One year ago, a group of financial industry professionals, aided and abetted by a large and diverse group of experts and thought leaders, formed the Sustainability Accounting Standards Board -- SASB for short. The group’s bold, audacious goal: to create and disseminate “industry-specific accounting standards for material sustainability issues for use by U.S. publicly listed corporations and their investors.”
Last October, SASB began the process of 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. The group anticipated tackling one sector per quarter through early 2015 -- a total of 10 sectors altogether. First up was health care, followed by financials, technology and communications, non-renewable resources and transportation. Later on come services, resource transformation, consumption renewable resources and alternative technology, and infrastructure. (You can find the full list and the status of each here.)
So, how’s it going? On the first anniversary of the group’s founding, I talked with Jean Rogers, its founder and executive director, about the journey so far -- and the road ahead. The interview has been edited for clarity and length.
Joel Makower: First of all, congratulations on making it this far. How does it feel?
Jean Rogers: It feels good. I remember when my daughter turned 1 and my husband and I were so excited that we had kept her alive for a year. We knew there was still a long way to go but we thought maybe we can take a little nap. It’s sort of that same exciting feeling that you’re never quite sure. You have a vision, you’re never quite sure how it’s going to manifest itself when you really start doing it for real.
Makower: You’re still talking about your daughter, right?
Rogers: [Laughs] Well, that’s true too, actually. But as you see it take shape and see the groundswell of support, both within and outside the organization, it really is an incredible feeling. I think it also gives you a bit of adrenaline to keep going in the face of very little sleep that is a part of every single start-up in the world. But we are definitely experiencing that hockey-stick trajectory of growth and interest, and we're very gratified about how far we’ve been able to come in a year.
Makower: Before we go to look at what’s in front of us, let’s look a little bit what’s behind you. Where would you say you are now?
Rogers: We’re kind of like the duck with its head above the water and the feet paddling furiously underneath. Nobody really sees how much is actually going on at SASB. We are actually halfway through. We have fully five sectors now. One is complete and four are underway, and that’s five out of 10 sectors. So we’re halfway there even though it’s just a year into it, in terms of the heavy, heavy lifting of the research and the evidence basis for material issues.
Makower: Is this where you thought your 1-year-old would be at this point?
Rogers: This is exactly where we thought our 1-year-old would be. We are exactly on track. We’ve actually hit every milestone in terms of starting one sector every quarter and, of course, now finishing one sector every quarter. The whole process takes about a year, which is why we’ve seen only one come out. All the rest are works in progress and following closely behind. Just like that old camp song “Row, Row, Row Your Boat,” where each party sort of chimes in at its appropriate point -- that’s exactly what we’ve been going through and each sector is singing its own chorus but they’re all sort of harmonizing.
What’s been interesting or surprising is the amount of support we’ve been able to get in just a year, and the amount of participation in our industry working groups in a year. Those numbers are extraordinary, and more than we would have anticipated. In just four sectors for which we’ve actually run working groups, we have had over 850 participants, including investors representing $12 trillion in assets under management and companies representing $5 trillion in market cap. That’s just four sectors to date.
Makower: How would you describe the environment in which you’re working? How has it changed over the past year, in terms of being ready for SASB?
Rogers: There is something to be said for timing in life. We certainly recognize that we’ve been standing on the shoulders of giants and all of the awareness and market building in a way that folks like Allen White have done and Ernst Ligteringen at GRI and Bob Massie and those people who have been talking about the need for this disclosure on sustainabilities just for many, many years. Getting the word out has really primed the pump, and that has made it very simple and straightforward for us to come in and say, “You know what? There’s a need for an understanding of a subset of this information, a subset of this dialogue, to be very focused on that very specific communication between corporations and investors. And we will take that on and crack just that small nut.” Our ability to do that has been enhanced greatly by those that have come before us.
It’s really been a very easy sell to both corporation and investors to say, “The law already exists, material information already needs to be disclosed. Let’s give you those standards that enable you to do it in a very cost-effective and easy way.” We haven’t needed to make the case for sustainability, or to really explain sustainability. That’s already been done. The case for it was already made and I think we’re very grateful for that and we’re benefiting from that momentum. What we’ve had to do is to provide the evidence for materiality and to go through the very, very hard work of standard setting, which is focused on metrics.
Makower: Certainly the atmosphere can’t be all open arms. There’s got to be some pushback, some resistance. What are you hearing along those lines? What are you experiencing?
Rogers: The skepticism has come more from people who have been involved in sustainability reporting outside of the 10-K and who feel threatened by what SASB is doing. There are also those who actually do see this as a way to elevate certain sustainability issues to the CFO and to disclosure in the 10-K, and giving those issues that they’ve been toiling away on even more gravitas. But there’s definitely a certain contingent that has a sort of a fear factor of, “Well what do you mean? Are you saying that our sustainability report is going to go away or go by the wayside?”
It’s interesting that that’s where the pushback is coming from. It’s really not necessarily from corporations or investors. There’s no one in the world who would say that the Form 10-K is the most effective form or the only form of communication that you need for all of your stakeholders. It’s one form of communication and certainly a critical one for investors, but it does not in any way take the place of or render obsolete broader communication to a broader set of stakeholders. That is still very much needed and very much appropriate, as leading companies recognize.
Makower: So what are you excited about for Year 2?
Rogers: We definitely are facing the terrible twos, which means that the four set of standards that are in the pipeline from this year are going to be joined by four more. So we will have next year over 60 kinds of industries underway, and our stakeholders will grow from 850 in the working groups to somewhere in the range of 1,600 to 1,800. I’m both excited and awed by that prospect. All I can say is that it really served us well to spend the time that we did putting the process in place.
In a way this is our first-year anniversary of standard setting but we were at it for about 18 months before we started standard setting, putting our processes in place, putting our technology and our governance in place and building off the pilot work that we had done at the Harvard Initiative for Responsible Investment. It has served us well this year.
Next year is the really big hill, the really steep part of the hockey stick to climb in terms of continuing to meet our promise to the market of one sector per quarter.
Makower: What are you most concerned about Year 2?
Rogers: I’m concerned about the pace and our ability to care for the standards post-release. In other words, because we’re focused on getting the complete set, we know that we need to turn attention to adoption. We know that we need to help companies with that. We are actually starting a corporate pilot program. We just announced it at the Clinton Global Initiative in New York. That will help with adoption but it’s not enough. We need to be getting the word out.
We’ve grown from two to 20 people last year. About half of the 20 is our research and our standard setting team. Our stakeholder engagement team is four people and the rest are operations and education. So it is still a very lean and mean organization and we’ll likely remain that way through 2014.
Makower: Well, thanks. I’ll look forward to catching up when the terrible twos are over.
Rogers: Yeah, I’m looking forward to getting through those, too.