As the world faces pressing environmental and social challenges, the demand for reliable and transparent sustainability reporting has grown significantly, and increasingly shifted from voluntary to mandatory. There is a clear need for trusted global sustainability reporting and sustainability assurance standards to provide consistent and comparable reporting coupled with robust assurance.
To meet this global need for consistent sustainability assurance standards, the International Auditing and Assurance Standards Board (IAASB) has developed proposed International Standard on Sustainability Assurance 5000 (ISSA 5000), General Requirements for Sustainability Assurance Engagements. ISSA 5000 was developed in close coordination with key global and regional standard-setting bodies responsible for sustainability reporting. The groundbreaking standard aims to set a global baseline for sustainability assurance by enhancing the quality and trustworthiness of sustainability information, thereby fostering greater accountability and transparency. The proposed standard will be open for public consultation until December 1, 2023.
Among its notable features, ISSA 5000 is:
- Framework neutral, allowing it to be used irrespective of the reporting framework, standard, or criteria employed, which provides for flexibility and ease of implementation across different contexts.
- Scalable, meaning it can be applied to assurance on a single metric for a small entity, the entire sustainability information reported by a group, or even sustainability information throughout an entity's value chain.
- Practitioner agnostic; assurance practitioners from any profession can use the standard, provided they comply with relevant ethical requirements and apply a system of quality management that is at least as rigorous as International Code of Ethics for Professional Accountants (including International Independence Standards), published by the International Ethics Standards Board for Accountants, and the IAASB’s suite of quality management standards. This inclusivity enables professionals from diverse professional backgrounds to participate in sustainability assurance engagements.
- Applies to limited and reasonable assurance engagements and clearly differentiates where the procedures conducted diverge.
- Understandable, clear, and concise, serving the needs of various stakeholders in the sustainability assurance ecosystem. The IAASB developed it using a collaborative approach and the expertise and insights of IAASB members, IAASB reference groups (including accountants and other professionals), and other key stakeholders.
To ensure a comprehensive and globally coordinated approach, the IAASB consulted with leading global regulatory and standard-setting organizations. These include the International Organization of Securities Commissions (IOSCO), the International Forum of Independent Audit Regulators (IFIAR), the Financial Stability Board (FSB), the International Ethics Standards Board for Accountants (IESBA), the International Sustainability Standards Board (ISSB), and the Global Reporting Initiative (GRI).
ISSA 5000 acknowledges the evolving reporting landscape and the need for flexibility in engagement scopes. With reporting requirements rapidly changing and growing in complexity, the standard addresses these challenges while building on the IAASB's existing approach to assurance. Notably, it does not reference any other IAASB auditing or assurance standards, allowing for the necessary adaptability and innovation required in sustainability assurance and supporting profession neutrality.
Elevating Sustainability Assurance
The proposed ISSA 5000 sets a global baseline for those who provide sustainability assurance services. It introduces key elements that strengthen the assurance process and promote reliable sustainability reporting.
- Competence and professional skepticism: ISSA 5000 emphasizes the need for assurance practitioners to possess the necessary expertise and competence in sustainability matters. It stresses the importance of professional skepticism, urging practitioners to question and critically evaluate the reliability and accuracy of sustainability information.
- Risk procedures and materiality: The standard highlights the significance of conducting thorough risk procedures and identifying material sustainability matters. By focusing on the most relevant issues, assurance practitioners can provide stakeholders with assurance on the areas that truly impact an organization's sustainability performance and disclosures.
- Assurance procedures: ISSA 5000 provides guidance on the planning, execution, and documentation of assurance procedures. It outlines the steps to obtain appropriate and sufficient evidence, ensuring that the conclusions reached are well-founded and reliable. The standard encourages assurance practitioners to employ a combination of testing, analytical procedures, and other suitable methods to assess the accuracy and completeness of sustainability information.
- Reporting and communication: ISSA 5000 stresses the importance of clear and transparent reporting. Assurance practitioners are required to provide stakeholders with a comprehensive assurance report, explaining the scope of the engagement, the procedures performed, any modifications to the report (such as material misstatements identified or the inability to obtain sufficient appropriate evidence), and the overall conclusion. This transparent communication enhances stakeholders' understanding and confidence in the sustainability information presented.
Benefits of ISSA 5000
When final and in use by assurance practitioners, ISSA 5000 will bring numerous benefits to organizations, assurance practitioners, and stakeholders.
- Enhanced credibility and trust: By subjecting their sustainability reports to independent assurance in accordance with ISSA 5000, organizations demonstrate their commitment to transparency and accountability. This, in turn, enhances the credibility and trustworthiness of their sustainability information, fostering stronger relationships with stakeholders.
- Informed decision making: Stakeholders, including investors, regulators, and the general public, can make more informed decisions when sustainability information is subject to robust assurance. The reliability and accuracy provided by ISSA 5000 enable stakeholders to assess an organization's sustainability performance and make choices aligned with their values and objectives.
- Global consistency: ISSA 5000 facilitates consistent application of sustainability assurance across organizations and jurisdictions. This global consistency ensures that stakeholders can compare and benchmark sustainability performance effectively, allowing for meaningful analysis and evaluation.
- Combat greenwashing: By addressing the risks of management bias and fraud throughout the standard, ISSA 5000 promotes reliable sustainability information and enables more informed decision making. This, in turn, combats greenwashing and contributes to increasing trust among market players.
- Continuous improvement: Through the assurance process required when applying ISSA 5000, organizations receive valuable feedback on the reliability of their sustainability reporting that will be a driver for improving their sustainability practices and disclosures. This facilitates a cycle of continuous improvement, where organizations refine their processes to support accurate and transparent sustainability reporting that will better inform their decision making and that of stakeholders, including strategies to contribute to a more sustainable future.
The proposed International Standard on Sustainability Assurance 5000 is a landmark for sustainability reporting and assurance and will play a pivotal role in elevating the quality and trustworthiness of sustainability reporting. By providing a robust framework for assurance practitioners, ISSA 5000 enables organizations to demonstrate their commitment to transparency and accountability while providing stakeholders with reliable information for decision making. With sustainability taking center stage in today's world, ISSA 5000 sets a global benchmark for sustainability assurance, driving positive change and promoting a more sustainable future for all.
Read the proposed standard and provide feedback on the IAASB website.