SASB: What it is and what you need to start reporting

The Need for Sustainability Reporting

In an era where businesses are increasingly scrutinised for their environmental, social, and governance (ESG) practices, the need for comprehensive and evidence-based sustainability reporting has never been more apparent.

Enter the Sustainability Accounting Standards Board (SASB), a pivotal player in the realm of corporate transparency and accountability.

This article delves into the critical role played by SASB in shaping the landscape of sustainability reporting, the implementation of industry-specific standards, how to use the SASB framework for reporting, and where it fits in relation to other reporting frameworks.

As businesses strive to understand and communicate their material impact on sustainability, SASB stands as a beacon, providing a framework that goes beyond generic metrics and delves into the nuanced intricacies of industry-specific environmental and social considerations.

Join us in unraveling the layers of SASB's influence, as we explore the essence of evidence-based research in fostering a more transparent and sustainable corporate ecosystem.

What is the SASB (Sustainable Accounting Standards Board)?

SASB provides capital markets with sustainability-related financial information. The SASB is a non-profit organization that created industry-specific standards to help companies identify and disclose sustainability information (i.e. energy management initiatives) that has a financial impact.

In other words, information that could have a significant impact on the company's business model, revenue growth, margins, and financial risk or general financial performance. It focuses on business activities that affect the company's long-term capacity to create shareholder value.

Companies are starting to understand the impact of sustainable operations on their bottom line, making sustainability a growing focus for finance leaders and their teams.

According to Deloitte, finance departments play a crucial role “in ensuring that the sustainability metrics provided to internal and external stakeholders are relevant, compliant and accurate on the one hand, and in supporting the overall execution of the sustainability strategy on the other.”

The Sustainable Accounting Standards Board (SASB) highlights the link between sustainability and the financial health of an organisation. It was created to help companies disclose relevant sustainability information to their investors.

Deloitte believes CFOs are the best people to lead companies' sustainability initiatives, and the SASB gives them standards and processes to track and disclose those initiatives. But what do you need to know about this board and its standards? We break it down for you here.

The Background of SASB

The SASB was formed in 2011. Since then, it has merged and consolidated with other organisations. Here's a brief timeline of how it's evolved over the years:

• 2020: The SASB announced plans to merge with the International Integrated Reporting Council (IIRC).
• 2021: The SASB and IIRC merger was officially completed. They merged into a unified organisation called the Value Reporting Foundation (VRF).
• 2022: The VRF merged with the IFRS Foundation to support its newly-formed International Sustainability Standards Board (ISSB). The ISSB aimed to build on SASB standards with its draft sustainability disclosure standards.
• 2023: The SASB standards were revised to align with the industry-based guidance that accompanied the IFRS' climate disclosures.
• 2024: The SASB standards are being used as the foundation for the ISSB's standards, expected in 2024. The IFRS and SASB recommend using the SASB standards to prepare for ISSB compliance.

While the SASB is no longer an independent organisation or set of standards, it's still important to know about, as it's being used as the foundation for future sustainability disclosure standards. So next, we'll look at some of the different aspects of the SASB.

What are the SASB standards?

The SASB standards identify the sustainability-related issues that are most financially material across 77 different industries. The standards are globally relevant and referenced by companies in 170 countries.

These standards help organisations provide disclosures about the sustainability-related risks and opportunities that might affect their cash flow or cost of capital, which are specifically relevant to their industry.

This interests investors because “some information is needed for comparison across all industries and regardless of business model – such as governance of climate risk – while other information is more useful when it is industry specific.”

The use of the SASB standards for reporting has steadily increased over time. According to the SASB, 117 unique companies used SASB standards for reporting in 2019, and in 2022 that had risen to 2,231 companies.

What industries are the SASB standards relevant to?

The SASB standards apply to a broad range of industries and companies, and there is no one typical company to which it applies. SASB standards are relevant to 77 industries across 11 broader sectors, from consumer goods to infrastructure.

Some examples of SASB industries include:

• Construction materials: companies in this industry produce materials for sale to construction businesses or distributors. Example materials include cement and aggregates, insulation, bricks and roofing materials.
• Metals and mining: companies in this industry are involved in extracting metals and minerals. This includes quarrying stones, smelting and manufacturing metals, and refining metals after extraction.

• Food retailers and distributors: these companies are involved in wholesale and retail sales of food and beverage products. For example, supermarkets, convenience stores, speciality food stores, and distribution centres.
• Biotech and pharmaceuticals: this industry develops, manufactures, and markets medications. Research and development is a big focus in the industry, including running clinical trials and obtaining regulatory approval for new products.
• Air freight and logistics: companies in this industry provide global freight services and transportation logistics to businesses and individuals. Companies typically fall into one of three categories: air freight, post or courier services, and transportation logistics services.
• Marine transportation: this industry provides deep-sea, coastal or river freight shipping services. Important activities include the transportation of container or bulk freight, and tanker transportation of chemicals and petroleum products.

Even from these brief descriptions, you can see how different each industry is, so it’s no surprise that different topics will be financially material from one sector to another.

The SASB uses its Sustainable Industry Classification System to determine the industries, using sustainability profiles to group similar companies within industries and sectors.

A company’s sustainability risks and opportunities are the most important factors for industry classification. Other factors like economic cycles or revenue streams get a lower weighting.

The importance of SASB standards

Industry-specific

The SASB standards help organisations prioritise and communicate the financial materiality of sustainability-related issues. They are so useful to companies because they provide industry-specific guidance that doesn't feature in many other standards.

The issues that affect a company's cash flows, access to finance, and cost of capital vary by industry, making these standards more valuable and applicable than generic, one-size-fits-all standards.

Prepare for the ISSB standards

The ISSB has confirmed for companies to meet its standards, they'll require industry-specific disclosures. So companies can use the SASB standards to understand their industry's sustainability-related risks and opportunities.

While these standards are due to be replaced by the ISSB standards, they are a helpful starting point to help companies prepare for those new standards. According to the SASB, these new standards “builds on and consolidates the work of market-led investor-focused reporting initiatives” — including the SASB standards.

So if you're already complying with the SASB, your company is in a prime position to prepare for the ISSB standards when they come in.

What is the SASB materiality map?

The SASB materiality map is a visualisation of 26 high-level sustainability topics, showing which are most likely to be material to each of the 77 industries covered by their standards.

The materiality assessment helps companies quickly understand what they should measure. It gives an at-a-glance overview of what's material to their sector or industry.

It's only accessible through a login for the SASB Standards Navigator users, as the SASB realised companies more widely used the materiality finder (more on that later) as it was easier to use and understand.

What is the SASB materiality finder?

The SASB materiality finder is a tool to help users find relevant SASB disclosure topics and compare companies or industries. You can compare up to four sectors or publicly listed companies to understand how their most relevant disclosure topics differ.

So as an example, you can look at the disclosure topics that are most relevant to some of your competitors to help you get started with your own reporting.

The SASB materiality finder is free and accessible for everyone to use, unlike the materiality map, which is only available to paid users.

How to use the SASB for reporting

While SASB standards will be replaced by the ISSB standards in 2024, the ISSB is using SASB standards as the starting point for their standards.

This means that if you use the SASB standards for reporting, that's a good preparatory step for complying with the ISSB standards going forward.

With that in mind, here's a brief overview of using the SASB for your reporting.

1. Work out which SASB industry standard or standards apply to your organisation. Your first step is to understand which SASB standards apply to your company. They provide standards for 77 industries, so only some will be relevant to you.
   
   To do this, you can use the SASB materiality finder to look up the standards for your industry. You can also review what other companies in your sector disclose by searching in the materiality finder.
   
   This will help you see the standards your peer companies (or competitors) use for reporting.
2. Review available SASB resources. Once you’ve worked out which standards are most relevant to your company, you can download them from the SASB to review in full. 
   
   This will help you understand the standards’ structure and any specialist terminology they use. It will also help you work out what data you need to collect and what you need to report on.
3. Ensure you’re collecting reliable, accurate data internally. Now you know what you need to report on, you can review your data collection processes. It’s important to ensure you’re collecting reliable and accurate data.
   
   Additionally, if you’ve reported on SASB standards previously, you need to make sure you’re collecting data in the same way to provide consistent, comparable data.
4. Consider options for presenting and formatting your disclosures. Some SASB metrics require you to follow a specific, standardised format for your disclosures. But if you’re reporting on metrics that don’t follow a set standard, it’s important to consider how best to present them.
   
   Your aim is to make sure your data is presented in a useful, accessible way. For example, consider adding supporting charts, tables, or graphics to make information more digestible.
   
   Alternatively, you could include historical comparisons or industry benchmarks to contextualise your data.
5. Provide important context to your disclosures. A lot of the time, SASB reporting includes only quantitative metrics, resembling other financial reports, financial statements, and financial reporting documents. But there are many sustainability factors that you can't distil into numbers.
   
   For example, some SASB standards cover issues like human capital, social capital, or business ethics, which are difficult to measure. So consider any additional context and qualitative information to help investors access decision-useful information and understand the full picture of your sustainability efforts.
   
   This ensures a holistic view of your social impact and efforts by the board of directors in addressing social issues. This could include context related to your risk management and governance strategy or any estimates or assumptions in your reporting.

How does SASB relate to other sustainability frameworks and initiatives?

The SASB has close ties to lots of other sustainability frameworks and initiatives. In 2020 the CDP, CDSB, GRI, IIRC and SASB announced their shared vision for a comprehensive corporate reporting system that includes both financial accounting and carbon accounting/sustainability disclosure.

Since then, the ISSB has built on that work, incorporating the SASB standards and TCFD recommendations into its standards.

With so many frameworks and organisations to keep track of, here’s a primer on how they connect and where they differ.

CDP

The CDP is a globally recognised standard for corporate environmental reporting. It was formerly called the “Carbon Disclosure Project.” While its initial focus was on GHG emissions reductions (i.e. greenhouse gas emissions), it has since broadened its environmental focus to cover topics including deforestation, water security, biodiversity, and plastics — hence the name change.

It's a not-for-profit charity that runs the global disclosure system for investors, companies, and regions to help them with carbon accounting and to manage their environmental impact.

The CDP's disclosure system is fully aligned with the recommendations in the TCFD framework (more on them below!), which are being used alongside the SASB standards by the ISSB as the starting point for their own standards.

There are two big differences between the SASB and the CDP:

• The CDP focuses on environmental topics, while the SASB looks more broadly at the full ESG (environmental, social, and corporate governance) spectrum.
• The CDP focuses on capturing environmental-related data rather than the financially material data relevant to the SASB.

CDSB

The Climate Disclosure Standards Board (CDSB) was an international collective of environmentally-focused NGOs and businesses. It developed a framework for helping businesses report on environmental and sustainability-related information with the same quality, consistency, and stringency as they report on financial data.

While the CDSB used to be a distinct entity, it was consolidated under the IFRS Foundation in June 2022, like the SASB.

GRI

The Global Reporting Initiative (GRI) is an organisation that helps companies take responsibility for their sustainability initiatives and environmental impact. It provides “the world's most widely used sustainability reporting standards,” covering topics such as waste, emissions, biodiversity, and health and safety.

The two standards cover some common ground but are complementary rather than competing standards. The biggest difference between the GRI and the SASB standards is that the GRI isn't just focused on financial materiality reporting.

It also covers the human, environmental, and social aspects of business operations. The two initiatives work together, and companies often use the two reporting standards.

IIRC

The International Integrated Reporting Council (IIRC) is an international coalition of regulators, investors, companies, and standard setters from across academia, the accounting profession, and NGOs.

It aimed to reduce silos and complexity in corporate reporting by helping companies take an integrated approach to reporting on all aspects of their operations.

In 2020 the IIRC merged with the SASB, so its concepts became part of the SASB reporting standards. Since then, the SASB has been consolidated into the IFRS Foundation — a not-for-profit, public interest organisation established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.

So now, the IIRC's concepts of integrated reporting are becoming part of the ISSB's new global standards.

TCFD

The Task Force for Climate-related Financial Disclosures (TCFD) helps companies understand the type of financial information they should disclose to support investors and lenders in assessing the risks related to climate change.

Like the SASB, the TCFD focuses on financial disclosures. Its recommendations are complementary to the SASB standards. Companies can use both to make more effective climate and sustainability-related financial disclosures to investors and other key stakeholders.

However, the TCFD doesn't go as industry-specific as the SASB. Its recommendations are more generic, so they apply to most organisations.

The right technology makes reporting easier

While it's due to be replaced soon, companies who are focused on sustainability reporting and carbon accounting will want to get familiar with the SASB standards, to get ahead of reporting for the ISSB.

Whatever sets of standards or reporting frameworks you're using, a decarbonisation partner (industry experts like CoolPlanet) can help you collect accurate data to make reporting on energy projects more straightforward.

CoolPlanet's decarbonisation subject-matter experts have a proven track record of increasing the sustainability performance of companies we work with through energy projects.

Another thing that can make assessing the financial condition and carbon footprint of a company easier is ensuring you have the right technology in place. Up-to-date technology like CoolPlanetOS can help you pull emissions data quickly and accurately.

Having CoolPlanetOS installed in your facilities and running efficiently can help with your reporting, whether it's for SASB, ISSB, or any other sustainability standards.

Learn more about how we help companies with their reporting and net zero goals with a full decarbonisation management system.

Conclusion

The impact of the Sustainability Accounting Standards Board (SASB) in reshaping corporate sustainability reporting cannot be overstated. As businesses grapple with the need to disclose their material impact, SASB's industry-specific standards serve as a robust framework that resonates with a diverse range of stakeholders.

This holistic approach not only elevates transparency but also cultivates a deeper understanding of a company's environmental and social responsibilities.

As we wrap up our exploration of SASB's pivotal role, we encourage you to dive deeper into the intricacies of decarbonisation by downloading our insightful report, Demystifying Decarbonisation, which offers key perspectives on how businesses can navigate this journey.