An empirical study of sustainability reporting assurance: current trends and new insights

Abstract

Purpose This study aims to examine trends in the global assurance practices of sustainability reports, updating and broaden the extant literature and proving new insights that could guide future research. Design/methodology/approach The data were collected for 12,783 companies and exploratory descriptive analyses of sustainability reporting assurance practices were undertaken. Findings The study shows that assurance growth is lagging behind the growth in sustainability reporting. It reveals that assurer switching is a common practice amongst companies. There is an increasing trend towards the use of the International Standard for Assurance Engagements 3000 by non-accounting assurers. Additionally, in terms of assurance providers, the study finds that accounting firms are dominating the market, however, engineering firms are fast increasing their share of the sustainability assurance market, whilst consulting firms’ share is decreasing. However, the switch towards consulting firms is higher than the switch towards accounting firms in the last switch period. Practical implications Overall, the results of this study provide insights about companies’ assurance practices for regulators, assurance providers and companies interested in assuring their sustainability reports. Social implications This study is relevant for companies’ stakeholders, including investors, to enhance their understanding of companies’ current assurance practices. Originality/value Prior studies on the assurance practices of sustainability reports are limited in scope (concentrate on large companies) and depth (examine accounting vs non-accounting assures and consider the evolving patterns at the institutional rather than firm-level). This study presents developments and trajectories of assurance practices to inform researchers and practitioners on the global trends by bringing an updated and broader perspective on the topic.

A snapshot of sustainability assurance market in New Zealand

“…Consistent with prior studies on different contexts (Alsahali and Malagueño, 2021;Boiral and Heras-Saizarbitoria, 2020;De Beelde and Tuybens, 2015;Perego and Kolk, 2012;Manetti and Toccafondi, 2012), the NZ sustainability assurance market is dominated by the Big Four accounting firms, which provided 10 of the 13 reports. Of these cases, they are also the financial statement auditor in nine cases, including two cases where assurance is provided for integrated reports.…”

“…Given the current level of assurance demand, it is also important for assurance service providers to ramp up capability and capacity to prepare for the mandate. As variations in assurance practices are well-documented by prior studies (Alsahali and Malagueño, 2021;Boiral and Heras-Saizarbitoria, 2020;De Beelde and Tuybens, 2015;Gürtürk and Hahn, 2016;Perego and Kolk, 2012), our suggestions also apply to other jurisdictions that are proposing sustainability information assurance requirements, such as the European Union (European Commission, 2021).…”

“…The dominance of accounting firms in the sustainability assurance market and tendency to provide limited assurance is commonly documented by extant research. Multi-country studies have reported such observations (Alsahali and Malagueño, 2021;Boiral and Heras-Saizarbitoria, 2020;De Beelde and Tuybens, 2015;Perego and Kolk, 2012;Manetti and Toccafondi, 2012), and so have examinations on specific settings such as Germany and the UK (Gürtürk and Hahn, 2016), Italy (Rossi and Tarquinio, 2017) and South Africa (Ackers and Eccles, 2015). Manetti and Toccafondi (2012) explain that the main reason why many assurance providers prefer limited assurance for sustainability information is due to its complexity and combination of quantitative and qualitative elements, which prevents guarantees of highly reliable verification.…”

Internal Auditor's Role in ESG Disclosure and Assurance: An Analysis of Practical Insights

“…While we are not able to support this finding statistically, we give practical evidence implying involvement of the IAF in ESG is currently dominated by consulting activities. This finding suggests that assurance growth is lagging behind the growth in sustainability reporting (Alsahali & Malagueño, 2021) Our results may therefore be useful in discussions about maximizing the organizational value the IAF provides. We identify areas of engagement bearing hidden potentials, which have to be considered against limited resources.…”

“…The IAF is expected to -bring a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes‖ (IIA, 2021), thereby tackling the largely unregulated nature of ESG matters. The scope of internal auditing's involvement in ESG should correspond to its overall nature and thus include both the assurance and the advisory component 4 5 , while leaving the advisory component largely unaddressed 6 . Given the scarcity of internal audit research (Behrend & Eulerich, 2019;Christ et al, 2021) and the ambiguity of its value-adding role Eulerich et al, 2021), we aim to take a holistic view of internal auditors generating value through both assurance and consulting in ESG.…”