As the demand for responsible business operations intensifies, managers and investors have been wondering about the best approaches for sustainability reporting.
There are dozens of them, from the Global Reporting Initiative (GRI) to TCFD (the Task Force on Climate-Related Financial Disclosures), but SASB (the Sustainability Accounting Standards Board) framework is becoming very popular. Today, it is used in more than 170+ countries.
This post is a deeper look at SASB sustainability reporting standards to help you answer the big question, “How do you apply them in your organization?”
Sustainability Accounting Standards Board(SASB)is a not-for-profit organization formed to help promote sustainability in companies. The standards are designed as a response to lenders, investors, and insurance underwriters to help them identify companies focused on sustainability.
Companies use SASB framework to help them report their environmental, social, and governance (ESG) impacts to stakeholders.
SASB standards are applied by companies in varying disclosure channels, such as financial filings, annual reports, company websites, and sustainability reports.
Starting from 2018, SASB has been encouraging more companies on the globe, not just in the US, to adopt its standards to make the planet a better place. By the third quarter of 2021, more than 120 companies were using the SASB framework for sustainability reporting.
The lovely thing about SASB is that the standards are industry-specific, implying that if you are unsure of how to go about the sustainability reporting process, this might be the best framework. However, it will be a great idea to start by understanding how the standards work.
When SASB developed its sustainability reporting framework standards, it wanted to ensure that every company could become part of the noble course to make the planet a better place. Therefore, it targeted to make the standards more applicable by breaking them down so that each business can easily select what to use.
The standards are broken down into 11 sectors, which work for all 77 industries.
The standards include consumer goods, food & beverage, healthcare, financials, transportation, extractive& mineral processing, infrastructure, resource transformation, technology& communication, renewable resources & alternative energy, and services. Note that each of the standards comes with specific disclosure requirements based on stakeholder needs and financial materiality.
To apply these standards, SASB requires every business to be guided by the following core principles.
· Global Applicability
One of the missions of SASB is to ensure that the information that companies provide is not just relevant to themselves but also easy to compare across on a global basis. To make the standards more effective, SASB has been reviewing them, and now you can compare a company in the US with another in China, UK, or Egypt.
· Financial Materiality
SASB sustainability standards are designed to help investors make the right decisions about the company under consideration. Therefore, this principle is very crucial because it requires companies to focus on financially material issues.
The focus on materiality closely resembles that of the Global Reporting Framework (GRI), which was developed by Coalition for Environmentally Responsible Economies (CERES) and UNEP. When using SASB for ESG sustainability reporting, you will need to start by working with stakeholders to identify what is most important to them.
· Approach to Standard Setting
This is another unique principle that is aimed at making SASB even more effective. First, the SASB appreciates that organizations are different, and therefore, the application of the reporting must be different. For example, the reporting for a company such as an insurance firm with little impact on the environment has to be different from another with intensive pollution.
Still on the approach to standard-setting, SASB sustainability reporting framework requires the process to be evidence-based and market informed. With this principle, your reporting helps to strike a balance between the target investors, professionals, and investors.
Ultimately, the SASB sustainability reporting standards are aimed at creating a forward-moving enterprise where sustainability becomes part of the items the top management focuses on when drawing key strategies. This way, SASB and sustainability stakeholders believe that companies will be able to help halt the ills, from global warming to loss of biodiversity, facing the planet.
Once you have identified the standards for your industry, the next step is applying them in actual reporting. Some managers and entrepreneurs find it challenging, but here are some useful steps to guide you:
One of the mistakes that many people make during ESG sustainability reporting is simply starting the process for the sake of preparing the report only. This will not work. Instead, it would be best if you considered how it can become part of your organization. So, how can you make sustainability part of the organization's governance, planning, and risk management, to improve the company operations?
Like other leading frameworks, from GRI to TCFD, the SASB framework also requires you to identify the right stakeholders to target. The SASB standards are carefully crafted to specifically address needs of investors. At this early stage, it will be a good idea to also engage stakeholders and establish what their preferences are.
For example, do they prefer you give weight to issues related to the environment or governance? Focus more on what stakeholders want.
Still, at this stage, you need to think ahead and determine where exactly these stakeholders will be able to get the report that you will create. As we have mentioned, you want the message to reach the investors, insurance underwriters, and lenders, among others. Some managers prefer to integrate the report into other financial reports. However, you can also generate it as a stand-alone sustainability report.
The process of ESG sustainability reporting can be challenging, especially when not thought about well in advance. So, how well is your company prepared for the process ahead? There are three ways to be ready for this:
(i) Start by reviewing whether you have all the required information for ESG sustainability reporting.
(ii) Review internal controls to ensure that the process will be able to capture the required details. Here, you need to think of good sustainability reporting software for your organization.
(iii) What about the team? For large organizations, implementation of ESG sustainability reporting with SASB sustainability reporting framework often requires working with teams of experts. However, training part of your staff, such as team leaders, to foresee the process can also work.
The target of analysing your company’s preparedness is to ensure that the reporting process will go smoothly and ultimately generate a report that will make it easy to win targeted stakeholders.
Finally, you have the information and it is time to generate the report. So, prepare it carefully to ensure that it can assist your management in crafting better strategies for success. Furthermore, it should help to capture the company's long-term targets. Remember that this is the information that you will build on in the subsequent reporting cycle.
ESG sustainability reporting using the SASB framework should form a clear platform that your organization can use to craft new areas for improvement.
Indeed, you should not leave the stakeholders wondering about the next move. If you targeted to cut emission rates or water use by 30% and the objective has been achieved, will you focus on further cuts in the same area or move to a different one, such as social justice?
As we have demonstrated above, selecting the SASB sustainability reporting standards only marks the first step in your journey. The longer journey is ensuring you adhere to the three core principles when preparing the final report. It is never easy because you will be dealing with multiple data sets at different times.
If you need to generate quarterly reports, it can be a lot of work if the task is being done manually or with non-customized programs, such as excel. This is why you need appropriate sustainability reporting software. With the right app, you can:
· Easy to gather all the required data for your SASB sustainability reporting.
· Automate the data collection for sustainability reporting.
· Set key performance indicators so that the program signals you when they are met or missed.
· Cut the cost of ESG sustainability reporting for your company.
· Follow the process of ESG reporting more closely as the program works for you.
· With a good program, generating regular reports is easy and seamless.
To get one of the leading software for ESG sustainability reporting, visit Diginex.
If you have a company and want to use SASB sustainability reporting framework, it is paramount to start by understanding its standards for your organization.
SASB sustainability reporting standards are carefully formulated to help simplify the process but present the correct picture of your organization in the eyes of investors. Remember to ensure the process is implemented correctly and use an appropriate program for automation and continuity.
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After years and decades of searching, researching, and testing, a solution for most planetary problems has been found: ESG sustainability reporting.