A Shift in Sustainability Assurance: The Growing Trend Among Global Corporations

A recent survey conducted by the International Federation of Accountants (IFAC) and the Association of International Certified Professional Accountants (AICPA & CIMA) reveals a noteworthy trend among major global enterprises regarding sustainability assurance practices. According to the data, nearly 75% of the largest global corporations sought some form of assurance on their sustainability disclosures. This marks an increase from previous years and reflects a deeper commitment to accountability in sustainability.

Key Findings of the Study

In 2023, 73% of companies from G20 nations obtained assurance for at least part of their sustainability disclosures, up from 69% in 2022, and a significant jump from 51% just five years ago. The ongoing emphasis on sustainability and transparency pushes corporations to seek verification of their claims, leading to a growing reliance on audit firms rather than consultants for these services.

This year's report, titled The State of Play Sustainability Disclosure and Assurance, encompasses data trends over the past five years. It found that audit firms provided assurance for 55% of sustainability reports, despite a slight decline from 58% in 2022. This decline can be attributed to factors such as the consolidation of assurance reports in the European Union, where firms began issuing comprehensive reports instead of multiple separate ones.

Some regions are experiencing a notable rise in assurance services. For instance, countries like Singapore, South Africa, the United Kingdom, and the United States have reported increased engagement of audit firms for sustainability-related assurances, leading to heightened trust and credibility in the reported information.

Greenhouse Gas Emissions: The Most Assured Category

The report emphasizes that greenhouse gas emissions consistently remain the focal point of assurance, as companies often begin their assurance journeys by confirming these specific disclosures. The data indicates that there has been a notable increase in the number of assurance reports related to greenhouse gas emissions, particularly in markets like South Korea, which produced an average of 2.5 reports per company in 2023.

Susan Coffey, CEO of public accounting for AICPA & CIMA, stated, "Auditors possess extensive educational backgrounds, adhere to rigorous independence standards, and bring a comprehensive understanding of an organization's processes and risk profiles. This positions them as the ideal candidates for sustainability assurance engagements. With the maturation of corporate reporting practices, we see board members increasingly supporting this view."

Integration of Sustainability into Financial Reporting

More than 75% of corporations now integrate sustainability information into their financial reports, reinforcing the trend of transparency and accountability towards sustainability efforts. In 2023, about 44% of review companies included comprehensive sustainability content in their annual reports, a significant leap from just 18% five years earlier. This shift captures the growing investor and stakeholder demand for reliable sustainability information alongside financial disclosures.

Lee White, CEO of IFAC, remarked, "The largest global companies are responding positively to voluntary sustainability reporting and assurance systems, primarily driven by investor motivation. As global standards evolve, regulators are equipped to shift from optional to mandatory reporting, which should enhance the quality and consistency of sustainability information accessible to the public and stakeholders."

Implications for the Future

The findings from the IFAC and AICPA & CIMA study underline the increasing importance of sustainability assurance in the corporate sector. As a greater number of companies embrace the necessity of transparent sustainability practices, the accountability mechanisms for ensuring the accuracy of reported data will likely evolve as well. The shift from voluntary standards to potential mandatory reporting may pave the way for increased trust in corporate disclosures, echoing the rigor typically associated with financial reporting.

Overall, the results point towards a promising future where sustainability is solidly integrated into corporate governance, ensuring that businesses are held to higher standards of transparency and responsibility. With the commitment of organizations like IFAC and AICPA & CIMA, the movement towards dependable sustainability reporting is set to gain even more momentum in the coming years.