Sustainable Industry Classification System™ (SICS™)
Most major industry classification systems use revenue as their basis for classifying companies into specific sectors and industries. However, a company’s market value is determined by much more than its financial performance; in fact, in many industries it is estimated that as much as 80% of market capitalization is made up of intangibles, such as human capital, intellectual property and brand. Given this and the fact that we face a resource-constrained future, SASB developed the Sustainable Industry Classification System (SICS), which categorizes industries in order to acknowledge their resource intensity as well as their sustainability innovation potential. The system is tied back to a standard classification system (e.g., GICS and BICS) so users don’t have to learn another system.
SASB’s main work is establishing and maintaining industry-specific sustainability accounting standards appropriate for use in standard filing instruments, such as the Form 10-K and 20-F. Standards are being developed for all of the 88 industries populating SICS’s lowest level. The system then classifies the industries at a middle level, or Industry Groups, based on sustainability impact similarities. The Industry Groups serve an operational purpose as SASB will create Industry Working Groups (IWG) at this level for the development of the sustainability accounting standards. Finally, at the highest level, the Industry Groups and their Industries are grouped into 10 Thematic Sectors, which are primarily a reflection of the type of resources used or a reflection of the ultimate purpose given to these resources.
Please click here to learn more about and to see the Sustainable Industry Classification System.
SASB Materiality Map™
Our SASB Materiality Map is the starting point for understanding the relative materiality of issues in each industry and developing sustainability accounting standards. Our approach includes five data driven, backwards looking tests and two sets of forward looking adjustments. The five tests address:
- Financial risks
- Regulatory and policy drivers
- Industry norms and competitiveness
- Stakeholder concerns
- Opportunities for innovation
The two adjustments address linkages to operational value drivers such as revenue growth, return on capital, risk management, and management quality. The adjustments also address principles of sustainability such as intra-generational effects and systemic impacts. The material issues are then ranked according to their relative materiality and a threshold is established by which material sustainability issues are determined for each industry.
Please click here to go to the SASB Materiality Map.
SASB Sustainability Accounting Standards™
For those issues deemed material, SASB is creating industry-specific sustainability accounting standards that enable a company to characterize their performance with respect to the issue. A standard will be developed for each of the 88 industries in the SICS. The standards describe both impacts as well as opportunities for innovation. Taken together, they characterize a company’s positioning with respect to sustainability issues and the potential for long term value creation.
Disclosure using SASB’s sustainability accounting standards will enable:
- All U.S. publicly listed companies to engage in cost-effective sustainability disclosure
- Peer to peer company comparison by investors and the public
- Focused efforts by companies to improve performance on material issues
- A comprehensive view of material sustainability risks and opportunities for investors
- Public access to sustainability data free of charge via the Form 10-K, 20-F and the SEC EDGAR database
- Improvement of U.S. industry competitiveness on key dimensions of sustainability
To learn more about SASB’s sustainability accounting standards click here: SASB Sustainability Accounting Standards