How can companies start using Sustainability Accounting Standards Board (SASB) standards to disclose material sustainability information in the Form 10-K?
As described in previous Eco Innovator blog posts, SASB is a 501c3 organization that provides sustainability accounting standards designed for use in annual SEC filings. Through the end of 2015, SASB is developing sustainability accounting standards for more than 80 industries in 10 sectors. SASB standards help companies comply with existing regulations, such as Regulation S-K and the Sarbanes-Oxley Act, that require the disclosure on all material information in the Form 10-K and other SEC filings.
Now that SASB standards are becoming publicly available, we are increasingly asked how companies can start to use SASB standards. SASB standards for six industries in the health care sector were issued on July 31, 2013, and have been downloaded more than 1,100 times in 55 countries. The next standards are for industries in the Financials and Technology & Communications sectors, which will be issued on February 25 and March 18, 2014, respectively.
All public companies have processes to prepare annual SEC filings, and many public companies also have processes for publishing annual sustainability reports. However, including disclosure on material sustainability issues in the Form 10-K will likely present new challenges, such as increased communication between the CSO and CFO offices and review of sustainability data by legal counsel and accountants.
To get started using SASB standards, we recommend considering and planning for the following steps:
- Understand and Commit. Gaining a solid understanding of the evidence behind the standards, the legal basis for disclosing material sustainability information, and investor demand for sustainability data can help build support and cooperation for using the standards.
- Analyze and Assess. SASB standards identify the sustainability issues likely to be material for companies in every industry, but the final determination of materiality is the onus of the corporation. Upon determining material issues, perform a gap assessment: does your company collect the data outlined by SASB accounting metrics, and if not, what procedures need to be put in place?
- Implement and Act. Integrating SASB data into the Form 10-K will require legal and accounting review.
Although disclosing material sustainability information using SASB standards will require managing some changes within an organization, the benefits are compelling. They include reducing legal liability by complying with Regulation S-K and the Sarbanes-Oxley Act, identifying and managing the sustainability issues most likely to impact long-term value creation, and appeasing investors with information that they are increasingly requesting to evaluate companies.
To learn more about using SASB standards, register for our upcoming webinar or consider joining our Corporate Roundtable, which is our premier program for companies who want to learn how to use SASB standards. The Corporate Roundtable covers the preparation issues described above in depth and allows companies to learn from experts and peers.