With sustainability reporting assuming ever greater prominence in the business world, the demand for sustainability assurance has been mushrooming, says Jayne Mammatt, head of sustainability services at Ernst & Young.
The King III Code on Governance has highlighted the importance of reliable sustainability information and tasked the audit committee with establishing a formal process of external assurance on a company's sustainability information.
According to Mammatt, "There are many similarities between auditing an organisation's financial information and auditing non-financial information like sustainability as they are both about providing assurance".
Assurance, she says, is a statement intended to inspire confidence. Verification is the act of reviewing, inspecting, testing, checking, auditing or otherwise establishing and documenting whether items, processes, services or documents conformed to specified requirements.
Auditing is an evaluation of any organisation, system, process, project or product. Audits were performed to ascertain the reliability and validity of financial information and provide an assessment of the internal controls.
"In short," she says, "assurance is the outcome. It influences stakeholders' decisions or behaviour; it impacts positively on the organisation. Verification and auditing are a means or a method of achieving that assurance".
Mammat maintains that external assurance on sustainability reports is critical to management, investors, government, suppliers, customers, employees and NGOs and has significant benefits in terms of transparency, integrity, improvement and credibility.
But she emphasises that one size does not fit all when it comes to sustainability assurance. "Understand what you need, what the stakeholders need, the robustness of the process, the maturity of the sustainable development and reporting processes within the organisation, and the level of the internal assurance processes. Having done so, the assurance report can be tailored accordingly. It should be an iterative process as the scope should be extended as systems and processes improve and as more stakeholders use the report for their decision-making process."
Graham Terry, Senior Executive of Research and Strategy at the South African Institute of Chartered Accountants (SAICA) and author of the book Green - Why corporate leaders need to embrace sustainability to ensure future profitability, says chartered accountants [CAs(SA)] have a meaningful role to play in providing credible sustainability assurance to companies in SA.
"The scope of sustainability reporting can be very broad with some of the information being compiled outside of the existing business processes therefore the cost of assurance can be high. However, as sustainability information becomes more and more important there will be increased calls for assurance and companies are going to have to start embedding sustainability practices into their daily operations, business processes and strategies."
External assurers often use several guidelines and standards in their assurance engagements, namely:
Source: SAICA
For more information on sustainability reporting visit www.sustainabilitysa.org.
