Sustainability and ESG Assurance Remains a Risk

One of the most popular table discussion sessions at GreenBiz24 last week was on ESG assurance. Lots of folks sat around the table (actually, it was more like three tables pulled together) for quick 20-minute rotating sessions led by Kristen Sullivan and Evan Harvey. There was great interest in the topic, but also much confusion about what ESG assurance is and covers. Most of the questions and comments indicated that few had ever read an assurance letter, which states the specific scope of the engagement, its objective and the auditor’s opinion on whether the auditor’s activities uncovered the potential for material misstatements or irregularities in the company’s ESG report.

As Evan stated, assurance is a review of ESG processes, not an audit of the specific underlying data – especially under limited assurance procedures. Assurance activities can also involve relying on the work of others (such as GHG emissions quantifications by other consultants, supply chain due diligence audits performed by social auditors or industry programs, or – increasingly – output from AI systems). Furthermore, except where regulatory mandates include specific ESG assurance scopes and criteria, companies themselves are free to select the audit topic and scope. This can be beneficial but it also carries risks: the assurance result may be misinterpreted or misunderstood. Claims of greenwashing can also arise from critics/detractors who don’t know what assurance is. That is perhaps particularly important today where greenwashing lawsuits and enforcement actions are gaining steam.

My recommendation to anyone considering ESG assurance is to first read several ESG report assurance letters to get an understanding of what assurance is and isn’t. If you decide to move forward, most assurance providers provide pre-assurance reviews and support so clients have a detailed picture of the auditors’ expectations, processes, procedures and data needs. You will benefit greatly by working closely with your internal audit team and external assurance provider through that process.

If you aren’t already subscribed to our complimentary ESG blog, sign up here: for daily updates delivered right to you.

The post Sustainability and ESG Assurance Remains a Risk appeared first on PracticalESG.