No.

23-2004 ICCSR Research Paper Series - ISSN 1479-5116

No. 23-2004 ICCSR Research Paper Series - ISSN 1479-5124

Assurance Statement Quality in Environmental,

Social and Sustainability Reporting: A Critical
Evaluation of Leading Edge Practice
David Owen and Brendan ODwyer

Research Paper Series

International Centre for Corporate Social Responsibility
ISSN 1479-5116
Editor: Dirk Matten
International Centre for Corporate Social Responsibility
Nottingham University Business School
Nottingham University
Jubilee Campus
Wollaton Road
Nottingham NG8 1BB
United Kingdom
Phone +44 (0)115 95 15261
Fax
+44 (0)115 84 66667
Email dirk.matten@nottingham.ac.uk
http://www.nottingham.ac.uk/business/ICCSR

Assurance Statement Quality in Environmental, Social and Sustainability

Reporting: A Critical Evaluation of Leading Edge Practice
Professor David Owen and Dr. Brendan ODwyer

ABSTRACT
Recent years have witnessed a continual growth in the number of companies
reporting publicly on various aspects of their environmental and social
performance. Accompanying this growth has been a discernible rise in the
number of these reports that are being verified by independent third parties in
order to increase the credibility of their contents for readers. In this paper we
undertake a detailed critical analysis of assurance statements appearing in
leading edge environmental, social and sustainability reports as represented by
those shortlisted for the 2002 ACCA UK and European Sustainability Reporting
Awards scheme. Prior studies have questioned the credibility of statements
which appeared in the mid to late 1990s, raising fundamental questions as to
their value for external stakeholders. Drawing on an evaluative framework
centrally informed by the recently issued AccountAbility, FEE and GRI guidelines
on assurance, we advance previous work by assessing whether current leading
edge assurance practices offer more in terms of enhancing transparency and
accountability than did their predecessors.
Our analysis indicates some improvement in terms of the rigour of work
undertaken and independence of the assurance exercise. However, it also
exposes a large degree of management control over the assurance process, as
evidenced by a reluctance to address statements to specific stakeholder
constituencies and a general absence of stakeholder participation in assurance
processes. Distinct approaches to assurance among accountant and consultant
assurers are also highlighted with the former primarily adopting a cautious,
limited approach aimed at providing low assurance levels. While consultant
assurers take a more evaluative approach and appear to provide higher level
assurance, their focus on aiding corporate strategic direction potentially blurs
their independence. We contend that their apparent intertwining of the concepts
of accountability and value added needs careful scrutiny as this may reflect an
ultimate accountability to corporate management as opposed to other
stakeholders.
Authors
David Owen is Professor of Environmental and Social Accounting at the
International Centre for Corporate Social Responsibility (ICCSR) at Nottingham
University Business School.
Brendan ODwyer, BComm MBS DPA PhD ACA lectures in the Department of
Accountancy at the Michael Smurfit Graduate School of Business, University

College Dublin where he is Programme Director of the Master of Accounting.

Brendans main research interests encompass: corporate social accountability,
social and ethical accounting, auditing and reporting, corporate governance,
professional accounting body ethics, and qualitative research methods. His work
has been published widely in a number of leading international refereed
academic journals including Accounting, Auditing and Accountability Journal and
The European Accounting Review. He is a member of the editorial board of
Accounting, Auditing and Accountability Journal. Prior to joining academia,
Brendan worked as a Chartered Accountant with Ernst and Young in Dublin.
Address for correspondence
Professor David Owen, International Centre for Corporate Social Responsibility,
Nottingham University Business School, Nottingham University, Jubilee Campus,
Wollaton Road, Nottingham NG8 1BB, United Kingdom, Email
david.owen@nottingham.ac.uk
Dr. Brendan ODwyer, Department of Accountancy, Michael Smurfit Graduate
School of Business, University College Dublin, Blackrock, Co. Dublin, Ireland, Email:
brendan.odwyer@ucd.ie

ASSURANCE STATEMENT QUALITY IN ENVIRONMENTAL, SOCIAL AND

SUSTAINABILITY REPORTING: A CRITICAL EVALUATION OF LEADING EDGE
PRACTICE
1.

Introduction

Recent years have witnessed a steady growth in the number of companies reporting
publicly on various aspects of their environmental and social performance. For
leading edge reporters, predominantly, but not exclusively, large companies
operating in sensitive industrial sectors the preferred means of dissemination has
increasingly become the production of a substantial stand alone paper and/or web
based report. Since 1993, KPMGs tri-annual survey of reporting practice has charted
the steady growth in the number of reporters.

In the latest (2002) survey, for

example, it is noted that 45% of the top 250 companies of the Global Fortune 500
(GFT250) now issue an environmental, social or sustainability report compared to
35% in 1999 (KPMG, 2002). A significant growth rate is also noted in the number of
reports issued by the top 100 companies in eleven countries (including nine from
Europe together with the USA and Australia) up from 13% in 1993 to 28% in 2002.
Accompanying the growth in reporting has been a discernible rise in the proportion of
environmental, social and sustainability reports that are verified by independent third
parties. This trend is primarily driven by a realisation that the growing levels of
disclosure are being undermined by a credibility gap arising from a lack of confidence
in both the data and the sincerity of reporting organisations (Doane, 2000; Swift and
Dando, 2002; Dando and Swift, 2003). According to KPMGs figures, 29% of GFT250
report issuers in 2002 had their reports verified (1999: 19%) whilst similarly 27% of
top 100 companies included a third party verification statement in their report
compared with just 18% in 1999 (see also, CSR Network, 2003; Kolk, 2003).
Amongst leading edge reporters verification is significantly more prevalent, with
SustainAbilitys (2002) analysis of sustainability reporting indicating that 68% of the
worlds best sustainability reports feature some form of assurance statement. KPMG
(2002) suggests that the increased prevalence of verification arises from the
demand for reliable and credible information from management, for managing the
companys environmental and social risks, and from stakeholders who want
assurance that the report truly represents the companys efforts and achievements

(p.18). As Roger Adams, Technical Director of the Association of Chartered Certified

Accountants (quoted in AccountAbility, 2003a) notes:
All organisations want to show themselves in the best possible light. ACCA
believes that independent external assurance is a vital part of the credibility
and trust building process. The role of independent assurance is to ensure
that the reporter presents an account that is fair, complete, unbiased and
relevant. (p. 7)
Significantly, in the light of Adams comments, studies of assurance practice in the
context of environmental reporting have raised serious questions over the credibility
of such exercises and fundamental doubts concerning any value thereby added to
the reports produced from the perspective of external stakeholders. Kamp-Roelands
(2002) highlights major inconsistencies in terms of subject matter addressed, audit
scope, objectives and criteria employed, level of assurance provided, audit
procedures employed and wording of audit opinions offered. In a more critical vein,
Ball et al (2000) suggest that question marks over verifier independence and the
degree of rigour applied to their work, evidence of auditee control over the process
and an overriding emphasis on management systems as opposed to performance
based issues are indicative of a managerial turn rather than the exercise
representing any corporate commitment to external transparency and accountability
(see also, Gray, 2000, 2001).
Developments since the above two studies were carried out (for both the KampRoelands and Ball et al. studies the most recent reporting year utilised was 1997-98)
suggest that this is an opportune time to re-visit the issue of assurance statement
quality in order to ascertain the degree to which current practice exhibits similar
weaknesses to the ones they highlighted. One key development, accompanying the
increased popularity of reporting per se referred to above, has been the introduction
of a social, in addition to the longer standing environmental, component into reports
as what is commonly termed sustainability reporting becomes ever more prevalent.
Significantly, KPMGs 2002 survey is described as being one of sustainability
reporting whilst the previous ones were termed environmental reporting surveys.
Figures produced in the 2002 survey indicate that 27% of the GFT250 and 35% of
the top 100 company reports studied contained a significant social dimension. The
2002 survey draws particular attention to an increasing focus on social issues,
2

like community involvement, equal opportunity, workforce diversity, human rights,

supplier relations, child labour, freedom of association and fair trade, and goes on to
note that we expect this trend to be continued in the following years and for
sustainability reporting to become more integrated into business practice (p. 5).
Such a major broadening of focus for the reporting exercise has clear implications for
any accompanying assurance process, both in terms of scope of work carried out
and constituencies placing reliance on it. Recognition of this fact seems apparent
from the issuing of assurance practice guidance statements in recent years by
influential bodies such as AccountAbility (1999, 2003b), the Federation des Experts
Comptables Europeens (FEE, 2002) and the Global Reporting Initiative (GRI, 2002).
Whilst apparently pursuing somewhat different agendas, all of these initiatives have
the common aim of securing increased rigour in assurance practice, with a view to
enhancing the credibility of the reporting exercise itself. Additionally, they provide a
yardstick by which to judge the degree of reliance that can be placed on current
assurance practice as being fair, complete, unbiased and relevant.
Our aim in this paper is to undertake a critical analysis of assurance statements
appearing in leading edge environmental, social and sustainability reports as
represented by those shortlisted for the 2002 ACCA UK and European Sustainability
Reporting Awards scheme. By investigating whether inconsistencies in approach and
evidence of a managerial turn still permeate current practice we advance and
update the work of Ball et al. (2000) in light of the recent increase in assurance
practice. In addition, we also analyse the extent to which the contents of assurance
statements satisfactorily address key elements forming the basis

of the

AccountAbility, FEE and GRI recommendations such as independence, clear

identification of the scope of the engagement together with standards and criteria
employed, materiality, completeness and responsiveness. This represents the first
comprehensive attempt to evaluate leading edge assurance practice drawing on
guidance issued by these influential bodies. Underpinning our analysis is a concern
to answer the question as to whether current leading edge assurance practices offer
more in terms of enhancing transparency and accountability than did their
predecessors (see, Ball et al., 2000; Owen et al 2000). Before turning our attention to
the analysis of assurance statements we look in a little more depth at the

AccountAbility, FEE and GRI guidelines that centrally inform our evaluative
framework.
2.

The AccountAbility, FEE and GRI Guidelines

AccountAbility issued an exposure draft of a Foundation Standard, AA1000, in

November 1999, which was concerned with specifying the processes both
organisations and assurance providers should employ to secure the quality of what
they then termed social and ethical accounting, auditing and reporting. Subsequently
a programme of work was begun to revise the standard via an envisaged AA1000
Series which is intended to guide organisations in establishing systematic
accountability processes that involve Stakeholders in the generation of strategies,
policies

and

programmes

as

well

as

associated

indicators,

targets

and

communication systems, which effectively guide decisions, activities and overall

organisational performance (AccountAbility, 2003b, p.33). As part of this process a
stand alone Assurance Standard has been produced which provides the basis for
assuring a sustainability report, together with underlying processes, systems and
competencies, against the AA1000 series definition of accountability and associated
principles. In addition to providing guidance for the assurance provider in applying
the AA1000 principles and in evaluating evidence in the context of assessing report
credibility, the standard specifies the following elements that the Assurance
Statement itself should cover:

A statement on the use of the AA1000 Assurance Standard.

Description of work undertaken, the level of assurance pursued and

description of the agreed criteria to be used during the assurance process.

Conclusions as to the report quality and underlying organisational processes,

systems and competencies which must cover whether:
i.

the report provides a fair and balanced representation of material

aspects of performance (materiality)

ii.

the organisation has an effective process in place for identifying and

understanding activities, performance, impacts and stakeholder views
(completeness)

iii.

the organisation has an effective process in place for managing aspects

of sustainability performance and responding to stakeholder views,
including any significant weaknesses in underlying processes, systems
and competencies (responsiveness)

iv.

the report can be used by stakeholders (responsiveness)

It is further suggested that additional commentary may be offered highlighting

progress in both reporting and assurance since the last report together with
suggestions for improvements in reporting and underlying processes, systems and
competencies for the next cycle. Finally, the standard requires assurance providers
to make information publicly available, within the assurance statement or related
public document, concerning their independence from the reporting organisation,
impartiality towards stakeholders and their own competencies.
FEEs 2002 Discussion Paper Providing Assurance on Sustainability Reports
discusses three possible approaches to providing assurance on sustainability
information, termed accountancy, social audit and consultancy. The accountancy
approach, whereby the roles of report preparer and assurance provider are clearly
distinguished, with the latter using a structured approach involving the analysis of risk
and use of appropriate procedures to gather evidence prior to issuing a report stating
the assurance given, is considered to fundamentally underpin the comprehensive
assurance process advocated. The Discussion Paper notes that:
In essence, the comprehensive approach is the accountancy approach,
enhanced through accommodation of aspects of stakeholder dialogue taken
from the social audit approach and the well-developed understanding of
management systems and processes developed through consultancy
methods (p.21).
Significantly, the accountancy approach dictates the recommended way for
communicating assurance to report users (in situations where the assurance provider
is a professional accountant intending to convey a high level of assurance) with
IFACs International Standard on Assurance Engagements (ISA 100) providing the
template. This calls for the assurance statement to include:

A title

An addressee

A description of the engagement objective and subject matter

A statement identifying the party responsible for the subject matter of the
report and the responsibilities of the assurance provider

In cases where the report is for restricted purposes, identification of the parties
to whom the report is restricted and for what purpose it was prepared

Identification of the standards under which the engagement was conducted

Identification of the criteria against which the subject matter of the report was
evaluated

A conclusion concerning the subject matter evaluated, indicating any

reservations or denial of a conclusion

The report date

The name of the assurance provider and place of issue of the report

In considering a number of practical difficulties which may arise in preparing an

assurance statement some scope is offered for relaxing the rather constrained IFAC
derived format outlined above. It is, for example, suggested that the credentials of the
assurance provider may be disclosed in situations where users may be unaware of
them, whilst it may also be necessary to explain the assurance providers degree of
independence from the reporting company. Furthermore, whilst issues appertaining
to stakeholder views and concerns do not feature centrally in assurance statement
content, as is the case with AA1000, it is acknowledged that stakeholder dialogue is
likely to be a significant issue in the reporting process itself and may therefore be
referred to in the assurance statement, and indeed may be necessary in helping
determine appropriate wording for the statement. Finally, scope is offered for
providing some assessment of the companys sustainability performance, or
reporting of that performance, although it is stressed that any such assessment must
be clearly differentiated from the assurance on the sustainability report itself.
Despite the above concessions, FEEs approach to sustainability assurance appears
much more bounded by an attitude of caution than that of AccountAbility, with an
overriding desire to avoid creating an expectation gap whereby a user mistakenly
assumes that there is more assurance than is actually present (p. 17). Indeed much
emphasis is placed on using the term assurance rather than audit or verification
for the very reason that it conveys a lower level of endorsement than that of the latter
two terms.
6

Whereas carrying out an assurance exercise is not mandatory under the GRI
Sustainability Reporting Guidelines, auditability of information forms one of the laid
down reporting principles considered essential for underpinning the production of a
balanced and reasonable report. Furthermore, a working group was formed in 1999
to explore issues and options for strengthening the credibility of sustainability
reports through various assurance mechanisms (GRI, 2002, p. 25). Guidance as to
what might be included in an independent assurance report arising as a result of the
groups consultations is contained in annex four appended to the Guidelines
document. The guidance has much in common with that provided by FEE including
recommendations that:

A separately identified assurance statement is produced with a specified

addressee identified. (It is suggested that this will normally be the board of
directors, or, if agreed, the organisations stakeholders.)

The respective responsibilities of report preparer and assurance provider are

clearly distinguished.

A statement of the scope and objective of the assurance engagement is

presented.

The criteria used in assessing evidence and reaching conclusions are

provided.

Standards applied are disclosed.

A statement of the conclusion reached concerning the subject matter

evaluated (with encouragement to report constructively on any reservations) is
provided

The identity and location of the assurance provider together with date of report
is included.

The GRI guidance, however, goes a little further than that of FEE in a number of
instances. Firstly, it is specified that a statement affirming the assurance providers
independence and freedom from bias and conflicts of interest should, rather than
may, be included. Secondly, a brief description, or outline, of how evidence providing
the basis for the conclusion reached was obtained is called for. Significantly, it is
noted that this will include the extent to which different categories of stakeholders
participated in the planning and execution of the assurance process and indicate any
constraints on this process (GRI, 2002, p. 79). Finally, the GRI guidance is a little
more prescriptive than that of FEE concerning wording of any conclusion reached in
7

that this should address the accuracy, completeness, reliability and balance of
the sustainability report, relative to the scope of the engagement (GRI, 2002, p. 79).
3.

Research Method and Sample

As noted earlier, our sample of assurance statements for analysis comprises those
appearing in environmental, social and sustainability reports shortlisted for the 2002
ACCA UK and European Sustainability Reporting Awards. The total number of
reports shortlisted was 81, of which 48 were from the UK. Of the UK reports 28
contained assurance statements (58%), whereas for the European reports, 13
assurance statements were located (34%). The latter figure, however, gives a rather
understated picture of assurance practice within large European companies in that
none of the seven companies shortlisted in the separate SME category for the
European scheme featured an assurance statement within their report, whilst
additionally we were unable to access English language versions of a further four
reports. Excluding these eleven reports from the overall sample moves the
percentage assured up to 59%, a figure much more in line with that observed in the
UK.
In carrying out our analysis we have followed the practice of earlier researchers (Ball
et al., 2000; Kamp-Roelands, 2002) in looking for variations in approach between
accountant and consultant verifiers and draw attention to notable differences where
appropriate. Additionally, we have looked for differences in assurance practice
applied to environmental and social/sustainability reporting exercises. A priori we
would expect some variation in the former instance, with accountant verifiers
presumably more likely than consultants to be influenced by the accountancy
approach of FEE and the GRI. In the case of type of report we wouldnt, however,
necessarily expect much in the way of differences of approach, save except perhaps
for more reference to issues of stakeholder engagement and dialogue in the case of
social/sustainability reporting. This is for two reasons. Firstly, the FEE (and to a large
extent the GRI) guidelines, as noted, draw on IFACs ISA 100 standard, which
applies to any report intended to convey a high level of assurance. Secondly, the
term sustainability report is increasingly being used to cover the broad range of
formats in which companies are reporting on their social and environmental
performance, whether within individual social, environmental, corporate
citizenship or environmental, health and safety reports; as part of their corporate
8

annual report; or in designated triple-bottom line and sustainability reports.

(AccountAbility, 2003a, p.3). By implication, therefore, it would appear that
AccountAbility are assuming their own assurance standard to be applicable to a
broad range of reports. Table 1 provides a breakdown of the number of assurance
statements analysed in terms of type of report and assurance provider.
Table 1: Assurance Statements Analysed
Type of Report

Total

Assurance Provider
Accountant

Consultant

Environmental

13 (32%)

Social/Sustainability

28 (68%)

10

18

19 (46%)

22 (54%)

Total

41

Noteworthy from Table 1 is that the dominant position of consultant verifiers identified
in the Ball et al. and Kamp-Roelands studies appears to have been significantly
eroded (at least as far as our sample is concerned), although accountants seem
more prominent in environmental rather than social/sustainability assurance
provision. Also, the preponderance of social/sustainability reports contrasts
somewhat with the picture painted by KPMGs (2002) survey referred to earlier, whilst
however providing some support for AccountAbilitys assertion above.
The evaluative framework employed for analysing our sample of assurance
statements is developed from the AccountAbility, FEE and GRI guidelines outlined in
the previous section. Key questions focussed upon are as follows:

What level of basic information concerning the assurance provider and the
assurance process is provided? Issues addressed are whether FEE and GRI
stipulations as to clearly identifying the type of statement (title), the addressee
and respective responsibilities of preparer and assurance provider are
followed, and whether information concerning the assurance providers
competencies is provided.
9

Is the degree of independence of the assurance provider from the reporting

organisation made clear?

Is a clear description of work undertaken offered, covering such issues as

scope of the assurance exercise, criteria and standards employed, together
with the level of assurance being given?

To what extent do statements address the core assurance principles of

materiality, completeness and responsiveness emphasised in AccountAbilitys
AA1000 assurance standard?

Is any assessment of underlying processes and systems, reporting procedures

and

performance

itself

made,

with

weaknesses

highlighted

and

recommendations/ strategic commentary offered?

In what form are opinions stated? For example, do conclusions reached on the
report address issues such as accuracy, completeness, reliability and balance
as called for in the GRI guidance?

A detailed questionnaire was partially derived from the instrument used in Ball et al. (2000).
However, this instrument was substantially revised to accord with the evaluative framework
outlined above. The initial analysis was undertaken by a research assistant who read each
assurance statement in detail on numerous occasions. Give that there is an element of
subjectivity in the interpretation of aspects of the evaluative framework, both authors then rechecked these results by reading the statements independently on several occasions.
Numerous changes were made to the overall analysis and the statements were again analysed
in depth by the authors to confirm and agree these revised findings.

4.

Results

4.1 Information Provision Relating to the Assurance Provider and Assurance

Process
As one would expect, all assurance providers clearly identified themselves (which
allowed us to separately identify accountant and consultant verifiers) and in the
overwhelming majority of cases their statements were dated. Information provided
on competencies was however patchy. Generally, Big 4 accountant verifiers were
10

content for the very name of the firm to indicate competence to undertake the
assurance process. We identified only two instances (11% of the accountant sample)
in which some clear indication was given of past assurance experience and four
examples (22% of the accountant sample) of the particular area of expertise brought
to bear on the assurance process being mentioned. In the former case, for example,
KPMGs attestation report for Volkswagen AG notes that experience and findings
from previous audits of environmental reports assisted them in identifying critical
areas for examination and drawing up an audit strategy. In terms of disclosing areas
of expertise, PriceWaterhouseCoopers (PwC) review of Abbey Nationals corporate
citizenship report is identified as being conducted by their environmental
management consultancy arm, whilst in a similar vein the verification of BASFs
social responsibility report is attributed to Deloitte and Touche Global Environment
and Sustainability Services. For their part, KPMG refer to the assembly of a
multidisciplinary team of social responsibility and assurance specialists to undertake
work on the Co-operative Insurance Societys social accountability report.
Consultant verifiers were more likely to disclose details of past assurance
experience, areas of expertise and relevant qualifications for undertaking the
assurance exercise with almost half (48%) disclosing in this vein. For example,
Ashridges verification report for Camelot refers to the verification team leader being
a Certified Member and Director of AccounAbility while Casella-Stanger append to
their verification statement for BAAs sustainability disclosures a note that they are a
UK based environmental consultancy which has expertise in a wide range of areas,
such as corporate social responsibility, EMS, risk, air quality, noise, water quality and
ecology. Additionally, the company has experience in the design, development and
verification of sustainability reports in a wide range of sectors, and several staff are
registered with the Institute of Environmental Management and Assessment (EMA)
as qualified auditors and members of AA1000.
Turning to information provision concerning the assurance process itself, we were
somewhat surprised to note that, notwithstanding the cautionary approach to
terminology adopted in the FEE guidelines, verification statement or verifiers report
was by a considerable margin the most popular term employed for independent
opinion statements. This term was used on twenty occasions (49% of overall sample)
which contrasts somewhat with the relative unpopularity of the term assurance
11

which appeared only six times (17%). It should however be noted that accountants
were much less likely to employ the term verification, using it in just five cases (26%
of accountants sample). Significantly, the accountant verifiers were also far more
likely to draw attention to the respective responsibilities of report verifiers and
preparers than were consultants. Indeed, we found only one occasion where no
specific reference was made identifying responsible parties. This was in the context
of Deloitte and Touches checking of certain data control procedures operated by
Grundfos, in which case the firm is at pains to point out that neither an audit or review
has been carried out in accordance with Danish accounting standards and that no
assurance is provided on the correctness of the total report. For consultants, by
contrast, on nine occasions (41%) no specific reference is made to the
responsibilities
of corporate management for report preparation, although it should be acknowledged
that the responsibilities undertaken by the verifier are generally most clearly spelt out.
One significant area where FEE and GRI guidelines seem to be having little impact is
in the specification of an addressee for the assurance statement. In only eleven
instances (27% of sample) did this occur and this was exclusively among the
accountant verifiers. They identified the board of directors on seven occasions, the
company itself on three and, rather quaintly, the readers of the report on the
remaining one. Intriguingly, when looking at the constituencies the organisations
report itself purports to address we see that employees are identified in 66% of
cases, customers 59%, the local community 54% and shareholders 49%. We can but
contrast the situation here with that of financial reporting where the report is prepared
for shareholders and the audit report is also clearly addressed to the same
constituency. There are significant issues of corporate governance to unpick in the
realm of sustainability reporting that presently go somewhat unacknowledged.
4.2

Independence of the Assurance provider

In total, just under half (46%) of assurance statements made some reference to the
providers independence from the reporting organisation. Consultant verifiers (65% of
cases) were more likely than accountant verifiers (39%) to provide such a statement
or reference, particularly in the context of verifying social/sustainability reports.
Indeed, for accountants, in the majority of cases simply labelling their statement as
being independent was deemed to suffice. Generally, by contrast, the consultant
12

group offered a more complete description of the degree of independence prevailing

in the reporter-assurance provider relationship. One example here is provided by
ethics etcs statement on the Co-operative Banks partnership report that they hold
a Business Direct account, but no other business or personal relationship with the
bank or its directors and managers.
Despite the accountant groups reluctance to provide a detailed statement of
independence from the client company, it is easy to draw an inference of an arms
length relationship from the generally detailed description provided of the respective
responsibilities of report preparer and assurance provider drawn attention to earlier.
Indeed, we came across no examples of accountant verifiers performing services for
the client other than assurance provision in the context of the environmental and
social reporting process. Whilst the overriding majority of the assurance statements
from the consultant group suggested a similar arms length relationship, we did
discover four instances where independence, either currently or potentially, was less
than complete. The clearest example of this comes from csr networks validation of
Balfour Beattys safety, environment and social report where ongoing consultancy
contracts with the company are referred to:
In 2002 these included advice on environmental metrics and data collection,
and a third annual environmental management benchmarking exercise.
Significantly, it is then noted that:
Taken together, these contracts add depth to our appreciation of governance
arrangements within the Group, but they also mean that our opinion cannot be
viewed as fully independent (emphasis added).
Interestingly, Ashridges verification of Camelots social and environmental report
draws attention to the offering of advice and guidance on the appropriate
performance measures to be included in the report but makes no similar
acknowledgement of their independence being possibly compromised. The contrast
with csr networks procedures is further highlighted by another instance, the latters
assurance statement appended to FRC Groups social report, where it is stated that
FRC have commissioned csr network to provide advice on social accounting

13

throughout the coming year. This presents a conflict of interest, particularly in relation
to future assurance exercises (emphasis added).
The final example of a less than fully independent relationship is provided by The
Corporate Citizenship Companys attestation statement for South African Breweries
corporate accountability report where attention is drawn to the fact that they have
acted as consultants to the company since 1999. The nature of the relationship is
rather underlined by Michael Tuffreys (co-founder of The Corporate Citizenship
Company) external commentary on the report which commences with the
resounding statement:
Having worked with SAB since soon after its London listing, it is personally
pleasing to see how frequently the company is now cited as a leader in social
reporting.
We would suggest that this is not the ideal way to commence an attestation
statement if one wants to achieve credibility with ones readership. Indeed, the rest of
the commentary does rather tend to accentuate the positive and ends with the
rallying call that SABs record is already a strong one. Meeting the social challenge
will make it stronger still.
Whilst we have drawn particular attention to situations where the relationship
between the company and its assurance provider may fall short of one of full
independence, it must be acknowledged that these now appear to be very much the
exception. However, similar issues of corporate governance that we drew attention to
in the previous sub-section are again relevant when considering the concept of
independence in the fullest sense of the term. Put simply, the assurance exercise is
commissioned by corporate management, rather than individual stakeholder groups,
who are thus able to place restrictions on the areas of performance and reporting
upon which the assurance provider can bring to bear independent judgement. An
example of this is provided in a footnote to Lloyds Register Quality Assurance
Limiteds (LROA) verification statement on BT Groups 2002 social and
environmental report where it is noted that:

14

 [v]erification scope is to confirm that the information presented is right.

LRQA had no input to topics chosen or their content, this is the responsibility
of BT, with support from the Independent Advisory Panel (emphasis added).
4.3

Description of Work Undertaken

Whereas all assurance statements make some reference to the scope of the
exercise undertaken, only fifteen statements (37%) go on to provide clear and
specific information on areas not reviewed or assessed. Information provision on the
level of assurance provided and specific criteria employed is provided by less than
half of the sample (41%).
Accountant verifiers (53%) seem more likely than their consultant counterparts (30%)
to spell out the exact level of assurance pursued. In a number of cases, notably in
work performed by PwC, it is indicated that there are limitations in the degree of
assurance being offered. Thus, for example, in their review of Abbey Nationals
corporate citizenship report it is clearly stated that, we have not conducted an
audit, as defined in auditing standards, and we do not express an audit opinion on
the performance data and information in the Report. The same phrase appears in
the firms review of BG Groups social and environmental report, with the additional
information provided that work had been planned and performed, in order to
obtain reasonable, rather than absolute, assurance on the information tested,
although a belief is stated that the work carried out, provides a reasonable basis
for our findings. The health warning appended to the attestation statement for BPs
environmental and social review is rather more stark, indicating that the statement in
itself, should not be taken as a basis for interpreting BPs performance in relation
to its non-financial policies. By contrast, in a rare example of a non Big 4
accountants verification exercise, Rainbow Gillespie convey the fact that they have
audited the social accounts of Traidcraft in accordance with AccountAbility 1000
Section 3 - Guidelines for the social and ethical auditor. Interestingly, the only two
other examples of (Big 4) verification exercises offering a high level of assurance are
both confined to environmental reports. PwC give an audit opinion concerning
environmental and safety indicators published in Rhodias sustainable development
report, whilst KPMG are clear that they are performing an audit of Volkswagens
environmental report. Significantly, the existence of Generally Accepted Audit
Standards for Audits of Environmental reports (IDW PS 820), issued by the German
15

Institute of Accountants, was instrumental in enabling the latter exercise to be carried

out.
Clearly, the lack of specific criteria, in terms of directly applicable auditing standards,
is a major constraint on the level of assurance offered. The criteria employed by
accountants are generally stated as reflecting emerging best practice together with
the underlying principles within international standards for assurance engagements.
We came across only twelve cases (29% of sample) where the verifier clearly
indicated that a particular standard had provided the criteria employed in the
assurance engagement. In the case of environmental report verification, in addition to
the use of IDW PS 820 observed above we also noted three references to
environmental management certification. For social/sustainability report verification
the AA1000 Framework Standard and the recently issued Accountability Assurance
standard are clearly achieving a position of some influence, being used substantially
to guide the assurance process on eight occasions (29% of this sample) and partially
once (URS Verifications assurance of Unilevers web based environment and society
disclosures). Generally consultants were to the fore in using this standard, with
assurance work at BAA, BAT, BT, Camelot, FRC and the Co-operative Bank being
driven by the AA1000 approach. In addition to Rainbow Gillespies verification of
Traidcraft, referred to above, the only other example we came across of an
accounting firms use of the AA1000 standards is KPMGs statement on the Cooperative Insurance Societys social accountability report. In this case the three page
verification draws particularly heavily on the provisions of the AA1000 Framework
Standard and features a detailed review of improvements achieved by the society
against the eight core principles of 1999 draft of the Standard.
Whilst criteria underpinning verification work, as may be seen from the above, are
generally not clearly specified, an overwhelming majority of statements do provide
details of work undertaken on the assignment as Table 2 indicates.

16

Table 2: Nature of Assurance Work Undertaken

% of
Total
Sample
(41
reports)

% of
Environmental
Reports
(13 reports)

% of
Social/Sustainability
Reports
(28 reports)

in

93

93

93

data

85

69

93

Validation of achievement
of targets

12

15

11

Validation of governance
arrangements

17

21

Site visit(s) carried out

56

69

50

Staff interviewed

85

77

89

Stakeholders interviewed

10

11

Nature of Work
Undertaken

Validation
report

of

data

Validation
of
collection systems

Comparing figures on work undertaken during the assurance process in the above
table with those appearing in Ball et al.s (2000) study suggests that a discernible
improvement in the rigour with which the process is conducted has taken place.
Notably, for our sample 93% of assurance providers make reference to having
undertaken a review of data in arriving at an opinion as against 70% in Ball et al.s
study. Additionally, 85% refer to having undertaken a review of systems (Ball et al.
43%), 56% to site visits (Ball et al. 32%) and 85% to having interviewed client staff
(Ball et al. 61%). Significantly, the latter figure contrasts somewhat starkly with the
number of statements (10%) that refer to interviews being carried out with
stakeholders as part of the assurance process. Interestingly, however, for the few
assurance providers commenting on governance issues, reference is generally made
to the need for involving stakeholders more closely in the reporting process. Thus, for
example, URS Verification Ltd note that the process of evaluation of stakeholder
opinion is emerging and the link to reporting is yet to be clearly established in their
verification of Unilevers report. In similar vein Bureau Veritass verification of BATs
17

social report refers to a need for the company to demonstrate actionable

commitment to stakeholder issues if they are to build trust, and so improve
inclusivity.
4.4

Materiality, Completeness and Responsiveness

The core principles of AccountAbilitys AA1000 Assurance Standard providing

guidance to the assurance provider in reaching an opinion, those of materiality,
completeness and responsiveness, are centrally concerned with issues of
stakeholder engagement and inclusivity. The materiality principle requires the
assurance provider to state whether the organisations report contains information
about sustainability performance required by its stakeholders for them to be able
to make informed judgements, decisions and actions (p. 14). According to the
AA1000

Assurance

Standard,

information

is

material

if

its

omission

or

misrepresentation in the Report could influence the decisions and actions of the
Reporting Organisations stakeholders (AccountAbility, 2003b, p. 15). The
completeness principle calls for an evaluation of the extent to which the reporting
organisation can identify and understand material aspects of its sustainability
performance (p. 17) which encompasses activities, impacts and stakeholder views.
Finally, the responsiveness principle requires the assurance provider to evaluate
whether the reporting organisation has responded to stakeholder concerns, policies
and relevant standards, and adequately communicated these responses in its report
(p. 18).
We found instances of specific reference being made to materiality issues in thirteen
assurance statements (31% of sample). However, the general procedure adopted
was to offer a very broad statement rather than specific details of how materiality
levels had been set or indeed what exactly material implied. For example, PwCs
review of BG Groups social and environmental report notes simply that it
addresses the material Health, Safety, Security and Environmental issues associated
with BGs operations, whilst Ernst and Youngs attestation of BPs environmental
and social review states that we are not aware of any material modifications that
should be made to the HSE data which would affect assessment of group-wide HSE
performance. Significantly, the latter report also points out that decisions regarding
matters included in the review have been made by the company and that the
degree to which the Review contents address key stakeholder concerns are based
18

on BPs judgement. We could find only two assurance statements which specifically
and unambiguously addressed the issue of materiality from a stakeholder
perspective. These were Bureau Veritas verification statement for BATs social
report which focussed centrally on the stakeholder dialogue process employed by the
company and KPMGs statement on CIS social accountability report which in
drawing attention to improvements made by the company against the eight AA1000
(1999) principles noted under the materiality heading that:
CIS is integrating social, ethical and environmental risks into a new risk
management process. Stakeholder dialogue is used in risk identification and
CIS is experimenting with various techniques of stakeholder dialogue with
different groups and issues.
One further example of reference being made to a stakeholder centred notion of
materiality worthy of particular mention is PwCs review of Cable and Wirelesss
environment report which notes that further work is required to strengthen the
framework for gathering and reporting environmental information including:
Development of a Group-wide approach to stakeholder engagement to
confirm the material environmental issues at Group, business and site level.
Turning to the issue of completeness, we found fourteen instances (34% of sample)
where the assurance provider offered some specific degree of assessment of the
extent to which the reporting organisation is able to identify and understand its own
sustainability performance. Consultant assurance providers (39% of cases) appeared
more likely to offer comment in this vein than accountant assurance providers (27%).
Specific comment was made suggesting that all information was provided to enable
stakeholders to make informed judgements on only four occasions (10% of sample).
In particularly forthright style in this context Ashridges verification of Camelots social
and environmental report claims confidence that:
this report presents a true, complete, balanced and accurate account of
how the organisation is implementing the values and principles stated in the
success models relevant to each stakeholder group.
However, their statement goes on to express two minor qualifications relating to the
level of detail of data provision, making the full report difficult for all but the most
19

informed audience to read, and the identification of areas of performance where

additional indicators would give a more complete picture of the companys
environmental impact. A similar concern with report complexity causing difficulties for
certain stakeholder groups is conveyed by csr networks assurance statement on
FRC Groups social and environmental performance report which also expresses
some reservations over completeness in noting that:
The report goes some way towards covering the impacts of both the activity of
the business and its governance and management. Areas for the future might
include the benefits to society as a whole of taking materials out of the waste
stream and further analysis of stakeholders such as policy makers.
In all, we identified just thirteen instances (32%) where the assurance provider
expresses some degree of uncertainty or reservation as to the accessibility of the
report to stakeholders or possible areas of incompleteness in reporting.
Finally, as far as responsiveness is concerned, in twelve (29%) of the assurance
statements analysed clear reference was made by the assurance provider to the fact
that an evaluation had been made of the extent to which the organisation had sought
to identify stakeholder interests and concerns. Significantly, most statements refer to
the need for the organisations concerned to do more in this regard. Fairly typical
comments here appear in two reviews carried out by PwC. Firstly, in the case of BG
Group it is noted that further work is required in terms of:
development of a systematic Group-wide approach to engaging with
relevant stakeholder groups to confirm the material social issues for BG and
communication of the results of this engagement in future reports.
Similarly, for Lattice Group attention is drawn to the need for:
formalising the Group level approach to stakeholder engagement,
particularly in order to confirm the material non- financial issues for the Group.
Whereas reference to the organisations procedures (or lack of them) for identifying
stakeholder interests and concerns features in assurance statements appended to
both environmental and social/sustainability reports, far more detail appears in the
latter cases, particularly in the relatively few instances where the assurance provider
20

has adopted the AA1000 Assurance Standard. In these cases reference is generally
made to evaluation of the reporting organisation having:

decided how to respond to expressed interests and concerns

established associated policies, targets and indicators

demonstrated that adequate resources have been allocated for their

implementation, and

communicated the above in its report in a manner that is both timely and
accessible to stakeholders.

Bureau Veritas verification of BATs social report provides a particularly good

illustration here. Amongst statements made are the following:
British American Tobacco has not yet defined and developed indicators and
targets for areas or issues raised in dialogue and we would have liked to see
more qualitative and substantial indicators included in this report, including
time commitments and performance targets. British American Tobacco states
it aims to move forward with a wider and more diverse means of stakeholder
engagement, to review and communicate a broader set of values and to
develop indicators and targets with stakeholders during the second reporting
cycle.
A clear budgetary commitment has been made to continue the accounting and
reporting process.
[Information conveyed in this social report] is both understandable and
accessible to stakeholders who wish to gain a better understanding of the
social and ethical issues facing British American Tobacco Group companies in
the UK and how those companies plan to address the issues.
4.5

ASSESSMENT OF UNDERLYING PROCESSES AND SYSTEMS, REPORTING PROCEDURES

AND PERFORMANCE

Twenty-two assurance statements (54% of sample) made specific reference to

instances of weaknesses in the organisations underlying systems, management
practices, reporting procedures or overall performance. In all but one case (Ernst &
Youngs attestation of BPs environmental and social review) some form of
21

recommendation for improvement was offered. Significantly, consultant assurance

providers (70% of sample) were far more likely to go down this route than
accountants (33%) with the procedure being adopted more commonly in
social/sustainability report assurance (68% of sample) than for environmental reports
(38%). In the main, recommendations were couched in fairly general terms. A fairly
typical example here, albeit one that specifies a time scale for implementation, is csr
networks validation of Balfour Beattys safety, health and environmental disclosures:
Over the next year, we recommend that the company should assess the
information that has been collated, progressively improve its completeness
and quality, and set relevant improvement targets. The challenge now is to
embed environmental management consistently in UK operations and to
progressively extend these requirements to new acquisitions and the
international businesses.
The same consultants assurance statement for Musgrave Group is a little more
specific in terms of recommending further development of key performance
indicators:
In particular, Musgrave Group should seek to develop relevant indicators of
social and economic performance, for example group-wide health and safety,
and the positive impacts on local (rural) communities through indirect job
creation and support to social infrastructure.
Some assurance providers went so far as to recommend specific reporting
developments. For example, URS verification of Unilevers web based report
recommended that the company consider reporting incidents in addition to
prosecutions and fines in order to conform with emerging best practice. An even
more hands on approach was adopted by Arthur D. Little in their verification of
Novartis health, safety and environment report, where it is noted that:
An example of the omission of relevant life cycle impact is the CO2 emission
since it addresses only the emissions from energy generated by Novartis. To
ensure that CO2 emissions from energy consumed from external suppliers is
also addressed we propose to redefine the CO2 target accordingly (emphasis
added).

22

In terms of the areas in which weaknesses were noted, and associated

recommendations offered, most commonly addressed were underlying processes
and systems (39% of cases) followed by issues relating to report content (34%) and
the preparation process (22%). In six cases verifiers went further in providing views
on the acceptability of the reporting organisations performance. Most specific were
Casella Stangers verification of Canary Wharfs environment and social report and
Entecs verification of The Environment Agencys report which both commented in
some detail on the organisations record in achieving performance targets. The only
reference we came across to acceptability of social performance, however, was Earth
Tecs verification of Pennon Groups environmental and social report where it is
noted that:
The Groups strong social performance in the sector has been recognised by
the Dow Jones STOXX Sustainability Indexes.
Whereas, in the main, observations on, and recommendations for improving, systems
and reporting procedures were fairly brief, there were three examples of substantial
strategic commentary being offered. Significantly, all were by consultants - csr
network for BA, LE Group and United Utilities, together with Casella Stangers
Strategic Overview of BAAs Long Term Progress Since 1997 (the year that the firm
were appointed as verifiers). The latter, in particular, is a particularly detailed
commentary which offers analysis of BAAs sustainable development programme,
success in achieving environmental targets, progress in developing environmental
key performance indicators and progress made in implementing recommendations
from the previous years verification exercise. Clearly, informed comment of this
nature may be regarded as adding value for the reports readership. At the same
time, however, questions are inevitably raised as to whether combining what is
essentially a consultancy function with a separate arms length assurance exercise
compromises the integrity of the latter, particularly when no indication of fee levels for
the respective commissions is offered.
4.6

Nature of Assurance Opinions Offered

One of the more illuminating features of our analysis was the rather terse use of
wording in the opinions of most Big 4 accountant assurance providers. Significantly,
there was an absence of the use of the term true and fair in these opinions despite
23

its ubiquity in financial statement opinions. Whilst most accountants opinions

addressed issues surrounding the accuracy and reliability of the transfer of
information from management systems to reports, their explicit limitations of scope,
referred to earlier, tended to lead to the crucial issue of completeness of reporting
being ignored in their opinions.
Consistency was the term generally favoured by accountant assurance providers in
the wording of their opinions. A fairly typical statement is that provided by Deloitte
and Touche in Denmark which focussed on confirming that submitted data were
consistent with the source documentation presented to us and thereby provided
some confirmation of data collection procedures. However, a reader might be more
comfortable if the wording requested by them was used instead of presented to
them, as the latter could easily imply that the company decided what information
would be presented hence making a mockery of the assurance procedures. It is
also interesting to contrast the use of the term consistent here to that used by PwC
in their opinions on Cable and Wireless, Volkswagen AG, BG Group and Lattice
Group. Here, the information in the reports is deemed not inconsistent with the
findings from PwCs work. Whether not inconsistent equates with consistent is left
up to the reader to decide. Additionally, PwC in London favoured the use of the term
appropriate representation when assessing how the reports of BG Group and
Lattice Group reflected social and environmental policies and governance
arrangements. However, from reading the assurance statements in full it is difficult to
understand how appropriate is to be defined, and by whom.
Whereas few accountant assurance providers explicitly addressed the issue of
completeness in their opinions, KPMGs opinion on Volkswagen AG provided an
exception in stating that the report is a complete and appropriate representation
insofar as materially relevant of the impact of on the environment of the Volkswagen
Marque. As we noted earlier, KPMGs opinion on CIS social accountability report
also assessed the report against the AA1000 principles, one of which is
completeness.
The KPMG/PwC opinion on Shell Internationals report is one of the few to deal
explicitly with performance issues in noting that in the case of certain information
appearing in the report, for which page number references are given, the data
24

properly reflect(s) the performance of the reporting entities. Additionally, Rainbow

Gillespie provide an opinion on Traidcrafts social accounts that, the companies
social impact on the stakeholder groups reported upon has been fairly presented .
However, the desire of most accountant assurance providers to warn against placing
too much reliance on their reviews is evident in the final statement contained within
PwCs opinion on sections of Unique Zurich Airports environmental report:
Our statement should be read in conjunction with the inherent limitations of
accuracy and completeness for environmental data, as well as in connection
with the scope of reporting on page 5.
The opinions of consultant verifiers tended to portray a more re-assuring picture for
the reader, with statements predominantly attesting to the accuracy, reliability and
completeness of reporting by companies. For example, csr network, who provided
assurance for six (15%) companies in our sample, had a separate section entitled
accuracy and completeness in all of their statements. Fairly typical of the opinions
offered in this section is the following extract from their assurance statement for BAs
social and environmental report:
For the air emissions, fuel efficiency, energy, noise, people relationships and
citizen report sections, we have found the data collection systems to be robust
and that the underlying trends are substantially correct.
However, later in the section a greater degree of reservation is expressed when they
refer to BAs environmental indicators only representing a reasonable overview of
the companys key impacts. The word reasonable is used in a similarly (at least
implicitly) negative manner by the same firm in noting that FRCs social report
provides a reasonable basis for understanding the key aspects of the companys
behaviour and social and environmental impact.
In contrast to the accountant assurance providers, we found only one instance where
the term consistent was used by consultants in relation to information reported. Far
more common was mention of fairness and balance in terms of information
presented, significantly, words that accountants generally refrained from using. For
example, RPS Consultants speak of Countryside Properties report providing a fair
reflection of the environmental, social and community activities undertaken by the
25

company, whilst Arthur D Little note that Novartis HSE report contains a fair
summary of relevant HSE impacts at Novartis own sites. For their part, Earth Tech
in their verification of Pennon Groups environmental and social report find that it
provides a fair and balanced representation of the significant environmental and
social sustainability issues and actions being taken under the control of the Pennon
Group. Finally in this context, a particularly strong endorsement of Unilevers web
based disclosures is offered by URS Verification:
URSVL considers that the report text and data relating to environmental
performance and management addresses the significant environmental
aspects of the business and these have been reported in a fair and balanced
manner.
In summary, clear distinctions between accountant and consultant assurance
provider opinions pervade our sample. From our analysis, a greater level of
assurance can be gleaned from the opinions of consultants, which certainly offer
more in terms of robustness and fullness of commentary. This review of opinions, of
course, is simply consistent with our earlier impression that there are very few
instances where Big 4 assurance providers are prepared to offer a high level of
assurance to report readers. Consultant assurance providers seemingly have far
fewer inhibitions. Whether their boldness is fully justified would be easier to ascertain
if details of fees paid for such assurance work were routinely disclosed, as is the
case with financial audit engagements.
5.

Discussion and Conclusions

Our objective in this paper was to carry out a critical analysis of assurance
statements appearing in leading edge environmental, social and sustainability reports
as represented by those shortlisted for the 2002 ACCA UK and European
Sustainability Reporting Awards scheme. Using an evaluative framework centrally
informed by the AccountAbility, FEE and GRI guidelines, we examined the extent to
which the contents of assurance statements satisfactorily address key elements of
these guidelines such as independence, clear identification of the scope of the
engagement

together

with

standards

and

criteria

employed,

materiality,

completeness and responsiveness. This represents the first comprehensive attempt

26

to evaluate leading edge assurance practice drawing on guidance issued by these

influential bodies. Underpinning this analysis was a concern to ascertain whether
current leading edge assurance practices offer more in terms of enhancing
transparency and accountability than did their predecessors. Hence, our analysis
significantly advances the work of Ball et al. (2000) in light of the recent increase in
assurance practice.
Contrasting the findings of this study with those of Ball et al. (2000), which utilised a
similar sample of assurance statements drawn from the ACCA Environmental (now
Sustainability) Awards Scheme shortlists, appears to indicate some improvement in
terms of rigour of work undertaken and independence of the exercise. Additionally, a
greater degree of focus on the performance (as opposed to simply management
systems) dimension is discernible, particularly in the case of assurance exercises
conducted on social/sustainability reports which employ AA1000 methodology.
However, even in these cases, stakeholder input into the assurance process is very
much the exception despite Henriques (2003) assertion that in order to enhance
trust in reporting assurers [need to] be well connected to the stakeholders and
understand their issues well. Moreover, stakeholder engagement with the reporting
organisation per se is often minimal (an issue mentioned in a number of assurance
statements), which, in itself threatens the credibility of these exercises. Hence, there
is still a large degree of management control over the reporting, and indeed
assurance, process. Assurance providers are appointed by management, who may
place any restrictions they choose on the assurance exercise, and they effectively
report to management. Significantly in this latter context, save for one mention of the
assurance statement being directed at its readership, on the few occasions that an
addressee is specified it is corporate management. The contrast here with
governance structures underpinning the financial audit process is only too clear. This
reluctance to address the assurance statement to specific constituencies seems to
imply they are primarily providing value to management thereby reflecting a
perceived demand for verification of this information from management as opposed
to stakeholders (see, KPMG, 2002, p. 18).
The

reluctance

to

address

assurance

statements

to

specific

stakeholder

constituencies also has implications for assurance on the materiality of the

information provided. In the AA1000 Assurance Standard (AA1000b, p. 15),
information is deemed material if its omission or misrepresentation could influence
27

the decisions and actions of stakeholders. From this, we can assume that identified
stakeholders are viewed as the key users of these reports, so why the reluctance to
address assurance statements to them? If these reports are addressed only to
management they merely represent an internal assurance exercise being published
externally. If credibility and trust are to be enhanced, the next wave of assurance
statements will need to move beyond this restrictive approach which implicitly defines
materiality as it pertains to management. Providing statements to management for
management is hardly likely to counter the apparent scepticism surrounding social/
sustainability reporting (Dando and Swift, 2003).
This reluctance to identify key constituents is also reflected in the lack of any
substantive consideration of materiality, defined in stakeholder terms, in assurance
statements. Materiality is a thorny and emerging issue in the area of assurance
(Zadek, 2003) but as Zadek (2003) points out:
if stakeholders dont think the information is relevant [or material], it just
wont count [and] public reporting [will] flunk as an accountability
mechanism.
AccountAbilitys recent attempt to provide a five part test of materiality may provide
for improved assurance by guiding providers more specifically, as well as providing
greater legal protection for reluctant directors (AccountAbility, 2003d). However, this
would also mean involving stakeholders more in assurance processes (see
JustAssurance, 2003), which, as we outline above, is not prevalent among our
sample.
An increasingly clear distinction is emerging between the approaches of accountant
and consultant assurance providers. The former tend to adopt a cautious approach
that largely focuses on the issue of consistency of information appearing in the
organisations report with underlying data sets. The phrase true and fair is
conspicuously lacking in accountants opinion statements, whilst completeness of
information provision is generally not attested to. Indeed, accountant assurance
providers are in many cases at pains to point out that, in the absence of generally
accepted social audit standards, high level assurance cannot be offered. The only
exceptions to this rule occurred in two instances of clearly delineated assurance
28

exercises conducted on environmental reports and two further occasions when

assurance of sustainability reports was conducted under AA1000 provisions.
However, despite this, recent evidence produced by Accountability (2003c) suggests
that early adopters of the AA1000 Assurance Standard perceive mainstream
accountancy bodies as reluctant to provide a statement of assurance that goes
beyond an opinion on the accuracy of the data included in the report (Accountability,
2003c, p.6). They tend to engage in little real time assurance (for example, by
attending stakeholder engagement meetings, where they occur) and in their concern
for a high level of detail in the assurance process are accused of reducing it to a
mere data checking exercise. This trend stands in stark contrast to the broader
holistic strategic risk based approaches to financial audit that have been
promulgated by the Big 4 over the past decade which take a big picture view of
enterprises and focus on audits adding value to clients (Higson, 1997; Winograd,
Gerson and Berlin, 2000; Solomon and Peecher, 2001). In fact, the accountants
approach to assurance in this study bears a striking resemblance to an equivalent of
the outmoded first generation financial auditing approach where transactions in
books were directly verified (Higson, 1997, p. 200). In conjunction with the
reluctance to consult stakeholders, their approach also resists providing assurance
on information chosen by user[s] (Elliott, 2002, p. 139), which has been deemed
part of the future of 21st century assurance for accountancy firms (Elliott, 2002).
Given the recent emergence of standards such as AA1000 it will be interesting to
track if these accountancy firms are willing to start providing more high level
assurance involving stakeholders in the near future and why, outside of their
complaints regarding the non-existence of appropriate standards, they have been
reluctant to do so to date.
In contrast to the accountant assurance providers, consultant assurance providers
tend to focus much more on the issues of completeness, fairness and overall balance
within their opinion statements. Furthermore, they tend to provide more in the way of
commentary on systems, reporting and performance weaknesses. Consultants also
tended to take more of an evaluative approach and in contrast to many of the
accountant assurers were involved as the reporting process emerged as opposed to
merely arriving at the end to verify data collection procedures and accuracy. In sum,
consultants would appear to adopt a more strategic approach to the audit exercise,
which might be considered as adding value to the process from the perspective of
29

external stakeholder groups (Investment Responsibility Research Center [IRRC]

1996). Ironically, this is exactly the approach one might have expected from the Big 4
providers given the recent trends in financial audit assurance.
There is some indication, particularly from our analysis of the accountant assurers,
that little thought has gone into what assurance statements are supposed to be
providing. The accountants reluctance to mention their credentials suggests that
they may rely on their brand name as opposed to any substantive work to covey an
impression of assurance in reporting. In the recent study of early adopters of the
AA1000 Assurance Standard referred to above, one participant stated that we need
the assurance provider to provide a brand that is trusted by stakeholders (AA1000,
2003c). From our analysis, we can only conclude that the reluctance to specify
credentials may reflect the symbolic nature of these exercises. It seems to be the
case that, in many instances, indicating that a social/sustainability report is assured
by a respected assurer is deemed enough to convey the credibility required on the
report. It is a mere badge of approval, whatever its substantive content.
On a cautionary note, from the perspective of assurance being viewed as a central
element in holding powerful economic entities accountable to their stakeholders, the
added value approach of consultants referred to above seems highly problematical.
As Gray (2000) points out, once social accounting and auditing moves away from its
focus on holding the organisation to account it operates largely as a management
tool rather than a mechanism of democratic society. Wheeler and Elkington (2001),
for example, write in gushing terms of the accountability agenda being superseded
by a value adding agenda for companies, their markets and their main stakeholders.
For them, the term assurance, rather than portraying a lower level of endorsement is,
a more powerful and strategically relevant alternative to audit or verification,
carrying as it does the sense of governance, stewardship and strategic risk
management (p. 10). Significantly, what this will entail for the assurance process will
be:
partnerships with public relations and communications professionals and
with other agents and brokers (i.e. not just company managements) who can assist
in designing what should and should not be part of the assurance framework. (p.12)

30

To us, this suggests that, to quote Power (1997, p. 127), more [assurance will] not
necessarily mean more and better accountability merely more value added for
management as they manage key risks imposed by various stakeholder groups who
need to be controlled.
However, a key irony in the added value approach of consultants in our sample is
that, despite the potentially compromising position they find themselves in, they tend
to, through their assurance statements, provide the reader with higher levels of
assurance on the reports and processes they assess. This is an issue that would
benefit from more in-depth exploration with these assurance providers in order to
ascertain how they juggle these potentially sensitive roles.
In our view, it is, however, very difficult to envisage how more robust levels of
assurance can be brought about when the assurance provider is effectively
accountable to corporate management (the paymaster) and in the absence of any
countervailing power (Frank, 2001) to which he or she may have recourse in the
case of dispute. This has been an ongoing concern in financial auditing for many
years given that, despite shareholders legally appointing auditors, corporate
management effectively undertake this role with shareholders mostly rubber
stamping their recommendation thus leaving auditors at the mercy of management.
As others have pointed out, any dependence on the organisation by assurors could
lead to sensitive issues being ignored in the assurance processes (ODwyer, 2001)
with materiality being defined in narrow terms. The nature of these power relations
and their potential influence on the reporting process need greater in-depth
exploration and also bring us back to our concern for greater stakeholder
involvement and empowerment in assurance. If crucial governance issues and the
intertwining of the very different concepts of accountability and value added
continue to be ignored then current efforts to standardise environmental and social
auditing practice will sow the seeds of their own failure and an ongoing expectations
gap will evolve.
We fully accept that our analysis above, while detailed and comprehensive, is based
on a specific sample, albeit that of recognised leading edge practitioners, and infers
levels of assurance based on statements released externally. In order to examine in
greater depth the complexities and challenges involved within these assurance
31

processes we need to engage with assurance providers directly to obtain their

perspectives on the processes they undertake. Issues such as the assuror
appointment process, perceived threats to their independence, their relationship with
top management, the potential for conflict and their commitment to assuring
accountability need exploration. Given the assurance statements merely provide us
with some output on the nature of the work undertaken, we need to also investigate
assurers evolving relationships with management, the means by which assurance
statements are drafted and approved, assurers perceptions of their key
responsibilities and of the value they add to the credibility of the reporting process
from the perspective of key stakeholder groups.

6.

References

AccountAbility, 1999. AA1000 Framework: Standard, Guidelines and Professional

Qualification. AccountAbility, London.
AccountAbility, 2003a. The State of Sustainability Assurance. AccountAbility, London
AccountAbility, 2003b. AA1000 Assurance Standard. AccountAbility, London.
AccountAbility, 2003c. AA1000 Assurance Standard Practitioners Note.
AccountAbility, London.
AccountAbility, 2003d. Redefining Materiality: Practice and public policy for effective
corporate reporting. AccountAbility, London.
Ball, A., Owen, D. L. and Gray, R. H., 2000. External Transparency or Internal
Capture?: The Role of Third Party Statements In Adding Value To Corporate
Environmental Reports. Business Strategy and the Environment 9 (1), 1-23.
CSR Network, 2003. Material World: The 2003 Benchmark Survey of Global
Reporting. CSR Network Limited, Bath, UK.
Dando, N., Swift, T., 2003. Transparency and Assurance: Minding the credibility gap.
Journal of Business Ethics 44 (2) 195-200.
Doane, D., 2000. Corporate Spin: the troubled teenage years of social reporting. New
Economics Foundation, London.
Elliott, R.K., 2002. Twenty-first century audit assurance, Auditing: A Journal of
Practice and Theory 21 (1), 139-146.
Fedration des Experts Comptables Europens (FEE), 2002. Providing Assurance
on Sustainability Reports. Discussion Paper, Fedration des Experts
Comptables Europens, Brussels.
Frank, T. 2001. One Market Under God: Extreme Capitalism, Market Populism and
the End of Economic Democracy. Secker & Warburg, London
Global Reporting Initiative (GRI), 2002. Sustainability reporting guidelines on
economic, environmental and social performance. Global Reporting Initiative,
Amsterdam.
Gray, R. H., 2001. Thirty Years of Social Accounting, Reporting and Auditing: What
(If Anything) Have We Learnt? Business Ethics: A European Review, 10 (1), 915.
Gray, R.H., 2000. Current Developments and Trends in Social and Environmental
Auditing, Reporting and Attestation: A Review and Comment. International
Journal of Auditing 4 (3), 247-268.
32

Henriques, A., 2003. How to trust a verifier. Ethical Corporation Magazine.

http://ethical.corp.com/content_print.asp?ContentID=685.
Accessed
22
December 2003.
Higson, A., 1997. Developments in audit approaches: from audit efficiency to audit
effectiveness?: in Sherer, M., Turley, S. (Eds.), Current Issues in Auditing.
Paul Chapman publishing, London, pp. 198-215.
Investor Responsibility Research Centre (IRRC), 1996 Environmental Reports and
Third Party Statements. IRRC, Washington.
Justassurance, 2003. http://www.justassurance.org/. Accessed December 24 2003.
Kamp-Roelands, N., 2002. Towards a Framework for Auditing Environmental
Reports, unpublished PhD thesis, Tilburg Univerity, The Netherlands.
Kolk, A., 2003. Trends in Sustainability Reporting by the Fortune Global 250.
Business Strategy and the Environment 12 (5), 279-291.
KPMG, 2002. International Survey of Corporate Sustainability Reporting. KPMG
Global Sustainability Services, De Meern, The Netherlands.
ODwyer, B. 2001. The Legitimacy of Accountants Participation in Social and Ethical
Accounting, Auditing and Reporting. Business Ethics: A European Review,
10(1), 27-39.
Owen, D. L., Swift, T. A., Humphrey, C., Bowerman, M. 2000. The New Social Audits:
Accountability, Managerial Capture or the Agenda of Social Champions?
European Accounting Review 9 (1), 81-98.
Power, M., 1997. The Audit Society: Rituals of Verification. Oxford University Press,
UK.
Solomon, I., Peecher, M. E., 2001. Assurance Services: An Introduction. SouthWestern College Publishing, Ohio, US.
Swift, T., Dando, N., 2002. From methods to ideologies: closing the assurance
expectations gap in social and ethical accounting auditing and reporting.
Journal of Corporate Citizenship 8, 81-90.
SustainAbility, 2002. Trust Us: The Global reporters 2002 survey of corporate
sustainability reporting, SustainAbility, London.
Wallage, P., 2000. Assurance on sustainability reporting: an auditors view 19, 53-65.
Wheeler, D., Elkington, J., 2001. The end of the corporate environmental report? Or
the advent of cybernetic sustainability reporting and communication. Business
Strategy and the Environment 10, 1-14.
Winograd, B. N., Gerson, J. S., Berlin, B. L., 2000. Audit Practices of
PricewaterhouseCoopers, Auditing 19 (2), 175-182.
Zadek, S., 2003. Materiality in Reporting. Ethical Corporation Magazine.
http://ethical.corp.com/content_print.asp?ContentID=928.
Accessed
22
December 2003.

33

Research Paper Series

International Centre for Corporate Social Responsibility
ISSN 1479-5116
Editor: Dirk Matten
The ICCSR Research Papers Series is intended as a first-hand outlet for research output of ICCSR.
These include papers presented at symposiums and seminars, first drafts of papers intended for
submission in journals and other reports on ongoing or completed research projects.
The objective of the ICCSR Research Papers Series is twofold: First, there is a time goal: Given the
quality of ICCSR publication, the targeted journals normally require large time spans between
submission and publication. Consequently, the ICCSR Research Papers Series serves as a
preliminary airing to working papers of ICCSR staff and affiliates which are intended for subsequent
publication. By this, research output can be made available for a selected public which will not only
establish ICCSRs lead in advancing and developing innovative research in CSR but will also open the
opportunity to expose ideas to debate and peer scrutiny prior to submission and/or subsequent
publication. Second, the ICCSR Research Papers Series offers the opportunity of publishing more
extensive works of research than the usual space constraints of journals would normally allow. In
particular, these papers will include research reports, data analysis, literature reviews, work by
postgraduate students etc. which could serve as a primary data resource for further publications.
Publication in the ICCSR Research Paper Series does not preclude publication in refereed journals.
The ICCSR Research Papers Series consequently is interested in assuring high quality and broad
visibility in the field. The quality aspect will be assured by establishing a process of peer review, which
will normally include the Editor of the ICCSR Research Papers Series and one further academic in the
field. In order to achieve a reasonable visibility the ICCSR Research Papers Series has full ISSN
recognition and is listed in major library catalogues worldwide. All papers can also be downloaded at
the ICCSR website.

Published Papers
No. 01-2003

Wendy Chapple & Richard Harris

Accounting for solid waste generation in measures of regional productivity growth

No. 02-2003

Christine Coupland
Corporate identities on the web: An exercise in the construction and deployment of
morality

No. 03-2003

David L. Owen
Recent developments in European social and environmental reporting and auditing
practice A critical evaluation and tentative prognosis

No. 04-2003

Dirk Matten & Andrew Crane

Corporate Citizenship: Towards an extended theoretical conceptualization

No. 05-2003

Karen Williams, Mike Geppert & Dirk Matten

Challenges for the German model of employee relations in the era of globalization

No. 06-2003

Iain A. Davies & Andrew Crane

Ethical Decision Making in Fair Trade Companies

No. 07-2003

Robert J. Caruana
Morality in consumption: Towards a sociological perspective

No. 08-2003

Edd de Coverly, Lisa OMalley & Maurice Patterson

Hidden mountain: The social avoidance of waste

No. 09-2003

Eleanor Chambers, Wendy Chapple, Jeremy Moon & Michael Sullivan

CSR in Asia: A seven country study of CSR website reporting

No. 10-2003

Anita Fernandez Young & Robert Young

Corporate Social Responsibility: the effects of the Federal Corporate Sentencing
Guidelines on a representative self-interested corporation

No. 11-2003

Simon Ashby, Swee Hoon Chuah & Robert Hoffmann

Industry self-regulation: A game-theoretic typology of strategic voluntary
compliance

No. 12-2003

David A. Waldman, Donald Siegel & Mansour Javidan

Transformational leadership and CSR: A meso level approach

No. 13-2003

Jeremy Moon, Andrew Crane & Dirk Matten

Can corporations be citizens? Corporate citizenship as a metaphor for business
participation in society (2nd Edition)

No. 14-2003

Anita Fernandez Young, Jeremy Moon & Robert Young

The UK Corporate Social Responsibility consultancy industry: a phenomenological
approach

No. 15-2003

Andrew Crane
In the company of spies: The ethics of industrial espionage

No. 16-2004

Jan Jonker, Jacqueline Cramer and Angela van der Heijden

Developing Meaning in Action: (Re)Constructing the Process of Embedding
Corporate Social Responsibility (CSR) in Companies

No. 17-2004

Wendy Chapple, Catherine J. Morrison Paul & Richard Harris

Manufacturing and Corporate Environmental Responsibility: Cost Implications of
Voluntary Waste Minimisation

No. 18-2004

Brendan ODwyer
Stakeholder Democracy: Challenges and Contributions from Accountancy

No. 19-2004

James A. Fitchett
Buyers be Wary: Marketing Stakeholder Values and the Consumer

No. 20-2004

Jeremy Moon
Government as a Driver of Corporate Social Responsibility: The UK in Comparative
Perspective

No. 21-2004

Andrew Crane and Dirk Matten

Questioning the Domain of the Business Ethics Curriculum: Where the Law ends or
Where it Starts?

No. 22-2004

Jem Bendell
Flags of inconvenience? The global compact and the future of United Nations

No. 23-2004

David Owen and Brendan ODwyer

Assurance Statement Quality in Environmental, Social and Sustainability Reporting:
a Critical Evaluation of Leading Edge Practice