Choosing the Right Tools for the Job

In addition to SASB Standards, companies commonly use the following sustainability reporting frameworks and standards, which are described here in their own words.

CDP (formerly Carbon Disclosure Project):
CDP wants to see a thriving economy that works for people and planet in the long term. To achieve this, it focuses investors, policymakers, companies, cities, states and regions on taking urgent action to build a truly sustainable economy.

CDP runs a global disclosure system that enables companies, cities, states and regions to measure and manage their environmental risks, opportunities, and impacts. More than 7,000 companies respond to CDP’s climate change, water security, and forests questionnaires annually at the request of more than 525 investors with US$96 trillion in assets and 125 large purchasing organizations. CDP provides data users with critical financial and non-financial information to integrate sustainability into their investment and decision-making processes.

CDP’s questionnaires gather both qualitative and quantitative information from across governance, strategy, risk, impact, and performance. To aid comparability and ensure comprehensiveness, CDP includes sector-specific questions and data points; for example, the climate change questionnaire incorporates sector-specific questions for high-impact sectors, such as agricultural commodities, oil and gas, cement, and transport services. In 2018, CDP aligned its climate change questionnaire with the TCFD.

Many companies approach sustainability reporting by asking themselves what story they want to tell. The more important question may be, “What story does our target audience need to hear?” Often, the best way to understand the needs and expectations of a specific audience is also the simplest: Ask them.

For example, consider The Travelers Companies’ implementation of SASB Standards. As Yafit Cohn, the company’s Vice President, Chief Sustainability Officer and Group General Counsel, has pointed out, “a foundational part of our process was meeting with our large institutional investors, representing half of our shares outstanding, to solicit their views, preferences, and guidance with respect to ESG disclosure.” Among other findings, Travelers “observed significant investor momentum behind SASB Standards and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).” Cohn has said that “the conversations we had with our investor base confirmed how essential it is for us to draft a coherent and comprehensive narrative, specifically for investors, about Travelers’ approach to ESG and how we are managing risks and availing ourselves of opportunities to enhance the long-term economic sustainability of our company.”[1] Travelers proceeded to use the learnings from its investor engagements in deciding on its approach to reporting, the frameworks and standards with which it has aligned its disclosures, and the specific topics it covers on its sustainability site.

Laurel Peacock, Sustainability Director at NRG Energy, agrees. “We had an investor road show where our CSO went along with the CEO, CFO, Head of IR, and others to talk with shareholders about ESG, and we had those face-to-face conversations to learn, ‘Are we providing the information you need?’ ‘What other information can we get you?’” she says. “All our communications come down to the audience.” Based in part on feedback from investors and other stakeholders, NRG has developed an approach to sustainability disclosure that illustrates the complementary nature of the disclosure frameworks it uses, which include SASB Standards, GRI standards, CDP disclosures, and the TCFD recommendations.

Similarly, for Vornado Realty Trust, “Our decision to disclose through SASB came out of stakeholder engagement with our largest institutional investors,” according to Senior Vice President of Energy & Sustainability Daniel Egan. “I’ve been fortunate to have exposure to the stakeholders we think are most valuable—investors, tenants, employees, and local governments—to understand their needs,” he says. “We did a series of one-off ESG engagement calls with our largest investors and nearly 100 percent had either heard of SASB, worked for a [SASB Investor Advisory Group] member organization, or were just very supportive of organizing our disclosure according to the SASB framework.”

A company may also wish to extend its consideration of the target audience beyond identifying specific topics and metrics to determining how that information should be presented. For example, Nike chose to report its SASB disclosures in a standalone table rather than weaving the data throughout its sustainability report. After all, “The information they [investors and professional stakeholders] are looking for should be easily accessible,” said Director of Purpose Communications and Reporting, Alex Hausman.

Finally, it’s important to remember that not every investor has the same information needs, so what works for one might not satisfy another. “[Our] support of SASB does not diminish the value we place in other comprehensive or issue-specific ESG disclosure frameworks that call for more comprehensive transparency such as GRI, CDP, or the UN Guiding Principles Reporting Framework addressing human rights,” according to Heidi Soumerai, Managing Director at Boston Trust Walden. She points to greenhouse gas emissions (GHG) data as an example. Although SASB Standards include a Scope 1 GHG metric for 23 of 77 industries, Walden believes all companies should report this information. “In our view, SASB’s industry-based materiality framework does not encompass some system-wide indicators that contribute to improved economic (and societal) outcomes long term,” she has said. Thus, for many companies, using a combination of disclosure frameworks may be the most effective way to meet the information needs of a key audience or audiences.

[1] Remarks of Yafit Cohn, The Travelers Companies, Inc., SEC Investor Advisory Committee Discussion Regarding Disclosures on Sustainability and ESG Topics (December 13, 2018).

Although the sustainability reporting landscape is sometimes described as an “alphabet soup” of initiatives, reporting companies recognize that different frameworks and standards serve different purposes. Considering the use of multiple approaches isn’t about trying to check every box, it’s about weighing the unique value-add of each one. As Alex Hausman, Sustainable Reporting and Disclosure Director at Nike, says, “If a new framework like TCFD is legitimately additive, why wouldn’t we do it?”

NRG Energy’s sustainability reporting is guided by SASB, the Global Reporting Initiative (GRI), CDP, the Sustainable Development Goals (SDGs), and TCFD—with each one adding to the total mix. For example, “SASB Standards allowed us, in a pretty cost-effective way, to provide a new format where investors could quickly go look at actual performance metrics,” says Sustainability Director Laurel Peacock. “For the most part, [the various frameworks] are completely complementary, not conflicting.”

Similarly, Nike aligns its reporting with SASB, GRI, the SDGs, and the UN Global Compact. When the company added SASB to the mix, Hausman says, “we had heard pretty clearly that this was the framework that investors are asking for.” The company was already reporting an array of sustainability-related information, he says, but “we’ve heard that the SASB framework would provide a more familiar framework that would make the information they [investors and professional stakeholders] are looking for easier to find.”

For Vornado Realty Trust, SASB added to the reporting it produces in accordance with GRI and to the member-based Global Real Estate Sustainability Benchmark. “The frameworks have close alignment on a lot of key performance indicators,” says Senior Vice President of Energy & Sustainability Daniel Egan. With SASB, “we now have a non-proprietary source we can refer investors to for information.”

As laid out in Choosing the Right Tools for the Job, it is critical for companies to identify the audiences interested in the company’s sustainability performance, understand their information needs, establish communication objectives accordingly, and select the appropriate reporting framework(s)  to accomplish these objectives.

In evaluating the range of information that may support decision making among different stakeholder groups, companies may wish to consider the concept of “double materiality” introduced in the European Commission’s 2017 Guidelines on non-financial reporting and discussed further in its Guidelines on reporting climate-related information. This approach comprises two perspectives that may influence a company’s reporting objectives and thus its disclosures:

• Financial Materiality: Concerns the company’s development, performance, and position, in the broad sense of affecting the value of the company. This perspective is typically of most interest to investors and other financially concerned parties, such as debtors, lenders, and underwriters.
• Environmental and Social Materiality: Concerns the environmental and social impact of the company’s activities, and typically is of most interest to citizens, consumers, employees, business partners, communities, and civil society organizations.

Source: European Commission on Reporting Climate-Related Information

Importantly, these two perspectives are not mutually exclusive. For example, a given sustainability issue can materially impact a company’s financial performance and the environment at the same time—consider, for instance, how a beverage manufacturer manages its water consumption. In addition, issues can rapidly evolve, and issues that are material from a societal perspective may become financially material over time.  Many companies choose to disclose using these two perspectives, leveraging SASB standards to guide disclosure of financially material sustainability information and GRI Standards to guide disclosure of issues that are material to society and stakeholders.