The importance of assurance on the information and disclosures within the sustainability report cannot be over-emphasised. An organisation’s maturity journey to assurance over sustainability disclosures involves preparing for internal and external assurance. It involves factors such as the organisation’s controls and processes, and the availability and quality of data for sustainability reporting.
As organisations prepare for the verification of sustainability disclosures, they should consider the specific risks that lurk within the assurance exercise.
Understanding these risk areas will help organisations better prepare for assurance and improve the overall quality of sustainability reports. Some considerations for organisations during the assurance readiness process for sustainability reporting include the following.
The high levels of uncertainty, assumptions and model sensitivity that accompany the use of estimates and scenarios in sustainability reporting are a high-risk area that organisations must pay attention to.
Non-financial reporting relies heavily on estimates and scenario analysis to translate non-financial information into financial insights.
Having in place a rigorous assurance readiness process to verify these estimates and scenario analysis will increase confidence in the sustainability information.
Another area for organisations to consider is the availability of sustainability-related data across their value chain. It is a high-risk area because these extend beyond the organisation’s control, with limited access, inconsistent methods, and third-party dependencies.
Considering how to verify and build confidence across the organisation’s value-chain data is a critical component of the assurance readiness process. Also, organisations need to consider the judgments and biases that surround qualitative narratives in sustainability reports.
The organisation’s assurance readiness process should be designed to assess qualitative narratives within the sustainability report to avoid selective presentation by management.
The failure to ensure fair and accurate qualitative narratives leads to another important consideration known as greenwashing.
Organisations have to weigh management incentives and public pressure to achieve sustainability performance targets, and how this could increase the risk of greenwashing and fraud in sustainability reports.
Other considerations for organisations include those specific to greenhouse gas emissions, such as boundary choices, scope 3 estimation, and completeness.
For climate-related disclosures, organisations have to consider the assurance readiness process for greenhouse gas measurement. In addition, organisations should consider the impact of manual processes and weak governance structures on the overall assessment of their systems and control environment, as this could affect the quality of the sustainability information prepared.
The writer is a partner at PricewaterhouseCoopers. He is an author who writes and speaks widely on corporate reporting topics.
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