International auditors have been issued updated guidance to strengthen the evaluation of firms’ ESG claims. The move, developed by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA), aims to improve the consistency and credibility of ESG reporting, according to IESBA Chair Gabriela Figueiredo Dias.
The new guidance, released under the IAASB’s International Standard on Sustainability Assurance 5000 and IESBA’s International Ethics Standards for Sustainability Assurance, addresses key ethical challenges such as avoiding client pressure to cherry-pick favourable data and ensuring information is not misleading, a practice often referred to as “greenwashing.”
“One thing is to know what you must do, and another is to know how to behave and how to approach dilemmas, decisions, and judgments that you need to make,” Dias said.
These standards are intended to provide a framework for auditors to navigate the complex ethical landscape of sustainability reporting.
IESBA’s financial reporting standards have already been adopted in approximately 130 countries, and Dias expects similar uptake for the new sustainability guidelines. However, regional variations in sustainability regulations remain a challenge.
The European Union is currently debating the scope of its Corporate Sustainability Reporting Directive (CSRD) amid concerns that extensive reporting requirements could affect the bloc’s competitiveness. Meanwhile, in the United States, similar rules face legal challenges and are likely to face continued scrutiny under Donald Trump’s administration.
“In a world with less detailed rules, ethics standards matter more as there is more space for judgment and decision-making,” Dias said.
Despite political and regulatory complexities, 34 of the world’s largest auditing firms are expected to adopt the guidance, establishing a global framework for consistent behaviour and accountability. Dias noted that enforcement mechanisms will vary by jurisdiction but emphasised the importance of a unified ethical approach.
“This creates a significant global framework and a set of expected behaviours which have some kinds of enforcement,” Dias added.