Ethical Performance
inside intelligence for responsible business


Light shines on assurers’ ‘inferior’ double-tasking

October 2008

Consultancies that help companies produce a sustainability report and then provide assurance for it have been criticized for doing so., which keeps an exhaustive log of non-financial reports, says the practice is unacceptable and ‘inherently inferior’.

It has calculated that of 4733 assurance statements published during the past 15 years, 150, or just over three per cent, have been prepared in this way.

In an analysis of assurance techniques, the website says such statements show ‘a clear lack of independence’ and it questions their value. ‘All manner of potential conflicts of interest arise, [such as whether] an assurance provider [can] be expected to document its own shortcomings’, it argues. ‘If impartiality is fundamental to establishing trust, they’re missing the mark.’

Some consultants have privately expressed concerns about this for some time but have been reluctant to go public for fear of appearing to criticize rival businesses. However, after the report was published, a number commented on the practice.

Simon Propper, managing director of the Context consultancy, said: ‘If you’re advising a client on the appropriate line to take in a report, you can’t really then come along with another hat on and check whether you think that was the right judgement. You need a different team to do that.

‘Unfortunately this kind of fluffy practice hasn’t been criticized publicly, and that’s a failing of SRI analysts, journalists and others. It’s also a reflection of the lack of feedback that companies get on their reports.’

Deborah Evans, head of CSR reporting and assurance at Lloyd’s Register Quality Assurance, told EP she agreed with the criticism and said her company would ‘never verify its own solutions to a customer’s problem’, while Malcolm Guy, director of The Reassurance Network, said that as a rule the practice should be avoided.

‘Ironically, when reporting first emerged in the 1990s, it was considered best practice for the report to be independently written by the assurer,’ he said. ‘Since then there has been a much greater focus on independence. For assurance to be credible the assurer must have both the independence of mind to form opinions and draw conclusions, and also the freedom to express them.’

However, he felt it could be acceptable, as part of the assurance of a draft report, for the assurer to suggest alternative wording, content or structure to improve the overall document.

Sarah Ratcliffe, regional director at Upstream, which provides ‘advisor’s statements’ at the end of sustainability reports it has helped clients to prepare, told EP the statements do not represent, nor claim to be, a fully independent assessment of the company’s reporting or provide formal assurance or verification of the content.

‘We work only for the real estate sector where reporting practices are much more embryonic... therefore the costs of external auditing are sometimes considered by our clients to be prohibitive and, in current market conditions, [they] feel that this money may be better spent on investing in their sustainability programmes,’ she said. | Global | Nonfinancial reports

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