The new International Standard on Sustainability Assurance 5000 of the International Auditing and Assurance Standards Board, or IAASB, is actually said to be a significant major breakthrough for the sustainability reporting landscape. The ISSA 5000, or more commonly referred to as the new International Standard on Sustainability Assurance 5000, addresses an increasingly necessary need of dependable ESG data by providing a framework for the sustainability assurance that can be utilized globally from varied sectors and in widely disparate regulatory contexts.
This new standard was announced by the IAASB during an Accountancy Europe/IFAC webinar, in which IAASB Chair Tom Seidenstein reminded that it is the fruit of good collaboration. “The IAASB has constructed a global baseline that can function in every jurisdiction, in Europe, and elsewhere,” emphasized Seidenstein, pointing to the fact that the new standard is aligned with the EU’s Corporate Sustainability Reporting Directive (CSRD) and major international frameworks, such as the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).
Setting a Worldwide Benchmark for ESG Assurance
ISSA 5000 is positioned as an antidote to the swelling tide of sustainability reporting in which companies and investors increasingly demand independent verification over ESG claims. As businesses are seen to be obligated to offer full transparency concerning financial reports, both environmental and social impacts also have to be accounted for in depth. A weak standard of assurance within this sector has resulted in a lack of reliance and assurance in ESG data across sectors.
ISSA 5000 fills the gap by establishing a framework for consistent assurance processes of sustainability reports, including either limited or reasonable assurance engagements. The standard assimilates the conventional principle of materiality together with double materiality, which is increasingly fundamental to EU regulations. Such a double materiality will allow assurance providers to consider not only the potential risks to an organization but also the impact of such activities on society as a whole.
IOSCO Chairman Jean-Paul Servais said that he thanks the IAASB for timely issuance of ISSA 5000, in which it has rightly said, “A strong assurance framework for sustainability-related reporting needs to be focused on the public interest and should be profession – and framework – agnostic.” Standards like this are important for effective assurance of corporate disclosures much earlier, that is, by 2024.
Broad Consultation to Frame a Usable and Inclusive Standard
The result of a wide-ranging consultation, the ISSA 5000 standard is the outcome of making people from six continents come together through webinars, roundtables, and feedback sessions to arrive at a standard that may show diversity and be adopted by even the most divergent of cross-global regulatory environments and needs of business.
Similarly, an effort in making the global assurance profession move towards more sustainable and transparent practices is reflected by an IAASB’s stakeholder-driven approach. Given that sustainability reporting might cover many forms of non-financial data, the standard strives to offer a sound framework that is nevertheless pliable enough to work across different industries and types of organizations.
Tom Seidenstein was of the view that the approach of IAASB toward ISSA 5000 was of a flexible and reliable solution for organizations globally. The result is a standard that takes good care with extant international frameworks that ensure that sustainability information across global markets has credibility.
Alignment with EU Sustainability Regulations and Beyond
Perhaps the most material aspect of ISSA 5000 is its alignment to the European Union’s Corporate Sustainability Reporting Directive, CSRD; it applies to large companies conducting operations in the European Union, which must provide thorough reports on ESG performance. The European Commission has already indicated that it could recommend ISSA 5000 as one of the required standards under the CSRD framework, and this will build greater coherence in reporting requirements for sustainability if adopted across the EU.
Issa 5000 therefore aligns with the CSRD, reinforcing the EU leadership on sustainable reporting and assurance, thus giving every other jurisdiction the prospects of similar regulations to further boost the comparability and trustworthiness of global ESG data.
The fact that it can be harmonized with other top frameworks, such as ISSB and GRI, shows the IAASB is working towards the integration of ISSA 5000 into an already existing sustainability landscape. Organizations complying with these standards would easily adopt the ISSA 5000 due to the expansion of their current reporting practices, increasing chances for systematic and consistent assurance on sustainability.
Help with Implementation for Practitioners and Business
To encourage implementation of ISSA 5000, the IAASB has committed to developing a high-quality suite of implementation resources, such as guidance materials, video tutorials, and outreach initiatives. Implementation resources are expected to be released starting January 2025, to support practitioners with the required knowledge and tools that will enable them to implement seamlessly ISSA 5000 within their assurance engagements.
Implementation commitment happens at a time when the IAASB is attuned to the pains and challenges of implementing new standards, most particularly one as long and content-rich as ISSA 5000. The initiatives of the IAASB will be to ease the changes of the assurance providers and also help the companies align their ESG reporting practices toward the requirements of the standard.
Increasing Stakeholder Trust in ESG Assurance
With IOSCO endorsing ISSA 5000, the standards are likely to build stakeholders’ trust in sustainability reports. With the increasing utilization of ESG information in investor, regulators, and public use, independent assurance has also emerged as a very effective complement for ensuring completeness and accuracy of the sustainability claims. Based on growing demands for higher transparency and integrity with ESG reporting, ISSA 5000 provides a clear, consistent approach towards assurance.
The new standard goes beyond Europe. IAASB is advocating ISSA 5000 as the international benchmark in assurance of sustainability. As organizations and investors increasingly focus on sustainability, ISSA 5000 forms a route to reliable and stable ESG data, responsibility, and trust in companies for their corporate sustainability.
Looking Ahead
In the wake of increasing standardization in the assurance of sustainability, ISSA 5000 stands as a milestone development for the assurance of the same. With growing regulatory pressure and the increasing need of stakeholders for authentic ESG data, ISSA 5000 has come at the opportune time for businesses all over the world. As IAASB encourages the maximum adoption of the same, the capability of the standard to be aligned with the various existing frameworks and to adapt to various regulatory requirements has set ISSA 5000 forth as a foundational tool for the future of sustainability reporting.
In the coming months, everyone will watch whether the implementation resources of IAASB help to implement this new standard and to what extent the regulators embrace ISSA 5000 into the framework. In this regard, ISSA 5000 provides a pragmatic credible way forward for companies, investors, and stakeholders with an interest in sustainable practices to enhance global standards for ESG assurance.
Source
Content adapted from IAASB announcement and relevant details on the release of ISSA 5000 along with its alignment with international frameworks on sustainability.