Assuring your Sustainability Report: Experts Explain the Options
In the rapidly evolving field of sustainability reporting, key issues quickly supplant one another. External assurance of sustainability reports -- a topic that may not have attracted much attention a few years ago – drew standing-room-only crowds to two sessions at the CR Magazine’s recent COMMIT!Forum in New York. Thanks to the drive toward integrated reporting and increasing investor interest in non-financial performance data, more companies are realizing the inevitability of providing investment-grade nonfinancial data as accurate and reliable as the financial data presented in annual reports and 10-Ks.
There’s much to be said on the issue for although both sessions featured well-credentialed panelists, some participants left hungry for more information. I’ll attempt to summarize what they shared and fill in some of the blanks.
Global Reporting Initiative (GRI) external relations manager Marjella Alma kicked off one panel noting that assurance levels among U.S. reports lagged those from other regions. She speculated that the low assurance levels in the U.S. could be attributed to a surfeit of choices among:
- the wide variety of companies and firms providing assurance (e.g., Big Four consulting firm, engineering firms and boutique consultancies, among others),
- over 100 assurance and verification standards (e.g. ISO 14001, AICPA, Carbon Disclosure Project, UN Global Compact, and GRI, among others), and
- uncertainty about the types and levels of assurance being offered (e.g. positive vs. negative, partial vs. complete).
Alma advised participants to watch for the results of research being conducted by GRI, which has been interviewing companies that have declared a “+” in 2011 regarding their attitudes regarding the value of external assurance. The GRI is researching the state of assurance in the U.S. by surveying companies to understand the reasons reporters obtain assurance and the differences in their assurance approaches. Look for the report which should be released in November.
Amidst all these options, the GRI doesn’t provide clear guidance on exactly what assurance should consist of. A show of hands from the audience confirmed that companies are crying out for clarity and guidance on assurance standards.
Finally, Alma noted that the GRI, Carbon Disclosure Project and the World Resources Institute/World Business Council for Sustainable Development’s Greenhouse Gas Protocol are all moving toward requiring assurance of data submitted under their frameworks and toward providing assurance standards.
Choosing an Assurance Provider
Some obvious choices of assurance providers include the Big Four firms E&Y, Deloitte, PwC and KPMG, (some of which were well-represented at the conference), engineering firms and specialty boutiques. Panelists agreed that selection of an assurance provider and verification level should be driven by a company’s reporting strategy and its reason for seeking verification. A company’s level of reporting maturity and data collection prowess would also influence selection of an assurance provider. To verify environmental performance data intended for an operations-oriented audience, it may be sufficient to engage an engineering firm. For a company preparing to issue an integrated report targeted to investors, the better route may be to opt for a CPA firm.
A Pathway to Assurance
It’s useful to view the assurance process as a journey, similar to that of sustainability reporting, in which a company’s mastery of the process grows over time. Panelist Brendan LeBlanc, Executive Director of E&Y’s Climate Change and Sustainability Services, outlined a potential assurance pathway for companies new to the process which provides progressively stronger levels of assurance.
- Pre-assurance – At this point, a company would engage a consulting firm to conduct a readiness assessment which reviews its data collection processes and provides recommendations for improving data integrity.
- “Limited” or “negative assurance” -- Under this type of review, the accounting firm would issue a negative opinion to the effect that nothing has come to their attention that would cause the reviewer to doubt the accuracy of the data.
- “Positive” or “reasonable assurance”-- This stronger level of assurance states that the reviewer believes the report is conformance with the relevant standards, most likely the International Standard on Assurance Engagements (ISAE) 3000 (if no national standard exists).
Meaningful Data for Meaningful Decisions
The bottom line is that not all assurance is created equal.
“If you are expecting stakeholders to use information from your CSR report to make a meaningful economic decision such as joining, doing business with or investing in your company, then you need provide meaningful information that is assured. These people are going to want to know that the information is meaningful and credible,” stated panelist Eric Hespenheide, partner, Deloitte & Touche LLP.
Cindy Mehallow is principal of CRM Communications, a woman-owned sustainability communications consulting practice specializing in corporate social responsibility reporting and stakeholder communications. A GRI Organizational Stakeholder, Cindy has produced award-winning sustainability reports for Fortune 500 companies in a variety of industries.