Blog 28.07.16

To assure or not to assure, that’s the CR question.

Assurance

10 things you need to know about third-party assurance and deciding whether or not your company should get its corporate responsibility report assured.

It’s that time of year again. While we’re still feeling the summer heat, vacations are winding down and corporate responsibility (CR) leaders are thinking ahead to the fall. In late summer, we tend to get some questions, from novice and veteran reporters alike, about assurance. Unlike with financial disclosures, there aren’t any standards or requirements for assurance of CR disclosure, and there are many different ways to go about it.

GRI has a guide explaining the ins-and-outs of external assurance for sustainability reporting, but deciding whether or not to go through the process can be difficult. Companies can choose to assure one or two key performance indicators, every aspect of their reports, or anything in between. (Or forego it altogether). What’s a CR manager – who is charged with communicating to diverse audiences, improving performance, and managing a budget – to do?

We’ve started to look at some trends in CR assurance that may be useful.

Who’s getting assured?

  • Big firms: Larger firms and firms with higher capital expenditures (as a proxy for long-term planning or investments in projects with environmental impact[1]) are more likely to assure their reports. In 2015, 63% of the world’s 250 largest companies invested in some level of assurance[2] .
  • Firms with formal goals: Firms with clear CR goals are not only more likely to issue CR disclosures, but are also more likely to externally assure. Both disclosure and assurance are intended to show superior CR performance[3].
  • European firms: Of the world’s largest firms, all French and British companies assure their carbon data (it is mandatory in the UK that firms include GHG disclosures as part of their Annual Report and Accounts). 89% of German firms assure carbon data. This is compared to a global average of 62% and only 41% of US firms who assure carbon data[2].

What are they assuring?

  • Assured reports tend to contain “just the facts” information. They also focus less on community and social activities and more on measurable environmentally impactful activities[1].
  • Carbon data is the most common CR topic to be assured. Of firms who report carbon metrics, 62% get it assured[2].
  • Of companies who report CR information in their annual report, 50% have their whole annual report with CR information assured. 34% have specific CR indicators assured, 5% have only specific CR chapters assured, and 11% assure a combination of specific chapters and indicators[2].

What are the benefits?

  • CR assurance increases the likelihood of issuing firms being included in the Dow Jones Sustainability Index (DJSI)[3] .
  • Although not required, CDP gives points for data verification. There are specific verification requirements in order for a firm to qualify for the CDP A-list.
  • There is a positive association between CR assurance and both the number of socially responsible investments (SRI) and the percentage of SRI share holdings[3]. But keep in mind, correlation does not necessarily mean causation.

Who does the assuring?

  • Major accounting firms provide third-party assurance to two-thirds of the companies who decide to assure[4]. Boutique sustainability and engineering firms can also provide assurance. Researchers have not found any evidence that the type of assurer affects DJSI or investor perceptions[3].

 

So what should I do?

You might still be asking what the right approach for your company is, or whether to pursue any assurance at all. Context’s advice is to take a look at your audiences and understand their needs. Stakeholder engagement can be a great way to get the pulse from investors, NGOs and customers, but you can also start by reaching out to a few friendly voices.

We recommend asking yourself, and your team, a few questions:

  1. What are the most important audiences for your report? What do they ask us about or look for in our report? It’s important to know how your stakeholders use your report whether you’re thinking about assurance or not.
  2. Which kinds of information are our stakeholders looking for assurance on? If it’s only a few topics, consider prioritizing key performance indicators or focusing on your most material issues. You might also consider assuring different kinds of data from year to year as a quality check on your measurement systems.
  3. Which stakeholders are looking for assurance and why? How does it influence our relationships with them? You may go different directions if your major investors or customers require it or if it’s just one factor among many.
  4. What are the trade-offs? Assurance is an investment of time and money and choosing the right approach will help you maximize both.

 

Sources and additional reading:

1

Not All CSR Reports are Created Equal: Report Quality and Voluntary Third-Party Assurance

2

The KPMG Survey of Corporate Responsibility Reporting 2015

3

Voluntary External Assurance of Corporate Social Responsibility Reports and the Dow Jones Sustainability Index Membership: International Evidence

4

The external assurance of sustainability reporting

 

________________________________________________________________________

Monica2

Co-author Monica Rowand

Monica is a summer associate intern in Context’s New York office. She is an MBA student at the University of Colorado, Boulder (CU) and president of the school’s Net Impact chapter.  She works as the program manager for Ralphie’s Green Stampede, CU’s award-winning sports sustainability program. CU uses fan engagement campaigns made possible by corporate partnerships to encourage behaviour change in its university fan base. Before joining the Green Stampede, Monica ran outreach and education programs at the non-profit organization Global Green USA.

 

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