GRI & SASB 2020 Collaborate To Better Understand The Use Of The Two Standards Together In Corporate ESG Reporting

Two heavyweights in the corporate reporting frameworks/standards arena have announced intentions to move closer to help promote “clarity and comparability in the sustainability landscape” – GRI and SASB.

The two organizations just announced a collaborative work plan to demonstrate how some companies have used both sets of corporate ESG reporting standards…together — and lessons to share for reporters.

The common understanding expressed is that “GRI and SASB share a guiding principle” – that greater transparency (in corporate reporting) is the best currency for creating trust among organizations and their stakeholders (Tim Mohin – CEO of GRI).

Notes SASB CEO Janine Guillot:  “In a post-COVID world, companies will increasingly be expected to disclose their performance on a range of ESG Topics.”  The COVID-19 crisis demonstrates that non-financial information disclosure can highlight material financial implications, she advises.

In the short-term of the collaboration, the two organizations will develop examples based on reports that demonstrate how corporate reporters can use GRI Standards and SASB Standards together.  Further progress in the collaboration will be decided later this year/into 2021.

The Global Reporting Initiative is the most widely-used corporate reporting framework around the world for companies reporting on their ESG sustainability, responsibility, citizenship (companies select their titles) and related activities.

The GRI Standards for reporting features a set of “universal” and “topic-specific” standards (continuing to evolve) each with one or more disclosures to guide corporate managers in preparing their disclosures — focused on the environmental, economic and social impacts of a company.  The reporting is fashioned for delivery of important ESG information to a range of stakeholders – including investors.

The GRI Standards are the fifth generation of the framework; the first corporate reports were published following “G1” back in 1999-2000. Since then more than 40,000 reports have been published following the constantly-evolving GRI framework (which became standards in 2017).

The Sustainable Accounting Standards Board (SASB) standards are more recently developed, with investor needs in mind. After an intensive collaborative effort by investors and corporate issuers and other parties, standards were announced for 77 industries in 11 sectors. Using the SASB Sustainable Industry Classification System – SICS®.

SASB standards recommend material ESG disclosure topics and related accounting metrics for the primary SICS industry assigned to a company (often companies operate across more than one industry and should consider guidance from SASB on these as well).  For example, a Primary SICS Sector may be “Extractives & Minerals Processing” and the industry, “Oil & Gas – Exploration and Production”.

SASB recommendations for corporate reporting are reflecting a critical input from institutional investors on what providers of capital are considering to be material for the industry categories.  The intention is to identify a subset of sustainability-related risks and opportunities likely to affect a publicly-traded company’s financials and risk profile.

At G&A institute, our team uses both sets of standards as a “hybridized” approach in working with our corporate clients in preparing their ESG disclosure and structured reporting.

“Best practice” in preparing the corporate sustainability report with ample ESG data disclosures for both investors and a range of stakeholders requires a fulsome content indexes to guide the user (especially the investor and ESG rating agencies’ analysts) to the exact information they are seeking (for example GhG emissions, water used or energy consumption) in an efficient and effective manner.

The GRI Standards content index is one of the most important aspects in assisting these analysts and other users in navigating the content and disclosures.  We help companies cross-reference the SASB standards – as well as (more recently) the TCFD recommendations for disclosures; CDP data; GRESB data where applicable…and more working to create a Rosetta Stone for different users of the report to interpret the disclosures through their lens.

In our work as Data Partner for the U.S.A., U.K. and Republic of Ireland for GRI, we are capturing significant information now on the use of GRI and SASB and other reporting frameworks in one report – a most welcome advance in corporate ESG disclosure.

The trend of using both sets of standards is clearly on the rise for U.S. public companies.

Watch for our announcement (very soon!) with results of the annual S&P 500 Index® analysis.  There is information in the report about the use of GRI and SASB among the S&P 500 – and the use of other reporting frameworks as well.

The S&P 500 universe of corporate issuers continue to set the pace for all publicly-traded – and privately-owned companies – in the disclosure of ESG data and information now expected by key stakeholders.

While our hybridized approach to corporate ESG reporting adds value to the reporting company’s effort to achieve greater disclosure, we advise clients (as do SASB and GRI in their announcement of collaboration) that the two standards organizations prize the independence of their standards-setting processes.  As do the other reporting / standards-setting frameworks (like TCFD, CDP, et al).  There is not yet a “one-size fits all” for corporate ESG reporting, but announcements like the one in our featured story move the needle.

Bottom line:  as stated by SASB and GRI, both provide compatible standards for sustainability reporting that can be used in the same report.  While they are designed to fulfill different purposes, based on different approaches to materiality, there are many ways to use them to create a hybrid report that creates value.

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Promoting Clarity and Compatibility In The Sustainability Landscape
Source:  Global Reporting Initiative (July 13, 2020)
Amid rising global demand for clarity in the sustainability reporting ecosystem, the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) are pleased to announce a collaborative workplan.

Proof of Concept: In Time of Crisis, Sustainable Investing Stays Strong and in Favor With Investment Professionals

For almost a decade in this newsletter we’ve brought to you a steady stream of news, research and experts’ perspectives that focus on two related subject areas:  (1) the escalating interest in the investment community in corporate ESG factors and adoption of sustainable investing approaches and (2) the corporate response, clearly in recognition of the intensifying competition for capital and so exerting efforts to excel in ESG strategy-setting, operational performance and disclosure.

It has taken some time for sustainable investing trends to capture wider investor attention and to persuade asset managers of the importance of ESG performance factors in normal times, with skepticism expressed (at first) quite frequently and then over time, less so.

Few mainstream asset managers are expressing doubts these days – and two powerhouse asset management firms (BlackRock and State Street) are very prominent champions of sustainable investing approaches.
We’ve seen the annual survey by the U.S. Forum for Sustainable and Responsible Investing (US SIF) survey of professionals managing assets starting out in the first survey with finding just US$639 billion in 1996 — with respondents indicating they were using sustainable investing policies.

That moved to the level of $3 trillion AUM in 2010 and on to $13 trillion in the 2018 survey.  That’s $1-in $4 of professionally-managed AUM for the assets they manage. (The next survey results will be announced later in 2020.)

Investors and corporate managers are usually looking for proof-of-concept for emerging trends and that has been the case for “SRI” / sustainable investing.  The Covid-19 crisis is providing some of that for sustainable investing — and making the case for corporate sustainability and embrace of the concept of ESG’s importance.

For example, the experts at HIS Markit have been offering perspectives on a range of issues and topics and recently shared the results of in-depth conversations with investors and analysts…during this time of market volatility and economic uncertain.  What are the findings in terms of investor embrace of sustainable investing strategies?

Top lines:  ESG criteria have been more important in the investment process in the coronavirus crisis. Issues in focus inside companies and by investors include such things as employee health & safety, corporate governance, and society-at-large.

Note this from the report:  “Some investors and analysts value ESG now more than ever.  They observe that the companies which have historically exhibited strong governance and the commitment to ESG are more effectively managed through this volatile period.” (Guess which companies may be more successful at attracting and retaining capital.)

The chief investment officer of a U.S. asset management firm told interviewers that the virus crisis has impacted how corporate governance is viewed …companies all over the world need to be thinking more broadly about who they want to be in the world aside from being rich.”

In a period characterized by the virus crisis and social unrest, a United Kingdom analyst interviewed said that “ESG was extremely important throughout last year and start of this year…there is a big demand for sustainable investments…and it’s there no matter if the global economy is weak or if there is a global pandemic…”

To be sure, there has been considerable good news for sustainable investment professionals and corporate sustainability managers in recent weeks, as investment professionals describe the resilience of companies with strong sustainability performance.  There is still skepticism expressed (such as in the IHS survey) and convincing needed on the part of holdout asset owners and managers.

We’ll keep sharing the research results as experts look at the capital markets and the impact of the pandemic and widespread social unrest and protest on sustainability – positive and negative.

There is much more for you in the Top Story this week, in the HIS Markit Perspectives about the firm’s survey of investment professionals.

COMING SOON
Our team is putting the finishing touches on the signature research effort of Governance & Accountability Institute – our annual look at the S&P 500® Index companies and their sustainability / responsibility / citizenship reporting.  Watch for this in July, followed after by the team’s look at the second 500 large-caps in the Russell 1000® Index.  We think you’ll find this year’s research effort very informative and useful in your own business – whether that be managing corporate sustainability and sustainable investment.

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The Importance Of ESG During A Global Pandemic
(Source: IHS Markit Perspectives V) Some investors and analysts value ESG now more than ever. They observe that the companies which have historically exhibited strong governance and commitment to ESG are more effectively managing through this volatile period.

We’re also sharing ideas for corporate managers on how to make their company more sustainable, with advice from Earth 911. And from the influential World Economic Forum (WEF) – the Davos folks – we have views of the state of sustainability for 180 WEF-ranked countries and the vitality of their ecosystems.  The virus crisis is placing great pressure on retail brands – how are the companies reacting… what is ahead for brand marketers in the “next normal”?  We have the views of Retail Dive for you in the fourth of our Top Stories this week.

Moving The World Forward Toward a More Sustainable Future: The Member Nations of the United Nations, Working Collaboratively For Progress in the 21st Century

by Hank Boerner – Chair & Chief Strategist – G&A Institute

“The United Nations” began as a World War II-era strategy as President Franklin D. Roosevelt talked about the allies of the United States of America partnering in the fight to save democracy and collectively battling the regimes of fascist dictators in Europe and Asia.

On January 1, 1942, 26 nations “united” in Washington DC to coordinate the battle with the “Axis” powers.  (“Axis” – the axis line, said President Roosevelt, ran from Berlin (Germany) through Rome (Italy) and to Tokyo (Japan) – the clear linkage in his mind of the fascist leadership.)

In February 1942 the president addressed the nation in his 20th “fireside chat” (broadcasting nationwide on “the radio”) to talk about the progress of the war.

The U.S. was coming from far behind in terms of preparedness for a global battle, and so an important part of the progress in this, the start of the first year of U.S. involvement in the global conflict, President Roosevelt explained to the nation of 125 million souls:

“The United Nations constitutes an association of independent peoples of equal dignity and equal importance. The United Nations are dedicated to a common cause. We share equally and with equal zeal the anguish and the awful sacrifices of war. In the partnership of our common enterprise, we must share in a unified plan in which all of us must play our several parts, each of us being equally indispensable and dependent one on the other.

“We have unified command and cooperation and comradeship. We of the United Nations are agreed on certain broad principles in the kind of peace we seek. The Atlantic Charter applies not only to the parts of the world that border the Atlantic [Ocean)] but to the whole world; disarmament of aggressors, self-determination of nations and peoples, and the four freedoms – freedom of speech, freedom of religion, freedom from want, and freedom from fear.”

The leader of the free world of that era envisioned an global organization that could bring about a new world ordering, to assure greater peace and prosperity to many peoples of the world.  President Franklin Roosevelt passed away in April 1945; soon the global conflict ended; and then what he long envisioned became the possible:

On October 24, 1945, 50 nations gathered in San Francisco to sign on to the “United Nations Conference on International Organizations” – and the UN as we know it today was launched.  (We celebrate UN Day on 24 October in commemoration of that historic event.)

Today the UN has 193 members – sovereign states that have equal representation in the UN General Assembly. The UN is the world’s largest intergovernmental organization – a forum for governments, not a world government.  And within the organization are important initiatives that have been shaping corporate responsibility, corporate citizenship, sustainability, and for capital markets, as well as for sustainable investing.  These are agencies, programs, institutes, global collaborations, and other entities.

You know some of them as the UN Principles for Responsible Investing (PRI); the UN Global Compact (UNGC); the UN Sustainable Development Goals (SDGs); the work of the UN Environmental Programme (UNEP).

Today we are hearing quite a bit in the corporate sector and in the capital markets about the Universal Declaration of Human Rights (adopted 1948); the UN has been the driving force behind 80-plus “human rights laws”.  Consider:  the declaration has been translated into 380 languages to date, says the UN High Commissioner for Human Rights..

We are sharing with you three recent highlights from the UN universe.   First, an update from the UNGC CEO Lisa Kingo, stressing that now is the time for society to invest in the 1.5C future…”there never has been a time”, she points out, “like today for coming together and jumpstarting a worldwide transformation towards a more inclusive and sustainable net-zero economy.”

Also from the UNGC, news of the launch of the Ocean Stewardship 2030 Report – to be a roadmap for how ocean-related industries and policymakers can jointly secure a healthy and productive ocean by 2030.

We are now in the Decade of Action on the Global Goals (the SDGs). The UNGC is an initiative of the UN Secretary General, a call to companies everywhere to align their operations and strategies with 10 universal principles focused on human rights, labor, environment and anti-corruption.

The Global Reporting Initiative (GRI) is today an independent global foundation that was birthed by the United Nations, building on the principles advanced for corporate responsibility by the NGO Ceres (based in Boston). An organization known for a philosophy of “constant improvement”, GRI recently organized an Agriculture and Fishing Project Working Group that will lead the work to create a new sustainability standard for ag & fishing.

This is part of the work of GRI’s New Sector Program – a multi-stakeholder group will move forward the initiative to help companies with ag and fishing in their value chains promote transparency and accountability, and better understand their role in sustainable development.

It’s almost 80 years now since President Franklin Delano Roosevelt – one of the most progressive leaders in U.S. history – conceived of the “united nations”, as a necessity to bring together the resources of other nations to fight a war on all of the continents, whose outcome was then uncertain.  And then to assure the peace and work to end wars, or at least settle disputes peacefully.

In November 2010 Secretary General Ban Ki-Moon noted:  “Sadly, FDR never saw the fruits of his efforts.  He died weeks before the founding conference. Yet his vision lives on in the UN Charter’s collective commitment to peace and security, economic and social welfare, tolerance and fundamental human rights.  Franklin Roosevelt’s Four Freedoms. This legacy of multilateral cooperation guides us today…”

Well said!

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OOPS
In the June 8th issue of our newsletter (Highlights), with headline “Will We Ever See SEC Rules/Guidance for Corporate ESG Disclosure and Reporting?  The Question Hangs in the Wind..”  We incorrectly identified the corporate reporting regulations being reviewed by the Securities & Exchange Commission – should have said “Reg S-K” (not Reg F-D).  Sorry for the any confusion caused.  A more complete commentary on all of this is here on our blog.