20/02/2025
TIC Council is calling on the European and national policymakers to take decisive action to ensure a fair and competitive market for sustainability audits, in line with the objectives of the Corporate Sustainability Reporting Directive (CSRD).
Europe’s financial audit market has long been dominated by a small group of firms, collectively known as the Big Four. The CSRD was designed to promote competition in sustainability assurance by allowing a broader range of qualified entities—known as Independent Assurance Service Providers (IASPs)—to verify sustainability reports.
A key concern is the limited authorization of IASPs, with less than a quarter of EU Member States only authorizing these independent providers, creating a fragmented market. With a fair market access for IASPs, European companies will have a wide range of assurance providers that would ensure the availability of providers and a cost-effective application of CSRD for them.
Why This Matters for European Businesses and Sustainability Goals:
- Lower Costs for Companies: Allowing more competition will help reduce the financial burden of sustainability audits, particularly for smaller companies.
- Access to Specialized Expertise: Certification bodies bring in-depth knowledge of environmental, social, and governance (ESG) factors, adapting to the needs of the company by ensuring audits are based on materiality rather than a simple data exercise.
- Strengthened Audit Independence: Separating financial and non-financial audit providers prevents potential conflicts of interest, bolstering the credibility of sustainability disclosures.
TIC Council's Call to Action:
TIC Council urges policymakers to use the opportunity of the ongoing CSRD simplification process (Omnibus) to implement much-needed reforms. These changes will ensure a robust assurance market that is transparent, diverse, and capable of meeting the growing demand for high-quality sustainability verification services.
Key Recommendations:
- Mandatory Authorization of IASPs: All EU Member States should allow accredited IASPs to perform sustainability audits, creating a more open and competitive market.
- Guarantee of Audit Independence: To prevent conflicts of interest, the same firm should not conduct both financial and sustainability audits for the same company.
- Recognition of ESG Expertise: Sustainability assurance must be handled by professionals with demonstrated expertise in relevant sustainability fields.
Europe now has a pivotal opportunity to foster a truly competitive and accessible market for sustainability audits. Embracing these reforms will make sustainability reporting more affordable for companies, keeping the ambition of CSRD in place without undermining competitiveness.