The call for detailed information on environmental, social and governance reporting (ESG) is growing louder, according to the Center for Audit Quality (CAQ).
Companies are increasingly prioritizing ESG, and investors say that the COVID-19 pandemic and racial injustice protests are strengthening the case for companies to provide understandable and reliable information on their ESG positions. However, the information is being provided in many different forms, CAQ says in a release.
A recent Government Accountability Office (GAO) analysis found that most institutional investors want more ESG information from companies, but when it is reported it’s “not always clear or useful.” Additionally, McKinsey & Company found that 97% of surveyed investors believe sustainability reporting – an example of ESG reporting – should be rigorously audited.
As a result, investors, government agencies, standard-setters and auditors are moving toward a market-based system that provides auditor assurance over ESG.
The CAQ has demonstrated how auditors can improve the reliability of ESG reporting in a recent report, “The Role of Auditors in Company Prepared ESG Information: Present and Future.”
“Auditors have long played a role in the reliability of traditional financial information, and they can do the same with ESG information,” says CAQ Executive Director Julie Bell Lindsay.
Useful ESG information requires broad adoption of existing reporting frameworks and standards. In just the last few weeks, the Sustainability Accounting Standards Board and the Global Reporting Initiative announced they are collaborating to provide compatible standards for sustainability reporting.
CAQ says, “As market stakeholders consider the future of company-reported ESG information, all signs point toward the desire for a globally accepted system designed to help companies present comparable, relevant, reliable and assured ESG information.”