The connection between sustainability disclosures and financial disclosures is continuing to strengthen globally, and large companies in the UK are leaders when it comes to creating consistency that can benefit companies and investors alike.
Each of the UK’s 100 largest companies included their sustainability disclosures in either an annual report (94%) or an integrated report (6%) in 2023, the latest dataset available for The State of Play: Sustainability Disclosure and Assurance, an annual report by the International Federation of Accountants (IFAC), the AICPA, and CIMA.
In 2019, the first year of the study, 60% of UK companies shared sustainability data in a separate report.
Globally, 24% of the 100 largest companies in the six largest featured jurisdictions (including the UK) and the 50 largest companies in 16 other jurisdictions still reported sustainability disclosures in a separate report in 2023, down from 57% in 2019.
Ninety-eight per cent of large companies globally reported some sustainability data in 2023, up from 91% in 2019. Seventy-three per cent obtained some assurance of their sustainability disclosures in 2023, up from 51% in 2019.
When audit firms provide assurance, 99% applied the ISAE 3000 (Revised) standards or similar AICPA or internationally recognised standards, while just 38% of other service providers did the same.
“Auditors have extensive education requirements, adhere to strict independence rules, and possess a holistic view of an organisation’s business, processes, and risk profile,” Sue Coffey, CPA, CGMA, CEO–Public Accounting of the Association of International Certified Professional Accountants, said in a news release. “That makes them ideal candidates to perform sustainability assurance engagements, and we’re seeing many boards and audit committees endorsing that view as corporate reporting matures.”
The majority of sustainability reports were assured by audit firms in 2023. The percentage dipped from 58% in 2022 data to 55% in 2023, but that doesn’t mean the percentage of companies turning to audit firms is falling. The dataset looks at total reports as opposed to the number of companies choosing audit firms versus other service providers (OSPs).
In the four EU countries in the report (France, Germany, Italy, and Spain), where an overwhelming majority of reports are assured by audit firms, nearly 10% fewer reports were assured by audit firms in 2023 vs. 2022. Firms’ report consolidation efforts in those jurisdictions lowered the percentage of total reports assured by audit firms but not the number of companies using audit firms.
And, according to the news release, when companies obtain assurance for the first time, they typically focus on greenhouse gas-related information and start with OSPs who specialise in that area. OSPs are more likely to issue multiple greenhouse gas-related assurance reports (for example, an average of 2.5 assurance reports were generated per company in South Korea in 2023, an approach that increases the overall percentage of reports assured by OSPs).
The percentage of large companies in the UK using audit firms for assurance increased to 47% in 2023 from 42% in 2022.
“The largest global companies have responded well to voluntary systems of sustainability reporting and assurance, driven by investor demand,” IFAC CEO Lee White said in the news release. “With new global standards in place, regulators now have the toolkits to move from voluntary to mandatory disclosures over time, which we expect will further drive high-quality, consistent, and comparable sustainability-related information for the investing public and all stakeholders.
“IFAC and our members, including [the] AICPA and CIMA, remain committed to supporting this shift — advancing trust, good governance, and global alignment in sustainability disclosure, united in shaping a future where sustainability information earns the same level of trust as financial reporting.”
— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.