What results when a group of powerful, diverse experts convene to birth the next generation of sustainability standards for their industry?
Outcomes from SASB’s inaugural industry working groups show that the results are powerful. They provide both strong support for -- as well as provocative suggestions about -- the SASB standards that are under development. As previously covered on GreenBiz, SASB is developing industry-specific sustainability accounting standards for use by corporations and their investors, designed for use in the mandatory filings of publicly-traded companies in the U.S., such as the Form 10-K. These standards will help companies address the material environmental, social and governance (ESG) issues that are relevant to their industry. They will also help investors accomplish a heretofore onerous task– evaluating and comparing peer-to-peer ESG performance.
Through SASB’s multi-stakeholder Industry Working Groups, we solicit feedback on our standards via industry experts across three interest groups: market representatives (investors and analysts), corporate representatives and intermediaries (NGOs, academics and government). Our Healthcare IWGs reviewed the material issues for each industry and weighed in on whether the suggested key performance indicators (KPIs) are cost-effective and decision-useful. Here’s a look at what we learned in Healthcare and what we expect to grapple with in the next sector, Financials.
Our research into ESG issues for the Healthcare sector revealed that social factors -- driven by broader societal trends -- dominated the material issues for the industries in this sector. These broader societal trends include access to affordable care and insurance. A recent study published in Archives of Internal Medicine found that cost of care for acute appendicitis in different facilities in California ranged from $1,529 to $182,955—and approximately one-third of the variation in charges was unexplained. Additionally, an estimated 60 percent of all personal bankruptcies in the United States are associated with extraordinary unpaid medical expenses, while 75 percent of those cases involved individuals who had health insurance coverage.
This research also unveiled the myriad forms of innovation—process, product and business-model—that have arisen in response to material ESG issues in the Healthcare sector. Examples include accountable-care organizations (a response to quality of care), green design in hospitals (a response to resource efficiency) and community pharmacies (a response to customer health and safety).
Seventy-two participants provided feedback in our working groups for the Healthcare Sector (23 percent investors, 33 percent companies and 44 percent other stakeholders). The feedback comes from a powerful base, with participants from corporations representing $800 billion market capital and investor participants representing $952 billion assets under management. Working group surveys covered an average of eight material issues and 12 key performance indicators (KPIs) per industry. Seventy-seven percent of survey participants deemed suggested KPIs to be decision-useful, and 75 percent deemed them cost-effective to report.
We are tackling 89 industries in 10 quarters – taking on a new set of challenges with each new sector we cover, one every three months. Our upcoming Financials Industry Working Group will develop standards for eight associated industries—including Commercial Banks, Investment Banking, Mortgage Finance and Insurance. We’ve found that social and environmental impacts are secondary, and derived from governance.
SASB’s work is just beginning. To accomplish our vision to transform the capital markets, we need you as we tackle new sectors. What will we find when we examine what are the ESG factors that are truly material to the industries in the financials sector? Sign up for an industry working group (the deadline for registering to participate in our Financials group is January 31). Participate in our period of public comment on draft healthcare sector standards in February. Register for a webinar, dialogue with us on Twitter and LinkedIn. Together, we can transform the capital markets—by collaborating on standards that create a race to the top on the critical dimensions of sustainability.
This is the first in a series of quarterly articles that will detail the results of SASB’s Industry Working Groups. Next quarter’s update will cover the Financials Sector findings and a preview of the Technology and Communications Sector.