Charting the new era of globally accepted international sustainability assurance standards

07/28/2022

Len Jui, Deputy Chair of International Auditing and Assurance Standards Board and KPMG China Partner, on the IAASB’s readiness to take action amid a growing demand for assurance on sustainability reporting



Globally, there is increasing demand from a broad range of stakeholders for organizations to provide transparency about their sustainability, including environmental, social and governance (ESG) matters. There is also a global trend whereby organizations are shifting from voluntary reporting to reporting in accordance with requirements mandated by their local jurisdictions. Sustainability matters may indicate how an organization has impacted the environment, people, and economy, and vice versa. These matters may also have impacts on financial reporting, for example, asset impairments or restructuring efforts necessary to mitigate climate-related risk.

Here in Hong Kong, the topic of sustainability reporting including ESG and climate-related disclosures have been on the agendas of both the Hong Kong Securities and Futures Commission and Hong Kong Stock Exchange. The investing community, those in charge of governance and management are also engaging in initiatives to promote both awareness of the issues in the public interest, and improve compliance with required disclosures and changes to a company’s operating strategy to address the sustainability-related impacts.

As demand for assurance on sustainability reporting grows, there is an urgent need for globally accepted international sustainability assurance standards that can be used by all assurance professionals. While International Standard on Assurance Engagements (ISAE) 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information and ISAE 3410 Assurance Engagements on Greenhouse Gas Statements as issued by the International Auditing and Assurance Standards Board (IAASB) provide a robust foundation for such engagements, and are currently widely used by audit practitioners, the IAASB’s strategic focus needs to be on:

a) Being the globally recognized standard setter for assurance on sustainability reporting. In this vein, it is essential that the IAASB is integrated in discussions at global and jurisdictional levels, to reinforce the IAASB’s rigorous due process that is characterized by accountability, inclusiveness, transparency, public consultation and public oversight, and the quality of its auditing and assurance standards.

b) Focused actions to respond to global needs for specific assurance standards on sustainability reporting, which build upon existing IAASB standards and guidance in a priority manner.

In delivering its work plan, the IAASB is currently undertaking information gathering and research activities to:

  • Understand the topics (underlying subject matter), aspects about the topics (aspects of the underlying subject matter), mechanism for reporting (the subject matter information), and reporting standards (criteria) underlying sustainability reporting.
  • Understand the challenges in performing assurance engagements on sustainability reporting, and the urgency and priority of these challenges.
  • Identify and prioritize possible actions the IAASB should take in addressing assurance on sustainability reporting.

The IAASB’s work will build upon its existing standards and guidance that already deal with this topic more broadly.

In September, the board will consider an outline of the project plan, a draft structure of the standard, requirements to be brought in from ISAE 3000 (Revised) and ISAE 3410 and, time permitting, material from its Extended External Reporting Guidance to be incorporated as requirements in the standard. The IAASB’s key stakeholders outreach will be ongoing as we continue to focus on developing a set of globally accepted international sustainability assurance standards. The target is to have the project proposal approved at the December meeting.

The IAASB have heard practitioners calling for more guidance on assurance of sustainability information to address a number of related topics. However, it is important for the reporting standards to continue to develop under rigorous due process and finalized with proper public oversight. It is encouraging to see the significant developments being made by the International Sustainability Standards Board, the European Commission’s Corporate Sustainability Reporting Directive and the United States Securities and Exchange Commission’s Proposed Rules to Enhance and Standardize Climate-Related Disclosures for Investors. The assurance standards need to be reporting framework neutral, similar to the IAASB’s International Standards on Auditing. Therefore, it is important that the assurance standards are capable of application to the reporting standards without any gaps.

The development of a suite of International Sustainability Assurance Standards (ISAS) requires time and the proper due process needs to be followed. The desired output is a high-quality suite of standards that are able to be applied by practitioners consistently across the globe to achieve high quality sustainability assurance engagements. The progress to develop ISAS is an evolution process not a revolution process. In the evolution process, standards will be developed, updated and continually improved to reflect changes in reporting standards, address practical issues and meet public interest needs. Stakeholders such as national standard-setters, assurance providers, users of information and regulators all have key roles to play.


Hong Kong is in a unique position as a global financial hub built on an established capital market infrastructure and supported by effective regulatory oversight and a mature accounting profession. The IAASB looks forward to engaging with stakeholders in Hong Kong as it embarks on the evolution of high-quality assurance standards in support of high-quality sustainability reporting in the public interest.