FRC expresses concern over UK sustainability assurance providers

There is a wide variety of sustainability assurance providers in the UK but there are concerns over the consistency in quality of the assurance, the FRC has reported. 

According to its latest market study into assurance of sustainability reporting, the FRC found that many companies reported difficulties in determining the suitability of sustainability assurance providers and assessing their likely quality, especially when appointing a new provider.

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.

The 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. 

The study found that some stakeholders believe that the UK sustainability assurance market could become dominated by the Big Four audit firms, which could limit choice and effective competition. 

Beyond this, there are concerns about the immaturity of the UK sustainability assurance market and that a lack of clarity on the UK’s regulatory position could hinder investment, planning and capacity development. 

The report also recognised stakeholders’ desire for the UK to establish a clear regulatory framework that promotes trust and transparency in assurance of sustainability related reporting. 

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.”