Audit Firm Publishes New Guidance to Combat Greenwashing Risks in Sustainability Reporting
NEW YORK, NY – November 23, 2025 – Morrison & Associates LLP, a leading global audit and assurance firm, today published enhanced guidance to help auditors identify and address greenwashing risks in corporate sustainability reporting. The new framework comes as regulators worldwide intensify scrutiny of environmental claims and investors demand greater accountability for ESG performance.
The guidance arrives at a critical juncture. In January 2025, the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) issued tougher guidelines for auditors evaluating corporate environmental claims, aiming to restore trust in sustainability disclosures. According to Reuters, the standards target the 34 largest global audit firms, which are expected to adopt the measures immediately. The IAASB’s Proposed International Standard on Sustainability Assurance 5000 establishes rigorous requirements for assurance engagements, requiring auditors to assess both financial materiality and impact materiality from stakeholder perspectives beyond investors.
Morrison & Associates’ new guidance directly addresses emerging tactics used to mislead stakeholders. Key risk areas include false carbon offset claims, misrepresentation of sustainability certifications, and omission of material environmental liabilities from financial statements. The firm’s framework provides specific audit procedures to verify the authenticity of environmental initiatives, including independent verification of emissions data, assessment of supply chain transparency, and evaluation of internal controls over sustainability reporting.
“Greenwashing has evolved from vague marketing language into sophisticated financial misstatement,” said Sarah Chen, Morrison & Associates’ Global Sustainability Assurance Leader. “We’re now seeing cases where companies manipulate environmental data to secure lower financing costs or inflate stock prices. Our guidance equips auditors to detect these schemes before they erode market confidence.”
The financial stakes are substantial. Research from Grant Thornton indicates that misleading ESG disclosures can artificially inflate share prices of publicly traded companies, exposing them to securities litigation and regulatory penalties under frameworks like the UK Financial Services and Markets Act 2000. The CPA Journal reports that greenwashing can result in fines, compensation payments, mandatory environmental restoration costs, and severe reputational damage. Companies found guilty of greenwashing face an average 6-8% decline in brand equity within six months of public exposure, according to recent market analysis.
The guidance emphasizes three core audit pillars. First, auditors must evaluate leadership commitment to authentic sustainability integration, not peripheral initiatives. Second, procedures require cross-functional collaboration between marketing, legal, and sustainability departments to ensure consistent, accurate claims. Third, auditors must assess fraud risk governance, including board oversight of sustainability communications and whistleblower protections for reporting irregularities.
Regulatory momentum continues accelerating. The U.S. Securities and Exchange Commission finalized climate disclosure rules in early 2025, while the European Union’s Corporate Sustainability Reporting Directive now covers over 50,000 companies. The UK Financial Conduct Authority’s anti-greenwashing rule, finalized in June 2024, mandates that all sustainability claims must be fair, clear, and not misleading. These developments have created a complex compliance landscape where auditors serve as critical gatekeepers.
Morrison & Associates will implement the guidance across its global network beginning December 1, 2025, with specialized training for 1,200 sustainability assurance practitioners. The firm has also developed proprietary analytics tools to benchmark client disclosures against industry standards and detect statistical anomalies in emissions reporting.
About Morrison & Associates LLP
Morrison & Associates LLP is a global professional services firm providing audit, tax, and advisory services to Fortune 500 and mid-market companies across 45 countries. With more than 8,000 professionals worldwide, the firm specializes in complex assurance engagements, sustainability reporting verification, and regulatory compliance advisory. Morrison & Associates is a founding member of the International Network of Environmental Assurance Professionals and actively participates in IAASB standard-setting initiatives.
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