The other question I’ve heard companies ask is whether SASB is even needed in the first place. After all, if the SEC already requires companies to report on “material” issues, what role does SASB play? “Materiality is materiality, whether it's sustainability related or not,” I tell Rogers.
She readily agrees with the premise, but points out that in practice sustainability reporting often doesn’t call out material issues. “The disclosure on climate change is appalling,” she says, despite the fact that the SEC has singled it out as a key reporting issue and provided guidance to companies on the topic.
“We've done a review of disclosure since that [climate change] guidance came out. About 88 percent of companies that we looked at in carbon-intensive industries either had no disclosure or boilerplate disclosure on climate change, which is not useful for anyone. It's not useful for management. It's not decision-useful for investors. It's just adding noise to the market to the information that's out there.”
A Sector a Quarter
SASB is just beginning to head down a long road that, if it succeeds, is aimed at quieting some of that noise. Over the next two and a half years, the SASB team — now numbering 11, with several more hires on the way — plans to develop standards for 89 industries in 10 sectors suitable for use in 10-K forms (along with its counterpart, 20-F, which must be submitted by all "foreign private issuers" that have listed equity shares on exchanges in the United States). First up is health care, which includes biotech, pharmaceuticals, medical equipment, hospitals, and related products and services. Following that come financial services, technology and communications, non-renewable resources, transportation, and others — one sector each quarter through early 2015.
For each of these sectors, SASB — working with a series of Industry Working Groups, as well as technical advisors and others — will develop a series of key performance indicators that are considered to be material for SEC reporting purposes. Participation in the IWGs is voluntary, free, and open to any interested party. (SASB says that IWG participation should take 4 to 6 hours over a one-month period, all done online.)
SASB is actively recruiting companies to join each of its 10 IWGs. Based on my informal survey of companies at our recent GreenBiz Executive Network meetings, there will be a lot of interested parties. “This is a great opportunity to serve on a committee of peers to help determine the most material sustainability metrics for our industry,” Holly Emerson, a senior analyst at Ingersoll Rand Company’s Center for Energy Efficiency and Sustainability, told me. “It also offers us the opportunity to gain insight from the financial community. We really like the operating model of SASB; modeled after FASB, it is an open and transparent process and focused on the needs of U.S. companies.”
Emerson and many others will be watching where SASB goes — if it really does get rolled into SEC reporting rules, and how much all of that standardized disclosure finally achieves the dream of elevating sustainability to the realm of CFOs and corporate boards.
Clearly, it’s going to be a process — perhaps a decade for all of this to unfold. But maybe not: I asked Jean Rogers her expectation of where SASB will be in five years. She ticked off a list of key achievements: a full set of standards, companies piloting them, investors starting to use the data coming out of them, and engagement with the SEC on making SASB’s standards part of its reporting requirements.
It’s an ambitious, even audacious agenda. But I wouldn’t bet against it.