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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Developments in sustainability assurance

Harlow Mining's sustainability report claims it will reach net zero by 2040. The assurance team notes that no interim targets or plans support the claim, and that management may be overstating progress to attract green investment. Which risk is most directly raised by this situation?

The situation raises greenwashing risk, meaning the sustainability report may mislead users by overstating environmental performance or commitments. The practitioner should seek evidence supporting the net zero claim and consider the effect on the conclusion if it is unsupported.

  1. AGreenwashing risk, which is the risk that the information misleads users about the entity's environmental performanceCorrect
  2. BGoing concern risk arising from the 2040 target date
  3. CInherent risk that is eliminated by the existence of the sustainability report
  4. DDetection risk that is reduced by using limited assurance

Explanation

Overstating environmental credentials to attract investment is greenwashing, a risk of misleading users that the assurance practitioner must consider, including through evidence on forward-looking claims. It is not a going concern matter by itself, a report does not eliminate inherent risk, and limited assurance does not reduce detection risk.

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