Auditors Get Tougher Guidelines on Judging Firms' Environmental Claims

As the demand for sustainability reporting and assurance grows, auditors are facing new challenges in evaluating companies' environmental claims. The International Auditing and Assurance Standards Board (IAASB) has recently published the International Standard on Sustainability Assurance (ISSA) 5000, which provides a global baseline for sustainability assurance engagements. This new standard aims to bring further comparability and increased confidence in reported sustainability information, addressing unique challenges and opportunities in assuring sustainability information (IAASB, 2023).

The increasing demand for sustainability reporting and assurance is driven by various factors, such as investor pressure, national climate laws, and broad-ranging reporting frameworks. As companies seek to meet sustainability goals and comply with reporting requirements, they will increasingly require external assurance on their sustainability disclosures. This trend is supported by surveys, such as those conducted by KPMG and EY, which indicate that most companies are feeling increasing pressure to provide ESG assurance from stakeholders, including shareholder activists and investors (KPMG, 2022; EY, 2022).

The new ISSA 5000 standard is expected to have a significant impact on the market for sustainability assurance services, driving growth and creating opportunities for firms that specialize in or have strong capabilities in sustainability assurance. The Big Four accounting firms, specialist sustainability consulting firms, and national and regional accounting and consulting firms are likely to benefit most from this trend.



Firms that specialize in sustainability assurance or have a strong capability in this area are likely to benefit most from this trend. These firms may include:

1. Big Four accounting firms: Deloitte, EY, KPMG, and PwC have extensive experience in sustainability assurance and are well-positioned to capitalize on the growing demand for these services. For example, KPMG's 2022 survey found that most companies are already feeling increasing pressure to provide ESG assurance, indicating a significant market opportunity for these firms (KPMG, 2022).
2. Specialist sustainability consulting firms: Firms that focus exclusively on sustainability consulting and assurance, such as Sustainalytics, MSCI ESG Research, and Trucost, may also benefit from the increased demand for sustainability assurance services. These firms have deep expertise in sustainability-related issues and may be able to provide more specialized and tailored assurance services than larger accounting firms.
3. National and regional accounting and consulting firms: As the demand for sustainability assurance grows, local and regional firms may also see an increase in opportunities, particularly in markets where sustainability reporting and assurance are becoming more prevalent. These firms may be able to leverage their local knowledge and relationships to attract clients seeking sustainability assurance services.

In conclusion, the new ISSA 5000 standard is expected to have a significant impact on the market for sustainability assurance services, driving growth and creating opportunities for firms that specialize in or have strong capabilities in sustainability assurance. The Big Four accounting firms, specialist sustainability consulting firms, and national and regional accounting and consulting firms are likely to benefit most from this trend. As companies seek to meet sustainability goals and comply with reporting requirements, they will increasingly require external assurance on their sustainability disclosures, further driving the demand for sustainability assurance services.

References:

* IAASB. (2023). International Standard on Sustainability Assurance (ISSA) 5000. Retrieved from
* KPMG. (2022). ESG Disclosure: The New Reality. Retrieved from
* EY. (2022). EY Climate Change and Sustainability Services. Retrieved from