In the spring of last year, a special ICAEW event introduced members to two new global assurance standards designed to create a comprehensive package for sustainability disclosure. Developed by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA), those standards are now set to take effect on 15 December this year.

The most prominent is the IAASB’s International Standard on Sustainability Assurance (ISSA) 5000, which the Financial Reporting Council has already adopted for voluntary application in the UK. In parallel are the IESBA’s International Ethics Standards for Sustainability Assurance (IESSA), which address critical risks to the quality and integrity of disclosure in this space.

In an arena typified by a jumble of different reporting frameworks – some voluntary, some mandatory – ISSA 5000 and IESSA promise to make sustainability reporting more transparent and consistent. And while 15 December may appear far off, the IAASB and IESBA are both encouraging entities to align with the standards sooner rather than later.

For accounting firms, it is important to evaluate how ready they are to provide high-quality sustainability assurance services. Client companies will be eager to ensure that robust sustainability information, processes and controls underpin their business models and comply with relevant reporting requirements.

A broader range of information

With that in mind, ICAEW has launched a dedicated Sustainability Assurance Certificate – a course that will enable accountants to build the relevant know-how.

To explore the factors that determine a firm’s readiness for sustainability assurance work, ICAEW Insights spoke to Rosie Dunscombe FCA, Founder at Blue Crane Consulting, and author of the new course.

Dunscombe points out that the ultimate aim of sustainability assurance – to give users confidence in the disclosed information – is exactly the same as that of financial assurance.

“However, sustainability assurance covers a much broader range of information, linked to matters such as climate, labour practices, biodiversity, and the related governance and metrics and targets of those risks and opportunities,” she notes. 

That may be expressed either financially, or in quantitative or qualitative terms, she explains. “There may be some items that you express in purely financial terms. But you may also need to disclose information related to tonnes of CO2 emissions, litres of water and/or numbers of health and safety incidents, for example. Plus, you may need to include more descriptive material on factors such as the condition and quality of natural habitats that your business operations impact, or depend upon.”

In tandem, Dunscombe says, the depth of assurance can vary. While reasonable assurance in a sustainability context goes to the same level of rigorous detail as it does in finance, much current work in the field is based on limited assurance, which may take more of a top-line approach. Also, while financial disclosure frameworks are time-honoured bastions of corporate reporting, with extensive geographical and sectoral coverage, their sustainability counterparts are much newer, and far more patchwork.

Depending on the nature of its business, an entity may report under voluntary or mandatory frameworks, its own internally developed standard – or even a hybrid of all three.

Redirecting core capabilities

Turning to which sorts of skills accountants must acquire to perform sustainability assurance effectively, Dunscombe is eager to stress – “in an encouraging way” – that it is more a question of a knowledge gap.

“The skills that accountants already have are transferrable,” she says. “If we look at identification of opportunity and risk, for example, that’s a core skill that you can use to assess sustainability matters that could reasonably be expected to affect a company’s prospects. So, it’s really about knowing how to apply core skills – such as planning, strategy and professional scepticism – in a different space.”

For Dunscombe, that links directly to how an accounting firm should assess whether its team has the required grasp of that knowledge to take on sustainability assurance assignments on a regular basis.

“One question we pose in the course is, ‘Does an engagement leader need to be a sustainability subject-matter expert?’” she says. “Our view is, no – you must be sufficiently competent to lead the team, and also to evaluate it. So, do the people on that team have the expertise to understand the specific assurance and reporting requirements that clients are working to? With ISSA 5000 coming in, that knowledge is an absolute must-have.”

Engagement leaders are ultimately responsible for how clients perceive the quality of your engagements, she says. Therefore, it’s not just about having enough people numerically to take on the work. “It’s about having the correct mix of capabilities – plus understanding your clients’ needs and which areas are particularly material to them, based on the framework they’re reporting against.”

Logical structure

To help accountants develop that knowledge, each module of the course focuses on a key stage of the sustainability assurance engagement lifecycle.

For example, module 1 introduces the most fundamental tenets of sustainability, including an animation that explains how the UN’s Sustainable Development Goals are spurring corporates’ activities in the field. It goes on to outline core concepts and definitions for sustainability assurance, the most distinctive features of engagements and what increasing regulatory standardisation means for accounting professionals.  

Module 2 – Acceptance and Continuance – goes into greater detail on how firms can best prepare to take on and maintain sustainability assurance engagements. Topics include the importance of ethical requirements and professional standards, plus an overview of the relevant competencies and capabilities – including material on the role of the engagement leader in delivering high-quality client experiences. Subsequent modules provide guidance on how to understand your client’s sustainability context and respond to risks of material misstatement.

Commenting on the new course, ICAEW Director of Sustainability, Reporting and Assurance Ravi Abeywardana says: “As sustainability assurance moves from an emerging service to a core part of the global corporate disclosures ecosystem, consistency, competence and credibility become critical. While the fundamentals of assurance remain the same, practitioners now need clarity on how to apply established disciplines to new types of information, risks and opportunities, and ensure clients have robust sustainability processes and controls that underpin their business model and strategy. 

“The ICAEW Sustainability Assurance certificate is designed to help firms translate global requirements such as ISSA 5000 into high-quality, defensible engagements, supporting market confidence and effective oversight as sustainability assurance continues to mature.”