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CFO INSIGHTS

Feature Interview with Jean Rogers PhD, PE, CEO of the Sustainable Accounting Standards Board

July 23, 2015

 

Editor: Sustainability issues have entered the mainstream of financial management, control and reporting.  What in your view can explain the relatively recent explosion of interest and information in this arena?

 

Jean: I think it’s sort of a perfect storm, isn’t it? We’re really just starting to see the effects of decades of growing interest in the role of business in society and an increased understanding of how companies use resources, including different forms of capital and the effect on the environment and society. What that translates into is increased materiality for investors, because at the end of the day, investors are interested in corporations and portfolios that are going to do better if their interests are aligned with those of society.

 

Editor:  To what extent do changing demographics play a role?

 

Jean: I think demographics are very important, and there are very recent studies that show that more women are entering the investment community. They share a different value set around concern for the environment and social factors. That really points to the changing nature of this “reasonable investor,” which is the hypothetical standard by which the SEC evaluates materiality.  The reasonable investor forty years ago who was content with only financial data is not the reasonable investor of today, who wants to understand a much broader range of factors.  Just think who the reasonable investor will be 40 years from now! My child is eight years old and she has a completely different set of values that are instilled in her schooling - concern for the environment and other factors. I see it across the board in the younger generation. The younger investing community has a real interest in trying to align their personal values with their investment objectives.

 

Editor: What response have you had to the sustainability reporting standards you’ve issued thus far?

 

Jean: We have three provisional standards out for use in nineteen industries – healthcare, the financial sector and telecommunications.  All we can look at now is the demand for downloads of the standards.  We’ve had over 3,000 downloads already from interested parties in 55 countries – in just those three sectors.

 

Editor: How does the work of SASB differ from other standards setters and other reporting frameworks that are being proposed internationally?

 

Jean: We’re really focused on the investment community and things that are likely to drive value, rather than things that are of interest to other stakeholders beyond investors. We’re also very designed for the U.S. market. We’re designing our standards for a very specific use, which is in the mandatory filings within the 10-K and the 20-F forms.

 

Editor: How do you explain the foreign interest in the standards?

 

Jean: If foreign companies do significant business in the U.S. they’re subject to the same requirements around disclosure and regulation, so they’re interested in understanding how to comply, and how to incorporate these disclosures into their mandatory filings. I also think there’s just a general interest from both U.S. companies and international companies in understanding materiality. We often hear frustration with the frameworks that are out there, so I think companies are looking for a much more cost-effective way to disclose their performance on these factors.

 

Editor:  How is assurance being developed around the SASB standards?

 

Jean: We have significant involvement from the accounting firms in our standards development process and also on our advisory council. We have a member of the big four on our board. We have a very good relationship with the PCAOB, and we’re working with them on how to attest to this information with the appropriate level of rigor of verification for the MD&A.

 

Editor: Recently there has been some push-back from SEC Commissioner Gallagher around the role of SASB in setting standards for reporting.  How you see your relationship unfolding with the SEC going forward?

 

Jean: Actually Commissioner Gallagher’s remarks were made prior to having a briefing with SASB. We have since met with him and briefed him on our work and I think cleared up his misunderstanding that we were in some way trying to usurp SEC’s authority, which we are not.  When we met he was very gracious and pleased to understand that we are a market solution and very cost-effective way for companies to address these factors and a very useful way for investors to consume the information.  He was also really pleased to hear about the breadth of participation from the investor and corporate community in the standards development.

 

 

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