Business relationships in difficult times
A new era for reporting and assurance
Environmental, social and governance, or ESG, considerations have increasingly become a core part of investment analysis and a top priority for corporations and communities. There has been an acceleration in the number of companies reporting on ESG risks and opportunities; a dramatic shift in the range of stakeholders (investors, employees, customers and others) demanding ESG prioritization; an evolution of laws and regulations on ESG matters; and massive fund flow into ESG investment strategies as the finance sector increasingly recognizes the importance of ESG factors to long-term performance and corporate value.
Yesterday’s focus on only financial statements is giving way to an integrated approach that brings financial information together with broader business reporting. In particular, investors and other stakeholders seek robust ESG information, and organizations across all industries are endeavoring to provide it.
Transparent reporting on ESG risk management and ESG opportunities allows investors and other stakeholders to assess how well prepared a company is for potential changes related to its operating environment and for market trends that could have a material impact.
Obtaining assurance over a company’s ESG information is essential to help ensure that reporting is of high quality, reliable and comparable.
To increase stakeholders’ confidence in the reliability of ESG information, corporations are engaging independent Certified Public Accountants (CPAs) to perform assurance engagements on their ESG information. A number of measurement and reporting methodologies are applied in the preparation of ESG information in accordance with recognized sustainability standards, requiring deep professional knowledge and expertise to obtain assurance. Research indicates that, among other benefits, assured ESG information results in a lower cost of capital; research further indicates that the benefits are more pronounced when an independent public accounting firm provides the assurance.1, 2,3
Reliable, comparable and relevant ESG information begins with quality reporting by company management. CPAs can help at this stage, and other steps along the way, to build credibility and trust.
