Overview

The Sustainability Accounting Oversight Board (SASB) is a non-profit organization which is developing industry-specific standards for the recognition and disclosure of material environmental, social and governance (ESG) impacts by U.S. public companies.

In formulating its disclosure standards, SASB views sustainability as having five dimensions – environment; social capital; human capital; business model and innovation; and leadership and governance.

SASB is not a governmental body, and its standards have no legal effect. However, SASB is explicitly attempting to identify ESG information that is material to investors under the existing securities law definition of materiality. As SASB points out, the SEC’s Management’s Discussion and Analysis (MD&A) requirements call for a description of known trends, events, and uncertainties that are reasonably likely to have material impacts on the reporting company’s financial condition or results of operations. SASB describes its standards as “designed for integration into MD&A and other relevant sections of SEC filings.” Because of the link between securities law materiality and SASB’s standards, there is a possibility that its standards will influence the law of materiality and could become de facto disclosure requirements.

One of SASB’s objectives is to formulate quantifiable measures of sustainability performance. Such metrics facilitate comparison between companies and comparison of a company’s performance over time. SASB found that the use of sustainability performance metrics in SEC filings is not common today. Importantly, even in these cases the metrics were non-standardized, and therefore lacked comparability from one industry firm to the next

SASB has developed a complete set of 77 Industry Standards. In November 2018, SASB published these Standards, providing a complete set of globally applicable industry-specific Standards which identify the minimal set of financially material sustainability topics and their associated metrics for the typical company in an industry.

These Standards are explained graphically through a Materiality Map, are available for individual sector download and may be viewed through a complete Standards Navigator database. SASB staff and Standards Board followed a Conceptual Framework and Rules of Procedure to develop these Standards, which are designed to be cost-effective for companies to implement and decision-useful to both companies and investors.

SASB provides an Engagement Guide for investors to consider questions to discuss with companies regarding financially material issues as well as an Implementation Guide (update in early 2019) for companies which explains issues and approaches to consider when implementing SASB Standards.

Recent developments

Amendments under consideration

• None