Sustainability reports should be externally assured: CPA Australia

Content Summary

Sustainability reports should be subject to external assurance to preserve their integrity and independence, according to global professional accounting body CPA Australia. 

Reporting on internal assurance alone may create an expectation gap and confuse users, decreasing the trust and confidence they place in a sustainability report. 

“External assurance by an external auditor requires the expertise and collaboration of financial and accounting professionals and other independent ESG experts. Listed companies should be required to publicly disclose if external assurance has been obtained on their sustainability reports,” said Melvin Yong, Singapore Country Head, CPA Australia.

In Singapore, the assurance of sustainability reports has been a key discussion point recently. A consultation paper on climate and diversity, issued by market regulator Singapore Exchange Regulation (SGX Regco), closed for submissions last week.

SGX RegCo had proposed that public-listed companies must subject their sustainability reports to assurance by their internal auditors. However, companies may also choose to have their reports externally assured through external auditors or an independent assurance services provider.

In 2017, the Task Force on Climate-Related Financial Disclosures (TCFD), set up by the international Financial Stability Board, recommended four elements of climate-related disclosures of financial information that could be adopted by organisations across sectors and jurisdictions; governance, strategy, risk management, and metrics and targets.

CPA Australia considers that a staged approach to external assurance is necessary to enable capacity building and readiness within reporting entities. It recommends starting with external assurance on metrics that have clear measurement criteria, such as greenhouse gas emissions. In this context, the making of corporate net-zero emissions commitments is highly significant.

Further, CPA Australia recommends that assurance be required against suitable criteria that comprises the sustainability framework and standards applied, or at a minimum the reported basis of preparation, rather than just selected assertions. 

Aiming for net-zero emissions

Acknowledging the urgency of taking action, CPA Australia has pledged to achieve net zero greenhouse gas emissions within its organisation and to provide sound advice to governments for a just transition to a net zero economy. 

The professional accounting body, which represents more than 168,000 members around the world, has also committed to providing training and guidance to its members to support them in reducing emissions in their own organisations and businesses.

These commitments are part of a global commitment, launched today, by 12 accounting bodies to commit to net zero greenhouse gas emissions. This is an initiative of The Prince of Wales’ Accounting for Sustainability (A4S) Project Accounting Bodies Network (ABN), of which CPA Australia is a member. This network represents over 2.5 million professional accountants and students across 179 countries. 

CPA Australia Chief Executive Andrew Hunter said, “The accounting profession occupies a privileged position in the global economy. As trusted advisers, we’re privy to deep business insights about sustainability risks and opportunities. This knowledge creates an obligation to use our skills to protect our environmental heritage. CPA Australia is a global organisation in a global profession and we’re proud to be part of the global response to climate change.” 

CPA Australia is one of the only accounting bodies in the world to produce an Annual Integrated Report that has received Limited Assurance under the entire <IR> framework. It will report progress against the net zero commitment in its Integrated Report.

Executive Chairman of A4S Jessica Fries said, “The accounting bodies making this commitment are showing leadership in the fight against climate change. Accountants who work for the good of their businesses, and serve the public interest, have always been the backbone of stable economies. This commitment brings us closer to building a sustainable world.” 

Read the Net Zero Commitment.

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Joanna Chek, Senior Marketing and Communications Manager, on +65 6671 6546 or [email protected]