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Sustainability reporting, assurance rates on the rise globally

February 22, 2024

Large companies globally continue to make strides when it comes to reporting sustainability data and obtaining assurance of that data, but more strides are needed as sustainability reporting begins the shift from a voluntary endeavor to a required one.

The International Federation of Accountants (IFAC) and AICPA & CIMA, together as the Association of International Certified Professional Accountants, have jointly published the fourth annual installment of The State of Play: Sustainability Disclosure and Assurance, which analyzes the 2022 disclosures of the 100 largest companies in the six largest featured jurisdictions (including the United States) and the 50 largest companies in 16 other jurisdictions.

Worldwide, 98% of companies reported some level of detail on sustainability in 2022, and 69% obtained assurance on at least some of their sustainability disclosures. Those numbers are up from 91% reporting on sustainability and 51% obtaining assurance in 2019, the first year covered by the report.

"There is more reporting of information, and more information is getting assured. And as we see more regulations being implemented around the world, we expect companies to respond with higher-quality reports," said Ami Beers, CPA, CGMA, senior director–Assurance & Advisory Innovation at AICPA & CIMA.

While the numbers are headed in the right direction in light of the SEC's anticipated climate rule and following the release of International Sustainability Standards Board sustainability standards and the EU's Corporate Sustainability Reporting Directive, other numbers reveal the level of work still ahead of mounting regulations.

For example, since the first report in the series spotlighted 2019, the percentage of companies getting assurance on their sustainability disclosures from a CPA firm as opposed to a consultant/other service provider has dipped from 63% to 58%.

Ninety-two percent of CPA firms assuring sustainability disclosures used ISAE 3000 (Revised) — the current industry standard — as the framework for assurance, while only 38% of consultants/other service providers used it. Including standards similar to ISAE 3000 (Revised) issued by accounting and audit bodies, 99% of firm audits applied such standards.

"The goal of sustainability disclosure must be information, including the processes in place to prepare it, that is on par with financial reports," the report states. "We believe professional accountants will play a significant role in enabling comparable, reliable, trustworthy sustainability reporting as well as its assurance."

State of Play in the US

Ninety-nine percent of U.S. companies in the study reported on sustainability in 2022, and 88% obtained some assurance — up from 71% in 2019. Ninety-three percent featured sustainability information in a stand-alone report, down slightly from 95% last year but well above the global rate of 30%.

U.S. companies ranked next to last among the 22 jurisdictions in the study in terms of the percentage that used a CPA for its assurance of sustainability information — but did make notable progress. Twenty-three percent used an audit firm in 2022, up from 11% in 2019.

The average lag time in 2022 for U.S. companies between the signature date of a sustainability assurance report and a financial statement audit was 118 days. The global average was about a month and a half — including just nine days in the U.K., where regulations effective in 2022 require climate-related disclosures in annual reports.

"It's purely a voluntary environment now," Beers said, "but there are big changes coming that we expect will create great opportunities, especially for young finance, accounting, and audit professionals interested in the space."

More global perspective

Among the 98% of companies reporting some sustainability disclosures in 2022, 97% disclosed data in all four categories covered in the study — greenhouse gas emissions (GHG); other environmental; social; and governance. In two years, that number has risen from 89%.

While the percentage of companies getting some level of assurance was 69% across the board, 98% of companies reporting on GHG obtained assurance.

Among companies using an audit firm to perform a sustainability-related engagement, 73% used their financial statement auditor.

"When companies use accounting firms for sustainability assurance, they're more likely to choose the same firm they use to audit their financial statements," Sue Coffey, CPA, CGMA, AICPA & CIMA's CEO–Public Accounting, said in a news release. "Because the level of confidence with and reliability on sustainability disclosure should be the same as financial information, we expect more companies will recognize that accounting firms are best suited for this critical work."

[Journal of Accountancy]


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