The SASB Standards – How are they used?

Dec 20, 2022

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What are the SASB Standards?

SASB stands for the Sustainability Accounting Standards Board and the SASB Standards were developed to guide companies in communicating or reporting financially material sustainability information to investors.
Before we delve deeper into what the SASB Standards are and how companies report using the standards, it is pertinent to get an understanding of the word “sustainability” in the context of SASB. While the word can mean different things depending on the context, SASB uses the word ‘sustainability’ to refer to a company’s activities that maintain or enhance its ability to create long-term shareholder value.

SASB – The Organisation

We look at SASB, the organization, and its origins. As of August 2022, the International Sustainability Standards Board (ISSB) of the International Financial Reporting Standards (IFRS) has assumed responsibility for the continued development and promotion of the SASB Standards. Prior to that date, the SASB standards had come under the remit of the Value Reporting Foundation (VRF). The VRF was then consolidated with SASB into the IFRS Foundation. The ISSB now has oversight of these standards and will embed the standards’ industry-based approach into the ISSB’s standards development process. Eventually, the SASB standards will become the IFRS Sustainability Disclosure Standards, but until then, the ISSB will continue to support and encourage the use of SASB standards by companies.

The SASB standards were founded in 2011 and evolved over time with hundreds of companies using the guidance provided by the standards to report financially material sustainability factors to their financial stakeholders and investors. The focus continues to be the assessment and disclosure of the internal impact of Environmental, Social, and Governance (ESG) risks on the financial performance of a company. Under the ’General Issue Category’, the SASB standards have various sustainability factors such as Environmental, Social Capital, Human Capital, Business Model Innovation, and Leadership and Governance. The SASB standards can be used by any company, size notwithstanding, and across multiple industries. More specifically, they have 77 industry-specific versions and companies tend to use the standards in their annual ESG reports or Integrated Reports.

Benefits of Using SASB Standards

Now that we have a basic understanding of these standards, we can move on to the benefits of using the standards to report financially material ESG factors.

(a) One of the key benefits of reporting in alignment with SASB standards is its usefulness to investors. When making investment decisions, investors want to compare data. The SASB standards ensure that investors have comparable, consistent, and reliable data on financial material sustainability factors.

(b) With an average of 6 disclosure topics and 13 accounting metrics, these standards are considered very cost-effective for companies to accrue data and disclose pertinent information.

(c) SASB Standards are industry-specific. This is crucial as the factors that impact the financial performance of a business will depend on the industry it belongs to. With the use of resources and tools provided by the board, a reporting company can define which industry (or industries) it falls under. The tool to determine this is known as the Sustainable Industry Classification System (SICS).

(d) SASB Standards are compatible with other international frameworks and standards such as Task Force on Climate-Related Financial Disclosures (TCFD), Global Reporting Initiative (GRI), Integrated Reporting <IR> Framework, etc. With integrated reports or ESG reports, depending on the audience that the reporting company is speaking to, the use of multiple standards might be needed and it is common to see companies use GRI and SASB together.

SASB Components

SASB also ensures educational resources are available to help organizations familiarise themselves with some key components during its journey towards SASB-aligned reporting. These components include:

- Standards application guidance which provides universal implementation guidance applicable to all industry standards.

- Disclosure topics – As mentioned earlier, SASB standards vary from industry to industry, and on average have 6 disclosure topics. These topics list and briefly explain how handling the topic can impact the company’s ability to create long-term shareholder value.

- Accounting metrics – Each SASB standard has quantitative and qualitative metrics to help measure performance on each topic. On average, these standards have 13 accounting metrics per industry.

- Technical protocols – Each accounting metric has underlying technical protocols that guide reporting companies on definitions, scope, accounting, compilation, and presentation in addition to providing criteria by which a company can engage with a 3rd party assurance provider.

- Activity metrics – The standard includes activity metrics that provide context on the reporting company such as the scale of the business and operational details.

Implementation Process for Companies using SASB

Since using the SASB standards will require resources and time, these are suggestions to help implement them in a company’s ESG report or Integrated report.

(a) Establish a foundation

This requires having the buy-in of the board of directors and executive leadership team. A company can establish a foundation and set the tone by having questions for the board of directors and executive leadership team. Additionally, the organization would need to build capacity across functions that allow for the development of a culture that links sustainability to business performance. Some of the functional teams that would need to be involved are finance and accounting, sustainability, EHS, general counsel, risk management, internal audit, internal control, strategy, operations, information technology, compliance, human resources, investor relations, corporate secretary, and other relevant areas including supply chain, manufacturing, etc.

(b) Right tools for the job

This would require understanding sustainability standards and frameworks, developing disclosure objectives based on stakeholder needs, using multiple frameworks such as GRI with SASB, and double materiality.

(c) Choose the right reporting channel

The channel to report may depend on multiple factors such as whether this is a mandatory disclosure or a voluntary disclosure.

(d) Understand SASB standards

This involves understanding the common terminology and structure of the SASB standards.

(e) Assess company readiness

This is necessary in order to successfully implement these standards by reviewing and understanding metrics, performing gap analysis when needed, and ensuring data reliability.

(f) Develop company disclosures

Reporting using SASB is just about accruing data. The intention should be to get that information across to readers and investors in the best possible manner. The presentation format, providing context, disclosing modifications and exclusions, and reviewing the narrative should all be taken into consideration.

(g) Enabling improvement

Reporting companies need to monitor drivers of ESG risk and opportunity, sustainability disclosure practices, SASB standards development, and sustainability performance to continuously improve.

Most companies looking to ensure their sustainability reporting is up to the mark using a combination of software tools and external agencies for design and content. One such specialized corporate reporting agency is Report Yak which has an experienced design team and a content team that has expertise in different international standards like GRI and SASB. Check out some of the award-winning reports we’ve done for large corporations and feel free to reach out to discuss your next ESG report or Integrated report!