One of the objectives of assurance is to provide a level of confidence in the accuracy of information provided to stakeholders. This benefits stakeholders who rely on the information for their decision-making.
Organisations that assure the information disclosed can increase their brand reputation, trust and credibility in the marketplace.
It enables organisations to manage risks better and drive value creation in the short and long term. Internally, leaders of organisations can monitor and manage the risks facing their organisations.
At the same time, external stakeholders like investors can place a higher level of trust in information that has been assured.
Assurance of non-financial reports such as sustainability reports has some unique features that make them different from traditional financial reporting like financial statements, which are backwards looking.
For instance, sustainability reporting includes more forward-looking information that takes more work to assess.
Sustainability information also includes non-financial metrics like impact and outcomes, which are difficult to measure and can be very subjective, making it difficult to obtain an objective assessment.
Organisations could get assurance internally, externally or through a combination of both.
There are two levels of assurance available for sustainability reporting, reasonable assurance and limited assurance. Reasonable assurance provides a higher level of assurance when compared to limited assurance. Reasonable assurance is similar to the assurance level provided on financial statements by external auditors.
It requires the assurance provider to obtain sufficient evidence to form an opinion. It requires assessing and testing the internal processes, controls, systems and data used to prepare sustainability reports.
In contrast, limited assurance requires limited evidence compared to reasonable assurance to enable the assurance provider to express a negative view of the information presented, indicating that nothing has come to their attention that the information presented is materially misstated.
For now, the assurance level of most sustainability reports is limited assurance due to the ongoing development of sustainability reporting across many organisations compared to the matured levels for financial statements, which are based on reasonable assurance.
Organisations must improve the quality of data used for sustainability reporting to move it from limited assurance to reasonable assurance.
Organisations could also choose different assurance levels for various aspects of their sustainability report.
Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics.
