Competition Concerns in ESG Assurance Markets

1. Introduction

ESG assurance refers to the independent examination or verification of an undertaking's environmental, social and governance disclosures. It may cover greenhouse-gas emissions, climate-risk metrics, sustainability targets, workforce information, human-rights indicators, supply-chain data, biodiversity information and other sustainability disclosures.

The market has acquired particular competition significance because mandatory sustainability reporting creates a corresponding demand for assurance services. In the EU, for example, the sustainability-assurance framework requires covered undertakings to obtain an assurance opinion, while the regulatory framework also addresses independence, assurance standards and the role of statutory auditors and independent assurance service providers.

The competition problem is that ESG assurance can develop as an extension of the traditional financial-audit market. Existing audit relationships, technical expertise, regulatory accreditation, proprietary methodologies and access to client data may give incumbent audit firms substantial advantages over new ESG-assurance providers.

A recent study of 268 EURO STOXX 600 companies reported that 263 used their incumbent financial auditor for CSRD sustainability assurance and that Big Four firms were involved in 97% of the observed engagements. This is empirical research rather than a legal finding, but it illustrates the potential concentration issue.

2. Relevant Competition-Law Framework

Competition concerns can arise under several categories.

A. Horizontal agreements

ESG assurance firms may compete for the same clients. Agreements concerning:

• fees;
• allocation of clients;
• geographic territories;
• minimum prices;
• common methodologies;
• sharing of commercially sensitive information; or
• exclusion of smaller assurance providers

can potentially raise concerns under cartel or concerted-practice rules.

B. Abuse of dominance

A large assurance provider may potentially abuse market power through:

• exclusionary tying;
• discriminatory access to assurance methodologies;
• refusal to provide necessary interoperability;
• loyalty arrangements;
• excessive or discriminatory fees;
• restrictions on switching;
• bundling financial audit and ESG assurance.

C. Vertical restraints

Competition issues may arise between:

reporting company → financial auditor → ESG-assurance service

and between assurance providers and:

• ESG-data platforms;
• carbon-accounting software;
• emissions databases;
• ESG-rating providers;
• certification bodies;
• sustainability-reporting software providers.

D. Merger control

Consolidation between large accounting, auditing, ESG-data and assurance businesses may reduce the number of independent providers.

E. Professional-regulation barriers

Accreditation and independence requirements may be legitimate quality safeguards, but they can also affect market entry if designed or applied disproportionately.

3. Major Competition Concerns

3.1 Big-Firm Concentration

The most obvious concern is concentration.

The traditional audit market already has significant concentration. The UK Competition and Markets Authority found that the Big Four conducted approximately 97% of audits of the largest UK companies in its 2018 market-study work.

If sustainability assurance is automatically assigned to the incumbent financial auditor, the same concentration can migrate into ESG assurance.

This can create:

• fewer suppliers;
• reduced switching;
• weaker price competition;
• barriers to innovation;
• dependence upon incumbent methodologies;
• reduced opportunities for specialist sustainability firms.

The UK statutory-audit market investigation similarly identified concentration, barriers to entry and switching as competition concerns.

4. Bundling of Financial Audit and ESG Assurance

One of the most important issues is bundling.

A company already purchasing financial auditing services from Firm A may find it commercially convenient to purchase ESG assurance from Firm A as well.

The argument in favour of bundling is straightforward:

• the auditor already knows the company;
• financial and sustainability information may overlap;
• the auditor has existing internal controls knowledge;
• transaction costs are lower;
• duplicate information requests can be avoided.

However, competition concerns arise if the incumbent uses its position in financial audit to make independent ESG-assurance competition difficult.

Potential problematic practices include:

1. conditioning financial-audit services on purchasing ESG assurance;
2. offering artificially low bundled prices;
3. refusing to provide necessary information to an independent ESG assurer;
4. making switching costly;
5. using audit-client relationships to foreclose specialist providers.

A 2026 study of European companies found near-universal alignment between financial auditors and sustainability-assurance providers in its sample, illustrating why bundling is an important competition issue.

5. Entry Barriers

ESG assurance requires credibility.

Large firms may possess:

• global offices;
• accredited professionals;
• sector-specific specialists;
• proprietary audit technologies;
• established relationships with listed companies;
• extensive ESG databases;
• compliance infrastructure.

A new entrant may therefore face a substantial credibility disadvantage even if its technical competence is comparable.

Regulatory accreditation can further increase entry costs.

The competition-law question is not whether accreditation is legitimate. Assurance of ESG information involves serious reliability concerns. Rather, the question is whether the regulatory requirements are proportionate and genuinely connected with assurance quality.

6. Accreditation and Independent Assurance Providers

The development of Independent Assurance Service Providers (IASPs) is particularly important.

If only traditional statutory auditors can effectively provide ESG assurance, the market may remain structurally concentrated.

A competitive market could contain:

• Big Four audit firms;
• mid-tier accounting firms;
• specialist ESG assurance companies;
• environmental verification bodies;
• engineering firms;
• carbon-verification specialists;
• sector-specific assurance providers.

The EU framework expressly contemplates independent assurance service providers, while also maintaining requirements relating to competence and independence.

This creates a regulatory balance:

quality and independence safeguards versus unnecessary barriers to entry.

7. Access to ESG Data

ESG assurance increasingly depends upon access to:

• emissions data;
• supply-chain records;
• satellite information;
• carbon databases;
• employee data;
• climate models;
• lifecycle-assessment information;
• sustainability software.

A dominant firm controlling a critical dataset could potentially disadvantage competing assurance providers.

Competition issues could arise where access is:

• technically restricted;
• commercially discriminatory;
• excessively expensive;
• supplied only on inferior terms;
• subject to unreasonable licensing restrictions.

The problem becomes especially significant where the dataset is difficult to replicate.

8. Proprietary ESG Methodologies

Assurance firms may develop proprietary:

• materiality-testing systems;
• emissions-calculation methodologies;
• ESG risk models;
• AI verification systems;
• supply-chain verification tools.

Intellectual-property protection is legitimate. Nevertheless, competition concerns may arise if proprietary systems become essential to participation in the market.

Possible issues include:

• discriminatory licensing;
• interoperability restrictions;
• refusal to provide essential technical information;
• exclusionary software contracts;
• tying assurance services to proprietary technology.

9. ESG Assurance and Digital Platforms

Modern assurance markets are increasingly technology-dependent.

A large assurance provider may combine:

ESG assurance + ESG software + carbon accounting + data analytics + ESG ratings + consulting.

This creates potential ecosystem effects.

A firm controlling several complementary markets could use one market to strengthen its position in another.

For example:

ESG software → ESG data → ESG consulting → ESG assurance.

Competition authorities may therefore need to examine the entire ecosystem rather than considering ESG assurance in isolation.

10. Information Exchange Between Assurance Firms

Assurance providers regularly interact through:

• professional associations;
• standard-setting processes;
• industry working groups;
• regulatory consultations;
• technical committees.

Such cooperation may be legitimate.

However, exchange of competitively sensitive information concerning:

• fees;
• client allocations;
• future pricing;
• capacity;
• strategic expansion;
• customer switching;

could facilitate coordination.

The competition-law distinction is therefore between legitimate technical cooperation and coordination that reduces independent competitive decision-making.

11. Fee Coordination

ESG assurance is a relatively developing market.

There may be uncertainty regarding:

• appropriate audit hours;
• risk premiums;
• complexity adjustments;
• specialist fees;
• sector-specific pricing.

Professional associations or groups of providers should therefore be cautious about recommendations that effectively standardise prices.

A mandatory assurance market is particularly susceptible to coordination because clients cannot simply decide to purchase no assurance at all.

12. Client Allocation

Competition concerns may arise if large firms agree, formally or informally, to divide:

• industries;
• geographic regions;
• listed-company clients;
• sectors such as banking, energy or mining.

Such arrangements could eliminate competition for customers and make the market resemble a collection of protected territories.

Client allocation is therefore potentially much more serious than ordinary professional cooperation.

13. Switching Costs

Switching an ESG assurer may require:

• transferring ESG databases;
• reviewing historical calculations;
• understanding previous materiality assessments;
• rebuilding assurance documentation;
• revalidating controls;
• training personnel.

These costs can create customer lock-in.

An incumbent provider could potentially exploit this by imposing:

• long contractual terms;
• automatic renewal;
• restrictive termination clauses;
• excessive transition charges;
• technical restrictions on data portability.

Competition authorities should distinguish genuine transition costs from strategically created switching barriers.

14. Cross-Market Leverage

A firm dominant in financial audit could potentially leverage that position into ESG assurance.

The theory would be:

Market A: statutory financial audit
↓
Market B: ESG assurance

If clients perceive the financial auditor as the natural or required ESG assurer, independent competitors may have difficulty obtaining scale.

This is particularly important because the traditional audit market has already been investigated for competition problems.

15. ESG Assurance and Consulting Conflicts

A major structural issue concerns the relationship between assurance and consulting.

A firm might simultaneously provide:

• ESG strategy consulting;
• sustainability-report preparation;
• carbon accounting;
• ESG software;
• ESG assurance.

This creates two competition-related concerns.

First: foreclosure

A firm providing consulting services may be able to channel the client toward its own assurance services.

Second: independence

The assurance provider could effectively be reviewing work that it helped create.

EU rules consequently impose restrictions concerning non-audit services and independence in the relevant circumstances.

16. Competition and Quality

Competition in assurance is unusual because price competition alone is insufficient.

An assurance provider competes on:

• reliability;
• independence;
• technical expertise;
• reputation;
• sector knowledge;
• methodology;
• technological capability;
• turnaround time;
• price.

A very low price that results in inadequate assurance can harm the market.

Accordingly, competition law should not treat every regulatory quality requirement as an anticompetitive restriction.

The appropriate objective is:

effective competition subject to minimum assurance-quality and independence standards.

17. Six Important Case Laws and Competition Authorities

Because ESG assurance is a comparatively new market, there are relatively few reported judgments dealing specifically with ESG assurance itself. The following authorities are therefore important directly or by analogy, particularly for professional-service concentration, regulated professions, bundling, market power and competition restrictions.

Case 1 — CMA, Statutory Audit Services Market Investigation

United Kingdom, 2011–2014

The UK authorities investigated competition in statutory audit services for large companies. The investigation identified concerns concerning concentration, barriers to entry and switching and ultimately resulted in remedies.

Relevance to ESG assurance

This is one of the closest competition-law precedents for ESG assurance.

It demonstrates that professional services can constitute a competition market even where:

• customers select their own provider;
• quality is heavily regulated;
• professional independence is important.

The same reasoning can apply where incumbent financial auditors automatically capture ESG-assurance engagements.

Case 2 — CMA, Statutory Audit Market Study

United Kingdom, 2018–2019

The CMA examined whether the statutory audit market was functioning competitively. It identified serious competition concerns, including limited choice and concentration among the largest audit firms.

Relevance

The case illustrates the potential structural competition problem in ESG assurance.

If mandatory ESG assurance simply follows the incumbent financial auditor, market concentration can be reproduced rather than creating a genuinely independent ESG-assurance market.

Case 3 — Wouters and Others v Algemene Raad van de Nederlandsche Orde van Advocaten

CJEU, Case C-309/99

The Court considered competition rules in the context of professional regulation and recognised that not every restriction adopted by a professional body necessarily violates competition law.

Relevance

ESG assurance will necessarily involve professional standards.

Rules concerning:

• independence;
• professional ethics;
• competence;
• conflicts of interest;
• assurance quality

may restrict competitive conduct.

Wouters is therefore important because it illustrates the need to examine whether professional restrictions are genuinely connected with legitimate professional objectives and proportionate to them.

Case 4 — Arduino

CJEU, Case C-35/99

The case concerned professional fee regulation and the application of EU competition principles to rules governing a regulated profession.

Relevance

The case is useful for analysing ESG-assurance fee structures.

If professional bodies or regulators develop common fee schedules, the competition-law question becomes whether the system merely establishes legitimate professional regulation or unnecessarily eliminates independent price competition.

Case 5 — O.T.O.C. v Autoridade da Concorrência

CJEU, Case C-1/12

The Court examined competition rules in relation to a professional regulatory body and restrictions affecting the market for accounting services.

Relevance

This is particularly relevant because ESG assurance lies close to accounting and auditing.

It demonstrates that professional organisations performing regulatory functions can still come within competition-law scrutiny when their rules affect market access or competitive behaviour.

The case is therefore useful for analysing:

• accreditation;
• professional licensing;
• restrictions on new entrants;
• scope-of-practice rules;
• regulatory barriers.

Case 6 — CNSD v Commission

CJEU, Case C-35/96

The case concerned a professional organisation and competition rules in relation to regulatory arrangements governing professional services.

Relevance

The principle is useful for ESG assurance because professional organisations may have dual roles:

1. protecting professional quality; and
2. influencing the competitive conditions under which members operate.

Where a professional association establishes ESG-assurance standards, membership conditions or commercial rules, the competition implications must therefore be examined carefully.

18. Comparative Lessons From the Case Law

The authorities collectively suggest several principles relevant to ESG assurance.

19. Merger-Control Concerns

Consolidation may occur at several levels:

A. Audit-firm mergers

Two large audit firms combining could reduce the number of ESG-assurance suppliers.

B. Audit + ESG-data acquisition

A large auditor acquiring an ESG-data provider could vertically integrate assurance and data.

C. Assurance + ESG-rating provider

Combining assurance and ratings may create competitive advantages through access to proprietary information.

D. Software + assurance

An ESG-reporting software company acquired by an assurance firm could give the firm preferential access to customers and data.

Merger analysis should therefore consider pipeline effects and future ESG-assurance markets, rather than only current revenue.

20. Potential Abuse-of-Dominance Theories

Where a provider possesses substantial market power, the following theories may become relevant:

1. Tying

Financial audit services are tied to ESG assurance.

2. Bundling

A combined financial-audit/ESG package is offered on terms that make independent purchasing unattractive.

3. Exclusive dealing

Customers are discouraged or prevented from using rival ESG assurance providers.

4. Discriminatory access

Independent assurance providers receive inferior access to data or technology.

5. Excessive pricing

A dominant provider charges materially excessive assurance fees, subject to the applicable legal test.

6. Refusal to supply

A dominant data or technology provider refuses access that competitors genuinely require.

21. Competition Concerns From AI-Based ESG Assurance

AI will increasingly be used to:

• analyse emissions data;
• detect anomalies;
• verify supply-chain information;
• compare ESG disclosures;
• assess climate-risk models;
• identify inconsistencies.

This may create a new source of competitive advantage.

A large provider with access to millions of historical ESG datasets could potentially develop better AI assurance models than smaller competitors.

The resulting advantage is not automatically unlawful. It becomes a competition issue where proprietary data, interoperability restrictions or exclusionary conduct prevent effective competition.

22. Remedies

Possible competition-oriented remedies include:

Structural measures

• encouraging independent assurance providers;
• preventing excessive concentration;
• merger remedies.

Behavioural measures

• transparent pricing;
• non-discriminatory data access;
• reasonable switching provisions;
• data portability;
• prohibition of tying.

Regulatory measures

• proportionate accreditation;
• mutual recognition of qualified providers;
• transparent assurance standards;
• independent oversight.

Market-opening measures

• joint assurance arrangements;
• tendering requirements;
• mandatory periodic auditor rotation;
• separate procurement of financial audit and ESG assurance.

These remedies must nevertheless preserve assurance independence and quality.

23. Key Hypothetical

Suppose Company X is required to obtain ESG assurance.

Its financial auditor, Firm A, is one of four dominant audit firms.

Firm A tells Company X:

“We will provide your financial audit at the normal fee, but our ESG-assurance team will provide the mandatory sustainability assurance as part of the same engagement.”

A specialist ESG assurer, Firm B, offers a lower price.

However, Firm A refuses to provide Firm B with certain historical audit documentation and ESG-control information unless Firm B pays substantial transfer charges.

Competition issues

This could raise questions concerning:

1. bundling;
2. leveraging financial-audit relationships;
3. switching costs;
4. access to information;
5. discriminatory conditions;
6. foreclosure of specialist ESG providers.

The legality would depend upon the relevant jurisdiction, market definition, market power, actual contractual arrangements and objective justification.

24. Market Definition

A competition authority may need to consider whether the relevant market is:

Narrow

ESG assurance services for large listed companies

or:

Broader

Assurance and verification services

or potentially:

statutory financial audit and sustainability-assurance services

The appropriate market definition would depend upon substitutability.

Relevant factors include:

• accreditation;
• customer requirements;
• technical qualifications;
• price;
• switching costs;
• regulatory recognition;
• geographic scope;
• ability of environmental-verification firms to substitute for statutory auditors.

25. Economic Effects

Competition problems in ESG assurance can ultimately affect the wider sustainability-information ecosystem.

Reduced competition could potentially result in:

• higher assurance fees;
• less innovation;
• slower technological development;
• reduced provider choice;
• weaker incentives to improve assurance methodologies;
• greater dependence on incumbent firms.

Conversely, poorly designed competition remedies could create:

• lower assurance quality;
• insufficient expertise;
• fragmented standards;
• inadequate independence.

The regulatory challenge is therefore to combine competition, independence and assurance quality.

26. Conclusion

ESG assurance is evolving from a largely voluntary sustainability-verification activity into an increasingly regulated professional service. The competition implications are consequently becoming more significant.

The principal concerns are:

1. concentration of assurance providers;
2. automatic migration of financial-audit clients into ESG assurance;
3. bundling and tying;
4. entry and accreditation barriers;
5. restricted access to ESG data and technology;
6. switching costs;
7. information exchange and fee coordination;
8. vertical integration between assurance, consulting, ESG data and software;
9. merger-related concentration; and
10. potential leveraging of financial-audit market power into ESG assurance.

The UK audit-market investigations are particularly instructive because they demonstrate that highly regulated professional services can nevertheless present structural competition problems. The professional-services jurisprudence of the CJEU further demonstrates that professional regulation must be assessed against competition principles, while legitimate quality and independence requirements can justify appropriately designed restrictions.

Thus, the central competition-law question for ESG assurance is not simply whether assurance should be regulated. It is whether the regulatory and commercial structure permits independent, credible and effective competition among qualified assurance providers without compromising the reliability of sustainability information.