The way in which organizations account for their role in society is changing rapidly. The demand from stakeholders for information, both financial and non-financial, is increasing rapidly. In 2022, society is reasonably skeptical about the reliability of the shared ‘green’ information. There are also too many examples of ‘greenwashing’, boasting with incorrect green numbers towards the public. In this context ‘greenwashing’ can be labeled as a form of social fraud.
More and more organizations understand this and (voluntarily) show their accountability by providing a sustainability report, CO2 emission reports and other types of reports. It’s crucial for their credibility that organizations can demonstrate the information they provide is reliable. New European regulations concerning information on sustainability in annual reports lead to the fact that large companies will shortly be obligated to have an assurance engagement performed for the mandatory sustainability information. This obligation will also have an impact on companies which are not directly implicated in these new EU regulations, but are nevertheless impacted through their close collaboration with partners that do need to comply. In other words, green, reliable information is becoming a relevant for all companies, large and small.
Coney Minds has been following the evolution of Green Assurance for many years now. Over the last ten to twenty years there have been many developments worldwide on the audit and sustainability framework.
The most impressive and also the leading framework is the Global Reporting Initiative. The Global Reporting initiative was developed to add ‘certainty’ to sustainability information. It is a misunderstanding that this standard is only meant for multinationals. We see that more and more SMEs want to contribute to a sustainable world.
As of 2018, certain large companies and groups are required to disclose non-financial and diversity information in their board reports. This is based on the Non-Financial Reporting Directive (NFRD). In doing so, they must pay attention to, among other things, the environment, social affairs and the fight against corruption.
In 2020, the AFM has expressed its wish for an international standard for non-financial information in reporting. The AFM is in favor of integrated reporting, in which an organization presents all its relevant financial and non-financial together. The AFM is in favor of including non-financial information in a company’s board report and also imposing this obligation on large non-PIEs. This means an increasing importance of this topic.
The European Commission (hereafter: EC) has a progressive program on sustainability. One of the tools to lead Europe towards a sustainable economy is through better transparency. That is why a European directive proposal was published in 2021 for further regulation of corporate sustainability reporting: the Corporate Sustainability Reporting Directive (hereafter: CSRD).
The European Council’s proposal, based on the review of the EC’s CSRD proposal, consists of a step-by-step implementation (Counseil de L’Union Européen 2022), as of reporting year 2024 for companies that are already covered by the NFRD (EC 2014), followed by all large companies as of reporting year 2025 and finally all listed small and medium-sized enterprises as of reporting year 2026.
The companies that will have to comply to the CSRD must have an external assurance engagement performed for the mandatory sustainability information. The CSRD shows us that the object of assurance is broader than just the mandatory sustainability information in the board report.
For instance, this concerns information about what percentage of the revenue, the operational costs or the investments is related to sustainable economic activities. With the latter, the relationship with the annual financial statements audit becomes more apparent.
For the legally required sustainability information in the board report, the auditor must check whether it is in accordance with the CSRD, including the European standards for sustainability information.
A production company has formulated the goal of reducing plastic consumption by 80% in the next five years. The company has mapped out the consumption of plastic (in kilograms) for each step in the production process. This information is enriched with purchasing data for the plastic by means of an analysis of the purchasing process. The company works with three different plastic suppliers. A clear baseline measurement has been made.
We have created a data analysis solution to measure consumption for each step in the production process over the next five years. We make this consumption transparent and visualize the plastic flow. The client includes the plastic KPIs in a report of non-financial information. We tested the reliability of these KPIs through ongoing monitoring of the underlying source data.
In dialogue with our clients, we experience that more and more SMEs are looking for answers to the following questions:
We see it as our challenge to turn this into a realistic story with our clients. We act as a sounding board for the design of relevant KPI reports and test the correctness of the KPIs and the underlying data.
Auditing of your financial statements supported by data analysis, that is Auditing 3.0
In recent years, much has been written about discriminatory, incorrect or unfair data analysis solutions and the use of algorithms.There is social unrest and there are concerns about how data results in decisions.
The way in which organizations account for their role in society is changing rapidly. In 2021, society is fairly skeptical about the reliability of the shared 'green' information. There are also too many examples of 'greenwashing', making good appearances with incorrect green numbers towards the public.