The two global leading sustainability reporting standards GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board) are planning to align their frameworks in order to bring sustainability reporting one step closer to the financial mainstream and, in prior, to investors. The two initiatives announced that ahead of the Global Climate Action Summit (GCAS) which took place in mid-September 2018 in San Francisco. The intention is to simplify the standards in alignment with the TCFD (Task Force on Climate-related Financial Disclosures) recommendations.
What are the two sustainability reporting standards about and what are the differences?
Founded in 1997, GRI established its first sustainability reporting framework in the same year. Since then, the standard has been developed continuously by an ongoing stakeholder process for many years. The latest version, the GRI Sustainability Accounting Standards (GRI Standards), have been established two years ago (autumn 2016). Companies that report their sustainability efforts in alignment with GRI identify its key stakeholders and dig with them into a dialogue in order to identify its material sustainability topics which have the most significant impact on the environment and the society. This is a key aspect and also mandatory if a company would like to publish its sustainability report in alignment with the GRI Standards.
The SASB was founded in 2011. The current SASB standards are still provisional but will be finalized in October (see GreenBiz from the 20th Sep. 2018). The key aim of the framework is to meet the needs of investors by fostering high-quality disclosure of material sustainability information. The SASB standards are designed to improve the effectiveness and comparability of corporate disclosure on ESG factors (see SASB).
Firstly, one difference between the two considered standards is that GRI is trying to frame what is the impact that organizations are having on the world whereas the SASB looks at the world’s impacts on the company. Furthermore, the key difference is the stakeholder perspective. A company reporting in alignment with the SASB is providing sustainability information to investors. So, the investors are able to assess the influence of these factors on their portfolio (see GreenBiz from 2nd Jan. 2018).
Reasons for harmonizing GRI and SASB
Besides above-named aspects, there are still areas where contents of both standards overlap. So, a special implemented two-year project will help to harmonize the frameworks, to identify areas where they are already similar and areas where they do not overlap.
One reason of harmonizing the two sustainability reporting frameworks is to bring substantial sustainability information for all stakeholders and investors together. It is possible, that investors are not reviewing a companies’ sustainability report and therefore, missing important information for their own assessment. That’s also, why TCFD recommends including climate-related disclosures into public financial fillings each year. Main obstacles in this context are auditing and data collection. Whereas financial disclosures have to follow strict requirements sustainability reports, for example, have not to follow strict rules compared with financial reports (see GreenBiz from 20th Sep. 2018).
Firstly, the alignment of GRI and SASB should result in a more holistic sustainability reporting approach. Furthermore, it should provide substantial sustainability information to investors that they can assess their own portfolio better. The TCFD can help to integrate non-financial information, especially climate-related data, into a mainstream financial report.
The merger between the two standards would potentially lead to several advantages:
- Companies can address and understand linkages and interdependences between financial and sustainability disclosures
- Sustainability reporting gets more holistic
- Companies have to disclose more detailed information as the SASB asks to go deeper regarding specific aspects which is very helpful for the company
- More stakeholders are involved more intense as investors play a key role within this frame
- Risks could be avoided or at least mitigated more efficient
Companies should take these opportunities. However, achieving the potential benefits caused by above-named aspects depends on how a company follows the guidelines provided by the sustainability reporting framework. Therefore, companies should think of integrating sustainability factors into mainstream reporting to show linkages between these two areas. In this context, it is not enough including non-financial information into the financial report where the sustainability issues are separated from the financial aspects. In other words, integration is desirable, and inclusion should be avoided.
If you would like to get more information regarding this topic or if you need support in publishing a sustainability report which is in alignment with GRI or SASB contact us via or +49.8192.99733-20.