In January 2024, the International Ethics Standards Board for Accountants (IESBA) published its “Sustainability” and “Using the Work of an External Expert” exposure drafts, with the goal of mitigating greenwashing and elevating the quality of information to foster greater trust in sustainability reporting and assurance. The key points from our responses to the proposals are set out below.

Proposed standards and other revisions to the code relating to sustainability

ICAS has responded to the exposure drafts for the IESBA Code of Ethics for Professional Accountants (including international independence standards) relating to sustainability in the following areas:

International Ethics Standards for Sustainability Assurance
We agree that the public interest would be best served by having equivalent ethics and independence standards apply to all parties providing assurance on sustainability-related information, as is the approach adopted in the proposed International Ethics Standards for Sustainability Assurance (IESSA) that would constitute Part 5 of the IESBA Code of Ethics for Professional Accountants (including international independence standards). However, we harbour concerns as to how IESBA will be able to expand the scope of the code to cover assurance providers other than professional accountants (PAs) in public practice. It’s our opinion that this can only be achieved if assurance providers who are not PAs are required by jurisdictional regulators to adhere to the code or equivalent standards, and for there to be an appropriate enforcement and sanctions regime for failure to comply.

While we agree that there should be a strong code for this area, the proposed IESSA is a large, complicated document. As a result, it may be a barrier to people who are not PAs entering or remaining in the market. There is a need to focus on the key issues now; then, as the market matures, a longer-term project can be undertaken for the detail. The IESSA could be the right document in a few years’ time when there is a stronger market of PAs and non-PAs.

Level playing field
We note that compliance with Part 4B of the code, “Independence for assurance engagements other than audit or assurance engagements”, is “encouraged” for non-PAs, but equivalent content is not contained within Part 5. As a result, non-PAs have fewer obligations than PAs, who are required to apply Part 4B. To level the playing field, we suggest Part 4B should also be included within Part 5.

Value chain entities
This is a complex area. More work is required by IESBA to arrive at a practicable approach given the number of entities that could be within the scope of an entity’s value chain.

Using the work of an external expert

IESBA recognises that using the work of an external expert might create threats to a PA’s or sustainability assurance practitioner’s (SAP) compliance with the fundamental principles. It therefore establishes an ethical framework to guide PAs (in public practice and in business) and SAPs in evaluating whether an external expert has the necessary competence, capabilities and objectivity for them to use the expert’s work for its intended purposes. While we agree conceptually with this approach, and believe external experts in an audit or assurance engagement should be evaluated through the lens of objectivity, we feel the proposed provisions place too much emphasis on independence rather than objectivity.

At these early stages for sustainability reporting and assurance, where there is going to be an increased use of experts in other areas, this focus on “independence” might reduce the marketplace of those available to work with PAs and SAPs, because they will be unable (or unwilling) to meet all its requirements. Why would they sign up to providing all the information required in the proposals if there is no legal or regulatory requirement to do so? Rather than strict adherence to independence rules per se, it would be wiser to focus on professional judgement being appropriately applied to assess objectivity.

Coordination between IESBA and IAASB

Ongoing coordination and discussions between IESBA and the International Auditing and Assurance Standards Board (IAASB) are essential in making sure that appropriate alignment between proposed International Standard on Sustainability Assurance (ISSA) 5000 and the proposed revisions to the code is achieved.

Next steps
The IESBA is currently considering the responses to these consultations with a view to approving its finalised proposals at its December meeting. 

View the full responses to the exposure drafts on sustainability assurance and using external experts