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The CAQ is pleased to share our views related to the May 2023 International Sustainability Standards Board (ISSB): Consultation on Agenda Priorities. The CAQ is supportive of the ISSB’s efforts to develop and seek comment on its agenda priorities. In...

The CAQ is pleased to share our views related to the May 2023 International Sustainability Standards Board (ISSB): <a href="https://www.ifrs.org/content/dam/ifrs/project/issb-consultation-on-agenda-priorities/issb-rfi-2023-1.pdf">Consultation on Agenda Priorities</a>. The CAQ is supportive of the ISSB’s efforts to develop and seek comment on its agenda priorities. In our letter we highlight the importance of market acceptance and market adoption of the IFRS Sustainability Disclosure Standards. We recognize that deciding on agenda priorities in a complex and evolving sustainability reporting environment presents many opportunities and challenges. We believe that continuing the momentum generated from IFRS S1 and S2 by focusing on interoperability, implementation, new research and standards, connectivity, and outreach with stakeholders including investors and the IASB, will position the ISSB well to make these important decisions.

Read the full comment letter <a href="https://thecaqprod.wpenginepowered.com/wp-content/uploads/2023/09/caq_issb_agenda-consultation-comment-letter_signed_8.31.23.pdf">here</a>.

Comment Letter | International Sustainability Standards Board: Consultation on Agenda Priorities

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Comment Letter

Company Management

In this video, Desiré Carroll, Director at the Center for Audit Quality, gives a rundown of the current state of ESG Reporting among S&amp;P500 companies, pulled from the CAQ’s recent analysis. Additionally, given where companies currently are, what are the...

In this video, <a href="https://www.thecaq.org/about-us/our-people/desire-carroll">Desiré Carroll</a>, Director at the Center for Audit Quality, gives a rundown of the current state of ESG Reporting among S&amp;P500 companies, pulled from the CAQ’s recent analysis. Additionally, given where companies currently are, what are the implications of the SEC’s anticipated climate-related disclosure for public companies? Watch the full video as Desiré Carroll walks through key takeaways from our analysis and key information to know leading up to the SEC’s climate-related rule:

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Video | The Current State of ESG Reporting and What to Expect Leading up to the SEC’s Climate Rule, Presented by Desiré Caroll

Video

The public company auditing profession faces an ever-evolving corporate reporting landscape. Investors and other stakeholders increasingly seek company prepared information outside financial statements, including environmental, social, and governance (ESG) information which has become a top priority for companies.

The demand for...

The public company auditing profession faces an ever-evolving corporate reporting landscape. Investors and other stakeholders increasingly seek company prepared information outside financial statements, including environmental, social, and governance (ESG) information which has become a top priority for companies.

The demand for ESG-related disclosures is driven by large institutional and private equity investors, retail investors, customers, employees, and other stakeholders. As a result, governments and regulators around the world are taking a closer look at reporting requirements to address stakeholders' information needs. With increasing stakeholder demand and growing regulatory developments, like the European Union’s Corporate Sustainability Reporting Directive (CSRD)  and the U.S. Securities and Exchange Commission’s (SEC’s) highly anticipated final climate-related disclosures rule,  it’s clear that ESG reporting is here to stay.

The Center for Audit Quality conducted our <a href="https://www.thecaq.org/sp-500-and-esg-reporting">annual analysis</a> of S&amp;P 500 ESG reports and CDP Climate Change Questionnaires to determine ESG trends among leading companies. Our findings reveal how many companies report ESG information, what reporting standards and frameworks were used, and if they received assurance from a public company auditor in 2021. Keep reading for our key takeaways.
<h3>Increased Assurance from Public Company Auditors</h3>
An encouraging trend in our analysis of 2021 S&amp;P 500 ESG data is that more companies are seeking third-party assurance from public company auditors. In 2021, 60 companies obtained assurance from public company auditors compared to 43 in 2020, a nearly 40% increase. Companies obtaining assurance from other assurance providers also increased, with 268 companies reporting that they engaged other assurance providers compared to 245 in 2020.
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When it comes to the scope of information subject to assurance, companies increased the scope of information subject to assurance by public company auditors in 2021 - shifting from mostly seeking assurance over only greenhouse gas (GHG) emissions to mostly obtaining assurance over GHG emissions <em>and</em> 1-3 other ESG metrics (e.g., water, energy, waste metrics). 31 companies who engaged a public company auditor in 2021 obtained assurance over their GHG metrics plus 1-3 additional ESG metrics.

Public company auditors play a critical role in serving the public interest and supporting the flow of reliable information for decision-making. Their unique skill set, experience incorporating experts into engagements, and understanding of business processes enable them to easily adapt to new reporting landscapes and requirements, and there are many <a href="https://www.thecaq.org/why-choose-a-cpa-for-esg">benefits</a> to engaging a CPA for third-party assurance of ESG information.

The public company auditing profession has decades of experience in developing methodologies that enable them to adhere to professional standards. Auditors also comply with rigorous requirements for independence, firm systems of quality control, and subject matter competency. Auditor assurance over ESG metrics can enhance stakeholder trust and confidence in management’s assertions, data, and disclosures.
<h3>Rising GHG Scope 3 Emissions Reporting</h3>
We also analyzed the GHG scope 3 emissions categories reported in 2021. Overall, companies increased the extent to which they reported each category.

The most reported category in 2020 and 2021 was business travel, with 327 companies reporting this data compared to 258 in 2020. Fuel and energy-related activities was the second most reported category, followed by purchased goods and services. Purchased goods and services saw the largest increase from 2020, with 71 additional companies reporting this category in 2021.
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Overall, companies also increased the extent to which they assured each of the GHG scope 3 emissions categories. Business travel, fuel and energy-related activities, and employee commuting were the most assured categories in both 2020 and 2021. Investments had the highest percentage increase at 157%, with 18 companies receiving assurance in 2021 compared to 7 in 2020.
<h3>Standards and Frameworks</h3>
There are four commonly used ESG reporting standards and frameworks – <a href="https://www.sasb.org/standards/download/?lang=en-us">Sustainability Accounting Standards Board (SASB) Standards</a>, , <a href="https://www.fsb-tcfd.org/recommendations/">Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations</a>, <a href="https://www.globalreporting.org/standards/">Global Reporting Initiative (GRI) Standards</a> and the <a href="https://www.integratedreporting.org/resource/international-ir-framework/">Integrated Reporting Framework</a>.

S&amp;P 500 companies continue to use these standards and frameworks to varying degrees, whether fully adopting the standard or framework or using them as a reference when determining what information to include in their ESG report.

The SASB Standards remain the most frequently cited of the four, with 452 companies utilizing the standards in 2021, up from 410 in 2020. Usage of the TCFD Recommendations, the GRI Standards, and IR Framework also increased in 2021. More than 290 companies referenced three or more standards, a significant increase from last year’s 229.
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Our <a href="https://www.thecaq.org/audit-partner-pulse-survey-spring-2023">Spring 2023 Audit Partner Pulse Survey</a> revealed that 41% of audit partners say the diversity of standards and frameworks for ESG reporting is a top challenge facing companies in their industry sector. The CAQ continues to advocate for policies that would enhance and standardize climate-related disclosures in the US to give companies and investors clarity around ESG information. We expressed support for a globally accepted ESG reporting system that is built from existing standards and frameworks in our <u>comment letters</u> to the <a href="https://thecaqprod.wpengine.com/wp-content/uploads/2022/07/caq_issb_s1-and-s2-comment-letter_7_29_2022.pdf">International Sustainability Standards Board</a> (ISSB) and the <a href="https://www.thecaq.org/news/caq-comments-on-sec-climate-disclosure-rule-proposal-supports-objectives-but-identifies-needed-changes">SEC</a>.

ESG remains a topic of focus for our profession and as we prepare for the SEC’s upcoming climate-related disclosures rule, the CAQ is committed to developing resources that enable public company auditors to best meet investor needs for these disclosures and maintain audit quality. Explore the full S&amp;P 500 ESG analysis <a href="https://www.thecaq.org/sp-500-and-esg-reporting">here</a>.

&nbsp;

<hr />

<strong>Author</strong>: <a href="https://www.thecaq.org/about-us/our-people/desire-carroll">Desiré Carroll</a>, Director, Professional Practice, CAQ

The Rise in S&P 500 ESG Reporting

Blog Post

The CAQ applauds the International Sustainability Standards Board (ISSB) for launching its first two sustainability disclosure standards. These standards are a significant milestone on the path to delivering a comprehensive global baseline of sustainability-related financial disclosures that will bring investors...

The CAQ applauds the International Sustainability Standards Board (ISSB) for launching its first two sustainability disclosure standards. These standards are a significant milestone on the path to delivering a comprehensive global baseline of sustainability-related financial disclosures that will bring investors consistent, comparable sustainability-related financial information.

“Investors continue to demand high-quality, accurate, reliable information on climate,” said Julie Bell Lindsay, Chief Executive Officer, Center for Audit Quality. “We are pleased with the ISSB’s newly-launched standards, which will not only help preparers provide sustainability-related financial disclosures to investors but also provide a basis for auditors to deliver credible and reliable assurance over information prepared in accordance with these standards.”

CAQ Statement of Support for ISSB’s S1 and S2 Standards

Statements

The CAQ looked at ESG reports, company websites, completed Carbon Disclosure Project (CDP) Climate Change Questionnaires, and third-party assurance or verification reports for 2021 period end data from S&amp;P 500 companies to understand what they disclosed about ESG reporting standards and frameworks, greenhouse gas (GHG) emissions, assurance or verification over the ESG information, and net zero or carbon neutral commitments. This analysis does not contemplate information disclosed by companies in other documents or SEC filings.

S&amp;P 500 ESG Reporting and Assurance Analysis

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Earn 1 CPE Credit

In partnership with ISSB, join us for a live broadcast from the New York Stock Exchange close to the expected launch of the IFRS Sustainability Disclosure Standards as part of a series of events taking place around...

<b>Earn 1 CPE Credit</b>

<span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">In partnership with ISSB, join us for a live broadcast from the New York Stock Exchange close to the expected launch of the IFRS Sustainability Disclosure Standards as part of a series of events taking place around the world. We'll be joining the International Sustainability Standards Board (ISSB) and other panelists to discuss the significance of the new standards, S1 and S2, in creating a global baseline of high-quality sustainability information for investors, and to corporate reporting and assurance in North America and around the world.</span>

<b><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Speakers include:</span></b>
<ul>
 	<li><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Emmanuel Faber, Chair International Sustainability Standards Board</span></li>
 	<li><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Barry Melancon, CPA, CGMA, CEO at Association of International Certified Professional Accountants; President &amp; CEO at American Institute of CPAs</span></li>
 	<li><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Julie Bell Lindsay, CEO of the Center for Audit Quality</span></li>
 	<li><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Pamela Steer, President &amp; CEO of CPA Canada</span></li>
 	<li><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Elizabeth King, President, Sustainable Finance &amp; Chief Regulatory Officer at Intercontinental Exchange</span></li>
 	<li><span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">Additional speakers to be announced.</span></li>
</ul>
<span data-darkreader-inline-bgcolor="" data-darkreader-inline-bgimage="">This virtual event is designed for accounting, finance, and audit/assurance professionals as well as investor relations professionals and sustainability professionals in the U.S. and abroad.</span>

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Explore the CAQ’s S&P 500 Analysis of ESG Reporting Information

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