Accountants have already branched out into this arena. But are they the best placed to provide the assurance on sustainability reports? Investors are increasingly demanding such reports. Indeed, more and more funds require one, hence the rise in popularity of indices such as the FTSE4Good.
Nowadays, more than 2,000 organisations worldwide produce voluntary social and environmental reports and a small but growing number are moving toward sustainability reports, according to the World Business Council for Sustainability Development.
Many more are picking up on the usefulness of such reports, which provide credibility to their business, not to mention the value they add to their share price and a reduced cost of capital.
But, there is still no solid benchmark against which to judge the quality of these reports. Neither is there a consistent approach to assurance.
Picking up the baton, FEE, the European accountancy body, has just issued a discussion paper to encourage a multi-stakeholder debate on sustainability reporting and its assurance. It comes just a few months ahead of the United Nations Global Reporting Initiatives update of sustainability reporting guidelines. The GRI, established in 1997 to address the issue, sets non-binding reporting standards on sustainability accounting in a bid to provide stakeholders with consistency.
One issue that is now causing consternation is the lack of uniformity in reporting. There is nothing equivalent to GAAP in sustainability reporting.
But, ‘experts’ in assurance have sprouted up around the world as demand has grown over the last decade.
David York, head of auditing practice at ACCA, said: ‘There is a wide range of assurance providers in the marketplace. FEE thinks users of reports are entitled to get assurance, contrary to the current situation where assurance provision is through the back door.’
Accountants have a history of expertise in investigating risk and providing assurance, but sustainability is as much about a company’s human rights record as it is about community investment.
York suggests that if the International Federation of Accountants endorsed the GRI guidelines that would give accountants, at least, a benchmark to follow.
Claudia Gonella, a manager in KPMG’s sustainability advisory practice, said that although the profession has crucial expertise in assurance provision, this is one area where it needs to work closely with a broader group of experts.
‘The assurance approaches fall short of adding credibility and trust. We need stakeholder inclusive alliances to perform,’ she said.
Gonella pinpoints three weaknesses in assurance provision that need to be addressed to ensure stakeholder trust. ‘Firstly, providers start with the report and don’t look at the underpinning process. Secondly, they never look at the performance on the ground and lastly, there is too much focus on technical accuracy, which loses the meaningfulness for stakeholders.’
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