By: Melisa Galasso
Blog Series (Post 1 of 3)
Sustainability is becoming a major topic for companies and as a result, the disclosure of sustainability metrics has grabbed the attention of accountants. More than half of the Fortune 500 companies, as well as those included in the S&P Index, are publishing sustainability and responsibility reports.
The Sustainability Accounting Standards Board (SASB), a nonprofit organization working to develop standards for the disclosure of sustainability metrics in US-based, publicly-traded corporations, was accredited by the American National Standards Institute (ANSI), and publicly launched in 2012. Supporting the work of the Securities and Exchange Commission (SEC) and complementing the Financial Accounting Standards Board (FASB), SASB is creating Sustainability Standards to assist companies in identifying relevant sustainability data for disclosed in the Form 10-K and Form 20-F. The SEC mandates that Management Discussion & Analysis (MD&A), produced by public companies, must include any material relevant data necessary for potential investors to better understand their operations. The term material is defined by Securities Law.
Sustainability issues range from environmental and human capital, to business models and innovations. The Board’s goal is to provide guidance as to what industry-specific, nonfinancial information would qualify as material to an investor and therefore would require disclosure. As a result, quantifiable and industry-related Environmental, Social and Governance (ESG) data is being identified by the SASB.
SASB uses sector research to write these standards, which are then given to industry working groups for evaluation and refinement prior to being released for public comment. After the comment phase ends, SASB reviews and updates them so that they can’t be released for public use. Through consensus, its goal is to identify metrics that are comparable, relevant, useful, cost effective, comparable, and auditable. The goal of SASB is to standardize metrics and provide guidance for more than 80 industries, across 10 sectors, over a two-and-a-half-year period, which began in the fourth quarter of 2012 with focus on the healthcare sector. SASB announced a corporate pilot program in the fourth quarter of 2013, to help companies apply these standards for disclosing material ESG issues in annual SEC filings.
Along with SASB’s efforts to improve disclosures related to sustainability reporting, the Global Reporting Initiative (GRI) provides general non-industry specific guidance to be used by both public and private companies. Based in the Netherlands, GRI differs from SASB’s standards. For example, the GRI is a great option for private companies who are interested in disclosing sustainability data. Meanwhile, SASB standards are designed to be used by public US companies that file a Form 10-K or international public companies that file a Form 20-F. Also, the GRI is not industry specific and is designed for both public and private companies. Recently, GRI released G4 (the fourth generation of the GRI sustainability reporting guidelines), which replaces the present G3.1 at the end of 2015.
On October 8, 2013, I had the privilege of interviewing Dr. Jean Rogers, the Founder and Executive Director of SASB. We had a great discussion regarding the future of sustainability reporting. The next post in this series will be the first half of my fruitful interview with her, so please stay tuned!
Melisa is an Audit Manager in the Professional Practices Department at Cherry Bekaert, LLP, in Charlotte. She currently serves on NCACPA’s Accounting & Attestation Committee and is Chair-Elect of the Charlotte Chapter. Melisa can be reached at [email protected]