Reducing the credibility gap in sustainability reporting : an auditors view

Reducing the Credibility Gap in

Sustainability Reporting:

An Auditors View

Fleur Birnie

10059652

22

of June, 2015

Word Count: 23.444

Amsterdam Business School

Faculty of Economics and Business, University of Amsterdam

Master Accountancy and Control

Track Accountancy and track Control

Statement of Originality

This document is written by student Fleur Birnie, who declares to take full responsibility for

the contents of this document. I declare that the text and the work presented in this document

is original and that no sources other than those mentioned in the text and its references have

been used in creating it. The Faculty of Economics and Business is responsible solely for the

supervision of completion of the work, not for the contents.

Abstract

This research investigates whether the assurance process of sustainability reporting by a Big

Four accounting firm decreases the credibility gap between published sustainability reports

and the level of stakeholders’ trust. To conduct this research a qualitative method using

interviews is chosen. The sample consist of nine interviewees, both accountants and advisors,

from XGT and one interviewee (accountant) from YHS who is used as a control variable. The

results indicate that a credibility gap definitely exists and solutions to decrease this gap are

provided. Firstly, reports should be written brief and concise and should not have the

appearance of an advertisement folder. Secondly, assurance by an external party increases

stakeholders’ trust, however this does not matter whether reasonable or limited assurance is

provided. Thirdly, there should be one uniform standard used by accountants for the assurance

process of sustainability reports. Fourthly, stakeholder dialogues help in two different ways to

decrease this gap; it creates interaction between organizations and her stakeholders’ which

gives these stakeholders the feeling they have been heard. Also stakeholder dialogues form

the basis of an organizations materiality matrix which in turn leads to more focused and

concise sustainability reports as organizations can derive the most material issues they need to

report on from the materiality matrix. Collaboration between accountants and non-accountants

increases the audit quality, which in turn results in more stakeholders’ trust and thus decreases

a credibility gap. Finally, one additional solution came up, which is the so-called

Transparency Benchmark. However it is not clear yet whether this leads to a decrease of the

credibility gap.

Acknowledgement

First I would to thank XGT for doing my internship at their organization. They provided me

with a nice environment to write my thesis, a workplace, equipment, access to the

interviewees, knowledge and all other things I needed to undertake this research as I wanted

to. Without this internship this research would have been conducted completely different.

Next I would like to thank all of the interviewees for their help, time, patience, knowledge and

even the literature they send me without me even asking. The interviewees helped me

conducting this research in the way I had in mind, and introduced me to a another world of

assurance (which definitely attracted my attention). Also I would like to give a big thank you

to Jan van de Pouw who was so kind to read my whole thesis and adjusted all grammar

mistakes where needed. Last but not least I want to thank my supervisor Ron van Loon, who

helped me during this research and answered all my question when asked.

Table of contents

Statement of Originality ………. 1

Abstract ……….. 2

Acknowledgement ………..….…………..….…….…………... 3

Table of Contents ……….…….. 4

1. Introduction ……… 6

1.1

Background ………... 6

1.2

Previous Research ……… 7

1.3

Motivation and Contribution ……...……… 8

1.4

Research Question ……… 9

1.5

Structure ……….. 9

2. Operationalizing the Research Question...………. 10

3. Literature Review ……….……. 13

3.1

Sustainability Reporting ……….……... 13

3.1.1

Defining Sustainability Reporting ……… 13

3.1.2

Influences of Sustainability Reporting ……….……… 16

3.2

Assurance in Sustainability Reporting ………. 17

3.2.1

General Concepts of Assurance ……… 17

3.2.2

Providing External Assurance on Sustainability Reports ……… 18

3.3

Credibility Gap in Sustainability Reporting ………. 20

3.3.1

Defining a Credibility Gap ………... 20

3.4

Factors Making a Credibility Gap Decrease ………...… 21

3.4.1

Accounting Standards in Sustainability Reporting …………..……… 21

3.4.1.1 GRI, G4 ………. 22

3.4.1.2 A1000AS Accounting Standard ………. 22

3.4.1.3 ISAE 3000 ……….……. 24

3.4.2

Stakeholders ………...….. 24

3.4.2.1 Stakeholder Theory and Stakeholder Engagement ……… 24

3.4.2.2 Stakeholder Dialogue ……….… 25

3.4.3

Collaboration Between Accountants and Non-Accountants ……..…. 26

4. Propositions ………... 29

5.1

Types of Research ..………... 31

5.2

Research Method ………..… 32

5.3

Research Design ………...… 33

5.3.1

Research Method Used – Interviews ……… 33

5.3.2

Sample – Interviewees ………..… 35

6. Results ……… 37

6.1

Sustainability Reporting ………...… 37

6.2

Assurance ………. 45

6.3

Stakeholders’ Trust ……….. 54

6.4

Credibility Gap ……….… 56

6.4.1

Assurance ……….…… 59

6.4.2

Accounting Standards ……….. 62

6.4.3

Stakeholder Dialogue ………...… 64

6.4.4

Collaboration Between Accountants and Non-Accountants ………... 66

6.5

Transparency Benchmark ……….... 69

7. Discussion ……….…. 71

7.1

Result Analysis ………..…….. 71

7.2

Limitations ………... 73

7.3

Future Research ……… 73

8. Conclusion ………. 75

References ………. 79

Appendix ……….…….………… Second Document

Appendix A – Interview Guide

Appendix B – Coding Scheme

Appendix C – Sustainability Report Shell 2014

Appendix D – Sustainability Report Maersk 2014

1

Introduction

1.1 Background

Besides ‘regular’ financial statements, many organizations are publishing Corporate Social

Responsibility (CSR) Reports, or so called Sustainability Reports as well these days. A

sustainability report is an organizational report on economic, social and environmental

performance. It also presents the values of the organization and demonstrates the link between

its intended strategy and its commitment to a sustainable global economy (Daub, 2007).

Sustainability reports are a way to communicate the organization’s sustainability performance

towards their stakeholders. It comprises the most critical and/or material impact of the

organization’s choices, whether these are positive or negative (KPMG, 2013). These

sustainability reports are, however, not mandatory in every country. Worldwide, 71% of 4.100

companies surveyed in 2013 are issuing a Sustainability Report, and 51% of these companies

are including this Sustainability information in their annual financial reports (KPMG, 2013).

As for financial statements, there are multiple standards regarding sustainability

assurance as well. Three of these standards are most commonly used. Firstly, there is the

Global Reporting Initiative (GRI), which promotes the use of the Sustainability Reporting

Framework and recommends the use of external assurance. The latest development by GRI is

the GRI Reporting Guidelines (G4), developed in 2013 (GRI, 2014). These GRI Reporting

Guidelines (G4) help organizations identifying and managing risks and opportunities they are

exposed to (GRI, 2014). In the same year, 78% of companies worldwide which issued a

sustainability report were referring to these GRI Reporting Guidelines (KPMG, 2013).

Secondly, there is AcountAbility (AA), a global non-profit network which was the first

developing a standard for assuring credibility and quality of sustainable reporting (and

performance). In 2008, the latest revision of the AccountAbility Principles was released.

These principles, inclusivity, materiality and responsiveness, are used to guide sustainability

assurance in accordance with the AA1000AS AccountAbility Assurance Standard 2008 and

the AA1000SES AccountAbility Stakeholder Engagement 2005 (AccountAbility PS, 2008).

The AA1000 Assurance Standards are used both by certified accountants as well as

non-accountants (Junior, Best and Cotter, 2013; Manetti and Becatti ,2009). Thirdly, there is the

International Standard for Assurance Engagements other than Audits or Reviews of Historical

Financial Information (ISAE 3000). IASE 3000 is developed by the International Auditing

and Assurance Standards Board (IAASB) and is, in contrast with AA1000 Assurance

Standard, only used by certified accountants (GRI, 2014; Junior, Best and Cotter, 2013;

Manetti and Becatti, 2009).

The aim of applying these standards and guidelines is gaining sustainability assurance;

to provide greater assurance towards stakeholders regarding the credibility and completeness

of sustainability reports. An assurance statement enhances the trust and accountability of

stakeholders as it is an externally prepared statement with an independent opinion. It has been

designed to increase the confidence of the report’s users in the reliability of the reported

information (EY-2, 2013; GRI, 2013).

1.2 Previous Research

In 2000, Wallage wrote about assurance on sustainability reporting. However, there were no

or only newly developed standards in their infancy for sustainability reporting. As

sustainability reporting was new phenomenon, the verification process of the underlying

reports was at a very early stage of development also. Wallage (2000) stated there would

(probably) be experts from other fields like sociologists, ethicist and physicist entering the

market as major competitors to the traditional, financial, auditors to provide assurance on

these sustainability reports. At the same time Wallage (2000) claimed that financial auditors

had some relative advantages over these consultants, but still multidisciplinary cooperation

would be required. However, the advantages of the financial auditors would result in a more

focused view on verification during the assurance process compared to the consultants’

advantages.

Three years later, Dando and Swift (2003) were stating that growing levels of disclosure

of social, ethical and environmental performance would not be accompanied by greater levels

of public trust. Despite the fact we are three years further in developing standards for

sustainability reporting (AccountAbility AS, 2008). However, Dando and Swift (2003) were

suggesting that third party independent assurance could possibly reduce this credibility gap.

They tought that t

he new AA1000S Assurance Standard, developed by the Institute of Social

and Ethical AccountAbility, would provide an approach and a tool for addressing this gap.

In response to Dando and Swift (2003), Hodge (2009) concluded that more and more

organizations that publish sustainability reports, were accompanying these reports with

external assurance statements. Hodge (2009) investigated whether these assurance statements

had an impact on the users of sustainability reports. And if so, whether there would be a

difference in impact with the different types of assurance providers; between external

assurance statements issued by accountants or external assurance statements issued by

specialist consultants (non-accountants). For an example of a non-accountant expert (limited)

assurance statement, see Appendix C, pp. 54 – 55. Hodge (2009) investigated this from the

stakeholders’ perspective.

Last there are O’Dwyer and Owen (2005) who have investigated the distinct approaches

in providing assurance among accountants and non-accountant experts. Also O’Dwyer (2011)

researches the differences in practice between accountants and non-accountants when

constructing assurance engagement for sustainability reports. He investigated real life

situations where accountants work together with non-accountants to see whether there were

implications when both ‘groups’ were working together, and if so, what these implications

were. O’Dwyer (2011) also looked into available standards like AA1000AS and ISAE 3000,

to see whether these are useful in the assurance process of sustainability reports.

1.3 Motivation and Contribution

As Dando and Swift (2003) argued that the AA1000S Assurance Standard, developed by the

Institute of Social and Ethical AccountAbility, could offer an approach to reduce the

credibility gap. This credibility gap remains to exist between the level of sustainability

disclosures that organizations provide/ publish next to their financial information, and the

level of stakeholders’ trust towards these disclosures. This credibility gap is the result of

subjected stakeholders’ skepticism about what an organization is claiming in their

sustainability reports and the alleged reality of these situations (Dando and Swift, 2003). This

research investigates whether the AA1000S Assurance Standard can indeed reduce this

credibility gap, as this standard is now in use, with the latest revision send on in 2008.

Combining the above-mentioned with Wallage’s (2000) alleged view that financial

auditors would have advantages over social and environmental experts (which would result in

more verification of sustainability reports), this research is about the auditor’s perspective on

this. Do auditors really have an advantage over experts and consultants from other fields? Or

is it actually a form of synergy and is the collaboration between accountants and

non-accountants more valuable instead of working apart from each other? When non-accountants

become aware of the very existence of a credibility gap, do they hire more professionals,

higher quality experts or consultants to (indeed) try to reduce this credibility gap between the

level of sustainability disclosure and stakeholders’ trust?

As Hodge (2009) carried a stakeholder’s perspective, it is interesting to investigate what

a Big Four accounting firms’ and auditor’s perspective is on above-mentioned. This has not

been investigated before and will contribute to previous research. Do auditors think they add

credibility to sustainability reports alone, or do they need other experts from the sustainability

field? Can auditors construct new assurance practices independently, or again, do they need

other non-accounting experts? How can auditors add value during and maybe even after, the

audit engagement process of sustainability reports? Are the three new principles used in the

AA1000S Assurance Standard, inclusivity, materiality and responsiveness, helpful or is there

more? This research has been built upon the four papers of Wallage (2000), Dando and Swift

(2003), Hodge (2009) and O’Dwyer (2011) by further investigating their prospected views.

This research also adds a new perspective, that of one of a Big Four accounting firm.

After an audit engagement the auditor is ‘out of the picture’. This means the auditor is

not engaged in the process where the credibility gap actually exists; between the organization

which issued the sustainability report and its stakeholders. So also from a societal point of

view it is interesting to investigate how an auditor tries to contribute in reducing this gap. Do

they add credibility only during the audit engagement when the auditor can make a

contribution or is there more and can they also make an effort outside the engagement process

which have an influence on this credibility gap?

1.4 Research question

This research builds further upon previous discussed researches and investigates whether Big

Four accounting firms can play a part in reducing the credibility gap in sustainability

reporting. Therefor the research question is:

Does the assurance process of sustainability reporting by a Big Four accounting firm

decreases the credibility gap between published sustainability reports and the level of

stakeholders' trust?

1.5 Structure

The remaining of this paper is constructed as follows: paragraph 2 explains and

operationalizes the research question, followed by the literature review in paragraph 3.

Propositions regarding the research question will be elaborated on in paragraph 4. Paragraph 5

will explain the research methodology and results will be displayed in paragraph 6. In

paragraph 7 will be the discussion and paragraph 8 ends with the conclusion.

2

Operationalizing the Research Question

This paragraph explains which theory has been used to explain and operationalize the research

question. As the research questions consists of two parts, this paragraph provides an insight to

gain understanding of both concepts.

As there is no theory (yet) that can explain the research question of this paper, the

research question must be broken down into two phenomena/ concepts. These two phenomena

can be both operationalized with explanations/ theories which already exist. To do this, there

have been raised several sub questions. Below is a validity framework provided to make this

more clear.

The red box, the ‘theory level’, represents the research question; the influence of assurance on

sustainability reports, on the credibility gap (arrow 1). As mentioned before, there is no theory

(yet) which explains this relationship. So this theory level is broken down in two parts, which

are shown in the green box, the ‘measurement level’.

To understand what kind of influence assurance has on sustainability reports, there must

be an explanation about what assurance on sustainability reports means first (arrow 2). This

can be explained by answering the following sub-questions:

1. What does the concept of sustainability reporting mean?

2. What are the reasons for a n organization to publish sustainability reports?

3. What are (possible) influences when issuing sustainability reporting?

4. What does the concept of assurance mean?

5. Why, and how is assurance provided on sustainability reports?

When there is understanding about the concept of assurance on sustainability reports,

the next step to understand the relationship on the ‘theory level’, is to gain an understanding

of the concept ‘credibility gap’ (arrow 3). To understand this concept, the following

sub-questions will have to be answered:

6. What does the concept of a credibility gap mean?

7. What are the reasons for a credibility gap to occur?

8. What are influences that make a credibility gap decrease?

When both concepts are operationalized, the search for an explanation can commence

which elucidates the influence of the first concept (assurance on sustainability reports) on the

second concept (credibility gap) (arrow 4). This can be done with the explanation of some

external factors (arrow 5). The external factors which will be covered in this research are:

9. Assurance Standards;

Do the frameworks and/ or standards mentioned below influences a credibility gap? If

so, in what way does this occur?

-

AA1000AS Accounting Standard

-

GRI, G4

-

ISAE 3000

10. Stakeholders;

What are the influences of applying stakeholder theory and implementing stakeholder

dialogue on a credibility gap?

-

Stakeholder theory/ Stakeholder Engagement

-

Stakeholder dialogue

11. Collaboration between accountants and non-accountants (including possible training);

How does collaboration between accountants and non-accountants influence a

credibility gap? Can additional (external) training be seen as a helping factor here?

To answer the research question, there must be an understanding of the concepts used in this

research question. By explaining what sustainability reporting is (why and how it is used),

next to explaining what assurance means (and how assurance is provided on sustainability

reports), the first part of the research question will become more clear. Furthermore,

explaining what a credibility gap is and how this gap can be decreased gives the explanation

of the second part of the research question. All these ‘measurement level’ (green box)

concepts will be explained in the next paragraph, as well as the external factors.

This paragraph elaborated on how the research question can be operationalized and explained.

This is necessary as there is no existing theory yet which can explain the phenomenon of a

credibility gap. The research question can be divided in two parts at the theory level; namely

‘assurance on sustainability reports’ and ‘credibility gap’. These two parts are operationalized

at the measurement level with theories/ explanations which already exist. Some external

factors are also brought up which can help explaining the research question.

3

Literature Review

This paragraph explains all concepts of the measurement level mentioned in paragraph

2 Operationalizing the Research Question. The concepts addressed are: sustainability

reporting, assurance, credibility gap and external factors (assurance standards, stakeholders

and collaboration between accountants and non-accountants).

3.1 Sustainability Reporting

This paragraph explains what sustainability reporting means and why sustainability reporting

is being used. It also designates the possible influences of sustainability reporting.

3.1.1 Defining and explaining sustainability reporting

These days, more and more organizations starting to draw attention on environmental and

social issues in their annual reports (Daub, 2007; O’Dwyer, 2011)). In 2012, governments

and/ or stock exchanges of 33 countries mandated or impelled some level of sustainability

reporting (EY-2, 2013). In 2013, 93% of the world’s biggest 250 companies (G250) issued

sustainability reports (GRI, 2014).

Financial statements are not the only reports anymore that are published to inform

shareholders and stakeholders about the performance(s) of an organization (Daub, 2007;

O’Dwyer, 2011)). In the 1990s, environmental reporting was seen both for the benefit of the

public as well as for the companies’ own benefit (Hess, 2001). These days, daily public

discourse about topics like climate change, pollution, economic crises and human rights raises

questions about the role of corporations within our society. This asks for greater transparency,

sustainability and responsibility within organizations and their issued reports (EY-2, 2013). It

requires companies to gather data about circumstances and elements they have not measured

Figure 1

Sustainability Reports of

G250 organizations:

before, but which are important for effective sustainable business operations (EY-1, 2013;

EY-2, 2013). As sustainability reports must contain the correct information for the appropriate

(group of) people, this data will have to be relevant and strategic too (next to transparent and

reliable) (EY-1, 2013).

Reporting on sustainability issues is not (yet) mandatory in every country. Worldwide,

71% of 4.100 companies surveyed in 2013 are issuing a Sustainability Report, and 51% of

these companies are including this Sustainability information in their annual financial reports

(KPMG, 2013). European Commissioner Michel Barnier proposed a new regulation on

non-financial reporting in April 2013. This new regulation will affect 18.000 (large) companies in

Europe when adopted. These companies are then required to report on ESG (Environmental,

Social and (corporate) Governance), anti-corruption and human rights. Companies affected

are the ones with more than 500 employees and either a net turnover of over €40 million or a

balance sheet that exceeds €20 million. Listed companies are also required to report on

diversity at board level (gender, age and race) (EY-1, 2013).

However, there is not just one definition for sustainability reporting. Various

organizations and authorities use different explanations. Daub (2007) and Hodge (2009) state

that sustainability reports must tell the public how the organization is improving its

economics, environmental and social effectiveness and efficiency in that reporting period.

This will have to be done with both qualitative and quantitative information, including

positive as well as negative contributions (Junior, Best and Cotter, 2013) . The World

Business Council for Sustainability Development (WBCSD, 2002) adds to this by saying

sustainability reports are compiled to provide both internal and external stakeholders with a

clear picture of a companies’ corporate position and activities in economic, environmental and

social dimensions (MacLean and Rebermak, 2007). These three dimensions are called the

‘Triple Bottom Line’. Also known as the three P’s: people, planet, profit (Marrewijk, 2003;

Searcy, 2013). For an example, see Appendix C, pp. 47 – 53. The information in sustainability

reports can vary from a few paragraphs within the firms’ annual reports to extensive separate

(sustainability) reports (Hodge, 2009).

Not all companies who engage in sustainability activities issue a report about these

activities (EY-2, 2013). There are multiple incentives for companies when deciding to issue a

sustainability report or not. These incentives vary from providing transparency to

stakeholders, gaining competitive advantage, increasing brand reputation or because of

Figure 2

Reason to issue a sustainability

report (in 2013), by organization type:

(EY-2, 2013)

stakeholder pressure to increase the quality and quantity of financial and non-financial

information (EY-2, 2013; EY, 2014).

The fact whether sustainability reporting is becoming a factor to reckon with or not and

becoming mainstream is not much of a doubt anymore. Co-founder of the GRI, Allen White

stated:

‘’ Sustainability reporting has gone from the extraordinary, to the ordinary, to the expected”

The next paragraph will elaborate more on previously mentioned motives. However, besides

motives there are challenges to overcome before issuing sustainability reports. Examples of

these challenges are the availability of the correct data, accuracy or completeness of the data

or limited resources. Even when these challenges are met, there are still reasons for

companies not to issue a sustainability report. Some of these reasons are the fact that no one is

asking for this kind of information, or companies are tracking this information internally but

decide not to publish it externally (EY-2, 2013).

Figure 3

Reason why organizations do not

issue a sustainability report (in

2013), by organization type:

3.1.2 Influences of sustainability reporting

Where financial reports rely on financial numbers, sustainability reports rely on non-financial

data. This data will have to be reliable to ensure transparency towards stakeholders, but also

have to simplify comparison between reports at the same time (EY-1, 2013).

There are multiple incentives why organizations issue sustainability reports. A first

reason is to increase transparency towards stakeholders and shareholders. As a response, this

can lead to an increased financial performance when the organization is communicating their

good deeds. More reliable and valuable disclosures will lead to extended balance sheets, as it

will lead to increased share prices, higher cash flows and better firm liquidity (EY-1, 2013;

EY-2, 2013). A second reason is the easier way to gain access to capital. As organizations are

reporting on sustainability investments and showing great transparency at the same time, these

organizations may be able to convince investors they are competitive, want to differentiate

themselves and are less risky to invest in compared to other companies in that same industry

(EY-2, 2013; Hess, 2001). As there is less information asymmetry within these organizations,

investors seemingly prefer to invest in these transparent companies (EY-2, 2013). Coherent

with transparency is the fact that some companies are afraid to disclose negative information

about themselves. However, if this negative information does exist, it is a matter of time until

this information is discovered by the public and will be presented anyway. To make sure the

public will not disclose this information from a biased perspective, companies must

proactively disclose this information themselves (Daub, 2007; Hess, 2001).

European commissioner Michel Barnier (EY-1, 2013) stated:

‘’Transparency is part of the solution, not the problem. That’s why non-financial reporting is

such an important issue… it serves the interest of investors, shareholders, employees and

society at large’’

As it takes time to gather all information needed to compile sustainability reports,

companies gain more insight in potential changes and opportunities in their business, which is

another reason to engage in sustainability reporting (EY-2, 2013; KPMG, 2013). With these

insights, organizations may be able to predict possible risks they could be facing. When

estimating these risks, management can anticipate on these risks by preparing and providing

solutions, for example concerning issues regarding process improvement and future material

scarcity (Hess, 2001; KPMG, 2013). A fourth reason is that sustainability reports are a way to

build, improve, or repair a (better) reputation. At the same time, sustainability reports try to

send a message of trustworthiness to the public. When stakeholders have an insight in the

organization’s practices, this can increase consumers trust, which results in organizations

maintaining their license to operate. Organizations do this by seeking legitimacy for their

actions and try to influence the decision-making process of different stakeholders at the same

time. (Daub, 2007; Junior, Best and Cotter, 2013). Not only external stakeholders are

(positively) influenced by sustainability reporting, also internal stakeholders are effected; for

instance with increasing levels of employees’ happiness and productivity (EY-2, 2013).

3.2 Assurance in sustainability reporting

This paragraph explains the key concept of assurance in general. It also addresses the

questions as to why and how external assurance is to be provided on sustainability reports.

3.2.1

General concept of assurance

The definition of assurance consist of multiple elements. These elements are assurance

engagement, assurance statement, assurance provider and the reporting organization. The

reporting organization is the organization which issues financial and/ or non-financial reports

and/ or disclosures which have to be assured in an assurance engagement, undertaken by an

assurance provider. The reporting organization is responsible for the preparation and

publication of these reports and/ or disclosures, where the assurance provider is responsible

for the assurance statement issued when the assurance engagement has been completed

(AcountAbility AS, 2008). For an example of a (limited) assurance statement on a

sustainability report, see Appendix D, p. 40.

AccountAbility AS (2008) describes assurance as:

‘’The methods and processes employed by an assurance provider to evaluate an

organization’s public disclosures about its performance as well as underlying systems, data

and processes against suitable criteria and standards in order to increase the credibility of

public disclosure for the intended audience. Assurance includes the communication of the

results of the assurance process in an assurance statement ‘’

GRI (2013) adds to this:

‘’The outcome of an independent verification process [.…] usually based on specific

assurance standards or frameworks’’

‘’ An assurance engagement may involve assessing not only the accuracy and reliability of

what is disclosed, but also the processes for deciding what issues and data are disclosed’’

The intent of an assurance engagement process is always to increase the quality of

information within the reports and/ or disclosures. Higher quality of information is seen as

more trustworthy. Because of higher trustworthiness the reports and/ or disclosures are more

useful for both the organization as well as for the user of this information (GRI, 2013). Also

the organization itself will gain more insight about the impact of their decisions and policies.

The users of this information, stakeholders, must both be able to rely on the information

provided by the organization, as well as be able to base their decisions on this provided

information. This can be for instance about potential investments (Adams and Evans, 2004;

Hess, 2001).

The number of assurance statements in sustainability reports is increasing in the last few

years (EY-2, 2013). With this higher demand for assurance services within sustainability

reporting, the demand for more comparability and alignment of these reports will inherently

increase too (EY-2, 2013)

3.2.2

Providing external assurance on sustainability reports

As the provision and publication of sustainability reports is increasing, so is the public

demand for the accuracy of these reports ((EY-2, 2013; Hodge, 2009). The data used in these

sustainability reports is a tool for assessing the organizations health and future prospects

(GRI, 2013). However, this data addresses different topics, both quantitative and qualitative,

which at the same time will differ per sector and organization (GRI, 2013). Because all these

reports vary within the different industries, these reports are lacking completeness (O’Dwyer,

2005). As a reaction, stakeholders are questioning the integrity of this published information

and are demanding for more transparency (Junior, Best and Cotter, 2013; KPMG, 2013).

As some stakeholders might think sustainability reporting is being used by

organizations as a marketing tool, external assurance can provide a solution to counter these

thoughts (EY, 2014; Hess, 2001). Assurance providers can ensure that stakeholders’ views are

truthfully represented in the reports and all procedures and policies have been complied with

as demanded (Hess, 2001). Organizations, together with stakeholders, will have to decide to

what extent they want to benefit from the external assurance provider’s experience and

expertise and also what topics should be covered in the assurance reports (EY, 2014). This

will both enhance stakeholders’ confidence about the fact (their) information is used correctly

(Hess, 2001), as well as stakeholders’ confidence about the organization’s risk mitigating

towards exposed sustainability issues (EY, 2014). Next to ensuring accuracy, reliable

information and comparable data, external assurance will have to assess the way organizations

align their strategies with (key) stakeholders’ expectations and also how these organizations

are performing in the ‘learning and innovation area’ (O’Dwyer, 2011). The assurance

provider also assesses internal controls, systems and processes, reports on any discovered

weaknesses and about any implications which can have a long-term effect on the business

operations (EY, 2014).Organizations are promoting external assurance of sustainability

reports, as it both improves the credibility as well as increases the quality of these reports

(EY-2014; Junior, Best and Cotter, 2013). In 2013, 59% of the 250 world’s largest

organizations (G250) were investing in external assurance of their sustainability reports

(KPMG, 2013).

A (cumulative) stakeholder’s quote from the EY (2014) report:

“reporting organizations and their stakeholders increasingly accept that robust, independent

external assurance is a key way of increasing the credibility and effectiveness of their reporting,

and ultimately their performance”

Figure 4

To the question If assurance

adds credibility to a

sustainability report:

Hodge (2009) states that assurance of sustainability reports is challenged by two key

factors. The first is the fact there are no generally accepted criteria on how to report on

sustainability issues. As the report is prepared for a broad range of stakeholders with each

having different interests, there is not one single report which can be used as an example how

it should be done (Adams and Evans, 2004). This results in the fact that the subject matter of

every assurance engagement is different. When the nature of the assurance engagement is

clear, this will lead to more useful assurance reports. Wallage (2000) states that without any

standards with criteria how to report on sustainability issues, assurance providers will not be

able to evaluate these issues, as they cannot test them against anything. Second is the lack of

specific guidance relating to assurance practices of sustainability reports. As a result,

assurance statements vary from each other in scope and (possible) applied standards. These

key factors contribute in lower quality assurance reports and make them less reliable at the

same time (Hodge, 2001).

3.3 Credibility gap in sustainability reporting

This paragraph defines what a credibility gap means and how this gap occurs. The influences

on a credibility gap will also be explained. The influences addressed are: accounting standards

(AA1000S, GRI G4, ISAE 3000), stakeholder theory, stakeholder engagement and the

collaborations between accountants and non-accountants.

3.3.1

Defining and explaining a credibility gap

Credibility is a prerequisite for effective sustainability reporting. Through independent

assurance and the use of accepted standards, this credibility can be enhanced (AccountAbility

AS, 2008). Both by stakeholders as well as by the reporting organizations, external assurance

is seen as a way to increase the credibility (and effectiveness) of the issued reports

(AccountAbility AS, 2008; Adams and Evans, 2004)). When stakeholders’ trust in the

organization grows, the level of assurance required by these stakeholders decreases (Adams

and Evans, 2004).

Dando and Swift (2003) state that higher levels of disclosures in sustainability reporting

will not be accompanied by levels of greater public trust in these reports and/ or disclosures.

Stakeholders still question if organizations take sustainability issues seriously. With this low

level of trust, stakeholders’ demands for information are not served and the information given

by the organizations will not be seen as credible (enough) (Dando and Swift, 2003; Wong and

Millington, 2014)). Adams (2004) added to this by saying that this doubt about the reported

performance compared to the real performance in sustainability reports would never be

tolerated in financial reports. However, as reports (will have to) become more transparent, as

demanded by stakeholders, this will result in sustainability reports becoming more extensive.

From a reader’s perspectives, this makes the load of information in these reports less

manageable, which again decreases the credibility of the information provided (MacLean and

Rebermak, 2007).

Despite the fact there is a parallel between financial reporting and sustainability

reporting (non-financial reporting); financial reports describe what the organization is doing

for their shareholders, where sustainability reports describe what the organization is doing for

(all of) their stakeholders. Also, financial reports explain what strategy has been adopted to

achieve certain results in the future, while sustainability reports highlight the organization’s

objectives for the future and the way to realize these objectives. However, there is (still) a

difference in trust and credibility between the users of both reports concerning the information

provided (MacLean and Rebermak, 2007).

With the doubt of financial analysts and stakeholders concerning relevance, reliability

and comparability, it can be said there is a credibility gap between the organizations issuing

sustainability reports and the users of these reports (Manetti and Becatti, 2009).

3.4 What makes a credibility gap decrease?

Within assurance there are multiple ways to decrease this credibility gap. Specific guidelines

for the reporting organizations how to construct a sustainability report and professional

standards for the assurance provider which specify on how to engage this assurance process,

are ways to do this. Stakeholder dialogue and collaboration between accountants and

non-accountants are other possibilities. All of these forms will be discussed in the next sections.

3.4.1 Accounting Standards

As assurance of sustainability reports is relatively new, frameworks and standards have been

developed for these assurance services in the last decades to create more robust and

comparable reporting (Dando and Swift, 2003). However, these frameworks and standards

vary in approach and are not common practice (yet) in every country and/ or industry (GRI,

2013). O’Dwyer (2011) (even) states that developed standards so far are not suitable because

sustainability issues change over time, and thus these standards are not applicable for every

unique organization.

3.4.1.1 GRI, G4

The GRI Framework is developed by the Global Reporting Initiative, a not-for-profit

network-based organization (GRI, 2013). GRI’s mission is to make sustainability reporting

standard practice, just like financial reports (GRI, 2013). GRI promotes sustainability

reporting as a way organizations can contribute to a sustainable global economy by reporting

on their economic, environmental, social and governance performances (GRI, 2013). For an

example, see Appendix D, pp. 18 – 36. The GRI is an independent institution whose aim it is

to develop globally applicable free guidelines for sustainability reporting, which are

voluntarily in use (GRI, 2013; O’Dwyer and Owen, 2005). The GRI Framework consists of

guidelines and documents to assist reporting organizations when preparing sustainability

reports and/ or disclosures (EY-2, 2013). 78% Percent of organizations worldwide who issue

sustainability reports are using the GRI Guidelines (KPMG, 2013).

The latest revision of the GRI Guidelines was in 2013: GRI Reporting Guidelines G4

(GRI, 2013). Users of the GRI Guidelines are recommended to submit their reports and/ or

disclosures also for external assurance, next to internal assurance. However, as external

assurance is not mandatory for sustainability reporting, organizations can (still) comply with

the GRI Guidelines without external assurance (EY-2, 2013).

3.4.1.2 AA1000AS Accounting Standard

The AA1000AS (2008) Accounting Standard is developed by AccountAbility, a global

non-profit network to promote accountability innovations to advance sustainable development

(AccountAbility AS, 2008). The AA1000AS (2008) is the second edition of AccountAbility’s

assurance standards and is an internationally accepted and freely available standard.

AccountAbility states:

‘’ AA1000AS (2008) assurance provides a platform to align the non-financial aspects of

sustainability with financial reporting and assurance’’

‘’ AA1000AS (2008) assurance provides a comprehensive way of holding an organization to

account for its management, performance and reporting on sustainability issues by evaluating

the adherence of an organization to the AA1000 AccountAbility Principles and the quality of

the disclosed information on sustainability performance’’

The AA1000AS (2008) has a twofold function: firstly, it evaluates the nature of the subjected

sustainability report and also to what extent the report is associated with the AA1000AS

AccountAbility Principles. Secondly, it evaluates the quality of the (publicly available)

disclosures on sustainability issues and performances (AccountAbility AS, 2008).

The AA1000AS (2008) is primarily intended for sustainability assurance providers.

However, also reporting organizations searching for assurance in according with this

standards may find this useful (AccountAbility AS, 2008). The AA1000AS (2008) is used

both by certified accountants as well as non-accountants. Its focus is on the assurance process

where the reporting organization already predetermined the scope of the assurance

engagement (Hodge, 2009; Junior, Best and Cotter, 2013).

In 2008, the latest version of the AccountAbility Principles (AA1000APS) was released.

These principles are used to guide sustainability assurance in accordance with the AA1000AS

(2008) and the AA1000SES AccountAbility Stakeholder Engagement 2005. The principles

used in the AA1000AS (2008) are inclusivity, materiality and responsiveness (AccountAbility

PS, 2008). As these are principles and not prescriptive rules, organizations have the freedom

to focus on the matters they consider material. Also these principles provide a framework for

organizations to identify and act on opportunities as well as risks and compliance

(AccountAbility PS, 2008)

Of the three principles, inclusivity is the foundation principle. An organization must

determine whom she impacts and also who have an impact on the organization itself. These

are the participating stakeholders to whom the organization can be held accountable

concerning sustainability issues. This participation of stakeholders is called inclusivity

(AccountAbility PS, 2008). Inclusivity is the starting point to determine materiality, as

materiality assesses what the most significant and relevant issues are for an organization and

its stakeholders. Material issues are issues which can influence decisions, actions and

performances of both the organization as well as its stakeholders (AccountAbility PS, 2008).

These decisions, actions and performance of an organization related to the material issues,

including communication with stakeholders is called the responsiveness (AccountAbility PS,

2008). Together, these three principles support the procurement of accountability

(AccountAbility PS, 2008).

3.4.1.3 ISAE 3000

The International Standard on Assurance Engagements (ISAE 3000) is developed by the

International Audit Assurance Standards Board (IAASB) (IAASB, 2013; Junior, Best and

Cotter, 2013). The IAASB develops auditing and assurance standards and guidelines for

professional accountants. With these standards and guidelines, IAASB wants to enhance the

quality and consistency of assurance and at the same time, increase public’s confidence in the

auditing and assurance profession (IAASB, 2013).

ISAE 3000 is a standard for any Assurance Engagement Other Than Audits or Reviews

of Historical Financial Information, and was published to emphasize procedures for evidence

gathering processes and assuror independence (GRI, 2014). IASE 3000 is only used by

certified accountants and has its focus almost completely on stakeholders (GRI, 2014; Hodge,

2009). Also ISAE 3000 addresses the possibility of integrating the work of a practitioner’s

expert next to the financial expert (accountant) (IAASB, 2013). More about the collaboration

of accountants and non-accountants (field experts) will be described in paragraph 3.4.3

Collaboration between accountants and non- accountants.

3.4.2 Stakeholders

Stakeholders are organizations, individuals or groups of individuals who can significantly

affect the organization’s services, products and/ or activities, or whose actions can affect the

ability of the organization to meet its core objectives and successfully implement (desired)

strategies (AccountAbility AS, 2008; GRI, 2013). One will have to keep in mind that

stakeholders are not those who just ‘have knowledge’ or ‘a view’ about the organization, but

they are the ones who can influence the whole organization. Stakeholders can be for instance

employees, customers, suppliers, investors, governmental organizations, stockholders or

creditors. Every organization has different types and levels of stakeholders with each of them

having different interests and concerns (AccountAbility AS, 2008; GRI, 2013).

3.4.1.1 Stakeholder Theory/ Stakeholder Engagement

Stakeholder theory means in essence that the ones who are affected by organizations’

decisions, have the right that the organization concerned will consider their interests when

making those decisions (Hess, 2001). In other words, organizations must determine what

obligations they have towards their stakeholders when identifying, understanding and

responding to sustainability issues (AccoutAbility, 2011; Hess, 2001). Organizations must try

to incorporate stakeholders in their day to day business and let relevant stakeholders

participate in (important) decisions and actions (Hess, 2001). Management will have to

determine what the right level is of meeting these stakeholders’ demands, to be able to

achieve the organization’s core objectives. When the level of stakeholders’ importance and

their power increases, the level of meeting these stakeholders’ demands increases

simultaneously (Roberts, 1992). As the right level of responsiveness towards the stakeholders

is determined, this can help increasing the organization’s performance(s) (AccountAbility,

2011).

However, as not all stakeholders can represent their own interest, for example future

generations, auditors play a vital role in establishing stakeholders’ trust. Responsiveness

towards stakeholders is important as stakeholders request to be confident about the systems

and processes within the organization, as well as the resulting information that flows from

these systems and processes. This resulting information supports the performance and

commitments of the organizations and thus must this information be reliable to receive

stakeholders’ trust (Dando and Swift, 2003; Walllage (2000)).

3.4.1.2 Stakeholder Dialogue

Both Hess (2001) and Dando and Swift (2003) argue that stakeholders are the center point of

assurance. Hess (2001) explains that this stakeholder-oriented perspective consist of three

elements; first, stakeholders’ views must be taken into account; second, in the reporting

process must be a dialogue between the organization and its stakeholders; third, the

sustainability report must be able to address to all the different views of the various

stakeholder groups.

To be able to address to all these different views, dialogue between the stakeholders,

as well as between the organization and the stakeholders, is important. This stakeholder

dialogue addresses the principle of Inclusivity from the AA1000 AccountAbility Principles

Standard (2008), as described in paragraph 3.4.1.2

AA1000AS Accounting Standard

(AccountAbility, 2011). By including this stakeholder dialogue, not only different opinions

can be heard, but also the rationales behind these opinions (Hess, 2001).

Within sustainability reporting, norms and objectives for defined issues are set through

collaboration between the organization and its stakeholders (Wallage, 2000). Stakeholder

dialogue creates an opportunity for the stakeholders to see whether their concerns and ideas

have been taken into account (AccountAbility, 2011; Wallage, 2000). As there are multiple

stakeholder groups, these groups will vary in opinion(s). Through the process of dialogue,

points of disagreement can be worked on and trade-offs between stakeholders and

organizations can be worked out (Hess, 2001).

3.4.3 Collaboration between accountants and non- accountants

Wallage (2000) stated there probably will be experts from other fields, like sociologists,

ethicist and physicist, entering the market as major competitors to provide assurance on

sustainability reports. At the same time Wallage (2000) stated that financial auditors will have

some relative advantages over these consultants as they have more experience in audit

engagement processes, but still multidisciplinary cooperation would be necessary. With the

advantages of financial auditors, together with the knowledge of field experts, this

collaboration will result in a more focused view on verification instead of on consultancy.

Hodge (2009) stated there are more third parties, other than accountants, providing

external assurance these days. Reporting organizations have more options/ alternatives than a

few years ago. When deciding who or what organization to ask for the provision of external

assurance, organizations must first decide what level of assurance they need. Stakeholders

have more confidence in the sustainability report when external assurance is provided by an

accounting firm (Hodge, 2009; Perego, 2009)). This is also the conclusion of EY-1 (2013):

Figure 5

To the question what type of

organization is preferred to provide

external assurance

on sustainability reports:

(EY-1, 2013)

However, Junior, Best and Cotter (2013) introduce a new form of assurance providers; the

Mixed Approach. This approach combines the two types of assurance providers, accountants

and non-accountants, meaning external consultant specialists. Manetti and Becatti (2009)

already wrote about this approach earlier. Manetti and Bacatti (2009) state that consultant

specialists will have experience in social audit, and when combining these specialist with

financial experts (accountants) who have experience in financial audits, this combination can

lead to higher quality of the external assurance process. Perego (2009) agreed with this as he

stated accountants deliver a higher quality assurance as they are more focused on the

reporting format and assurance procedures (like standardized approaches and professional

standards used). Non-accountants focus on the recommendations and opinions and thus

deliver higher quality assurance on another part of the audit. Combining these two specialists,

accountants and non-accountants, will increase the overall quality of the assurance process of

sustainability reporting (Perego, 2009).

O’Dwyer and Owen (2005) do not agree with above-mentioned. They stated that

accountants focus on the consistency of information in sustainability reports, but accountants

cannot provide high quality assurance when there is an absence of generally accepted

accounting standards. Non-accountants focus more on the completeness and fairness of

sustainability reports and are seen by stakeholders as the ones who are adding more value to

the assurance process (O’Dwyer and Owen, 2005). Adding to this, O’Dwyer (2011) argued

there would be a lot of tension between accountants and non-accountants when working

together. This will hinder the assurance process as it takes a lot of time and investigation from

both sides to make the collaboration run smoothly. Because there are clear distinctions

between the approaches of both assurance providers, collaboration is not a solution to provide

higher quality assurance on sustainability reports according to O’Dwyer (2011).

This paragraph elaborated on all the concepts discussed in paragraph 2 Operationalizing

the Research question. As daily public discourse about topics like climate change, pollution,

economic crises and human rights raises questions about the role of corporations within our

society, sustainability and responsibility within organizations and their issued reports, greater

transparency from these organizations is asked. For this reason a lot of organizations are

publishing a sustainability report these days wherein they report about above-mentioned

issues. To assess the accuracy and reliability of what organizations disclose, external

assurance on these sustainability reports can be provided. The intent of an assurance

engagement process is to increase the quality of information within the reports and/ or

disclosures. Higher quality of information is seen as more trustworthy. As stakeholders do not

always trust all the information disclosed by the organizations, which is called a credibility

gap, an external verification of these reports can help to decrease this gap. Other solutions are

the use of standards (for both the reporting organization as well as the organization who

provides the external assurance), stakeholder dialogues and collaboration between

accountants (financial experts) and non-accountants (field/ consultancy experts).

4

Propositions

As this is a qualitative research (about which will be elaborated on in paragraph 5), there are

no hypotheses in this study. Based on previous literature review, expectations came up about

the results of this investigation. Expectations in a qualitative research are called propositions,

which are worked out in this paragraph.

Dando and Swift (2003) argued that a generally accepted standard would be helpful in

the assurance process of sustainability reports, and also O’Dwyer and Owen (2005) state that

no high quality assurance reports can be provided without standards. As we are now at least

ten years later after these pronouncements and multiple standards are in use now, it can be

expected that these developed standards would be helpful in assurance engagements of

sustainability reports and higher quality assurance reports issued these days. As there are

nowadays also guidelines for the reporting organization like the GRI G4 about how to

construct a sustainability report, these reports are hopefully more alike and thus ‘easier’ for

assurance providers to audit during the assurance process. Another point is that when higher

quality audits are being delivered, this will result in more trust from stakeholders. The more

trust stakeholders have in the reliability and relevance of the sustainability reports, the more

this will decrease the credibility gap between the issued reports and stakeholders’ trust in

these reports.

With stakeholder dialogue, more interactions take place between stakeholders and

organizations. Concerns stakeholders might have, as well as objectives from both the

organization as well as from stakeholders can be discussed in this dialogue. So these

dialogues can lead to sustainability reports addressing (more of) stakeholders’ needs. Also

with more dialogue, stakeholders’ suspicion about reported performance compared to real

performance can be decreased. This will increase stakeholder’ trust in sustainability reports

and subsequently decrease the credibility gap.

As financial accountants do not have all the knowledge needed concerning social,

environmental and sustainable issues, help of experts from other fields is required. The

accountants do have the knowledge about how to conduct an assurance process, something

non-accountants do not possess. Both assurance providers can complement each other during

an assurance engagement, as Manetti and Becatti (2009) and Perego (2009) both argue.

However, as O’Dwyer (2011) stated that collaboration is not always profitable as both

assurance providers have different approaches and different knowledge. It will take a lot of

time to understand both worlds and make the assurance engagement process proceed

smoothly. It is expected that both the accountants as well as the non-accountants will have the

knowledge of their collaboration partner, collaboration will be very effective and leads to

higher quality assurance reports. However, this essentially means that the assurance provider

actually will have to have two fields of expertise; being a social/ environmental/ consultancy

expert as well as being a financial expert (accountant) at the same time. There are probably

not many experts who master two fields of expertise, so this leads to the proposition that

training (about subjects in the field of providing assurance on sustainable reports) is necessary

for both accountants as well as non-accountants. This will release the tension between the two

assurance providers while working together, make the assurance process run more smoothly

and will result in higher quality audits.

This paragraph discussed the expected outcome of this research. Expected is that developed

standards will be helpful in assurance engagements of sustainability reports, which will result

in higher quality issued assurance reports. As higher quality audits are being delivered, this

will result in more stakeholders’ trust. The more trust stakeholders have regarding the

reliability and relevance of sustainability reports, the more this trust will decrease the

credibility gap between the published reports and stakeholders’ trust in these reports. Another

solution will be stakeholder dialogue; concerns stakeholders might have, as well as objectives

from both the organization as well as from stakeholders can be discussed in these dialogues.

These dialogues will increase stakeholder’ trust in sustainability reports and thus decrease the

credibility gap. Finally is expected that collaboration between accountants and

non-accountants will lead to higher quality assurance reports as both experts have knowledge

which complements each other and which, again, will lead to a decrease of the credibility gap.

5

Research methodology

This section describes the research methodology which has been used for this study. Firstly, a

description of different types of research will be provided. Secondly will be explained why

qualitative research is chosen for this study. This explanation will be followed by a

description of how this research will be designed and conducted. Finally will be elaborated on

the sample used.

5.1 Types of Research

In academic research there are two dimensions of research; Ontology Research and

Epistemology Research. Ontology Research is about ‘the world’s view’ and is seen from the

researchers’ perspective; how the researcher sees the world, how the researcher views reality

Ontology is about ‘real’ things which do already exist and thus it tell us about ‘existence’.

Ontology answers the question ‘what is […] ?’. The answer to that question can be both

objective as well as subjective (Ryan et al., 2002). Epistemology Research is about

‘knowledge’ of certain phenomena, it is about the nature of knowledge itself. Epistemology is

about verification and finding answers to the questions asked in ontological research. So

epistemology answers the ‘how’-question; ‘How do you know it is true?’, ‘How can you

separate true and false?’. It focuses on meanings and processes of certain phenomena (Ryan et

al., 2002)..

Next you can divide research in quantitative and qualitative research. Both types have

ontological and epistemological underpinnings (Ryan et al., 2002). Quantitative research is

mostly conducted while using large databases and is used to form hypotheses which are tested

in the hope to generalize the findings. Qualitative research, on the other hand, is used to

explain certain phenomena and tries to answer ‘why’ and ‘how’ questions. Methods used in

qualitative research are often interviews, observations or documentary analysis. These

methods often are combined in field studies or case studies (Merriam, 2002). Interviews can

be structured, semi-structured or unstructured and are used to gain insight and understanding

of people’s feelings, perceptions and opinions. Observations are used to observe

conversations, interpersonal interactions, activities or certain behavior. With documentary

analysis correspondence, (official) publications, contracts and personal diaries are

investigated to find the answers needed (Merriam, 2002). To make the difference between

quantitative and qualitative research more clear, Table 1 provides the characteristics of both

fields of research.

Quantitative

Qualitative

Numbers

Point of View Researcher

Researcher Distant

Theory Testing

Static

Structured

Generalization

Hard, ‘Reliable’ Data

Macro

Behavior

Artificial Setting

Words

Point(s) of View Participants

Researcher Close

Theory Contextual and/ or Emergent

Process

Unstructured

Contextual Understanding

Rich Deep Data

Micro

Meaning

Natural Setting

Although there are differences between quantitative and qualitative, it will have to be

emphasized that neither is superior over the other. Both methods are needed when doing

research; it solely depends on the aim of the study which method is used (O’Sullivan, 2010).

5.2 Research Method

As described in section 1.3 Motivation, the objective of this research is to describe how

auditors can contribute in decreasing the credibility gap between issued sustainability reports

and the level of stakeholders' trust. As this research focusses on the auditor’s view and not on

the researcher’s view, a qualitative (epistemological) research using interviews is conducted.

As with qualitative research, the purpose of this research is not to generalize the findings but

to gain more insight in the thoughts, objectives and rationales from auditor’s about engaging

in a sustainability report assurance process.

As almost solely the biggest organizations in the world are publishing sustainability

reports, the ones who got their sustainability reports verified with external assurance will get

this assurance with one of the Big Four accounting firms. This is because stakeholders have

more confidence in the sustainability report when external assurance is provided by an

Table 1

Characteristics Quantitative and Qualitative Research