Overview

In December 2022, the International Ethics Standards Board for Accountants (IESBA) approved a project proposal with the objectives to develop: (a) Revisions to the Code to address the ethics issues that might arise in sustainability reporting; and (b) Ethics and independence standards for use and implementation by all sustainability assurance. In undertaking this project, the IESBA has engaged closely with the International Auditing and Assurance Standards Board (IAASB) to ensure that the IESBA’s final sustainability-related standards will be consistent and interoperable with the proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements (ISSA 5000), including definitions of terms such as “sustainability information,” using the work of another practitioner, sustainability assurance engagements in a group context, and the concept of value chain.

On January 29, 2024, the IESBA issued an Exposure Draft (ED) on International Ethics Standards for Sustainability Assurance (including International Independence Standards) (IESSA), which includes revisions to the existing the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) related to sustainability reporting. This ED proposes a framework of expected behaviors and ethics provisions for use by all sustainability assurance practitioners regardless of their professional backgrounds, as well as professional accountants involved in sustainability reporting. The goal of these standards is to mitigate greenwashing, elevate the quality of sustainability information and to foster independent, high-quality engagements and consistent practices.

The IESBA believes that practitioners who are already familiar with the Code could implement IESSA without significant costs related to obtaining an understanding of the new requirements. Nonetheless, a few areas that will be impacted include: (i) the new requirement in for the auditor to consider communicating actual or suspected non­com­pli­ance with laws and reg­u­la­tions (NOCLAR) to the sustainability assurance practitioner; (ii) the provisions addressing group sustainability assurance engagements (In the case of group sustainability assurance engagements performed in accordance with IAASB standards, there is currently no equivalent standard to ISA 600 (Revised)); (iii) the provisions addressing the independence considerations when assurance work is performed at, or with respect to, a value chain entity. The IESBA plans to issue non-authoritative guidance material for those who are not familiar with the Code to assist them in navigating the IESSA. Regarding the revisions to the Code, the IESBA anticipates that there will be non-trivial implementation costs.

The IESBA proposes an effective date of the final provisions to be December 2024 to align with the effective date of ISSA 5000.