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What is ESG? ESG is a commonly used acronym for environmental, social, and governance issues that collectively form the mainstays of a sustainable corporate strategy. ESG disclosure and reporting can demonstrate how a business enterprise contributes to and is connected to the wider social environment and can communicate the enterprise’s commitment to viable strategies designed to prepare for climate change. | |
What is ESG disclosure and reporting? ESG disclosure is a specific type of reporting made by an entity about its performance around ESG issues or against specific criteria. The nature and extent of ESG reporting required by entities - and requirements for external assurance on that reporting - is dependent on local regulations and currently varies by jurisdiction. In Hong Kong, the HK SAR Government published its roadmap for Sustainability Disclosure in December 2024 and whilst certain required disclosures currently only apply to Main Board listed entities, an increasing number of businesses are choosing to increase their reporting on ESG matters on a voluntary basis. | Why ESG assurance? Many business enterprises are committed to sustainability and wish to demonstrate this commitment to their key stakeholders – including their customers and suppliers, and their lending institutions and investors – by communicating reliable and credible information about their sustainability goals and activities and their level of preparedness for future climate change. Other business enterprises – who are just starting their ESG journeys and may be thinking of waiting until regulation requires them to obtain assurance on their ESG disclosures – may soon face challenges from those of its stakeholders already committed, who may only seek to partner with entities aligned with their own ESG strategies in future and/or who may require trustworthy information from the entities they do business with, in order to meet their own reporting obligations. An assurance report from an external third party provides an independent conclusion on the sustainability matters reported by an entity and thereby strengthens the credibility of the statements and data disclosed. |
What types of ESG assurance report can be given?
Limited assurance
Expresses a conclusion on whether, based on the procedures performed and evidence obtained, any matter(s) have come to attention that would give cause to believe that the sustainability information presented and disclosed is materially misstated.
Reasonable assurance
A higher level of assurance, providing an opinion on the outcome of the measurement or evaluation, including presentation and disclosure, of the entity’s published information on sustainability matters against the applicable criteria.
| The procedures the practitioner will perform will vary in nature and timing and, for example, will require to be less extensive in the case of providing a limited assurance report. A limited assurance report will increase confidence in the ESG data presented and disclosed, but not to the same extent as a report providing reasonable assurance. |
So, is it best to choose limited or reasonable assurance?
Changes in local regulations in Hong Kong in the years to come may mandate the level of assurance required for all business enterprises in the future, based on factors such as an entity’s size, geographic location or its business activities.
For now, even when obtaining assurance is voluntary, consider the needs of key stakeholders and the organisation’s current strategic goals when determining the level of assurance reporting required. Reasonable assurance can provide a high level of confidence in ESG data, which may be critical for entity’s seeking to outmatch their key competitors, meet key investor expectations or achieve performance measures in global sustainability indices. On the other hand, limited assurance still provides a recognised level of credibility for organisations new to reporting on ESG matters or where their ESG disclosures are relatively straightforward and non-complex.
How can we help?
Sustainability assurance at RSM Hong Kong
In sustainability assurance, the engagement leader must possess a combination of specialised skills, ethical understanding and the requisite experience to effectively manage the complexities of ESG topics. RSM Hong Kong has a dedicated ESG assurance team with the engagement leader possessing the relevant academic background (e.g. master of corporate governance) and necessary qualifications (e.g. CESGA, HKACG and ACG) to provide sustainability assurance services, with the support of external experts as needed to assess more complex areas of disclosure reporting (such as in the measurements made for greenhouse gas emissions, biodiversity or social governance practices).
