Looking to make informed decisions about sustainability performance?
The Sustainability Accounting Standards Board (SASB), a non-profit developing sustainability accounting standards for companies in various industries, provides a framework for reporting on financially material sustainability information that is important to investors.
SASB has recently been integrated into the International Sustainability Standards Board (ISSB), after having previously merged with the International Integrated Reporting Council (IIRC) to form the Value Reporting Foundation (VRF).
In this article, we'll explore how SASB works and the benefits of using its standards.
Learn how companies can use SASB to improve their sustainability reporting, and how investors can make better decisions based on companies' sustainability performance!
By the end of this article, you'll have a solid understanding of the SASB and the role it plays in driving sustainability disclosure in the corporate world.
The SASB Standards takes a topic specific approach to ESG reporting. The SASB Standards cover 77 different industries and identify subsets of environmental, social, and governance issues within each of said industries.
This structure is specifically designed to help companies disclose financially-material sustainability information; thus, the SASB Standards adhere to a financial materiality (rather than double materiality) approach.
The SASB Standards provide the following components for each industry standard: standards application guidance, a list of disclosure topics, accounting metrics, activity metrics, and technical protocols aimed at making data standardized and comparable. Examples of material issues and metrics for SASB’s industry-specific approach can be found here.
SASB Standards are often used in conjunction with the GRI Standards, as the two sets of Standards have divergent but complementary approaches (SASB focuses on financially material information and GRI focuses on stakeholder impacts).
SASB Standards are especially useful for more granular topics as they provide key performance indicators (KPIs) and metrics related to climate risks and opportunities that are tailored for industry-specific concerns. The SASB Standards are free to download for non-commercial use.
The SASB Standards define sustainability as “corporate activities that maintain or enhance the ability of a company to create long-term shareholder value”. Sustainability accounting is the measurement, management, and reporting of said activities.
The VRF groups sustainability-related activities into five different dimensions:
The SASB Standards provides a wide array of resources to help companies determine and meet their needs.
The list below links to some relevant pages that companies may want to explore in the process of their sustainability reporting (this is not an exhaustive list).
All organizations can use the SASB Standards, as there are no strict requirements on who may use the framework.
However, due to the topic-specific nature of the SASB Standards, they are most commonly utilized by investors and private companies.
The VRF page on global use of SASB standards states that “[m]any types of market participants, including companies, advisors, and others, support and use SASB via becoming members of the SASB Alliance and/or licensing SASB Standards”.
SASB is used globally, and according to a 2021 SASB report, “[m]ore than 225 asset owners and asset managers, representing approximately $72 trillion in assets under management across Asia, Europe, the Middle East, North America, and South America participate in the SASB Alliance, or have licensed SASB Standards for use in investment tools and processes”.
SASB is mainly used by companies and investors to assess the material issues of a specific industry/company, and to identify expected metrics.
The SASB Standards help companies benchmark with industry peers by providing guidance on which material issues and key metrics to focus on and report out on.
Companies will commonly include a SASB Correspondence Table in their Sustainability or CSR Report to indicate how they used the Standards, and to further explain quantitative and qualitative data in the report.
On the other hand, investors may use the SASB Standards to assess, compare, and further understand their portfolios.
SASB Standard guidance provides investors with additional context on industry standards (ie. informs investors of the ESG reporting norms within a specific industry), thus allowing investors to identify leaders and laggards within their portfolio, and better understand risks and opportunities.
The biggest benefit of the SASB Standards specifically (also the biggest limitation) is that they are industry specific.
Material issues vary by industry, so industry-specific disclosure guidance is time- and cost-effective and reduces the reporting burden by honing in on the most relevant issues. On average, each SASB industry standard includes 6 disclosure topics and 13 accounting metrics.
Also, sustainability reporting in general, with any standard, confers a number of benefits.
Namely, companies that produce high quality sustainability reports are more likely to enjoy a positive reputation in the eyes of stakeholders and the general public, as compared to competitors who do not produce sustainability reports. Sustainability reports also provide vital information on material issues and help support overall risk assessments.
This was shown by a 2015 Harvard working paper (“Corporate Sustainability: First Evidence of Materiality”) that tracked the performance of 2,307 unique firms over 13,397 unique firm-years across 6 sectors and 45 industries, ultimately finding that firms that addressed financially material sustainability factors had significantly higher accounting and market returns.
Finally, as the VRF stresses, ESG reporting is increasingly necessary to meet investor needs and expectations. Investors are recognizing the need for comparable, consistent, and reliable data, and see the SASB Standards as one tool for achieving quality disclosure.
Investors benefit from SASB Standard usage as well; the Standards enable companies to provide comparable, consistent ESG data, which in turn gives investors a clearer understanding of a company’s prospects and enables them to make more informed decisions.
The VRF states that investors have “historically lacked access to comparable, standardized data they need to inform their decisions,” and markets the SASB Standards as a tool for integration and communication of ESG considerations (in investment and stewardship decisions).
The SASB Standards provides an Implementation Primer that walks companies through reporting and communicating with investors with the SASB Standards. A graphic of the suggested steps to link sustainability to business performance is shown below.
There is no audit phase, and no set timeline for this process.
The SASB Standards are a voluntary framework to aid in sustainability reporting, and issues recommendations for best practices, rather than requirements.
As with most other frameworks, there is no universally accepted, official verification process for confirming the quality of reports created in line with the SASB Standards.
However, do note that the SASB updates its Standards via a project-based model (process shown in the diagram below), so regularly checking the SASB Standards and metrics for updates is recommended.
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