Sustainability Reporting Assurance – Sustainability Insurance, Management Intelligence, & Risk Avoidance
Sustainability report assurance is a critical part of the Global Reporting Initiative G4 sustainability report format and its inexorable emigration towards financial reporting integration (see end of article for info on GRI assurance).
This is a great thing not just because assurance increases the credibility and defensibility of sustainability reports – an argument sufficient in-and-of-itself to merit an assurance investment — but also because assured reporting provides a solid informational basis for confident sustainability management.
Too bad many companies still don’t see the value in all the good assurance brings to sustainability reporting and sustainability risk management. Here are some things to think about.
What Assurance Brings to the Party?
The most immediately important assurance considerations include:
- Verification of material sustainability impacts;
- Verification of data robustness; and
- Verification of information sources and processes.
These actions work together, not unlike in financial reports, help to avoid exposing a company to unnecessary reputational and stakeholder action risk, not to mention any misguided sustainability management practice that may result from inaccurate information/data.
Unlike annual financial reports, which are constantly being updated (internally and/or externally) with data and quality analysis, however, most sustainability reporting is annual in nature. Sustainability performance intelligence is typically and dangerously static as a result.
Static reporting is a significant and mostly unaddressed risk because sustainability stakeholders operate in an increasingly dynamic and information rich environment. Every company is thus constantly exposed potential negative public attention.
Accidentally and coincidentally lose the same customer’s reservation twice and POW! a video trashing your hotel chain’s otherwise stellar client performance goes viral causing millions in reputational value damage. Answer a question wrong on the customer hotline, one product glitch in millions of units sold…. well, you get the picture.
Don’t let your Stakeholder Define Your Sustainability Materiality
If your company does not define and then assure/verify its material impacts, stakeholders will always define them for you and not always in the most positive way. Worse yet, stakeholder opinion need not be verified and can be entirely overstated, misleading, or just outright wrong yet still accepted as the gospel truth.
Because stakeholder opinion is not time specific these risks are magnified. As Solitaire Townsend, co-founder of Futera recently reasoned:
Relegate your ‘report’ into a mere repository of information, and enter a permanent ‘reporting’ mindset.
Sustainability will be coordinated through billions of people talking to each other, and talking to your brand.
Relevance and responsiveness will be crucial. Current reports are rarely either. In this world
Social media could kill sustainability reporting. Or save it.
Meaningful engagement alone goes a long ways towards tapping all that is good from stakeholder networks, particularly if your goal is constant value creation through improved sustainable management and outcomes. More simply, a company can invite engagement or allow stakeholders to lie in wait until the next crisis.
Continuously updated reporting anchored to an annually assured sustainability report is an inexpensive form of insurance against stakeholder driven risk and an invaluable management tool at the same time.
GRI G4 Assurance
The International Federation of Accountants defines an assurance engagement as one “in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.”
Overall, for external assurance of reports using the GRI G4 Guidelines, it is important that the assurance providers:
- Are independent from the organization & able to reach an objective & impartial opinion or conclusions.
- Are demonstrably competent in both the subject matter & assurance practices.
- Apply quality control procedures to the assurance engagement.
- Conduct the engagement in a manner that is systematic, documented, evidence-based, & characterized by defined procedures.
- Assess if a report provides a reasonable & balanced presentation of performance, taking into consideration the veracity of data in the report as well as the overall selection of content.
- Assess the extent to which the report applies GRI G4 Guidelines in the course of reaching its conclusions.
- Issue a written publicly available opinion or set of conclusions on the veracity of the report.
For more information on GRI G4 assurance processes see: https://www.globalreporting.org/resourcelibrary/GRI-Assurance.pdf