As momentum to adopt mandatory sustainability reporting rules builds in Asia, the International Auditing and Assurance Standards Board (IAASB) has finalised its much-awaited guidelines to verify the quality of climate-related disclosures.
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The auditing standard, known as ISSA 5000, aims to give investors confidence that a company is not greenwashing in its sustainability reports – similar to how regulators require third-party accounting firms to review financial statements to guard against fraud.
Prior to the IAASB’s new standard, there were no standalone guidelines for sustainability assurance providers beyond a broad set of assurance standards called the ISAE 3000, which provides high-level guidance for non-financial reporting.
The new standard was approved by the IAASB last month and will kick in from 15 December 2026. According to the timeline posted on the global standards body’s website, it will also publish a range of guidance and application materials by next January.
IAASB first proposed its rules for auditing corporate climate disclosures last August, barely two months after the International Sustainability Standards Board (ISSB) released its inaugural framework for sustainability reporting.
ISSA 5000 can be used to assure disclosures are aligned with major reporting standards, including the ISSB, Global Reporting Initiative (GRI) and European Union’s sustainability reporting standards.
Last month, ISSB’s vice chair Sue Lloyd congratulated IAASB on finalising its assurance standard, saying that the ISSA 5000 is “an important component” that will enable companies to “provide high-quality, comparable, decision-useful disclosures for investors”.
Carol Adams, chair of GRI’s Global Sustainability Standards Board, said that while she is encouraged that disclosures made using the GRI standard has a higher rate of assurance than any other disclosure frameworks, external assurance has yet to become widespread.
In 2022, 40 per cent of disclosures using the GRI standard obtained assurance, based on an analysis by the International Federation of Accountants. Meanwhile, the assurance rate was 11 per cent and 3 per cent for those referencing Sustainability Accounting Standards Board (SASB) standards – now subsumed under the ISSB – and the Task Force for Climate-related Disclosures (TCFD) respectively.
Apart from the rate of assurance, ISSA 5000 could also bring up the credibility of sustainability reports prepared in accordance with the GRI standard, said Adams.
Ping-Sheng Koh, professor of accounting and management control at ESSEC Business School, Asia Pacific (APAC), told Eco-Business that the ISSA 5000 is well-positioned to meet the growing demand for sustainability assurance services.
“As jurisdictions worldwide, including Singapore, introduce mandatory climate reporting requirements, there is a surge in the need for qualified professionals to provide assurance services on sustainability-related disclosures,” he said.
In the APAC region to date, only Australia and New Zealand have mandated limited external assurance – the baseline level of assurance – for a company’s direct, indirect and value chain emissions, or Scope 1, 2 and 3 emissions.
The timelines for external assurance in Singapore and Malaysia, two latest jurisdictions to mandate ISSB-aligned disclosures for large listed companies from 2025, are still subjected to further consultations. The former has proposed requiring external limited assurance, in line with either ISSA 5000 or International Organisation for Standardisation (ISO) 14064-3, starting from 2027.
Alan Vallance, chief executive of London-based professional accounting body, the Institute of Chartered Accountants in England and Wales (ICAEW), observed that the finalised text of ISSA 5000 clarified the difference between limited and reasonable assurance, which “was a key concern” at the draft stage, particularly around the extent of evidence and risk assessment that needs to be obtained for the two types of assurance.
Reasonable assurance is a higher level of assurance that involves a deeper review of sustainability data and processes.
“The standard has been developed at commendable speed, and while it is not perfect, it sets a robust foundation for future sustainability projects to address complex areas such as materiality and group engagement in more depth,” said Vallance.
“We also support the proposed effective date, which provides firms with 18 to 24 months to prepare for implementation,” he said.
Greenwash curb?
ISSA 5000 considers failing to report any significant impacts on stakeholders that an organisation has identified, just because they are unfavourable, as a “material misstatement” which amounts to greenwashing. But industry players said that the guidance alone is not sufficient to prevent greenwashing.
Vallance said the ICAEW recognises the IAASB’s assurance standard as only “one part of the solution” to greenwash. It cannot entirely eliminate the risks of misleading claims, especially when data quality and measurement remain challenging, he added.
“To combat greenwashing effectively, ISSA 5000 needs to be complemented by strong regulatory frameworks, robust enforcement and ongoing stakeholder vigilance,” Vallance said, stressing the need for the standard to be consistently adopted across all jurisdictions.
Koh echoed his sentiments, saying that ISSA 5000 “cannot guarantee the truthfulness or meaningfulness of the information contained within them, given much of the underlying information can be difficult to measure and verify”.
“In addition to ISSA 5000, robust regulatory frameworks are essential to hold companies accountable for sustainability claims,” he said. Investors and other stakeholders must also play a more active role in demanding transparency, while developing robust sustainability metrics and performance indicators that can improve the comparability of reports, Koh added.
As Eco-Business reported in March, there remains no regulatory oversight of assurance providers to ensure their independence and reliability.
With Big Four accounting firms – Deloitte, Ernst & Young, KPMG and PwC – which already dominate the financial audit market now becoming the biggest players in sustainability assurance, firms that use a single auditor for thier financial and sustainablility reports will need to be mindful of potential conflicts of interest, said Mak Yuen Teen, professor of practice and director of the Centre for Investor Protection at the National University of Singapore Business School.
