As organisations currently work with incomplete, uncertain, or unavailable granular data to create sustainability information, they can utilise reasonable and supportable information to make assumptions of a present or a future situation, to guide decisions.
This is the recommendation of the Association of Chartered Certified Accountants in their recent report, highlighting that as the number of variables and assumptions increases, judgments would become more subjective and complex as well.
According to ACCA, the need to work with estimates and the extent of this may not be apparent at first, as it may be only seen when the organisation starts collecting and evaluating the data that issues with data availability and quality become apparent.
ACCA says that revisiting assumptions, updating methodology and revising estimates are part of the process to continually improve the quality of sustainability information.
The professional accounting body suggests that organisations may use estimates when creating sustainability information, before robust data systems are available to conduct direct measurements, citing the IFRS Sustainability Disclosure Standards as example as it allows organisations to use all reasonable and supportable information that is available to the organisation at the reporting date without undue cost or effort.
ACCA further cites current approaches to estimate sustainability information for present situations, which include:
- using third-party or proxy data, and
- deriving sustainability data from financial and other data.
Moreover, ACCA says reasonable estimates do not undermine the usefulness of the information if the estimates are accurately described and explained. Estimates should be revised over time to produce more decision-useful information as:
- knowledge of a sustainability topic improves,
- assumptions are refined,
- processes and systems improve, and
- better-quality data becomes available.
