Proposals unveiled for first global standard on green claims assurances

The International Auditing and Assurance Standards Board (IAASB) opened a consultation on the framework this week, in response to concerns that corporate sustainability information disclosed through channels like annual reports is not always reliable or detailed.

This concern is particularly pronounced among investors, who want a clearer overview of the environmental and social risks and opportunities of investing in specific companies or projects.

The IAASB’s proposed general requirements could apply globally. It will guide third-party auditors on how to spot and weed out greenwashing, and provide corporates with information on the audit processes they should be pursuing.

In markets including the EU, corporates will soon be required to have their ESG disclosures externally audited in a similar way to how they already gain assurance on their financial statements. As this process becomes more commonplace, the new standard aims to ensure that auditors do not let misleading or undetailed disclosures slip through the net.

“Corporate reporting, whether financial or sustainability focused, is more trusted when it receives external and independent assurance based upon globally accepted standards independently developed in the public interest,” said IAASB chairman Tom Siedenstein.

“Our proposed ISSA 5000 is a crucial step in enhancing confidence and trust.”

Ending the patchwork of frameworks

To avoid over-burdening corporates with conflicting disclosure requirements, the proposed standard will be applicable to reporting made in alignment with existing frameworks.

The IAASB is working with the International Sustainability Standards Board (ISSB), the Global Reporting Initiative (GRI) and the International Organisation of Securities Commissions (IOSCO) on interoperability. It is also in talks with the EU to ensure interoperability with the bloc’s new Corporate Sustainability Reporting Directive and European Sustainability Reporting Standards.

Beyond these top-line details, the design of the framework will largely be determined through an extensive consultation. Written responses will be accepted and, alongside this, the IAASB will convene a series of four roundtables and other virtual and in-person events beginning in September.

The news from the IAASB comes shortly after the ISSB, the world’s first global sustainability standards body, published its first two standards. Its initial focus is on climate, with the new standards covering impact and risk disclosures across the fields of mitigation and adaptation.

Several nations had pledged to support the ISSB’s work in general. This week, the UK Government confirmed it will support the first two standards specifically.

This builds on the UK’s move to mandate climate risk reporting from some large businesses last year.

The UK’s Department for Business and Trade will embed the ISSB’s standards within its forthcoming UK Sustainability Disclosure Standards, which it hopes to launch by this time next year.

“UK-endorsed standards will only divert from the global baseline if absolutely necessary for UK-specific matters,” the Department has stated.

Responding to this news, the Institute of Chartered Accountants’ chief executive J Bruce Cartwright called it “an important step in aligning the reporting of sustainability-related risks and opportunities by UK entities and therefore facilitating global comparability”.

Cartwright added: “The ISSB standards lay a strong foundation for international reporting, but we continue to propose building on this foundation to include disclosures of an organisation’s impacts through also adopting the standards of the GRI Standards. A report encompassing both the “impact of” and “impact to” an entity of environmental and social factors would meet even more investor needs, as well as the needs of other stakeholders.”

“While details around the actual ISSB standards and their implementation are being formed, we emphasise the need for the UK Government to mandate sustainability reporting, given sustainability is such a pressing issue for the planet.”