The Sustainability Accounting Standards Board released an implementation guide Tuesday to help public companies in the U.S. identify, understand and report on the sustainability topics most likely to be material to investors.

SASB has released provisional standards for a series of different industries in recent years and plans to complete that work in the first quarter of 2016. The implementation guide will help more companies actually make use of the standards.

Robert Herz, the former chairman of the Financial Accounting Standards Board and a current board member of SASB, told Accounting Today about how companies can use the implementation guide. “It takes them through the standards and what they're intended to do, how to think about the implementation process,” he said. “Since 2012 SASB has been developing what they call provisional standards that cover key sustainability reporting issues and related metrics for almost 80 industries across 10 broad economic sectors. They’ve done it industry by industry because the particular issues and metrics that matter from an investment point of view and future financial performance point of view are often quite specific to a particular industry.”

He contrasted SASB's work to garden variety sustainability reports. “Unlike what gets reported now in corporate sustainability or social responsibility reports, which cover a whole waterfront of what are called environmental, social and governance issues, SASB specifically focuses on what is material, using the Supreme Court definition of 'materiality' that the SEC uses, what’s material from a valuation and investment point of view,” said Herz. “For each industry it’s a more limited set of issues, maybe five to seven issues per industry and only maybe 10 to 15 metrics, because it’s really the ones that actually matter from an investment point of view. They’re nearing the end of producing those provisional standards.”

SASB plans to issue another document in the next few weeks that will go out for public comment laying out a process for finalizing the provisional standards. 

“The implementation guide takes you through how to look at the standards, what the standards are, how to use them and then how to think about how they might apply in your circumstance,” said Herz.

The SASB Implementation Guide is a reference document for issuers who are in the process of integrating SASB standards into their existing 10-K or 20-F disclosure processes. The guide aims to help companies identify the industry-specific sustainability topics most likely to be material to an investor, understand the current state of disclosure and performance on those topics, and improve their existing reporting processes to more effectively disclose material information on sustainability topics. It addresses topics including materiality assessments, benchmarking the current state of disclosure, and internal controls.

While sustainability reporting seems to have caught on more in Europe than in the U.S., Herz believes there is already heavy demand among U.S. investors for such information, and he is seeing more references to the SASB standards themselves.

“In the U.S. we see them beginning to be mentioned in some companies’ sustainability reports specifically,” he said. “They’re specifically referring now to SASB metrics, even though they’re in a provisional state. Just as important from my point of view is that an increasing number of large investors are referring to them and asking portfolio companies to start providing them.”

Among the companies referencing the SASB standards in their sustainability reports are Acer, Barclays, Delta Airlines, FMC, Hewlett-Packard, ING, Microsoft, Owens Corning, Praxair, SAP, Solvay, State Street, Symantec and Volvo.

While SASB is not an official standard-setter like FASB that is sanctioned by the Securities and Exchange Commission, Herz pointed out that its standards are voluntary and SASB communicates actively with the SEC. In addition, two former chairs of the SEC are on SASB's board, Mary Schapiro and Elisse Walter, along with another former SEC commissioner, Aulana Peters.

“This is voluntary, and in the first instance it’s going to have to be market driven,” said Herz. “If you look at who is on the board of directors, it’s something we obviously believe in strongly. But I think more importantly there’s more and more acceptance of the importance of ESG [environmental, social and governance] issues, not just from a social responsibility point of view, although that’s important, but embedding it in investment analysis.”

Herz also noted that he is on the board of Morgan Stanley, which has an Institute for Sustainable Investment that helps the bank determine how it incorporates sustainability factors into its investment analysis and recommendations.

“Other major Wall Street firms and investor groups have been doing similar kinds of things,” said Herz. “The real issue for me is that I’m not an environmental activist or a tree hugger per se. I’m a guy that cares about getting good information into the market to improve investment analysis and choices. That’s really what this is about.”

The SASB standards enable companies to hone in on the specific issues that actually matter to investors. Adoption of the sustainability accounting standards could also help usher in more use of integrated reporting, although Herz sees important distinctions between the two.

“Integrated reporting is a much broader framework, and it doesn’t provide you with specific metrics to disclose,” he said. “Integrated reporting provides a framework, but SASB provides some of the relevant comparable content that might be put within an integrated report.”

Even though SASB is focusing on companies in the U.S., Herz is seeing wide interest in the provisional standards in the European Union and Japan. The implementation guide, for which Herz wrote a foreword, promises to help companies make use of those standards.

“It’s going to explain the standards,” he said. “You can then go to each of the standards and see which issues and which metrics there are for those standards. The implementation guide is going to talk about materiality assessment. It’s going to talk about benchmarking yourself against other companies, how to capture the data and put in the internal controls, and whether or not you want to think about independent assurance, how to present the information.”

The provisional standards will be refined further, Herz pointed out, although they have already been developed by a wide-ranging group of stakeholders. “The process to develop that over the last three years has been very painstaking and inclusive to understand what are really the material issues by industry,” he said. “It’s involved industry working groups comprising people from companies in the industry, investors in the industry, accountants, lawyers and academics. In total, it’s now involved something like 3,000 people and companies that represent something like $11 trillion in market capitalization and investors that represent $25 trillion of assets under management. It’s a very thorough and inclusive process.”

SASB also plans to refine how it generates the standards, using some of the lessons Herz learned from his time chairing FASB.

“What we’re proposing to do going forward is adding some additional elements of what I consider best practice due process from my experience as a standard setter,” he said. “It will be a proposal on the whole due process procedures, taking what’s called the Existing Standards Council, which was more advisory in nature, and making it into a voting group to work with the staff and either approve or not approve proposed standards and changes to standards.”

Other proposals include open meetings, an oversight group from the board of directors to oversee due process, and other elements used in groups like FASB, its parent organization the Financial Accounting Foundation, as well as the International Accounting Standards Board and its parent, the IFRS Foundation. The document is expected to come out in the first half of December for a 90-day comment period, and Herz hopes it will be read and commented on widely. To access it and the implementation guide, visit

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