Sustainability Disclosure and Assurance Have Caught on Big-Time

Sustainability reporting is almost universal among the world’s largest companies, and third-party assurance over sustainability disclosures is becoming the norm. Those are among the conclusions that emerge from two new reports on sustainability disclosure and assurance.  In its annual report on sustainability disclosures, the Center for Audit Quality (CAQ) found that 99 percent of S&P 500 companies publicly disclosed detailed sustainability information in 2023 and that 73 percent of S&P 500 companies that reported sustainability information obtained third-party assurance over at least some of that information.  The International Federation of Accountants (IFAC) and the Association of International Certified Professional Accountants (Association) reached almost identical conclusions in their fifth annual report on global sustainability reporting practices.  The IFAC/Association report, which reviewed the disclosures of 1,400 large companies in 22 countries, found that, in fiscal year 2023, 98 percent reported sustainability information, and 73 percent of sustainability reporting companies obtained third-party assurance over at least some of the disclosures.

The Center for Audit Quality:  S&P 500 Sustainability Reporting and Assurance Analysis

The CAQ has posted on its website S&P 500 Sustainability Reporting and Assurance Analysis, its annual update of its study of S&P 500 company sustainability disclosures.  As noted above, the CAQ found that 99 percent of S&P 500 companies publicly disclosed sustainability information in 2023, essentially unchanged from 98 percent in 2022. Seventy-three percent of S&P 500 companies that reported 2023 sustainability information obtained third-party assurance over at least some of that information, compared to 70 percent of sustainability reporters that obtained assurance in 2022. About one-quarter (24 percent) of the companies that obtained assurance in 2023 retained a public company auditor to provide sustainability assurance. 

The CAQ reviewed S&P 500 company websites, CDP Climate Change Questionnaires, and third-party assurance or verification reports for reporting periods ending in 2023. (The analysis does not include information disclosed in SEC filings.) The CAQ found that most S&P 500 companies have a website page where a standalone sustainability report is available as a PDF, although some issue sustainability information in multiple reports and some provide a sustainability interface web portal.

For a summary of last year’s report, see CAQ’s Annual Analysis Finds that More Companies are Using Their Auditor for ESG Assurance, July 2024 Update.  (In prior years, the CAQ report has analyzed “ESG reporting and assurance.”  The 2025 report uses the term “sustainability” rather than ESG.)  Below are some highlights of the 2025 CAQ study.

1. Sustainability Reporting Frameworks and Standards

The CAQ tracked references to four sustainability disclosure frameworks or standards: the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate Change (TCFD), and the Integrated Reporting Framework (IR). (The SASB standards and TCFD reporting are now under the oversight of the International Sustainability Standards Board (ISSB), which began to adopt standards in 2023.)

A substantial majority of S&P 500 companies referenced at least one of these four reporting frameworks or standards in their 2023 sustainability disclosure. Seven companies referred to all four, and 303 companies referred to three of the four. Eighteen companies reported sustainability information but did not reference any reporting framework. The most frequently referenced sustainability disclosure framework or standard in 2023 was SASB (455 companies, down slightly from 459 in 2022), followed by TCFD (416 companies, up from 411 in 2022), GRI (352 companies, down from 358 in 2022), and IR (nine companies, down from 13 in 2022).

The CAQ also looked at references to several other frameworks, in addition to the four sustainability disclosure frameworks it has traditionally tracked.  Ninety-three companies mentioned the ISSB’s standards in their sustainability reporting, although many of these simply noted that the ISSB had assumed oversight of the SASB standards and TCFD framework.  One hundred six companies mentioned California’s climate disclosure laws (see California Will Go Easy on Enforcement of GHG Emissions Reporting in 2026, January 2025 Update), while 100 companies referred to either the E.U. Corporate Sustainability Reporting Directive or the European Sustainability Reporting Standards (see E.U. is Dialing Back Sustainability Reporting and Due Diligence, March-April 2025 Update).

2. Assurance or Verification

In 2023, 362 S&P 500 companies (73 percent) disclosed receiving some form of assurance or verification over certain of their sustainability metrics, a seven percent increase from the 340 companies that obtained assurance in 2022.  Of the companies that obtained assurance in 2023, 87 utilized public company auditors, and 283 obtained assurance from other types of providers. The percentage of companies that engaged a public company auditor to perform their assurance engagements rose from 21 percent in 2022 to 24 percent in 2023. (Eight companies appear to have used both a public company auditor and another provider.) Ninety-four percent of the companies that obtained assurance from a public company auditor in 2023 used the firm that performed their financial statement audit, down slightly from 95 percent in 2022.

3. Assurance by Public Company Auditors

For those S&P 500 companies that used a public company auditor to provide sustainability assurance, the information covered, standards used, and level of assurance varied.

• Forty-four companies obtained assurance over greenhouse gas (GHG) emissions and between one and three additional sustainability metrics. (e.g., water, energy, or waste metrics), compared to 39 companies in 2022. Twenty-two companies obtained assurance over GHG emissions only, while 21 obtained assurance over GHG emissions and more than three other metrics.

• U.S. public company auditors used the American Institute of Certified Public Accountants (AICPA) attestation standards to perform their assurance engagements, while non-U.S. auditors used the International Auditing and Assurance Standards Board (IAASB) standards. In two cases, a U.S. public company auditor used both the AICPA attestation standards and the IAASB assurance standards.

• Ninety-three of the 2023 assurance reports issued by public company auditors provided only limited assurance on the sustainability disclosures they reviewed, up from 79 that provided limited assurance in 2022. Eleven of the public company auditor assurance reports provided reasonable assurance, the same as in 2022.  (These numbers exceed the number of companies that obtained assurance from public company auditors because some companies had multiple assurance engagements.) Reasonable assurance is the level of assurance required in financial statement audits filed with the SEC, while limited assurance means that the auditor performed certain procedures and reported that nothing came to his or her attention indicating that the disclosure reviewed was materially incorrect.

4. Assurance or Verification by Other Providers

There was also variation in the information covered, standards used, and level of assurance provided by non-auditor assurance providers, although the long-term trend of non-auditor providers expanding the scope of information as to which they provide assurance continued in 2023.  However, in some cases, there were significant gaps and inconsistencies in non-auditor disclosures concerning their work.

• Companies that sought assurance over their GHG emissions tended to utilize non-auditor assurance providers. In 2023, the CAQ found 107 instances in which such providers issued reports on GHG emissions only, essentially the same as the 108 GHG-only assurance reports in 2022. In 107 other cases, companies obtained assurance over GHG emissions and between one and three additional sustainability metrics from a non-auditor. Sixty-nine companies obtained assurance over GHG emissions and more than three other metrics from a non-auditor.

• Non-auditor sustainability assurance providers used one of three sets of standards in performing their work: International Standardization Organization (ISO) standards, IAASB standards, or the Accountability’s AA1000 assurance standard. The ISOs were the most popular. The CAQ found 235 instances in which non-auditors used the ISOs, compared to 181 for the IAASB’s standards and nineteen for AA 1000.

• Providers that were not public company auditors used three terms to describe the level of assurance they provided: “Limited assurance” (341 instances), “Moderate assurance” (15 instances), and “Reasonable assurance” (42 instances). In four cases, the level of assurance cannot be determined from the documentation. The 42 reports in which non-auditors provided reasonable assurance on sustainability disclosures during 2023 was a decline from 51 non-auditor reasonable assurance reports in 2022. (As in the case of auditor assurance reports, the report numbers for non-auditor assurance exceed the number of companies that obtained assurance from non-auditors because some companies had multiple assurance engagements.)

The CAQ notes that there are inconsistencies in how non-auditor assurance providers describe their work. For example, 80 percent of such providers that claimed to have used the IAASB’s standards indicated that they had performed their engagement “in accordance” with the IAASB assurance standards while 20 percent either did not specify their level of compliance or indicated that their engagement was “based on”, “consistent with” or “in alignment with” the IAASB assurance standards.  The CAQ observes: “An engagement performed using a proprietary methodology that is ‘based on,’ ‘consistent with’ or ‘in alignment with’ but not ‘in accordance’ with assurance standards suggests that the standards were not followed as written.”  There were similar inconsistencies regarding whether the assurance provider followed quality control standards or ethics or independence requirements.

5. GHG Emissions Information

Almost all companies that obtained sustainability assurance in 2023 obtained assurance over their GHG emissions. In 2023, 360 of the 362 S&P 500 companies that obtained any type of sustainability assurance obtained assurance over GHG emissions -- 23 more companies than obtained such assurance in 2022. Of those 360 companies, 288 obtained assurance over Scope 1, 2, and 3 emissions, while 69 obtained assurance over only Scope 1 and 2 emissions. Two companies obtained assurance over Scope 1 emissions only, and, for one company, the GHG emissions that were subject to assurance could not be determined from the documentation. (Scope 1 GHG emissions are direct emissions from sources owned or controlled by an organization. Scope 2 GHG emissions are emissions associated with purchased electricity, steam, heat, or cooling. Scope 3 GHG emissions include all other emissions that occur in the upstream and downstream activities of an organization, such as those from the activities of suppliers or customers’ use of the organization’s products).

Scope 3 emissions are the most difficult to measure, and Scope 3 reporting companies may not report all categories of Scope 3 emissions. In 2023, the three most reported Scope 3 emissions categories were: Business Travel (384 companies), Purchased goods and services (346 companies), and Fuel and energy-related activities not included in Scope 1 or 2 (343 companies).  These three categories were also the most assured types of Scope 3 emissions.

6. Other Sustainability Topics Subject to Assurance or Verification

In addition to GHG emissions, S&P 500 companies obtained assurance over a wide range of sustainability metrics in 2023. Excluding “other,” the top five assurance topics were energy (175 companies, up from 164 in 2022), water (154 companies, up from 141 in 2022), waste (98 companies, up from 91 in 2022), employee health and safety (68 companies, up from 56 in 2022), and human capital/diversity and inclusion (64 companies, up from 50 in 2022).

7. Net-Zero or Carbon-Neutral Commitments

In 2023, 297 S&P 500 companies disclosed a net-zero and/or carbon-neutral commitment – an increase over the 293 companies that disclosed such a commitment in 2022. The most common net-zero commitment date was 2050, the same as in 2022.  The most common carbon-neutral commitment date was also 2050, followed closely by 2030.

8. Carbon Credits or Carbon Offsets

The CAQ looked at whether companies mentioned carbon credits or carbon offsets.  In 2023, 329 companies made such disclosures, a slight decrease from 337 companies in 2022.

The International Federation of Accountants and the Association of International Certified Professional Accountants: The State of Play: Sustainability Disclosure and Assurance

On May 12, IFAC and the Association issued The State of Play: Sustainability Disclosure & Assurance—Five-Year Trends & Analysis (2019-2023), their fifth annual report on global sustainability reporting practices. The IFAC/Association report is based on a review of the disclosures made by 1,400 companies, representing the largest companies by market capitalization in 22 jurisdictions. The study included the ESG disclosures of the 100 largest companies in the United States and five other major economies and of the 50 largest companies in the remaining 16 jurisdictions. (For a summary of the prior IFAC/Association report, see Large Companies Worldwide Continue to Expand Their ESG Disclosure and Assurance, February 2024 Update.)

As noted above, the report finds that, in fiscal year 2023, 98 percent of these large companies reported some sustainability information, the same percentage as in 2022. In addition, 73 percent of sustainability reporting companies obtained third-party assurance over at least some of their disclosures. This reflects an increase from 69 percent that obtained assurance last year. GHG emissions remain the most widely assured category of sustainability information. 

IFAC’s press release announcing the 2025 report also highlights trends in the use of auditors as assurance providers. Audit firms—as opposed to consultants or other service providers—provided 55 percent of assurance on sustainability disclosures. Audit firms’ overall share of the market declined from 58 percent in 2022, although this decline may be due to  “mitigating factors”, such as a trend for E.U.-based companies (which rely more heavily on auditor assurance) to obtain a single assurance report rather than a series of separate reports.  Despite the overall downward trend, the use of audit firms increased in 2023 in several major markets, including Singapore, South Africa, the United Kingdom, and the United States.  More than three-quarters of companies now report sustainability information along with financial disclosures in annual or integrated reports. These companies overwhelmingly use their statutory auditor to provide assurance over sustainability disclosures.

Other findings of the IFAC/Association report include:

1. Role of the Audit Committee 

The audit committee is often the focal point of both sustainability strategy and disclosure. 

• Eighty-seven percent of companies disclosed board-level oversight of sustainability strategy, and 69 percent of those companies identified the audit committee as having such oversight responsibility, up slightly from 68 percent in 2022. Sixty-seven percent gave sustainability strategy oversight responsibility to more than one board committee.

• Sixty percent of companies disclosed board-level oversight of sustainability reporting, and 61 percent of those companies identified the audit committee as having such oversight responsibility, up from 41 percent in 2022.  The share of companies that said that the sustainability committee had responsibility for oversight of sustainability reporting was constant at 45 percent.  Twenty-nine percent of companies that made a disclosure concerning board-level oversight of reporting gave that responsibility to more than one committee, unchanged from last year.

• Twenty-four percent of companies disclosed board-level oversight of sustainability assurance, and 78 percent of those companies identified the audit committee as having such oversight responsibility. Only five percent gave sustainability assurance oversight responsibility to more than one board committee.

2. Sustainability Reporting Frameworks 

Ninety-two percent of the companies in the study disclose sustainability information pursuant to more than one reporting standard or framework, up from 87 percent last year.

• In 2023, 85 percent of the 1,400 global companies referenced or used the United Nations’s Sustainable Development Goals (SDGs), 80 referenced or used the GRI standards, 73 percent referred to or applied the TCFD framework, and 55 percent used or referenced the SASB standards.

• In the United States, the SASB standards were the most popular reporting framework: SASB was referenced or used by 92 percent of the 100 U.S. companies in the study, followed by TCFD at 86 percent. Ninety-four percent of U.S. companies used multiple frameworks.

3. Materiality Assessment Strategies

Companies disclosed a variety of techniques to determine which sustainability topics are material for the company. Most companies (84 percent) employ stakeholder engagement, while 71 percent use standards and frameworks, such as SASB and GRI, as part of their materiality determination. Other materiality assessment techniques include desktop research (34 percent), management/board engagement (24 percent), and use of external experts (24 percent).  Eighteen percent of companies disclosed the use of AI as part of their materiality determination process. Twelve percent made no disclosures concerning how they identify material sustainability topics.  

4. Assurance over Sustainability Disclosures

Assurance over sustainability disclosures is becoming the norm.

• As noted above, 73 percent of companies obtained third party assurance over at least some of their ESG reporting, up from 69 percent in 2022. For the 100 U.S. companies studied, 90 percent obtained some level of assurance over at least some ESG disclosures.

• Audit firms performed 55 percent of assurance engagements, a decrease from 58 percent last year and well below the 63 percent share audit firms had in 2019. However, in the United States, the trend is in the other direction:  In 2023, audit firms only provided about 28 percent of sustainability assurance, compared to 23 percent in 2022 and 11 percent in 2019.

• Ninety-seven percent of audit firm ESG engagements resulted in limited assurance reports, while the remaining three percent provided reasonable assurance. In contrast, 63 percent of engagements conducted by other service providers resulted in limited assurance, while 16 percent resulted in moderate assurance and 15 percent in reasonable assurance.

Audit Committee Takeaways

The ESG disclosure revolution has many implications for audit committees.  In the current environment, committees may want to afford particular consideration to four aspects of sustainability reporting.

1.     Quality of sustainability disclosures.  As the CAQ and IFAC/Association studies indicate, sustainability reporting is almost universal among the largest companies. However, sustainability disclosures are often not subject to the same controls and procedures as traditional financial disclosures. This creates risks that the sustainability report may be inconsistent with other company disclosures or that the accuracy of the information presented may not be verifiable. These risks should be of concern to audit committees due to their responsibility for disclosure oversight and oversight of controls and procedures.  Audit committees should ensure that management takes the accuracy and reliability of sustainability disclosures as seriously as it does financial statement disclosures.

2.     Level of third-party assurance. As third-party assurance over sustainability disclosures becomes routine, audit committees should focus on the differences between the various levels of assurance.  For example, as these two reports make clear, most companies that obtain assurance over sustainability disclosures opt for limited, rather than reasonable, assurance. This is the case regardless of whether a public company auditor or some other type of professional provides the assurance.  While the cost of obtaining limited assurance is typically lower than the cost of reasonable assurance, the benefits are also lower. Investors may not understand what limited assurance engagements entail, and there is a significant risk that they will overestimate the value of limited assurance. See Sustainability Assurance is the New Expectations Gap, May-June 2024 Update. Management and the audit committees should consider the benefits of obtaining reasonable assurance over the company’s sustainability disclosures. Companies that choose limited assurance should ensure that the disclosure clearly explains to users the meaning of that assurance level.

3.     Non-auditor adherence to standards.  Audit committees of companies that use non-auditor assurance providers should also look carefully at the standards their assurance provider claims to follow and how it describes its adherence to those standards.  As the CAQ report discusses, non-auditor assurance providers may assert that their work is “based on”, “consistent with” or “in alignment with” a recognized body of standards, although this terminology suggests that the provider did not follow the standards as written. Similarly, it may be unclear whether the assurance provider has any system of quality control or observes any recognized ethics or independence requirements.  The value of a report that was not prepared in accordance with established standards, or that is rendered by a provider that is not independent of the client or does not have a quality control system, is questionable.

4.     ESG/sustainability backlash.  Audit committees reviewing these two reports should recognize that they address 2023 sustainability disclosures.  Since 2023, there has been something of a backlash against the role of sustainability factors in corporate strategy and decision-making, at least in the United States.  While much of this backlash has focused on diversity, equity, and inclusion (DEI), other aspects of sustainability, including climate change, have been affected as well.  It is not yet clear how this backlash will affect sustainability disclosure, although there have been numerous anecdotal reports of companies omitting or deemphasizing DEI disclosures.

Each company must decide how to navigate these uncertainties, and approaches will vary.  One starting point may be for companies to step back and revisit what sustainability information is material to the economic success of their business and what types of disclosure are most likely to provide investors with decision-useful information. Whatever changes there may be in governmental or societal attitudes toward the role of sustainability considerations in corporate decision-making, it seems clear that disclosure focused on economically material information will remain necessary.  Audit committees can play a key role in helping management identify and disclose such information.