According to new data from the International Federation of Accountants (IFAC), the number of US global companies that received independent assurance on their environmental, social and governance (ESG) disclosures rose from 51% to 58% in 2020 compared to the previous year. The Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA), the latter two of which represent the unified voice of the Association of International Certified Professional Accountants.
The 2020 information released today is an update to last year’s first study by the accounting bodies, which examined global trends in both sustainability reporting and enforcement. This latest update offers the first benchmark of progress compared to baseline data. A follow-up study, which includes information from 2021, is expected to be published later.
When it comes to ESG enforcement, 82% of engagements were limited in scope in 2020, essentially the same as in 2019 (83%). Approximately 61% of assurance engagements were completed by audit firms worldwide, down slightly from the previous year (63%). Jurisdictions with some of the highest levels of confidence among professional accountants include Australia, France, Italy, Germany and Spain. In other countries, including South Korea, the United Kingdom, and the United States, most assurance activities are performed by service providers outside the accounting profession. Professional accountants have high professional standards, including independence, and are subject to regulatory oversight, which is critical in this space.
In terms of reporting, the study found that 92% of global companies provided some ESG data to investors through integrated, annual or stand-alone reports. The use or reference to the Sustainability Standards Board (SASB) standards more than doubled in 2020. This is important because the new disclosure proposals of the International Sustainability Standards Board (ISSB) incorporate and build on the SASB standards. (The SASB’s parent organization, the Value Reporting Foundation, will merge into the IFRS Foundation on August 1, 2022 to support the work of the ISSB.)
“It is encouraging to see the continued high level of reporting on sustainability information and the overall increase in safeguards around the world,” said IFAC Director General Kevin Dancy. “But our research shows us that 80% of companies use multiple frameworks or standards, resulting in data that is not consistent, comparable or useful for decision-making by investors, stakeholders or society at large. Sustainability reporting and enforcement will only reach their full potential when they are based on a harmonized global framework, led by the International Sustainable Development Standards Board’s comprehensive disclosure baseline.”
Data from the 2020 study also shows that 89% of companies provided at least some information in each of the four categories: greenhouse gases, other environmental factors, social and government. However, only 43% gave assurances for all four categories. The most common area for independent guarantees was greenhouse gases (95%).
Seventy percent of global companies that engaged a professional accounting firm to complete an ESG assurance application chose a firm that audits their financial statements.
“High-quality reporting requires high-quality assurance,” said Susan C. Coffey, CPA, CGMA, AICPA & CIMA, CEO of the Accounting Division. “Auditors already have a holistic view of a company’s risk profile, structure and processes, so it makes sense for this firm to be involved in ESG as well. Professionally qualified and licensed accountants have the necessary experience, objectivity, integrity and commitment to professional standards needed to build credibility in ESG reporting.”
IFAC and AICPA & CIMA work with Audit Analytics to understand the state of affairs related to environmental, social and governance (ESG) reporting and assurance practices on a global basis. An initial version of the study was published last year. This latest update looked at data from 1,400 global companies from the G20 countries, as well as Hong Kong SAR, China and Singapore. The full methodology is referenced in the study.
IFAC is a global organization of accountants that serves the public interest by strengthening the profession and contributing to strong international economies. IFAC consists of 180 members and associate members in 135 jurisdictions representing more than three million accountants in public practice, education, public service, industry and commerce.
About the Association of International Certified Professional Accountants and AICPA & CIMA
The Association of International Certified Professional Accountants (the Association), representing the AICPA and CIMA, advances the global accounting and finance profession through its work on behalf of the 689,000 AICPA and CIMA members, students and professionals in 196 countries and territories. Together, we are a global leader in public and management accounting through advocacy, support of CPA licensure and specialty credentials, professional education, and thought leadership. We build trust by empowering our members and engaged professionals with the knowledge and opportunities to be leaders in expanding prosperity for a more inclusive, resilient and sustainable future.
The American Institute of CPAs (AICPA), the world’s largest membership association representing the CPA profession, sets ethical standards for its members and US auditing standards for private companies, not-for-profit organizations, and federal, state, and local governments. It also develops and evaluates the unified CPA exam and creates a pipeline of future talent for the accounting profession.
The Chartered Institute of Management Accountants (CIMA) is the world’s leading and largest professional body for management accountants. CIMA works closely with employers and sponsors of advanced research, constantly updating its requirements for professional qualifications and professional experience to ensure that it remains the employer of choice for hiring financially-trained business leaders.