KEY ISSUES IN SUSTAINABILITY ASSURANCE

Dave OwenInternational Centre for Corporate

Social ResponsibilityNottingham University Business School

Current sustainability assurance practice: A brief overview

• Significant rate of growth internationally• Increased use of Standards—notably ISAE 3000 and

AA1000AS• Accounting firms (predominantly the ‘big 4’) are the main

assurance providers• Accountants overwhelmingly provide limited assurance

featuring negative form opinions• Assurance statements rarely specify an intended

audience• Increased trend towards offering commentary on

performance and recommendations• Stakeholder inclusion in the process is minimal

Current Assurance Practice: A brief critique

• Inconsistency in terms of objectives, scope and procedures

• A large degree of management control over the exercise

• Use of jargon and guarded phrases in assurance statements

• Not much value-added for stakeholders

The Present Study

• Sponsored by the ACCA

• Interviews with senior corporate responsibility managers from ten FTSE 100 companies

• Interviews with three categories of stakeholder – the investment community (3); prominent NGOs’ (4); the trade union movement (1)

Key Aims of the Research

Corporate Respondents: Reasons for commissioning assurance Factors underpinning choice of assurance

provider Scope and depth of assurance work desired Level of resource committed to the exercise Views as to necessary degree of stakeholder

inclusion Perceptions as to benefits accruing

Key Aims of the Research

Stakeholder Respondents:Perceptions of ‘value added’ to the

reporting process by assuranceLevel of involvement experienced and

desired in assurance exercisesViews as to actual and potential efficacy of

assurance in promoting stakeholder accountability

Major Findings

From the Perspective of Corporate Interviewees Assurance must provide value for money Cost constraints preclude any major move

towards reasonable assurance provision Awareness of stakeholder detachment from the

exercise, and a desire to bring about their more active involvement

Formalising stakeholder involvement by means of some form of stakeholder panel the favoured option (although many practical difficulties acknowledged)

Major Findings

From the Perspective of Stakeholder Interviewees A clear dichotomy of views as to whether assurance

adds value to the reporting process: Investment community – assurance not relevant in terms

of their decision-making needs; more concern with issues of data integrity and synergy with financial reporting practice than stakeholder inclusion (although some support for Expert Panels)

Trade union official – reservations over practical competencies of assurance providers and the institutional legitimacy of the sustainability assurance industry

Major Findings

NGO Representatives – broadly supportive of assurance (although aware of limitations); desired more involvement via participation in stakeholder panels (although concerns over domination of ‘big brand’ NGOs’, resource constraints and compromising of independence)

Some Corporate Governance Implications

• The issue of the addressee for assurance statements• Voluntary vs. mandatory reporting and assurance• No form of redress for stakeholders• The company’s success and longevity vs. society’s

sustainable development needs• Assurance offers a technical solution to an essentially

political problem“The government isn’t doing its job…At some point you

have to get to the root of the problem” (trade union official)