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Too many assurance statements add little value to non-financial reports, a specialist group has warned.
The panel of 22 judges for this year’s UK Sustainability Reporting Awards believes that even among the 88 reports submitted to them as examples of best practice, assurance statements are ‘too often limited to being a simple tick-box exercise’ and do not address the needs of the reader.
Assurance statements, the judges say, should ‘provide insights into the gaps, strengths and weaknesses of internal management and reporting processes’, but many offer only platitudes.
Statements often do no more than define the scope and remit of the assurance process and would be greatly improved by commentary, opinion, recommendations and a rundown of performance ‘highlights and lowlights’, according to the judges, who include Melissa Gamble, senior SRI analyst at Morley Fund Management, Mike Kelly, KPMG’s UK head of CSR, and Patrick Mallon, Business in the Community’s director of benchmarking and reporting.
They say too few statements specify which parts of a report have been vetted, and that icons should be more widely used in reports to signal the sections and statements which have been externally assured, as Bureau Veritas has done in the most recent British American Tobacco report.
The panel says assurers should also:
encourage the company to respond to any recommendations made in the assurance statement and indicate whether it intends to adopt them
explain whether their previous recommendations have led to changes in the company’s reporting procedures
disclose the fees they receive for their services, even though this is not legally required. A rare example is Rio Tinto’s 2003 Environment and social review, in which the company itself disclosed the £215,200 ($412,000) fee paid to assurers ERM in its preamble to the assurance statement.
Lucy Edwards, who works in the Ernst & Young team that has assured non-financial reports for 02, Aviva, BNFL, BP, Marks & Spencer and Orange, said there was some validity to the judges’ comments, but warned there were legal restraints on assurers, who had to distinguish verification from advice.
She said: ‘There’s a fine line between providing assurance and providing consultancy, and although we do have sections in statements where we suggest, for instance, that a report hasn’t focused on certain areas or more work needs to be done in others, providing detailed conclusions and opinions on where we would like to see an organization going is more of a consultancy role.’
Edwards added that an assurance provider’s role is largely prescribed by the client company. ‘To an extent we are limited by the brief that the company gives us and what it wants the assurance to cover,’ she said.
The judges recommend companies explain how their reporting is making their employees more aware of responsible business practice and whether non-financial performance indicators are used to determine bonuses paid to directors, as the Danish life sciences company Novo Nordisk does in its annual report published last month.
The panel of 22 judges for this year’s UK Sustainability Reporting Awards believes that even among the 88 reports submitted to them as examples of best practice, assurance statements are ‘too often limited to being a simple tick-box exercise’ and do not address the needs of the reader.
Assurance statements, the judges say, should ‘provide insights into the gaps, strengths and weaknesses of internal management and reporting processes’, but many offer only platitudes.
Statements often do no more than define the scope and remit of the assurance process and would be greatly improved by commentary, opinion, recommendations and a rundown of performance ‘highlights and lowlights’, according to the judges, who include Melissa Gamble, senior SRI analyst at Morley Fund Management, Mike Kelly, KPMG’s UK head of CSR, and Patrick Mallon, Business in the Community’s director of benchmarking and reporting.
They say too few statements specify which parts of a report have been vetted, and that icons should be more widely used in reports to signal the sections and statements which have been externally assured, as Bureau Veritas has done in the most recent British American Tobacco report.
The panel says assurers should also:
encourage the company to respond to any recommendations made in the assurance statement and indicate whether it intends to adopt themexplain whether their previous recommendations have led to changes in the company’s reporting proceduresdisclose the fees they receive for their services, even though this is not legally required. A rare example is Rio Tinto’s 2003 Environment and social review, in which the company itself disclosed the £215,200 ($412,000) fee paid to assurers ERM in its preamble to the assurance statement. Lucy Edwards, who works in the Ernst & Young team that has assured non-financial reports for 02, Aviva, BNFL, BP, Marks & Spencer and Orange, said there was some validity to the judges’ comments, but warned there were legal restraints on assurers, who had to distinguish verification from advice.
She said: ‘There’s a fine line between providing assurance and providing consultancy, and although we do have sections in statements where we suggest, for instance, that a report hasn’t focused on certain areas or more work needs to be done in others, providing detailed conclusions and opinions on where we would like to see an organization going is more of a consultancy role.’
Edwards added that an assurance provider’s role is largely prescribed by the client company. ‘To an extent we are limited by the brief that the company gives us and what it wants the assurance to cover,’ she said.
The judges recommend companies explain how their reporting is making their employees more aware of responsible business practice and whether non-financial performance indicators are used to determine bonuses paid to directors, as the Danish life sciences company Novo Nordisk does in its annual report published last month.
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