3.4.3.0 Introductie

In the US sustainability reporting is a voluntary practice and undertaken mostly by the largest companies. Reporting organizations use a variety of voluntary reporting frameworks, standards and guidelines to disclose Environmental, Social and Governance information. Among others, US companies follow guidelines and principles such as, the CDP (former Carbon Disclosure Project), the Global Reporting Initiative, the International Integrated Reporting Council, the UN Global Compact, the UN’s guiding principles on business and human rights, UN-backed Principles for Responsible Investment, the International Chamber of Commerce’s Charter for Sustainable Development and the OECD Guidelines for Multinational Enterprises.12The most used standards amongst US companies are the Global Reporting Initiative standards.3 Listed companies carry on most sustainability disclosure. In 2011, the Global Reporting Initiative and Governance & Accountability Institute identified 333 sustainability reports published by organizations in the US. From this total of 333 sustainability reports, 244 were published by listed companies, only 57 reports were published by privately owned companies and 12 reports were published by public institutions.4 The Global Reporting Initiative was the most used among the reporters as 269 organizations used the Global Reporting Initiative standards to prepare the report, 16 organizations mentioned the Global Reporting Initiative in the report and only 48 organizations did not mention the Global Reporting Initiative in their reports.5 The Global Reporting Initiative has a focal point based in New York City since 2011.6

On a national level, the US Government and corporate sector have been encouraged to report on Environmental, Social and Governance risks by sustainability related platforms and information providers, as the following: i) the Environmental Protection Agency, already mentioned above, regarding mandatory environmental reporting, has also developed a number of voluntary programs and projects, partnering with industry and with the public sector to reduce greenhouse gas emissions.7 The Environmental Protection Agency has been active providing technical expertise and encouraging voluntary reductions from the private sector; ii) Ceres, a non-profit organization based in Boston and San Francisco, was created in response to the Exxon Valdez oil spill in 1989. It encourages sustainable business practices to build a sustainable global economy, through a large network of investors, companies and public interest groups;8 iii) the Global Initiative for Sustainability Ratings (GISR), jointly created by Ceres and Tellus Institute in 2011, it is an independent, global, non-commercial, initiative, based in the Boston. It aims at developing a global corporate sustainability ratings standard aligned with the US national and global sustainability agendas;9 iv) The Governance & Accountability Institute, is a for-profit corporate research-based Environmental, Social and Governance advisor and consulting organization based in New York. It provides consulting services in risk management, corporate governance and Environmental, Social and Governance performance, and varied sustainability trainings.10

Another leading sustainability reporting initiative was developed by the Sustainability Accounting Standards Board (SASB). The SASB is a private sector non- profit organization (just as the US Generally Accepted Accounting Principles) created in July 2011 to “develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors.”11 Private foundations, among others, the Rockefeller Foundation, the Metanoia Foundation and Bloomberg Philanthropies currently fund the SASB. On a later stage it expects to finance itself with revenues from licensing, education and training fees.12 The SASB is developing standards in 10 sectors, Health Care, Financials, Technology & Communication, Non-Renewable Resources, Transportation, Services, Resource Transformation, Consumption, Renewable Resources & Alternative Energy, and Infrastructure; and industry-specific.13 As of March 2016, SASB has issued provisional sustainability accounting standards for 79 industries.14 Harvard research (Robert Eccles & Serafeim, 2013)15has found that “the materiality of the different sustainability issues likely varies systematically across firms and industries.” SASB believes that “sustainability issues affect different industries in different ways” and only industry- specific metrics will help businesses to manage risks efficiently.16

The SASB develops standards that fit in the SEC’s Form 10-K.17 The US listed companies may use the SASB standards to disclose sustainability information in their annual report to be included in an SEC filing.1819The combination of using the SASB and the US-GAAP by US listed companies in their SEC’s fillings is also a step towards integrated reporting, although not through the IIRC’s framework.20 As SASB puts it: SASB’s work “is a practical implementation of the concept of integrated reporting in the context of US capital markets.”21

Looking at the development of financial reporting standards in chapter 2, we saw that the SEC in the US requires public companies and regulated companies to prepare their financial reports according to the US Generally Accepted Accounting Principles (US-GAAP). In more than 100 countries, including in the European Union, companies prepare their financial reports using the IFRS. The use of different financial standards has proved to be challenging for double listed companies but also triggers difficulties for comparing financial performance of companies based in different regions.

Despite the SEC’s intentions of making the US Generally Accepted Accounting Principles compatible with the International Financial Reporting Standards, eliminating double and overlapping requirements for simplifying financial reporting across different countries, the two reporting standards remain in use. Financial reporting though the US-GAAP has developed in parallel with the development and growth of accounting services and education curricula, has it happen with the International Financial Reporting Standards in Europe. A potential merge of the two standards would entail high costs and the low cost-effectiveness of this merge should be considered.22

Considering this current state of the art of financial reporting standards we can see the potential of the sustainability reporting standards developed by SASB to follow a similar path to the one of the US-GAAP, this is being used only in the US. If the SEC mandates the SASB, these standards are already developed and focusing solely on the US market.23 A possible result from the SASB requirement by the SEC would be the development and growth of these standards within the US market, inclusion in the education curricula at universities and part of the US accountancy profession practice. It’s relation with a possible international sustainability reporting standard, as the International Financial Reporting Standards, would therefore, be following a similar trajectory of development and practice. Companies based in different regions, as in the US and in Europe, would not only disclosure financial information using different reporting standards but also reporting sustainability related information using different standards. This disparity would reinforce the challenge for communicating effectively and in a consistent manner to investors and other relevant stakeholders.

Independently of how good of a standard the US-GAAP and SASB are for the US market and US investors, I am of the opinion of an international effort for developing an integrated and international standard suitable to respond to the constant evolving global market, and to respond to the rapid change of consumer’ needs.

The most important sustainability indices in the US are the Dow Jones Sustainability Indices, in which participation is voluntary. Another example is the MSCI KLD 400 Social Index (formerly Domini 400 Social Index).24 In addition, the world’s largest stock exchanges and the most important exchanges in the United States, NASDAQ and NYSE, have both become Partner Stock Exchanges within the Sustainable Stock Exchanges by committing to promote improved Environmental, Social and Governance disclosure and performance among their listed companies.25

In 2010 the United States Bureau of Labor Statistics developed the Green Jobs Initiative and started measuring green jobs. The Bureau of Labor Statistics (BLS) collected information about i) the number of and trend over time in green jobs, ii) the industrial, occupational, and geographic distribution of the jobs, and iii) the wages of the workers in these jobs (BLS, 2012).262728Initiatives such as this one can provide data on how green jobs are evolving in a country and therefore give an indication of how sustainability is developing in that country. On March 2013, the US Federal Government ordered the across-the-board spending cuts, commonly referred to as the US budget sequestration in 2013 or only sequestration, required by the Balanced Budget and Emergency Deficit Control Act.29 Under this order the BLS had to cut its budget by over USD $30 million, by 30 September 2013. In response to this requirement the BLS discontinued the Green Goods and Services Industry Employment data, including the “measuring green jobs” products.30