An ESG reporting strategy that encompasses sustainability data has several stages and involves many decisions as your company collects, manages and ultimately reports this information. Reporting should be investor-grade — credible and well-supported so that investors and other stakeholders can rely on it when making decisions. While this process should be an integral part of your strategy, it’s a move many companies are thinking about for the first time.
As you contemplate this path forward, consider the benefits that assurance over ESG data provides. Management and boards may gain an independent perspective on their ESG reporting. Investors and other stakeholders (including within the value chain) may get a view of your company’s longer term value creation strategy and insight into the reliability of management’s assertions, data and disclosures.
An assurance engagement, performed by a CPA firm, can also enhance the reliability of company reported ESG data. In PwC’s 2022 Global Investor Survey, 87% of respondents told us they believe corporate reporting contains unsupported sustainability claims. But many of those respondents also said they would have greater confidence in the reporting if there was an independent reasonable (75%) or limited (54%) assurance report. Working with an independent assurance provider to assure ESG data can build trust with key stakeholders at a time when there is skepticism about the thoroughness and accuracy of sustainability disclosures.
By today’s standards, companies can, and are, voluntarily reporting ESG data — and that’s a good first step. Transparency is the key to building trust in the marketplace. Companies in the early stages of ESG reporting may be focusing on one or two key metrics while developing a plan to build a more comprehensive reporting process. That’s OK. Reporting will improve over time as enhancements to the process are made.
But companies are coming under regulatory and stakeholder pressure to provide expanded sustainability disclosures and to have their reporting assured by an independent auditor. Many new or proposed global sustainability regulations — including forthcoming SEC climate disclosure rules — may eventually require independent assurance of certain ESG data, such as Scope 1 and Scope 2 greenhouse gas emissions. These regulations may require companies to move from limited to reasonable assurance over time, so now’s the time to start thinking about sustainability assurance.
While companies are familiar with the auditing process for their financial statements, assurance over ESG information may be a relatively new endeavor. That raises the question, who should do the work?
When evaluating candidate firms, your company should consider criteria such as:
Companies should also consult their market’s regulatory requirements that assurance providers must meet.
While it may seem like this decision would come toward the end of your data reporting strategy, there are benefits to involving the firm you select into every stage of the process and well in advance of public facing reporting. Using an existing service provider helps support companies that are often working to streamline year-end reporting processes and reduce the number of third parties involved.