3.2 Sustainability Accounting Standards Board (SASB) Standards

The Sustainability Accounting Standards Board (SASB) Standards are a key tool for companies to report on financially material sustainability issues. These industry-specific standards help businesses identify and disclose the most relevant sustainability topics, focusing on what matters most to investors and financial performance.

SASB Standards complement other global reporting frameworks like GRI and TCFD. By providing standardized metrics and protocols, they enable companies to benchmark performance, communicate effectively with investors, and integrate sustainability information into financial reports, supporting better decision-making and risk management.

SASB Standards Approach

Industry-Specific Standards

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• SASB Standards are organized by 11 sectors that encompass 77 industries
  • Each industry has its own unique standard that identifies the minimal set of financially material sustainability topics and their associated accounting metrics
• SASB's Sustainable Industry Classification System (SICS) categorizes companies into sectors and industries in accordance with their shared sustainability risks and opportunities
  • SICS enables comparison of sustainability performance within an industry
  • Examples of SICS sectors include Health Care, Financials, and Infrastructure

Focus on Financial Materiality

• SASB Standards focus solely on financially material issues, which are defined as issues that are reasonably likely to impact the financial condition or operating performance of a company and therefore are most important to investors
  • This approach ensures the standards are cost-effective for companies and decision-useful for investors
  • It allows companies to prioritize the most relevant sustainability topics for their industry
• SASB Standards enable companies to communicate their governance around the risks and opportunities related to the sustainability topics in their industry in a standardized manner
  • This supports better risk management and decision-making by companies and investors
• SASB Standards are intended to constitute suitable criteria for preparing an Integrated Report in accordance with the International Integrated Reporting Council (IIRC) framework
  • Integrated reporting combines financial and sustainability information to provide a holistic view of a company's performance

Materiality Assessment in SASB

Research Phase

• SASB identifies financially material issues through a rigorous materiality assessment process
  • The process involves examining evidence of interest and evidence of financial impact for each sustainability topic
• Evidence of interest is determined by searching tens of thousands of industry-related documents such as:
  • Form 10-Ks (annual reports filed with the SEC)
  • Shareholder resolutions
  • Corporate Social Responsibility (CSR) reports
  • Media coverage
  • SEC comment letters
• Evidence of financial impact is determined by evaluating:
  • Sell-side research reports
  • Investor call transcripts
  • Third-party case studies
  • Anecdotal evidence
  • News articles

Consultation and Publication Phases

• In the consultation phase, SASB gathers additional input by convening industry working groups
  • These groups consist of industry experts and market participants who provide valuable insights and feedback
• In the publication phase, SASB releases an exposure draft of the standards for a 90-day public comment period
  • This allows stakeholders to review and provide feedback on the proposed standards
  • After considering the feedback, SASB finalizes and publishes the standards
• SASB's standards-setting process is transparent, balanced, and follows best practices
  • It considers the perspectives of a variety of stakeholders while focusing on the needs of investors
  • This approach ensures the standards are credible, reliable, and useful for decision-making

SASB Disclosure of Sustainability Information

Standardized Metrics and Protocols

• SASB Standards provide companies with standardized sustainability metrics designed to communicate performance on industry-level sustainability topics
  • These metrics are designed to be integrated into mandatory filings such as the Form 10-K or 20-F (for foreign issuers)
  • Companies can also disclose SASB information in a stand-alone sustainability report, on their website, or in an integrated report
• Each SASB Standard includes:
  • Disclosure topics: Industry-specific sustainability topics that are likely to be material for most companies in the industry
  • Accounting metrics: Standardized, quantitative metrics that measure company performance in relation to each disclosure topic (categorized as quantitative or discussion and analysis)
  • Technical protocols: Guidance on definitions, scope, accounting, compilation, and presentation of the accounting metrics
  • Activity metrics: Industry-specific metrics that quantify the scale of a company's business and are intended for use in conjunction with accounting metrics to normalize data and facilitate comparison

Benefits of SASB Disclosure

• SASB recommends that companies use SASB Standards to guide investor-focused disclosure on the sustainability issues that matter most to financial performance in their industry
  • This approach helps companies provide decision-useful information to investors
• Companies can use SASB Standards to benchmark their performance against industry peers and communicate their sustainability performance in a decision-useful way to investors
  • This enables better assessment of risks and opportunities and supports informed decision-making
• Disclosure of SASB metrics can lead to improved sustainability performance over time as companies strive to manage and report on these issues
  • It can also enhance a company's reputation and credibility with investors and other stakeholders

SASB Standards vs Other Frameworks

Complementary to Other Frameworks

• SASB Standards are designed to complement other sustainability reporting frameworks, such as:
  • Global Reporting Initiative (GRI) Standards, which focus on a broader range of sustainability topics that are material to a wide range of stakeholders
  • Task Force on Climate-related Financial Disclosures (TCFD) recommendations, which provide a framework for climate-related financial disclosures across industries
• SASB has a memorandum of understanding with GRI to guide companies in using both sets of standards together
  • This enables companies to meet the needs of a wide range of stakeholders while providing decision-useful information to investors
• SASB has also mapped its standards to the TCFD recommendations to help companies disclose climate-related financial information in alignment with both frameworks
  • This supports more comprehensive and consistent climate-related disclosure

Differences in Scope and Approach

• SASB Standards focus on industry-specific sustainability topics that are financially material to investors
  • Other frameworks, such as GRI, may cover a broader range of sustainability topics that are material to a wider group of stakeholders
• SASB Standards provide metrics that are tailored to each industry, while other frameworks may provide more general guidance applicable across industries
  • For example, TCFD recommendations provide a high-level framework for climate-related disclosures, while SASB Standards provide industry-specific climate-related metrics
• SASB Standards are designed to be cost-effective for companies and decision-useful for investors, while other frameworks may require more extensive disclosure
• SASB Standards are intended to be used in mandatory filings and other investor-focused communications, while other frameworks may be used in voluntary sustainability reports or other communications
  • However, many companies use SASB Standards alongside other frameworks to provide a comprehensive view of their sustainability performance to investors and other stakeholders