Principles Plus SASB Standards

Date01 August 2020
by Thomas L. Riesenberg
Thomas L. Riesenberg is Director of Legal and Regulatory Policy at SASB.
Prof. Jill E. Fisch has authored an excellent piece about
sustainability disclosure. Her proposal to mandate
a new Sustainability Disclosure and Analysis sec-
tion of SEC lings is an interesting idea for improving the
disclosures t hat investors currently receive regarding such
important matters as climate change, human capital, and
a range of other issues. She also proposes that company
management certif y as to the accuracy of these disclosures,
another step toward improved disclosure.
But it is likely the case that without signicant tweaks,
her sugge stion would not i mprove the consistency a nd
comparability of disclosures. is is because her proposal
is principles-based, that is, issuers would decide for them-
selves the three most signica nt sustainability issues and
then decide what to disclose about these issues.
us, for example, Company X, in the hotel industry,
might disclose information about water use eciency.
Company Y, a competitor, might disclose data relating to
employee retention. Company Z might address climate
change. And even when two c ompanies in the same indus-
try disclose information on the same issue or topic, they
might use dierent metrics in doing so.
is type of information would not result in compa-
rability and consistency in disclosures. As Professor Fisch
discusses, companies currently disclose considerable infor-
mation about ESG matters, typical ly in documents known
as corporate social responsibility reports. But numer-
ous surveys and studies have shown, and outreach by the
Sustainability Accounting Standards Board (SASB) has
conrmed, that investors are dissatised with these dis-
closures because they are generally inconsistent and non-
comparable between companies. SASB’s researchers have
found that most ESG disclosures consist of boilerplate
disclosures—generic statements that are not specically
tailored to the individual company, the risks it faces, a nd
the opportunities it might have. SASB found that vag ue,
non-specic information was used more than 50 percent
of the time when companies addressed a SASB topic in
20 17. 1 Professor Fisch also acknowledges this problem; she
describes “a lack of standardization that makes it dicult
for investors to compare information across issuers.”
1. SASB, e State of Disclosure: An Analysis of the Eectiveness of Sustain-
ability Disclosure in SEC Filings (2018),
Investors and corporate issuers both have expressed dis-
satisfaction with the current state. For example, a recent
McKinsey study found that 85% of investors either agreed
or strongly agreed that “more standardization of sustain-
ability reporting” would help them allocate capital more
eectively, and 68% of corporate executives either agreed
or strongly agreed that standa rdization would enhance
their company’s ability to create value or mitigate risk.2
e lack of comparable, decision-useful information has
also been shown to have negative long-term societal and
economic impacts. For example, a company’s investments
in employee training, or health, or direct compensation
can lead to lower dividends or reduction in short-term prof-
itability, so companies might avoid making such expendi-
tures. is is unfortunate, since those types of costs can
create long-term value for shareholders and broader soci-
etal benets. As Professor Fisch notes, ESG disclosures in
the United States lag behind those made in Europe and
elsewhere, largely because such disclosures are mandated
in many non-U.S. countries. is means that the ec onomic
benets accruing from more comprehensive and better dis-
closure also lag in the United States.
Professor Fisch concedes that a principles-based
approach will likely lead to unsatisfactory results. She
states: “Because each issuer’s board determines the most
signicant sustainability issues independent, there is likely
to be substantial variation among the issues addressed.”
Why, then, does she opt for this approach? She believes
that there is no adequate alternative, stating: “the applica-
bility of any specic issue varies by issuer a nd industry”
and that “the issues that arg uably warrant disclosure and
their importance continue to evolve.” us, “designing a
line-item series of disclosures to address sustainability is
likely unworkable, and a principles-based approach appears
more appropriate.” Further, Professor Fisch believes that
the problem will correct itself over time because of the SEC
review process and reviews by industry participants: “ is
2. McKinsey & Company, More an Values: e Value-Based Sustainability
Reporting at Investors Want (Aug. 2019). Likewise, a 2016 PwC survey
on ESG found that only 29 percent of investors polled were condent in
the quality of ESG information they were receiving and only eight percent
of investors thought that existing ESG disclosures allow for comparison
across companies and peers. PricewaterhouseCoopers, Older and Wiser: Is
Responsible Investment Coming of Age? (2016),
sustainability/publications/assets/pe-survey-report.pdf. Numerous other re-
ports and studies have discussed the general topic of the growing interest in
better ESG disclosure. See, e.g., Deloitte, Heads Up: Sustainability Disclosure
Goes Mainstream (Sept. 24, 2019).
Copyright © 2020 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®,, 1-800-433-5120.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT