Organisations are very familiar with financial assurance statements, and the integrity they provide to financial disclosures. Towards the end of any Annual Report, you will see an assurance statement that covers the financial data reported by the reporting entity.
There is growing demand to provide a similar level of assurance over “extra-financial” or other sustainability data (that is, information not found in the financial accounts such as employee, safety and risk management performance disclosures), to verify the quality of the information collected and reported. This demand is increasing due to the greater reliance placed upon sustainability-related metrics and data disclosures by investors, customers, employees and broader stakeholders, and the increased recognition that sustainability performance can impact the financial bottom line.
Just as it is important to ensure your cash flows line up, the validity and quality of sustainability information is paramount to ensuring that organisations are tracking against their sustainability strategies and targets, and transparently disclosing their impact to stakeholders.
Why is Sustainability Assurance important?
Conducting an independent review over the extra-financial / sustainability disclosures ensures the rigor and integrity of the data and the way in which the data has been collected, governed and controlled.
Obtaining external Sustainability Assurance also demonstrates best practice, as it signals an organisation takes sustainability reporting seriously and seeks to continuously improve internal controls, systems and processes to better address sustainability aspects.
Different levels of assurance
Unlike financial audits, which are to be delivered in line with international accounting standards, the standards for Sustainability Assurance vary and are come with different scopes. They also vary in their purpose and relevance to different stakeholder audiences. We created the below diagram to help understand the different levels of scope and stakeholder relevance.
What we have labelled as ‘Base’ level assurance in the diagram focuses on whether the data collected is true and a fair reflection of performance. It has a narrow focus that is of most value to stakeholders with a direct interest in the data that is disclosed. For instance, greenhouse gas data could be of interest to regulators (for compliance) or climate change interest groups. ‘Adherence’ level assurance assesses whether the data has been collected in line with recognised reporting standards and industry expectations, giving it broader relevance to a general audience. ‘Principles’ level assurance goes beyond the data and asks whether the company is applying sustainability management principles to manage risk, govern decisions and disclosures. Many sustainability leaders adopt this level of assurance to satisfy the expectations of highly engaged audiences such as investors and stakeholders directly impacted through its activities.
How can Point Advisory help?
Point Advisory has experience delivering assurance across the three levels of assurance over sustainability information disclosed in regulatory reports, annual reports, sustainability reports, integrated reports, and website material. Our team can help organisations determine the level of sustainability assurance that is of most value for them and their stakeholders, and the combination of sustainability standards to be applied.
We deliver a range of assurance and verification services such as:
Greenhouse Gas Inventories and compliance under:
– the National Greenhouse and Energy Reporting (NGER),
– the Climate Solutions Fund (CSF), and
– the Climate Active carbon neutral program.
Sustainability and PRI Report Assurance where we:
– are a licensed assurance provider under AA1000 Accountability Standards,
– apply the ASAE3000 standard for data assurance, and
– check against the GRI Sustainability Reporting Standards.
Accredited project/product verifiers to the:
– Infrastructure Sustainability (IS) Rating Scheme, and
– Responsible Investment (RIAA) Certification Program.
This article was written by Nina Haysler, Manager in Human Rights & Strategy.