SASB’s approach to determining materiality for the purposes of standard-setting is informed by the provisions of the federal securities laws and the regulations of the Securities and Exchange Commission (“SEC”), including in particular Regulation S-K; opinions of the U.S. Supreme Court; and interpretations and guidance issued by the SEC.
Together with robust vetting and verification, this is a conservative and rigorous approach. Specifically, SASB’s standard-setting process is evidence-based, market-informed, and validated through research and quantitative analysis focused on determining whether performance on a given topic would affect the financial condition and operating performance of the company, and thereby be reasonably likely to affect the investment or voting decision of a reasonable investor.
With this process, SASB is able to identify topics that are reasonably likely to be material to investors and therefore warrant inclusion as a topic for standardized disclosure, and thereby improve the decision-usefulness of information contained in SEC filings (such as Forms 10-K and 20-F). The below diagram outlines the steps in SASB’s process. For a more detailed description, please see the Approach to Materiality & Standards Development – Staff Bulletin.
The SASB Standards Board is accountable for the due process, outcomes, and ratification of the SASB standards, including ongoing changes to the standards going forward. The members of the SASB are appointed by the SASB Foundation Board of Directors. The governance documents guiding the SASB Standards Board are the SASB Conceptual Framework and SASB Rules of Procedure.
A grievance process to address comments on the SASB Rules of Procedure has been established as well.