Issues with assurance on SDG disclosures and NFR

by Carol Adams

Main points:

  • The consultation informing the SDGD Recommendations identified a number of gaps in assurance provision;
  • The International Auditing and Assurance Standards Board (IAASB) is currently consulting on guidance on Extended External Reporting (EER) Assurance. 

Readers will no doubt be familiar with examples of ‘green washing’ and ‘rainbow washing’ (referring the UN SDGs).  Given concerns about the credibility of non-financial reporting (NFR), the consultation leading to the publication of the Sustainable Development Goals Disclosure (SDGD) Recommendations asked: “Do you foresee issues in the supply of assurance? Why? Are there alternatives to assurance that could be included to enhance credibility of reporting?”

Responses expressed concern about the limited take up of external assurance on EER and limited scope of assurance engagements (see Adams, 2020).

“Until there is a recognition that a similar protection [as provided through financial audit] is at least as necessary for the people and planet that experience these impacts there will be low demand. …without this protection it will be possible for organisations to have information assured on scopes that preclude impacts that would be considered material to the people experiencing them.” [emphasis added]

Jeremy Nicholls

Key issues with assurance

Key issues raised by respondents were:

1. Assurance standards are underdeveloped (CA ANZ, Cbus, FTSE Russell, ICAS, UNDP, University of Bristol, Unilever) although Deloitte note that SDGD assurance can be carried out using ISAE 3000.

2. Lack of maturity of assurance standards increases the liability risk of assurance assignments. (Deloitte)

3. The cost of assurance prevents take up and broader assurance scopes. (Deloitte, UNDP)

4. The scope and level of current assurance engagements are limited (and this reduces credibility). (CA ANZ, Cbus, University of Bristol, Xinwu He)

5. Education and upskilling of accountants is needed to meet increasing supply needs. (Arup, IIRC) and to assess forward-looking disclosures (IIRC, Malaysian Institute of Accountants)

6. Demand for SDGD assurance is likely to grow as disclosure increases in response to investor and stakeholder demand and increased regulation. (Deloitte, IIRC)

7. There are issues with the (perceived) independence of non-financial assurance providers. (Xinwu He)

The issues raised by respondents to the consultation impact on the extent to which assurance enhances the credibility of NFR, including SDG Disclosures. (You can read the responses in full here.)

A robust approach to materiality is critical to avoid ‘rainbow washing’ and Datamaran emphasised the importance of seeking assurance over the materiality process given that it determines what is disclosed. But there is no requirement in the Standard to do this (IAASB, 2020, p23; IAASB 2013).

Independent expert panels

While some responses explicitly supported the idea of an independent panel of experts to comment on an organisation’s approach to the SDGs (Datamaran, Unilever), it was noted that there would need to be careful consideration given as to who should be on them and the independence of such members. (Malaysian Institute of Accountants, University of Bristol).  Deloitte and UNDP stressed that there were no alternatives to assurance that would satisfy the needs of investors, but Deloitte went on to support independent panels:

“Scrutiny from an independent panel provides a formal channel for challenge and may validate or benchmark the approach a company has adopted. Panels may also review judgements and the like around issues and materiality.”


Internal controls

A number of responses informing the SDGD Recommendations emphasised the ability of disclosures themselves (in particular those related to internal controls and internal audit practice and other disclosures in the Governance and Management Approach themes of the SDGD Recommendations) to enhance credibility (Deloitte, FTSE Russell, ICAS, the IIRC, Impact Management Project, Malaysian Institute of Accountants, PwC, Rebecca Self, Stathis Gould).  Despite this recognition of the importance of the internal control system (IC) to the credibility of NFR (or EER), acknowledged by the IAASB, the Standard does not require the assurance practitioner to understand it in a limited assurance engagement (IAASB, 2020, p14; IAASB, 2013).

There is still a long way to go to address problems with assurance of non-financial reporting (NFR) – a topic discussed four years ago at the 2016 GRI conference. 


Adams, CA (2020) Sustainable Development Goal Disclosure (SDGD) Recommendations: Feedback on the consultation responses, published by ACCA, IIRC and WBA. ISBN-978-1-898291-33-6 [link]

IAASB (2020) Public consultation on proposed guidance: Proposed Non-authoritative guidance, External Extended Reporting (EER) [link]

IAASB (2013) International Standard on Assurance Engagements (ISAE) 3000 Revised, Assurance Engagements Other than Audits or Reviews of Historical Financial Information [link]

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  1. Marilyn says:

    Thanks for this write up. I concur on assurance of Materiality process and encouraging internal controls thses should support more credible and reliable SDG disclosures.

  2. Anne Dansey says:

    I’m interested to understand more about the need for accountants to be further trained as opposed to incorporating impact assessors environmental and social to capture the value creation and benefits of SDG adoption.

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