The assurance of integrated reports: let’s get some perspective before we get technical


written by Carol A Adams

If assurance of integrated reports is to add credibility and build trust, it needs to focus on the attributes most likely to lead to a paradigm shift in integrating sustainability into business thinking and practice. These are identified in The IIRC: A Call to Action  (Adams, 2015) as: a broader notion of what constitutes value creation; thinking about the business model more broadly in terms of the six capitals; and, an emphasis on long-term thinking.

The reader of an integrated report surely, as a starting point, wants to know how a company defines value and to whom. To what extent is it thinking of value more broadly than financial profit? Is it putting a value on relationships, an engaged workforce and nature’s resources or natural capital, for example? Does it look at value from the perspective of investors only or does it consider the value it is adding from a broader stakeholder perspective? This information ought to be in the company’s integrated report. Surely the most important role of assurance of an integrated report, beyond the role currently fulfilled by financial audit and sustainability assurance engagements, is to provide user with information which allows an assessment of the degree of confidence to which these statements can be relied on.

That is, to what extent is the organisation working to maximise value creation according to its own definition? To what extent is it balancing short, medium and long term thinking? To what extent is it really consciously considering trade-offs between the capitals?

These are the questions I want answers to when I pick up an organisation’s integrated report.

And as a report preparer I want to know how well we are tracking towards integrated thinking. What are the next steps we need to take to maximise long term value creation (broadly defined) for all our stakeholders?

The IIRC’s Assurance on <IR> : An introduction to the discussion (IIRC, 2014a) does not ask how assurance can address these questions so the outcome of the consultation process risks supporting assurance practice which misses the point. PWC’s (2014) paper Inspiring Trust Through Insight calls for thinking differently about assurance. It notes that “the established assurance model is not as supportive as it could be of innovation and experimentation in corporate reporting”.

Sasol’s award winning integrated report has a nice section on how stakeholders contribute to value creation, an excellent diagram depicting its business model and information on its long term plan to invest in renewables. But it fails to mention the carbon bubble and what is, by all accounts, a material risk (given the nature of its business) to its value and ability to create value in the long term. Assurance of integrated reports must address this.

carol_bookIn Understanding Integrated Reporting: the concise guide to integrated thinking and the future of corporate reporting (Adams, 2013) I noted:

“The credibility of integrated reports depends to a significant extent on the processes rather than the accuracy of numbers (which readers would expect to be audited through a financial and sustainability report assurance process). Readers of integrated reports will want answers to questions such as:
How was the business model developed? Is it complete?
What is the extent of cooperation across senior management (and silos)?
Have key stakeholders been consulted and senior management involved in determining material issues?
Is there a link (‘connectivity’) between the vision, strategy, business model, inputs, outputs and outcomes?
Is the strategy achievable given externalities, the business model, the resources available and performance to date?
Sustainability assurance processes may address some of these issues, but not all. More work is needed in developing assurance frameworks.”

I suggested that the assurance provider management letter might help to resolve tussles of ownership of parts of the processes as internal dynamics shift and systems and processes evolve. In fact it could do much more than this.  I also suggested that:

” A more proactive response to meeting this particular need might be to get this sort of guidance through involving an external expert as a ‘critical friend’ in internal planning meetings.”

The IIRC’s discussion paper on assurance briefly mentions the possibility of other means of adding credibility, including stakeholder panels, but does not call for feedback on what these might be or how they mighty work. Would expert stakeholders fulfil such roles without being paid? Would paying them compromise their independence?  I would like to see these questions explored.

The IIRC’s Assurance on <IR>: an exploration of issues (IIRC 2014b) discusses an assurance approach for the principles and content elements of <IR> and some methodological issues assurance for <IR> primarily from the perspective of financial auditing.  It seems somewhat odd that it compares materiality for <IR>, the most important, game-changing components of which are non-financial, with materiality in financial reporting. The approach used in some sustainability reports is arguably much more appropriate given that they deal almost exclusively with non-financial issues. There is a discussion of this here.

Perhaps we need to get some perspective and remember what we are trying to achieve before we get too technical.  After all, an assurance engagement which which doesn’t add credibility to integrated reports by addressing user questions, however technically competent and robust, is not adding value.  It will simply create a new kind of audit expectations gap (see Adams and Evans, 2004).

PWC (2014) is on the right track when it asks: “What if, rather than providing a conclusion on how an organisation’s reporting measures against criteria, we were able to provide insight that lets people look behind the numbers to enable them to decide for themselves the degree of trust they put in the information?” ICAS (2013) also asks some pertinent questions in Balanced and reasonable.

If assurance providers don’t see the wood for the trees, they risk undermining the paradigm shifting potential of <IR>.  We need processes that will both increase credibility and also help management follow the steps to integrated reporting.


Adams, C A (forthcoming) The International Integrated Reporting Council: a call to action Critical Perspectives on Accounting, DOI 10.1016/

Adams CA (2013) Understanding Integrated Reporting:  The Concise Guide to Integrated Thinking and the Future of Corporate Reporting Dō Sustainability ISBN 9781909293847.

Adams CA and Evans R (2004) Accountability, completeness, credibility and the audit expectations gap Journal of Corporate Citizenship 14: 97–115.

ICAS (2013) Balanced and reasonable

IIRC (2014a) Assurance of : An introduction to the discussion

IIRC (2014b)  Assurance on <IR>: and exploration of issues

PWC (2014) Inspiring Trust Through Insight

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  1. James Farrar says:

    Brilliant post. You say:
    ‘After all, an assurance engagement which which doesn’t add credibility to integrated reports by addressing user questions, however technically competent and robust, is not adding value.’
    I go a step further and say an assurance statement to stakeholders that fails to address material omissions is destroying value by betraying trust. ERM are guilty of that in the Sasol example.

    You cite PwC: “What if, rather than providing a conclusion on how an organisation’s reporting measures against criteria, we were able to provide insight that lets people look behind the numbers to enable them to decide for themselves the degree of trust they put in the information?” PWC (2014)

    I must admit to feeling queasy about taking such direction from PwC. Consider their assurance of Siemens’ Sustainability report in 2010 fiscal year where the company air brushed out all mention of its nuclear business. The report was issued and assured by Siemens and PwC just 3 weeks after the Fukushima and within 3 months Siemens had exited the business due to, it claimed, stakeholder pressure.

    So two points – (i) non investor stakeholders need to have access to remedy against assurance providers such as ERM and PwC when they mislead stakeholders in this way by error of commission or omission in materiality determination assurance. Investors would certainly have access to remedy on key material financial disclosures. (ii) IIRC needs to do much more to shore up non financial stakeholder interests. I note the earlier framework drafts included stakeholder inclusiveness and responsiveness as guiding principles and these principles have been dropped, first one, then another until both are out in the latest draft. Instead the principles are addressed in ‘Stakeholder Relationships’. Unfortunately, here the relationships are defined in so much as the stakeholder can effect value/destruction creation for the firm but not the other way round and much less on responsibility. I have asked IR how and why the principles were lost in this way on numerous occasions but have never had a good explanation.

    • Thanks for adding your insights James.

      In assessing individual assurance statements in this regard, it would be important to look at the scope of the assurance engagement and the audience for the assurance statement. I didn’t do this.

      My concerns are: 1) that assurance engagements of integrated reports should add value by addressing key user questions and helping management improve their reporting (processes); and, 2) that we need to consider the possibilities of other means of adding credibility to these reports.

  2. Reporting is storytelling. Whether it is, GRI, or other, the story is about an organization’s achievements as told by management. The story will always have a particular agenda set by management. I have read hundreds over the years.
    You ask for a role for assurance. Assurance should determine whether the story is non-fiction or fiction.
    Assurance applied to financial reporting provides confidence of a non-fictional story (generally). Assurance applied to non-financial reporting should do likewise, but it will take some time to determine what that means.
    – Is the story credible and self-consistent? (Fiction vs non-fiction)
    – Is the story an integrated report? (Complies with the guidelines)
    – Does the story provide sufficient confidence for finance providers to invest? (Usefulness)
    Having reviewed the IIRC papers on Assurance, I am still not confident that an insurer would be comfortable issuing liability insurance to an assurer of an integrated report. I would be very reticent about undertaking assurance without it. Perhaps that is where we should start developing the concept of assurance.

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