Report

2023.11.15

What is the SASB Standard for ESG Disclosure? (Part 2) Benefits for Companies

SASB
Standards/Regulations

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(This article is the second part of a two-part series; please also see the first part if you would like to see an overview of the SASB standards.)

What is the SASB Standard for ESG Information Disclosure? (Part 1)
https://aiesg.co.jp/topics/report/2301025_sasb1/

What is the SASB Standard for ESG Information Disclosure? (Part 2)

Although the SASB itself is not legally binding, the SASB Standards have become the recommended standard for mandatory ESG disclosure in some countries. and management risk mitigation. In addition, studies conducted by aiESG members and others have shown that the SASB Standards are effective in ESG management.

Table of Contents - Part 2

1. advantages for the company
2. publishing indicators in accordance with SASB standards
3. support for SASB compliance provided by aiESG
Conclusion

In recent years, as sustainability has become increasingly important to companies, the number of companies adopting the SASB Standards has been on the rise as their international influence expands. The second part of this report focuses on the benefits of adopting the SASB Standards, which specify disclosure requirements for important ESG information related to sustainability. After reviewing the detailed provisions of the SASB Standards necessary to secure these benefits, we will also refer to the services that aiESG can provide.

1. Advantages for Companies

The SASB Standards facilitate investor decision aids with uniformity of information through adherence to finely tuned standards.
This would be of great benefit to the company.

Advantage 1: "Clear and efficient disclosure of information.
The easy-to-understand indicators and detailed specifications of analysis methods allow companies to effectively use their limited time and money to publish sustainability indicators.

Advantage #2: "Improved branding"
In recent years, companies have been strongly expected to respond to sustainability, with the SDGs at the top of the list.

In some regions, there have been cases identified that require environmentally conscious corporate activities and related reporting, and sustainability initiatives in corporate activities are becoming a factor that cannot be ignored as a motivator for investors.

Disclosure of information in accordance with SASB standards can create the impression to investors (as well as to stakeholders as a whole) that the company follows sustainability standards in terms of its corporate image.

A side benefit of being a company compliant with the SASB standard is that it is likely to have access to market financing and other opportunities.

The application of the SASB standard is expected to be highly effective in terms of improving corporate branding in the future.

Advantage 3: "Reduction of Management Risk
The SASB standard imposes the release of quantitative (qualitative) indicators based on five main aspects, although detailed indicators differ for each industry.

From a risk management perspective, the introduction, consideration, and publication of these indicators will enable the construction of management strategies that capture risks from a long-term perspective.

In particular, the SASB requires disclosure of ESG-related matters that have a significant financial impact, which also greatly contributes to eliminating the risk of damaging corporate value.

The number of companies adopting the SASB standard will continue to grow worldwide because of the benefits it offers in terms of risk avoidance for corporate management.

The following section will explain what requirements are imposed on the procedures for the actual index disclosure.

2. Publication of indicators according to SASB standards

Companies can prepare reports that comply with SASB standards by referring to the SASB Implementation Primer, which is published by the official

The main items that the SASB Standards require companies to disclose are

interpoint (interword separation)Disclosure topic: "What is the company's business?
A set of disclosure topics that vary by industry sector, the SASB Standards enumerate how the management or mismanagement of disclosure topics can affect a company's long-term value creation. On average, the SASB Standards include six disclosure topics per industry.

interpoint (interword separation)Accounting metrics
Both quantitative and qualitative indicators are used to measure the performance of disclosure topics. There are 13 indicators for each industry sector.

interpoint (interword separation)Technical protocol
It provides clear instructions to companies on definitions, scope, etc.* so that metrics can be compared across companies. This also serves as an instruction to independent third-party evaluation organizations.
*Define, scope of application, accounting, aggregation, and display

interpoint (interword separation)Activitiy metrics:.
Refers to an indicator used to measure the size of a company's operations. The purpose of disclosing the business background is to facilitate normalization to the relevant disclosure analysis.

An important aspect of SASB standards reporting for companies is the increased profit margin that comes from attracting the attention of investors and investment evaluation firms through compliance with established analytical methodologies.
SASB Standards play an important role as an element of clearer sustainability disclosure, as investors have been shown to significantly price companies that comply with SASB Standards.

3. Support for SASB compliance provided by aiESG

We, aiESG, Inc., which conducts ESG assessments, are the first Japanese company to obtain a Corporate Reporting Software license under the IFRS Foundation's SASB Standard, an international sustainability disclosure standard.

aiESG becomes the first ESG evaluation organization in Japan to be licensed under the international sustainability standard "SASB Standards".
https://aiesg.co.jp/topics/news/20230808_sasb/

Through academic research, aiESG members have shown that the SASB Standards are effective in ESG management.

Paper presentation] The Relationship between Environmental Valuation and Stock Price Returns
~Investors consider companies that do not engage in environmental management to be a significant risk.
https://aiesg.co.jp/topics/report/230712_escore_investor/

Through this research, we can improve the transparency of ESG assessments in addition to providing analytical services focused on ESG information, which is of utmost importance to investors and companies through the licensing of the SASB standard.

Our analysis of ESG supply chain big data enables us to provide detailed estimates for more than 3,200 ESG indicators, including human rights, water resources, and governance.

The quantitative analysis required for reporting in accordance with SASB standards can also be performed by referring to data provided by the company.

4. summary

The SASB standard is effective in appealing to investors because addressing ESG and sustainability is extremely important in today's corporate management. the SASB has been established as a common international standard for sustainability information disclosure, and many companies around the world have adopted it, and Japanese companies are also increasingly adopting it. Although not legally binding, the SASB will become increasingly important in the future as the trend toward integration of international standards and frameworks for sustainability increases. The benefits to companies include uniformity of information, improved branding, and reduced management risk, and the SASB standard will bring significant benefits to corporate management. In reporting, companies should refer to the SASB Implementation Primer and comply with disclosure items, accounting indicators, technical protocols, and activity indicators. aiESG provides analytical services that comply with the SASB Standards to improve the transparency of ESG assessments.

aiESG can assist you with everything from the basics of SASB to the actual disclosure of non-financial information.
Please contact us if your company is having trouble with SASB compliance.

Related page
What is the SASB Standard for ESG Information Disclosure? (Part 1)Outline of SASB
https://aiesg.co.jp/topics/report/2301025_sasb1/

aiESG becomes the first ESG evaluation organization in Japan to be licensed under the international sustainability standard "SASB Standards".
https://aiesg.co.jp/topics/news/20230808_sasb/

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