Value Reporting Foundation: A brief guide to financially material sustainability with SASB

Sustainability impacts finances

Climate conscious investors are relying on ESG data more than ever, to make investment decisions. As more and more investors demand institutional investors like investment banks to integrate ESG principles into their investment decisions, there is now a great need to collect, report and analyse data that is relevant and material to ESG concerns.

This has led to the formation and growth of institutions like the GRI, which creates guidelines for maintaining sustainability reports in organisations. However, despite conditions like materiality and completeness being prerequisites to the data being included in these sustainability reports, they are not perfect at relating directly to financial factors. This is why there is a need for efforts to find ways to relate the sustainability data to financially relevant terms.

Sustainability Accounting Standards Board (SASB) offers standards that guide the disclosure of financially material sustainability information by companies to their investors. Their standards are industry-specific, and take into account the specific impact a sustainability issue may have on a company in a specific industry.

Likewise, the International Integrated Reporting Council (IIRC) operated a separate set of integrated supporting frameworks that communicates how an organisation’s activities create value for it in the short and long terms. 

However, the presence of all these separate organisations created a complicated landscape, where companies had to join and use frameworks from several different organisations to effectively communicate financially material sustainability data. The simplification of this complicated landscape was one of the primary reasons for the merger that resulted in the creation of the Value Reporting Foundation.

About the value reporting foundation

SASB was founded in 2011 as a non-profit organisation to help create a common language to communicate the financial impacts of sustainability between companies and investors. They initially operated as an independent organisation.

But as the need for a unified system has risen, they have merged with the International Integrated Reporting Council (IIRC) to form the Value Reporting Foundation, which was formed in June 2021. The merger aims to simplify the systems for reporting sustainability data that is financially material. 

How SASB and GRI are used together for sustainability reporting

SASB standards continue to be widely used for sustainability reporting, and will do so post-merger by companies from around the world.

Some companies even use the SASB standards together with the GRI frameworks to present a complete picture of their sustainability performance to investors and other stakeholders. Companies like General Motors from the US, and Diageo from the UK use both standards to meet the needs of their wide range of stakeholders. 

GRI standards focus on sustainability data that is relevant to a wider range of stakeholders whereas SASB standards put more focus on data that is relevant to investors. By using these two standards together, a company can present a more inclusive report of their sustainability performance, thereby resulting in a well-informed set of stakeholders. 

General Motors, to use an example, considers the GRI standards to be the foundational standard for reporting sustainability data. But they still use the SASB standards to report financial information on ESG issues to communicate sustainability information that is more relevant to investors. 

There is also the added advantage of SASB having industry-specific features. This is different to the global nature of the GRI, which has a larger scope.

This focused nature of SASB makes the data thus reported more useful to investors. Although there are no official guidelines for using these two standards together, a pragmatic approach was rewarded in the case of companies like GM and Diageo.

SASB and Integrated Reporting for communicating sustainability

Even though companies have found success by using the GRI and SASB standards together in their sustainability communication efforts, the fact remains, there are no defined guidelines for their combined use. The merger and subsequent use of Integrated Reporting principles alongside SASB aim to solve this exact issue.

Integrated Reporting frameworks work on the foundational principle of value creation in the short, medium and long terms. It guides the structure and content of a sustainability report, similar to the function performed by the GRI, but with a focus on value creation to investors.

This means the SASB and IR Frameworks are complementary tools performing different functions, but with a similar objective in mind. The newly formed Value Reporting Foundation will present organisations with guidelines on how the IR frameworks can be used together with SASB standards. 

The SASB standards will remain largely unchanged post-merger and will be available to be used by organisations without needing to use the IR Frameworks. However, there is now a greater amount of resources and guidance to using the two together, to help organisations navigate sustainability reporting a bit easier.

Using SASB in your sustainable business

Any company that needs to present financially material information in the context of sustainability to investors will benefit from using the SASB standards.

Whether you are a large, listed organisation with thousands of employees or a growing startup trying to attract investors, there is value to be found in using these standards.

They signify a strong intention to become a sustainable business, as well as to understand the financial impact of ESG issues in your organisation. They are also effective tools at hedging any risk that may arise out of such issues.

The standards are intended to be ‘decision-useful’, by informing the investors of the issues and performance. They are also meant to be cost-effective to use, as well as being informed by the market through various companies from around the world.

While presenting a whole picture of your organisation’s sustainability performance to the stakeholders is important, in most cases, investors remain the most important stakeholder. As such, it is vital that the organisation uses standards that will inform the more conscious investors of your ESG performance in relevant financial terms.

SASB standards are free to download for non-commercial use and can be licensed from their website if you intend to use them in your organisation.

What if you need help with using these standards?

SASB standards and the IR Frameworks are designed to be accessible and cost-effective for organisations to use. But it is undeniable that many organisations and companies have only just begun integrating sustainability reporting into their reporting activities.

You may be better off availing the services of sustainability consultants who are well-versed in the use of these standards and frameworks to initiate your journey towards sustainability reporting.

We, at SUSTINARO, focus on serving your organisation’s sustainability needs. With our focus on sustainability communication, we are well-equipped to guide your organisation in taking your first steps in reporting sustainability data.

Even if your competitors do not report sustainability data, the time is now to take action. 

Become a market leader with your sustainability efforts and be rewarded with all the short and long term benefits of integrating sustainability in your business. Drop us a message now, and learn more about how sustainability can help your business.