The International Auditing and Assurance Standards Board has published its final version of International Standard on Sustainability Assurance 5000, or ISSA 5000, to base a standard that would be the basis of practice for professionals engaging in sustainability assurance engagement. With more and more companies worldwide disclosing climate-related and other sustainability risks, opportunities, and impacts as a result of different emerging regulatory requirements, including the EU’s Corporate Sustainability Reporting Directive (CSRD) and IFRS climate and sustainability reporting standards from the International Sustainability Standards Board (ISSB), a new standard is coming along.
Many of these frameworks, such as the CSRD, require external assurance for sustainability reporting. This regulatory drive is in keeping with the increasing pressure from stakeholders-such as shareholders and activist groups-on companies to give assurance over ESG data, as independently reported. The majority of corporate executives have already felt this demand, KPMG finds. Meanwhile, an EY survey of finance professionals and investors finds significant support for thirdparty, independent assurance in strengthening the credibility of sustainability disclosures.
The IAASB issued its first-ever public draft for ISSA 5000 last year in the hope of providing a versatile framework for multiple sustainability reporting standards, which include those issued by the EU, ISSB, Global Reporting Initiative (GRI), and International Organization for Standardization (ISO). This is supposed to be a worldwide version applicable worldwide, something that IAASB Chair Tom Seidenstein said was the “global baseline” well able to fit into the European regulatory environment and others. Some companies will already have to present sustainability reports this year based on the new EU standards, and ISSA 5000 “fits the requirements of the specific EU as well as the timelines within the CSRD,” noted Seidenstein.
Such key features of ISSA 5000 are that it is applicable for both limited and reasonable assurance engagements, and it is adaptable enough to apply both traditional materiality assessments and double materiality, which refers to the concept used in CSRD through which companies are obliged to assess sustainability risks both on their operations and on external impacts on society and the environment.
Thirdly, the European Commission has asked CEAOB to provide recommendations on including ISSA 5000 within the standards concerning CSRD and it will become a significant opportunity for becoming one central tool of any efforts towards compliance with the EU. Moreover, an important advocate of the new standard is International Organization of Securities Commissions (IOSCO), being a very important policy forum where securities regulators can count on its support. IOSCO Chairman Jean-Paul Servais welcomed the timely effort of the IAASB in developing a “comprehensive international regulatory toolkit” for sustainability disclosures, with a framework-agnostic approach in line with IOSCO’s goal to improve public trust in sustainability reporting, according to the chairman of the board of ISSA 5000.