Verification and Assurance
All publicly traded U.S. companies are required to have their financial statements independently audited to the internationally respected GAAP standard. The purpose of the independent audit is to assure shareholders that the company has accurately communicated its position and performance for the reporting period. ESG performance data is vulnerable to the same (if not greater) misrepresentation as financial performance data; thus, it should be similarly verified by an independent third-party and to an internationally respected standard.
The indicators we used to evaluate this expectation assessed whether a company’s disclosure was externally verified and if the company verified its report to an internally recognized standard.
As companies move toward integrating sustainability data within their financial filings, many will likely use the same auditor for both their financial filings and sustainability reporting. This not only capitalizes on natural synergies and creates cost efficiencies, but also formalizes the importance of sustainability reporting internally by giving it similar weighting as financial data. UPS uses Deloitte to audit both its financial and sustainability reporting. The company reports that this alignment allows its CSR team to build the internal business case for sustainability. Similarly, Alcoa uses PriceWaterhouseCoopers to audit both CSR reporting and financial filings.