Applause for the Sustainability Accounting Standards Board
By Steve Schueth
And Simone Aliya
We all know that businesses manage what they can measure. Investors who view sustainability as a way for companies to reduce risk, gain competitive advantage, and improve social well-being have long been seeking measureable standards by which companies can be compared apples-to-apples.
Federal law requires publicly traded companies in the U.S. to report material information to the Securities and Exchange Commission quarterly on Form 10K. But we don’t yet have such a requirement for sustainability issues—even though many responsible investors view them as material to the risks and opportunities that companies face.
How companies manage environmental impacts, relate to their communities, treat their employees, and insulate themselves from risks such as extreme weather and global supply chain disruption are increasingly being viewed as material. “Materiality” is a legal term, but in essence, one can think about it this way: If an investor knew about it, would it make a difference? If so, it’s material.
The non-profit Sustainability Accounting Standards Board (SASB) is coming to the rescue. SASB, with the help of expert volunteers who populate its industry-specific working groups, is developing clear and measurable sustainability standards—similar to what the Financial Accounting Standards Board (FASB) has been doing for the past forty years.
SASB has undertaken a massive task—to develop standards and key performance indicators (KPIs) that in the years to come could make it significantly easier to identify and invest in enterprises that stand taller than their competitors when viewed through a sustainability lens. SASB envisions a world where all forms of capital are accounted for and managed. The goal is to have its standards incorporated into the SEC rules for all publicly held companies.
We believe there’s a compelling value proposition here. SASB is defining the materiality of key environmental, social, and governance issues within each industry and producing a set of concise, comparable industry-based sustainability accounting standards. This should begin to eliminate the tendency for different companies even in the same industry to define sustainability in different ways, and report different information. Most importantly, it should help companies focus on issues most likely to create long-term shareowner value.
Mel Miller, First Affirmative’s Chief Economist, has served on the SASB Financial Sector Working Group, and we have nominated another expert for the SASB Technology & Communications Sector Industry Working Group. We loudly applaud the Sustainability Accounting Standards Board!
Posted: March 13, 2013