Sustainability Accounting Standards Board says standard metrics will help investors gauge risk.
A group called the Sustainability Accounting Standards Board has issued provisional standards for eight industries in the transportation sector.
Though not affiliated with the Financial Accounting Standards Board, which develops the generally accepted accounting principles used in financial statements, SASB is similar in that it is developing standards that it says will help companies comply with Securities and Exchange Commission regulations that require public companies to disclose information material to investors in their annual reports.
The new SASB provisional standards address environmental, social and governance issues most likely to contain material information for companies in eight transportation industries: automobiles, auto parts, car rental and leasing, airlines, air freight and logistics, marine transportation, and rail and road transportation.
SASB standards seeks to provide investors with data they can use to benchmark and compare companies. SASB analyzed the quality of disclosure topics in the latest Form 10-Ks and 20-Fs from leading companies in the sector and found that 16 percent of disclosures are boilerplate, 54 percent are industry-specific, and 17 percent are metrics — the remaining percentage represents lack of disclosure.
In the marine transportation industry, SASB suggests companies disclose various metrics related to the environmental footprint of fuel use, ecological impacts, business ethics, and accidents and safety management. For example, it suggests companies disclose their environmental impact by using metrics such as air emissions of pollutants or the energy efficiency design index for new ships.
In many cases, the raw numbers are just a starting point for an investor or other user of the data.
For example, a giant company like Maersk or MSC is naturally going to have a much bigger environmental footprint than a small regional company that only operates a couple of dozen ships; but an investor concerned about the impact of upcoming environmental regulation or a shipper looking to move its cargo in the most environmentally friendly way might be able to use the information to see if a big company is making progress in its effort to reduce pollution over a number of years.
SASB suggests shipping companies disclose the number of calls in countries that have the 20 lowest rankings in the non-profit Transparency International’s “Corruption Perception Index.” Nashat Moin, the research lead on the Transportation Sector at SASB, noted this isn’t to indicate that serving those countries (in 2013, companies near the bottom of the list included Cambodia, Haiti, Iraq and Equitorial Guinea) is a bad idea. In fact,it may be highly profitable or even important on humanitarian grounds. But the corruption information may be useful to investors who want to avoid risk or question management on what kind of safeguards they have to prevent corruption.
“More and more investors see the sustainability of company activities as a key input to their investment decisions. SASB’s moves to expand reporting and provide more transparency and disclosure in this area will be particularly welcomed by this growing group,” said Bob Collie, a chief research strategist at the Russell Investments subsidiary of Northwestern Mutual.
Group issues ‘sustainability standards’ for transportation
