Focus on credible sustainability reporting

Despite the external assurance of corporate sustainability reporting not being mandatory, Lasse Ingström, Risk Advisory Partner at Deloitte has seen that companies are increasingly choosing to give greater credibility to their reporting through external assurance.

There are two main types of external assurance engagement – Limited Assurance and Reasonable Assurance. "Limited Assurance states that no audit evidence has been found to suggest that the subject matter is not in accordance with the relevant standards in all material respects," Ingström explains. "Reasonable Assurance on the other hand, involves a more comprehensive audit and declares that the subject matter is actually in accordance in all material respects."

"Most companies currently use Limited Assurance, but I believe that mature reporters should consider Reasonable Assurance for their key sustainability indicators to bring sustainability reporting on a par with financial data, which is reported at Reasonable Assurance," claims Ingström. "Reasonable Assurance provides greater credibility and more value-added recommendations for further business development, and it can differentiate a company from its competitors, as it is still relatively uncommon in sustainability reporting."

The trend towards greater external assurance

Stora Enso has externally assured the Group's annual sustainability reporting since 1998, and in 2015 it became one of only a small number of companies in the world to achieve Reasonable Assurance for its direct and indirect CO₂ emissions data – Scope 1 and 2 as defined by the Greenhouse Gas Protocol. "The external assurance of our sustainability reporting gives us greater credibility externally and reassurance internally," explains Noel Morrin, Executive Vice President Sustainability at Stora Enso.

Stora Enso is in the process of developing a roadmap to further improve the external assurance of its sustainability reporting. "Our move from Limited Assurance to Reasonable Assurance for fossil CO₂ emissions last year was a valuable experience that we have learned from and can draw on in the future," says Morrin.

Credible integrated reporting?

According to Ingström, there is already a strong trend towards integrated reporting. "Integrated reporting promotes sustainability as an integrated part of the business, rather than an add-on," says Ingström. "But I believe we will see the assurance methodology develop in the coming years to be more in sync with the forward-looking nature of integrated reporting."

Morrin agrees on the need for external assurance to develop before non-financial sustainability reporting can be fully integrated into financial reporting. "Integrated Reporting is only credible when non-financial data is assured to financial data standards, which means Reasonable Assurance for all reported data," says Morrin.

"Companies in general are clearly a long way off from this, and the methodologies to define material sustainability topics for reporting must also be developed further," says Morrin. "Integrated reporting would require a credible internationally agreed materiality methodology to provide the consistency currently lacking in the integrated reporting market alongside non-financial data assured at the Reasonable level. Until this happens, the credibility of Integrated Reporting has to be open to criticism."