The growing role of audit in ESG information integrity and assurance Accountants and auditors have an expanding role to play in determining the integrity of their company’s or their clients’ disclosure of ESG topics. Environmental, social, and governance ESG reporting is here to stay — backed by the explosive growth in ESG investment products as well as broader stakeholder interest in ESG performance. In turn, corporations are being challenged to produce reliable, transparent ESG information that meets the needs of critical stakeholders such as investors, customers, and employees. “From a corporate reporting perspective, this is the most consequential challenge facing the clients we work with,” says Marjorie Whittaker, Managing Director of SEC Regulatory Matters & ESG Sustainability Solutions at Grant Thornton. In the last two months, an increased level of voluntary and required disclosure by companies around ESG initiatives and priorities across the world has transpired. However, navigating what definitions, frameworks, standards, and methodologies companies should use to outline their ESG strategy and reporting components remains up to the organization itself. Because of these self-selected requirements on what information is disclosed, this lack of transparency increases the importance of an independent audit function internally and the use of an external third-party for ESG assurance. Like audits of financial statements and the internal control over financial reporting, third-party assurance enhances the reliability of ESG information and builds confidence among stakeholders. To do this, auditors conduct attestation engagements to provide assurance that ESG information is presented in accordance with certain criteria. “We help management and the board feel confident in the reported ESG information, which is important given the increased focus and attention from external stakeholders,” explains Whittaker. Because companies are at various stages of their sustainability journeys, the breadth of ESG assurance engagements is vast. As companies prepare for external assurance, they often begin with an assurance readiness assessment. This service helps clients understand what preparation they may need to undertake to be ready for external assurance.
While most companies that obtain external assurance today start with limited assurance, over time the market may transition to “reasonable assurance,” which is like traditional audits of public companies’ financial statements. Financial statement auditing is a well-recognized practice performed by highly competent professionals adhering to rigorous standards. Long may that ‘ethos’ continue. The rise of the importance of nonfinancial information — including that on ESG topics — on a company’s operations spurred the inclusion of sustainability reporting in company reports. Contact Us:
John Martin
Founder and Chief Executive Officer
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