Credible reporting

Lars-Olle Larsson, chairman of the FEE Sustainability Assurance Group, says assurance is key to the development of CSR reporting

Within the CSR community there is acceptance that reports provide the framework for dialogue between corporations and stakeholders. But how can stakeholders be sure that information in a CSR report is reliable?

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.

It is important that CSR reporting continues to develop, as a number of key steps remain to be taken. Which is why the European Federation of Accountants launched a publication entitled FEE Call for Action: Assurance for Sustainability.

Actions required

The publication highlights the actions required if
sustainability reporting is to become as established as financial reporting is today. Ideally, assured corporate reports would allow stakeholders to confidently assess the extent to which private corporations and public sector organisations 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.

Credible assurance is the key to increasing confidence in CSR reporting in the eyes of key stakeholders such as the world’s capital markets. Action is required from a range of stakeholders in the debate. Corporations, standard setters, assurance providers, sustainability indexes and NGOs need to work together to further develop CSR reporting.

The target should be to successfully develop an auditable CSR reporting framework. Continuous action over the next few years is necessary so that progress can continue to be made towards the ideal long-term future of CSR.

Private corporations and public sector organisations should seek independent assurance of their reports. Users need to have a clear understanding of the assurance being provided. Reporters and assurers need to make sufficient disclosures about independence, allowing stakeholders to assess the degree of independence of the assurance provider and hence the impact that may have on the assurance communicated.

Standard setters

Proper consideration of assurance issues is essential when determining the form and content of the Global Reporting Initiative Guidelines. The GRI needs clear principle-based criteria for its standards if they are to be auditable. It should continue to recognise the importance of assurance and to assist standard setters for assurance. The nature of indicators and other disclosures must not preclude assurance. Standard setters for assurance need to recognise that incremental reporting is acceptable and that there is, therefore, a need for assurance standards to be applicable in such circumstances.

Sustainability indexes such as FTSE4Good and the 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 sustainability reporting. Those responsible for them should give due weight to the presence and nature of assurance when drawing up their criteria, such as for inclusion or rating.

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

Vision for a sustainable future

Increasingly, annual reports containing financial statements include sustainability information. 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 a financial reporting framework. However, capital markets have yet to place the same level of emphasis on sustainability reporting with independent assurance.

Sustainability reporting must become as established as financial reporting. Implicit in this is the use of accepted reporting criteria, a trustworthy assurance profession and effective procedural and quality control standards for assurance work. However, there remain many challenges of a business and technical nature to be overcome.

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