In the light of the Rio+20 summit, a new body has been created in the US to build a framework for disclosure of social and environmental data of public companies.
The Sustainability Accounting Standards Board, which is set up as a private sector not-for-profit organization, aims to become to ESG reporting what the Financial Accounting Standards Board (FASB) has been to financial audit and compliance for the past 40 years.
During this period the main focus for investors has been on financial capital. It is now widely established that companies, to achieve long-term success, must also develop a sound management of ‘natural capital’. However, as ESG reporting is neither homogenous nor standardized, information is not equally accessible to investors.
By determining a list of social, environmental and governance issues that are material and industry-specific and including them into the risk factor item of Form 10-k, which companies must file with the SEC, the SASB aims to set a minimum standard for ESG disclosure.
This will allow investors to understand both financial and sustainability risks and opportunities associated with a business and to start benchmarking companies and sectors.
As a result, this should encourage US-listed companies to be in line with best practice and to make the production of an integrated annual report the new standard.
