Industry-specific sustainability reporting standards coming soon
ESG reports have become common, as they provide great information in a way that places companies in a good light. Few would doubt that they serve a powerful marketing function.
One issue for investors is the lack of reporting standards in this area. Companies are pretty much free to report as they please. Of course, federal law requires the disclosure of material information. But exactly remain largely undefined.
A framework would certainly help standardize such information, creating common practices regarding the ESG-oriented issues that are likely to be seen as material. All in all, it would help fill in a lot of gaps for investors.
Fortunately, the Sustainability Accounting Standards Board (SASB) is blazing a trail toward such standards. It has released its first set of reporting standards for ESG issues; this one covers the health care sector, specifically biotechnology, pharmaceuticals, medical supplies & equipment, health care delivery, health care distributors and managed care.
SASB says that it will develop standards for more than 80 industries in 10 sectors over the next two years. In the coming months, SASB intends to release provisional sustainability accounting standards for the financial services and technology/communications sectors. Standards for the non-renewables sector are in development, according to the group.
"The broad participation in our standards setting process demonstrates the unmet need in the U.S. financial accounting system to articulate material, non-financial risks and opportunities via the channel through which investors are accustomed to receiving information," said Dr. Jean Rogers, executive director of SASB in a statement. "SASB standards are cost-effective, relevant, useful, comparable and auditable. They are the first that truly enable comparison of peer performance and benchmarking within an industry."
We'll see if they gain traction with issuers. The participants in the effort to create the first sector standards bode well. The list includes Baxter, Cleveland Clinic, J&J, Kaiser Permanente, Pfizer, Merck, Novo Nordisk, AllianceBernstein, Breckinridge Capital Advisors, Calvert Investment and USB Securities.