IESBA proposes ethics code changes for sustainability assurance

The International Ethics Standards Board for Accountants has proposed new ethics rules for sustainability assurance to help auditors steer companies away from exaggerated claims about their environmental efforts.

The proposed standards, which IESBA unveiled in late January, aim to elevate the quality of sustainability information and avoid so-called “greenwashing” by companies that boast about making strides on reducing their emissions and enlist outside auditing firms to bolster those claims.

“One of the major issues the standards are intended to address is the issue of greenwashing,” said Ken Siong, program and senior director at IESBA. “We know that it is very prevalent in the area of sustainability reporting. We hear unfortunately too many instances of companies being called to account in terms of the claims they’re making relative to their decarbonization efforts, how green their products or services are, especially in the financial sector, and how they’re designing certain financial products that allegedly serve to meet ESG goals, but in reality it is found that’s actually not the case. Our standards are intended to bring an ethical approach to those products and services up to par and raise the level as to how companies are advocating their strategies, goals and vision for how they are meeting their sustainability goals.”

IESBA is asking for comments on two exposure drafts, International Ethics Standards for Sustainability Assurance ED, which includes revisions to its existing ethics code related to sustainability reporting, and Using the Work of an External Expert ED, by April 30 and May 10, respectively, It’s also planning a series of webinars to explain the proposals.

The exposure draft on using the work of an external expert proposes an ethical framework to guide professional accountants or sustainability assurance practitioners, as applicable, in evaluating whether an external expert has the necessary competence, capabilities and objectivity in order to use that expert’s work for the intended purposes. The proposals also include provisions to apply IESBA’s ethics code’s conceptual framework when relying on the work of an outside expert. To coincide with the launch of the public consultation, the International Accreditation Forum announced its intention to stipulate to national accreditation bodies around the world that IESBA’s proposed standards are to be used when accrediting and authorizing conformity assessment bodies to carry out assurance work on corporate sustainability disclosures.

Accountants and auditors are already being asked to report and vet their clients’ sustainability claims. “On the reporting side, accountants play a fundamental role as preparers and decision makers in the reporting chain, and certainly on the assurance side, clearly the audit firms play a very prominent role in this area and will play an even greater role as we go forward,” said Siong. “The accounting profession has historically developed the expertise and the skills needed to basically be the go-to players when it comes to assurance services, so the profession will play a very important role and is already playing a prominent role on both sides with sustainability reporting and assurance.”

The effort parallels a proposed set of sustainability assurance standards that IESBA’s fellow standard-setter, the International Auditing and Assurance Standards Board, proposed last August. 

“We’re working very closely with them because we both serve the same objective of really achieving a globally consistent framework of standards on the reporting side and assurance side,” said Siong. “On the IAASB side, clearly their remit is on assurance. What we’re trying to achieve is to avoid fragmentation of standards. That is undoubtedly not in the public interest.”