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© 2015 SASB™
Sustainability Reporting & Disclosure: Form Follows Function
Doug Park, JD, PhDDirector of Legal Policy and [email protected]
Moderator:Nicolai LundyEducation [email protected]
November 17, 2015
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Source: SASB
The SASB MissionImproved non-financial disclosure results in enhanced market efficiency
The mission of SASB is to develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors.
That mission is accomplished through a rigorous process that includes evidence-based research and broad, balanced stakeholder participation.
Facts about SASB
Independent 501(c)3 non-profit
American National Standards Institute (ANSI) accredited standards developer
Developing industry-specific standards for 10 sectors and 80+ industries
Guided by the U.S. Supreme Court’s definition of materiality, SASB prioritizes topics of disclosure and standardizes the form of disclosure
Robert H. HerzFormer Chairman –FASB
Dan Hanson, CFAPartner and Director of U.S. Equities – JarislowskyFraser USA
Strong LeadershipInformed by experience, credibility, character, commitment, and vision
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Mary Schapiro – Vice ChairPromontory Advisory Board Vice ChairFormer Chairman – SEC
Jack EhnesCEO – CalSTRS
Steven O. Gunders, CPA, MBAPartner – Deloitte & Touche LLP (Retired)
Erika KarpCEO – Cornerstone Capital Inc.
Suz Mac CormacPartner – Morrison & FoersterLLP
Shawn LytlePresident – Delaware Management Holdings, Inc.
Michael R. Bloomberg – ChairPhilanthropist, Founder of Bloomberg LP, and the 108th Mayor of New York City
Clara Miller President – The F.B. Heron Foundation
Catherine OdelboExecutive Vice President, Corporate Strategy and Partnerships –Morningstar Inc.
Aulana PetersFormer Commissioner – SEC
Bob Eccles, PhDProfessor of Management Practice –Harvard Business School Edward D. White
Managing Partner – FahrLLC
Elisse WalterFormer Chairman – SEC
Kevin ParkerCEO – SICM
Jean Rogers, PhD, PEChief Executive Officer & Founder – SASB(Ex-officio)
Curtis RavenelGlobal Head, Sustainability Initiatives – Bloomberg LP
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The FormsWhere sustainability information is reported
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SEC filings (e.g., Form 10-K) – prepared according to the federal securities laws
Sustainability report – prepared using either GRI guidelines or the company’s own criteria
Integrated report – prepared using the IIRC’s framework
Consensus-driven
Cost-effective
Evidence-based
Industry-specific
What Is Different About SASB?The ‘alphabet soup’ of the sustainability reporting landscape can be confusing
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Decision-useful
Sustainable Industry Classification SystemSICS™ industries are grouped by resource intensity and sustainability impacts
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Health Care Biotechnology Pharmaceuticals Medical Equipment & Supplies Health Care Delivery Health Care Distributors Managed Care
Technology & Communications Electronic Manufacturing Services &
Original Design Manufacturing Software & IT Services Hardware Semiconductors Telecommunications Internet Media & Services
Renewable Resources & Alternative Energy Biofuels Solar Energy Wind Energy Fuel Cells & Industrial Batteries Forestry & Paper
Transportation Automobiles Auto Parts Car Rental & Leasing Airlines Air Freight & Logistics Marine Transportation Rail Transportation Road Transportation
Non-Renewable Resources Oil & Gas – Exploration &
Production Oil & Gas – Midstream Oil & Gas – Refining & Marketing Oil & Gas – Services Coal Operations Iron & Steel Producers Metals & Mining Construction Materials
Infrastructure Electric Utilities Gas Utilities Water Utilities Waste Management Engineering & Construction Services Home Builders Real Estate Owners, Developers &
Investment Trusts Real Estate Services
Services Education Professional Services Hotels & Lodging Casinos & Gaming Restaurants Leisure Facilities Cruise Lines Advertising & Marketing Media Production & Distribution Cable & Satellite
Resource Transformation Chemicals Aerospace & Defense Electrical & Electronic Equipment Industrial Machinery & Goods Containers & Packaging
Financials Commercial Banks Investment Banking & Brokerage Asset Management & Custody
Activities Consumer Finance Mortgage Finance Security & Commodity Exchanges Insurance
Consumption Agricultural Products Meat, Poultry & Dairy Processed Foods Non-Alcoholic Beverages Alcoholic Beverages Tobacco Household & Personal Products Multiline and Specialty Retailers &
Distributors Food Retailers & Distributors Drug Retailers & Convenience Stores E-Commerce Apparel, Accessories & Footwear Building Products & Furnishings Appliance Manufacturing Toys & Sporting Goods
Reporting AlignmentSASB is separate from, but complementary to, a variety of reporting initiatives
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SASB GRI IIRC FASB
Type of guidance
Scale
Standards Guidance Framework Standards
U.S. U.S.InternationalInternational
Target disclosure
Subject Non-financial Non-financial Non-financial Financial
Mandatory SEC filings
Voluntary report
Voluntary report
Mandatory SEC filings
Investors Investors InvestorsAll stakeholders
Target audience
GRI IIRCU.S. Supreme Court case law
U.S. Supreme Court case law
Definition of materiality
Scope Industry-specific
General General General
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Robust StandardsBuilt to deliver high-quality data, SASB standards contain more than just metrics
SASB Standard
Disclosure topics
Technical protocol
Accounting metrics
No New Regulation RequiredSASB standards rest on existing regulation and support disclosure in the MD&A
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Federal securities laws require companies to:
Disclose material information as appropriate in SEC filings such as the Form 10-K/20-F, 10-Q, and 8-K.
Disclose management’s view on known trends, events, and uncertainties that are reasonably likely to have a material impact on results of operations and financial condition.
Form 10-K (MD&A)
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Complementary EffortsMandatory and voluntary reporting serve different purposes for different audiences
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Material InformationSustainability factors likely to effect the financial condition or operating performance of a company
Relevant Information All environmental, social, and governance topics of interest
Investors
Stakeholders
Alignment in reporting is key (e.g., consistent use of the description “material”)
Relationship To The Legal And Regulatory StructureOf each form
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SEC Filings Sustainability Report
Integrated Report
Required Not Required Not Required
Disclosure obligations in federal securities laws
No direct relationship, but potential legal implications
No direct relationship, but potential legal implications
Materiality as underlying disclosure principle
Different standard governs reporting
Different standard governs reporting
Disclosure AnalysisAn analysis by channel
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Consistency and Cost-EffectivenessConsistent reporting across channels improves efficiency and reduces legal risk
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Product Design for Use-phase Efficiency“Our growth efforts focus on developing environmentally compatible and sustainable solutions that can effectively increase farmers’ yields and provide cost-effective alternatives to chemistries which may be prone to resistance.”
“Sustainable Product Sales: In 2014, we had a 17.5% increase in sales of sustainable products. A “sustainable product” is one that impacts one or more of the global challenges.” (i.e. scarce resources, climate change, environmental consciousness, food & health expectations, and land competition).
FY 2014 FORM 10K 2014 SUSTAINABILITY REPORT
Health, Safety, & Emergency Management“[The company] has steadily improved our recordable incident rate for the last five years. However, in 2014 our recordable incident rate did not decrease. We are taking specific actions to understand how we can continue to drive safety performance in all parts of our company.”
“Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations are subject to hazards inherent in chemical manufacturing and the related storage and transportation of raw materials, products and wastes.” (…) “Some of these hazards may cause severe damage to or destruction of property and equipment or personal injury and loss of life and may result in suspension of operations or the shutdown of affected facilities.”
2014 2013 2012
Total Recordable Incident Rate (TRIR) 0.51 0.41 0.59
Process Safety Incidents (Tier 1 & 2) 0 0 0
RT0101-14: Revenue from products designed for use-phase resource efficiency
RT0101-20: Total Recordable Injury Rate for (a) direct employees and (b) contract employees
RT0101-17: Process Safety Incidents Count (PSIC), Process Safety Total Incident Rate (PSTIR)
SASB METRIC(S)
Learn MoreIncrease your understanding of the link between sustainability and corporate value
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Fundamentals of Sustainability Accounting CredentialThe world’s first credential in sustainability accounting
How industry-specific sustainability information can inform corporate strategies or investor decisions
How to evaluate corporate performance on sustainability factors
The context for materiality and sustainability
How to identify the sustainability factors impacting financial performance
FSA.sasb.org/prep for curriculum, free resources, and registration
Level I: Principles Level II: Application (2016)
Helping CompaniesSASB’s Implementation Guide helps companies focus—and report—on what matters
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SASB Implementation Guide for Companies
Select sustainability topics Assess current state of disclosure and
management Embed SASB standards into financial
reporting and management processes Support disclosure and management with
internal control Present information for disclosure
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Q&A
Doug Park
Learn More:
(Now) FSA Credential – http://fsa.sasb.org
(Now) Standards Navigator – http://navigator.sasb.org
(Next Month) Implementation Guide
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