She said theIAASB was on track to approve the standard in September. However, a critical message coming through from stakeholders is the need for educational materials and illustrative examples to bring practical application of the standard to life. Work on a first-time implementation guide is underway and will for the first time be released at the same time as the standard, Jackson explained. Meanwhile, she said ongoing input from ICAEW members with experience of engagements under ISSA 5000 will be invaluable in developing further frequently asked questions and related guidance.

“When you've been involved in standard-setting, particularly as long as I have, it is really easy to get lost in the technical detail. But it’s not just about the technical detail – it’s much bigger than that. 

“We're all at the advent of a new area of technical reporting that includes both financial and sustainability information, and decisions we make today about this fundamental infrastructure around governance, reporting and assurance give us huge opportunities to make our global economy work better and in a more sustainable fashion.”