In this article, we will review the recently issued research, a five-year analysis (2019-2023) of global trends in sustainability reporting and assurance, conducted by IFAC and AICPA & CIMA , which examined the practices of 1,400 companies across 22 jurisdictions.
A key finding is the increasing rate at which companies are obtaining assurance over their sustainability disclosures, although limited assurance is still the most common level. The report also highlights the persistence of various standards and frameworks used for both reporting and assurance, with a trend towards including sustainability information within annual or integrated reports. The key findings from the report are as follows:
Increasing Rate of Sustainability Assurance
A clear and significant trend is the increasing rate at which companies are obtaining assurance over the sustainability information they disclose. The percentage of companies obtaining some level of assurance has risen from 51% in 2019 to 73% in 2023.
Jurisdictions showing double-digit growth in sustainability assurance include Hong Kong, S.A.R., Indonesia, Mexico, Russia, and Saudi Arabia.
Persistence of Fragmentation in Standards
Despite the increase in assurance, the study indicates that fragmentation in the standards used for both reporting and assurance remains.
The use of multiple sustainability reporting standards and/or frameworks grew to 92% in 2023.
While ISAE 3000 (Revised) remains the most common assurance standard, its use declined slightly in 2023 due to increased market share by other assurance standards.
Integration of Sustainability and Financial Reporting
There is a notable shift towards integrating sustainability disclosures into annual or integrated reports, moving away from standalone sustainability reports.
The inclusion of sustainability information in annual reports has more than doubled from 18% in 2019 to 44% in 2023.
Companies that include sustainability information alongside financial information are significantly more likely to obtain assurance from an audit firm.
Integration is also reflected in a narrowing gap between the signature date of the financial audit and the sustainability assurance report.
Scope of Reported and Assured Topics
Nearly all companies that disclose ESG information report on all four categories; greenhouse gas (GHG), other environmental, social, and governance.
GHG emissions data is the most frequently assured topic, with 99% of companies obtaining assurance focusing on this area.
Assurance coverage of other environmental and social metrics has improved, but assurance of governance metrics has declined.
While 82% of companies disclosed Scope 3 emissions in 2023, 76% of those obtained assurance over this data. The disclosure of scope 3 emissions varied significantly reflecting the challenges in obtaining this data.
Sustainability Governance
Board-level oversight of sustainability strategy and reporting is increasing, primarily within audit, governance, or sustainability committees.
87% of companies disclosed Board-level oversight of sustainability strategy in 2023.
60% of companies disclosed Board-level oversight of sustainability reporting in 2023.
However, oversight of sustainability assurance at the board level remains surprisingly low, with only 24% of companies that obtained assurance specifying which board committee has oversight.
Role of Audit Firms vs. Other Service Providers
Audit firms continue to be significant providers of sustainability assurance, particularly for companies integrating sustainability information into their annual reports.
Other service providers gained market share in 2023 despite audit firms increasing their number of assurance clients.
Materiality Assessment
Most companies disclose using double materiality or both economic and other factors to determine material sustainability topics (85% in 2023).
Common techniques for determining materiality include stakeholder engagement, using standards/frameworks (e.g SASB Standards and GRI from Global Reporting Initiative (GRI)), desktop research, management/board engagement, using external experts, and using AI.
Future Outlook
The report suggests that mandatory reporting and assurance requirements, such as those in the EU, are a pivotal factor in the future of corporate reporting.
The research indicates that the future of corporate reporting for large, stock-exchange-listed companies will include assured sustainability-related information, although the pace and scope may vary by jurisdiction.
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