Delegates and speakers at the 2024 Audit and Assurance Faculty Conference are gearing up to meet the growing need and demand for sustainability assurance services. Let’s explore what’s on their minds.
Companies across the globe are increasingly required or choosing to provide sustainability information to regulators, investors and other stakeholders, and driving up demand for high quality sustainability assurance services. At the 2024 Audit and Assurance Faculty Conference, delegates and speakers came together to share their experiences and expectations of the fast-changing sustainability reporting and assurance landscape and to prepare for emerging opportunities and challenges.
This one-day event provided education, insights and pointers – both technical and practical – for those in various roles and at different stages on their sustainability reporting and assurance journey. This article shares some themes that ran throughout the day, and ‘takeaway’ considerations for auditors.
Navigating the landscape
Although assurance has a key public interest role in building trust in meaningful and comparable sustainability-related information, the increasingly crowded and ever-evolving nature of the reporting and assurance landscape can make it difficult to navigate. This was reflected in the conference event programme, which covered:
- why sustainability assurance is important;
- skills and resources to prepare for and provide sustainability assurance;
- managing and improving the availability and quality of sustainability data;
- key regulations that impact on sustainability assurance;
- the proposed International Standard on Sustainability Assurance (ISSA 5000); and
- the direction of travel for sustainability assurance.
All this and more will be explored in greater depth in forthcoming Audit & Beyond articles, written by expert and specialist speakers from the conference and other trusted sources.
Drivers of change
Welcoming delegates and speakers to the event was Chair of the Audit and Assurance Faculty Board, David Isherwood, Ethics Partner at BDO. “Levels of interest and focus on sustainability reporting and assurance have risen exponentially over recent years, and now it is getting the attention it deserves,” he said. Drivers that are behind this rapid evolution, why sustainability assurance is so important, plus existing and emerging challenges and opportunities were all explored during the opening panel session.
“At NatWest Group, we have been working to embed control frameworks to support our sustainability reporting.” Panellist Supriya Sobti, Head of Climate and Purpose, Finance, outlined how assurance plays a role in supporting stakeholders to assess the credibility of sustainability reporting and in building trust among investors and other stakeholders. She also explained why and how the bank is working towards increasing levels of limited assurance for sustainability reporting and plans to gradually move to more reasonable assurance as disclosure standards develop, data availability improves, and measurement methodologies formalise.
This kind of diligent and thoughtful approach is far from universal. Carolyn Clarke, CEO and founder of Brave Within LLP, risk and assurance specialists, noted that often corporates make climate-related disclosures periodically, in annual reports and when speaking to investors, while not being clear and transparent about the basis for their sustainability disclosures, commitments, and claims to green credentials. She suggested much more frequent assurance and a greater role for internal audit professionals.
Panel leader Jessica Fries, Executive Chair, A4S (Accounting for Sustainability), urged accountants to step up and help organisations to meet the growing need for more credible sustainability reporting and assurance. The other panellists, Adrian Crompton, Auditor General, Audit Wales, and George Richards, Partner and Head of ESG Reporting and Assurance at KPMG also shared insights based on their very different experiences of sustainability reporting and assurance, against the backdrop of an ever-evolving regulatory landscape.
Reporting and assurance regulations and standards
Josephine Jackson, Vice Chair of the International Auditing and Assurance Standards Board (IAASB), shared a progress update on the IAASB’s proposed assurance standard, ISSA 5000. “This is an ambitious project to develop a globally accepted overarching standard for sustainability assurance that will work with any sustainability reporting framework or standard,” she explained, and any size entity. The IAASB is scheduled to approve the standard by 2024.
Long-established standards for sustainability reporting, such as the Global Reporting Initiative (GRI), have recently been joined by new regulations and standards for reporting and disclosures on environmental, social and governance (ESG) factors, climate specifically, and sustainability more broadly. Many speakers and panellists acknowledged the confusing “alphabet soup” of abbreviations and acronyms, while focussing primarily on three areas of sustainability reporting regulation for delegates to consider during 2024.
- The Corporate Sustainability Reporting Directive (CSRD) adopted by the European Commission and the European Sustainability Reporting Standards (ESRS). Effective for reporting periods from 1 January 2024, including some non-EU groups and companies, with mandatory limited assurance.
Read more: CSRD: Sustainability assurance. - Global IFRS Sustainability Standards from the IFRS Foundation’s International Sustainability Standards Board (ISSB) – currently IFRS S1 and IFRS S2. Effective from 1 January 2024. UK decision on endorsement expected H1 2025.
Read more: Jurisdictions decide whether assurance is required; IFRS Financial Reporting. - The Climate Rule from the US Securities and Exchange Commission – for domestic and foreign companies with US listings. Limited assurance mandatory. Adopted March 2024; currently paused due to legal challenge.
Read more: SEC standardises climate-related disclosures for investors.
Specialists from Deloitte clarified some of the complexities around concepts, comparability, interoperability and other matters, and explored how regulation can impact sustainability assurance. Deloitte’s James Self, Managing Director, ESG Assurance, and Steve Farrell, Head of ESG Assurance, noted, for example, how nuanced the influence of existing and emerging regulation can be on demand for assurance. For example, although Task Force for Climate-related Disclosures (TCFD) are mandatory for some UK companies, there has also been a significant increase in companies choosing to make voluntary TCFD disclosures.
Gearing up for change
Many presenters and panellists noted how well-placed auditors are to meet the growing need for sustainability assurance. Auditors can build on their existing technical and practical skills, and they understand the importance of ethics, independence, and professional scepticism. Delegates were reminded that ICAEW has introduced an e-learning programme, leading to an ICAEW Sustainability Certificate, which many accountants in business and in practice may find useful on their sustainability reporting and assurance journey.
Michelle Cardwell, Principal at the International Federation of Accountants (IFAC), shared some of its research into what skills and competencies in sustainability reporting and assurance will be needed by every accountant, not just by those who are or aim to become sustainability specialists. IFAC plans to revise its International Education Standards, to embed sustainability into initial professional development. In Equipping professional accountants for sustainability – what’s new and what hasn’t changed, IFAC sets out four key areas where accountants may need to update their knowledge and skills to close any gaps and adapt to new ways of thinking and working.
What skills and competencies in sustainability reporting and assurance will be needed by every accountant?
One area that is already presenting practical hurdles for preparers, assurers and other professionals involved in sustainability reporting and assurance, is how to access the necessary data. The data challenge, and its scale and significance, were acknowledged throughout the day, but particularly during the panel session on ‘Getting to grips with sustainability-related data’.
Data that’s needed for sustainability reporting and assurance can range far and wide. There are, for example, over 1,000 qualitative and quantitative data points across 10 key ESG topics for CSRD disclosures. Even for less extensive disclosures, the necessary data is not always available or accessible, and quality can be problematic. There was, understandably, great interest among delegates around what constitutes good quality sustainability-related data and what preparers and assurers can do to better manage and improve this.
Lisa Rabone, Chief Data and Sustainability Advisor with data specialist Eden Smith Group, offered some words of comfort and advice for preparers and assurers. “There’s a whole group of data professionals out there that know how to manage sustainability data. Lean into the people who know how to collect, manage and govern it, and focus on how you can support them and work together,” she said. Going forward, sustainability reporting and assurance may need to become more interdisciplinary and multidisciplinary endeavours.
What constitutes good quality sustainability-related data and what can preparers and assurers do to better manage and improve this?
The future of sustainability assurance
Mardi McBrien, Chief of Strategic Affairs and Capacity Building at the IFRS Foundation, and Kris Nathanail, Chief of Staff at the International Organization of Securities Commissions (IOSCO) both talked about how fast the regulatory landscape is changing. McBrien reported that many countries are looking at how they can align around the global sustainability standards IFRS S1 and IFRS S2, and that a priority for the ISSB going forward is to continue harmonisation and interoperability with standards such as the European Sustainability Reporting Standards.
While it is not possible to predict the future of sustainability reporting and assurance with any degree of certainty, if the experiences and expectations of speakers and delegates at the conference are any indication, the direction of travel is clear. There will be more sustainability-related reporting and disclosures. More regulations and standards. More alignment and interoperability. More limited assurance, and eventually a move towards more reasonable assurance. And, there will be more auditors, accountants and non-accountants involved in both sustainability reporting and assurance.
For many delegates, attending the event was a vital step in understanding the current state of play with sustainability assurance and what’s coming quickly down the line. “Although our clients aren’t yet required to report on sustainability, we need to know what to expect in the short and the longer term,” said an auditor from a small UK practice. Others are already conducting sustainability assurance engagements, as one auditor from a mid-sized UK firm explained: “There’s no shortage of demand and we are now turning work away.”
- For further information and insights visit ICAEW’s Sustainability Assurance hub.
