Trends in Sustainability Assurance

Paolo PeregoDepartment of Accounting

Rotterdam School of ManagementErasmus University

Amsterdam GRI Conference 2010 - Thursday 27 May

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Trend analysis (1)

• Panel data from a sample of Fortune G250 in the period 1999-2008 (N=212).

• Adoption of sustainability assurance statements:

Year Reports % Assurance % 1999 84 40% 18 21% 2002 111 52% 35 32% 2005 146 69% 45 31% 2008 147 69% 82 56% Total 341 180

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Trend analysis (2)

• Diffusion of sustainability assurance statements:

• Consistent early adopters:

– Bayer, BHP Billiton, BP, BT, Enel, Eni, Ing Group, Novartis, Philips, Shell, Statoil, Unilever

Early adopters

Late adopters

Followers Laggards Non-adoption

Consistent YYYY 12 NYYY 9 NNYY 13 NNNY 42 NNNN 118

Non-consistent YNYY 1 NYNY 3 NNYN 3 YYNN 2 NYYN 6 YYNY 2 YYYN 1 Total N=212 N=18 N=18 N=16 N=42 N=118

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Trend analysis (3)

• Diffusion per country:

Japan 39 (22%)

United Kingdom 29 (16%)

Germany 18 (10%)

Netherlands 15 (8.3%)

…

United States 12 (6.7%)

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Assurance providers (1)

• Four categories:

1. Accountants (Big-4 and other accounting firms)

2. Consultants (Broader and Specialist consultancies)

3. Certification bodies

4. Others (NGOs, Stakeholder panels, Academic institutions, individuals)

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Assurance providers (2)

• Assurors per year:

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Assurance standards

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Assurance standards and assurors

• Most frequent combinations for accountants:

• ISAE 3000 + GRI (N=10)

• ISAE 3000 (N=9)

• AA1000 + GRI (N=5)

• Most frequent combination for specialists and certification bodies:

• AA1000 + GRI (N=5)

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Quality of assurance statements (1)

• Methodology:

– Content analysis of 19 categories from O’Dwyer & Owen (2005) framework.

– Multiple scores per categories for max 30 points.

• Highest scores:– 30 points: HSBC Holdings (2008)– 24 points: BT, Ericsson, Nestle (2008)

• Mean (s.d.) per year:

1999: 10.28 (3.43)

2002: 9.43 (3.54)

2005: 12.64 (4.83)

2008: 13.80 (6.67)

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Quality of assurance statements (2)

• Mean (s.d.) across assurors:

Accountants 13.94 (4.50)

Consultants 11.25 (5.69)

Certification bodies 14.30 (7.20)

Others 6.81 (4.47)

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Quality of assurance statements (2)

• Mean (s.d.) across standards:

No standard 9.73 (4.52)

AA1000 17.83 (4.17)ISAE3000 17.50 (2.07)GRI 15.67 (7.38)AA1000 + ISAE3000 16.00 (6.08)AA1000 + GRI 20.13 (4.47)ISAE3000 + GRI 17.80 (1.03)AA1000 + ISAE3000 + GRI 19.50 (0.71)

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Research directions (1)

• Determinants of non-financial assurance:

– Country-level (Simnett et al, 2009, Kolk & Perego, 2010)

– Industry-level

– Firm-level

– Individual-level

• Consequences of non-financial assurance:

– Tangible effects, e.g. on environmental performance

– Intangible effects, e.g. on reputation, stakeholder pressure, or financial analysts’ judgment

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Research directions (2)

• Dynamics of standardization applied to assurance engagements:

– Multi-stakeholder (AA1000) versus professional standards (ISAE 3000)

– Global versus national standards

– Voluntary versus mandatory standards