Sustainability reporting assurance is on
the rise, although it still remains a minority exercise for the
world’s leading companies. Arvind Hickman speaks
to KPMG sustainability expert Wim Bartels about changing trends in
assurance and the future of the voluntary practice.

Large companies are increasingly turning to audit firms to have the
accuracy of their sustainability reports checked, according to new
research by KPMG International.

There has been a rise in the demand for assurance services and
consulting work among the leading 2,200 companies during the past
three years, benefitting audit firms that specialise in these
services.

The KPMG International Survey of Corporate Reporting
Responsibility 2008 notes that despite increasing demand, assurance
is still a minority exercise, with only 40 percent of the Global
Fortune 250 (G250) and the 100 largest companies in 22 countries
containing formal assurance statements within sustainability
reports. Of these, half of the organisations chose to have parts of
their report assured, while the rest opted for full assurance.

Assurance is most common among companies in the mining (100
percent), utilities (75 percent), and oil and gas (59 percent)
sectors, and least common in the construction and building
materials, and the forestry, pulp and paper sectors.

European companies led the pack in terms of assurance (see
graph below
) while North American counterparts lagged behind.
The survey also revealed that 27 percent of sustainability reports
included other forms of third-party commentary in place of
assurance, such as stakeholder panels or subject matter statements.
It is important to note that assurance on sustainability reporting
is not mandatory, unlike the assurance that must accompany
financial statements in a company’s annual report.

KPMG Sustainability Services global head Wim Bartels tells
The Accountant the voluntary nature of sustainability
reporting assurance and the fact that sustainability reports are
still a relatively new concept means that companies and
stakeholders remain divided on the value of formal assurance.

“When you look at the full life of sustainability reporting,
it’s about 10 years,” he says. “So this is the 10th time that a
company could have asked for assurance, which is not a lot. Some
companies conclude that assurance is something outside of our
business, its something you don’t really need because there is not
so much demand for it from stakeholders.

“I think that it isn’t so clear in all cases for companies and
stakeholders to determine what the value of assurance is. We are
still in a phase of demonstrating what the value of assurance
is.”

Bartels says that more KPMG clients are beginning to see the
value in sustainability reporting and assurance, and predicts this
will increase as investors crave more non-financial
information.

“If investors ask for information, they want it to be accurate
and complete. So it is changing and investors have been looking
into this for three to five years. That could change the landscape
for assurance because then it becomes more of a core business issue
in terms of reporting,” Bartels explains.

One of the key findings of the KPMG study is that sustainability
reporting has become a mainstream activity for the largest
companies. Nearly 80 percent of G250 companies issued reports, up
from 50 percent three years ago. Likewise, the use of assurance has
also jumped, albeit more moderately from 30 percent to 40
percent.

The growing importance of assurance means that information and
data checkers are now being called upon to play a wider role
throughout the whole reporting process.

“When you look three to five years ago, we were mainly focusing
on whether the information was accurate and that was our role at
the time,” Bartels says.

“Now, clients need to show us how they make sure the information
is complete so that they have the right issues within reports.
Within the issues they must provide all the relevant information
and show us the process on how to do that.

“Companies are now increasingly asking how they should design
the systems and processes and how to link these to their management
agendas. Those questions are coming to us but within assurance
engagements, we need to keep our role clear. So, if we are an
assurance provider, we can’t take the consulting role, but the
demand is there.”

Regulation could increase demand and the level of integrity
associated with sustainability reporting assurance. One reason why
companies are reluctant to pursue assurance is that it is
voluntary. Bartels believes that as sustainability reporting
matures regulation will follow, but this needs to be market driven
rather than imposed upon companies.

“There should be a need for real trustworthy information and as
soon as this demand is fully there, that’s the moment to say ‘let’s
now regulate it to make sure we work consistently on the same basis
with the same standards’,” he says.

Sustainability reporting assurance