Key issues in sustainability assurance

The purpose of the latter is to enhance the status of reporting by the inclusion of an independent opinion, designed to increase the confidence of report users in the reliability of reported information and to demonstrate accountability to key stakeholder groups.

Additionally, it is anticipated that organizational benefits may arise from the assurance exercise in the form of improvements in internal information and reporting systems, resulting in better management of social and environmental performance. Despite the introduction in recent years of authoritative guidance for carrying out sustainability assurance engagements, which emanates from professional accounting bodies a stream of academic research has strongly questioned the efficacy of assurance in enhancing transparency and corporate accountability to key stakeholder groups.

The value of assurance statements to readers, and indeed companies themselves, has also been severely questioned in the reports of judging panels for the ACCA Sustainability Reporting Awards scheme issued in recent years.

The critiques referred to above have all been ‘desk-based’, that is, they have concentrated solely on published sustainability assurance statements.

The impetus for the present study lies in a belief that there is much scope for fieldwork-based research that seeks to explore in more depth the practicalities of the assurance process, together with corporate management and stakeholder perspectives on its major potentialities and problems.

To this end, the study features a series of semi-structured interviews held with senior corporate responsibility managers, together with further interviews held with representatives of three key stakeholder groups, namely investors, NGOs and the trade union movement.

The research had three main aims:

1. To investigate reasons for commissioning sustainability assurance; factors underpinning the choice of assurance provider; the scope and depth of assurance work desired, together with the level of managerial resource committed to the exercise; and perceptions of the potential benefits accruing

2.To elicit views about the appropriate level of stakeholder inclusion in the assurance process

3. To examine stakeholder perceptions to the reporting process by the provision of assurance and the degree of inclusion they experience; and elicit suggestions for developing further the assurance process in order to promote a greater degree of stakeholder accountability.

Key Findings

The main conclusion reached from analysis of the interview data is that while there is some evidence of stakeholder interest, notably on the part of NGOs, the real driving force behind assurance is internal. Nonetheless, there are substantial organisational constraints, largely driven by cost considerations, on its further development.

For corporate respondents, the overriding concern was that assurance must provide value for money. Key benefits arising from the exercise were generally considered to be improvements in information and reporting systems, together with increased confidence in the integrity and reliability of corporate data released into the public domain.

Corporate respondents generally expressed an awareness of stakeholder detachment from the assurance process, acknowledging, for example, that stakeholders do not read assurance statements, and expressed a desire to bring about their more active involvement. Formalizing stakeholder involvement by means of some form of stakeholder panel appeared to present the most attractive option.

Attention was, however, drawn to the practical difficulties inherent in arriving at a representative panel, while some favoured using the services of external experts, either in the form of a panel or to provide individual comment in the report, rather than opting for direct stakeholder representation. There was a clear dichotomy in the views of stakeholder interviewees about the value of assurance to the reporting process.

Interviewees from the investment community adopted an overriding concern with issues of data integrity and increased synergy with financial reporting and audit practice, rather than with the issue of stakeholder inclusion.

NGO representatives were broadly supportive of assurance, although aware of a number of limitations, and generally expressed a desire for more involvement in the assurance process. In principle they favoured promoting engagement through the participation of civil society groups on stakeholder panels.

There was substantial disagreement between corporate and stakeholder interviewees on the question of whether assurance statements should be addressed to stakeholders. The former argued that as the company commissions the assurance it is only natural that the statement is addressed to the same constituency. For their part, stakeholder interviewees took the view that as sustainability reporting is directed towards society at large, and not restricted to company management, it should follow that any accompanying assurance statement also be addressed to society.

The final issue referred to above, which might be considered trivial on one level, actually raises fundamental questions about the link between reporting and corporate governance systems.

For two stakeholder interviewees (one NGO representative and the trade union official), corporate governance reform was regarded as an essential part of a move towards a situation where companies and their associated (regulated) reporting and assurance practices can serve the interests of society rather than the self-interest of the corporate lobby.

(ACCA)