MHA welcomes ISSA 5000 as the first standard that can be applied across all sustainability assurance engagementsMark Lumsdon-Taylor November 30th 2023
ISSA 5000 specifically addresses greenwashing, double materiality and two-tier assurance market
MHA has published its response to the International Auditing and Assurance Standards Board (IAASB) on recent proposals for a new sustainability assurance standard, ISSA 5000. We welcome the proposed new standard which will revolutionise and enhance the quality of assurance engagements as companies increasingly opt for independent assurance on their ESG data and disclosures.
Our letter makes a number of recommendations to enhance the proposed standard and deliver an assurance engagement to the highest quality and ethical standards.
"The proposed standard provides assurance practitioners and clients with confidence that the engagement will be performed to the highest professional standards says Mark Lumsdon-Taylor, MHA's Head of ESG and Partner, "We need to be careful that ISSA 5000 is truly interoperable across professions - as is the IAASB's ambition."
Matt Howells, Audit & Assurance Technical Partner agrees:
"ISSA 5000 is a high-quality standard that will elevate the assurance market for sustainability engagements. The first of its kind, it can be applied across the complete spectrum of environmental, social and governance topics. It specifically addresses the risk of ‘greenwashing’ in sustainability reporting and will enhance the quality of assurance engagements."
MHA strongly encourages the IAASB to work with the International Standards Organization and IOSCO to identify relevant professional ethical and quality management standards to ensure that all sustainability assurance practitioners understand the IAASB's expectations. "I have seen a slew of mediocre assurance reports prepared under the existing assurance standards, ISAE 3000/3410, from both audit firms and environmental consultants," shares Tim Dee-McCullough, Sustainability & ESG Technical Director. "It is imperative that the IAASB collaborates with its international peers to reinforce ethical and quality requirements."
A critical concern is the onset of 'double materiality' under a recent EU directive and other sustainability frameworks, whereby a wider group of stakeholders and the impact of a company's activities on them is considered together with the traditional investor and lender perspective. "Management and assurance practitioners can often form different views of which topics are material and likely to influence the decisions made by users of the sustainability information being assured," said Chisomo Kaferawanthu, Technical Director. "Practitioners will need to ensure they address any differences in views prior to accepting the engagement - increased guidance from the IAASB would certainly be helpful."
As Mark explains:
“The proposed standard elevates the assurance landscape for users of sustainability reports with its focus on the risk of greenwashing and requiring assurance practitioners to consider the risk of fraud on an assurance engagement. As we have recommended to the IAASB that needs to be reinforced with a focus on dealing with the risk of a two-tier assurance market, where unregulated practitioners provide assurance without appropriate ethical or quality management systems in place.”