IFAC on building trust in sustainability reporting

Posted on January 19, 2025 by Editor

The International Federation of Accountants (IFAC), in partnership with the We Mean Business Coalition and the Global Accounting Alliance, recently published the resource Building Trust in Sustainability Reporting and Preparing for Assurance. This guide provides a comprehensive roadmap for establishing effective governance arrangements and controls to bolster confidence in sustainability disclosures.

The guidance emphasises how governance and internal control systems can enable companies to align sustainability reporting with financial statement timelines. It also aims to reduce the likelihood of modified assurance conclusions and to meet investors' demands for a similar level of rigour in sustainability reporting as in financial disclosures. Importantly, it builds on previous IFAC resources, focusing on integrated internal control environments to connect sustainability and financial data, enhancing transparency and understanding of sustainability risks and opportunities.

A key recommendation is to extend internal controls over financial reporting to sustainability processes, supported by automated systems that enhance data governance, controls, and audit traceability. This integration not only improves data reliability but also facilitates compliance with global frameworks such as the ISSB's IFRS S1 and S2 standards, and the European Sustainability Reporting Standards (ESRS). Both require organisations to disclose governance processes and internal controls for managing sustainability-related risks.

Not covered in this guidance, but worthy of note, is that the - crucial - digitisation of sustainability reporting means there is a similar need to ensure that the tagged data itself is accurate, reliable, and consistent. Quality control over digital disclosures, including assurance on tagging accuracy, will be key to maintaining stakeholder trust in data drawn from these reports - and therefore central to ensuring the data they offer is useful for analysis.

Read the full guide here.