Hello everybody and welcome back to another edition of C&F Talks where I get to speak to one of the speakers at a forthcoming City & Financial Conference. Today I have with me Andrew Henderson, who's the Senior Advisor at Speeki. Andrew is going to be speaking at our fourth annual Sustainability Reporting Summit, being held in London on the 20th of January.

Andrew, as I said, is the Senior Advisor at the firm with over 15 years of experience at the intersection of ESG compliance and technology. So, very much looking forward to hearing what Andrew has to say this afternoon. Andrew, welcome.

Thank you, great to be here.

Maurice

Turning to our first question, Andrew, the governance consultation that was published on this area of creating a new oversight body for sustainability assurance providers has obviously been warmly welcomed, I think, by the industry as a whole.

What are the most critical functions this body should perform to effectively prevent greenwashing and build up trust in sustainability reporting, which is somewhat lacking, I think, at the present time?

Yeah, I mean, I also agree it's a good initiative to have an oversight body. I think it's similar ideas are happening across Europe and across other parts of the world. So, I think it's definitely needed.

I think it's important that, I mean, trust is exactly the core of any assurance process. So, it's requiring the new body to be focused on competence and independence, really. Those are the two main areas.

Competence is obviously vitally important no matter what assurance is done, but it's also probably more important in this area because it's so new. It's new and the goalposts are moving regularly, but it tends to be that there's a lot of people either from a sustainability background, so they're very good at the technical detail but not necessarily auditors and not necessarily auditing against a particular standard.

So that's part of the competence that needs to be addressed. Or it's an auditor background, so they're very good at the audit process but don't have the skills in some of the sustainability matters. So that's what we're seeing across the board. Some areas are reasonably well addressed. I think carbon accounting is well addressed. There's a lot of people who can do the greenhouse gas protocol assurance.

But the other many areas across sustainability, I think, are still lacking in some of the levels of competence, which requires time. So, I think the regulator will need to address that, understand that that will take time to get enough people well trained and competent.

And the second thing is independence, just making sure that we don't have some of the issues that have arisen in the financial auditing of consultancy and assurance of merging into one in the same firm. I think that just has to be a very hard and fast rule, which potentially means the need for the independent assurance service providers, rather than saying the statutory auditors have to do this sustainability assurance. I just don't think that will work.

Yeah, so it's something that's very welcome, isn't it?

I mean, turning to how it's actually performed, how the assurance is performed, how do you see emerging technologies such as AI, automated data validation, and continuous monitoring tools shaping the future of sustainability assurance?

Well, I mean, they are inevitable. I don't think you can pretend that they're not. I think they have to be in a supporting role.

I think assurance that it wouldn't be assurance if it wasn't a human at the end of the process. So, what we're doing as a firm, and I think a lot of other assurance firms are doing, is working out where the AI and the automation can best fit. And it has a huge role.

We see that with the systems we have in place, set document reviews, and lots of other things can be done in incredibly quick times, but it still needs checking. Everything needs checking because, as we said at the outset, it's about building trust. So, automation will get us so far.

It has to be part of the picture, but it can't replace humans, or it's not assurance. Assurance requires a person who signs off on the report, on the piece of work that they've done, because they've got themselves to a level of confidence in that piece of work with whatever tool set, they happen to be using.

Yeah, and obviously, I suppose, part of the challenge is around data.

As the sustainability data becomes more digital and granular, what expectations should an oversight body or assurance standard set around data government, system integrity, and the traceability of evidence? And furthermore, should technology enable assurance to be treated differently from traditional manual approaches, and if so, how? So two-part question.

Well, I think the level of digitalized data is growing. I mean, most people nowadays have some kind of a carbon calculator system, whereas five years ago, there was a lot of spreadsheets. Now, we, when we're doing assurance projects, take that into account.

We generally spend less time on the checking of individual calculations if there's an automated system, because what we're looking at is the methodology that that system's put in place and how well that's worked and audit trials around that, whereas if it's a spreadsheet, we'll be looking at least sampling across lots of different cells just to make sure the calculations were correct. So, where we look changes significantly based on the systems that are being used, and that's true across the board. The more automation, the more systems approach, the less we're looking at the individual inputs, and the more we're looking at the methodology and what was built.

And on the second part of that, how do you see that the various technologies progressing? Do you think that that's going to be, do you think we're going to see the use of agentic AI and so on in this space?

Definitely. I mean, it's already happening. On the corporate side now, a lot of people are spending a lot of time and effort building systems to help with, again, if I focus on carbon, on agentic AI systems to automate the calculation and gathering processes.

But again, on the assurance side, that means that we're focusing more on the AI assurance to make sure the AI is achieving what it should do. Rather than the automation, it's more about the methodology. So, from the assurance side, we're just shifting where we need to focus. The reality is we need to deal with whatever the client has in place, but once we've addressed that, we work out our planning.

Maurice

And of course, the government's proposed oversight regime is going to be voluntary, at least in the first instance. What incentives or pull factors could encourage assurance providers to opt into the regime before it does become mandatory? And conversely, what might make them hesitate to do so?

Well, I think like most things, it's going to be driven by industry. I think corporates, I mean, my belief, and we haven't really spoken to people about this, but my belief is that corporates will want assurance by firms that are under the government regulatory regime. I think it will be a huge benefit for them.

I think there's no point doing assurance exercise if people don't trust it. And I think the regulatory regime will help that trust. I mean, it's not the only thing. There's a lot of other things that need to be built in. But I think voluntary is fine to start with. We're certainly looking at coming under that regime. We're already a certification body under other regimes. It's not a big leap. It just makes sense.

Yeah, it does. I suppose if you can trust in a reputation or if you like a kite mark to prove to investors that what you're saying is going to be correct, then many companies will go for that. I think probably that's all we can cover at this stage, Andrew.

For our viewers, we'd very much like for you to come and join us at the 4th Annual Sustainability Reporting Summit in London on the 20th of January, where you'll hear more from Andrew and from a wonderful lineup of speakers covering all the principal topics. Further information is available at our website, www.cityandfinancial.com. 

So, Andrew, I look forward to seeing you after the festive break on the 20th of January.

Yeah, thanks very much for your time today.