Corporate reporters, those who are responsible for creating sustainability reports and reporting environmental, social, and governance data to various other organizations, have been frustrated for year by what many refer to as an alphabet soup of standards and frameworks such as CDP, GRI, IIRC, PRI, SASB, TCFD, UNGC… and the list goes on.
Still, while they complained at how those various organizations’ requests weren’t aligned, they dutifully complied with each of their requests and mandates.
Finally, help is on the way.
Last month, two of the aforementioned organizations, GRI (formerly the Global Reporting Initiative) and the Sustainability Accounting Standards Board, (SASB) announced a collaborative effort to help quell any confusion and to position their own standards as the most consequential.
CEO at SASB, Janine Guillot explained, “our basic SASB 101 pitch that we give to everyone we speak to talks about SASB and GRI as being complementary, but we could never break through into the public sphere with that message. It was always this conflict narrative, which was extremely frustrating.”
However, the “conflict narrative” wasn’t without foundation. For years, and often contentiously, the two organizations have competed for the attention and dominance of corporate reporters, NGOs, and the mainstream investor community. According to one report, at a sustainability reporting conference in Singapore last Autumn, the CEOs of GRI and SASB “traded barbs over whose was the superior standard”. Elaine Cohen, sustainability reporting expert, labelled it as a “showdown”.
For years, and often contentiously, the two organizations competed for attention and dominance.
At the event, now-former SASB CEO Madelyn Antoncic called GRI too difficult for investors to understand and claimed it was too complicated for companies to compare their performance with peers. In turn, GRI CEO Tim Mohin pointed out that its standard is used by 75% of the world’s largest companies “with those numbers, I don’t see how what SASB is saying can be true”.
But, times have changed. SASB employed a new CEO, Guillot, who has been with the company for five years, after a decade of working with investors such as Barclays and CalPERS. She came to her CEO job on the back of a strong working relationship with Mohin; the two are now taking baby steps parallel to each other, helping the customers of sustainability data, according to a joint briefing document, “understand the similarities and differences in the information created from these standards”
For several reasons, this could be the perfect time for such a collaboration. One reason is the ever-expanding focus on sustainability and environmental, social, and governance (ESG) metrics by the mainstream investment community, which creates a greater need for a set of dominant standards to emerge. If there was ever any question about this trend, BlackRock CEO Larry Fink rejected those doubts in his annual shareholder letter, referencing SASB and TCFD, the reporting framework created by the Task Force on Climate-related Financial Disclosures.
Aligned metrics are needed, even within companies, where sustainability departments are communicating with far more stakeholders.
Mohin stated, “you’ve got a much broader base of people who are interested in talking about these topics, coming from a much broader array of disciplines an investor relations person, a corporate secretary, a general counsel, a financial controller, a marketing communications person and an HR person. All of a sudden, you’ve got to bring together these multidisciplinary teams within both companies and investors. And that goes all the way up to the board, since boards of directors are now interested in these topics.”
Obviously, there is another small group of interested parties outside the corporation, such as customers, employees, and regulators who seek easily understandable and comparable data about a company’s sustainability performance.
As is the new normal, we must also take COVID-19 into account.
Mohin gave his opinion on that as well, “if the COVID-19 pandemic has shown us anything, it’s that nonfinancial disclosure is very meaningful from a global financial standpoint, and that the concept of what is financially material and what is considered not financially material is a very dynamic thing. We went from the issues that are important in a pandemic being sort of down the list to being front and center overnight. And now we have the issues of racial justice and inequality front and center. We’ve seen how the events of the world can change that definition for a company very, very quickly, which I think is one of the very important messages here of why GRI and SASB need to work together.”
The pandemic has brought a number of aspects of corporate performance into sharper focus, including how business contributes to biodiversity loss and the resulting increased potential for disease outbreaks. That, as well as the need, which Guillot recently pointed out in GreenBiz, for more resilient supply chains for essential goods such as food and medicine.
Harmony and collaboration
The two organizations’ work together is focused on going into the marketplace with aligned, complementary messages. Mohin said that one goal is to “understand how the different standards are used by companies. And then take the next step, which is to show in practice companies that are using both standards.”
Meanwhile, Guillot states another goal is to “demonstrate with real live companies who are reporting to both sets of standards how the companies are doing it, why they’re doing it and what kind of information each provides for stakeholders” She also suggested the possibility of doing some “mock disclosures”, by pulling together best practices from across multiple companies.
The two organizations’ work together is focused on going into the marketplace with aligned, complementary messages.
Beyond that is a world of other collaboration possibilities, about which neither Mohin nor Guillot would speculate.
The question is, can the GRI-SASB partnership change the game for the better? Mike Wallace, who ran GRI’s North America operation from 2009 to 2014, thinks so. He remains laser focused on reporting standards and ESG ratings methodologies in his role as a partner at the consultancy ERM, believing that greater collaboration could especially help those just beginning their reporting journeys.
He stated “it is a confusing space for new entrants when one considers the various options, requests and suggestions for how to address the growing demand for ESG information”, citing “at least a half-dozen disclosure options.”
“We are regularly integrating a range of the frameworks, guidelines and standards together for clients. For those companies that are just getting started, the GRI and SASB collaboration will be greatly appreciated”
This all sounds familiar. The two organizations have been discussing the opportunities that could arise from collaboration. A couple of years ago, it was reported that a Bloomberg-funded effort was in the pipeline to bring the GRI and SASB standards “in line with each other wherever possible.”
There’s also the proposed reporting framework that was announced in January at the World Economic Forum’s annual conference in Davos. In collaboration with the Big Four accounting firms, and endorsed by the CEOs of 140 large companies, it was created by WEF’s International Business Council to recommend a set of core metrics and disclosures “to be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries.”
However, that doesn’t mean rubbishing SASB, GRI and other such standards. As reported by the Financial Times, the WEF framework “takes inspiration from existing disclosure frameworks such as SASB, the Global Reporting Initiative and the TCFD and will also include the EU’s new taxonomy that defines green instruments.”
The problem is, it’s still confusing. It seems that alignment and simplification of corporate sustainability reporting could still be some way off.
Still, the SASB-GRI announcement is promising. Both organizations believe that transparency, particularly performance metrics and comparable information, lead to improved societal outcomes.
Guillot concludes, “if financial and nonfinancial stakeholders have access to information and can compare company performance on issues, then our theory of change is that companies will compete to improve performance and that at the end of the day leads to improved sustainability outcomes.”
After all, that is what we are trying to achieve here.