Assurance Statement

Definition

An assurance statement is a formal declaration provided by an external party regarding the credibility and reliability of a company's sustainability report or other disclosures. This statement serves to enhance stakeholder trust by confirming that the reported information has been independently verified and meets certain standards, which can include adherence to established frameworks and guidelines.

5 Must Know Facts For Your Next Test

1. An assurance statement typically comes from accredited firms that specialize in auditing and verifying sustainability reports.
2. There are different levels of assurance, ranging from reasonable assurance, which provides a higher level of confidence, to limited assurance, which is less comprehensive.
3. Assurance statements often reference specific reporting standards such as the Global Reporting Initiative (GRI) or the ISO 14064 for greenhouse gas emissions.
4. The presence of an assurance statement can significantly enhance the credibility of a sustainability report and influence stakeholder perceptions positively.
5. Companies that seek assurance for their sustainability reports may find it helpful in identifying areas for improvement in their reporting processes.

Review Questions

• How does an assurance statement contribute to the credibility of a company's sustainability reporting?
  • An assurance statement enhances credibility by providing an independent verification of the accuracy and reliability of the reported information. It assures stakeholders that the data presented in the sustainability report has been reviewed by a qualified third party, which can increase trust in the company's commitments and performance. This external validation also helps ensure that the company adheres to relevant reporting standards and frameworks.
• What are the different levels of assurance that can be provided in an assurance statement, and how do they vary in terms of depth and reliability?
  • There are generally two main levels of assurance: reasonable assurance and limited assurance. Reasonable assurance offers a higher level of confidence in the reported information as it involves a more comprehensive examination of the data and processes. In contrast, limited assurance provides less depth, often involving less rigorous procedures and resulting in lower confidence about the accuracy of the claims made in the sustainability report.
• Evaluate the role of an assurance statement in influencing stakeholder engagement and corporate accountability in sustainability practices.
  • An assurance statement plays a crucial role in fostering stakeholder engagement by providing evidence that a company is committed to transparency and accountability regarding its sustainability practices. By having an independent third-party validate their claims, companies can enhance their reputation among investors, customers, and regulators. This external validation not only builds trust but also encourages continuous improvement in sustainability practices, as companies are more likely to address weaknesses identified during the verification process.

Related terms

Third-party Verification: The process where an independent organization reviews and assesses the accuracy and reliability of a company's sustainability reporting.

Sustainability Reporting: The practice of disclosing environmental, social, and governance (ESG) performance, impacts, and strategies to stakeholders.

Materiality Assessment: A process used to identify and prioritize the most significant issues impacting a company's sustainability and stakeholders' interests.