How is a sustainability report audited?

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How is a sustainability report audited?

The independent audit of the Sustainability Report: Finja Vehrs (right) and Inga Schlamann (center) from the PricewaterhouseCoopers auditing company discuss the paper sources statistics from 2008 and 2009 with Hildegard Kemper (left) from Central Material Purchasing / Procurement Marketing.

The approach of the PricewaterhouseCoopers AG auditing company

Corporate Responsibility (CR) represents a new level of responsibility by the organization, which the company – triggered by rapid globalization – is calling for ever more strongly. Meeting this standard is already an essential prerequisite for protecting the corporate reputation and the brand. Companies who have set themselves this goal maintain an intensive dialog with their stakeholders. These are all the groups which are affected by corporate activities. For only those who identify their requirements and expectations at an early stage are able to include them in their corporate strategy and in the business processes.

Communication of the strategy and measures for sustainable management is becoming increasingly important here. For example, almost all of the DAX 30 companies publish sustainability reports and provide further information on the Internet.

Principles of good Sustainability Reporting

The guidelines of the Global Reporting Initiative (GRI) present a comprehensive and internationally widely accepted recommendation for the content of sustainability reporting. The basic principles of completeness, clarity, accuracy, timeliness, comparability and reliability among others are valid for reporting according to this.

To enhance the credibility of sustainability reporting, the GRI recommends, in addition to the establishment of suitable management systems and reporting processes, having the reports certified by experts.

Both for the stakeholders as well as for the management, the external audit provides the assurance that reports are accurate, complete and appropriate. The auditor's examination of systems and processes, along with the associated findings and recommendations, which are recorded in the assurance statement are often starting points for the optimization of internal sustainability management.

Assurance procedure

The PwC approach for the assurance of a sustainability report basically follows the same standards as the audit of other business data and processes, for example in the examination of consolidated financial statements and annual financial statements. These standards are defined at PricewaterhouseCoopers in an international uniform audit approach. A special feature of the assurance of sustainability reports, however, is that there are as yet no statutory provisions and requirements in Germany; meaning that the object, scope and standard of the assurance procedure are therefore agreed individually and entered in the assurance statement.

The PricewaterhouseCoopers assurance procedure for the business audit of a sustainability report is briefly described below:

Preaudit

In a kick-off workshop at the beginning of an audit, the assurance procedure, the necessary paperwork, documentation and contacts as well as the schedule are agreed with the client. This serves the senior auditor as a basis for drawing up a detailed assurance program.

The preaudit itself includes the recording of the relevant systems and processes of sustainability reporting, as well as an assessment of adequacy in accordance with the agreed assessment criteria (process evaluation).

Audit of the reporting processes

Following this, the audit team establishes that the relevant reporting processes and process controls within the company have been complied with, particularly the processes concerning the gathering, quality assurance and aggregation of data for sustainability reporting (process validation).

This can be done – depending upon the type and complexity of the processes – by process observation or an analysis of individual processes and controls. To do this, the auditor establishes on the one hand through so-called on-site inspections at the data source that data is fully and correctly recorded. On the other hand, the understanding of the process acquired during the preaudit ensures that the essential controls along the entire process chain up to the aggregation of key performance indicators and their provision for the report can be included in the audit.

What is permissible and also desirable to ensure the efficient performance of assurance, is the use of audit results from third parties, provided they meet the high standards of assurance procedure and assurance reliability demanded by PricewaterhouseCoopers.

Audit of the quantitative information

The audit of the quantitative data in the sustainability report is enhanced through analytical inspections – such as the generation and review of expected values, or the conducting of trend and deviation analyses – as well as the classical scrutiny of documents. This applies mainly to those indicators which did not achieve sufficient assurance reliability through the process audits. This can also apply to individual information for which an individual audit promises higher assurance reliability or greater efficiency.

The audit is accompanied by a review of the drafts of the Sustainability Report, to assess the compatibility of their content, language and design with the GRI reporting principles as well as the quantitative information in the context of the report.

Reporting

At the conclusion of the audit, the audit findings and any recommendations on improving the systems and processes of sustainability reporting are discussed with the client and the assurance statement is issued.

The statement assuring the independent business audit of the Axel Springer AG 2009 Sustainability Report can be found here .