At a glance
By Gary Anders
The Proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements was first issued by the IAASB as an exposure draft in August 2023.
It is due to be issued in the third quarter of 2024 and aims to be the global baseline for the delivery of consistent sustainability information. The IAASB has not yet determined when the standard will come into effect but has proposed an implementation period of at least 18 months after the final standard is issued, per the exposure draft.
ISSA 5000 has been developed with an accelerated timetable due to demand from global stakeholders who want a timely, comprehensive international sustainability assurance standard from the IAASB, says IAASB vice-chair Josephine Jackson.
Independent external assurance can play a key role in the perceived reliability of sustainability information.
“Corporate reporting, whether financial or sustainability focused, is more trusted when it receives external and independent assurance based upon globally accepted standards independently developed in the public interest,” Jackson explains.
ISSA 5000 is also a direct response to the International Organization of Securities Commissions (IOSCO) recommendations and complements the work of other standard setters, including the International Ethics Standards Board for Accountants (IESBA), Jackson says.
The primary goal of ISSA 5000 is to enhance the trust and confidence that investors, regulators and other stakeholders have in sustainability information by providing a basis for robust assurance.
Relationship to existing standards
Developed to be a principles-based, overarching standard, ISSA 5000 is suitable for both limited and reasonable assurance engagements on sustainability information reported across any sustainability topic using any suitable reporting framework.
Such frameworks include the International Sustainability Standards Board’s first two IFRS Sustainability Disclosure Standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, issued in June 2023.
Others include those issued by the Global Reporting Initiative, as well as jurisdiction-specific regulatory requirements, such as the EU’s Corporate Sustainability Reporting Directive and mandatory climate-related financial disclosures in Australia and New Zealand.
"Corporate reporting, whether financial or sustainability focused, is more trusted when it receives external and independent assurance based upon globally accepted standards independently developed in the public interest."
ISSA 5000 has been built on the foundations of other international standards, including the International Standards on Auditing (ISAs) and the International Standards on Assurance Engagements (ISAEs).
ISSA 5000 will apply concepts consistent with the ISAEs – including ISAE 3000 and ISAE 3410 – and the ISAs, with refinements to address the circumstances of sustainability assurance engagements.
ISSA 5000 also includes requirements to apply the IESBA’s International Code of Ethics for Professional Accountants and the IAASB’s quality management standards, or requirements at least as demanding.
Impact on reporting
“The requirements and application material in ISSA 5000 were developed to provide greater specificity for sustainability assurance engagements while still remaining principles-based,” Jackson says.
“Practitioners will also find that the differences between work effort for limited assurance and reasonable assurance have been clearly set out using the side-by-side format, enabling direct comparison.
“Those who prepare sustainability reporting can anticipate additional or new requests from assurance practitioners for evidence to support all material disclosures being reported on sustainability,” she explains.
Assurance practitioners will be required to read and consider any available sustainability information that needs to be reported to ensure consistency between and within reports, including annual reports and financial statements.
“To help assurance practitioners and others, the IAASB is developing implementation guidance, which will be issued alongside the final standard,” Jackson says. “We will also develop additional support and guidance in the months following the final standard.”
Potential challenges
A CPA Australia submission to the IAASB in November 2023 supports the development of this standard. However, the submission also notes that “the proposed standard is a ‘minimum viable product’ that will require further refinement and detail added to it for it to be a useful and reliable source of requirements and guidance on sustainability assurance”.
“ISSA 5000 will form part of a broader ecosystem that includes, amongst others, sustainability reporting standards, legislative requirements, quality management standards, ethical and independence requirements, and suitably qualified and competent professionals,” the submission states.
“Many of these elements of the broader ecosystem are likely to be tailored to align with jurisdiction-specific statutory and reporting requirements. It is the responsibility of stakeholders including the IAASB to ensure ISSA 5000 is a ‘good fit’ to the broader ecosystem.”
"The role of auditor now is only performed by auditors or accountants, but under ISSA 5000 if you are a climate engineer or a scientist, you can be an auditor."
Tiffany Tan, CPA Australia’s interim external reporting and assurance lead, acknowledges that the draft standard is a good starting point, but emphasises the need for significant refinement due to the “catch-all” nature of the standard.
ISSA 5000 has been designed to be adaptable to information provided by any entity, regardless of size. It is also a profession-agnostic standard, supporting its use by both professional accountant and non-accountant assurance practitioners.
This is one of its most challenging aspects, Tan says, because the traditional understanding of who can be an auditor will change.
“The role of auditor now is only performed by auditors or accountants, but under ISSA 5000 if you are a climate engineer or a scientist, you can be an auditor,” she explains.
Getting prepared
Tan says there will also be a steep learning curve for many practitioners, irrespective of their background, as they navigate the wide spectrum of sustainability reporting topics encompassed by ISSA 5000, from climate and biodiversity to labour practices and human rights.
“The breadth of subject matter demands a rapid update of skills and the capabilities among practitioners before the standard is issued later this year,” Tan says.
“For those already well versed in these areas through different standards, adapting to ISSA will require them to identify any gaps and update their methodology.
“This imperative is particularly pronounced for non-accounting practitioners, given ISSA 5000’s stringent requirement to meet the ‘at least as demanding’ test outlined in the IAASB’s quality management standards and the International Code of Ethics for Professional Accountants before accepting engagements.
“Those who have already done this work in the past using different standards will need to be familiar with the new standard and then identify any gaps and update their methodology.
“Practitioners are running out of time. You really need to get onto it to grasp the assurance requirements outlined in ISSA 500 and understand how they apply across various sustainability reporting frameworks,” Tan says.
Len Jui FCPA, KPMG Asia-Pacific lead on public policy and regulatory affairs and former IAASB vice-chair, notes that assurance practitioners need to start preparing for the application of ISSA 5000.
This includes learning and training, determining resources required, mapping their firm’s system of quality management to align with the standard and ensuring compliance of ethical requirements when applying ISSA 5000.
“For the report preparers, they need to understand ISSA 5000 to ensure they coordinate with the assurance provider to facilitate successful implementation of assurance requirements on the reports issued,” Jui says.
For the first time, he adds, the traditional assurance profession will face challenges from non-assurance professionals offering similar services to the entities that need to publish sustainability information.
“Assurance practitioners will need to design a system of quality management to ensure high-quality assurance engagements are being carried out and monitor any deficiencies that may occur in such engagements,” Jui says.
Consultation process
To reduce challenges identified in the draft standard, the IAASB has relied heavily on consultation feedback from practitioners, regulators and oversight authorities, and other stakeholders.
“We are addressing these challenges to the extent they are relevant to most assurance engagements on sustainability information or are significant enough to necessitate a conditional requirement or additional application material,” Jackson adds.
“As proposed, ISSA 5000 is an overarching standard and principles-based. The requirements and application material need to be suitable to the wide range of circumstances and reporting frameworks that practitioners will face, while also being at an appropriate level of detail that is not overwhelming.
“Accordingly, not all matters can be dealt with in detail in ISSA 5000. This is why we plan to develop a suite of sustainability assurance standards after the overarching standard, ISSA 5000, is finalised,” Jackson says.
“Some of the challenges may be addressed more comprehensively in future standards. Others may be fleshed out in the first-time implementation guidance that we will issue alongside the final standard.”
