Blog Post: Growing Importance of Carbon Assurance in Annual Reporting
Summary:
As climate concerns are rising and regulations are tightening, companies are being pushed to prove their environmental claims with real data. Carbon assurance – where an independent expert checks a company’s emissions numbers – is becoming an important part of how businesses report on their climate impact. Carbon assurance helps companies prove their environmental claims are accurate and trustworthy, boosting transparency and accountability.
What is Carbon Assurance, and Why Does It Matter?
So, carbon footprint is a common term said – the amount of greenhouse gases a company emits. But how do we know if those numbers are real or just smart marketing?
That is where carbon assurance comes in. It is like a financial audit, but for carbon emissions. An independent third party checks the numbers and methods a company uses to report its carbon footprint, making sure everything is accurate and follows standards like the GHG Protocol (Sustain.Life, 2024). It is a way of saying “Yes, you can trust what we are reporting.”
More companies are starting to turn to carbon assurance because people – from investors to customers – are asking for proof, not just promises. Investors, regulators, and the public can be more confident that the company’s climate claims are real (Open Forum, 2024). It is easy to say you are going green. It is harder to show the receipts.
Example:
If a company’s annual report claims it cut its carbon emissions by 30% last year. With carbon assurance, an independent expert would double-check the data – such as energy use records and calculations – to confirm that 30% reduction is true. If it does check out, the company can be confident the claim is solid. It is like how financial audit gives credibility to a company’s profit figures. As the Carbon Trust puts it, companies should be auditing their environmental claims with the same rigor as financial reporting (Carbon Trust, 2022).
What is Driving the Shift?
Three big trends are the reason behind why companies are being pushed towards carbon assurance:
1-Stricter Regulations:
In Europe, the Corporate Sustainability Reporting Directive (CSRD) now requires that large companies to report their emissions and have them assured externally – starting with limited assurance and moving towards stricter levels over time (Emitwise, 2024).
In the US, the Securities and Exchange Commission (SEC) has approved new climate disclosure rules which will require public companies to report their greenhouse gas emissions. Even though the U.S. has faced some pushbacks, it shows that even American regulators want better climate transparency from companies. (Kirschman, 2024).
These regulations aim to make climate data as trustworthy and consistent as financial data. In the UK, the Cabinet Office released Procurement Policy Note (PPN) 06/21, that obligates suppliers bidding for the major government contracts submit a Carbon Reduction Plan with GHG emissions calculated in line with ISO 14064-1 and subject to a reasonable level of assurance (UK Government, 2021).
The EU’s CSRD gradually requires all large companies to have their sustainability disclosures independently assured, starting with limited and progressing to reasonable assurance by 2028 (European Commission, 2023).
As governments are starting to raise the bar, companies started to adapt faster to avoid falling behind.
2-Investor Expectations:
Big investors are looking for more than sustainability brochures. They want numbers they can trust. Inaccurate emissions reporting can lead to accusations of greenwashing – when a company’s claims about being environmentally friendly does not match the reality. Carbon assurance reduces this risk by showing that an expert has validated the data (Carbon Trust, 2022).
3-Public Pressure and Reputation:
Customers, employees, and the public are paying attention to how companies act. Getting carbon assurance is a way to build credibility, especially for brands that want to lead in sustainability. Independent verification helps to build trust among stakeholders and keeps companies accountable (Open Forum, 2024).
How does Carbon Assurance Work?
1-The company collects its data on energy usage, travel, supply chain, etc.
2-They calculate the emissions, usually following frameworks like GHG Protocol.
3-An independent expert reviews the data, the methods, and systems used.
4-The verifier gives an opinion – usually saying if the data appears accurate or needs improvements.
Assurance does not mean every single detail is 100% checked. But it gives a reasonable level of confidence that the data is not misleading (Sustain.Life, 2024).
Reasonable VS. Limited?
As Sustain.Life states, limited assurance is usually enough for smaller organizations with simpler emissions profiles, while reasonable assurance is more suitable for larger companies or those under stricter regulatory regimes.
When to Use Each Level?
Why This Matters for the Future?
Carbon assurance is not all about compliance. It is about future-proofing your business. As reporting expectations grow and climate become more central to strategy and finance, businesses that can share verified data stand out (Emitwise, 2024).
It also motivates internal improvements. When you know someone will review the data, you will build a better system. Which will mean a stronger sustainability performance overall.
By time, carbon assurance will become as important and standard as financial auditing – a normal part of doing business responsibly. Companies that start earlier will not only be more prepared but will be even more trusted.
Recommended Reading & Resources:
IFRS Foundation – ISSB Climate Disclosure Standards (IFRS S2): Official standard for climate-related disclosures, which provides a global baseline and is designed to be assurance-ready.
European Commission – Corporate Sustainability Reporting Directive (CSRD): Overview of the CSRD requirements, including the phased introduction of mandatory assurance for sustainability information.
International Auditing & Assurance Standards Board – ISSA 5000: The new International Standard on Sustainability Assurance, offering a framework for auditors to assure sustainability reports (IAASB, 2024).
Ceres (2024), “Closing the Gap: Investor Insights into Climate Data Assurance”: Report highlighting investor perspectives on the importance of independent assurance for climate disclosures and recommendations for companies.
CDP Guidance on Verification: CDP (Carbon Disclosure Project) guidelines explaining how third-party verification of emissions can improve scores and credibility, useful for companies looking to enhance their climate reporting.
References:
ICAEW (n.d.) Limited assurance vs reasonable assurance: What’s the difference? Available at: https://www.icaew.com/technical/audit-and-assurance/assurance/process/scoping/assurance-decision/limited-assurance-vs-reasonable-assurance
Sustain.Life (2024) Emissions auditing and verification: What is third-party GHG assurance? Available at: https://www.sustain.life/blog/emissions-auditing-verification-third-party-ghg-assurance
Sustain.Life (2024) – Emissions auditing and verification: Third-party GHG assurance. https://www.sustain.life/blog/emissions-auditing-verification-third-party-ghg-assurance
Emitwise (2024) Future proof your business with carbon audit assurance. Available at: https://emitwise.com/resources/blog/future-proof-your-business-with-carbon-audit-assurance/
Carbon Trust (2022) How to counter greenwashing with transparent communications. Available at: https://www.carbontrust.com/our-work-and-impact/guides-reports-and-tools/how-to-counter-greenwashing-with-transparent-communications
Open Forum (2024) Carbon assured. Available at: https://www.openforum.com.au/carbon-assured/#:~:text=%E2%80%9CCarbon%20assurance%20involves%20independent%20verification,trust%20among%20stakeholders%E2%80%9D%2C%20he%20added
Kirschman, L. (2024) Q&A: The growing trend of environmental, social and governance assurances in corporate America. University of Washington News. Available at: https://www.washington.edu/news/2024/04/05/qa-the-growing-trend-of-environmental-social-and-governance-assurances-in-corporate-america
UK Government (2021) Procurement Policy Note 06/21: Carbon Reduction Plans. Cabinet Office. Available at: https://www.gov.uk/government/publications/procurement-policy-note-0621-taking-account-of-carbon-reduction-plans-in-the-procurement-of-major-government-contracts
European Commission (2023) Corporate Sustainability Reporting. Available at: https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en