The State of Sustainability Reporting

In a post for the SEC Institute Blog, George M. Wilson and Carol A. Stacey discuss the SASB’s recent report, The State of Disclosure 2016.

In that report, the SASB provides an “overview of the quality of existing corporate disclosure on SASB topics.”  According to Mr. Wilson and Ms. Stacey, for the report, the SASB reviewed annual reports on Form 10-K and Form 20-F for the top ten companies in 79 industries.

Using that information, the SASB makes a number of important observations.  For me, the most important observation was, “[our] findings, among all others contained in this report, demonstrate that, by and large, companies are taking a minimally compliant approach to sustainability disclosure, providing the market with information that is inadequate for making investment decisions.” [Emphasis Added]

Given that conclusion, it’s to me that financial market regulators need to work with organizations like the SASB, GRI, and the IIRC to standardize sustainability reporting and to develop mandatory reporting requirements, rather than encouraging voluntary disclosures.

In their blog post, Mr. Wilson and Ms. Stacey summarize conclusions from the SASB “State of Disclosure” report and, to demonstrate some of the concerns expressed in that report, they compare the water usage and water management disclosures provided by PepsiCo and Coca-Cola in their most recent sustainability reports.  (Those interested in the bloggers’ comparison are encouraged to read their excellent blog post)

Their PepsiCo/Coca-Cola disclosure comparison confirms the SASB report conclusion and demonstrates two major problems with the current voluntary approach to corporate sustainability reporting: (1) a lack of commonality among the disclosures presented by companies in the same (or in related industries) and (2) the dearth of specific definable metrics provided in the voluntary sustainability disclosures.

Of course, Mr. Wilson and Ms. Stacey make similar observations.  They conclude: “[a]s you can see in comparing these two disclosures, it is challenging to assess the relative performance of these two companies in water use issues. For example, it would be helpful to have information about the amount of water each company uses and from where the water is sourced. Both companies tout significant decreases in water use, but only one provides a financial perspective. In addition, both companies present qualitative information, but again assessing relative performance is difficult.”

An excerpt of the “The State of Disclosure 2016” report is available for free from the SASB website.  For the full report, you must register on the website and pay for a “full access pass,” which gives the holder access to the SASB’s complete publications library.


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