Lack of Sustainability Report’s content credibility and the rise of external assurance

external assurance

Since the 1990s, the number of companies disclosing information on their environmental, social and governance (ESG) performance has grown significantly. According to The State of Play in Sustainability Reporting in the European Union, Sustainability Reporting is growing in numbers (around 4,000 reports are registered globally and 2,000 in Europe). The KPMG Survey of Corporate Responsibility Reporting 2013 indicates that among the largest 250 companies listed in the Fortune Global 500 ranking (G250), 93% issue sustainability reports.

Today, we can observe companies issuing such reports as a part of their annual reports or as stand-alone CSR reports. Despite the increase in the number of CSR reports their quality is different. The reports do not always provide complete data that reader’s desire, which in turn intensifies the problem with the evaluation and comparison of the organization’s results, achieved in this scope.

Instances of non-credible communication, the misuse of CSR for marketing exercises, and corporate scandals with large environmental and social impact have sparked skepticism and mistrust toward CSR reports. As a result, companies and stakeholders are trapped in the “credibility gap” of CSR reporting, which is harmful for both: stakeholders cannot satisfy their information needs regarding CSR and companies can hardly convey their CSR activities in a credible manner?

The issue of credibility in CSR communication has given rise to external verification, stakeholder engagement and integrated reporting. The Global Reporting Initiative (GRI) recognizes the importance of the external assurance for sustainability reports since 2002. In its G3/G3.1/G4 Guidelines, GRI recommends the use of external assurance for sustainability reports in addition to any internal support, such as internal audit team involvement. A report conducted by the Centre for Sustainability and Excellence indicates that the GRI Reporting Guidelines (G3,G3.1,G4) were the most frequently used by companies (66%) in 2014. The report also highlights some non-GRI reporting guidelines and standards, like OECD, UNGC, CDP, IFC and ISO 26000.

The Global Reporting Initiative (GRI) reflects in its Sustainability Disclosure Database the following three, generally accepted types of external assurance providers:

  • Accounting firms
  • Engineering firms
  • Small consultancies/boutique firms

According to AICPA report, assuring sustainability reporting can in turn result in key competitive benefits such as:

  • Increased stakeholder confidence in the information
  • Improved decision-making by the organization
  • Higher rankings among leading sustainability raters and rankers like CDP (formerly, the Carbon Disclosure Project) and Dow Jones Sustainability Indices (DJSI)
  • Enhanced brand reputation
  • Improved ability to attract and retain employees
  • Stronger performance and efficiencies
  • Cost savings
  • Improved risk management

Instituting a solid and credible CSR reporting process takes a tremendous amount of effort. Yet it is effort that is well worth the time and resources involved because of the payoff it produces in the form of risk reduction and enhanced business value.

To learn all about successful sustainability reporting, GRI Guidelines,  current global and local legislationrecent trends and external assurance, join now the Certified Sustainability Practitioner Program, Advanced Edition 2016 in Houston, February 23-24

Learn more and book online here

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