The Big Four financial audit firms are the top “green counters,” too, leading the market in corporate sustainability assurance services, according to a new Verdantix analysis of global sustainability assurance providers.
The study, Green Quadrant Sustainability Assurance Providers, compares 13 providers on 48 criteria including energy and environment expertise, knowledge of standards and customer wins, and found that six firms lead the pack. The presence of the Big Four — Deloitte, Ernst & Young, KPMG and PwC — as market leaders, along with established risk management firms Bureau Veritas and DNV, demonstrates the financial materiality of sustainability risks.
Each of the leaders scores highest in at least one of the eight assurance service lines. They all perform well in core assurance engagements: sustainability reporting, risk analysis, GHG inventories and responsible supply chain, Verdantix said.
The overall trend shows that firms want to improve the credibility of sustainability reports and provide greater confidence to the board of directors, shareholders, and increasingly, their customers. As the financial weight of sustainability risks increases, companies are investing more in sustainability assurance and are more likely to buy this assurance from a leading brand, Verdantix said.
“Our research found that sustainability risks tied to corporate reputation and compliance are on the increase. So CFOs are getting more involved in the selection of assurance providers. This is one reason why firms increasingly buy sustainability assurance from the Big Four audit firms,” said study author James Beresford.
According to the research, adding credibility to external communications is the key purchase driver, with 87 percent of respondents citing this as a chief concern. Buyers shortlist assurance providers based on their experience with relevant standards, their sustainability expertise, and accreditation with standards or certification bodies. Cost effectiveness ranks fourth in importance as a purchasing consideration.
One-third of respondents said that assurance has a role to play in validating the accuracy of GHG data, and 27 percent believe that assurance has a role in managing reputational risks, improving management confidence in sustainability data and testing internal processes.
Looking forward, the study found that from 2013, the growth of carbon regulation as well as an increasing realization that sustainability is a source of competitive advantage will drive investor interest in firms’ sustainability performance. This will create demand for “financial grade sustainability management information” and increase involvement from the CFO in sustainability-assurance purchase decisions.
Government and stock exchange reporting requirements will encourage integration of relatively well-understood sustainable business metrics into business review commentary and existing financial reporting, the study said.