The emphasis on Sustainability is growing rapidly, changing the landscape for Business, it has now become a Strategic necessity; Investors, Consumers, Regulators and Communities have come to expect that all organisation’s have Reliable Environmental, Social, and Governance (ESG) performance. However, Reporting on Sustainability isn’t Enough - without Third-Party Validation, these types of Reports can be viewed as Unsupported Statements, and in many instances, as Greenwashing. This makes ESG Assurance even more Critical; Sustrack provides leaders in ESG Assurance - particularly through Reasonable Assurance - to increase the Credibility, Trust and Long Term Value of your Organisation.
What is the Importance of ESG Assurance?
ESG Assurance is the independent verification of reports by an organization regarding its Environmental, Social and Governance (ESG) efforts. ESG Assurance provides assurance to all Stakeholders that the information reported regarding the sustainability of a Company is accurate, reliable, and in compliance with accepted standards. The process of ESG Assurance allows the transition of sustainability reporting from an opportunity to market to being a credible asset that a company can use in its day-to-day operations and provide comfort to its Stakeholders.
As ESG Standards (such as GRI, ISSB, and CSRD) are gaining momentum across different countries and organizations, ESG Assurance is quickly moving to become more than a recommendation but rather a requirement for doing business with Stakeholders. Additionally, a reported ESG from an organization with an ESG Assurance report has revealed to the stakeholders that the organization is acting in good faith, has a proven track record of being transparent and accountable, and that its ESG efforts align with proven sustainability concepts.
Selecting the Correct Level of Assurance: Limited vs. Reasonable Assurance
The ability to tailor an assurance engagement to meet the needs of your business is one of the key advantages of working with Sustrack. In general, there are two types of assurance engagements:
Limited Assurance. A limited assurance engagement provides a reasonable level of assurance based on analytical review; however, it does not involve as much detailed testing and is not as extensive as a reasonable assurance engagement. In a limited assurance engagement, the assurance provider typically performs a plausibility review, verification of certain procedures and documents. A limited assurance statement will usually state, "To our knowledge, there was nothing that came to our attention that suggests that the information is materially misstated." The cost associated with a limited assurance engagement is significantly less than that of a reasonable assurance engagement and is often suitable for many companies.
Reasonable Assurance. Reasonable assurance is the highest level of assurance presently available for nonwww-financial data, providing users with high levels of confidence in the accuracy of reported data. The level of detail required to obtain reasonable assurance leads to more extensive testing, more substantive procedures and a higher level of data verification. The assurance statement for reasonable assurance will typically read, "In our opinion, the data fairly represents all relevant information." By giving users a high level of confidence, reasonable assurance enables businesses to obtain additional funding and investment capital from potential investors.
Of the two levels of assurance, the reasonable assurance level is often considered the gold standard and may be the best fit for organizations with well-established sustainability programs, the most stringently regulated industries, or those that want to compete for responsible investment capital.
Deep Dive: What Reasonable Assurance Entails
- Detailed Verification of all ESG Data (collection of data from multiple departments and various information systems). Sustrack performs substantive testing and sampling to ensure its accuracy and completeness;
- Evaluation of Internal Controls (evaluation of ESG data generation and management systems and processes, and not just an evaluation of the data itself). This lets Assurance professionals identify weaknesses in these systems and processes, and build on them to improve ESG data reporting;
- Assessment Against Global Standards (comparison of companies' data against Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), International Accounting Standards Board (IASB), and other reporting standards). There's a lot of variance in how companies present and disclose their data depending on where they are located, so there's a need to assess an ESG company's disclosures against internationally accepted practices.
- Audit Procedures (audit-style). Reasonable Assurance often involves performing documentation verification, obtaining third-party confirmations, and performing comprehensive cross-checking of ESG data.
With this level of assurance, stakeholders can have confidence that the ESG data they've received is consistent and has been properly vetted for material misstatements, which is critical for both investment decisions and complying with regulations.
Why Businesses are Seeking Reasonable Assurance More and More.
Corporations are seeking Reasonable Assurance from companies like Sustrack for three reasons:
- Building Stakeholder Confidence
As sustainability becomes an increasingly important metric for evaluating a corporation’s success, independent assurance provides a clear distinction between substantive sustainability efforts and those that are merely surface level. Reasonable Assurance shows a willingness to demonstrate authenticity and build stakeholder trust among investors, customers and regulators.
2.Providing Enhanced Regulatory Compliance
Many Countries are tightening regulations relating to ESG-reporting (Environmental, Social & Governance) on a global scale. Reasonable Assurance provides companies with a solid foundation on which to be compliant (and possibly demonstrate a higher-level of compliance than what may be required) in Geographies where regulations have or will be implemented such as the EU and India. An example of this is the EU’s CSRD (Corporate Sustainability Reporting Directive) and India's BRSR (Business Responsibility & Sustainability Reporting) legislation what will be mandatory in the near future.
3. Internal Process and Data Quality Enhancement
The process of assurance typically identifies areas for improvement regarding the collection and quality of data, internal controls, and how companies report their financial information and environmental, social and governance (ESG) information. By taking action to resolve the identified areas for improvement, businesses improve their business operations and provide a higher-quality basis for their ESG disclosures.
Medium level of importance.
- Reducing the Risk of Misstatement and Greenwashing
With increased scrutiny given to climate claims as well as the impact companies have on social issues, companies are at risk of experiencing damage to their reputation if their ESG disclosures are challenged. Reasonable Assurance reduces the likelihood of misstatements and allegations of greenwashing.
The philosophy of Sustrack is to engage with its corporate partners in an effort to create a sustainable business model through assurance.
Sustrack's assurance services are more than just a means of verification; they provide the entire supply chain with end-to-end service via their approach to assurance, from planning and scoping through the entire data collection process to the issuance of a Final Report. The transparency and accountability Sustrack brings to the assurance process are paramount, and they use a combination of best-practice methodologies and customized insights to ensure that all parties involved have a positive experience throughout the process. By ensuring that companies receive high-quality assurance reports, Sustrack is able to provide measurable value and differentiate itself as a leader in the market.
Final Thoughts: Add Value By Providing Your Customers With High-Quality Assurance
In an ever-evolving market that is increasingly focused on environmental sustainability, companies need to provide their customers with a high-quality assurance report that demonstrates the value of the company's commitment to protecting the environment, ensuring responsible sourcing and disposal, and meeting social and economic standards associated with doing business in today's economy. With an assurance report from a third-party expert such as Sustrack, companies will demonstrate to all stakeholders that their company is committed to doing business responsibly and creating long-term value for its shareholders and others who may want to invest or work with them.
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