As the summer season comes to end, there’s not only a shift in the weather but also a renewed focus on strategic planning and forward-thinking.
The demand for more and reliable ESG reporting is increasing, driven by user demands and upcoming new regulations, such as the Corporate Sustainability Reporting Directive (“CSRD”). As a result, more ESG metrics and disclosures are being assured and, when CSRD becomes applicable from 2024, an increasing number of companies will obtain assurance over their entire sustainability report (“sustainability statement”). This assurance is also increasingly being provided by the companies’ financial statement auditors. Therefore, it is vital that companies plan ahead, to ensure they have the right assurance strategy to keep pace with the level of change in the market.
Context
We continue to see an uptick increase in the amount of ESG reporting that FTSE100 companies obtain assurance over. Investors, suppliers, customers, and employees all want to understand the purpose and values of the businesses they work with or for. Therefore, it is important for Boards and management teams to monitor and assess the breadth and level of assurance that is being obtained, in light of the trends we’ve identified below.
In this article, we present the key trends in ESG assurance for the UK’s largest listed companies. Our analysis is based on a review of all FTSE 100 companies’ 2023 Annual Reports, ESG reports, company websites, and, where publicly available, ESG assurance reports. The data was obtained using the latest Annual Reports published as of May 2024 (see Appendix 1). For comparative purposes, we have used our December 2022 article “All icing. No cake” which collated similar data on the FTSE 100 for the 2021 year-end.
Key Findings
In 2023, 79% of companies obtained assurance1, marking a 4% increase from 2021. This means the vast majority of the FTSE 100 have at least some experience of the requirements of an assurance process, such as understanding the importance of providing accurate information to the assurance practitioner.
Collaboration across different teams within a company is vital to support a smooth reporting and assurance process and we expect this to become more important as companies begin to report under the CSRD.
Our data shows that 47% of companies that obtained ESG assurance in 2023 used the same practitioner for both ESG assurance and financial statement auditing. This is a significant 14% increase from 2021, reflecting a trend we expect to continue in the next few years as the CSRD comes into force. This is due to the level of detail and disclosures required for the European Sustainability Reporting Standards (ESRS) that is likely to have overlap with the auditor knowledge and processes. For example, ESRS Topical Standard G1 requires disclosures related to an entity's risk assessment and control environment, which, in providing assurance over, may have some overlap with work performed during a financial statements audit.
63% of companies that obtained assurance in 2023 received it from a “Big 4” accounting firm, representing an 8% increase from 2021.
As the reporting and assurance requirements increase for the largest UK companies, more companies may seek alignment between their assurance and audit practitioner.
In 2023, 52% of the assurance reports were signed on the same day as the financial statements audit report. Currently, some companies publish separate sustainability reports and metrics that are assured after the Annual Report is issued. However, under CSRD, the sustainability statement, which is subject to assurance, must be presented within the Annual Report itself. Companies that do not currently receive assurance at the time of publishing their Annual Report need to plan ahead to meet this requirement.
As expected, the majority of the ESG assurance reports in 2023 were for limited assurance. 94% of the reports signed provided limited assurance, 5% were hybrid2 and just one company obtained reasonable assurance for all its assured KPIs.
For context, reasonable assurance work follows a similar methodology to an audit, involving understanding of the company and its culture, identifying risks, undertaking detailed testing, evaluating the evidence obtained and forming an assurance opinion. This type of assurance report is positively phrased, such as “in our opinion, the report is properly prepared, in all material respects, in accordance with..
Limited assurance follows the same methods as reasonable assurance but with a lower level of assurance, meaning the procedures performed are less extensive. This type of assurance report is negatively phrased, such as "nothing has come to our attention..."
For guidance and support on your ESG assurance journey, contact our ESG assurance team.
Article written by: Andy Kierney and Phil Bennett.
Our sustainability insights
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We obtained the data using the latest Annual Reports published of the FTSE 100 companies as at May 2024. The data covers mostly December 2023 year/period ends, but ranges from April 2023 until March 2024 year/period ends.
List of companies included:
3i Group plc
Admiral Group plc
Airtel Africa plc
Anglo American plc
Antofagasta plc
Ashtead Group plc
Associated British Foods plc
AstraZeneca plc
Auto Trader Group plc
Aviva plc
B&M European Value Retail S.A
BAE Systems plc
Barclays plc
Barratt Developments plc
Beazley plc
BP plc
British American Tobacco plc
BT Group plc
Bunzl plc
Burberry Group plc
Centrica plc
Coca-Cola HBC AG
Compass Group plc
Convatec Group plc
Croda International plc
DCC plc
Diageo plc
Diploma plc
DS Smith plc
EasyJet plc
Entain plc
Experian plc
F&C investment Trust plc
Flutter Entertainment plc
Frasers Group plc
Fresnillo plc
Glencore plc
GSK plc
Haleon plc
Halma plc
Hikma Pharmaceuticals plc
Howden Joinery Group plc
HSBC Holdings plc
IMI plc
Imperial Brands plc
Informa plc
InterContinental Hotels Group plc
Intermediate Capital Group plc
International Consolidated Airlines Group, S.A.
Intertek Group plc
J Sainsbury plc
JD Sports Fashion plc
Kingfisher plc
Land Securities Group plc
Legal & General Brands plc
Lloyds Banking Group plc
London Stock Exchange Group plc
M&G plc
Marks & Spencer Group plc
Melrose Industries plc
Mondi plc
National Grid plc
NatWest Group plc
Next plc
Ocado Group plc
Pearson plc
Pershing Square Holdings Ltd
Persimmon plc
Phoenix Group Holdings plc
Prudential plc
Reckitt Benckiser Group plc
RELX plc
Rentokil Initial plc
Rightmove plc
Rio Tinto plc
Rolls-Royce Holdings plc
RS Group plc
Schroders plc
Scottish Mortgage Investment Trust plc
Segro plc
Severn Trent plc
Shell plc
Smith & Nephew plc
Smiths Group plc
Smurfit Kappa Group plc
Spirax-Sarco Engineering plc
SSE plc
St James Place plc
Standard Chartered plc
Taylor Wimpey plc
Tesco plc
The Berkeley Group Holdings plc
The Sage Group plc
Unilever plc
Unite Group plc
United Utilities Group plc
Vodafone Group plc
Weir Group plc
Whitbread plc
WPP Group UK Limited
- For context the assurance being provided is under a range of standards, primarily ISAE 3000 or 3410 (84%), but also under other standards such as ISO 14064, so the external assurance is not always comparable.
- Hybrid Assurance is when assurance has been obtained on specific KPIs, where some KPIs have been assured to a limited a reasonable level.
