SASB Standards & Other ESG Frameworks
The Sustainability Reporting Ecosystem
A wide range of constituencies—including investors, companies, policy makers, regulators, NGOs, and civil society—use corporate sustainability reporting to inform a wide range of decisions. A dynamic ecosystem of organizations has evolved to meet these various information needs. Disclosure standards and frameworks, including the SASB Standards and Integrated Reporting Framework, are the foundation of this ecosystem. They facilitate the disclosure of comparable, consistent, and reliable ESG information. Using this information, data providers and rating agencies can build tools, analytics, and resources for the capital markets.
Narrowing in on Standards and Frameworks
It is important to distinguish between sustainability frameworks and sustainability standards. Frameworks provide principles-based guidance on how information is structured, how it is prepared, and what broad topics are covered. Meanwhile, standards provide specific, detailed, and replicable requirements for what should be reported for each topic, including metrics. Standards make frameworks actionable, ensuring comparable, consistent, and reliable disclosure. Frameworks and standards are complementary and are designed to be used together.
How SASB Standards fit into the reporting ecosystem
SASB Standards identify the sustainability information that is financially material, which is to say material to understanding how an organization creates enterprise value. That information – also identified as ESG (environmental, social, and governance) information – is designed for users whose primary objective is to improve economic decisions.
- Broader than SASB Standards: Impact materiality captures the significant impacts an organization has on the economy, environment, and people that are not captured by enterprise value. There are a variety of users with a range of objectives who want to understand an organization’s positive and negative contributions to sustainable development.
- SASB Standards: Financial materiality in the context of sustainability information represents the sustainability factors that are material to short, medium, and long-term enterprise value.
- Narrower than SASB Standards: Financial reporting captures the information already reflected in the financial accounts, which includes assumptions and cashflow projections. The primary users are those whose primary objective is to improve economic decisions.
Achieving Simplification in the Sustainability Disclosure Landscape
Businesses and investors have long called for clarity and simplification in the sustainability disclosure landscape. Several milestones over the last few years have resulted in significant progress towards this necessary clarity.
The first milestone was collaboration between leading framework providers and standard setters. In September 2020, CDP, CDSB, GRI, IIRC and SASB announced a shared vision for a comprehensive corporate reporting system that includes both financial accounting and sustainability disclosure, connected via integrated reporting. The joint statement outlined how existing sustainability standards and frameworks can complement generally accepted financial accounting principles (Financial GAAP). As outlined in this joint statement, various frameworks and standards offer complementary approaches, as they are designed for unique sets of stakeholders and are based on unique definitions of materiality. Companies can use different frameworks and standards as building blocks to develop a system of disclosure tailored to the unique needs of their stakeholders.
The second milestone was a collaborative work plan, announced in July 2020, to show how companies can use GRI and SASB Standards together. SASB Standards focus on sustainability issues expected to have a financially material impact on the company, aimed at serving the needs of most investors and other providers of financial capital. GRI Standards focus on the economic, environmental, and social impacts of a company in relation to sustainable development, which is of interest to a broad range of stakeholders, including investors. A Practical Guide to Sustainability Reporting Using GRI and SASB Standards shows how companies are using the two sets of standards together and provides reporters with insights from peer companies to support their sustainability reporting and disclosure journeys.
The third milestone was the IIRC and SASB’s consolidation into the Value Reporting Foundation, which was announced in November 2020 and finalized in June 2021. By integrating two entities that were focused on enterprise value creation, this merger represented significant progress towards simplifying the corporate reporting landscape. The Value Reporting Foundation was a global nonprofit organization that offered a comprehensive suite of resources, including the Integrated Thinking Principles, the Integrated Reporting Framework, and SASB Standards.
The fourth milestone was the IFRS Foundation’s decision–announced in November 2021–to establish the International Sustainability Standards Board (ISSB) to develop a comprehensive global baseline of sustainability disclosure to meet investors’ information needs, and to consolidate with the Value Reporting Foundation and the Carbon Disclosure Standards Board (CDSB) to help establish the ISSB. The VRF consolidated into the IFRS Foundation in August 2022. The ISSB builds on the work of TCFD, CDSB, SASB and the Framework. By incorporating TCFD and SASB into its exposure draft standards in a significant way, the ISSB has directly responded to market demand for simplification of the sustainability disclosure landscape.
Aligning Metrics in SASB Standards
When formulating accounting metrics for its disclosure topics, the SASB Standards Board and Technical Staff considered the existing body of reporting standards and used existing metrics whenever possible. SASB Standards reference metrics already in use by industry, from more than 200 entities, such as WHO, CDP, EPA, OSHA and industry organizations such as ICAO, IPIECA, EPRI and GRESB. Aligning SASB Standards with existing reporting standards avoided additional costs for companies and aligned SASB Standards with global corporate transparency efforts.