- Today, the International Auditing and Assurance Standards Board (IAASB) proposed a new standard for improving the credibility and reliability of sustainability assurance engagements: the ISSA 5000 General Requirements for Sustainability Assurance Engagements.
- The standard is set to be finalized and implemented before the end of 2024, so that it can assist the first round of reporting under the International Sustainability Standards Board (ISSB)’s new standards.
- It aims to promote confidence in sustainability reporting by bringing the levels of quality and consistency used for financial audits to sustainability assurances. One of the hallmarks of its design is its broad utility: it is structured to apply across sustainability topics and will be ‘profession agnostic’.
- Countries considering the use of ISSB standards could likely be early adopters of the assurance standard, including Canada, the UK, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa.
Story
Background
The IAASB develops auditing assurance related standards and guidance in the public interest. It works closely with the International Ethics Standards Board for Accountants (IESBA) that promulgates ethics standards (including independence).
As a step towards ultimately bringing sustainability reporting and financial reporting together, the International Organization of Securities Commissions (IOSCO) and other international authorities spurred the standards’ development — understanding the critical role that credible, consistent assurances can play in successful implementation of the new ISSB standards.
A hallmark standard
The IAASB 5000 is designed to serve as an over-arching standard for the entirety of sustainability assurance engagement. It will also provide a platform for additional guidance on specific areas of sustainability engagement that the IAASB has committed to consider as part of its activities over time. Its profession agnostic approach may also help with take-up, even though jurisdictions are considering whether assurances must be provided by professional accountants.
Next steps
IOSCO will review the final standard later this year in much the same way as it reviewed, and ultimately endorsed, the recent ISSB sustainability and climate disclosure standards. IOSCO will assess whether the standard is sufficiently robust to support assurance engagements that meet investors’ need for reliable information. IOSCO members would then take up how they might adopt, apply, or otherwise be informed by IAASB 5000. The new standards build upon prior work, including assurance engagements on Greenhouse Gas Statements.
Some jurisdictions have already made certain provisions for sustainability assurances. The EU’s Corporate Sustainability Reporting Directive (CSRD) requires companies to seek limited assurance of sustainability reporting. The assurance provider report is to include (1) a description of the process used to reach a conclusion on compliance with sustainability reporting standards, (2) required electronic tagging, and (3) specific disclosures required under certain other EU legislation. In addition, the European Commission will determine by 1st October 2028 whether it is feasible to move from limited to reasonable assurance for sustainability disclosures.
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Jurei Yada, Programme Lead, EU Sustainable Finance at E3G said:
“The entire sustainability reporting infrastructure is changing. The IAASB’s proposed assurance standard can have a multiplier effect on the use of the new ISSB and ESRS disclosure standards. Improved stakeholder confidence in the credibility of disclosures can also accelerate the uptake of transition plans.”
Elizabeth Jacobs, Senior Specialist, Sustainable Finance at E3G said:
“The IAASB’s standard cuts a path for improving trust in sustainability disclosures. This opportunity comes at an interesting time for the industry, as stakeholder confidence in assurance, as well as financial audit disclosures, can hugely impact success in the transition to a net zero economy. Let’s hope the IAASB’s work prompts everyone to lift their game.”
Available for comment
Jurei Yada (EN, FR, PL, JP), Programme Leader, EU Sustainable Finance at E3G
m: +32 (0)4 92 11 38 68; jurei.yada@e3g.org (EU time zone enquiries only)
Elizabeth Jacobs (EN) Senior Specialist, US Sustainable Finance at E3G
m: 202 921 8187; elizabeth.jacobs@e3g.org (EST time zone enquiries only)
Notes to Editors
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