July 23, 2019

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An Antidote to the Headache of Sustainability Reporting: SASB Releases Standards for the Health Care Sector

An analysis of the current state of disclosure in this sector indicates an opportunity for SASB standards to really move the needle on disclosure.

Katie_schmitz_eulitt_sasb

By Katie Schmitz Eulitt, Associate Director, Stakeholder Engagement, SASB

Companies often compare sustainability reporting to death by a thousand cuts.

Various stakeholder groups have seemingly countless requests for data served in slightly different ways. In response to this increasing interest in environmental, social and governance (ESG) issues, sustainability reporting has proliferated: more than 5,000 companies issued a sustainability report in 2012, compared to just 26 in 1992.

But while corporate reporting is increasing in volume, it’s not necessarily increasing in quality.

Sustainability Accounting Standards Board [SASB] research shows that up to 75 percent of what companies report on ESG factors is immaterial in any given industry. Unlike financial reporting, which ties performance to valuation and is actionable by investors and corporations alike, much sustainability reporting to date has lacked rigor and comparability.

We don’t need more reporting, we need reporting that allows management and investors to focus on the sustainability issues that matter most to risk mitigation and long-term value creation.

With that in mind, today SASB has released its first set of provisional standards for industries in the Health Care sector. Companies can now begin using the standards to disclose material sustainability issues in the Form 10-K, 20-F and other required SEC filings. By using SASB standards, companies can comply with existing regulation (U.S. Federal Law, Regulation S-K) that requires all material issues to be disclosed in the Form 10-K.

Sustainability Standards: Now Available for Health Care Sector

Our standards are available for six industries in the Health Care sector: biotechnology, pharmaceuticals, medical supplies and equipment, health care delivery, health care distributors and managed care.

The standards address ESG issues most likely to be material for companies in these industries with issues like resource management, pharmaceutical water contamination, drug safety and side effects, health care sectorethical marketing, affordability and fair pricing, managed care price performance and safety of clinical trial participants, addressed.

Standards Setting: Who & What Was Involved

We used a rigorous and objective process—including research supported by Bloomberg technology, data and analytical tools; balanced, multi-stakeholder industry working groups; a public comment period; and review by an independent Standards Council comprised of experts in standards development, securities law, investment, environmental law, metrics and accounting—to develop these standards. 

The working groups for the Health Care sector included 127 survey responses and representation from publicly traded companies with more than $800 billion market cap and investment firms with more than $952 billion in assets under management.

Need for Standards: Moving the Needle on Disclosure

An analysis of the current state of disclosure in this sector indicates an opportunity for SASB standards to really move the needle on disclosure. In a SASB study of the Form 10-Ks of 58 health care companies, for example, 35 percent of filers have no disclosure and 37 percent have only submitted boilerplate disclosure on material ESG issues.

By identifying material issues and accounting metrics at the industry level, SASB standards fill an SASBunmet need in the U.S. capital markets, enabling corporations to articulate material, non-financial risks and opportunities via the channel through which investors are used to receiving information.

Our standards will also alleviate reporting fatigue by providing clear guidance on what ESG issues are material for companies to report on within their specific industries. In addition to the clear direction provided by these standards for the first time in disclosing material issues in the Form 10-K and 20-F, companies can now use them to identify which ESG issues to prioritize operationally—toward the goal of improving performance—as well as emphasize in their CSR or integrated reports.

In fact, over the next two years, we aim to develop standards for over 80 industries in 10 sectors.

ESG data abounds, currently packaged nicely in beautiful reports. But how can companies and investors determine what matters? And once that’s determined, how do companies and investors benchmark and compare these issues industry by industry?

SASB’s provisional standards for the health care sector can now give investors a true representation of non-financial performance without hitting a rut of comparing oranges to apples – and create a race to the top on the most critical dimensions of sustainability. 

Take a look at the standards and let us know what you think by leaving a comment below or connecting with us on Twitter and Facebook.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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