SASB’s Proposed Revisions to Its Conceptual Framework and Rules of Procedure

Jeffrey Hales is a professor of accounting at the University of Texas at Austin and Chair of the SASB Standards Board and Tom Riesenberg is SASB’s Director of Legal and Regulatory Policy.

Lawyers don’t typically use conceptual frameworks in their work, but accountants, social scientists, and many other professionals do. For example, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) both have well-established conceptual frameworks. Standard setters develop conceptual frameworks for two reasons: first, they provide an intellectual grounding in core principles and objectives that guide standard-setting efforts; and, second, they provide a common language that improves the ability of a standard setter to communicate ideas and intentions with key stakeholders.

Indeed, it has been argued that FASB’s conceptual framework has been key to the “FASB’s institutional success by disavowing a neutral posture towards its constituents’ conflicting interests and explicitly privileging the user interest over the preparer interest.” [1] The IASB has taken a similar position. Following these precedents, the Sustainability Accounting Standards Board (SASB) also has a conceptual framework in place that, among other things, establishes that the SASB Standards are designed primarily to facilitate disclosure of sustainability information that is useful to investors, lenders, and other creditors.


SASB was established in 2011 and adopted a conceptual framework in 2013. The framework served as a guide as the SASB staff developed and published provisional sustainability standards for 77 industries. In 2017, SASB reorganized itself with the appointment of nine individuals to an independent, standard-setting arm of the SASB Foundation, and issued a revised Conceptual Framework. At the same time, SASB established the due process procedures for the Standards Board’s standard-setting activities, as detailed in the Rules of Procedure. Both of those documents are now the subject of exposure drafts that would make various changes.

Like the conceptual frameworks of the FASB and the IASB, the Conceptual Framework of the SASB sets out the basic principles, definitions, and objectives that guide the Standards Board and SASB’s technical staff in its approach to setting sustainability accounting standards. The proposed revisions to the two documents do not fundamentally change SASB’s approach to sustainability accounting or standard setting; instead, the revisions are intended to better articulate SASB’s approach to both.


 A particularly significant change is to the language used to define materiality. The 2017 Conceptual Framework specified that SASB “applies the definition of ‘materiality’ established under the U.S. securities law,” namely that information is material if there is a “substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” [2] However, in 2018, the SASB Foundation Board of Directors revised the mission of SASB, acknowledging a rapidly growing, global interest in SASB’s industry-specific standards. While this interest was largely driven by SASB’s focus on decision-useful information for investors and lenders, the Standards Board recognized the need for the standards themselves not to be US-centric. The same holds true for the governance documents that guide the Standards Board.

In the proposed revision to the Conceptual Framework, sustainability-related information is described as financially material “if omitting, misstating, or obscuring it could reasonably be expected to influence investment or lending decisions that users make on the basis of their assessments of short-, medium-, and long-term financial performance and enterprise value.” This definition is similar in many respects to the IASB’s definition of materiality: “Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” In fact, the proposed definition is intended to align as much as possible with the definitions of “materiality” used by standard setters and other organizations around the world who, like SASB, have a focus on the informational needs of providers of capital. One significant matter: the proposed definition includes a reference to time horizons. This is important. The Bases for Conclusion & Invitation to Comment, which SASB issued alongside its exposure drafts, explains that stakeholders have, at times, misinterpreted SASB’s approach to financial materiality as a short-term time horizon, “which is not the Board’s intent.”

Characteristics of Decision-Useful Information

Another area where some significant changes are proposed is in the language used to describe the characteristics of decision-useful information. Again, the intent is to more clearly articulate the principles that guide the Standards Board and staff in their standard-setting activities.

Disclosure Topics

As described in the exposure draft, when evaluating potential disclosure topics for a given industry, the Standards Board and staff first consider whether a topic is financially impactful and of interest to investors. In other words, can the sustainability topic be linked to operational and/or financial performance? Does it relate to issues that investors or creditors typically monitor and incorporate into their capital allocation decisions, engagement strategies, voting decisions, due diligence, or other aspects of their investment processes?

In addition to the two primary characteristics noted above, the Standards Board and staff also consider whether a potential disclosure topic is prevalent and actionable. Does the topic apply to most companies in the industry and across geographies? Is the topic framed in a way that is linked to the types of strategic and operational decisions made by companies?

Accounting Metrics

For each sustainability disclosure topic identified in an industry standard, there are typically one to three accounting metrics that support performance reporting on that topic. Unlike prior versions of SASB’s Conceptual Framework, which only listed several potential attributes of these metrics, the proposed revisions identify two primary characteristics of sustainability accounting metrics:

  • Representationally faithful. A metric is representationally faithful if performance on the metric correlates with performance on the disclosure topic it is intended to address.
  • Complete. A set of metrics is complete if individually, or as a set, the metrics provide enough data and information to understand and interpret performance on the sustainability disclosure topic.

The revised Conceptual Framework also identifies several other characteristics of accounting metrics that would help support decision-useful information. In particular, accounting metrics are more likely to be decision useful if they are also the following:

  • Comparable
  • Neutral
  • Verifiable
  • Aligned
  • Understandable

Proposed Revisions to the Rules of Procedure

When SASB’s Rules of Procedure were adopted in 2017, the Standards Board considered how, once the standards were codified (which happened in November 2018), it might, going forward, revise those standards. After all, sustainability accounting is a new and rapidly developing field, and revisions were always inevitable. The Rules of Procedure at that time contemplated a three-year review cycle for all of the standards, along with work that could address “urgent issues” that might emerge. The Board later concluded that the three-year schedule was “unnecessarily rigid and arbitrary,” and the proposed revision to the Rules of Procedure drops references to a three-year review cycle, relying instead on project-based work.


Will these proposed changes in the Conceptual Framework and Rules of Procedure affect the content of the SASB Standards going forward? The Standards Board and staff think that direct impacts are, by design, likely to be minimal. However, by better articulating concepts and processes, the Standards Board hopes to benefit indirectly through improved communication and engagement with investors, preparers, and other key stakeholders. Those processes are very important to the Standards Board, as detailed in both documents. The Standards Board welcomes feedback on both documents and the public comment period is open through Nov. 30.


1See William Bratton, Private Standards, Public Governance: A New Look at the Financial Accounting Standards Board, 48, B. C. L. Rev. at 9, 5–53 (2007).(go back)

2TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976).(go back)

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