I joined the SASB board of directors because I believe that, while the U.S. capital markets and regulatory system are the best in the world, they can still be—and, indeed, must be—improved for the benefit of investors, issuers, and markets. That belief drove my focus more than 10 years ago, when I was Director of Corporation Finance at the SEC, and continues to do so today.
In today’s rapidly changing business landscape, investors often look beyond financial statements to understand how companies create long-term value. Financial reporting today has not kept pace with both company managers and investors’ interest in broader categories of information that are also material to operations and financial performance. Recognition of this point explains in large part why the SEC included sustainability matters as a subject in its disclosure effectiveness initiative and why it has received extensive comment favoring more and improved sustainability information.
SASB’s sustainability accounting standards respond to the call for improved sustainability disclosure. Indeed, the emphasis of SASB standards on securities-law concepts of materiality and their focus on industry standards represent a natural evolution of traditional financial reporting and a practical pathway to the goal of more effective sustainability disclosure. Moreover, while sensible and forward-looking regulation is important, a company should not only aim for compliance in its disclosure practices, but also help establish and enhance best practices. Considering the SASB standards is one way to achieve that objective.
In this inaugural report, SASB presents a review and analysis of current sustainability disclosures included in hundreds of SEC filings across every major industry. The findings serve as both a reason for optimism and a reminder that much work remains to be done. Although companies appear to have increasingly recognized the risks and opportunities involved in managing material sustainability issues, they have also struggled to communicate them effectively to their investors.
To be clear, this report is a review of disclosure—not performance. It’s up to the market to assess the latter. In doing so, markets would benefit from improved quality, consistency, and comparability of information, rather than the boilerplate that, according to this report, currently characterizes more than half of the disclosures reviewed.
This report suggests that companies can do better and provides some examples as to how that is accomplished. It is provided in the spirit of contributing to the debate as to the ways in which we can improve sustainability reporting effectively and responsibly.
Member of SASB’s Board of Directors
Former Director of the Division of Corporation Finance, U.S. Securities and Exchange Commission
To download SASB’s Annual State of Disclosure Report, visit the SASB Library.