Trends in external assurance of sustainability reports: spotlight on the USA
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Transcript of Trends in external assurance of sustainability reports: spotlight on the USA
T r e n d s i n e x T e r n a l a s s u r a n c e o f s u s Ta i n a b i l i T y r e p o r T s:
Spotlight on the USA
April 2013
In col laboration with:
a c K n o W l e d G M e n T s
Research and analysis
• Marjella Alma, Mike Wallace—Global
Reporting Initiative (GRI) Focal Point USA
• Louis Coppola, Dan Doyle—Governance
and Accountability Institute—GRI Data
Partner for Ireland, United Kingdom and
United States of America
Data provided by
• Rina Levy—Bloomberg LP
• Ian van der Vlugt—Global Reporting
Initiative (GRI)—Global Secretariat,
Amsterdam
• Louis Coppola—Governance and
Accountability Institute
Interviews undertaken by
• Gwendolyn White—Ball State University
and Marjella Alma—GRI Focal Point USA
Design and editing
• Curran & Connors, Inc.
T A B L E O F C O N T E N T S
•Introduction
•ExecutiveSummary
•SustainabilityReportingintheUSA
•ResearchMethodology
•ResearchLimitations
•AssuranceofSustainabilityReports—Definitions
•ProvidersofExternalAssurance
•LevelsofExternalAssurance
•ScopeofAssurance
•AssuranceStandards
•Conclusions
•RelevantDefinitionsandOrganizations
•AppendixA:InterviewQuestions
•AppendixB:BloombergData
•AboutGlobalReportingInitiative
•ThankYou
i N T r O d u C T i O N
The Global reporting initiative is an international organization that is operating all
over the world. Gri continuously develops its Sustainable repor ting Guidelines,
which has been adopted by organizations from 88 countries. The mission of Gri is to
make sustainability reporting standard practice. Gri actively promotes the practice
of sustainability reporting to increase the number of orga nizations that report, as
well as the quality of reporting. To support organizations that want to publish a
sustainability report, Gri of fers the Sustainability reporting Guidelines.
The Global Reporting Initiative is an international
organizationthatisoperatingallovertheworld.GRI
continuously develops its Sustainable Reporting
Framework, or “GRI Guidelines,” which has been
adopted by organizations from 88 countries. The
mission of GRI is to make sustainability reporting
standardpractice.GRI activelypromotes theprac-
ticeofsustainability reportingto increasethenum-
beroforganizationsthatreport,aswellasthequality
of reporting. To support organizations that want
to publish a sustainability report, GRI offers the
SustainabilityReportingGuidelines.
Next to theGRI Secretariat inAmsterdam,which is
GRI’smainexecutiveanddevelopmentbody,ithassix
FocalPoints1 (regionaloffices) in countries thatare
strategicallypivotal to thepracticeof sustainability
information disclosure and the availability of this
data to larger society. In order to encourage the
practiceof sustainability reporting in theUSA,GRI
establisheditsFocalPointUSAinNewYork.
Since GRI kicked off its presence in the USA, the
US-based team and its local network have often
been asked about the importance of the practice
of external assurance to sustainability reportspre-
paredbyAmerican companies. As thedemand for
nonfinancial performance is increasing—driven by
investors, rating agencies, regulators and other
stakeholders when analyzing the risks and value
creationofcompanies—thedemandforreliabledata
alsoincreases.
Since GRI recommends the practice of external
assurance in the GRI Guidelines2, the Focal Point
decided to explore the current trends in external
assurance in theUSA inorder tobetterunderstand
externalassurance.
The GRI Guidelines advise reporters to start
their reporting process by defining their material
sustainability, or “nonfinancial” issues, to create a
focusedstrategy,managementapproachandreport.
Determiningthisfocusincludesengagingstakehold-
ers inthisexerciseaswellasananalysisofthesus-
tainabilitycontext.Bothshouldhelpdrivethequality
ofthereport.
Throughdialogueandnarrative, civil society, inves-
torsandother stakeholders can interactwithorga-
nizations on their performance and transparency
andhelp fosterunderstandingof the linksbetween
sustainabilityandthecorebusinessstrategy.
Inorder to showcommitment to transparencyand
reliability, theorganizationmaychoose tohave the
reportexternallyassured.Obtainingexternalassur-
anceon sustainability informationand theunderly-
ingreportingprocessesisintendedtomakethedata
morereliableandtheorganizationmorecredible.
GRI’s Data Partner for the USA, Governance &
Accountability Institute (G&A Institute) started to
research external assurance trends for all sustain-
ability reports that got published in 2011with the
aimofsheddinglightonthecurrentstatusofexter-
nal assurance in theUSAaswell as clarificationof
GRI guidance on this particular matter. After all
reportspublished in2011hadbeencataloguedand
analyzedbyG&AInstituteandGRIFocalPointUSA,
theGRIteamworkedwithGwenWhiteatBallState
Universitytointerviewthecompaniesthathadcho-
senassuranceandhavethempresentsomeperspec-
tiveonthevalueandfutureofexternalassuranceof
sustainabilityreports.
GRIiscurrentlydevelopingthenextgenerationofits
SustainabilityReportingGuidelines (G4).GRI’s guid-
anceonexternal assurance isnotunder revision in
theG4development process. This research report
shouldhelpinformreportingorganizationsandothers
onthecurrentstateofexternalassuranceintheUSA.
1Australia,Brazil,China,India,SouthAfricaandUnitedStatesofAmerica.2GRIGuidelines,versionG3,releasedOctober2006.
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
Thisreportcoversresearchconductedtoassessthe
current stateofexternalassuranceof sustainability
reporting in theUS,whileplacing these trends into
thecontextandperspectiveoftheglobalsituation.
Global trend analysis shows continued growth in
sustainability reporting around the world. Within
thereportinguniverse, reporters increasinglychose
external assurance of their sustainability report.
Although the growth in reporting numbers in the
USAisoutpacingtheglobalaverageinthepasttwo
years,theUSAisstillsubstantiallybehindintermsof
bothintegratedreportingandexternalassurance.
K E y F i N d i N G S 3 :
• The report shows that in theUSA, only 10 percent (26 out of 269) of GRI-based sustainability reports
obtainedexternalassurancein2011.Theinternationalpercentageismuchhigherat38percent.
• GRI’slatestSustainabilityReportingGuidelines,theG3anditsupdateG3.1,introducedtheApplicationLevel
systemwithA,BandC indicating the levelof transparencyof the report.Most assured reports (in this
report,thosedesignatedwitha“+”symbol) intheUSAin2011areApplicationLevelBGRI-basedsustain-
abilityreports.Globally,theseweremorelikelytobeonthehighestleveloftransparency,namelyApplication
LevelAreports.
• Someof the26assured reportscontainedmore thanoneassurancestatement;30assurancestatements
wereidentified.
• The30assurancestatementsidentified(fromreportsdesignatedwitha“+”symbol)wereperformedbydif-
ferentassuranceproviders:accountancy,engineeringorprofessionalservicefirms.
E X E C u T i V E S u M M A r y
Through interviewswith the organizations that had their GRI-based sustainability reports externally
assured,twoquestionswereaskedregularlybytheseorganizationsplayinga largerole inthedecision-
makingprocessofexternalassurance.
1
First, interviewees lookedatwhat valueassurancecouldprovideataparticular stage in the reporting
process.in other words, what are you hoping to achieve with assurance and do you feel fully informed
of the different providers and approaches? Thematurity levelandnature in their reportingprocesses
andnatureoftheirbusinesswerekeyfactorsfordecidingonthepreferredproviderandapproach.
2
Second,intervieweestalkedabouttherigorandperceivedcredibilityoftheexternalassuranceapproach
andprovider.does the selected provider and approach correspond with what you are expecting or
hoping to achieve?Alreadyexisting tieswith theassuranceprovider for financial reportingaswell as
practical considerationsas towhichpartsof thebusiness to improvewerekey factors indetermining
whichproviderwouldbedeliverthisservicebest.
3BasedondatatakenfromGRI’sSustainabilityDisclosureDatabase,accessedinOctober2012,database.globalreporting.org.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page5
S u S T A i N A B i L i T y r E P O r T i N G i N T H E u S A
6KPMGInternationalSurveyofCorporateResponsibilityReporting2011,http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate-responsibility2011.pdf.
Thepastdecadehasshowncontinuousgrowthinthe
number of organizations reporting publicly on
diverseaspectsof their sustainabilityperformance.
According to the KPMG International Survey of
Corporate Responsibility Reporting2011,95percent
of the largest250public companies in theworld—
G250—issuedsustainabilityreports,and80percent
didthisonthebasisofGRI’sSustainabilityReporting
Guidelinesin2011.6
Historically,most sustainability reports have been
published in Europe and Asia, but in the past two
years reporting numbers in theUS have increased
by 44 percent (according to GRI’s Sustainability
Disclosure Database), rapidly outpacing the global
growthinsustainabilityreporting,whichisestimated
tobea20percentincrease.
GRI,with theassistanceof itsUSDataPartner, the
Governance&AccountabilityInstitute,hasidentified
a totalof333 sustainability reports thatwerepub-
lished in2011byorganizationsbased in theUnited
States.Of the 333 reports, 244werepublishedby
publiclytradedcompanies.Another57reportswere
issuedbyprivatelyownedcompanies,eight reports
by nonprofit organizations and twelve reports by
public institutions. In12 instances,asubsidiaryofa
foreignbusinessissuedareport.
236 organizations applied the G3 Guidelines; 33
appliedG3.1.Oftheremainder,16organizationsref-
erencedGRIand48organizationsproducedsustain-
ability reports thatdidnot (explicitly)mention the
useoftheGRISustainabilityReportingGuidelines.
A totalof269organizationsmadeuseof theG3or
the G3.1 Guidelines and included a GRI Content
Index.Ofthese269organizations,187(69.5percent)
declaredanApplicationLevelfortheirreport.
Ofthose187organizationsthatdeclaredApplication
Levels,only26ofthereportsincludedanApplication
Levelwith a “+” symbol, indicating that the report
wasverifiedbyathirdpartyandincludedanexternal
assurancestatement.
In terms of absolute numbers, reporting has been
takenupbyvariousindustries intheUSA.Themain
sectors reportingare foodandbeverageproducts,
computers and technology, electric utilities and
healthcare.
Globally,38percentofGRI-basedreportsincludinga
GRIContent Index inGRI’s SustainabilityReporting
Disclosuredatabaseareassured, asmarkedby the
“+” symbol, and this percentage has grown in the
pastyearsfrom32percentin2008.TheUSpercent-
ageof10percentismuchlower.
Another major trend in reporting is integrated
reporting. Integrated reportingasproposedby the
IIRCisaformofcorporatereportingthatprovidesa
clearandconciserepresentationofhowanorganiza-
tion creates value,nowand in the future.An inte-
grated report is one that could bring together
material informationabout anorganization’s strat-
egy,governance,performanceandprospects.Again,
theUS levelof thispractice ismuch lower thanthe
global average.Only six percent ofGRI-based sus-
tainabilityreportsweredeclaredbythereportersas
“integrated reports” in comparison to 20 percent
globallyin2011.
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
GRI-basedsustainabilityreports2011USA
LevelA
LevelA+
LevelB
LevelB+
LevelC
LevelC+
Undeclared
0 20 40 60 80 100
Theresearchmethodologyconsistedoftwophases:
The first phaseconsistedofdeskresearchondatafromGRI’sSustainabilityDisclosureDatabase,rawdatafromtheBloombergdatabaseandtrendanalysisfromtheKPMG’s International Survey of Corporate Responsibility Reporting 2011.4
Inthisphase,analysiswasperformedondatacontainedinGRI’sSustainabilityDisclosureDatabase.Thisdata-baseincludesthesustainabilityreportspublishedbetween1999and2012ofwhichGRIisaware.From1999to2010,thedatabaseonlycapturedtheGRI-basedsustainabilityreports.Asof2011,thedatabasealsoincludesother sustainability reports,butGRIacknowledges that thedata isnot complete, asGRIdoesnot knowallsustainabilityreportsthatarepublished.AllchartsincludedinthisreportarebasedonreportsincludedintheGRISustainabilityDisclosuredatabase.
TheresearchanalyzesGRI-basedsustainabilityreportsinthedatabasethatwerepublishedbetweenJanuary2008andDecember2012,witha closer focuson reportspublished in2011 (most likely coveringdata fromcalendaryear2010).Theresearchfocusesoncalendaryear2011asGRIstartedtotrackdatafieldsonexternalassuranceinthisyearforGRI-basedsustainabilityreportspublishedintheUSA.
r E S E A r C H S T E P S
• International trendswereanalyzedby reviewing thenumberofassurancestatements through identifyingassuredGRI-basedsustainabilityreports.Forpurposeofthisresearch,aGRI-basedsustainabilityreport isdefinedasonethatusestheG3orG3.1GuidelinesandcontainsaGRIContentIndex.
• Inthedatabase,the“+”symbolindicatesthatthereportingorganizationhasobtainedexternalassurance.TheresearchonlylookedatassuredGRI-basedreportsthatdeclaredthis“+”symbol.
Please note that the Application Level system operates under the premise that a “+” should only be declared by a reporting organization when it believes the assurance engagement has been conducted on the basis of GRI’s six key qualities for assurance (see box 1). By studying the reports that declared a “+” in 2011, GRI does not confirm the validity of this “+” declaration.
r E S E A r C H M E T H O d O L O G y
4http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate-responsibility2011.pdf.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page7
• Internationaltrendspresentedinthispapercomprisedreportingperiods2008until2012.
• Forpublicationyear2011,alargersubsetofexternalassurancedata(i.e.,typeofprovider)wasstudiedandpresented inthispublication.Thismoreelaboratesubsetofdataonexternalassurancewasnotcapturedbefore2012byGRI.
• USspecifictrendswereidentifiedbyanalysisofassuredreportsinpublicationyear2011.Afteridentifyingthese reports, the researchers reviewed thepublishedassurance statements indetail for informationonscope, level, assurance provider, standards etc. The second phase consisted of phone interviewswithAmericancompanies thathad their sustainability reportexternallyassured in2011.Theoutcomesof theinterviewsareincludedasanonymousquotesinthispublication,andtheinterviewquestionscanbefoundinAppendixA.
ThesecondarysourcesthatarereferencedinthispublicationaretheKPMG International Survey of Corporate Responsibility Reporting 20115andtheBloombergdatabase.Bloombergranaseparateanalysisasacontribu-tiontothispublication.ThisrawdataisonlyaccessibletosubscribersoftheBloombergterminalandislocatedintheESGsectionofthisdatabase.Bothsourcescaptureexternalassurancedataandbothenablethisresearchtobeplacedintoaglobalcontext.
5http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate-responsibility2011.pdf.
• TheGRISustainabilityDisclosureDatabaseincludesallreportsthatGRIand/oritsDataPartnershaveidenti-
fied.Registrationof sustainability reportswithGRI isnota requirement,and therefore reportsexist that
havenotbeenincludedinthisresearch.
• Thispublicationstudiesthe26assuredGRI-basedreportsthatexplicitlydeclarethe“+”symbolintheUSand
arecapturedinGRI’sSustainabilityDisclosuredatabase.Thisshouldbeconsidereda limited sampleasthe
aboveevidenceshowsthatotherassuranceengagementsmighthavebeenperformedwithoutthe“+”being
declaredaccordingtoGRI’smethodology.
• A“+”declarationismadebyareportingorganizationandshouldbebasedonGRI’ssixkeyqualitiesforassur-
ance (seebox1).Thevariety inassurancestatements indicatesvarying interpretationsandapplicationof
thesekeyqualities,i.e.,someassuranceengagementsonlylookatafewsustainabilityindicatorsortopics,
whereasotherapproachesassesstheentirereportincludingtestsofunderlyingprocesses.
• SomeGRI-basedsustainabilityreportsdonotusetheApplicationLevelsystem.Inthedatabase,suchreports
are classifiedas “GRI-undeclared” (withaContent Index)or “GRI-referenced” (withoutaContent Index)
reports.Forthesereports,thedatabasedoesnottrackwhethertheyhaveundergoneassurance.
• TherearealsoGRI-basedsustainabilityreports,declaringanApplicationLevelofA,BorC,thathaveassurance
statements,butwithouta“+”symbol.These falloutsideof thescopeof thedesk research.Someof these
assuranceengagementshavebeenidentifiedduringthisresearch.Eightofthesearelistedinthispublication.
• Tosupplementthedataanalysis,15ofthe26identifiedorganizationswereinterviewed.
r E S E A r C H L i M i T A T i O N S
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA
“ G R I S HOU L D UND ER S TAND WHAT vA R I OU S F I RM S
A R E D O I N G A N D WH AT S TA N DA R D S T H E Y A R E
F O L L OW I N G D U R I N G T H E R E P O R T I N G P R O C E S S .
A S SUR ANCE S TANDARDS NEED TO HAvE vA LUE .”
“ GR I SHOULD REQU IRE A S SUR ANCE . I T K EEP S E v ERY-
ONE ON A L E vEL P L AY ING F I E LD .”
“ I T ’ S NOT T HE RO L E O F GR I TO PR E S CR I B E C ER TA IN
A S SUR ANCE PROv IDER S OR APPROACHE S . I T I S F INE
TO ENDOR SE C ERTA IN A S SUR ANCE S TANDARDS , BUT
NOT IN T ERMS OF WHO I S QUAL I F I ED TO PROv IDE I T.
T HAT ’ S THE BUS INE S S O F ACCRED I TAT ION BOD I E S . ”
CompanyRepresentative
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page9
A S S u r A N C E O F S u S T A i N A B i L i T y R E P O R T S — D E F I N I T I O N S
W H A T i S i T ?
Theuseof third-party independent reviewsof sus-
tainability reports is intended to increase the trust-
worthiness of disclosed information. The terms
“assurance,” “external assurance,” “verification,”
“audit,” “certification,” “attestation,” “checks” and
“third-party opinions” are used interchangeably
by sustainability practitioners, but definitions and
interpretationsmaydiffer.
The topic of external assurance of sustainability
reportsisofparticularsignificanceinglobalmarkets
astheneedforcrediblesustainabilitydataincreases.
Financial markets rely on credible and verifiable
financial data, and market mechanisms will con-
tinually seek third-party validation of information
available inpublicdomain,be that financial and/or
nonfinancial.With sustainability reportingmaturing
andmorestakeholdersdependingontheavailability
of reliable data, the importance of external assur-
anceincreases.
Reporters and report users are increasingly inter-
ested inhowexternal assurance canhelp improve
sustainability disclosure, and many view a third-
partyassessmentasthenextstepinthesustainabil-
ity reporting journey. GRI uses the term “external
assurance”asanoverarching term to coverawide
rangeof approachesof thirdparties assessingGRI-
basedsustainabilityreports.
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
r E F E r E N C E S T O E X T E r N A L A S S u r A N C E i N T H E G r i r E P O r T i N G G u i d E L i N E S
ThereferencesofexternalassuranceintheGRIReportingGuidelines:
BOX1:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING
1 ChoicesonAssurance(pg36,GRISustainabilityReportingGuidelines,versionG3)
Organizations use a variety of approaches to enhance the credibility of their reports. Organizations may have systems of internal controls in place, including internal audit functions, as part of their processes for managing and reporting information. These internal systems are important to the overall integrity and credibility of a report. However, GRI recommends the use of external assurance for sustainability reports in addition to any internal resources.
A variety of approaches are currently used by report preparers to implement external assur-ance, including the use of professional assurance providers, stakeholder panels, and other external groups or individuals. However, regardless of the specific approach, it should be conducted by competent groups or individuals external to the organization. These engagements may employ groups or individuals that follow professional standards for assurance, or they may involve approaches that follow systematic, documented, and evidence-based processes but are not governed by a specific standard.
GRI uses the term “external assurance” to refer to activities designed to result in published conclusions on the quality of the report and the information contained within it. This includes, but is not limited to, consideration of underlying processes for preparing this information. This is different from activities designed to assess or validate the quality or level of performance of an organization, such as issuing performance certifications or compliance assessments.
Overall, the key qualities for external assurance of reports using the GRI Reporting Framework are that it:
• Is conducted by groups or individuals external to the organization who are demonstrably competent in both the subject matter and assurance practices;
• Is implemented in a manner that is systematic, documented, evidence-based, and character-ized by defined procedures;
• Assesses whether the report provides a reasonable and balanced presentation of performance, taking into consideration the veracity of data in a report as well as the overall selection of content;
• Utilizes groups or individuals to conduct the assurance who are not unduly limited by their relationship with the organization or its stakeholders to reach and publish an independent and impartial conclusion on the report;
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page11
BOX1:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING
• Assesses the extent to which the report preparer has applied the GRI Reporting Framework (including the Reporting Principles) in the course of reaching its conclusions; and
• Results in an opinion or set of conclusions that is publicly available in written form, and a statement from the assurance provider on their relationship to the report preparer.
As indicated in Profile Disclosure 3.13, organizations should disclose information on their approach to external assurance.
GRIApplicationLevels(pg5,GRISustainabilityReportingGuidelines,versionG3)
Upon finalization of their report, preparers should declare the level to which they have applied the GRI Reporting Framework via the “GRI Application Levels” system. This system aims to provide:
• Report readers with clarity about the extent to which the GRI Guidelines and other Reporting Framework elements have been applied in the preparation of a report.
• Report preparers with a vision or path for incrementally expanding application of the GRI Reporting Framework over time.
Declaring an Application Level results in a clear communication about which elements of the GRI Reporting Framework have been applied in the preparation of a report. To meet the needs of new beginners, advanced reporters, and those somewhere in between, there are three levels in the system. They are titled C, B, and A. The reporting criteria found in each level reflect an increasing application or coverage of the GRI Reporting Framework. An organization can self-declare a “plus” (+) at each level (eg., C+, B+, A+) if they have utilized external assurance. An organization self-declares a reporting level based on its own assessment of its report content against the criteria in the GRI Application Levels.
In addition to the self-declaration, reporting organizations can choose one or both of the follow-ing options:
• Have an assurance provider offer an opinion on the self-declaration,
• Request that the GRI check the self-declaration.
GRIPrincipleReliability(pg17,GRISustainabilityReportingGuidelines,versionG3)
Reliability
Definition: Information and processes used in the preparation of a report should be gathered, recorded, compiled, analyzed, and disclosed in a way that could be subject to examination and that establishes the quality and materiality of the information.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA
BOX1:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING
Explanation: Stakeholders should have confidence that a report could be checked to establish the veracity of its contents and the extent to which it has appropriately applied Reporting Principles. The information and data included in a report should be supported by internal controls or docu-mentation that could be reviewed by individuals other than those who prepared the report. Disclosures about performance that are not substantiated by evidence should not appear in a sustainability report unless they represent material information, and the report provides unam-biguous explanations of any uncertainties associated with the information. The decision-making processes underlying a report should be documented in a manner that allows the basis of key decisions (such as processes for determining the report content and boundary or stakeholder engagement) to be examined. In designing information systems, reporting organizations should anticipate that the systems could be examined as part of an external assurance process.
ProfileDisclosure3.13(pg22,GRISustainabilityReportingFramework,versionG3)
3.13 Policy and current practice with regard to seeking external assurance for the report. If not included in the assurance report accompanying the sustainability report, explain the scope and basis of any external assurance provided. Also explain the relationship between the reporting organization and the assurance provider(s).
GRI does not make recommendations on which assurance provider to choose or which assurance approach to use.
The reporting organization should select its assurance provider on the basis of these key quali-ties and, provided they are fulfilled, only then declare a “+” for its GRI sustainability report.
During a GRI Application Level Check (see glossary), GRI does not assess whether the external assurance for a report meets the key qualities for assurance identified by GRI, and it offers no opinion on whether this “+” is justifiable. The GRI Application Level Check itself is also not an external assurance engagement. The Application Level Check is complementary to assurance, indicating the extent to which the G3 or the G.31 Guidelines have been applied.
“ THERE ARE INCONSISTENCIES IN THE REQUIREMENTS
FOREXTERNALASSURANCETHATLIMITTHEvALUEAND
EFFECTIvENESSOF IT.”—QuotefromCompanyRepresentative
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page13
W H O i S S E E K i N G A S S u r A N C E i N T H E u S A A N d W H y ?
Parallel to the growth of sustainability reporting,
thereisariseinthenumberofsustainabilityreport-
ers seeking assurance. According to the KPMG
International Survey of Corporate Responsibility
Reporting 2011, 46percentof the reportingGlobal
250useassurancetoverifyandassesstheirsustain-
abilitydata,andoverthelastsixyearsthispercent-
age has been stable. Of those G250 companies
seeking assurance, more than 70 percent obtain
assurancefromaccountancyfirms.
In the US, federal securities law requires publicly
traded companies to submit an externally assured
financial statement. Tomeet the legal obligations,
such financial audits have to be conducted at the
highest level,which is called reasonableassurance.
In theUSA, the AICPA7 issued the AT101,which is
anattestation standard for financial reporting,but
whichisreferencedinsomeofthe30assurancestate-
mentsforsustainabilityreportsinourlimitedsample.
LookingataninternationalsetofGRI-basedsustain-
ability reports captured in GRI’s Sustainability
DisclosureDatabase, external assurancehasgrown
from32 percent to 38 percent between 2008 and
2011.8 Out of 34 countries included in the KPMG
International Survey of Corporate Responsibility
Reporting 2011, theUSA ranked32nd,withonly13
percent seeking assurance on their sustainability
report. Analysis of GRI’s Sustainability Disclosure
Databaseshowsverysimilarfigures,with15percent
oforganizationsseekingassuranceinNorthAmerica,
belowthelevelofallothercontinents.
Asofthedateofthispublication,theGRI-basedsus-
tainability reports released in 2012 suggest an
upward trend, with almost half of them having
soughtexternal assurance.More2012analysis can
befoundintheconclusionofthisreport.
Assurancelevelsvaryacrosscontinentsforreportspublishedin2011
NorthAmerica
LatinAmerica
Africa
Oceania
Asia
Europe
NoExternalAssurance
ExternalAssurance
0% 20% 40% 60% 80% 100%
7SeeDefinitions:AICPA.8SustainabilityDisclosureDatabase,September2011.
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
GRI-based sustainability reporting in theUSgrewby44percent from2010 to2011.Of the187GRI-based
sustainabilityreports(withaGRIContentIndex)publishedin2010,18reportingorganizationsdeclareda“+”
symbol(9.6percent),comparedto26outof269reports(9.7percent)in2011.Inabsoluteterms,thenumber
ofreportswitha“+”symbolgrewbyeightreports.Threeorganizationsthatdeclareda“+”symbolin2010did
notrepeatthisin2011:onedidnotissueareport,andtwoissuedareportbutdidnotdeclarea“+”symbol.
Thetablesbelowshowthoseorganizationsthatdeclared“+”symbolsin2010and2011.Thereportingorgani-
zationshouldselectitsassuranceprovideronthebasisofthesekeyqualitiesand,provided they are fulfilled,
onlythendeclarea“+”symbolforitsGRIsustainabilityreport.
In2010:
ApplicationLevelA+(7) ApplicationLevelB+(6) ApplicationLevelC+(5)
DowChemical AMBProperty MohawkIndustries
FreeportMcMoran Bristol-MyersSquibb Praxair
GoLiteLLC CliffsNaturalResources Qualcomm
HessCorporation Prologis SouthwestAirlines
NewmontMining StateStreet TeradataCorporation
PacificNorthwest UPS
Nat.Lab
SouthernCopper
The table below shows the 26 organizations that declared a “+” symbol in 2011; they are organized by
ApplicationLevel:
ApplicationLevelA+(6) ApplicationLevelB+(18) ApplicationLevelC+(2)
Alcoa AMBProperty 3M
DowChemical BankofAmerica MohawkIndustries
Freeport-McMoran Bloomberg
HessCorporation BristolMyers-Squibb
NewmontMining BucyrusInternational
PacificNorthwest CliffsNaturalResources
Nat.Lab Clorox
Coca-ColaEnterprises
H.J.HeinzCompany
Kimberly-Clark
Nisource
NorthernTrust
Praxair
Qualcomm
SouthwestAirlines
StarbucksCoffee
StateStreet
UPS
Themajorityoftheassuredreportsin2011(18outof26),wereApplicationLevelBreporters.Also,allwere
business corporationsexcept forPacificNorthwestNat. Lab,which is apublic institutionownedby theUS
DepartmentofEnergy.Bloombergwastheonlyprivatelyownedbusinessinthissample.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page15
BOX2:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING
Inthecourseoftheresearch,eightadditionalassurancestatementswereidentifiedfromthelistof 2011 published GRI-based reports. These organizations used the GRI framework for theirreporting,andincludedaGRIContentIndex,butdidnotdeclarea“+”symbol.ThereasonmightbethatthereporterdidnotbelievetheassuranceengagementwasincorrespondencewithGRI’ssixkeyqualitiesforassuranceorthatthereporterwasunawareofthepossibilityofdeclaringa“+”symbol.
Other sustainability reports that have
(sections) assured:
Gri references
AbbottLaboratories NoApplicationLeveldeclared
Chevron NoApplicationLeveldeclared
Cummins NoApplicationLeveldeclared
ExxonMobil NoApplicationLeveldeclared
HewlettPackard B
IntelCorporation A
PinnacleWestCapitalCorporation NoApplicationLeveldeclared
WyndhamWorldwide C
Amongthe333sustainability reports inGRI’sdatabase thatwere releasedbyUSorganizations in2011, it is
likelythatthereareadditionalreportsthatsoughtassurancebutwerenotformallydocumentedassuchinthe
GRIdatabase.Forthisreason,Bloombergdatawasconsulted.Between2009and2011,Bloomberg’sdatabase
recorded24,39and36examplesof“verification”insustainabilityreports,respectively.Thosecompaniesthat
disclosed sustainability information canbe found inAppendixB. In classifyinganESG report as “verified,”
Bloomberg does not assess whether the statement in the report is in correspondence with the GRI six
keyqualitiesonassurance. It shouldbenoted thatmany reports in theUSAchoose tohaveonly theirGHG
emissionsassured.
The different approaches taken by KPMG, Bloomberg andGRI in capturing external assurance data show
similar trendsalbeitbasedondifferentmethodologies.KPMG looksatpercentagesoforganizationsseeking
assuranceof the largest 250public companiesworldwide and the largest 100 companies in 34 countries.
Bloomberglooksat“verification”ofallpubliclytradedcompaniesintheUS.Forpurposeofthisresearch,GRI
only lookedat thoseUSorganizations thatdeclareda “+” symbolon theirGRI-based sustainability reports
publishedin2011.
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
The tablebelowmaps the26organizations, as identified in theGRIdatabase in2011, againstGRI’s sector
classification.Mining andmetals has five reporting companies and financial services has four companies
declaringa“+”ontheir2011GRI-basedsustainabilityreport.
Organization Sector ApplicationLevel
SouthwestAirlines Aviation B+
DowChemical Chemicals A+
Praxair Chemicals B+
3M Conglomerates C+
MohawkIndustries ConsumerDurables C+
HessCorporation Energy A+
Nisource EnergyUtilities B+
BankofAmerica FinancialServices B+
Bloomberg FinancialServices B+
NorthernTrust FinancialServices B+
StateStreet FinancialServices B+
Coca-ColaEnterprises FoodandBeverage B+
H.J.HeinzCompany FoodandBeverage B+
StarbucksCoffee FoodandBeverage B+
Kimberly-Clark ForestandPaper B+
BristolMyersSquibb HealthCareProducts B+
Clorox Household&Personal B+
UPS Logistics B+
Alcoa Mining&Metals A+
BucyrusInternational Mining&Metals B+
CliffsNaturalResources Mining&Metals B+
Freeport-McMoran Mining&Metals A+
NewmontMining Mining&Metals A+
PNNL PublicAgency A+
AMBProperty RealEstate B+
Qualcomm Telecommunications B+
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page17
P r O V i d E r S O F E X T E r N A L A S S u r A N C E
“ S INCE THE COMPANY I S A TOP 10 0 BR AND, THE Y UNDER-
S TAND THAT THE SUS TA INAB I L I T Y REPORT AND THE A S SUR-
A N C E E N G AG EMEN T P RO C E S S N E ED T O B E B U S I N E S S
C R ED I B L E . A L SO , S I N C E T H E F I RM DOE S OUR F I NANC I A L
ACCOUNT ING , I T A L RE ADY HA S KNOWLEDGE OF THE COM-
PANY W I T H R EGARDS TO DATA S T R E AMS AND I T WA S A
NATUR AL F I T TO CHOOSE THE PROv IDER .”
“ OUR COMPANY WORKED W I TH THE S AME A S SUR ANCE PRO -
v IDER FOR THE PRE v IOUS TWO Y E AR S , SO THERE I S A C ER -
TA I N FAM I L I A R I T Y B E T WE EN T H E C OMPAN I E S WH I C H
A L LOWS TH INGS TO GO SMOOTHLY. OUR A S SUR ANCE PRO -
v I D ER UNDER S TOOD T H E ENv I RONMEN TA L A S P EC T S O F
T HE COMPANY AND US ED K E Y ME T R I C S TO COMPREHEN -
S I v ELY ANALY z E THE COMPANY AND MAKE SURE A L L REL-
E vANT ARE A S WERE COvERED IN THE REPORT.”
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
A total of 24different assuranceproviderswere identified in the limited sample of 26 externally assured
GRI-based reports producing 30 assurance statements, and below they are aggregated into accountancy,
engineeringandprofessionalservicesfirms:
“ T H ER E WER E NO S I T E v I S I T S . E v ER Y T H I NG WA S DONE
E L EC TRON IC A L LY. ”
Forthe26reportersinthesample,therewere30assurancestatementsissuedintotal.BristolMyersSquibb
and3Mundertooktwodifferentassuranceengagements.UPSundertookthreedifferentassuranceengage-
ments,twowithanaccountancyfirmandonewithanengineeringfirm.
1311
06
ProfessionalServicesFirms
EngineeringFirms
AccountancyFirms
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page19
Thetablebelowdisplayswhichreportingorganizationschosewhattypeofassuranceproviderbrokendownby
accountancyfirm,engineeringfirmorprofessionalservicesfirm:
ByAccountancyFirm ByEngineeringFirm OtherProfessionalServicesFirm
Alcoa BankofAmerica 3M(2)
CliffsNaturalResources Clorox AMBProperty
NorthernTrust Coca-ColaEnterprises Bloomberg
StarbucksCoffee DowChemical BristolMyersSquibb(2)
UPS(2) HessCorporation BucyrusInternational
NewmontMining Freeport-McMoran
Nisource H.J.HeinzCompany
Praxair Kimberly-Clark
StateStreet MohawkIndustries
SouthwestAirlines PacificNorthwest
UPS Nat.Lab
Qualcomm
6AssuranceStatements 11AssuranceStatements 13AssuranceStatements
“ I N AUGUS T/ S EP T EMBER WE S TART ED THE IN I T I A L CONvER-
S AT I ONS I N WH I CH WE TA L K ED A BOUT T HOS E S I T E S WE
BEL I E v ED THAT RE A L LY NEEDED TO BE LOOKED AT. SOME
SMA L L ER S I T E S A R E P I C K ED U P ON A SMA L L ER C YC L E ,
E v ERY 5 Y E A R S FOR I N S TANC E . A S I T E v I S I T COU LD B E
ONE DAY TO T HR EE DAY S D EP END ING ON T H E S I z E O F
OPER AT IONS/EM I S S IONS THAT THE S I T E REPRE SENT S AND
WHE THER I T I S A COMPL E X S I T UAT I ON . T H E P ROv I D ER
PRODUC E S R EPORT S FOR E ACH v I S I T, AND T H E Y DO AN
OvER A L L REPORT AT THE END. THE WHOLE PROCE S S L A S T S
UNT I L JUNE .”
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
The International FederationofAccountants (IFAC)
definesanassuranceengagementas“oneinwhicha
practitioner expresses a conclusion designed to
enhance thedegreeof confidenceof the intended
users other than the responsible party about the
outcomeoftheevaluationormeasurementofasub-
ject matter against criteria.”9 This research found
referencestotwodifferentlevelsofassuranceinthe
sampleof30assurance statements; the two levels
are limited(ormoderate)assuranceandreasonable
(orhigh)assurance.
There isonefactorthat indicates limitedorreason-
able assurance, and that is whether the opinion
given ispositiveornegative. IFACdistinguishes rea-
sonable and limited assurance as follows: “The
objectiveofareasonableassuranceengagementisa
reductioninassurance engagement risk(seedefini-
tions) to anacceptably low level as thebasis for a
positiveformofexpressionofthepractitioner’scon-
clusion.Theobjectiveofalimitedassuranceengage-
mentisareductioninassuranceengagementriskto
alevelthatisacceptableinthecircumstancesofthe
engagement,butwherethatriskisgreaterthanfora
reasonableassuranceengagement,asthebasisfora
negative form of expression of the practitioner’s
conclusion.”10
From the30assurance statements in the sample,16 indicated that limitedassurancehadbeenperformed.
Therewereonlythreeassurancestatementsthatclaimedtobereasonableassurance.Examplesofreasonable
assuranceinoursampleweresoughtbyUPS(obtainedfromDeloitteandSGS)andStarbucksCoffee(obtained
fromMossAdams).Alevelofassurancewasnotspecifiedin11cases.
L E V E L S O F E X T E r N A L A S S u r A N C E
LevelsofassuranceforUSreportspublishedin2011
Reasonable
Limited
NotSpecified
0 2 4 6 8 10 12 14 16 18
11
3
16
9http://www.ifac.org/sites/default/files/downloads/b003-2010-iaasb-handbook-framework.pdf.10http://www.ifac.org/sites/default/files/downloads/International_Framework_for_Assurance_Engagements.pdf.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page21
S C O P E O F A S S u r A N C E
For16outof the30assurance statements, awide
rangeofsustainabilitytopicswereassured.Itneeds
to be noted that although a wide range of topics
wereassured,someengagementsonlycoveredKPI’s
whereasothersweremorethorough,i.e.,alsocover-
ing underlying internal control processes. Out of
these30statements,7indicatedthattheassurance
hadbeenperformedforthetopicofgreenhousegas
(GHG)emissionsonly.Another7statementscanbe
classified as assurance of specific sections, which
were environmental sustainability topics, such as
water,carbonandwasteinall7cases.
“ E X T ERNA L A S SUR ANCE G I v E S YOU T HE UNDER S TAND ING
O F B E I NG ON T H E R I GH T T R AC K . I T A L SO S HOWS T HAT
YOU ARE B E ING T R ANSPARENT.”
“ WE WANT TO PROvE OUR ME THODOLOG I E S AND S Y S T EMS .
WE O F T EN FAC E I S SU E S W I T H OUR S I T E - S P EC I F I C DATA
S E T S , AND WE N EED TO G E T T H EM CORREC T ED B E FORE
GO ING TO PUB L I C AT ION . T H E DATA NEED S TO B E ACCU -
R AT E AND REL I AB L E . QUAL I TAT I v ELY, WE WANTED TO GE T
S OME UNDER S TAND ING O F WHAT S OME OTHER COMPA -
N I E S A R E D O I NG A ND HOW OUR S Y S T EM S C OMPA R E
AGA INS T OUR PEER S . ”
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
Thebelowtableoutlinesthe26organizationsdeclaringa“+”bythescopeoftheverificationorassuranceren-
dered for their sustainability reports. Considering GRI’s six key qualities on assurance, one can question
whethersustainabilitywithoutassuranceonawiderangeofsustainabilitytopics,shouldwarranta“+”level.
WideRangeof
SustainabilityTopicsSpecificSections GHGOnly
AMBProperty 3M(2) Alcoa
BankofAmerica BristolMyersSquibb(1) Bloomberg
BucyrusInternational CliffsNaturalResources BristolMyersSquibb(1)
Coca-ColaEnterprises H.J.HeinzCompany Clorox
DowChemical Praxair UPS(2)
Freeport-McMoran StarbucksCoffeeCompany
HessCorporation
Kimberly-Clark
MohawkIndustries
NewmontMining
Nisource
NorthernTrust
PacificNorthwestNat.Lab
SouthwestAirlines
StateStreet
Qualcomm
UPS(1)
“ E ACH Y E A R S I N C E T H E F I R S T A S SUR ANC E ENGAGEMEN T
HA S TAKEN L E S S AND L E S S T IME . T HE PROCE S S U SUA L LY
TA K E S A F EW MONTH S F ROM S TA R T TO F I N I S H . T H ER E
WERE vAR IOUS FACE -TO - FACE AND PHONE MEE T INGS . T HE
PROv IDER GAvE S TATUS UPDAT E S AT 3 0 PERCENT, 5 0 PER -
C ENT, 8 5 PERCENT, AND 95 PERCENT COMPL E T ION R AT E S .
T H E F I RM K E P T T H E F I N A L R E POR T F O R 2 1 DAY S F O R
RE v I EW BY S EN IOR PARTNER S , WH ICH I S v ERY FORMAL .”
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page23
Belowareexamplesof assurance statementsas illustrationsofdifferent variationsof approaches in terms
of level of assurance (limited/reasonable), scope of assurance (range of topics), coverage (KPI’s/internal
processes)andboundary(entities):
CompanyAssuranceProvider
Examples
3M TrucostandAshleyHamiltonConsulting
LevelLimited/Moderate
Scope:Waste,waterconsumption,vOCsemissions
Boundary:Allfacilitiesglobally(withanexemptionofnewacquisitions)
Two Assurance Providers: Trucosthasverifiedtheenvironmentalpartofthereport,andAshleyHamiltonConsultinghasverifiedthesocialandgovernanceinformation.
BucyrusInternational ISOSGroup
LevelLimited/Moderate
Approach:AlthoughonlytwentymaterialindicatorsarerequiredforaBlevelreport,thisexternalassur-ancestatementisbasedontheresultsofacompre-hensiveverificationofalldisclosedindicators.
CliffsNaturalResources Ernst&Young
LevelLimited/Moderate
Approach/Coverage:Wehavecarriedoutalimitedassuranceengagementinrelationtoselected2010performanceindicatorsdenotedbythe✔symbolintheGRIIndexonpages57and58ofCliffs’2010SustainabilityReport.
H.J.HeinzCompany SKMEnviros
LevelNotSpecified
Scope/Coverage:TheKeyPerformanceIndicatorswereselectedbyH.J.HeinzCompany.ThefollowingKPI’swereverified:• Electricity• Fuels• GHGemissions• Wateruse• Solidwaste
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
CompanyAssuranceProvider
Examples
StarbucksCoffee MossAdamsLLP
LevelReasonable/High
Scope:Ourresponsibilityistoexpressanopiniononthedatalistedbelowbasedonourexamination:• Greencoffeepurchasesandaveragepriceper
poundoftotalcoffeepurchased• C.A.F.E.Practicescoffeepurchasesandpurchasesas
apercentageoftotalcoffeepurchased• Fairtradecertifiedgreencoffeepurchasesandpur-
chasesasapercentageoftotalcoffeepurchased• Certifiedorganiccoffeepurchasesandpurchasesas
apercentageoftotalcoffeepurchased• Amountofcommitmenttoinvestmentinfarmer
loansandnumberoffarmers
UPS Deloitte Approach:WithintheUPSSustainabilityReportfor2010,therearetwostatementsbyDeloitte.Thefirstisan“IndependentAccountants’Report.”Thesecondisan“IndependentAccountant’sExaminationReport.”
LevelLimited/Moderate
Scope /Level: Statement1:Basedonourreview,noth-ingcametoourattentionthatcausedustobelievethatsuchsustainabilityreportdoesnotinclude,inallmaterialrespects,therequiredelementsofGlobalReportingInitiativeG3.1GuidelinesforApplication Level Bsustainabilityreports.11
LevelReasonable/High
TheStatementofGreenhouseGasEmissionsofthecompanyfortheyearendedDecember31,2010pre-sentedinAppendixBwasexaminedbyus,andinourreportdatedMay27,2011,weexpressedanunquali-fiedopinionofthatStatement.
Astheabovereportexcerptsshow,nexttovaryinglevelsandscopeofassurance,assurancestatementsmight
takedifferentapproachestowardsboundaryandcoverage.
11Often,butnotinallcases,ApplicationLevelChecksformpartofanexternalassuranceengagement.Inaddition,areportingorganizationmightopttoobtainanApplicationLevelCheckdirectlyfromGRI.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page25
“ S EN IOR MANAGEMENT WA S NOT IN T ERv I EWED. THE
A SSURANCE PROv IDER SPOKE TO THE ENv IRONMENTAL
MANAGER D I R EC T LY B EC AU S E T H E F O CU S O F T H E
A S SUR ANCE ENGAGEMENT WA S ENv IRONMENTAL .”
“ OUR PROv IDER REQU IRED A L ARGE AMOUNT OF DATA
AND SUPPORT ING MAT ER I A L S I N ORDER FOR T HEM
TO PROv I D E T H E I R E X T ERNA L A S SUR ANC E ON T H E
REPORT.”
OntheApproach
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA
“ WE SHARED T HE SU S TA INAB I L I T Y R EPORT AND T HE
OUTCOMES OF THE A S SUR ANCE ENGAGEMENT W I TH
S EN I O R MANAGEMEN T. I T H E L P S U S TO IMPROv E
OvER T IME AND S E T GOAL S . ”
“ T H E R E POR T WA S S H A R ED AND D I S CU S S ED W I T H
TWO vERY S EN IOR C- SU I T E E X ECUT I v E S . T HE REPORT
WA S NOT S H A R ED W I T H T H E AUD I T C OMM I T T E E .
T WO S EN I O R E X E CU T I v E S A L S O S AT I N O N T H E
DEBR I EF ING MEE T ING FOR THE ENGAGEMENT.”
“ NO, NOT CURRENT LY. ”
“ THE REPORT I S R E v I EWED BY THE C FO AND C EO, AND
OUR GENER A L COUNC I L . T H E OU TCOME S A RE A L SO
R E v I EWED B Y A P PROPR I AT E E X ECU T I v E S F O R T H E
vAR IOUS BUS INE S S UN I T S . ”
OnSharingtheOutcomeswiththeC-Suite
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page27
A S S u r A N C E S T A N d A r d S
Thetablebelowshowswhichdocumentsweremen-
tionedinthe30assurancestatementsas“assurance
standards.” A third of assurance statements (10
statements for8organizations)didnotmake refer-
encetoanyassurancestandards.
The most-referenced assurance standard was
AA1000AS,whichwasmentioned innineoutof30
assurance statements. The ISAE3000 standard and
AICPAAT-101(whicharerequiredforusebyaccoun-
tancyfirms)wereeachreferenced in fiveassurance
statements.Threeassurancestatementsmentioned
ISO14064-3 as an assurance standard,which pro-
videsguidance for thevalidationandverificationof
greenhousegasassertions.Oneassurancestatement
mentioned theeGrid2007andEPA40CFRasassur-
ancestandards,butthesearenot.
“ I T G I v E S THE COMPANY AND S TAKEHOLDER S CONF IDENCE
T H AT T H E NUMB ER S A R E C O R R E C T A ND C OMP L E T ED
ACCORD ING TO PROPER S TANDARDS . ANOTHER vA LUE HA S
TO DO W I TH EDUCAT ION . D I L I GENT LY US ING ACCOUNT ING
S TANDA RD S H E L P S T H E EN T I R E C OMPAN Y G A I N MOR E
KNOWLEDGE ON THE PURPOSE OF SUS TA INAB I L I T Y REPORT-
ING . A L SO, THE L ARGE AMOUNT OF DATA COL L EC T ED DUR-
ING THE A S SUR ANCE ENGAGEMENT G I v E S T HE COMPANY
L E v ER AGE AND H E L P S TO EN SURE T HAT T H E C A L CU L A -
T IONS ARE CORREC T.”
Otherpublications, referencedocumentsand reporting frameworks thatwerementioned,butnotasassur-
ancestandards,were:GRISustainabilityFramework,GRIGuidelines,GRIG3Protocols,theBloombergCarbon
EmissionsCalculationProcess, the IPIECA/APIOil andGas IndustryGuidance, ISO14001,OHSAS18001, the
ICMMSDFrameworkassuranceprocedureandtheAA1000APS.
AssuranceStandards–2011USReports
AICPAAT-101/ISAE3000
AA1000AS
ISO14064-3
0 02 04 06 08 10 12
03
05 05
09
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
O N T H E M A j O r C H A L L E N G E F O r A S S u r A N C E
“ MANY PEOPL E TH INK THE MA IN CHA L L ENGE I S COS T, AND
OTHER S TH INK THAT I T I S JUS T TOO L ARGE OF A TA SK TO
P ROv I D E A S SU R ANC E F O R A S U S TA I N A B I L I T Y R E P O R T.
O T H ER S F E E L T H AT C OMPAN I E S A R E NO T O RG AN I z ED
ENOUGH TO COMPL E T E THE TA SK CORREC T LY. I F DATA I S
IM PO R TAN T ENOUGH TO S P END T IM E A N A LY z I N G , I T
SHOULD BE A NATUR AL S T EP TO CHECK I T W I TH ANOTHER
SOURCE TO ENSURE MORE CONF IDENCE . T HE F I R S T REPORT
M IGH T B E AN E XC EP T ION , BU T OTHER R EPORT S SHOULD
BE A S SURED. A S SUR ANCE OF SUS TA INAB I L I T Y REPORT ING
I S R I GH T I N L I N E W I T H T H E Ov ER A L L GOA L S O F T H E
COMPANY.”
“ THE B IGGE S T CHA L L ENGE I S MAK ING SURE THAT THE R IGHT
PROCE S S E S ARE IN P L ACE TO ENSURE ACCURAT E DATA .”
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page29
TheresearchshowsthattheUSAisrapidlycatching
up when it comes to increases in the number of
sustainability reports being issued. There are now
more reports thaneverbefore;however, the focus
on improving sustainability reports by utilizing
assurance is laggingbehind substantially.Outofall
GRI-based reports (with an Application Level and
an Index) released in 2011, 38 percent underwent
assurance on a global scale compared to a mere
10percentintheUSA.
There is a large rangeofbothassuranceproviders
andapproachesintheUSmarket.In2011,thereare
26reportersthatdeclarea“+”symbol,andbymak-
ingthisdeclarationtheyareoftheopinionthatthe
externalassuranceis inlinewithGRI’ssixkeyquali-
ties. Some reporters use multiple providers for
different parts of the report, some reporters only
have their GHG emissions verified and some hire
assurance providers that use assurance standards
(such as AICPA AT-101, AA1000AS etc.) whereas
othersdonot.This variety calls fora closer lookat
the “+” declarations and should encourage both
companiesand their stakeholders to takea careful
lookat these claims.AmyPawlicki, fromassurance
standard developer AICPA, says, “We are very
pleased that GRI has conducted this research
studytogainabetterunderstandingofthird-party
verification on GRI-based reports. This research
represents an important step in helping the pre-
parersandusersofsustainabilitydisclosuresbetter
assess thediversityof assuranceoptions available
tothem.”
Awiderangeofplayersareactive inprovidingassurance,rangingfromtraditionalaccountancy,engineering
andotherprofessionalservicesfirms.Mostassuranceengagementsarebeingcarriedoutbyengineeringfirms
andotherprofessionalservicesfirms,whereasgloballyaccountancyfirmshavethebiggestmarketshare.The
interviewswith reporters that chose some formofexternal assurancehighlighted that thedecision-making
processonassurancerevolvesaroundtwomain ideas: first, interviewees indicatedthat itwas important to
assesswhatvalueassurancecouldprovideataparticularstageinthereportingprocess.Second,interviewees
explainedthatperceivedcredibilityoftheexternalassuranceapproachandproviderwasanimportantconsid-
erationaswell.
Itwillbe interestingtoseehowexternalassurancetrendswilldevelop intheUSA. It is likelythat the initial
phaseofmoreandmore companiesgetting startedwith sustainability reportingwill beaccompaniedbya
secondphasethatcanbecharacterizedasmorecompaniesandtheirstakeholderslookingcriticallyatthequality
of sustainability informationand looking forways toenhance thatquality.Halfway through theyear2012,
numbersfromGRI’sdatabaseshowedthattherewerealready30organizationsthatdeclareda“+”symbolwith
GRIwrappingupits2012figuresinthefirstquarterof2013,thesenumbersseempromising.Also,thedistri-
butionof assuranceproviders in this sample seems to be suggestive of changes in themarket,with over
40percentofprovidersbeingtraditionalaccountancyfirms,followedbycloseto35percentfromengineering
firmsand25percentfromotherprofessionalservicesfirms.Thefactthatbothaccountancyfirmsaswellas
engineeringfirmsaremorelikelytomakeuseofassurancestandardsmightsuggestamaturingmarket.
International figures (basedonGRI2012data) suggest thataccountancy firmsnowhaveover70percentof
themarket,withengineeringandotherprofessional services firmshavinga relatively evendistributionof
theremainder.
C O N C L u S i O N S
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
r E L E V A N T d E F i N i T i O N S A N d O r G A N i Z A T i O N S
A A 1 0 0 0 A SThe firsteditionof theAA1000AssuranceStandardwaspublished in2003byAccountAbilityas theworld’s
firstsustainabilityassurancestandard.Itwasdevelopedtoassurethecredibilityandqualityofsustainability
performanceand reporting, andwas the resultof anextensive, two-year,worldwideconsultation involving
hundreds of organizations. The 2008 edition of the AA1000Assurance Standard, AA1000AS (2008), is its
secondedition.TheAA1000AS(2008)iscompatiblewiththemethodologyofISAE3000andAICPAAT-101.
A C C O u N T A B i L i T yAccountAbility is a think tank and advisory services firm focusing on “mainstreaming” sustainability into
organizationalthinkingandpractice.Byproviding innovativeandpracticalsolutions,theyaimtohelpclients
improvetheirbusinessperformance,createvalueandbuildasustainablecompetitiveadvantage.Theirwidely-
usedstandards (e.g.AA1000AS), research,andstrategicadvisoryservicesaimtohelporganizationsbecome
moreaccountable,responsibleandsustainable.12
A i C P ATheAmericanInstituteofCertifiedPublicAccountants(AICPA)istheworld’slargestmemberassociationrepre-
sentingtheaccountingprofession,withnearly386,000membersin128countriesanda125-yearheritageof
servingthepublicinterest.AICPAmembersrepresentmanyareasofpractice,includingbusinessandindustry,
publicpractice,government,educationandconsulting.TheAICPAsetsethicalstandardsfortheprofessionand
US auditing standards for audits of private companies, nonprofit organizations, federal, state and local
governments.
A i C P A A T 1 0 1 1 3
AT101wasdevelopedbytheAmericanInstituteofCertifiedPublicAccountants(AICPA)toputrequirementsin
placeforCPAsexaminingand issuingreportsoncontrolsoversubjectmatterotherthanfinancial reporting.
ThesestandardsarecodifiedwithinATsection101,Attest Engagements,oftheattestationstandards.
A S S u r A N C E E N G A G E M E N TAnassurance engagement is one inwhich a practitioner expresses a conclusiondesigned to enhance the
degreeofconfidenceoftheintendedusersotherthantheresponsiblepartyabouttheoutcomeoftheevalua-
tionormeasurementofasubjectmatteragainstcriteria.(DefinitionbyIFAC;seebelowforIFAC.)
12www.accountability.org.13http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AT-00101.pdf.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page31
A S S u r A N C E E N G A G E M E N T r i S K“Assuranceengagementrisk istheriskthatthepractitionerexpressesaninappropriateconclusionwhenthe
subjectmatter information ismateriallymisstated. Ina reasonableassuranceengagement, thepractitioner
reducesassuranceengagement risk toanacceptably low level in the circumstancesof theengagement to
obtainreasonableassuranceasthebasisforapositiveformofexpressionofthepractitioner’sconclusion.The
levelofassuranceengagementriskishigherinalimitedassuranceengagementthaninareasonableassurance
engagementbecauseof thedifferentnature, timingorextentofevidence-gatheringprocedures.However,
ina limitedassuranceengagement, thecombinationof thenature, timingandextentofevidence-gathering
proceduresisatleastsufficientforthepractitionertoobtainameaningfullevelofassuranceasthebasisfora
negativeformofexpression.Tobemeaningful,thelevelofassuranceobtainedbythepractitionerislikelyto
enhancetheintendedusers’confidenceaboutthesubjectmatterinformationtoadegreethatisclearlymore
thaninconsequential.”14
B L O O M B E r GThe company was founded in 1982 and within 10 years had over 10,000 customers for the Bloomberg
Professionalservice,agroundbreakingprivatenetworkwithdata,analyticsandotherfinancialinformation.In
thesamedecade,BloomberglaunchedBloombergNewsandopenedofficesaroundtheworld.Subscriptions
totheBloombergProfessionalserviceskyrocketedinthenextdecade,andthecompanylaunchedBloomberg
TradebookandBloomberg.com.BloombergEnvironmental,SocialandGovernance (ESG)productsenableall
investorsacrossarangeofassetclassestounderstandtherisksandopportunitiesassociatedwithpotential
investmentsor counterparties as themarket continues toembraceESG factors.Bloomberg is aGRI Sector
LeaderandworkscloselywithGRI’sFocalPointUSAinawarenessraisingactivitiesintermsofthevalueofESG
andsustainabilityissues.15
F i N A N C i A L A u d i TAfinancialaudit,ormoreaccurately,anauditoffinancialstatements,istheverificationofthefinancialstate-
mentsof a legal entity,with a view toexpress anauditopinion. Theauditopinion is intended toprovide
reasonableassurancethatthefinancialstatementsarepresentedfairly,inallmaterialrespects,and/orgivea
trueandfairviewinaccordancewiththefinancialreportingframework.Thepurposeofanauditistoenhance
thedegreeofconfidenceofintendedusersinthefinancialstatements.
G r i A P P L i C A T i O N L E V E L SApplicationLevels indicatetheextenttowhichtheGRI’sG3orG3.1SustainabilityReportingGuidelineshave
beenapplied.TheA,BorClevelscommunicatewhichpartsoftheReportingFrameworkhavebeenaddressed
andwhichsetofdisclosuresareincluded.Theydonotgiveanopiniononthesustainabilityperformanceofthe
reportingorganization,thequalityofthereport,orformalcompliancewiththeG3orG3.1Guidelines.
14AsdefinedbyIFAC:http://www.ifac.org/sites/default/files/downloads/International_Framework_for_Assurance_Engagements.pdf.15www.bloomberg.com/company.
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
G r i A P P L i C A T i O N L E V E L C H E C KAGRIApplicationLevelCheck isapaid serviceprovidedbyGRIandothers that confirmsandpublicizes the
extenttowhichareporthasaddressedGRI’sstandarddisclosures.
G r i C O N T E N T i N d E XTheGRIContent Index listseveryG3orG3.1disclosureaddressed ina report.The Indexcomplements,and
shouldcorrespond to,anApplicationLeveldeclaration.Awell-constructed Indexenables readers toaccess,
understand and communicate aboutGRI-based reportsmore readily. The Index communicateswhichGRI
disclosureshavebeenreportedandthereasonwhycertaindisclosureshavenotbeenreported.TheIndexis
thegateway to thesustainabilityperformancedata. It shouldhaveclearanddirect referencing,and ifused
online,canbeaninteractivenavigationtool.ThroughtheGRIContentIndex,reportusersshouldeasilyfindthe
specificGRIdataofinterest.
i F A CTheInternationalFederationofAccountants(IFAC)isaglobalorganizationfortheaccountancyprofessionthat
workswith itsmember organizations to protect the public interest by encouraging high-quality practices
aroundtheworld.IFACisfacilitatingtheadoptionandimplementationofhigh-quality-standardsandguidance.
GRI’sFocalPointUSAislocatedwithintheIFACofficesinNewYorkCity,USA.
i S A E 3 0 0 0The ISAE3000 (2003) is the International StandardonAssuranceEngagements.This is a recognized interna-
tionalstandardtoensurethequalityofassurancework,includingreportverification,aswellasassuranceon
environmentalperformance,corporategovernance, internalcompliance,stakeholderengagementandother
areascentraltocorporateresponsibility.DevelopedbytheInternationalFederationofAccountants(IFAC)asa
successortotheISAE100,theframeworkisdesignedtoguideaccountants,auditorsandassuranceprofession-
alswhenundertakingnonfinancialaudits.
I S O 1 4 0 6 4 - 3 : 2 0 0 6ThisISOstandardspecifiesprinciplesandrequirementsandprovidesguidanceforthoseconductingormanag-
ingthevalidationand/orverificationofgreenhousegas(GHG)assertions.Itcanbeappliedtoorganizationalor
GHGprojectquantification,includingGHGquantification,monitoringandreportingcarriedoutinaccordance
with ISO 14064-1 or ISO 14064-2. ISO 14064-3:2006 specifies requirements for selectingGHG validators/
verifiers, establishing the level of assurance, objectives, criteria and scope, determining the validation/
verificationapproach, assessingGHGdata, information, information systemsand controls, evaluatingGHG
assertionsandpreparingvalidation/verificationstatements.
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page33
V A L u E
• Whatdoyouseeasthevalueofexternalassurance?
C H O i C E O F A S S u r A N C E
• Whatwasyourrationaleforchoosingyourassuranceproviderandapproach?
• DidyouhaveaclearunderstandingoftheGRI’srequirementstodeclarethatyourreporthasbeenexternally
assuredandthereforeshouldgeta“+”?
• Howdidyoudecidethatyourreportwasa“+”report?
G r i A N d A S S u r A N C E
• WhatroleshouldGRIplaywithregardstotheexternalassuranceofsustainabilityreporting?
F u T u r E O F A S S u r A N C E
• Shouldexternalassuranceofsustainabilityreportingbecomemandatory?
• Whatdoyouconsiderthemainchallengesofassuranceofsustainabilityinformation?
A P P r O A C H
• Didyourassuranceproviderpresentaclearplan(methodologyanddefinitivetasks)fortheirassurancepro-
ceduresandexplaintherationalebehindtheirapproach?
• Didyouunderstandtheassuranceprovider’sapproachandexecutionoftheassuranceengagement?
• Didyouunderstandthedifferenceinscopeofanengagementtoprovideassuranceonanentiresustainabil-
ityreportvs.thescopeofanengagementtoprovideassuranceonselectedindicators?
C O M P O S i T i O N O F T E A M
• Howmanyassuranceengagementteammembersparticipated(includingtheirprofessionallevelsandexpe-
rience)intheengagement?
• Didyouunderstandtherolesandresponsibilitiesofeachintheexecutionoftheengagement?
A S S u r A N C E E N G A G E M E N T
• Wereyouaskedtoprovideunderlyingsupportforthedataandinformationincludedinyoursustainability
reportaspartoftheassuranceengagement?
• Did the assurance provider challenge assumptions you made for any of the GRI indicators subject to
assurance?
A P P E N d i X A : i N T E r V i E W Q u E S T i O N S
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
• Didtheassuranceproviderraiseobservationsaroundyourreport’sfulfillmentoftheGRI’sreportingprinci-
plesfordefiningcontent:materiality,stakeholderinclusiveness,sustainabilitycontextandcompleteness?
• Didtheassuranceproviderraiseobservationsaroundyourreport’sfulfillmentoftheGRI’sreportingprinci-
plesfordefiningquality:balance,comparability,accuracy,timeliness,clarity,andreliability?
• Didyourassuranceproviderdiscusstherisksofmaterialmisstatementandfraudconsiderationswithyour
CSRlead?
• Didyourassuranceproviderfocusondocumentingaclearunderstandingofthedatamanagementprocess
foreachindicatorandconfirmtheirunderstandingwiththedataprovider?
• Didyourassuranceproviderreviewtheinternalcontrolsyourorganizationhasinplacetoensureaccurate
andcompletedata?
• Iftheassuranceproviderwasprovidinglimitedassurance,weresitevisitsincludedinthescopeoftheassur-
anceengagement?
i N T E r V i E W S
• Wereyouaskedtoparticipateininterviewsaspartoftheassuranceengagement?
Ifso,
• DidyourassuranceproviderinterviewyourdataprovidersoftheKPIswithinscope?
• DidyourassuranceproviderinterviewseniormanagementwithinyourCSR/CRcommitteetounderstandthe
overallreportingstructure,reportingobjectivesandsustainabilitypriorities?
d u r A T i O N
• Whatwasthedurationoftheassuranceengagement,i.e.,numberofweeksfromkickoffmeetingtotheissu-
anceoftheassurancestatement?
O u T C O M E S
• Didyourassuranceproviderprovideyouwithaninternalmanagementreportonobservations/findingsfor
processimprovementattheendofyourassuranceengagement?
• Ifso,howvaluablewasthisreport(1to5)?
• DidyousharethisreportwithyourC-suite,InternalAuditgrouporAuditCommittee?
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page35
BloombergDatabase 2009 2010 2011
Organization GRI verification GRI verification GRI verification
3M GRI No GRI Yes GRI YesAbbott GRI No GRI Yes GRI YesAgilentTech No No GRI Yes GRI YesAlcoa GRI Yes GRI Yes GRI YesAmgen No No GRI No GRI YesBankofAmerica GRI No GRI Yes GRI YesBaxter GRI Yes GRI Yes GRI YesBiogenIdec GRI Yes GRI No GRI YesBristolMyersSquibb GRI No GRI Yes No NoCampbellSoup GRI No GRI Yes GRI YesChevron GRI Yes GRI Yes GRI YesCitigroup GRI Yes No Yes GRI NoCliffsNaturalResources GRI Yes GRI Yes GRI YesCoca-ColaCompany GRI Yes GRI Yes No NoCoca-ColaEnterprises GRI No GRI Yes GRI YesDowChemical GRI Yes GRI Yes GRI YesDukeEnergy GRI Yes GRI Yes GRI YesEntergy No No No No GRI YesExxonMobil GRI Yes GRI Yes GRI YesFordMotor GRI Yes GRI Yes GRI YesFreeport-McMoran GRI Yes GRI Yes GRI YesTheHersheyCompany GRI No No No GRI YesHessCorporation GRI Yes GRI Yes GRI YesH.J.HeinzCompany GRI No No Yes GRI YesIntel GRI No GRI Yes GRI YesJMSmucker No No No No GRI YesJohnsonControls GRI Yes GRI Yes GRI YesKimberly-Clark No No GRI Yes GRI YesMolsonCoors No Yes No Yes No YesMondelez GRI Yes No No No NoMorganStanley No Yes No Yes GRI YesMotorola No No GRI Yes No NoNewmontMining No No GRI Yes GRI YesNewsCorporation No Yes No Yes No NoNisource GRI No GRI Yes GRI YesNorthernTrust No No GRI Yes GRI YesPraxair GRI Yes GRI Yes GRI NoPrologis NA NA No No GRI YesQualcomm GRI No GRI Yes GRI NoReynoldsAmerica GRI No GRI Yes GRI NoSouthwestAirlines GRI Yes GRI Yes GRI YesStarbucksCoffee No Yes GRI Yes GRI YesStateStreet GRI Yes GRI Yes GRI YesUPS GRI Yes GRI Yes GRI YesWellsFargo GRI Yes No Yes GRI NoWyndhamWorldwide No No GRI Yes GRI Yes
24 39 36
A P P E N d i X B : B L O O M B E r G d A T AV E R I F I E D ( S E c T I O N S O F ) S u S T a I N a b I l I T y R E P O R T S 2 0 0 9 – 2 0 1 1
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA
G L O B A L r E P O r T i N G i N i T i A T i V E
Global reporting initiative Focal Point uSA
Aspartofitsregionalexpansionstrategy,GRIenteredintoanagreementinOctober2010toestablishaFocal
PointintheUnitedStates.ThisFocalPointissupportedbyfoundingsponsorsDeloitteLLP,Ernst&YoungLLP,
KPMGLLP,andPwCU.S.,andishostedbyIFAC.
GRIFocalPointUSAplaysacrucialroleinmainstreamingsustainabilityreporting.
FocalPointUSAaims toboost thenumberofUScompanies reportingon sustainabilityand to improve the
qualityof those reports, and to increaseUSorganizations’ input intodevelopingnewguidance for sustain-
abilityreporting.
Website:www.globalreporting.org
Contact:[email protected]
Governance and Accountability institute—Gri data Partner for ireland, united Kingdom and uSA
TheGovernance&Accountability Institute, Inc. isaglobal consulting, research,newsand trendmonitoring,
editorialservices/publishing,analysis,andadvisory[services]organizationservingleadersandboardsoforga-
nizationsinthecorporate(private),publicandsocial/institutionalsectors.
Website:www.ga-institute.com
Reportingdashboard:www.sustainabilityhq.com/reports
USBlogSite:http://grifocalpointblog.org/usa
A B O u T
Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page37
GRI’sFocalPointUSAisparticularlygratefulfortheongoingsupportof:
Our FOuNdiNG SPONSOrS:Eachofthe“BigFour”accountingandprofessionalservicesfirmsintheUnited
States—Deloitte,Ernst&YoungLLP,KPMGandPwCUS—forprovidingdonations.
Our SEVEN SECTOr LEAdErS:Bloomberg,Clorox,Curran&Connors,Dell,Sprint,TheMosaicCompanyand
theNewYorkStockExchange—forcommittingtoshowingleadershipintheirsectorwhenitcomestosustain-
abilityreportingandworkingcloselywithustocrystallizethatleadershipintoaction.
Our BOArd OF dirECTOrS: Mark Cohen, vanderbilt University; Julie Gorte, PAXWorld; Sean Harrigan
(Chairman),PastExecutiveDirector,StatesCouncil,Region8;PeterWestra,GlobalReportingInitiative;Heather
White,NewStandards.
Our AdViSOry GrOuP:Mark Cohen, vanderbiltUniversity; EricHespenheide,Deloitte LLP; JohnHickox,
KPMGLLP;KathyNieland,PwCUS;CurtisRavenel,Bloomberg;SteveStarbuck,Ernst&YoungLLP;Davidvidal,
TheConferenceBoard.
AndofcoursewethankourNorthAmericanOrganizationalStakeholders,ourNorthAmericanGRICertified
TrainingPartnersandtheGRISecretariat.
T H A N K y O u
Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA