The practice of Sustainability is dynamic and ever-evolving; It requires collaboration, learning, teaching, and most of all a change from business as usual. As we inspire businesses and the public in ESG initiatives, we too, in our practice, must be willing and ready to continue to grow, learn and evolve.
As a sustainability analyst, I often search through and read sustainability reports. I understand the needs and desires of the investors/shareholders as they navigate the information within these reports and like many of you, I also bring an awareness of the frameworks themselves.
Having said this, I have become increasingly inspired to remind my cohorts of the principal purpose of the GRI and SASB disclosures, which is to present concise and succinct information surrounding specific & material topics to aid in investor decision making. This purpose is, unfortunately, being obscured by bad practices in sustainability reporting.
"Sustainability reports are made to complement, not replace reporting indexes/tables like the GRI Index & SASB Table."
Most likely, you too, have witnessed a variety of bad practices in ESG & sustainability reports. It is frustrating when looking for GRI and SASB disclosures if you are forced to spend hours extracting "quantitative information" from referenced "narrative content" in a report or worse yet are dropped in the middle of a 15-page policy to search for a paragraph that speaks to the disclosure you are searching for. You may also have times when you see that a disclosure that was referenced, does not actually exist (Ghost Disclosure) where the index says it was supposed to be. While these practices may be commonplace, it would be to our own great disadvantage if we were to continue to accept and condone these "bad habits" in our own practice.
I understand the widely coddled sentiment about ESG being like the “Wild West”, with the majority of ESG information being a voluntary disclosure, unregulated, unenforced, and unassured; It appears that everyone is copying everyone else in their ESG disclosure and reporting practices and unfortunately, including their mistakes & bad habits along the way.
I am concerned that if this continues and we do nothing to stop it, this could erode our practice by degrading the quality and usefulness of our work many times over.
We should not "do what everyone else does” & continue to ignore the guidelines and framework rules, because in the end, it will do us as sustainability professionals and our practice, a huge disservice.
Much of the work of the sustainability analyst is made possible by, if not created entirely from, interaction with frameworks, indexes, databases, and company sustainability information we painstakingly and carefully extract and refine from companies/clients within our consultation/ ESG report services.
The frameworks & Standards guide and inform our process and are the foundation of work we provide and are engaged in on a daily basis. These frameworks that we use, just focusing on GRI and SASB right now, are the compilation of thousands of people's time, thoughts, work, and dedication and it is important that we not lose sight of that in our work of creating sustainability reports; One way to respect the foundation of our practice would be to make more of an effort to try and follow the guidelines, principles and best practices that are an integral part of the success of the framework.
The proper use of frameworks is also something that distinguishes our work from that of the “CSR” or “PR” reports that often include marketing/spin, risk of greenwashing, and are not impartial sources of company information.
Let's Take a closer look at these baad habits...
1. The SASB Table
2. The GRI Index
3. SASB Omissions & Table Title
1.) The SASB Table
In recent years, I have noticed a severe uptick in the habit of creating fully referenced SASB Tables that do not contain information at all, only reference to where that information can be found or better said searched for. The locations of the disclosures vary and are inconsistent in their clarity and conciseness of response. This practice is many times further degraded by answering a quantitative question in narrative form or the opposite. Albeit there is no SASB police to draw attention to this; It is easy to see that the quality of direct disclosures is on the decline. Other times one clicks to view the linked reference and is dropped into a page of the sustainability report which they then have to read pages upon pages to extract the relevant information. Neither of these habits is conducive to giving the public/stakeholders/investors a fast and easy way to see and understand the information being presented, as this is the framework's primary purpose. The practice of a fully referenced SASB Table is a slippery slope and too frequently disclosure information is subsequently not clearly addressed.
Example of fully referenced SASB Index:
SASB Tables come in all shapes and sizes it is true, however, the SASB Table has intrinsic value in its ability to capture pertinent points of specific information and present them in one place; The disclosures within the chart could be accented/embellished by additional links/references to and for further or extended reading, information, but in the SASB Table itself, can ideally contain the full summarization of the response to the disclosure question proposed.
Since we in many ways build the sustainability reports upon these disclosures, wouldn't it make more sense to use the Table to consolidate and house the pertinent information of the disclosure and not use links to references exclusively or in place of a complete disclosure?
There is extensive evidence that investors benefit from being able to print out or have the ability to access the SASB Table exclusive of the Sustainability report. When the content is restored to the SASB Table, the intrinsic value that was intended, the freedom to be utilized as a separate component from the report, will be restored and this will, in turn, create the clear, comparable information that the investors and public are seeking.
Example of Best Practice SASB Table:
2.) The GRI Index
The GRI was created to help businesses and other organizations take responsibility for their impacts, by providing them with the global common language to communicate those impacts. The GRI has 6 lesser-known reporting principles that help guide the presentation, organization, and quality of content and information in GRI reports, they are balance; comparability; accuracy; timeliness; clarity; and reliability. Clarity and Comparability are two that suffer the most, in the context of a fully referenced GRI Index. In a fully referenced GRI Index, disclosures are more often not being addressed clearly or concisely and this makes information less convenient to access and challenging to extract and interpret.
Example of Fully referenced GRI Index:
Reference links have replaced actual disclosures on an unfortunately large number of reports and the GRI Index now sits as an empty husk at the bottom of the report, offering nothing but a long winding journey between linked references and across pages to satisfy the requested disclosures. Many times, you might be wondering if you found the right referenced part, have to read a whole chapter to find the particular paragraph you were looking for, or worse yet after all that searching you might end up finding only a partial disclosure, or worse yet no actual disclosure at all.
GRI disclosure information that is woven into a report can and feel different than a direct answer to a direct question; more often than not, for whatever reason, disclosures referenced within reports are not direct or clear disclosures at all.
The point being, while there is no direct rule in GRI, specifically, that says you “should” report disclosures within the GRI index itself it has become abundantly clear that the “referenced only” approach is a slippery slope that can erode our practice as it appears to condone incomplete, unclear, and at times difficult to locate/non-existent answers and this we DO KNOW is not conducive to GRI Indexes ultimate purpose and use.
WHY are these disclosures being integrated into the report but withdrawn entirely from the GRI Index itself ?
The GRI Index, when it contains disclosures, has much intrinsic value. Investors/stakeholders and the public benefit from seeing these concise, selective, and clear disclosures in the context of the GRI Index so, I propose that we endeavor to provide disclosure responses in the GRI Index and use reference links as supplemental/ additional or contextual reference only.
Being able to answer a disclosure fully and clearly is the goal for disclosures within the SASB Table and the GRI Index alike; the opportunity to reveal/elaborate on the context of the disclosure in a narrative form, should not supersede this goal.
For quantitative disclosures, there is no purpose for hiding the numbers in fancy charts/graphics within the report in place of housing them directly in the Table itself.
3. ) SASB Omissions & Table Title
Everyone has noticed SASB charts that have partial disclosures, excluded disclosures without explanation, or disclosures that have been omitted from the Table entirely. It is important to know that this is NOT best practice or advised within the guidelines of the framework. The reasons for not allowing omissions without explanation are plenty and point more generally to the purpose behind the SASB table which is to help guide corporations disclose material, decision-useful information to investors.
Example: Workforce Health & Safety Disclosure asks for (1) Total recordable incident rate (TRIR), (2) fatality rate, and (3) near-miss frequency rate (NMFR). If a company chooses to disclose the “ fatality rate” but excludes the “near miss frequency rate” the disclosure as a whole, may not present the most accurate or truthful view of the situation. More plainly said, although no one has died on the job, there are outstanding safety issues that need to be addressed, indicated by (NMFR).
One thing to remember about the SASB standards is that the disclosures herein are the cumulation of much industry research and collaborative public, company, investor assessments into the most material aspects of a specific industry.
They have paid special consideration to only include items that have been identified as financially material so as not to strain the reporting companies with the request of information that is not cost-effective to track and gather.
In essence, you can trust that what is being asked for in SASB disclosures is proven to be meaningful and material. Investors rely on clear disclosures in order to make peer-to-peer comparisons, get an unbiased understanding of risks, opportunities and perform financial valuations of said company. Titling the SASB table with industry used is also recommended in order to be in accordance with the standard. This also makes the disclosures within each industry easier to understand conceptually in the case of a company that spans a couple of industries.
While it is true that many companies these days are not “pure-play” or dedicated to one specific business industry, often including facets of other industries is needed to fully satisfy an accurate representation of “primary business activity”, this does not mean that it is in the best interest of the client, investors or public to exclude parts of disclosures or whole disclosures without stated reason or acknowledgment. Omissions to SASB Table disclosures are acceptable, where warranted when accompanied by an explanation/reason.
Conclusion
It is in our best interest, and the interest of the sustainability industry as a whole, to continue to evolve our practice, recognize and use best practices and in general strive to follow said frameworks rules, and guidelines; take the time to educate our clients in the integrity/history/purpose/rules/best-practices of the standards and frameworks that we use in work that we do and always include the "why". When clients are made aware of the "reason" behind the rules/guidelines they are usually, in my experience, more inclined to follow them. I believe that with this we can inspire more compliance, transparency, and ultimately more sustainable action and awareness.
In our role as sustainability professionals we balance 3 things:
The needs of the environmental, social, and governance decision-making bodies.
The integrity of the frameworks/standards reporting best practices.
Company and or client abilities/willingness to disclose and begin the journey towards creating meaningful sustainable change.
Resources:
SASB on Omissions:
“Your company, Your call, SASB Standards are intended for use in communications to investors regarding sustainability issues that are likely to impact corporate ability to create long-term shareholder value. However, reporting with SASB Standards is not an “all or nothing” proposition. A company determines for itself which standard or standards are relevant to the company, which disclosure topics are financially material to its business, and which associated metrics to report, taking relevant legal requirements into account. To ensure investors understand the thought process behind your disclosures, SASB recommends that you clearly explain why you omitted or modified SASB topics or metrics in your disclosures.” -Understanding SASB Standards
SASB Including Table Title:
“When reporting using a SASB standard, an entity shall cite the relevant SASB standard in order to be in conformance with the standard.” - Resources: Both of these are covered in more detail in “Develop Your Disclosures,” as well as in SASB’s Standards Application Guidance.
Balance Principle of GRI standards:
“The report is expected to avoid selections, omissions, or presentation formats that are reasonably likely to unduly or inappropriately influence a decision or judgment by the report reader. The report is expected to include both favorable and unfavorable results, as well as information that can influence the decisions of stakeholders in proportion to their materiality. The report is also expected to distinguish clearly between facts and the organization’s interpretation of them.” - GRI Foundation, Page 13, On referencing information in GRI Index 19-20
Page 20-21, GRI Index
