ESG Assurance & Verification
There is a clear demand for sound and reliable ESG data. Three reasons for this are:
Investors, boards, employees and the wider general public increasingly calling for organisations to integrate sustainability and ESG into the core of their business practices and organisational purpose.
A clear market drive for greater sustainability reporting and disclosure.
Organisations wishing to collect ESG data for measuring, reporting and improving their own ESG performance.
The increasing demand for public disclosure of ESG data has resulted in multiple ESG reporting standards and frameworks. These have become a central focus for many organisations looking to promptly respond to stakeholder requirements.
This rapid turnaround and focus on sustainability has often led to corporate accountability playing catch-up and has driven the need for external ESG validation to ensure the integrity and high-quality data of non-financial disclosures.
Many organisations are turning towards external ESG validation through assurance and verification as part of their internal audit process for reviewing their ESG function and performance.
What is ESG Assurance & Verification?
There are two broad levels of external ESG validation: assurance and verification. Both of these are data validation processes which go beyond framework alignment; however, the depth of data collection and detail of the review process differs between the two.
1. Verification is a process for checking non-financial data and processes using predefined criteria. These criteria are not (as yet) standardised and do not have to be performed by an accredited auditor.
2. Assurance is a more detailed and rigorous data checking process which uses the same methodologies and standards as financial data. This is often performed by an accredited auditor.
What are the benefits of external validation?
There are multiple benefits to obtaining external verification & assurance for ESG reporting and non-financial disclosures:
Assurance plays a key part in any internal audit function. It provides an impartial overview of performance combined with professional expertise &insight and compares findings against best practice.
It improves internal systems and controls, allowing for a wider assessment of overall systems and business operations that go beyond solely looking at numbers.
It highlights key areas for improvement and prioritises them in terms of importance.
It ensures compliance with policies and regulation.
It provides greater credibility and gives security for clients, customers and wider stakeholders. Misinformation and potential claims of greenwashing can cause an organisation significant reputational damage. External assurance & verification provides the evidence to support the accuracy of an organisation’s data.
In addition to providing validation of data quality, external assurance of ESG has the added benefit of levelling up a company’s performance in sustainability-related benchmarking and certification schemes such as GRESB, UNPRI and CDP.
Benchmarking frameworks (such as GRESB) reward organisations who have their data and performance assured or verified by an independent third party with higher scores. For CDP, it is mandatory for disclosed Scope 1 and Scope 2 greenhouse gases emissions to be verified or assured by an independent third party to achieve an A-List status. Furthermore, CDP offer a list of approved validation activities.
How Governex can help
Governex is an ESG advisory business that helps businesses across all aspects of ESG. We provide ESG validation, assurance and verification services.
We help organisations implement the right shift in focus from a purely financial commitment to include environmental, social and governance commitments. All in the context of meeting business purpose, strategy, integrity and diversity.
For further information, please get in touch.
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