Five Tips for Making the Most of Sustainability Assurance
No one has a crystal ball to tell them exactly how local and global economics and environmental and social challenges are going to shape their firm's long-term business performance. But that doesn't mean businesses don't try to second guess how these factors, and their response to them, will define future success.
This focus isn't limited to internal profit-making purposes either. Nowadays questions come at firms from all directions: clients, suppliers, NGOs, governments, shareholders, right down to the general public.
So what is the solution for a firm keen to inform about its corporate response to social, economic and environmental concerns? One crucial tool is sustainability assurance.
Consumers and investors are tired of being dismissed with lukewarm reports filled with adjective-stuffed declarations that, in the end, don't really say very much. Those of us on the receiving end of such statements have had our trust in sustainability communications eroded after hearing years of murky-eco claims.
Fortunately, regulators like the U.S. Federal Trade Commission and the U.K. Advertising Standards Agency have stepped in in recent years to mop up some of the dirtiest examples of greenwash. But core business audiences are still skeptical over what they are being told.
As a result, businesses committed to providing watertight information on their environmental, social and economic performance look to third parties that will put non-financial information and data to the test. An independent service provider helps businesses minimize reputation risks and rebuild a bridge of trust between both internal and external audiences.
While no one is forcing firms to put their sustainability performance down on paper, most execs realize that this is an integral part of their business, and the more reliable and detailed economic, environmental, social and governance (ESG) information available, the better.
Standards get higher by the day and firms' non-financial performance is already subject to increasing interrogation. Examples include how the 741 signatories to the UN Principles for Responsible Investment must ask the recipients of their investments to report on ESG issues, and to integrate this into annual financial reports; or how business customers request carbon management information through vehicles such as the CDP Supply Chain program and proprietary supplier questionnaires.
Who is helping firms put this information together? To take a closer look at the buyers and sellers in the sustainability assurance market, in the Verdantix report "Green Quadrant Sustainability Assurance Providers," we spoke with 15 buyers of assurance services (such as GHG management, evaluation of supply chain standards, and social and environmental management systems).
On the supply side, we interviewed practice leaders from 11 global assurance providers with revenues over $200 million and/or more than 500 employees. After hearing from both sides of the market, we identified five best practice recommendations as potential buyers attempt to select an assurance provider from the complex mix of accounting firms, specialist consultancies and certification firms offering these services:
1. Push for added value. Experienced buyers use the assurance process as a chance to test existing processes and evidence with a 'critical friend.' Just don't expect them to make direct recommendations -- acting in an advisory capacity would entail a conflict of interest.
2. Don't let words get in the way of actions. Focus on deliverables -- actual assessment activities -- rather than confusing terminology; suppliers and buyers may have different definitions of what 'verification' or 'assurance' actually means.
3. Test for capacity. Buyers must shortlist assurance providers with sufficient expertise across all the firm's material sustainability issues. If that's not possible, then multiple specialist assurance providers might be a better fit.
4. Assess experience with relevant standards. Look for a strong track record and knowledge of reporting, accounting and management standards. Inexperienced assurance practitioners with a 'tick-box approach' may push for inclusion of non-material issues irrelevant to stakeholders.
5. Remember your readers. Keep your core business audience in mind before purchase, and how best to meet their needs and expectations (all within your budget). There are a range of engagement options which should please everyone.
Verdantix identified six leading global players across the sustainability assurance market: Bureau Veritas, Deloitte, DNV, Ernst & Young, KPMG and PwC. These assurance providers demonstrate impressive expertise across multiple sustainable business issues and provide assurance services to a host of multi-billion dollar clients. That said, specialist firms may provide a better fit for engagements focused on specific issues, and by following our best practice recommendations, buyers will find the best match for their firm's requirements.
Verdantix clients can access the full report, "Green Quadrant Sustainability Assurance (Global)" at www.verdantix.com.
Photo CC-licensed by Ken Teegardin.