1-19. SASB Standards and the Importance of EHS Data: Understanding Sector-Specific Requirements

The SASB (Sustainability Accounting Standards Board) standards are a framework for companies to disclose financially material sustainability information to investors, and are widely recognized among investors and institutional investors, particularly in the United States. While the GRI Standards are comprehensive disclosure standards aimed at a wide range of stakeholders, SASB is unique in that it focuses on "sustainability issues that have a financial impact on investors." To that end, it organizes material issues that differ depending on the characteristics of a company's business by sector and requires disclosure of EHS (Environment, Health & Safety) related data.

SASB has established detailed standards for 11 industry sectors and 77 business types. For example, in the manufacturing industry, greenhouse gas emissions, energy efficiency, water use, and waste management are key disclosure items. Meanwhile, the pharmaceutical industry places emphasis on product safety and labor practices in the supply chain, while the mining industry focuses on occupational safety and health and the impact on local communities. In this way, SASB is designed to enable investors to evaluate corporate risks and opportunities by clearly indicating "industry-specific EHS risks and financial relevance."

The importance of EHS data lies in the fact that it is essential for investors to evaluate a company's long-term sustainability and financial soundness. For example, the incidence of workplace accidents and fines for violations of emissions regulations directly lead to financial risk. In addition, water resource efficiency and emissions reduction efforts are indicators of a company's resilience to future tightening of regulations and social criticism. SASB standards require that this information be systematically presented to investors as "financially material non-financial information."

The key to disclosure that resonates with investors is, first, to "clarify material issues specific to your industry." It is important to present EHS risks specific to your company's industry and their responses in accordance with SASB standards, rather than simply providing general CSR information. Second, to provide "quantitative and comparable data." For example, using standardized indicators, such as showing the number of workplace accidents as an incidence rate per million working hours or disclosing emissions by scope, allows investors to compare your company with other companies. Third, to "explain the financial impact." By clearly showing how EHS measures lead to cost reductions, avoidance of regulatory risks, and increased brand value, you can help investors understand their significance.

In practice, the mainstream approach is to combine SASB standards with GRI and TCFD (Task Force on Climate-related Financial Disclosures) for integrated disclosure rather than using them alone. SASB focuses on "financial materiality," GRI focuses on "stakeholder materiality," and TCFD focuses on "response to climate-related risks," and these standards are complementary, so combining them enables persuasive disclosure.

In conclusion, the SASB standards are international standards that organize EHS data from the perspective of financial risks and opportunities, enabling disclosure that is easy for investors to understand. For Japanese companies, too, it is essential to accurately understand sector-specific requirements and disclose their own EHS data from a financial perspective in order to smoothly raise funds in global markets and engage in dialogue with investors.