Over 80% of the average S&P company’s value is not on the balance sheet. US GAAP and SEC reporting do not capture these unrecognized intangible assets.
Shareholders are demanding more information
In 2014, 55% of proxy requests dealt with sustainability issues. In other words, these were demands for information that will help shareholders determine how long the companies they invest in are likely to be in business, or at least profitably. They are demanding this information because understanding this affects their investment value.
asking the tough questions
...and giving your Investors the answers they need.
Do your shareholders understand your company’s competitive position? Do you find that investors have many questions regarding your company’s risk preparedness? Do believe that your company will thrive during an economic shock? Do you have difficulty assessing and communicating the value of your company’s assets that are not on your balance sheet, such as human capital, best-in-class practices, and strategic advantage?
“72% OF INDIVIDUAL INVESTORS BELIEVE THAT COMPANIES BENEFIT WHEN THEY FOCUS ON SUSTAINABILITY.” – MORGAN STANLEY
What makes companies resilient?
They need to be sustainable.
A process built on shaky ground is set up for failure. For example, a company that relies on resources from a socially volatile region will encounter a supply chain problem, it is just a matter of time. If you work for a service company, your people are your value. How well-trained are they? Can they respond to change? Do they understand compliance with applicable laws the violation of which can cause a value-sapping lawsuit? What about your leadership? Are they incentivized to make decisions that encounter too much risk? How would they handle a crisis?
Reporting decision-useful information.
The Sustainability Accounting Standards Board (SASB) began in 2011 to create standards for reporting decision-useful information on the value missing from the balance sheets of US public companies – intangible assets that are not valued for accounting. The disclosures and metrics were designed from comprehensive stakeholder feedback and economic analysis to focus on factors that materially impact a company’s sustainability and thus their long-term profit potential.
In late 2015 the SASB issued 74 standards across 10 economic sectors. These standards are specifically engineered to fit within the SEC reporting rules and focus only on material matters for the companies in their respective industry.
The new SASB standards
Focusing on environmental, governance, and social matters.
While 7,000 public companies now issue some type of sustainability reporting, often called collectively ESG, or environmental, sustainability, and governance reports, also sometimes called CSR’s, they are replete with unfocused information that do not have a material impact on a company’s financial performance. Additionally, the data is non-standard and is not comparable with competitors’ information. The SASB standards focus only on environmental, governance, and social matters that are likely to have a material financial impact for US companies in a sector.
higher returns on capital
A Study by Harvard University
A study done by Harvard found that companies that have sustainable processes that focused on material matters have significantly higher returns on capital. The basic reason is that being sustainable is efficient. Less waste means less cost. Fewer lawsuits as a result of unethical practices mean more profit go to shareholders. Lower turnover results in higher productivity. It’s not a difficult connection to make.Download Study
The SASB standards help communicate to stakeholders the state of and progress on creating and maintaining a company to be profitable for the long-haul with less volatility. What investor wouldn’t like that?
Proclaim Your Value with SRP.
With 7,000 companies understanding the need to report on ESG matters, and the prospect of making the reporting more efficient, it is only a matter of time before your company needs to adopt SASB standards to remain competitive.
Don’t know where to start? We do, and we can help you from start to finish. We have a passion for sustainability and want to help you remain competitive. We have years of expertise. We have helped to run companies, not just accounted for them. And we ourselves have a sustainable model, so we practice what we preach.
The SASB standards are based on the following dimensions:
2. Social Capital
3. Human Capital
4. Business Innovation
Each standard defines metrics and disclosures that are proven to have a material impact on company performance and financial position. Each standard in turn emphasizes one or more dimensions depending on their impact on the sustainability of the companies in the industry.
WE offer a rapid turn-key solution.
SRP - Partners with Expertise
We partner with firms who have committed resources to specialize in effective and efficient implementation of SASB standards. Among the partners are firms in the environmental science, human resources, investor relations, and industry analysis, and financial reporting and accounting sectors.
4. Measurement Implementation
We’ll help you to revise or implement the equipment, software, and processes discovered in the Process Adaption phase to efficiently and effectively capture relevant sustainability information.
5. Reporting Processes Adaption
We have deep experience in internal controls (COSO, SOX), financial reporting, US GAAP, IFRS, and SEC rules. We can help you adapt your Sarbanes-Oxley controls to seamlessly integrate SASB reporting into the 10-K and 10-Q reporting cycle. We can help you to implement software to standardize SEC reporting with embedded SASB metrics and disclosures.
Our goal is to make your employees experts in sustainability reporting for your company. We are not interested in breeding dependence on us because that itself is not a sustainable practice. Sustainability must be woven into the fabric of your company so you can move from merely the cost savings that sustainable processes generate to having sustainable company strategy.
“89% OF (OVER 100) THE STUDIES WE EXAMINED SHOW THAT COMPANIES WITH HIGH RATINGS FOR ESG FACTORS EXHIBIT MARKET-BASED OUT-PERFORMANCE”
– DUETSCHE BANK GROUP
We have been querying company managements on ESG topics for decades. Today we have a specialized team to help our portfolio managers and analysts gather deeper intelligence on such topics and integrate these considerations into our investment processes.
Tim McCarthy,CFA, Director of Investor & Counterparty Services for Wellington Management
“When you have some of the largest players in the financial-services sector taking ESG seriously, it sends a powerful signal to the markets”
Thanks a lot!
Fiona Reynolds,Managing director of the Principles of Responsible Investment
90% of companies showed that sound sustainability standards lowered the cost of capital. • 80% showed a positive relationship between stock performance and good sustainability practices. • 88% indicated that operational performance of firms was improved by robust Environmental, Social and Governance practices.