Standards Content

Why aren't direct (Scope 1) GHG emissions included in every industry Standard? How do the SASB Standards account for indirect (Scope 2 and Scope 3) emissions?

SASB Standards technical staff recognize that there is broad support in global capital markets for all companies—regardless of their industry—to disclose their Scope 1, Scope 2, and (where feasible) Scope 3 greenhouse gas (GHG) emissions. The approach to climate-related disclosure in the SASB Standards is different but not in conflict with such cross-industry reporting.

The process for setting SASB Standards was designed to elicit the metrics that are most useful to companies and investors in understanding and managing the direct risks and opportunities presented by climate change and other sustainability issues. This process has identified a Scope 1 GHG emissions metric in the 22 industries that involve significant direct emissions—because these are the industries likely to face material financial impacts specifically related to their emissions. These impacts may manifest as regulatory risks and shifts in consumer demand, which in turn affect costs and revenues.

For indirect emissions, SASB Standards capture the operational and/or strategic factors that give rise to such emissions. For the 35 industries that indirectly contribute to greenhouse gas emissions through significant use of purchased electricity (i.e., Scope 2), SASB Standards recommend metrics related to understanding the amount, type (conventional or renewable), and source (self-generated or purchased) of energy. Research and consultation have demonstrated that these measures highlight the direct risk-management levers available to a company—and measure how the company is using them—and therefore provide actionable data to management and decision-useful information to investors.

For industries that indirectly contribute to greenhouse gas emissions upstream (e.g., from purchased materials processing and transportation), downstream (e.g., from distribution and use of products), or in other ways (e.g., from employee commuting and business travel)—in other words, Scope 3 emissions—SASB Standards recommend metrics directly related to performance in those areas, where they are financially material.

For more information on the approach to GHG emissions and related topics in the SASB Standards, see the SASB Implementation Supplement: Greenhouse Gas Emissions and SASB Standards and the SASB Climate Risk Technical Bulletin.

What is the conceptual approach to human capital management in the SASB Standards?

Human capital issues are well-represented throughout the 77 SASB industry standards, as detailed in the SASB Human Capital Bulletin. However, many issues are rapidly evolving and both companies and investors are increasingly attuned to their financial implications. As a result, investor expectations for human capital disclosure are rising. With this in mind, SASB Standards research staff undertook the Human Capital research project with the objective of evolving the content of the Standards in light of emerging trends.

As part of this project, Staff developed an evidence-based framework to support the identification of financially material impacts related to human capital management. This framework would enable the assessment of key themes within and across industries to form the basis of recommendations regarding possible modifications to industry Standards to incorporate new elements associated with human capital.

In December of 2021, the SASB Standards Board approved a new standard-setting project evaluating whether and how to address the themes of diversity, equity and inclusion in 45 industries. More information on that project can be found on the DEI project page.

These projects were transitioned to the ISSB upon consolidation of the Value Reporting Foundation into the IFRS Foundation in August 2022. Upcoming consultation on the ISSB's future agenda priorities will inform the delivery plan for these projects.

What is conceptual approach to water-related risk in the SASB Standards?

Water and wastewater management is one of the more prevalent issues addressed in SASB Standards, appearing in 25 of 77 industries. However, in many cases, the issue can have diversified impacts on operating risk and financial performance from one industry to the next, and these differences are considered in standard-setting.

Water risk impacts are physical in nature, such as those driven by limited natural water availability, competition for water resources and watershed pollution. SASB Standards consider two high-level categories of physical water risk: access to water and water quality. Additionally, SASB Standards consider how the regulatory environment can affect physical water risks and a company’s ability to manage those risks.

Do SASB Standards contain any industry-agnostic metrics?

SASB Standards use the following terms to describe performance metrics:

• "Industry-based" metrics are those that are tailored to a particular industry context.
• “Industry-agnostic” metrics are those that can be used to measure performance on a topic in a range of different industry contexts.
• “Cross-industry” metrics are applied consistently across all industries.

Because SASB Standards are designed to identify and standardize disclosure for the sustainability issues most relevant to the creation of enterprise value in each of 77 industry verticals, SASB Standards are industry-based and primarily contain industry-based metrics. However, many risks and opportunities cut across industries and sectors and those issues in many cases can be measured consistently across different business models (i.e., using "industry-agnostic" metrics). For example, SASB disclosure topics related to energy management (35 industries), employee health and safety (26 industries) and water management (25 industries) use identical or near-identical metrics in most relevant industry contexts.

SASB Standards do not currently contain "cross-industry" quantitative metrics, although demand has increased for certain metrics—such as those related to human capital management and climate change—to be more consistently applied across all industries, and these metrics are the subject of ongoing research. For qualitative disclosure, SASB Standards Application Guidance recommends that all companies disclose information about their governance, strategy and risk management for all SASB disclosure topics.

In the SASB metrics that ask for "Total amount of monetary losses …," should I disclose the amount that may not have been recognized in the financial statements yet (e.g., when a legal decision is pending and the outcome is uncertain)?

No. The scope of monetary losses included in the disclosure shall include only the losses that were accrued (i.e., on the statement of profit or loss) during the reporting period, which might differ from the amount paid in that period. The entity shall report the net amount of any loss or gain, including amounts reported in a prior period that are reversed during the current reporting period.

Although reporting companies may face different thresholds for recognition (i.e., “probable”) depending on whether they are reporting under US GAAP or IFRS standards, SASB Standards Application Guidance recommends that, when providing disclosure in accordance with SASB Standards, companies do so in a way that is consistent with their standardized financial reporting.

All losses accrued during the current reporting period shall be included in the scope of disclosure.