Amidst all of the noise and generalities around ESG and carbon footprints and sustainability, there have been some very concrete steps forward taken in the U.S. by SASB over the past couple of years toward clearer and more consistent corporate reporting.
The Sustainability Accounting Standards Board (SASB)
SASB was formed in 2011, so is a young organization. But it’s got on with its job. As the name suggests, the focus of this organization is U.S. corporate financial statements—the 10–Ks and such like that are filed with the SEC each year. In effect, it is built to be an add-on to FASB: while FASB covers the disclosure of material financial data about a corporation, SASB was set up to create standards for the disclosure of sustainability topics that may impact operating performance, topics that might range from greenhouse gas emissions to systemic risk management for financial services firms to fair labor practices.
Tools to help corporations meet increasing expectations
The backdrop to these standards is increasing expectations on the part of investors and others. That’s led to corporations taking a range of approaches to sustainability reporting—whether it’s additional information in the existing financial reports, voluntary supplemental disclosures, integrated reports or the like. SASB’s intent is to standardize what’s contained in corporate financial statements, making it easier for investors to compare practices and results across companies, and giving corporations a clearer definition of what’s expected.
What constitutes a material issue is of course quiet different between different industries: water management, for example, is a critical topic for some industries, but irrelevant for others. So, unlike FASB, SASB has adopted a sector/industry-specific approach. So far, they’ve published standards for 10 sectors and 65 industries, each following a broad-based consultation process and working groups. Two sectors (13 industries) remain; those are expected to be complete by the end of Q1, 2016.
With most of the standards now published, attention is turning to encouraging adoption. Earlier this week, SASB released an implementation guide for companies, which supplements existing materials such as their conceptual framework, a standards navigator, and sample disclosures.
With a heavyweight and influential board of directors chaired by Michael Bloomberg and including a former chair of the FASB (Bob Herz) and no fewer than two former chairs of the SEC (Mary Schapiro and Elisse Walter), the organization does not lack connections. With the attention being paid to questions of sustainability as great as it’s ever been, there is good reason to believe that we’ll be hearing more about SASB in the coming years.