This ESG report is audited?

Today’s investors, regulators and the general public want to understand a company’s societal and environmental impact. Greenwashing, or portraying your organization as more socially conscious than it actually is, has made stakeholders more skeptical and discerning.

One way through which companies can enhance the credibility of their reported ESG (environmental, social, and governance) efforts is to hire a specialist, or assurance provider, to verify the information disclosed in their ESG reports.

However, the challenge is that stakeholders expect assurance providers to identify all misstatements, detect every instance of inaccurate or misleading information, prevent fraudulent reporting and eliminate greenwashing. They set high expectations when to the read that this ESG report is audited. Yet, in practice, the legal and technical details of providing assurance are more nuanced, and the devil is in the detail, as always.

In analyzing ESG assurance reports from among the TSX 60 companies, members of the Climate Measures and Reporting Impact Lab, part of the Climate Business Institute at the John Molson School of Business, found signs of an ESG assurance gap. The gap is the difference between what readers of ESG reports believe is being assured and what is actually covered by the assurance process.

ESG Assurance Gaps

Gap 1:

Reading about an independent assurance in a sustainability report can create the expectation that all information is accurate. However, unlike financial reporting audits, the coverage of ESG assurance is much more loosely defined. Two levels of assurance are provided in the ESG reporting domain: reasonable and limited assurance.

Reasonable assurance, the more expensive option, ensures that the information has been rigorously evaluated and tested to address content that is at high risk of misstatements.

Limited assurance is more of a review, is more affordable and indicates only that the reported information subject to the assurance assignment is free of material misstatements.

ESG reporting in Canada is voluntary, unlike in the European Union, where the EU’s Corporate Sustainability Reporting Directive (CSRD) requires limited assurance as a mandatory requirement.

The TSX 60 companies predominantly prefer limited assurance, with 37 companies (64 per cent) opting for this level, while only 2 companies (3 per cent) obtained reasonable assurance, and 19 companies (33 per cent) did not seek any external assurance of their reported ESG information.

Gap 2:

Reading about an independent assurance in a sustainability report can further create the expectation that the entire ESG report has been examined by an independent third-party. This is, however, very rarely the case. Instead, the assurance statement typically specifies which measures of the ESG report were subject to verification.

The most common scope of assurance among the TSX 60 companies is to obtain assurance of (parts of) the Greenhouse Gas Emissions (GHG). Nearly all firms that sought some level of assurance included at least partial verification of GHG data, with only three companies excluding such coverage.

Beyond emissions, 23 companies extended assurance for other environmental metrics, while only 17 obtained assurance for social and governance measures as part of their sustainability reporting. A few companies also included social indicators or human capital indicators, such as employee turnover, workforce demographics and ethics training hours, within the scope of their ESG assurance.

The Impact Lab team found that about 40 per cent of firms (23 out of 58) obtained assurance for environmental disclosures. The least common assurance was governance related metrics at 29 per cent of the sample (17 companies).

This means social and governance information remains comparatively under-assured, revealing a selective assurance practice that reinforces the persistence of an ESG assurance gap.

Recommendation

ESG reporting assurance is still developing in Canada. The analysis reveals a fragmented assurance landscape: while most TSX 60 firms adhere to recognized assurance frameworks, there is no single dominant standard. For companies whose strategies are aligned with environmental and social consciousness, adhering to a recognized assurance framework and ensuring a rigorous audit of their progress will better position them to weather any changes towards more stringent regulations in Canada in the future.

Read the full article in 2025 ESG Reporting Radar: Al Maleh, H., Audousset-Coulier., S., Ben Ali, C., & Sener, B. (2025). The ESG Assurance Gap. In H. Al Maleh et al. (Eds.), 2025 ESG Reporting Radar: TSX 60 Spotlight (pp.1620). Climate Business Institute, Concordia University, John Molson School of Business, Montreal, Canada.

About the John Molson Climate Business Institute

The John Molson Climate Business Institute (CBI) focuses on rethinking how businesses operate to better align with environmental goals, social well-being and organizational principles. By conducting practical research, collaborating with stakeholders and offering educational programs, the institute drives meaningful change and helps businesses tackle the challenges of the modern world.

About Climate Measures and Reporting Impact Lab

The Impact Lab on Climate Measures and Reporting drives business decarbonization and environmental progress through research, teaching and community engagement. It focuses on improving climate-related communication, guiding businesses in transitioning to sustainable models and enhancing methods for measuring and managing emissions. By aligning strategies with sustainability goals, the lab helps organizations meet stakeholder expectations, improve decision-making and build trust in their environmental performance.