By Lee White, Chief Executive Officer, International Federation of Accountants (IFAC)
Corporate reporting is undergoing a once-in-a-generation transformation as sustainability disclosure evolves. What was once seen as an optional, discretionary exercise is now integral to the way companies communicate their business models, values and resilience to investors and stakeholders. But with this shift comes a real challenge: trust.
Every time a company makes a misleading claim—deliberately or not—about its sustainability efforts, it erodes trust. Greenwashing isn’t clever marketing; it’s misleading information, and it could be fraud. And because unsustainable practices have real consequences for a company’s performance, the effect on investors can be significant.
This is where assurance comes in. Assurance gives investors and stakeholders confidence in the information they are receiving from companies. With it, investors and all other users of sustainability information can get a clearer picture of a company’s true impact on the world and its prospects for long-term value creation.
Assurance is not a compliance function. It serves the public interest. It also strengthens the credibility of corporate information and ensures that sustainability reporting is appropriate and balanced. For investors, it offers a clearer lens through which to assess potential investments. It’s important not just for compliance but also for confidence.
The growing demand for credible sustainability information
Investors have been vocal about their need for global, consistent and comparable sustainability information. They want information that they can trust when making decisions on capital allocation. Other stakeholders, such as suppliers and employees, are also asking for this information so that they can make appropriate decisions for their economic, social and environmental priorities.
Governments, seeing the demand, are responding. More and more jurisdictions are advancing toward mandatory sustainability reporting and its related assurance. This relatively new trend is becoming more embedded in global business.
Ensuring investor and consumer protection
However, the sustainability-assurance market is fragmented. Right now, partly because sustainability assurance is still voluntary in most jurisdictions, anyone—from professional accountants and auditors to engineering firms and boutique consultancies—can offer assurance. And while this diversity brings valuable expertise, it also creates inconsistencies and varying levels of investor and consumer protection. Different standards, varying levels of rigor and a lack of consistent independent oversight leave investors exposed: Who can we trust? Should we trust anyone?
An ongoing series of global benchmarking studies, undertaken by the International Federation of Accountants (IFAC) and our partners at AICPA & CIMA (American Institute of Certified Public Accountants and Chartered Institute of Management Accountants), is quantifying this trend. Our data, focused on the largest companies in the G20 (Group of 20) and additional advanced economies, show that nearly all firms disclose sustainability information, and almost three-quarters obtain assurance on those reports. But firms that perform financial statement audits—for which licensed professional accountants are trusted and overseen by regulators to guard the integrity of crucial information—are behind only just over half of those assurance engagements. Actors without a similar level of accountability perform the rest.
We cannot allow a two-tiered system to emerge—one whereby regulated, professional accountants are held to higher standards, while others operate without consistent oversight. It’s all about investor and consumer protections. If the market for sustainability assurance doesn’t earn trust, then it doesn’t serve its intended purpose.
In the interest of public trust, IFAC supports the IAASB’s (International Auditing and Assurance Standards Board’s) recently approved ISSA 5000 (International Standard on Sustainability Assurance 5000) to become the global baseline standard for sustainability assurance. Developed to be profession-agnostic, it allows for a broad range of assurance providers while maintaining a high level of quality. But for this standard to work as intended, jurisdictional policymakers and regulators must ensure that all assurance providers—whether they come from the accountancy profession or not—are held to the same stringent standards of competence, ethics and independence, which points to recent work by the International Ethics Standards Board for Accountants (IESBA).
IFAC and Accountancy Europe, as representatives of the global and European accountancy professions, respectively, recently reaffirmed their commitments to high-quality and consistent sustainability assurance. In our joint statement, we underscore that it is vital for investor and consumer protections that all sustainability-assurance providers, regardless of their professional affiliations, operate on a level playing field and be held to the same or equivalent qualifications, professional standards for assurance and ethics, as well as public oversight.
If this doesn’t happen, our sustainable future will be much further from reality.
A systemic approach for a sustainable future
To get this right, we need a unified approach. That means integrating sustainability assurance into the existing regulatory framework, compatible with financial reporting, and arriving at clear oversight, consistent standards and robust ethical guidelines.
Connectivity is important. Linking financial and sustainability reporting helps to offer a more complete view of a company’s overall health, viability and performance. Integrated information enables investors, regulators and other stakeholders to see how sustainability-related risks and opportunities translate into financial results.
When sustainability and financial data are consistent, companies present a clearer, more comprehensive narrative to the market, enabling stakeholders to make effective and sustainable decisions.
It’s important to converge on this unified approach early on, before regulatory fragmentation can take hold and create unnecessary costs and complexities. Fragmented systems only get more difficult to resolve the longer they persist.
Crucially, we also need to build capacity—which we are already enhancing within the global accountancy profession—across a wider spectrum of sustainability expertise. Sustainability starts inside businesses, so there is a real need for these skills at the company level and, of course, at the accounting firms providing assurance services. That has to start early in our training, so IFAC has revised our International Education Standards—the global baseline for the accounting curriculum—to embed sustainability into the core skills of the next generation of accountants.
We need to foster partnerships among professional accountants, environmental scientists, engineers and sector-specific experts. This cross-disciplinary collaboration is essential if we are to meet the growing demand for trustworthy information and prevent greenwashing from undermining our collective progress. Sustainability information is too complex for any one profession in isolation.
Trusting the journey
We are at the start of something transformative. The sustainability-reporting ecosystem is still evolving, and we cannot ignore the calls for simplification in Europe to preserve the competitiveness of businesses—in particular, of small and medium-sized enterprises (SMEs). Early assurance reports will reveal deficiencies in data, processes and/or governance. That’s part of the journey. So long as we learn from these early findings, assurance will continue to improve and help drive better outcomes for investors, consumers and society at large.