Verdantix: Competition Hots Up For CSR Assurance
Press Release - For Immediate Release.
London, UK. April 2, 2008. Fifty-three FTSE 100 firms bought corporate social responsibility (CSR) assurance from 18 different CSR assurance providers, according to a new report from Verdantix. The report applies 82 evaluation criteria covering assurance standards and procedures, CSR expertise, industry knowledge and market momentum to compare 15 of the leading CSR assurance providers including firms like Deloitte, Enviros, KPMG, LRQA and URS Corporation.
“In 2007 a total of 92 per cent of the FTSE 100 published a CSR report and 53 per cent invested in external assurance.” said Verdantix Director, David Metcalfe. “The growth in CSR assurance over recent years reflects five key trends: enhancing credibility with stakeholders; alignment with the investment community; keeping up with competitors; responding to new CSR issues; and differentiating the company as a reporting leader.”
The Verdantix analysis is based on in-depth interviews with the practice leaders of 15 out of the 18 firms that provided assurance to a FTSE 100 firm in 2007. Additional research was conducted with a panel of CSR buyers and stakeholders from groups like AccountAbility and the Forest Stewardship Council. The research found that:
- Only 31% of FTSE 100 firms have an external assurance statement that includes a statement of independence from the assurance provider. A surprisingly lack of transparency given the CSR focus on credibility with stakeholders.
- Industries cluster into 3 groups based on the percentage of FTSE 100 firms in the industry that pay for CSR assurance. Personal and household goods companies top the list with 100% of firms in the industry assuring their CSR reports. Technology (0%) and construction (20%) come bottom.
- Costs of assurance engagements range from £20,000 for a “tick in the box” basic level of assurance targeted at improving the credibility of the report to a standards-centric £200,000 engagement which helps clients to improve CSR processes and differentiate their CSR competence.
- CSR directors struggle to justify investments above £60,000 since assurance does not deliver quantifiable financial benefits, it is not mandatory, customers do not demand assurance and it defines success with an absence of negative consequences.
- Potential buyers don’t understand what they will get and how much it should cost. The combination of standards like ISAE 3000 and AA1000 with different levels of applicability, different project scopes and multiple providers complicates management decisions on CSR assurance purchases.
"Buyers of CSR assurance face an incredibly complex task to select the right provider for their needs” said Metcalfe. “UK firms can pick from any one of 20 CSR assurance providers that offer similar sounding projects but at very different price points. Buyers find it hard to compare a CSR consulting boutique like The Virtuous Circle with a global professional services firm like Ernst & Young and an environmental consultancy like Enviros. Making the right decision is tough.”
To address this issue, Verdantix compared 15 CSR assurance providers to FTSE 100 firms on 82 different evaluation criteria. This uniquely detailed analysis identified the following key evaluation points for CSR directors:
- Assess experience in implementing assurance standards. Virtually all providers refer to CSR assurance standards such as AA1000 but not all have delivered standards-centric assurance projects.
- Worry less about competence in assurance procedures. There are few areas where a CSR assurance provider lacks a methodology or trained staff on items like site visits and stakeholder responsiveness assessments.
- Target stakeholder assurance activities as a key issues. CSR consultancies have more willingness to engage directly in assurance work with stakeholders whereas the Big Four and global inspection firms have operating procedures which limit their involvement.
- Be sceptical about claims of industry CSR expertise. The fragmentation of assurance work means that few providers can claim to have a wide range of proven expertise delivering CSR assurance in one industry.
- Focus on the provider’s professional baggage. The diversity of suppliers targeting the CSR assurance market means that their professional roots will have a big impact on the outputs from the engagement.
“CSR assurance is at a cross-roads. Potential buyers struggle to see the value of assurance through the fog of different standards, dozens of providers and flexible project scopes” said David Metcalfe, author of the report. “Suppliers should review their strategy and push towards consolidation and industry focus. To succeed they need to offer prospective clients more clarity on the value they deliver.”
The report, “Verdantix Green Quadrant: How To Select A CSR Assurance Provider”, can be purchased online and is available to Verdantix clients at www.verdantix.com
About Verdantix
Verdantix is an independent business research firm focused on climate change, carbon markets and corporate responsibility. For more information please visit www.verdantix.com
Press Contact
David Metcalfe, Director, Verdantix Ltd. +44(0)207 851 9143. press@verdantix.com
Wednesday, 02 April 2008