Developing the SASB framework

Jun 24, 2019
Debbie Miller talks to Stephanie Tang, a member of SASB and director of legal for corporate securities at Stitch Fix, about how the investor-focused framework was developed

What’s unique about SASB’s approach to ESG reporting?
SASB is an independent standard-setting organization that develops and maintains reporting standards that help businesses around the world identify, manage and communicate sustainability information to investors – information they need before making financial decisions. We help companies identify the subset of ESG issues that the firm determines to be financially material and that affects financial results.

SASB’s sustainability standards focus on financially material issues because those are the issues that have the potential to impact a company’s fiscal condition and are important for investors to know and understand. SASB’s standards are also unique because they are industry-specific.

These two attributes – being industry-specific rather than country or region-specific, and the focus on financial materiality – are what make the SASB standards globally relevant.

What is your methodology?
The SASB standards were developed for companies to communicate to investors; as such, the standards contain ESG factors that are reasonably likely to affect the financial condition or operating performance of companies within an industry. The idea is to help investors gain decision-useful ESG data, so they can evaluate the sustainability risks and opportunities in their investment decision-making process.

SASB’s standard-setting process is defined by its conceptual framework. To be included in an industry standard, a disclosure topic must be supported by both evidence of financial impacts and evidence of investor interest.

So your intended audience is investors?
SASB standards are designed for communicating to investors – which is why the standards include ESG topics that are likely to be material, as well as associated metrics to communicate performance on these topics. To be useful for investors, reported data should be consistent, comparable and reliable.

While many corporations currently produce and publicly report ESG data, the lack of a market standard to guide such disclosures can limit the usefulness to investors due to the lack of comparability.

SASB’s standardized approach identifies topics that are likely to be material, and provides useful and comparable metrics that can help meet investor needs.

How might Corporate Secretary readers approach ESG reporting?
Every company is unique, so we recommend engaging with shareholders to better understand their needs. Companies can start their reporting journey at SASB.org where they can download the standards and case studies of companies and investors that have already started using SASB standards.

For companies focused on climate impacts and risk, board directors can start by integrating climate change into key governance processes, enhancing board level oversight through audit and risk committees. In March 2019, SASB and the Climate Disclosure Standards Board published ‘Laying the groundwork for effective [Task Force on Climate-related Financial Disclosures (TCFD)] aligned disclosures,’ a checklist of 11 preliminary steps companies can take to start integrating the recommendations of the TCFD. This is a hands-on, how-to resource that can help both directors and management get started.

Companies can also start their reporting journey by conducting a materiality assessment with the SASB materiality map, an interactive tool to look up industry-specific disclosure topics and metrics and identify and compare disclosure topics across different industries and sectors.

SASB’s Engagement Guide for Asset Owners & Asset Managers can be a valuable resource for companies just starting to think about sustainability disclosures. Although the guide is primarily designed for shareholders, it can also help corporate professionals such as boards of directors, senior executives, investor relations personnel and others to better understand the evolving expectations of investors and prepare for constructive dialogue.

 

This interview appeared in Corporate Secretary’s special report on ESG engagement, reporting and integration

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