WSJ Editorial Misrepresents SASB

Janine Guillot
CEO, The SASB Foundation

At the Sustainability Accounting Standards Board (SASB), our work recognizes the role that accurate information plays in ensuring the effective functioning of global capital markets. We also believe that markets should have access to accurate information about our organization and the work we do. Unfortunately, a recent editorial in the Wall Street Journal, dated Feb. 17, 2020, mischaracterized SASB with a series of factual errors, false assumptions, and supporting information that seems to have been cherry-picked to support a pre-conceived narrative about our work.

Perhaps most notably, the editorial attempted to politicize our efforts by framing them in the context of Michael Bloomberg’s presidential campaign. Although we are proud that Mr. Bloomberg served as chair of the SASB Foundation board of directors from 2014-2018 and that Bloomberg Philanthropies has provided financial support to SASB, SASB was founded by Dr. Jean Rogers in 2011. We are not pursuing Mr. Bloomberg’s —or anyone’s—policy agenda, as the Journal asserts.

Indeed, our work is market-driven, not policy-based. Contrary to the Journal’s implications, SASB sets standards for company disclosure—not for performance. Our standards are premised on the idea that when markets have access to consistent, comparable, and reliable information about drivers of risk and return, they can more efficiently price risks and opportunities, and investors can more effectively allocate capital. Standardization is needed because companies already report a large and rapidly growing volume of sustainability information, but this disclosure has frequently failed to meet the unique needs of shareholders and other providers of financial capital.

Leading companies already acknowledge that environmental, social and governance (ESG) issues can impact financial performance and long-term risk.  For example, in their financial reporting, technology companies and retailers routinely acknowledge risks related to data security and privacy—a social issue; beverage producers understandably discuss water management—an environmental issue; and investment banks openly address the need to manage conflicts of interest—a governance issue. Although these examples may not be as culturally charged as cage-free eggs—they can have meaningful impacts on a firm’s balance sheet, its income statement, or its share price. Indeed, even cage-free eggs can do so, as an increasing number of countries around the world and US states regulate the housing of farm animals, introducing the potential for reduced revenues, increased costs, or even supply disruptions for large, publicly traded restaurant chains.

Decision-useful information about how companies are managing these and other business-critical ESG factors helps investors better understand not only the near-term costs involved, but also the likelihood that the a company’s effective management of these issues will pay dividends over time in the form of improved efficiency, reduced operating costs, enhanced reputation, greater resilience to risks, and the potential for competitive advantage.

Again, many companies already acknowledge these issues in their public reporting to investors. The Journal suggests SASB wants to take a company’s determination of materiality into its own hands, which is false. SASB has always agreed with the notion that “materiality judgments can properly be made only by those that understand the reporting entity’s pertinent facts and circumstances,” which is why we encourage companies to consider and assess for themselves each topic in the SASB standard for their industry or industries. When a company determines that a sustainability topic is material to its business, SASB’s voluntary standards offer a way to standardize disclosure on that topic for the benefit of both companies and investors.

In criticizing our work, the Journal presents public comments we’ve received as representative of our market outreach without noting that our standards development process is designed to obtain input from a broad range of constituents, including investors, companies, subject matter experts, and non-governmental organizations.  SASB’s disciplined approach to standards setting is one reason that SASB’s work is supported by a broad swath of mainstream investors with nearly $40 trillion under management.

SASB’s aim is to help facilitate efficient and resilient capital markets that can support long term economic growth. This is our only agenda, and we have never tried to hide it.