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New Sustainability Accounting Standards Board Aims To Quantify ESG Reporting
October 10th, 2012
A new nonprofit, with the support of Bloomberg, launched this month with an aim of developing comprehensive, industry-specific sustainability accounting standards.
As markets have evolved, so too have the needs for standards and accountability, and the Sustainability Accounting Standards Board (SASB) says it will fill a current void in corporate reporting by quantifying the value of corporate non-financial information, similar to what the Financial Accounting Standards Board (founded in 1973) does for financial information.
“The impact that financial reporting standards have had on the capital markets is obviously profound. We wouldn’t have the capital markets that we have today in terms of scope, depth and liquidity if investors didn’t have credible information for financial reporting,” said Harvard Business School Professor Robert Eccles, founding chairman of SASB. “Transparency is equally important for non-financial reporting, and that is at the core of SASB’s mission.”
SASB's first initiative is to produce a Materiality Map with the help of Bloomberg that weights the priority of sustainability issues by industry across 10 sectors. SASB says the map will be useful for asset allocation strategies and understanding exposure to certain kinds of environmental, social, and governance (ESG) risk. For issues deemed most material in each industry, SASB will develop key performance indicators unique to each of the 89 industries suitable for disclosure in the Form 10-K, thereby facilitating comparable corporate reporting.
SASB says various stakeholders will gain from sustainability accounting standards. Companies will be better able to communicate their ESG performance on the issues most material to their sector and strategy; will develop a better understanding of the relationship between financial and nonfinancial performance; will be better able to manage ESG risks and opportunities; and will save time and expense on ESG reporting.
Investors will enjoy a complete view of risks and opportunities of issuers; be able to weight portfolios according to sustainability risks; will finally be able to compare peer performance on material ESG issues; and understand the relative positioning of companies with respect to future challenges.
In addition, accounting firms will be able to provide more complete assurance of companies’ reporting on ESG performance, and stock exchanges can consider new minimum listing requirements and the creation of sector-based ESG indices.
“SASB will be the U.S. voice for material non-financial issues and how to recognize and account for them as part of corporate reporting,” said Jean Rogers, SASB Executive Director. “The standards we develop will promote sustainable value creation and ultimately enhance the competitiveness of all U.S. industries on the most pressing challenges facing industry and society today.”
Reports released earlier this year by Deloitte and Ceres linked long-term business value to corporate ESG disclosures.
@Bart_King is a freelance writer and communications consultant.