FASB, SEC, FTC, and… SASB? For controllers, this new set of standards may not feel familiar, but those looking at the future may need to look to these new standards for advice. Today, we look at a few things you should know about the Sustainability Accounting Standards Board and their guidance.
According to Pensions and Investments Online, Investors in U.S. companies are eager for more uniform ESG reporting from those companies that allows for apples-to-apples comparisons of the information most relevant for their investment decisions.
What are the SASB Standards?
Citing a variety of studies from the Sustainability Accounting Standards Board, the group has developed 77 industry standards designed to evolve along with investors’ needs and to connect the measures to performance.
Understandably, in the wake of social unrest, companies have looked toward ESG investments as a priority—and the SASB has become the leading voice for ESG insights. This has only become more prevalent in recent months, as COVID-19, climate change, and more, has driven investors to look for new metrics.
“The prospect of uniform ESG reporting advanced further in July when SASB and the Global Reporting Initiative joined forces to help users of sustainability data understand the similarities and differences in their respective standards, which vary by purpose and approach to materiality. GRI standards focus on the economic, environmental and social impacts of a company, and positive or negative contributions toward sustainable development. Users of GRI standards identify the issues most important to their stakeholders.”
As the leading voice for Controllers, we will be discussing the evolution of standards as they come into consideration, and hope to highlight all 77 industry-based standards. However, leading up to this, we would today like to discuss the primer on the SASB website, focused on understanding the standards and determining how they may affect you.
Goals of SASB Standardization
A company can begin this process by familiarizing itself with SASB terminology and the structure of SASB standards, which can be downloaded free of charge. In reviewing SASB standards, a company should familiarize itself with the following components:
- Standards Application Guidance: In reviewing its industry standard(s), a company should begin with this supplementary document, which provides universal implementation guidance applicable to all industry standards.
- Disclosure topics: Each SASB standard includes a set of disclosure topics, which vary from industry to industry. The standard lists and briefly describes how management or mismanagement of various aspects of the topic may impact a company’s ability to create long-term value. On average, SASB standards include 6 disclosure topics per industry.
- Accounting metrics: Each SASB standard provides companies with standardized quantitative—or, in some cases, qualitative—metrics intended to measure performance on each disclosure topic or an aspect of the topic. On average, SASB standards include 13 accounting metrics per industry.
- Technical protocols: Each sustainability accounting metric is accompanied by underlying technical protocols that provide guidance on definitions, scope, accounting, compilation, and presentation, and which may also serve as the basis for suitable criteria for an independent, third-party assurance engagement. The technical protocols help ensure that metrics are compiled consistently and enable comparisons across companies.
- Activity metrics: The standard also includes activity metrics to measure the scale of the issuer’s business, providing operational context and facilitating normalization of SASB accounting metrics, which is important for the analysis of related disclosures.
Those looking to adopt new standards are urged to look at the SASB Sustainable Industry Classification System, take steps to determine which disclosure topics are applicable, and look at the guidance to answer more questions.
Stay ahead of the Trends: Join the Controllers Council
The SASB Standards joins a variety of other initiatives expected to change reporting and compliance initiatives. Over the coming months, we will take a deeper dive into this and other initiatives controllers need to stay vigilant of. Looking for the best place to discuss these changes? Join the Controllers Council!