Expanded Summary

Introduction. Corporate reporting is no longer judged solely on financial results. Investors, creditors and other stakeholders increasingly weigh environmental, social and governance factors when they assess a company, which raises the value of reliable ESG information and, at the same time, the risk that some of it is inflated or selectively presented, including outright greenwashing. Independent assurance addresses this risk directly: it narrows the information gap between preparers and users and increases confidence among stakeholders (Simnett et al., 2009; Cohen & Simnett, 2015). Georgia\\'s reporting and audit framework has developed steadily over the past several years, yet independent verification of ESG information is still uncommon (Pirveli & Thompson, 2022), and tightening ESG expectations in the financial sector are pushing demand for higher-quality sustainability data (National Bank of Georgia, 2020). Against this background, the paper asks how prepared Georgia\\'s audit sector is to deliver ESG assurance, examining the regulatory environment, professional readiness and the main barriers to development.

Literature review. Assurance gives users a basis for treating non-financial disclosures as credible and independently checked; how far that credibility extends depends on the methodology applied and the practitioner\\'s independence (O\\'Dwyer et al., 2011). Both traditional audit firms and specialised advisory firms compete in this market, and both need sustainability, climate and governance expertise on top of standard audit skills (Farooq & De Villiers, 2017). Evidence from the European Union shows how quickly regulation reshapes both what companies report and what auditors are expected to know. In Poland, accountants\\' initial grasp of ESG and CSR requirements was limited, and targeted training did more for readiness than years on the job (Krasodomska et al., 2020); Zarzycka and Krasodomska (2021) find that gaps in the quality and volume of non-financial KPIs trace back to unclear subject matter and criteria as much as to auditor competence. Georgian evidence points the same way: across roughly 100 companies observed between 2018 and 2020, average sustainability reporting scored just 33 percent, with wide variation by sector and little third-party assurance (Pirveli & Thompson, 2022). A parallel strand of research on Georgia\\'s financial sector links the pace of ESG adoption to regulatory pressure and professional capacity (Zurabishvili et al., 2026), while the growth of sustainable finance instruments is raising the stakes of ESG data quality for companies seeking financing (Zurabishvili, 2026).

International regulatory framework. Internationally, the architecture around ESG reporting has hardened considerably. The EU\\'s Corporate Sustainability Reporting Directive requires assurance on sustainability information, moving from limited to reasonable assurance over time (European Parliament & Council of the European Union, 2022), and the related European Sustainability Reporting Standards and EU Taxonomy build on the governance, strategy, risk and metrics structure set out in the 2015 TCFD framework (Sabauri & Kvatashidze, 2023). At the global level, the IFRS Foundation\\'s 2023 IFRS S1 and S2 standards give sustainability-related financial disclosure a common basis (IFRS Foundation, 2023). For assurance specifically, the IAASB\\'s ISSA 5000, approved in 2024, covers both limited and reasonable assurance engagements and becomes mandatory for reporting periods beginning on or after 15 December 2026, with early adoption available from 2024 (IAASB, 2024, 2025). Accountancy Europe (2022) has added practical guidance for audit committees on ESG oversight and on guarding against greenwashing.

Georgias regulatory environment. Georgia\\'s reporting and audit framework rests on two institutions: the Service for Accounting, Reporting and Auditing Supervision (SARAS) and the National Bank of Georgia. Under the Law on Accounting, Reporting and Auditing, management reporting, which now includes sustainability disclosure, is mandatory only for public-interest entities in the first size category, meaning those with an average of more than 500 employees (Parliament of Georgia, 2016; SARAS, 2025). Some Georgian companies disclose ESG information voluntarily, mainly for reputational reasons and to improve access to finance (Pirveli & Thompson, 2022), and the pressure to do so reaches beyond companies directly covered by EU rules: many are affected indirectly through the ESG requirements of larger European partners. The European Commission\\'s updated ESRS and voluntary standard for small and medium-sized enterprises, adopted on 3 July 2026 and including a value-chain cap, makes this indirect pressure more concrete (European Commission, 2026). SARAS has been adopting IAASB\\'s updated standards in stages, bringing the 2023 to 2024 editions into effect during 2025 (SARAS, 2025), and its strategic documents flag the need to implement both IFRS sustainability standards and IAASB\\'s new assurance standards (SARAS, 2023).

Audit sector readiness. The structure of the audit market shapes how ESG assurance can develop. SARAS\\'s 2025 register lists 239 audit firms in Georgia, but only 15, about 6 percent, are licensed to audit public-interest entities: the four Big Four networks, eight mid-sized international networks and two local firms (SARAS, 2025). This concentration cuts both ways. Firms tied to international networks can draw on established global methodologies and resources, which should support faster ESG assurance development, but the same concentration raises the bar for smaller firms trying to enter the market. A comparison of the six international networks operating in Georgia, BDO, PwC, EY, KPMG, Deloitte and Grant Thornton, shows that ESG reporting, assurance and CSRD/ESRS compliance services are now standard offerings across all of them (BDO, 2026; Deloitte, 2026; EY, 2026; Grant Thornton, 2026; KPMG, 2026; PwC, 2026), while dedicated ESG data services are offered by only three: BDO, PwC and EY. Public information on what the Georgian representations of these networks actually offer is thin; only BDO, EY, KPMG and Deloitte Georgia mention specific ESG services on their local sites. SARAS\\'s quality management and engagement quality review requirements for public-interest entity audits already provide an infrastructure that ESG assurance quality control could eventually build on, and sector readiness, following the adoption of ISSA 5000 and SARAS\\'s updated Code of Ethics in May 2026, will depend as much on professional competence, data quality control and internal control systems as on the mere availability of consulting services (SARAS, 2024, 2026).

Key challenges. Three challenges stand out. The first is a mismatch in timing between regulatory pressure and market demand: EU firms face a predictable, CSRD-driven timetable for assurance, while in Georgia verification of ESG data remains largely voluntary and not yet an established practice (Pirveli & Thompson, 2022), leaving firms with little incentive to build dedicated ESG teams ahead of demand. The second is a shortage of specialised knowledge and methodological support. ESG assurance calls for climate, environmental, social and governance expertise on top of standard audit skills, and the absence of shared criteria puts more weight on individual professional judgement (Zarzycka & Krasodomska, 2021) and on targeted training (Krasodomska et al., 2020). Poland offers a cautionary example: of 47 firms licensed to audit public-interest entities, only 16 had actually provided sustainability assurance by the time Poland\\'s Audit Supervision Agency reviewed the sector in 2025, and the review turned up problems with interpretation and staff qualification even among firms already active in the field (PANA, 2025). Tighter regulation, in other words, does not by itself guarantee readiness, and preparing in advance works better than scrambling to catch up once a mandate takes effect. The third challenge concerns the quality of ESG information itself and the risk of greenwashing: because disclosure is still mostly voluntary, companies retain room to be selective about what they report, which gives independent assurance particular value in a market at Georgia\\'s stage of development, since a properly conducted audit reduces the risk that sustainability claims are misrepresented (Yahaya, 2026).

Conclusion and recommendations. Georgia\\'s institutional foundations for ESG assurance are taking shape, but the practical market is still at an early point. Internationally, CSRD, IFRS S1/S2 and ISSA 5000 now set out a reasonably clear framework, and the work of the National Bank of Georgia and SARAS is bringing the country closer to that framework, but low demand, a shortage of relevant competencies and the need for methodological support continue to hold development back. ISSA 5000 taking effect in December 2026 should accelerate this process, though turning the new standards into practice will require action on four fronts: a phased rollout of ISSA 5000 by SARAS that gives firms time to prepare procedures and staff, training programmes aimed specifically at small and mid-sized firms, closer methodological coordination between the National Bank of Georgia and SARAS, and measures that stimulate market demand by rewarding good reporting practice.

Keywords: ESG reporting; sustainability reporting; assurance services; audit; audit sector; Georgia.