To enhance corporate disclosure, there’s no shortage of ESG guidance and benchmarking frameworks to enable comparison between companies and supply externally validated information to various stakeholders. In this blog – we examine the role of one sustainability guidance framework – Sustainable Accounting Standards Board (SASB).
What is SASB?
To distinguish between guidance and reporting frameworks, it’s important to understand materiality – who is the intended audience of the framework, and how they intend to use the information disclosed (to make financial decisions, compare performance between organizations, or to ensure compliance).
The Sustainability Accounting Standards Board (SASB) is an ESG guidance framework that sets standards for the disclosure of financially material sustainability information by companies to their investors.
In total, SASB Standards track ESG issues and performance across 77 industries.
Who is using SASB now?
Asset management companies, like BlackRock, Goldman Sachs, and Morgan Stanley, manufacturing giants, like GM and Nike, and even specialized industries with companies like Merck and JetBlue use SASB’s Standards to disclose ESG metrics. SASB also supplies resources to explain how investors across multiple asset classes use the standards. These tools allow organizations to be specific and report with a system that allows for transparency and relevancy with their investors.
How is SASB structured?
SASB’s approach is to first categorize industries and sectors and then use nuances of each industry to define materiality of specific sustainability accounting criteria.
The SASB Materiality Map graphically displays the complete set of 77 Industry Standards (aligned to US based Sustainable Industry Classification System, or SICS) including specific industries within Finance, Food & Beverage, Healthcare, Transportation, and many more.
The industry-specific approach allows the Standards to cater to each type of business, supplying detailed guidance and examples of best practice to report 26 different ESG-related metrics of most any business that pursues this reporting framework.
How should organizations take on SASB guidance?
SASB asks companies to highlight specific disclosures and supply guidance on best practice for communicating those Environmental, Social, and Governance topics through standardized formatting. SASB’s requirements are focused on what information should be disclosed, but only supplies recommendations on where to disclose or how to share the ESG-related information. This flexibility aims to allow companies to share these data points through a means that makes sense for their organization, whether by Annual Report, Registration Document, or other financial reporting system.
What level of “E” in ESG is covered in SASB reporting?
SASB’s Environmental Reporting covers a variety of quantitative metrics within GHG Emissions, Air Quality, Energy Management, Water & Wastewater, Waste & Hazardous Materials, and Ecological Impacts.
Each category gets specific, asking for disclosure of data points in Scope 1, Scope 2, and Scope 3 emissions, measured on a company-wide portfolio level. The Standards reference other established US-based standards and certifications systems, such as ENERGY STAR.
In the Standards, a building owner, for example, would fall under the Real Estate Industry within the ‘Infrastructure’ Sector. This specific set of Standards uses language that is aligned to the industry, describing their Accounting Metrics to relate to tenants, owner/operator, and floor area. Many of the Standards apply to data points that may be measured in ESG reporting software like Envizi.
How does SASB compare to other ESG frameworks?
SASB’s framework is built to support companies in sharing their outward ESG impacts through the language of investors, debt holders, and internal financial stakeholders.
Of the other ESG reporting frameworks, the Global Reporting Initiative (GRI) is most similar to SASB, but supplies more broadly material information for reporting to stakeholders who are not just financial.
ESG performance is now considered a key indicator of business health and long-term financial viability. Increasingly, governments, investors, financial institutions and the general public are using ESG guidance and reporting frameworks like SASB and TCFD to compare peers and distinguish the ESG leaders from the laggards.
Calls are now growing for a global standard to satisfy the needs of this wide range of stakeholders. With an eye towards reducing the reporting burden on companies, the Corporate Reporting Dialogue was convened by the International Integrated Reporting Council (IIRC) to strengthen cooperation, coordination and alignment between key standard setters and framework developers. Members of the Corporate Reporting Dialogue consist of CDP, GRI, SASB, the Climate Disclosure Standards Board (CDSB), the International Accounting Standards Board (IASB), and the International Organization for Standardization (ISO) with the Financial Accounting Standards Board (FASB) as an observer. Back in December Janine Guillot, Head of the Sustainability Accounting Standards Board (SASB) told Barron’s that ESG reporting standards ‘could converge within 12 to 24 months’.
Ultimately, the current reality is that ESG reporting is a complex space, and it can be a burden for a company to report to multiple frameworks. But with a strong data foundation in place, a company can set itself up well to meet reporting requirements regardless of whether a single, comprehensive framework comes to fruition.