FRC publishes emerging findings from sustainability assurance market study
News types: Publications
Published: 15 October 2024
The Financial Reporting Council (FRC) has today published initial feedback on its market study into assurance of sustainability reporting. Launched in March 2024, this is the first market study carried out by the FRC. Led by the FRCs recently established Market Intelligence and Insights function, the study has been designed to explore how the market for sustainability assurance is functioning and developing in the UK.
Today’s report outlines feedback received from written responses to the FRC’s Invitation to Comment and extensive stakeholder engagement with companies, investors, and both audit and non-audit related providers of sustainability assurance, demonstrates the growth of the sustainability assurance market. This is seen in terms of both type of assurance provider and the range of companies seeking assurance over their sustainability reporting. In addition, the emerging findings provide market data on the use of sustainability assurance in the FTSE 350. This is the first time this data has been summarised and presented for FTSE 350 companies and is an important step forward in establishing a clear picture of the current and future needs of the UK market for sustainability assurance.
The study found that while currently most UK companies reported having sufficient choice of provider of assurance, some raised concerns that the market may begin to consolidate around the largest UK audit firms. Some respondents expressed fears that this may limit choice and effective competition in the market in the future. Beyond this, many stakeholders highlighted possible issues around consistency in the quality of sustainability assurance services.
The FRC recognises stakeholders desire for the UK to establish a clear regulatory framework that promotes trust and transparency in assurance of sustainability related reporting. The FRC therefore invites stakeholders to provide further input, responding to the questions set out in the emerging findings by emailing [email protected] by the 29 November 2024.
The FRC's Executive Director of Regulatory Standards, Mark Babington, said:
“For many investors, sustainability related reporting is becoming an increasingly prevalent factor in their decisions to allocate capital and invest in UK companies. Independent assurance of this reporting is vital in ensuring trust and transparency in companies non-financial reporting.
These emerging findings demonstrate the increasing demand for sustainability assurance that we are continuing to see from UK companies. While the UK’s approach to sustainability assurance is yet to be defined, this market study plays an important role in establishing a clear picture of the market and the challenges it faces.”