Sustainability Accounting Standards As The New GAAP

By on June 12, 2017

June 12, 2017

A hundred years ago, basic corporate financials were considered nobody’s business but the company’s. It took the depression of the 1930s to begin seriously chipping away at that mindset. A milestone was reached in the 1970s when U.S. corporations began reporting financial performance using “Generally Accepted Accounting Principles,” or GAAP, as defined by the Financial Accounting Standards Board (FASB). We’re now in the midst of another change of mindset in many ways comparable, according to attorney Tricia A. Dunlap, principal in a law firm that is focused on sustainability and climate risks to business. She also works with the entity known as the Sustainability Accounting Standards Board, which has been setting metrics that define the sustainability concept for purposes of disclosure to investors, in a way analogous to the GAAP. The SASB standards are “evidence-based, auditable, industry-specific, potentially material, and designed to allow investors to compare one company’s performance with its competitors,” according to Dunlap. Sustainability in this project is defined to include “a broad spectrum of corporate operations and issues that feed into corporate value, including: supply chain vulnerabilities, brand and reputation value, human rights, intellectual property, cyber security, and management of regulatory environments. None of these are financial issues in a direct sense, yet performance on any of them can affect corporate value.”

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