Key Impact Points:
- 79% of FTSE 100 companies now obtain ESG assurance—a steady rise driven by new regulations and increased stakeholder demand.
- Same practitioner for ESG and financial audit is growing—47% of companies used the same provider, indicating a trend towards streamlined assurance practices.
- Big 4 dominance in ESG assurance continues, with 63% of companies opting for their services.
Over Three Quarters of Companies Now Obtain External ESG Assurance
In 2023, 79% of FTSE 100 companies obtained external assurance over some ESG metrics—up by 4% from 2021. This trend underscores the increasing importance of accurate ESG data for investors and other stakeholders. As more companies prepare for the Corporate Sustainability Reporting Directive (CSRD) in 2024, collaboration between internal teams becomes critical to ensure a smooth assurance process.
Dual Role for Assurance and Audit Practitioners on the Rise
An interesting trend is emerging: 47% of companies obtaining ESG assurance in 2023 used the same practitioner for both ESG and financial statement audits—a notable 14% increase since 2021. This shift is likely driven by overlapping requirements between financial audits and the new European Sustainability Reporting Standards (ESRS). For instance, ESRS Topical Standard G1’s focus on risk assessment and control environment aligns closely with traditional financial auditing processes.
Big 4 Firms Leading ESG Assurance
The “Big 4” accounting firms continued to dominate the ESG assurance market in 2023, providing services to 63% of companies—up 8% from 2021. As reporting requirements grow under the CSRD, more companies may seek alignment between their financial auditors and ESG assurance providers, looking for efficiency and consistency.
Change the World - Subscribe Now
ESG Assurance Timing Challenges
Only 52% of companies that obtained ESG assurance in 2023 had it signed off by the time their Annual Reports were issued. Many still publish sustainability reports separately, with assurance finalized after the Annual Report’s release. With the CSRD requiring sustainability statements to be presented within Annual Reports, companies need to adjust their timelines to ensure simultaneous assurance.
Reasonable Assurance Remains Rare
While most ESG assurance in 2023 was limited assurance (94%), only one company obtained full reasonable assurance for all its key performance indicators (KPIs). Reasonable assurance, akin to a full audit with detailed testing and evidence gathering, remains a minority practice. Limited assurance, which involves less rigorous procedures, still dominates the landscape.
Looking Forward
With the CSRD on the horizon, companies must plan strategically to meet escalating ESG assurance demands. Whether it’s aligning ESG assurance with financial auditing or adapting timelines to ensure timely reporting, the landscape is rapidly evolving. For guidance on your ESG assurance strategy, contact our ESG assurance team.
This article is based on a review of FTSE 100 companies’ 2023 Annual Reports and publicly available ESG assurance data as of May 2024.
Related Article: BlackRock Decreases Support for ESG Proposals Amid GOP Pressure
