The Corporate Sustainability Reporting Directive (CSRD) is a European directive that requires companies to report on sustainability. The CSRD replaces the Non-Financial Reporting Directive (NFRD) and aims to provide investors, consumers, and other stakeholders with better insight into companies’ environmental, social, and governance (ESG) impacts. However, its implementation raises questions about the monopoly position of accountants in assurance engagements. Lizzy Bos, an external PhD candidate in Company Law and Financial Law at Erasmus School of Law, wrote an opinion piece on this topic for de Accountant. We spoke to her about the need for research into the future of the assurance market.
Independent assurance service providers require professional regulations. “Regulations are in place to ensure quality; the question is whether non-accountants can meet these standards while remaining profitable,” says Bos. The Ministry of Economic Affairs has already commissioned SEO to investigate the option for member states to open up the market. This is an important step towards a thorough assessment of potential consequences.
Research is necessary for informed decision-making
According to Bos, it is crucial to objectively examine whether the assurance market could also be opened to service providers other than accountants. “The discussion in the Netherlands remains stuck in suggestive arguments and future expectations without solid justification,” Bos states. “Rather than resigning ourselves to uncertainty, lawmakers should initiate research to analyse the impact of an open market.” Bos emphasises that, at present, it is unclear which choice would be best, as arguments often lack concrete evidence. “Right now, we do not know what is better, so we need to search for answers.”
The new European regulations require companies to produce a sustainability report and obtain assurance on it. While accountants are currently the designated professionals for assurance in financial statement audits, the CSRD expands this responsibility to sustainability reporting. However, the European legislator has given member states the option to allow other service providers to carry out these assurance engagements. In the Netherlands, there is an ongoing debate about whether to open up the assurance market. Bos advocates for thorough research to determine whether this choice would be beneficial.
Several European countries already allow competition
In countries such as France and Romania, the assurance market for sustainability reporting has already been opened to parties beyond accountants. Bos sees both advantages and disadvantages in this approach. The primary benefit, in her view, is the potential for specialisation within assurance professionals, which could improve the quality of assurance on sustainability reports. “If sustainability reporting truly gains the same significance as financial statements, it makes sense for a profession to specialise in assurance over these reports, much like how doctors specialise in different fields.”
On the other hand, opening up the market is complex and costly. Furthermore, it is uncertain whether alternative assurance providers will be able to enter the market successfully. “Opening up the assurance market will only be successful if companies actually appoint other assurance providers. However, due to the high costs of ‘getting to know the company’, this is unlikely to happen quickly. Moreover, the assurance market will only be successfully opened if the quality of assurance provided by other service providers matches that of accountants, and if users place the same level of trust in their assurance statements,” Bos explains.
Collaboration and quality control
One of the concerns about allowing other service providers is the potential loss of cohesion between financial and sustainability reporting. Bos understands this concern but clarifies that it is not the accountant’s responsibility to ensure this cohesion, but rather that of the reporting company itself. “It is up to the company to clarify how the cohesion between the sustainability report and the financial statements is maintained.”
Bos sees a possible solution in a model where both accountants and other assurance providers conduct a comparability assessment and align their findings. This could contribute to a more integrated approach to sustainability and financial reporting. “An accountant can remain an overarching profession, similar to a doctor, with specialisations within different information domains,” she says. In this way, the accountancy profession could evolve into a specialisation model, where various experts collaborate but do not necessarily work on the same reports simultaneously.
Implementation of the CSRD in the Netherlands
The implementation of the CSRD in the Netherlands has been delayed, creating uncertainty for companies and accountants. The Wet implementatie richtlijn duurzaamheidsrapportering (Implementation Act for Sustainability Reporting Directive) is still under review by the House of Representatives. Bos stresses that it is undesirable to wait entirely for the revision of legislation through the European Omnibus process. “Companies and assurance providers need clarity to prepare properly.”
The role of accountants in the future
According to Bos, the role of accountants will evolve, particularly in the context of sustainability. While accountants may take on a coordinating role in the future, they may no longer be the sole responsible party for assurance on sustainability reports. “We already see assurance teams consisting of various experts, with a registered accountant signing the statement,” says Bos. Ultimately, users of these reports would benefit from a single, integrated assurance statement that oversees all reported information, ensuring an effective transition towards sustainability.
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Click here to read Bos' entire contribution in Accountant, a publication of the Royal Netherlands Institute of Chartered Accountants.
