Corporate ESG Claims Will Be Audited Soon to Address Greenwashing Concerns

The International Auditing and Assurance Standards Board (IAASB) released its ideas for sustainable assurance this week, with a consultation period ending on December 1. Companies’ statements about their environmental credentials will be examined by new global audit standards and are anticipated to be approved by the end of next year. The decision underscores investor and stakeholder concern that corporate sustainability statements are not always reliable.

 “Corporate reporting, whether financial or sustainability-focused, is more trusted when it receives external and independent assurance based on globally accepted standards independently developed in the public interest,” IAASB Chair Tom Seidenstein said in a statement.

 Reporting on Environmental, Social, and Governance data has quickly become a priority for firms in response to investor, consumer, and regulator demand. According to the IAASB, the dependability of such disclosures is a critical problem for investors, particularly when some jurisdictions, such as the European Union, make external assurance necessary.

 Both reasonable and restricted assurances are included in the proposals. According to the IAASB, a reasonable assurance engagement for sustainability information is similar to an audit of financial statements. A restricted assurance engagement provides less trust in the accuracy of the reporting.