The International Corporate Governance Network (ICGN) has issued guidance to investors on how to interpret sustainability reporting assurances, aiming to tackle “immature standards” and varying regulatory regimes. The ICGN said sustainability reporting was at an early stage in many companies and markets, raising the risk of misstatements due to fraud, errors or “over-optimism” from management. This means much of the information is not “ready for assurance”, it said. The new guidance distinguishes between higher level ‘reasonable assurance’, and less rigorous ‘limited assurance’. It also distinguishes between ‘unqualified conclusions’, which suggest sustainability reporting is reliable and wholly in line with regulations; and ‘modified conclusions’, which suggest error, disagreement, or lack of sufficient evidence. The report also provides guidance on the independence and expertise of assurance providers, transparency of their auditing, and connectivity with financial statements. In addition, the ICGN provided eight questions investors can ask company boards about their sustainability reporting and assurance processes. “We are in a transition period, where companies and assurance providers are building capacity, global standards are being adopted and must be implemented, and market participants are developing their understanding of sustainability assurance,” the report said, urging companies to “introduce robust governance and internal controls, and [ensure] external assurance is of high quality, regardless of who conducts it”. This is key to foster trust in corporate sustainability reporting, the ICGN said.
