Pub. 3 2021 Issue 3

M A Y / J U N E 2 0 2 1 24 nebraska cpas to include items such as those related to the attraction, safety, engagement, and retention of employees. Most large publicly traded companies in the United States voluntarily provide sustainability disclosures. This reporting typically focuses on three areas: environmental, social, and governance (ESG). Ideally, ESG reporting entails a long-term perspective that aligns corporate goals with the need to conserve resources and support the community. While few companies engage in detailed ESG reporting within their annual reports, most provide social disclosures separately. There are two primary standard-setting bodies in the area of sustainability reporting: the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI). SASB standards focus on three attributes: • Financially materia l – Identify, manage, and report on the sustainability topics that matter most to investors and donors. • Market informed – Standards based on feedback from companies, investors, and other market participants as part of a publicly documented process. • Industry specific – Enable investors and companies to compare performance from company to company within an industry. General ly, GRI standards—the older of the two—cater to enterprises in general, while SASB focuses on specific disclosure standards in 77 different industries. GRI is oriented to all stakeholders, while SASB primarily deals with investor needs. Neither framework is required in the United States, but both have been adopted by international business and nonbusiness enterprises. Sustainability reporting is mandatory in European Union (EU) countries, with GRI standards commonly used to fulfill the requirement. The standards from both organizations follow the United Nations’ 17 Sustainable Development Goals and emphasize cost-effectiveness and decision-relevance in adoption and implementation of their disclosure metrics. The standards are not static in either framework, but are reviewed and revised periodically under ongoing research projects. A movement is underway to consol idate and coordinate sustainability reporting disclosures. GRI and SASB, along with the Climate Disclosure Standards Board, the International Integrated Reporting Council (IIRC), and CDP Worldwide, released a joint statement 8 proclaiming the sustainability reporting frameworks are complementary rather than competitive. The statement recommends that various frameworks be used together in an effort to move toward a single, comprehensive global framework to promote uniformity, comparability, and risk assessment across industries worldwide. Also ref lective of a consolidation of standards, SASB and IIRC recently announced a merger. The International Accounting Standards Board announced its intention to launch a sustainability reporting framework to go along with its IFRS financial reporting standards. Considerations in the Choice to Report ESG Companies considering reporting ESG items must carefully evaluate the benefits and costs of this type of reporting in the context of industry trends and political climate. The cost of producing an ESG report must be weighed against the benefits, both financial and nonfinancial. Gaining a better understanding of sustainability reporting standards offers CPAs the opportunity to help clients carefully examine the framework of the different systems of reporting standards to determine which best fits the strategic vision of the company. t