Sustainability regulatory frameworks are constantly changing to match increasingly complicated disclosure norms and ongoing concerns over greenwashing.
To address these issues, the International Auditing and Assurance Standards Board (IAASB) has issued a proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. This coincides with a global move towards more detailed sustainability and climate-related reporting, driven by the emergence of new sustainability disclosure levels and regulatory requirements.
ISSA 5000 is meant to be a comprehensive sustainability assurance framework designed to enhance trust among regulators, investors and other stakeholders on corporate sustainability information. The IAASB developed the standard to be overarching and suitable for both limited and reasonable assurance engagements on sustainability information prepared under any suitable framework.
‘The standard can be applied to whatever framework a company adopts to report on sustainability’
‘This global baseline that we have developed will allow for a future suite of standards which can address specific types of sustainability assurance engagements on specific topics, whether that be human rights or biodiversity, or aspects of topics such as processes, systems or controls,’ said Claire Grayston, principal, non-financial information assurance, at the IAASB, during the ACCA Technical Symposium 2023, held in Singapore in September.
The standard is designed to be profession-agnostic and will be able to be used by both professional accountants and non-professional accountant assurance practitioners in sustainability assurance engagements. ‘We have written the standard to be framework-neutral so that it can be applied to whatever framework a company adopts to report on sustainability,’ Grayston said.
Beyond that, the standard is also suitable for assurance on all sustainability topics, from waste to occupational health and safety and everything in between. It covers information disclosed about those topics, such as risks and opportunities and related key performance indicators.
It is also suitable for any reporting mechanism, ‘whether that be integrated reporting, sustainability information in an annual report or a standalone sustainability report’, Grayston added.
The proposed ISSA 5000 puts more emphasis on establishing principles rather than on the mechanics of particular procedures. This makes it broad enough to be useful for a wide range of stakeholders and sufficiently principals-based so that assurance practitioners can use their professional judgment to plan and execute assurance engagements suitable in the circumstances.
‘Where relevant, we looked at international auditing standards and adapted material’
The standard is underpinned by requirements to apply relevant ethical requirements and quality management at the firm level to provide robust independent assurance engagements. ‘The standard also adopts quality management for the engagement, which is equivalent to the auditing standard ISA 220 for managing the quality of an audit, including direction, supervision and review of the engagement team and their work,’ said Grayston.
Proposed ISSA 5000 supports consistent external assurance on sustainability information and aims to reduce fragmentation by offering a global baseline for sustainability assurance. While it is stand-alone, it is based on material from existing standards, including the International Standards on Assurance Engagements 3000 and 3410.
‘After considering existing standards on assurance engagements, we drew on the extended external reporting guidance that we issued in 2021 and then, where relevant, we looked at international auditing standards and adapted material from those for sustainability assurance,’ said Grayston.
Focus on outcomes
The IAASB says the standard puts the focus on outcomes rather than procedures to support its scalability and broad applicability, thereby limiting possible exceptions to the requirements.
Through outreach with stakeholders, the board identified six priority areas, such as the suitability of reporting criteria, and the scope of the sustainability information reported, both of which are central elements for a precondition for accepting the engagement, says Grayston.
Other priority areas included obtaining and evaluating evidence, internal control systems and materiality.
IAASB’s medium-term progress is aimed at developing global standards for assurance of sustainability and is included as a key strategic objective in its 2024-2027 plan.
‘We are coordinating closely with the ethics board in aligning the definitions that we use with the project they have in place at the moment to develop requirements within their code,’ said Grayston.
The IAASB has begun a series of global roundtables to ensure broad stakeholder input. Comments on the proposals are invited until 1 December 2023, with the final standard due to be issued before the end of 2024.