SASB issues XBRL taxonomy to improve ESG reporting comparability

The Value Reporting Foundation introduced the SASB Standards Taxonomy in XBRL format recently to make digital reporting simpler for issuers of environmental, social, and governance (ESG) disclosures and to improve data aggregation and analytics for investors.

Having the taxonomy in XBRL, an open standard used in business reporting, will enable reported metrics to be machine-readable via digital tags, and improve usefulness and comparability of ESG reports.

The Value Reporting Foundation was formed as a result of the merger between the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) in June this year.

The lack of comparability of ESG metrics across industries and countries is an oft-cited barrier to quality ESG data that's useful for decision-making. The new XBRL taxonomy is compatible with base taxonomies for financial reporting standards, such as IFRS and US GAAP, and is an effort to improve the quality and comparability of sustainability reports.

"We want sustainability reports to be digitally tagged so that data consumers can easily read them, machines can quickly aggregate information, and for data to get to analytics platforms and other data terminals easily," Madhu Mathew, director of technology of the Value Reporting Foundation, said in an interview with FM. "That is the primary goal: making that supply of sustainability information in SASB standards be efficiently and accurately connected to consumers of sustainability information."

Mathew added that the taxonomy has the flexibility to be extended to accommodate local jurisdiction requirements for sustainability reporting.

"What you're doing is, you're extending it for local purposes, but you're anchoring it to the original idea," he said. "So when investors are comparing companies globally, they can easily say — 'OK, this company in Singapore is reporting something very similar but is jurisdictionally accommodating', and [investors] can very quickly understand those nuances. That's why we provide that flexibility."

With increasing demand from investors for businesses to disclose sustainability information, there has been a marked rise in companies divulging ESG data of their business and operations in the past two years. In 2019, about 90% of companies in the S&P 500 published sustainability reports. Between 2020 and 2021, the Value Reporting Foundation reported a 215% increase in companies using the SASB framework for sustainability disclosures.

With the newly released XBRL taxonomy, the Value Reporting Foundation aims to make the reports more machine readable. This is crucial as the number of organisations reporting sustainability information using the SASB standards along with the integrated framework increases.

"You can think of integrated reporting as an overarching roof, and there's financial reporting and sustainability reporting under it," Mathew said. "We're very much hoping that the world globally would adopt this integrated concept, and when it comes to actual performance management, SASB metrics — given its specificity and industry-specific application — creates a complete picture."

With the release of this new XBRL taxonomy, the Value Reporting Foundation also announced the creation of a Taxonomy Review Committee that will oversee the management and governance of the taxonomy to ensure it meets the market's needs.

Mathew added that there are also efforts to assess how best to create a central repository of SASB reports to make it easier for report users to find data.

— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.