How can you trust your CSR report?

Only a quarter of the 3,000 companies expected to publish a CSR report this year will include a third-party assurance statement addressing the report's credibility and completeness.

That is the finding of a major new global study of the market for CSR assurance services carried out by CSR resources website CorporateRegister.com, which concluded that while growing numbers of firms are producing CSR reports, relatively few are treating them in the same way as annual reports and employing third-party bodies to verify their accuracy.

"Financial reports have to be audited, but CSR reports are still entirely voluntary," explained report co-author and managing director of CorporateRegister.com Paul Scott. "So unless firms can see a clear need for external assurance they tend to see assurance services as a cost they can leave out."

The report also found that adoption of third-party assurance for CSR reports varied by market, with about 30 per cent of European firms using independent bodies to check their reports compared with less than 10 per cent in the US. " Companies make a decision on assurance based on what their stakeholders expect, " said Scott. "For example, in the UK some sectors use third-party assurance quite widely as they need the credibility it offers, while in the US you can generally get away without it because no one else does it."

Scott added that there was a strong business case for firms preparing CSR reports to use assurance services. "This is absolutely best practice," he argued. "Third-party verification is what distinguishes a proper CSR report from PR and marketing. Those companies that want their CSR disclosures to be taken seriously need to use assurance."

He added that with two-thirds of the FTSE 500 now producing separate CSR reports the use of third-party assurance would help the report establish cred ibility among stakeholders and also better prepare the firm for the mandatory environmental reporting rules that many experts believe will be introduced over the next five years.

Growing numbers of firms are embracing this message, according to the report, which predicted that the number of reports globally including assurance statements is to climb from 650 in 2007 to around 750 this year. Scott said that the provision of assurance services was fast emerging as a sizable market, with each audit likely to represent a "decent injection of cash".

However, the report also warned that even where firms engaged third parties to verify their CSR statements there was still variation in the quality of that assurance.
"We have come across some instances of bad practice where the company that prepares the report also signs it off as assured, or where it is simply endorsed by a green celebrity of academic with no formal auditing processes having been followed," explained Scott.

He added that as such there was a need for a standardised approach and highlighted the report's outlining of a number of best practices that all assurance service providers should follow as a potential foundation for future standards.

However, he remained pessimistic that such standards would emerge in the foreseeable future. "Three types of company dominate the market - the big four accountancies, specialist CSR consultancies and certification bodies – and they all have different approaches so it will be difficult to get a standard that suits every type of provider."