The role of certified professional accountants in sustainability assurance
In recent years, environmental, social and governance (ESG) themed investment products and ESG-branded stock indexes have become increasingly prevalent. In Hong Kong alone, the assets under management of the 188 SFC-authorised ESG funds have reached US$151.7 billion in March 20231. At the same time, investors have become increasingly wary of potential greenwashing as ESG investments become more popular. Investors and other stakeholders have heightened expectations for entities to report credible and reliable sustainability information that helps them make informed decisions.
According to research by the International Federation of Accountants covering around 1,400 companies across the globe, 63.8%2 of companies that reported sustainability information provide some level of assurance on it in 2021, up from 50.8% in 20193. Certain jurisdictions, including the European Union4 and New Zealand5, have set timelines for mandatory assurance, while others, such as the United States6 and Australia7, have proposed mandatory assurance requirements for certain eligible companies. Further changes on the horizon include companies expanding the scope of their sustainability reporting as well as the scope and level of assurance, and companies entering into new businesses with parties that can provide relevant data and information.
Sustainability reporting requirements are advancing globally albeit at varying paces in different jurisdictions. Therefore, it is now more crucial than ever for business leaders to devise plans to train up staff across different corporate functions on how to prepare for the reporting requirements, budget for adequate manpower and other resources, engage with those charged with governance to ensure there is appropriate oversight on the reporting process, and discuss with the assurance providers on an appropriate assurance approach on the reported sustainability information (if any). A holistic approach will enable the reported sustainability information to meet prevailing market expectations and help maintain an organisation’s competitive edge.
