Expert, high quality and independent third-party assurance is essential for a credible and trusted sustainability reporting and disclosures ecosystem. With standards, regulations and expectations evolving, there is much for stakeholders to consider as they seek to unlock the value of sustainability assurance, during this fast-moving transition phase.

In support, the Global Accounting Alliance (GAA) brought together audit and assurance providers, board members, corporate preparers, investors, regulators, standard setters and other stakeholders, to converse and share perspectives on sustainability assurance, at an in-person event hosted by ICAEW, at Chartered Accountants Hall, London, on 3 March 2025.

Talking points ranged across recent developments in sustainability reporting and assurance standard-setting and regulation, evolving demands and expectations around assurance of sustainability information among investors and other stakeholders, plus the profession’s evolving role in enhancing trust in the sustainability information that companies use and report.

For years, investors have been calling for comparable, reliable and verifiable sustainability information. Demand has also been growing globally for consistency and connectivity between this and related information in financial statements, to offer a more complete picture of corporate performance and impacts to an increasingly wide range of stakeholder groups.

Things are moving in this direction. Standard-setters have recently published European Standards for Sustainability Reporting (ESRS), global IFRS Sustainability Disclosure Standards (IFRS S1 and S2), an International Standard on Sustainability Assurance (ISSA 5000), plus International Ethics Standards for Sustainability Assurance, including independence (IESSAs).

Progress towards a global baseline for sustainability reporting and its assurance was welcomed at the event, despite uncertainty on the extent of adoption and implementation across different jurisdictions. Many discussions were around the value of assurance over sustainability reporting and there were strong signs of continued market demand for this going forwards, including that this may extend to reasonable assurance over certain key performance indicators, even if the focus of policy makers remains on limited assurance, at least in the short term.

To set the scene and provide context for attendees ahead of a panel discussion on sustainability assurance and the evolving role of the profession, two presentations offered research-based insights from across the globe on what investors, other capital market participants and regulators expect from sustainability-related reporting and its assurance.

Séverine Neervoort, Global Policy Director at the International Corporate Governance Network (ICGN) shared some key messages from its 2024 Investor viewpoint report on The assurance of sustainability reporting, and investors’ expectations of report preparation and assurance quality and key questions for investors to ask boards as part of a ‘stewardship dialogue’.

Then came a presentation from financial think tank Carbon Tracker. Barbara Davidson, its Head of Accounting, Audit and Disclosure, shared  insights from its 2025 Flying Blind: Accounting and Audit Regulation report on the extent of and evidence of consideration of climate and transition risks in financial statements and audit reports over recent years, across capital markets in Australia, the European Union (EU), Japan, the United Kingdom (UK) and the United States (US). 

“Climate-related risk is a material consideration for investors today and should be reflected in financial statements today,” said Davidson. However, Climate Tracker reviews of financial statements (including notes) and audit reports (for 2022 and 2023 financial year ends), found that evidence of consideration of material climate-related matters is poor, even though the assessments are primarily grounded in existing requirements for financial reporting and assurance.

These and other insights helped to shape the discussion between panelists as they explored the value and evolution of sustainability assurance and the auditing profession’s role during the ongoing transition phase. As companies and assurance providers are building capacity, jurisdictions are considering adoption and implementation of global standards, and market participants are developing their understanding of sustainability assurance and the fast-changing ecosystem it provides trust in.

“To unlock the value of assurance of sustainability information, it is vital that investors and other stakeholders understand the purpose of assurance, different levels of assurance and types of conclusions; not just what assurance of sustainability reporting is, but equally importantly, what it is not,” noted the panel Chair, Paul Winrow, a partner with Forvis Mazars and Chair of ICAEW’s non-financial reporting assurance committee.”

Having a common shared understanding of assurance among stakeholders is fundamentally important, emphasizing that “Limited assurance is not the same as audit,” emphasized Winrow, prompting Neervoort to question whether ‘limited assurance’ is enough for investors who are used to the higher level of ‘reasonable assurance’ that is offered by financial statement audit.

“Can investors make a decision on the basis of limited assurance on sustainability information?” Investors need reliable information for their investment and stewardship decisions and for their reporting to beneficiaries and clients, she said, adding, “Is limited assurance enough to keep the trust investors need?”

In interactions with investor members of ICGN, Neervoort said, “Investors are seeking to understand how assurance is conducted, what it covers and how to interpret opinions”.  Although specialist terminology used by audit and assurance professionals can create some barriers to transparency and understanding. “Moving away from the jargon and using less specialized terminology to make things clearer would be helpful,” she said. Improving the clarity of communications around audit and assurance, could help to build shared understanding across interested stakeholders.

As standardization becomes more widespread internationally across financial and non-financial reporting on sustainability, so does the importance of its assurance. “We want to understand more of what companies are doing and ensure that trusted providers of audit and assurance are giving us the confidence to rely on that information,” explained Bazalgette, who welcomes limited assurance of sustainability information, as a starting point.

Concerns on whether limited assurance is sufficiently robust have increased, since draft proposals to simplify EU rules on sustainability were published in a February 2025 Omnibus package of proposals, introducing uncertainty on whether the EU still sees reasonable assurance as a long-term goal – and how other stakeholders will respond. “I think it’s highly likely that the market itself will start to press for reasonable assurance on sustainability reporting,” said Bazalgette, to give users of that information increased levels of confidence, close to what they get from financial statement audit.

Further insights on the role and value of audit and assurance came from Robert Köthner, who shared insights from his time as a former global Chief Accounting Officer and Vice President at the Mercedes-Benz Group in Germany and a current member of the International Auditing and Assurance Standards Board (IAASB). “From the perspectives of a preparer or management, I have a very simple, practical view,” he said, voicing a preference for using the same firm for both financial statement audit and for the assurance of sustainability reporting.

When it comes to sustainability reporting and assurance, experience taught Köthner that an assurance provider/auditor needs to hit the ground running, to immediately assess and address any issues and questions that arise. “Providing sustainability support is a learning process. It’s a journey for the assurer and the whole organization,” said Köthner. At Mercedes-Benz, this journey included a significant amount of time spent discussing materiality, or to be more precise, the concept of double materiality.

“The question of what double materiality means from a company’s perspective was a critical consideration,” he explained. Many in and around the financial markets were new to the concept when they encountered it in Europe’s standards for sustainability reporting, being more familiar with the financial materiality concept and its meaning in financial reporting and audit. Double materiality combines both financial materiality and impact materiality, and grappling with the implications has been tricky for preparers, auditors, investors and other stakeholders.

“We needed to reconcile this with the auditor and make sure that we were all speaking the same language on this,” said Köthner. “We found that early involvement of all parties, bringing them together to discuss things, was the key for success.” Materiality in relation to sustainability reporting matters and assurance engagements and reporting regimes is challenging. Preparers, investors, and other stakeholders at the GAA event voiced concerns about a lack of clarity on its meaning and comparability in financial and sustainability reporting.

Effective communication and transparency between those responsible for sustainability assurance and financial statement audits will become increasingly important. As Köthner observed, ISSA 5000, the International Standard on Sustainability Assurance, requires sustainability assurance practitioners and auditors to communicate to ensure consistency and quality in both sustainability and financial reporting, particularly regarding interconnected matters, and to avoid inconsistencies and overlaps. It also offers carefully worded guidance on materiality.

Bazalgette offered insights into investor’s perspectives and priorities in relation to various aspects of reporting on sustainability, its assurance and related company decisions. On choosing an assurance provider, he said: “The key thing for us is clarity from the company on its approach to selection. Investors and their advisors are looking for good processes to determine what the company needs, then identify and assess the right assurance practitioner for the job and its ability to deliver.” Assurance practitioners should be instructed by the board and bring strong skills in sustainability matters, assurance, and applying professional scepticism.

Among the most critical things for investors, however, are the interdependence and links between a sustainability assurance report and the financial statement audit. “We already have areas where we expect companies to report on material aspects in their financial statements and which we expect the auditors to be covering as key audit matters in their audit reports. When we have sustainability reports on many other areas that are considered material by the company or by investors, we will want to understand how these areas impact the financial statements, or if they don’t, the rationale behind this.

Although expectations are high of the value of assurance of sustainability reporting outside financial statements, both Neervoort and Davidson reminded the panel and delegates of how patchy and slow progress has been around considerations of climate risks and uncertainties in statutory financial statements and audit reports, despite existing requirements for companies and auditors, as well as guidance from standard setters and regulators on what is expected and/or required today.

“Climate is a great example to consider, because this is an area where the level of maturity is quite advanced,” said Neervoort, unlike biodiversity or human rights, for instance. As Neervoort noted, “Companies know what the expectation is on climate reporting. Everyone is conscious of it,” so what has impeded progress? “I don’t think there is an unwillingness to do it. I think it can still seem too new and too confusing,” she said, praising recent outputs such as the International Accounting Standards Board’s proposed illustrative examples to improve reporting of climate-related and other uncertainties in financial statements. “The eight examples are being really helpful.”

Sustainability reporting and its assurance ranges more widely and is more complex than climate-related reporting in financial statements. The Q&A after the panel discussion highlighted plenty of areas where gaps in understanding will not be easy to close; while exchanges about modified conclusions and the relative desirability (or otherwise) of an emphasis of matter paragraph, limitation of scope or qualified opinion, demonstrated how levels of understanding shape what’s expected and acceptable.

Clear and straightforward education, guidance and support may be critical in building a shared understanding across stakeholders interested in the sustainability reporting and assurance ecosystem. “The fast-changing ecosystem means that there is a steep learning curve ahead,” said Winrow, even for experienced buyers, assurance practitioners, investors and other users of sustainability-related information in audit and other types of assurance reports on sustainability information.

Our Member Organizations