Understanding Sustainability Reporting Frameworks: A Look at the Sustainable Accounting Standards Board (SASB)
If your company is looking to release a report on its environmental, social, and governance (ESG) or sustainability work, you’ll likely need to determine how to best align your initiatives to a set of internationally-recognized standards. It can be confusing: between the Global Reporting Initiative (GRI), the Sustainable Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD) (and that’s just to name a few), it’s no wonder the sustainability reporting landscape is often referred to as alphabet soup.
Last month, Uplift published an article on the most utilized reporting framework, the Global Reporting Initiative (GRI). Next up: the Sustainable Accounting Standards Board, or SASB.
What is SASB and why is it important?
Sustainability has become a mainstream element in investment decision making. Increasingly, companies are being called upon to provide details on sustainability-related risks and opportunities. Now part of the International Sustainability Standards Board (ISSB), SASB establishes and maintains industry-specific standards for guiding companies’ disclosures of financially material sustainability information to investors and other stakeholders.
Sustainability and social impact topics can directly impact the financial condition and operating performance of a company, for better or for worse. Consider a few examples:
Only recently, multiple global retailers reached a $5.5 million total settlement with the Federal Trade Commission in response to “deceptive eco-friendly claims” about their products.
On the flip side, the cost savings of sustainable business practices can be huge. At a basic level, for example, companies can save money by investing in energy-efficient technologies like LED lighting and renewable energy projects.
Additionally, approximately 55 percent of Gen Z and Millennials research the environmental policies and impacts of brands before accepting a job, and roughly 60 percent of this group say they are willing to pay more for sustainable products.
What sets SASB apart?
SASB Standards are industry specific and focus on financially material sustainability issues.
Industry-specific: Since not all sustainability issues matter equally to each industry–and the same sustainability issue can manifest differently across industries–SASB Standards are industry-based. This distinction means that there are different sets of standards identified for use across 77 different industries, based on what is most relevant to companies’ financial performance.
Financially material: SASB Standards also focus on sustainability disclosure topics that are reasonably likely to significantly impact the financial condition, operating performance, or risk profile of companies in each industry. The standards are a useful tool for companies to disclose sustainability information that it has determined to be material to its business. Though definitions of materiality can vary, SASB is designed to facilitate the disclosure of the subset of detail most likely to be considered by investors in their assessments of enterprise value. SASB is, first and foremost, a financial tool.
SASB Standards were developed based on extensive feedback from companies, investors, and other market participants as part of a transparent, publicly documented process. This detailed and transparent undertaking includes evidence-based research, broad participation from companies, investors, and subject matter experts, as well oversight and approval from an independent Standards Board.
Should my company focus on GRI or SASB?
Since SASB Standards and GRI Standards are compatible for sustainability reporting, many companies use both to meet the needs of various stakeholders. In general, SASB and GRI are designed to fulfill different purposes and are based on different approaches to materiality.
While SASB Standards focus on sustainability issues most likely to be considered by investors in their assessments of enterprise value, GRI Standards focus on the economy, environmental, and social impacts of a company in relation to sustainable development (which, of course, can also be of interest to a broad range of stakeholders–including investors).
As companies are increasingly expected to disclose their sustainability performance, reporting based on both GRI and SASB Standards, while not required, can provide the depth of disclosure that an organization’s stakeholders are looking for.
What’s next?
We’ve said it before and we’ll say it again: Measuring and sharing progress on your company’s commitment to sustainability topics is about so much more than the reputation bump you receive from telling a positive public story.
Effectively managing ESG issues is likely to improve business performance, including reduced operating costs, enhanced reputation, greater resilience to risks, and increased long-term enterprise value.
If you need help determining the best framework for your company or aligning your reporting, Uplift is here to help.
The Uplift Agency
Uplift builds strategies, programs, and communication campaigns that advance ESG in workplaces, supply chains and communities.
We know how to navigate the road ahead because we’ve already been down it – 90 percent of our team has led environmental or social programs in corporations or nonprofits. Because ESG is all we do, our services are more comprehensive and integrated than most firms.
