Non-financial data assurance is crucial for ESG reporting, but it's not easy. Here's what you need to know:
- It's about verifying non-financial info like environmental impact and governance
- Key for building trust in sustainability reports
- Major challenges: poor data quality, lack of standards, and measuring complex issues
Top 5 things to understand:
- Data quality is the biggest headache (57% of execs agree)
- No single rulebook exists, making comparisons tough
- Tech helps, but human expertise is still crucial
- More companies are getting on board (99% plan to get ESG assurance)
- Regulations are tightening, especially in the EU
| Aspect | Limited Assurance | Reasonable Assurance |
|---|---|---|
| Detail | Less | More |
| Cost | Lower | Higher |
| Conclusion | "Nothing wrong" | "Actively correct" |
Bottom line: ESG reporting is evolving fast. Companies that invest in good data and skilled people will come out on top.
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Key Questions and Answers
1. What is non-financial data assurance?
Non-financial data assurance is like a fact-check for sustainability reports. It's when someone checks if a company's ESG (environmental, social, governance) info is accurate.
Wes Bricker from PwC puts it simply:
"Assurance gives stakeholders a reason to trust the data they see."
2. Why is it tough?
It's tricky because:
- No single rulebook exists
- Data comes from all over the company
- Some things are hard to measure (like social impact)
3. What are the big hurdles?
The main issues? Poor data quality, info-gathering challenges, and lack of clear standards. In fact, 57% of execs say data quality is their top ESG headache.
4. How does the lack of standards affect things?
No clear rules mean:
- Companies report differently
- Comparing data between firms is tough
- Assurance providers struggle to define "right"
5. What about materiality?
It's crucial. Materiality means focusing on ESG issues that really matter for the business and its stakeholders. But without clear guidelines, deciding what's material is tough.
6. How can companies boost their data quality?
To improve data, companies can:
- Set up strong internal controls
- Use data quality dashboards
- Make data quality a regular meeting topic
Fun fact: Gartner found a 10% boost in customer data quality can improve customer responsiveness by 5%.
7. What skills are needed?
Non-financial data assurance pros need:
- ESG tech know-how
- Understanding of reporting frameworks
- Data analysis skills
- Good judgment
8. How's tech changing the game?
New tech is helping with:
- Automating data collection
- Spotting errors
- Making multi-standard reporting easier
9. Limited vs. reasonable assurance: What's the difference?
| Limited Assurance | Reasonable Assurance |
|---|---|
| Less detailed | More thorough |
| Cheaper | Pricier |
| "Nothing wrong" | "Actively correct" |
More companies are switching from limited to reasonable assurance for ESG data.
10. How are the rules changing?
They're getting stricter:
- EU's new directive starts in 2024
- Global standards are coming
- More countries require ESG reporting and assurance
Marjorie Whittaker from Grant Thornton sums it up:
"From a corporate reporting perspective, this is the most consequential challenge facing the clients we work with."
Wrap-up
ESG reporting is evolving fast. Companies face big challenges:
- Data quality issues
- Unclear standards
- Tricky ESG measurements
But it's not all doom and gloom. Here's what's happening:
More companies are jumping on board
KPMG found 99% of companies plan to get ESG assurance or prep for it. That's up from 96% in 2022.
Skills shortage is real
54% of firms are looking to hire ESG experts. Why? Not enough in-house talent.
Regulators are tightening the screws
EU's new rules kick in 2024. Other countries are following. Expect tougher ESG checks.
Data quality is the big headache
57% of execs say it's their top ESG challenge. Good data = trustworthy reports.
Tech helps, but it's not a silver bullet
New tools make data collection easier. But you still need human smarts.
The bottom line? ESG reporting is tough, but improving. Companies investing in good data and skilled people will win.
Larry Bradley from KPMG sums it up:
"Getting ready for ESG assurance is a journey – and companies are finding the further they get in that journey, the more there is to do and learn. The goal line is continually evolving."
The future of ESG reporting? It's all about tackling these challenges head-on.
