Sustainability Assurance is an independent verification on a company’s Environmental, Social and Governance (ESG) claims. Service providers in this space examine a company’s ESG reports and other related documentation (for example, supply chain and decarbonization plans, carbon footprint and greenhouse gas inventory reports, etc.). They issue a report about the level of confidence that may be placed on the numbers disclosed.
There is an increasing demand for this service as clients (investors and customers) and regulators are becoming less trusting of unsubstantiated and unreliable data. For businesses, this means engaging assurance providers to evaluate the sustainability reports to be submitted to the European Commission (along with other pertinent documents) pursuant to the Corporate Sustainability Reporting Directive (CSRD).
Others are following suit. India’s amended securities laws (the’s Bse, India) require the same for large listed companies. And, Effective January 1, 2023, exporters to the European Union must disclose their carbon emissions (pursuant to the Carbon Border Adjustment Mechanism (CBAM), which makes carbon numbers a part of shipment documents).
The service provider best suited to offer assurance will depend on the nature of the claim being made. IRQS, with its partner NABCB, is well positioned to provide the above services. It has rich experience in the field (over 30 years) and never performs consulting services (Conflict of Interest) on the same data being assessed.
The Unverified Report
Elsewhere, a report on a 40% emissions reduction is being finalized. We are not privy to the methodology, but a pretty picture of a wind turbine (with a setting sun, perhaps?) could be found in the report.
Once, this writer attempted to calculate her household carbon footprint. He quickly realized he’d forgotten to include his car. It was parked out in the open. About 30 minutes later, he had a nice looking number and very little trust in the outcome.
Of course, businesses routinely make the same sort of errors at an enormous scale. The risks of carelessness are also significantly higher. One errant number in an ESG report could result in lost business, an investigative report, or a story highlighting unpleasant transparency.
What this all means is that sustainability assurance is quickly becoming an essential service for the growing number of businesses looking to issue a trustable ESG report.
Simply put, sustainability assurance means that an independent agency verifies the procedures and processes that have produced the ESG report. The agency renders its opinion in the public domain.
The scope and breadth of assurance means that many organizations are confused when considering their options. The ability to verify a product’s carbon footprint, for example, is similar to the assurance given to an entire report.
Push Factors Converging on 2026
A few short years ago, sustainability reporting occurred on a largely voluntary basis. Trends have shifted. Now, several developments aligned in pulling on the same tread.
CSRD = Mandatory Assurance in Europe
In late 2022, the European Union passed the Corporate Sustainability Reporting Directive (CSRD). Initial estimates suggested the CSRD would impact approximately 50,000 organizations. Subsequently, the European Union enacted legislation to further simplify and amend the directive. The result of these actions was to extend some deadlines, and modify the scope of the CSRD.
Regardless of the amendments, the core of the legislation remains the same. Organizations within the scope of the CSRD are obligated to have sustainability reports prepared by a licensed statutory auditor or an independent assurance service provider.
The CSRD also mandates sustainability reporting for non-EU based organizations with significant business operations within the EU. Therefore, the requirements of the CSRD impact a significant number of organizations based in India and other countries.
Effect of Regulation on the Supply Chain
The majority of smaller organizations understand that they will be impacted if their direct customers are regulated. The focus is on the downstream effects. Analysts predict that, beginning in 2026, various nation-state regulations will create a significant and sustained impact on the organization.
In addition, large, regulated organizations are expected to disclose the greenhouse gas emissions and social statistics of their downstream suppliers. As a result, questionnaires are expected to cascade to suppliers. Ultimately, a component supplier in Pune may be required to disclose a Tier 2 supplier’s GHG emissions located in a different country.
Raising the Bar on Corporate Responsibility in India
India’s capital markets regulator SEBI is leading the effort on corporate responsibility and sustainability reporting with its initiative to require its largest and most influential businesses to report on these areas. Its recent initiative has outlined a phased approach to providing assurance that will ultimately require this type of reporting by its entire listed business population. Value chain reporting will also require its suppliers to also report on these areas.
From Reporting to Paying in the EU
The EU’s CBAM has recently transitioned from a reporting to a financial Embedded Emissions Allowance mechanism. Starting January 1, 2026, certain industries will have to pay for the CBAM if embedded emissions allowances are not met. Verification of emissions has now transitioned from a voluntary to a mandatory requirement.
Greenwashing
Global regulators have also targeted ESG/Sustainability related Disclosures and ESG Funds to ensure adequate levels of disclosures are made, and funds meet their ESG objectives. 2023 has been the first year where a significant number of funds have changed their names and/or disclosures as a result of increased enforcement actions.
The Need for Trust Remains
The use of artificial intelligence in the workplace will accelerate, especially in the areas of reporting and processes. Risk and assurance functions should remain just as important, if not more important, as these areas will be most impacted by use of automation and artificial intelligence. There will always be a need for reliability and trust.
Key Insight: Customers, regulations, and finance markets are uniformly focused on the same question. Who verified this?
Corresponding Right Assurance Service to Right Requirement
The assurance service sought after becomes evident once the requirement is understood. IRQS services accordingly address the requirement.
When the Focus Is on Emissions
The basis for claims on emission reductions, usually supported by verification to ISO 14064, is the organization’s inventory of its greenhouse gas emissions. Scope 1 and 2 emissions inventory, and if relevant, inventory of Scope 3 emissions, are addressed by verification to ISO 14064.
When the Product Carries the Message
The product carbon footprint is verified by means of ISO 14067. The two International Standards, ISO 14040 and ISO 14044, address critical review of life cycle assessment and address a wider scope including raw materials, production, use and end of life of the product. Both sets of Standards are increasingly used in product standards and rules for products and packagings, especially in chemicals, textiles and electronic products.
When the Framework Rules the Game
The focus of these assurance services is on the reports. The assurance services provide a basis for determination on whether disclosures are in conformity with the selected reporting framework, and if not, whether they are inconsequential or harmless.
When the Focus Is More on Process
ISO 20400, Responsible Procurement, and ISO 26000, Social Responsibility, address the organization’s processes and systems, and provide a framework to evaluate how the organization operates.
An Easy-to-Use Decision Aid
The service areas outlined above offer a useful starting point. Additional, but more thorough, questions are listed below.
- Who is doing the asking? Regulators, buyers, and investors have different interests.
- What is being represented? Is it an organizational total, a product, or a service?
- What standard is being referenced? BRSR, GRI, CSRD, CBAM, ISO?
- What is the level of confidence required? Limited or reasonable?
- What will the future bring? Most likely requirements? Will your service adapt?
Purchasing the least expensive assurance service available can be risky. So can putting off your report preparation until the last minute.
How Does the IRQS Assurance Process Work?
IRQS has a clear, five-step process to which the client can easily refer.
- Step One: The client defines the scope and data boundaries of the service it wants and the level of confidence it wants IRQS to provide. Based on this information, IRQS explains the processes and costs associated with providing the service.
- Step Two: IRQS assesses the client’s sustainability strategies and the evidence supporting the strategies to develop an engagement approach.
- Step Three: IRQS staff determines the evidence to support the claims made by the client.
- Step Four: IRQS staff reviews and evaluates claims made by the client and closes the engagement.
- Step Five: IRQS issues an assurance statement or report.
Surveillance and Continual Improvement
Where appropriate, the business keeps data up to date through follow-up reviews.
Strategic Planning
The structure plays a vital role in assurance. It provides management with the confidence to plan for sustainability.
Why IRQS is Unique
Other firms may verify sustainability reports; however, IRQS stands out, with a unique weight of independence.
Years of Experience in Assurance
The Indian Register of Shipping (IRS), the parent organization of IRQS, is made up of independent assessment teams. IRQS has more than 30 years of experience in assurance, covering more than 5000 clients in more than 50 countries.
Known Accreditation
As an NABCB accredited organization, IRQS is recognized by International Accreditation bodies. CBAM requirements stipulate that certain export statements must be made by exporters to the EU to prove that the exported goods do not contribute to pollution.
No Conflict of Interest
In IRQS, this is ingrained in the company culture, and it is one of the most critical aspects of the business. This is something that is difficult to find in other companies, and something that regulators value.
Specialists in Different Industries
They have specialists in various fields, from chemicals to energy and other sectors. Some knowledge can be learned and acquired; however, some experience and knowledge is industry-specific, and can only be acquired through specialization.
Consolidation of Framework Services
With offerings ranging from IR and Sustainability Reporting to climate change and ESG frameworks such as BRSR, GRI, CBAM, and ESG assurance, IRQS helps companies integrate various frameworks.
Working Across Borders
With its headquarters in Mumbai and several other offices across India and foreign offices in U.K, Singapore, U.A.E, The Netherlands, S.E.A and GCC, IRQS has a strong international presence. IRQS helps Multinationals and International business groups in obtaining Assurance across borders.
Legal and Business Requirements
Is it mandatory for businesses to obtain sustainability assurance?
This will depend on the particular business. CSRD mandates assurance for businesses within scope. BRSR Core applies to the largest businesses in India. Others are required to obtain assurance for sustainability information based on customer requirements.
What are the differences between product carbon footprint and GHG verification?
GHG verification is at the organization level, while product carbon footprint is at the product level.
Are there limitations to the number of frameworks covered?
IRQS has broad services, and therefore, limitations are minimal.
What kind of service is IRQS in regard to ensuring data?
IRQS ensures the data without alteration, thereby providing impartiality.
Be Prepared to Defense Green Claims
While there are companies that have legitimately reduced their GHG emissions by 40%, is that information easily verifiable?
Sustainability assurance fills that trust gap. The number of sustainable claims made by businesses will continue to increase. Regulators will continue to enhance their scrutiny and review processes. The sustainability service chosen by a business will validate the claims made by the business and prevent time and costs that would otherwise be incurred by the business in defending those claims.
What businesses should do next is identify and list all the sustainability claims that are made, determine who is requesting evidence for those claims and select the service that supports each claim.
Get Started
Learn more about the range of IRQS sustainability assurance services: Visit IRQS Audit and Assurance
