For companies reporting on their sustainability performance, and investors who measure that performance, there are challenges in identifying which sustainability issues are “material” for reporting purposes. In the absence of standards for materiality, companies have had to make judgment calls about what is, and is not, material to them. Additionally, without standardization, making any comparisons between companies’ sustainability performance has been an “apples-to-oranges” exercise.
Recent research by the Harvard Business School’s Initiative for Responsible Investment to address this problem has now led to the creation of a new body to develop a set of industry-specific standards for identifying and prioritizing material sustainability issues. The Sustainability Accounting Standards Board or SASB will develop and produce a set of concise, comparable industry-based sustainability accounting standards across key environmental, social and governance metrics. Having industry-specific indicators and standards is critical so that the standards are highly relevant to companies, and also allow for comparison within a specific industry.
The work will take place over the next 2.5 years and will involve 35 industry working groups developing the standards for 10 major sectors and 89 industries. When complete, the Sustainability Accounting Standards will clarify the process for identifying industry-specific material sustainability issues and will enable peer-to-peer benchmarking on these critical issues.