The Enemy of My Enemy
To my four readers, it has been 9 months since my last post. In that time, SASB (which had been a vocal advocate for better alignment with GRI) merged with the International Integrated Reporting Council (IIRC) — another in the unofficial trio of leading sustainability reporting standards. Not long after, BlackRock issued its 2021 Letter to CEOs re-emphasising the importance of TCFD and SASB reporting. Perhaps more crucially — but I digress here — the message also focused on net zero commitments and called for greater diversity and inclusion. By April 2021, company-that-shall-not-be-named published its first set of SASB disclosures — the latest addition to an index that happily houses five existing standards. Throughout this unfolding saga, I passed the SASB Level I and Level II exams to become a Fundamentals of Sustainability Accounting (FSA) Credential Holder.
License to practice
The FSA exams are not going to be particularly challenging for anyone who works with Environmental, Social and Governance (ESG) data on a daily basis. So, what’s the real value in getting certified? Let’s start with LinkedIn — take a peek at the profile of the ESG specialist at your favourite institutional investor. There is a higher likelihood that he/she will be an FSA Credential Holder than a practitioner with a relevant degree. The implication is that, for those working in financial institutions or who interact with investors on ESG matters, becoming an FSA Credential Holder is increasingly going to mean something.
Unexpected turn of events
[This post was originally intended to be a thrilling account of the certification process. Instead, we are going to take a much needed detour here to cover some salient developments.]
Although it seemed for the longest time that SASB and GRI were going to “better align” their standards, SASB ultimately made the decision to merge with IIRC in November of 2020 to form the Value Reporting Foundation. Gently put, the merger was not warmly welcome by most practitioners and raised a few questions — e.g., were there sufficient synergies between the two standards to warrant the merger?
While the <IR> Framework and the SASB Standards are now presented as being “complementary tools for investor-focused communications”, there are no immediate signs that the fundamental reporting requirements (i.e., indicators) have undergone significant revision. Is a merger meaningful if the basic building blocks remain more or less unchanged? Like most things, only time will tell.
Brief note to those taking the FSA exams in 2021 — the study material was updated post-merger with IIRC. Existing FSA Credential Holders do not have to re-sit the exams but are provided with a free copy of the updated material.
The subtext
Anyone immersed in this space will have noticed the unusually direct criticisms hurled at GRI over the years — “difficult”, “misaligned with company priorities”, “lack of comparability”, etc.
Now, all throughout this epic, GRI has remained relatively zen. Here is GRI’s CEO Tim Mohin calmly trying to bring clarity to the debate: “The GRI Sustainability Reporting Standards (GRI Standards) and the SASB Sustainability Accounting Standards are designed for different, but complementary, purposes. Stated simply, GRI looks at the company’s impacts on the world and the SASB looks at the world’s impacts on the company”.
And you would be calm and gracious too if you knew you had the upper hand.
Despite the loud public rhetoric (by a few) about GRI’s perceived shortcomings, it is still by far the most widely used sustainability reporting standard in the world. Sure, it’s not a perfect standard, but it’s probably not anywhere near as bad as critics claim.
By contrast, those sitting on the other side of the aisle with their constant fidgeting and finger-pointing, maybe that over-reactiveness is not such a good look. Watching from the outside, some of these shake-ups appear to be overly grand gestures that have fallen short of their target to isolate an established standard, one that has withstood the test of time.
Don’t drink the cool-aid
To those in the investment community who continue to lead the charge against GRI, with some vague notion of a future where all our data problems are solved by a simpler, unified reporting standard — there is good and bad news. The corporate ESG ratings, rankings and indices that are purchased from third parties — one of the foundations for ESG investment decision-making — I would hazard a guess that a good chunk (maybe even the majority) of the data upon which those ratings and rankings depend are GRI-based disclosures. Yes, each standard has its value — we love them all equally. But, unlike GRI, most do not support anything near the scope and quantity of disclosure indicators needed to yield what is considered a robust ESG rating. Know your data.
The good news is that it’s probably OK to have both kale and carrots on the menu (read: there is room for different standards). Also, maybe we don’t have to chop our vegetables with straws. Slicing and dicing sustainability data just requires different tools and skillsets. There are plenty of utensils in the cupboard if we know where to look.
