Reporting standards are changing, and they will continue to evolve over the next 18 months. To help companies interpret the need for their reporting strategies, BSR has conducted interviews with the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the International Integrated Reporting Council (IIRC).

To kick the series off, we discussed the future of SASB and the potential of the U.S. Securities and Exchange Commission’s (SEC) Disclosure Effectiveness Review with Himani Phadke, SASB’s research director.

Dunstan Allison-Hope: In March this year SASB reached a major milestone by completing its final provisional standard, bringing a four-year process to a close. How will these provisional standards be revised and maintained?

Himani Phadke: SASB has developed two governance documents—our Conceptual Framework and Rules of Procedure—setting out the fundamental principles, processes, and practices that will guide SASB’s work in the future. These documents are open for a 90-day public comment period, ending on July 6, 2016. During the next 12 to 18 months, we will also review the standards themselves for quality and seek additional feedback from issuers, investors, and other stakeholders.

Allison-Hope: How are lessons learned from actual company reporting practice incorporated into the changes?

Phadke: When developing the provisional standards, SASB’s analysts reviewed company reporting in Forms 10-K and 20-F, as well as sustainability reports and common sustainability reporting frameworks or guidelines.

The new consultation period is another opportunity to ensure that SASB standards are aligned to existing reporting initiatives and take into account challenges in collecting and reporting data. This is important to ensure the cost-effectiveness and feasibility of the standards. At the same time, SASB will continue to focus on developing standards that yield decision-useful and material information for the benefit of investors. SASB’s research shows that more than 40 percent of all corporate disclosures on sustainability topics in Forms 10-K and 20-F contain boilerplate language, which is much less decision-useful for investors than metrics.

Allison-Hope: How can companies provide comment on these changes?

Phadke: During the new consultation process on the provisional standards, SASB will have sector analysts fully dedicated to standards-setting and consultation for each sector. Companies can provide input on the content of the provisional standards by contacting the sector analysts directly, or sending general comments to comments@sasb.org. Sector email addresses can be found on SASB’s website.

Allison-Hope: The GRI is consulting on a transition from “guidelines” to “standards.” Is SASB seeking greater consistency between SASB standards and the disclosures contained in the GRI standards?

Phadke: SASB seeks to highlight alignment of our standards to other reporting initiatives, including the GRI. SASB and GRI serve different purposes, for different audiences. SASB’s standards are industry-specific and focused on information that is likely to be material to the financial condition or operating performance of companies and are designed to be decision-useful for investors and company management. In this way, SASB standards have some key differences compared to existing general frameworks or sustainability initiatives. While other frameworks help surface issues of interest to a wide range of stakeholders, SASB standards are designed to comply with U.S. securities laws under which publicly-traded companies are required to disclose material information to investors, based on the U.S. Supreme Court’s definition of materiality.

Allison-Hope: The SEC has launched a consultation on its Regulation S-K provisions. This is very significant for SASB—why?

Phadke: The SEC’s consultation—part of its Disclosure Effectiveness initiative—relates to the regulations that govern corporate reporting to the SEC using Form 10-K and contains the most extensive discussion of sustainability issues since the 1970s. This is a significant development, raising questions on how companies report sustainability information currently, both within and outside of SEC filings. The SEC’s comment period is open through July 21, 2016.

Regulation S-K already requires publicly-listed companies to disclose “material” information that would influence an investor’s decision-making. However, while financial accounting standards aid in assessing and comparing financial results of companies, investors are frustrated by the lack of standardized data through which to assess companies’ sustainability performance.

This consultation presents an opportunity to improve the disclosure of sustainability-related information. A market standard for the disclosure of sustainability information can reduce boilerplate language, alleviate corporate disclosure fatigue, eliminate selective disclosure, and improve investor decision-making.

SASB standards are the only standards that have been designed specifically for use in SEC filings and comply with U.S. securities laws, and thus are a suitable option for helping companies disclose material sustainability information in the Forms 10-K and 20-F. As such, the SEC could acknowledge the SASB framework as a credible set of standards and metrics that can be used by companies to fulfill their regulatory reporting requirements.