Standards boards team up to strengthen sustainability assurance market

The International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) have published joint guidance to increase trust and transparency around sustainability reporting assurance.

The standards establish clear expectations and specific requirements for auditors and other organisations providing assurance on sustainability information. They come after repeated calls for more transparency and standardisation for this industry, with demand growing rapidly as more and more jurisdictions (including the EU with CSRD) require third-party assurance of sustainability disclosures.

Two standards for better sustainability assurance

Specifically, the IAASB’s ISSA 5000 provides a framework for conducting assurance engagements on sustainability disclosures, focused on enhancing the credibility of sustainability reports. For example, sustainability assurance firms implementing the standard are required to assign an ‘engagement leader’ to each project, who will bear the ultimate responsibility for the quality of the assurance.

Meanwhile, IESBA’s IESSA standard provides the ethics and independence framework for the proper conduct of sustainability assurance practitioners.

“The interoperable package of ISSA 5000 and IESSA represents an important evolution in global sustainability reporting and assurance,” said Tom Seidenstein, Chair of the IAASB. “These standards establish the necessary technical and ethical pillars to ensure that qualified practitioners could consistently perform high-quality assurance engagements on sustainability information.”

Sustainability assurance market growth

Verdantix research recently found that the global ESG assurance services market was worth US$1.54 billion in 2022 – and will grow at a rate of 27% per year to US$5.89 billion by 2028, driven by mandatory sustainability disclosures and investor expectations for third-party assurance.

The proportion of auditors providing sustainability assurance to the FTSE 100 increased from 25% in 2019 to 33% in 2022, according to findings from a sustainability assurance market study published in October by UK regulator the Financial Reporting Council (FRC), which pointed to quality inconsistencies among providers.

In this context, the new standards aim to support auditors and sustainability assurance providers in ensuring that their services are aligned with the quality and transparency expectations of companies, investors and regulators.

Gabriela Figueiredo Dias, Chair of the IESBA, added: “Ethics is the foundation of trust. With these standards, we are equipping preparers and practitioners with the tools needed to uphold integrity and foster transparency in sustainability reporting. Together, the IAASB and IESBA are setting a global standard for accountability and professionalism.”

In jurisdictions adopting the standards, ISSA 5000 and IESSA will become effective for periods starting on or after December 15, 2026, with early adoption “permitted and encouraged”.