This article, the second of two parts, provides an overview of the International Standard on Sustainability Assurance 5000, which is included in Syllabus Area D of the Professional Diploma in Sustainability.

The first article in this series covered the application and objectives of ISSA 5000 General Requirements for Sustainability Assurance Engagements (ISSA 5000) and provided a brief overview of acceptance of a sustainability assurance engagement, and planning. This second article considers evidence, completion, and reporting in sustainability assurance engagements.

Introduction

It is necessary for the assurance practitioner to gather evidence to support their conclusions in any assurance engagement. ISSA 5000 gives detailed guidance on the gathering of evidence in sustainability engagements.

Reasonable assurance will require more complex procedures, similar to a financial statement audit, such as detailed testing or on-site visits. Limited assurance techniques are more specific in nature, often restricted to analytical review and management inquiries. The approach to evidence gathering is therefore impacted by the level of assurance required and practitioners will need to ensure their procedures will enable them to gain sufficient appropriate assurance evidence.

The assurance evidence obtained should be reviewed using professional judgement. Responses from management should be viewed with an element of professional scepticism and considered in the light of the substantive work undertaken.

Assurance practitioners may also face further challenges when gathering evidence, such as:

• Sustainability information may be based on estimates and forward-looking information;
• Sustainability information may be derived from third party sources; and
• Internal controls for sustainability may still be evolving.

Estimates and forward-looking information

Unlike financial information, which is usually historical in nature and based on past events, sustainability information is often forward-looking and based on estimates and future plans. Organisations will often produce scenarios based on best-estimate or hypothetical assumptions which might be subject to management bias or uncertainty. Evidence can therefore be difficult to obtain, and the assurance practitioner may need to exercise a significant level of judgement in determining whether they have obtained sufficient and appropriate evidence.

ISSA 5000 gives guidance over the use of estimates in sustainability reporting – particularly in the approach to giving assurance over forward-looking information (see paras 146L and 146R, A450-A452, A454-A455L).
 

Information from third party sources

There may also be a particular issue with the data used in the engagement, as much of it may come from third party sources not under the control of the client.

This may include information from sources, such as:

• Other companies within the supply chain (suppliers, contractors)
• External providers – eg carbon offset registries, industry benchmark specialists, external carbon emissions calculation tools.

The reliance which can be placed upon the evidence from third party sources will need to be assessed by the assurance practitioner using their professional judgement. There will need to be an understanding of how the sustainability data is collected and what, if any, recognised standards it adheres to. This is an area where the use of an independent expert may be required to identify whether any specialist information is consistent and relevant to the industry.

Internal controls

As sustainability reporting is relatively new, it is likely internal controls over sustainability information will not be as extensive as internal controls over financial information. There may be deficiencies in the internal controls and tools used by the client to collect sustainability data and generate sustainability information, and the controls may not be as established or robust as those within the financial reporting system. The internal controls over the financial system will also be more familiar to the assurance practitioner. This means there is a higher risk of the assurance practitioner not identifying control deficiencies, and this should be appropriately considered when gathering evidence.
 

Reporting

Finally, ISSA 5000 provides detailed guidance on the requirements for reporting in sustainability assurance engagements. As well as providing guidance on the content of the assurance report (see para. 190), it also provides illustrative assurance reports (see Appendix 3 of ISSA 5000). IAASB has also published a set of illustrative practitioner’s assurance reports as part of the ISSA 5000 supplemental guidance (see further resources section below).

ISSA 5000 recognises that the nature of sustainability reporting means the preparation of sustainability information may be subject to inherent limitations and therefore there may be inherent limitations in the assurance which can be provided. For example, many environmental disclosures rely heavily on estimates or are difficult to measure reliably. ISSA 5000 gives specific guidance on reporting where the assurance practitioner feels there are inherent limitations in preparing the sustainability information.

Key takeaways

ISSA 5000 is a significant development in providing guidance on assurance of sustainability information. While there are extensive requirements included in the standard, the key headlines we have discussed are:

• Assurance practitioners may face various challenges when gathering sufficient appropriate assurance evidence.
• Reporting can be considerably different in nature from financial statement audits, and it is vital the users of the assurance report understand the level of assurance being provided and any inherent limitations.

Further resources:

• Sustainability reporting: working with estimates | ACCA Global
• Internal control over sustainability data | ACCA Global
• Sustainability Assurance Illustrative Reports │IAASB

Adapted from an article written by a member of one of ACCA’s examining teams