Creating an ‘Auditable’ CSR Reporting Framework

Lars-Olle Larsson, a leading practitioner in the field of CSR reporting and Chairman of the FEE Sustainability Assurance Group, identifies assurance as key to the future development of CSR reporting, outlining the steps which need to be taken if CSR reporting is to attain the same level of credibility as financial reporting.

All sectors of society have a role to play in building a future in which global resources are protected, and prosperity and health are within the reach of everyone. The World Summit on Sustainable Development, held in 2002 in Johannesburg, South Africa afforded an opportunity for representatives of governments, NGOs, business and industry, trade unions, and other sectors of society to take stock and to direct future action toward meeting important challenges.

Strengthening the credibility of reporting is essential if stakeholders are to derive the maximum benefit from it. The last few years have witnessed substantial growth in the number of companies reporting on sustainability performance and there has been considerable improvement in the information provided to stakeholders.

The pace of change shows no sign of diminishing. It is important that reporting continues to develop, as a number of steps remain to be taken. That is why on the 9 June 2004, in Brussels, the European Federation of Accountants, (FEE), launched a publication entitled FEE Call for Action: Assurance for Sustainability.

The aim of the publication is to highlight the actions required if sustainability reporting is to become as established as financial reporting is now. In the long-term ideal future assured corporate reports would allow stakeholders to assess with confidence the extent to which private corporations and public sector organisations actually contribute to the evolution of equitable and sustainable communities and societies. Implicit in this is the use of widely accepted reporting criteria, a trustworthy assurance profession and effective standards for assurance work.

When launching the paper, I emphasised the importance of independent assurance: credible assurance is the key to increasing confidence in CSR reporting in the eyes of the world’s capital markets.

Companies, other stakeholders and indeed society as a whole benefit from enhanced sustainability reporting. However, if reporting on economic, social and environmental performance is to attain the same level of recognition as financial reporting, action is required from a range of stakeholders in the CSR debate.

The accountancy profession is acknowledged for its reporting and assurance expertise. In its latest paper FEE, the representative organisation for the accountancy profession in Europe, identifies a number of actions that need to be taken by corporations, standard setters, assurance providers, sustainability indexes and NGOs. The key target should be to successfully develop an ‘auditable’ Corporate Social Responsibility (CSR) reporting framework. I believe that continuous action over the next few years is necessary so that progress can continue to be made towards the ideal long-term future for CSR.

Corporations & Assurers

Private corporations and public sector organisations should seek independent assurance on their CSR reports. FEE calls on reporters and assurers to work co-operatively to provide users with a clear understanding of assurance in the context of sustainability reporting.

Reporting companies may disclose information that conveys implicit assurance, for example, the involvement of an internal audit function, or ISO certification of management systems. To avoid misunderstanding by the users of sustainability reports. FEE is calling on reporters and, where appropriate, independent assurers, to improve disclosure so as to provide users with a clearer understanding of the extent to which they may derive assurance. Reporters and assurers need to make sufficient disclosures about independence, to allow stakeholders assess the degree of independence of the assurance provider and hence the impact that may have on the assurance communicated.

Standard Setters

GRI (the Global Reporting Initiative) needs to take a stand on assurance of GRI reports – the GRI standards need clear principled-based criteria if they are to be ‘auditable’. The majority of companies that prepare a comprehensive sustainability report use the GRI Guidelines to some extent, at least as the most commonly used source of reference material. Rightly, GRI does not see itself as a standard setter for assurance. However, GRI should continue to recognise the importance of assurance and to assist standard setters for assurance. Proper consideration of assurance issues is essential when determining the form and content of the GRI Guidelines. The nature of indicators and other disclosures must not preclude assurance. Furthermore, FEE calls for GRI to encourage reporters to improve disclosure relating to internal assurance (such as for example the possession of ISO certificates) and its relationship with external assurance.

Reporting corporations necessarily adopt an incremental approach to reporting. Assurers need to be adaptable so that some assurance can be available to stakeholders in circumstances where a company is not yet fully compliant with generally accepted reporting standards. FEE calls on standard setters for assurance to recognise that incremental reporting is acceptable and that there is, therefore, a need for assurance standards to be applicable in such circumstances.

Standard setters need to engage more actively with those who are affected by their standards. The simple issue of proposals ‘for comment’, even if published on the Internet, is not sufficient. We note that, in contrast, the approach of the GRI involves both geographically balanced meetings as well as Web-based interaction. We call on all standard setters for assurance on sustainability to adopt a more proactive approach to stakeholder engagement so as to achieve higher participation in the development of standards.

Sustainability Indexes
Sustainability Indexes (e.g. FTSE4GOOD; Dow Jones Sustainability Index), registers for ‘ethical investment’ and codes for investors to steer their investment decisions along socially responsible investment lines, provide strong incentives for companies to adopt best practice reporting of sustainability issues. Those responsible for these indexes, registers and codes should give due weight to the presence and nature of assurance when drawing up their criteria, such as for inclusion or rating.


FEE calls on NGOs and other stakeholder organisations to increase their and their members’ awareness of the issue of assurance and to engage with standard setters to ensure that assurance standards are responsive to their needs.


The existence of a wide range of stakeholders and the emerging nature of sustainability reporting and assurance give rise to a risk that reporters and assurers may face litigation from many parties. As the development of reporting and assurance may be restricted by this risk, there is a public policy issue as to the extent to which liability to third parties could or should be restricted. FEE calls on legislators, standard setters and other affected parties to develop an understanding of the liability issues and to take account of them when acting.


Increasingly, annual reports containing financial statements include sustainability information and auditors are also involved in assurance engagements on corporate sustainability reports. It is established practice for auditors to give an opinion that conveys reasonable assurance that financial statements give a true and fair view in accordance with an identified financial reporting framework. Capital markets have yet to place, however, the same level of emphasis on sustainability reporting with independent assurance.

In FEE’s vision of a sustainable future, sustainability reporting is as established as financial reporting is now. In this scenario, corporate reports would allow stakeholders to assess with confidence the performance of private corporations and public sector organisations as they seek to play their part in the evolution of equitable and sustainable communities and societies. Appropriate action is needed if this vision is to become a reality.

Implicit in this future is the use of widely accepted reporting criteria, a trustworthy assurance profession and effective procedural and quality control standards for assurance work. There remain many challenges of a business and technical nature to be overcome. Through issuing the ‘call for action’ FEE aims to facilitate progress to ensure that those challenges are overcome sooner rather than later.

Mr. Lars-Olle Larsson is Chairman of the FEE Sustainability Assurance Group.

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