IFRS Foundation
August 8, 2017

SASB Standards to Inform Enterprise Risk Management (ERM)

Alex Davidson
Manager of Marketing & Community Insights, SASB

On the heels of a new white paper, Want to Get Serious About Sustainability? Use SASB’s Standards to Inform ERM, author Gregg Anderson, Managing Director at Crowe Horwath, took time to answer some key questions about his paper and how ERM relates to SASB.

SASB and Enterprise Risk Management (ERM) Why do you think more and more companies are making the link between sustainability and enterprise risk management?

I think it is very natural for these two disciplines to be linked together. Sustainability and Enterprise Risk Management (ERM) are helpful concepts for company leadership to execute on their chosen strategies. Sustainability helps leaders think about long term value creation strategies. ERM helps leaders think about the uncertainties in realizing long term value.

In today’s environment, sustainability and enterprise risk management must have agreement on these fundamental questions: “What should we do?” “What is the impact?” “Who does this impact?” “Is it meaningful?” “How do we increase the likelihood of success?” From a company governance perspective, these questions should be debated and discussed by company leadership.

What do you see as SASB’s role in filling the disconnect between companies and investors related to ESG data reliability?

First of all, I think investors want to understand how companies are managing their ESG risks and opportunities. One of the best ways a company can do this, is to demonstrate that they have meaningful and reliable ESG data that is useful to manage the business.

SASB has already worked with the investor community to identify the ESG topics that are meaningful for 79 distinct industries. On average, each industry standard has just five disclosure topics. SASB puts a spotlight on these topics. Let’s say that we are investors in the Software & IT Services Industry. SASB has published standards for me to evaluate how these companies are managing issues related to Data Security, Data Privacy, Recruiting a Skilled Workforce and their Data Center Environmental Footprint. Over time, we are going to be able to see the relationship between these issues, financial performance, return volatility and long term resilience.

Who are the key internal players that are leading the conversation around incorporating sustainability into ERM models?

They are the same key internal players who are driving and enacting the company strategy. In most cases the C-Suite with Board oversight. Sustainability helps frame the long term risks and opportunities. ERM is a tool to monitor the long-term risks and take advantage of new opportunities. If sustainability or ERM is not linked to strategy, it doesn’t work in the long term and over time they become irrelevant.

What are some tools that help management teams and boards bring together corporate activities for internal analysis?

Practitioners in sustainability and in ERM have developed their own distinct language around their disciplines. Terms like “Stakeholder Engagement,” “Materiality Analysis,” “Impact” have similar definitions but nuanced differences. Therefore, it is important to anchor all of these definitions to the organizations strategy and to view sustainability and ERM from the board member perspective.