Deciding Where to Disclose

Note: As of August 2022, the International Sustainability Standards Board (ISSB) of the IFRS Foundation assumed responsibility for the SASB Standards. The ISSB has committed to maintain, enhance and evolve the SASB Standards and encourages preparers and investors to continue to use the SASB Standards. The ISSB has confirmed that industry-specific disclosures are required and, in the absence of specific IFRS Sustainability Disclosure Standards, companies must consider the SASB Standards to identify sustainability-related risks, opportunities and related information to disclose. The guidance in this Implementation Primer is intended to serve as a useful reference for entities applying the SASB Standards independently from the ISSB Standards. Entities using the SASB Standards as part of their implementation of ISSB Standards should consider the relevant ISSB application guidance.

Implementation Primer

Even jurisdictions that mandate disclosure may allow flexibility in disclosure location, format, or content. A company may elect to use SASB Standards in one or more of a range of different disclosure channels, each of which is likely to be associated with its own set of pros and cons. The best choice will depend on the company’s own circumstances and the laws and regulations that govern the company’s disclosures.

Required Disclosure

In a growing number of jurisdictions, public reporting of certain sustainability information may be compulsory. For example, as of this writing, all but five G20 countries have mandatory corporate reporting schemes in place for climate-related risks and opportunities. In many places, such requirements extend well beyond the impacts of climate change. For example, with Directive 2014/95/EU (“the NFR Directive”), the European Union requires that large companies publish reports on the policies they implement in relation to environmental protection, social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery, and diversity on company boards. In the United States, the Securities and Exchange Commission’s interpretive guidance on disclosure requirements related to cybersecurity illustrates that the underlying logic it applies to financially material cybersecurity and climate-related risks—i.e., that disclosure may be required under existing regulation—may also be extended to other financially material sustainability factors.

A company’s first steps should be to identify any mandatory requirements that govern its corporate reporting on sustainability issues, and to assess how prescriptive the requirements are. Some jurisdictions have requirements to report on specific topics, along with more general guidance to report on the sustainability issues that are financially material to the company and/or material to a broad set of stakeholders. SASB Standards are a useful tool to assist in meeting legal requirements in most jurisdictions, although supplemental disclosures may be required to meet specific regional requirements. For example, the European Commission recognises SASB standards as a suitable framework for complying with NFR Directive disclosure obligations. Because SASB Standards are focused on industry-specific—not region-specific—sustainability factors, companies around the world have found them a useful tool to help identify financially material sustainability issues for disclosure to investors.

Voluntary Disclosure

SASB Standards identify sustainability topics likely to be financially material and are designed to be used in core communications to investors. Core communications to investors vary by company, but they may include annual reports to shareholders, regulatory filings, integrated reports, sustainability reports, earnings presentations, and/or investor relations websites, among others. It is up to a company to determine the means by which it reports SASB information to investors. The important thing is to consider your options, assess the pros and cons of each channel, and make a choice that is informed by a variety of sources, including the input received from shareholders as well as the guidance of your financial reporting, legal, and compliance teams. You may also wish to consult with your auditors.

Regardless of where the information is disclosed, SASB believes the governance processes (including management participation and board oversight) and internal procedures intended to ensure the accuracy of financially material sustainability information should be substantially similar to those used for traditional financial reporting.

Consider Your Options

An important first step is to take inventory of the company’s available disclosure channels and determine which are currently being used to report sustainability information to investors. Existing reporting channels may include, but are not limited to:

  • Mainstream financial report, such as an annual report to shareholders or regulatory filing
  • Integrated report
  • Sustainability or CSR report
  • Sustainability website
  • Investor relations website
  • Proxy statement
  • Earnings presentations
  • Investor day presentations
  • Surveys/questionnaires

You may also want to review the disclosure channel choices of existing SASB reporters, particularly those of industry peers, which are available on the SASB website.

Assess Pros and Cons

Each disclosure channel has its own unique strengths and weaknesses in terms of providing an effective channel for reporting on the disclosure topics and metrics in SASB standards. Broadly speaking, a comparison of available channels is likely to include the following considerations.

  • As the primary go-to resource for investors, mainstream financial reports are a convenient location for disclosing the topics and metrics suggested by SASB standards. However, such reports typically involve stringent requirements for completeness, accuracy, and timing, which may present challenges for companies with less mature sustainability disclosure processes. (Mainstream financial reports vary by region but can include annual reports to shareholders and/or regulatory filings.)
  • Incorporating SASB information throughout a sustainability report collects all of the company’s sustainability information in a single publication, but may lack direct linkages to contextual financial information for investors or may overwhelm investors with information intended for other audiences.
  • Adding a SASB reference table to a sustainability report has the benefit of collecting all the company’s sustainability information in a single publication, while making it easy for investors to find the SASB-specific information. However, it can result in the SASB information lacking context.
  • Producing a stand-alone SASB report provides an easy way for investors to find the SASB information and enables companies to provide significant context for the information. However, the information is reported separately from financial information, requiring investors to access multiple reports.
  • Including the SASB information in an integrated report provides a single location for both financial and sustainability information and enables companies to link the SASB information explicitly to long-term value creation.
  • Web-based reporting may provide opportunities for more timely, direct, and extensive communication with investors, but data may lack credibility without excessive “date stamping” or other transparency around how and when updates are made.

Selecting the Right Channel

Outside a company’s required disclosure obligations, there is no “right” or “wrong” place to report SASB information to investors. The best fit will depend on a variety of factors unique the company’s own circumstances. In developing criteria for selecting the appropriate disclosure channel, a company may wish to consider the following questions.

Questions to Consider:

✓   What sustainability disclosures—if any—are legally required? Is there a legally required disclosure channel?

✓   What channels is the company currently using to disclose sustainability information to investors?

✓   Through which channels are the company’s peers reporting sustainability information to investors? If the company’s peers have adopted SASB standards, what channels are they using for SASB disclosure? (Links to all SASB reporters are available on the SASB website.)

✓   Have the company’s investors indicated how they want to receive sustainability information?

✓   How are investors currently gathering sustainability information about the company? (e.g., through the company’s external reporting, through a third-party provider, etc.)

✓   What is the maturity of data collection processes? Are the processes and controls sufficiently mature to include the information in mainstream financial reports?

✓   What disclosure channel fits best with the company’s communications strategy?

Often a company may disclose information regarding SASB topics in multiple reporting channels in an effort to tailor the information to the needs of a specific audience. The company should ensure reported information is consistent across all channels and audiences, even if not necessarily identical.

Companies use SASB Standards to report financially material sustainability information to investors through a variety of different communication channels. Each organization’s choice typically depends on a range of factors, including its regulatory disclosure requirements and where it believes its investors want or expect to find the information.

For example, Nike publishes its SASB data in a standalone table on the company’s investor relations website, because “that’s where [shareholders] go,” says Director of Purpose Communications and Reporting Alex Hausman. Meanwhile, at NRG Energy, the same reasoning led to a different conclusion: “We decided to put it in our sustainability report because that’s where most of the company’s stakeholders already go for this type of information,” says Sustainability Director Laurel Peacock. Each company has established its own unique approach to communicating with investors that typically includes both mandatory and voluntary reporting.

Another consideration may be where peer companies are reporting. At Vornado Realty Trust, the company noted other firms in its industry—such as Host Hotels & Resorts and Kilroy Realty—were disclosing SASB Standards-aligned information in their annual filings with the U.S. Securities and Exchange Commission (SEC). Although the company faced timing challenges with getting its SASB disclosure in its 10-K filing with the SEC, it recognised “we’ve traditionally put our sustainability information out in tandem with our chairman’s letter in the Annual Report in April,” says Senior Vice President of Energy & Sustainability Daniel Egan. As a result, the company furnished its ESG report—including SASB-aligned data—to the SEC and investors more broadly through an 8-K (current report) filing. “It was a creative alternative,” Egan says. “We viewed it as a happy medium.”

When in doubt about where investors want or expect to find financially material sustainability information, just ask them, Egan says. “My questions for them were, ‘How do you feel about our sustainability reporting so far? Are we disclosing the right information on the right platforms? Do you want to see other information coming through other avenues?’ It was hugely valuable to participate in those conversations,” Egan says.

Summary and Worksheet

Key Actions:

  • Identify mandatory disclosure requirements, including any legal requirements regarding disclosure location
  • Identify existing channels used to disclose information to investors, along with existing channels used to disclose sustainability information
  • Review the disclosure choices of existing SASB reporters, especially those of peer companies
  • Consult with your auditors or advisory partners for insight on emerging and best practices
  • Develop options for disclosing SASB information and analyse pros and cons
  • Choose a disclosure vehicle