Starting Out on the Sustainability Reporting Learning Curve

By: George M. Wilson & Carol A. Stacey

In a recent post we discussed reasons why now is an opportune moment to begin learning about sustainability standards. Likely most of us have heard discussion or mention of how this reporting area is becoming important and that investors are beginning to ask for sustainability information.


When you embark on the sustainability reporting learning journey a number of questions arise. What exactly does sustainability reporting entail? Are there certain areas that should be included? Are there standards to follow? It turns out, through the Sustainability Accounting Standards Board (“SASB”), that there is a substantial amount of industry specific guidance.


A Starting Point


Our current reporting model focuses on historical financial information and related non-financial information that helps us build context to understand financial performance. In addition to history, public companies also make disclosures about what is “out there” that might hurt financial performance in the future. (For example, MD&A known-trend disclosures.)


Sustainability information goes well beyond our current model. Here is a quote from a report prepared by the SASB titled “The State of Disclosure 2016: An analysis of the effectiveness of sustainability disclosure in SEC filings”:


“Investors and their portfolio companies have become increasingly aware of the link between sustainability factors and business outcomes. For example, increased energy efficiency can lead to operational cost savings; effective resource management can reduce input price volatility and the risk of supply disruptions; and stronger data security practices can mitigate the risk of fines, litigation, and reputational harm, while also lowering a firm’s cost of capital. As a result, the investment community—in particular, investors with longer term views—are increasingly asking for improved disclosure around financial risks based on non-financial statement information, while companies have begun to disclose more information about how they manage key sustainability issues but provide little in the way of information on financial impact.” (Emphasis added.)


This goes well beyond our historical reporting model. For example, our current disclosures about environmental matters focus on where we may have problems with a state or federal regulator and how much of our capital expenditures are related to environmental compliance. Sustainability reporting is an extension of this thought process and looks at whether a long-term investor might also want to know about whether a company is committed to investing in technology that focuses on reducing such costs on an overall basis, and how much cost savings are expected.


A simple example would be a company with a large fleet of vehicles. If all the company’s current vehicles are powered by internal combustion engines and all burn regular gas or diesel fuel, an investor might be interested to know whether the company plans to replace vehicles as they are retired with vehicles that burn alternative fuels or even electric vehicles. The economics of such issues are not simple. Electric vehicles may have larger original costs, but they have dramatically fewer moving parts and are expected to have lower maintenance costs. If a company commits to such a strategy an investor might look at that company differently than one that plans to replace its fleet with regular internal combustion powered vehicles. The differences in future financial performance between companies pursuing these different strategies could be a very relevant issue for investors.


Here is a quote from the SASB’s web page:


Investors increasingly acknowledge that environmental, social and governance (ESG) factors impact a company’s ability to manage risk and deliver financial performance over the long-term. As such, many investors use ESG information to develop a comprehensive view of company performance and to evaluate a company’s long-term value. However, to do so in a rigorous and scalable way, investors need data that is relevant, reliable, and comparable. This is the need SASB was created to address.


Standard Setting by Industry


Building guidance for these kinds of disclosures is a massive task. The issues and relevant information vary by industry. An industry based approach is actually hard-wired into the SASB’s mission:


The Sustainability Accounting Standards Board sets industry-specific standards for corporate sustainability disclosure, with a view towards ensuring that disclosure is material, comparable, and decision-useful for investors.


The SASB has initially built their standard-setting process to tailor standards based on this sector breakdown:


Health Care


Technology & Communications

Non-Renewable Resources



Resource Transformation

Consumption I

Consumption II

Renewable Resources & Alternative Energy




To begin learning about the guidance for sustainability standards in your industry you start with your sector. Each sector is then divided into industries. For example, the Consumption/Sector includes the following industries:


Agricultural Products

Alcoholic Beverages

Meat, Poultry and Dairy


Processed Foods

Household and Personal Products

Non-Alcoholic Beverages


A tailored set of standards is then built for each of these industries within the sector. The volume of information, not to mention the amount of work behind this process is substantial. Here for example, for Consumption I, is a summary of areas addressed:



Agricultural Products Greenhouse Gas Emissions
Energy & Fleet Fuel Management
Water Withdrawal
Land Use & Ecological Impacts
Food Safety & Health Concerns
Fair Labor Practices & Workforce Health & Safety
Climate Change Impacts on Crop Yields
Environmental & Social Impacts of Ingredient Supply Chains
Management of the Legal & Regulatory Environment
Meat, Poultry, & Dairy Greenhouse Gas Emissions
Energy Management
Water Withdrawal
Land Use & Ecological Impacts
Food Safety
Workforce Health & Safety
Antibiotic Use in Animal Production
Animal Care & Welfare
Environmental & Social Impacts of Animal Supply Chains
Environmental Risks in Animal Feed Supply Chains
Processed Foods Energy & Fleet Fuel Management
Water Management
Food Safety
Health & Nutrition
Product Labeling & Marketing
Packaging Lifecycle Management
Environmental & Social Impacts of Ingredient Supply Chains
Non-Alcoholic Beverages Energy & Fleet Fuel Management
Water Management
Health & Nutrition
Product Labeling & Marketing
Packaging Lifecycle Management
Environmental & Social Impacts of Ingredient Supply Chains
Alcoholic Beverages Energy Management
Water Management
Responsible Drinking & Marketing
Packaging Lifecycle Management
Environmental & Social Impacts of Ingredient Supply Chains
Tobacco Public Health
Marketing Practices
Household & Personal Products Water Management
Packaging Lifecycle Management
Product Environmental, Health, & Safety Performance
Environmental & Social Impacts of Palm Oil Supply Chain



As you might expect, how to build and codify a set of standards dealing with such a variety of issues is constantly evolving process. You can read about the SASB’s plans to codify their standards and how this will change their topical organization in their technical agenda.


In our next post we will look at some of the detailed standards and actual disclosures in a few industries.


As always, your thoughts and comments are welcome!


Learn the nuts and bolts of SEC reporting

SEC Reporting Skills Workshop 2017

Build the foundational knowledge and practical experience necessary to prepare and review the SEC’s periodic and current reporting forms. Participants will learn the structure and details of Forms 10-K, 10-Q, and 8-K, with a particular emphasis on challenging and complex disclosures and how to effectively use the SEC’s guidance. Annual proxy requirements and SEC insider trading rules will also be discussed. Frequent SEC comment areas will be reviewed along with example comments. This definitive SEC course is perfect for beginners or as a refresher for experienced SEC reporting professionals. Learn How To:

  • Prepare and review Forms 10-K, 10-Q, and 8-K, and the proxy statement
  • Use all the important sources of SEC reporting rules and guidance
  • Write an effective MD&A
  • Deal with the SEC staff and understand their “hot buttons,” including frequent comment areas such as non-GAAP measures, revenue recognition, the statement of cash flows, segments, and contingencies
Dates and Locations:  

CorpFin Updates Their Financial Reporting Manual

By: George M.Wilson & Carol A. Stacey


On August 25, 2017, the staff in CorpFin updated their Financial Reporting Manual. The updates include:


A new section at the very beginning of the FRM that describes communications with the Office of the Chief Accountant in CorpFin (CF-OCA). It also includes a concise summary of some of the roles and functions of CF-OCA.


Section 2065 and the related index sections have been updated to clarify that questions about applying the guidance on abbreviated financial statements to a predecessor entity should be directed to CF-OCA.


Sections 10220.1 and 10220.5 have been updated to clarify the guidance on the omission of financial information from draft and filed registration statements when such information “relates to a historical period that the issuer reasonably believes will not be required to be included…at the time of the contemplated offering.” Included in the update are cross references to C&DI’s 101.04 and 101.05.


An interesting aspect of the revisions is how they adjust the FRM for the changes CorpFin Chief Accountant Mark Kronforst has made to organize the CF-OCA staff based on technical SEC reporting areas.


As always, your thoughts and comments are welcome!


UPDATES and Hot Topics from the Regulators

With the financial reporting world in a constant state of change, it’s challenging to keep up with new and evolving accounting standards, as well as regulations and policy shifts from the new administration. Attend SECI’s live program, 33rd Annual SEC Reporting & FASB Forum being held November 13-14 in Dallas, December 11-12 in San Francisco and December 18-19 in New York City with an accompanying webcast. Get the latest information on emerging issues and the regulatory landscape.

Alternative Financing Solutions for Emerging and Growing Companies

Auditors and Financial Officers of companies who raise capital with complex financial instruments often find themselves drowning in convoluted accounting issues and restatements. Avoid the confusion by attending the live workshop, Debt vs. Equity Accounting for Complex Financial Instruments being held September 13th in Las Vegas. Through a detailed review of the accounting literature and numerous examples and case studies this Workshop will help you build the knowledge and experience to appropriately recognize, initially record and subsequently account for these complex financing tools

SEC Updates Revenue Recognition Guidance – We Knew It Was Coming!

By: George M. Wilson & Carol A. Stacey

More than a quarter in advance of the effective date of the FASB’s new revenue recognition guidance the SEC has made necessary changes in their own revenue recognition guidance. As you can read here, the Commission and Staff have addressed three areas:


  1. SAB Topic 13 and other Staff revenue recognition guidance
  2. Bill-and-hold guidance
  3. Vaccines for Government Stockpiles


SAB 116 rescinds SAB Topic 13, which contained much of the Staff’s legacy GAAP revenue recognition guidance. In addition, SAB Topic 8, Retail Companies, and Section A, Operating-Differential Subsidies of SAB Topic 11, Miscellaneous Disclosure, have been updated to conform with the new FASB revenue recognition model.


To update bill-and-hold guidance, this Commission Release rescinds existing bill-and-hold guidance, which interestingly was from an Accounting and Auditing Enforcement Release (AAER No. 108, In the Matter of Stewart Parness). Upon adoption of ASC 606 companies will instead use the guidance in ASC 606-10-55 paragraphs 81 to 84.

The third update relates to vaccines sold into government stockpiles under the Vaccines for Children Program or the Strategic National Stockpile. The new guidance replaces a 2005 release and continues the practice of recognizing revenue at the time a vaccine is placed in a stockpile program. In this release the commission states that in such arrangements revenue should be recognized at the time of the transfer of the vaccine to the stockpile because the customer will have obtained control of the vaccine and the criteria for revenue recognition under the new bill-and-hold guidance will be met.

As always, your thoughts and comments are welcome!

Join us at the 13th Annual SEC Reporting & FASB Forum for Mid-sized & Smaller Companies

SEPTEMBER 14-15 – Las Vegas – Four Seasons Hotel Las Vegas Co-Chairs: Carol A. Stacey, MSA, CPA – Director, SEC Institute, a Division of PLI George M. Wilson, MBA, CPA – Director, SEC Institute, a Division of PLI

With a specific focus for mid-size and smaller companies, this program will help prepare you for successful third-quarter and year-end reporting processes. Hear from industry and topic experts about the impact of the new leadership at the SEC; rulemaking and projects at the SEC, FASB and PCAOB; and more!

  • FASB’s Lease standard will require potentially significant implementation efforts to meet a 2019 effective date – understand the standard and implementation challenges and what steps to take now
  • Revenue Recognition adoption is less than four months away – hear the experiences of early adopters and understand key last-minute issues, including how to design the required disclosures
  • Learn about recent known-trend enforcement cases and understand the current focus areas of investors and regulators
  • Understand how the Financial Instrument Impairment standard affects all companies and its impact to the allowance for trade accounts receivable
  • A roundtable discussion of current events, such as the SEC’s rulemaking and enforcement agendas; FASB’s direction; PCAOB recent developments, including the new Auditor’s Report standard; and corporate governance updates

Register Here:



A New Look

Hey, if you haven’t been there in a while, go check out the SEC’s home page!

As always, your thoughts and comments are welcome!


  • We are the Investor's Advocate

    The SEC protects investors, promotes fairness in the securities markets, and shares information about companies and investment professionals to help investors make informed decisions and invest with confidence.

Icon: We Inform and Protect Investors
We Inform and Protect Investors
Icon: We Facilitate Capital Formation
We Facilitate Capital Formation
Icon: We Enforce Federal Securities Laws
We Enforce Federal Securities Laws
Icon: We Regulate Securities Markets
We Regulate Securities Markets
Icon: We Provide Data
We Provide Data




Master SEC Reporting and Prepare to Tackle New Challenges – August & September Dates Announced

The complicated world of SEC reporting has now gotten even more complicated! Be sure you are prepared to comply with the recently enacted changes and have a plan in place to deal with the SEC staff “hot buttons”. Attend SECI’s live workshop SEC Reporting Skills Workshop 2017 being held August 17-18 in New York City, August 21-22 in Grapevine and September 25-26 in San Francisco with additional dates and locations listed on the SECI website.


Sustainability Disclosures – It’s Time to Explore!

By: George M. Wilson & Carol A. Stacey


Sustainability disclosures are being mentioned more and more in the news, in company reporting and in regulatory discussions. While it may seem like it is “early days” for this information, it may not be as early as we all think. Here are summaries of a few of the things going on now.


Sustainability information has been touched on by the SEC in their disclosures effectiveness project. In the voluminous 2016 Regulation S-K Concept release the SEC included this language:

We are interested in receiving feedback on the importance of sustainability and public policy matters to informed investment and voting decisions. In particular, we seek feedback on which, if any, sustainability and public policy disclosures are important to an understanding of a registrant’s business and financial condition and whether there are other considerations that make these disclosures important to investment and voting decisions. We also seek feedback on the potential challenges and costs associated with compiling and disclosing this information.

Enough companies are already disclosing sustainability information that the AICPA has published a Guide for Attestation Engagements on Sustainability Information. The AICPA also has a very informative web page about sustainability disclosures in general.


Standard setters in other parts of the world have also begun discussion about sustainability information. Here is an excerpt from a speech Hans Hoogervorst, Chair of the IASB, delivered in April 2017 at the IIRC Council Meeting in New York:

In their latest review of structure and effectiveness, from 2015 to 2016, the Trustees of the IFRS Foundation confirmed the current approach of the International Accounting Standards Board (the Board) to wider corporate reporting. Broadly, this approach is to cooperate with organisations like the Corporate Reporting Dialogue (CRD) and the International Integrated Reporting Council (IIRC).

The Board was also asked to study further what its future role should be in the wider corporate reporting landscape. The Board is examining this question now. During the Board meeting of March 2017, we devoted public discussion to this issue for the first time.

As we wind down from second-quarter reporting (or whenever your fiscal-year has a less busy period!), this might be an opportune moment to learn a bit about these disclosures. There are several sources of information you can begin with:

The Sustainability Standards Board (SASB) maintains industry specific sustainability accounting standards that help public corporations disclose material, decision-useful information to investors. The members of the SASB are appointed by the SASB Foundation, a structure similar to that of the FASB and the FAF. The SASB Foundation is chaired by Michael Bloomberg and both the Foundation Board and the SASB itself have members with deep capital markets, business and academic experience.

The International Integrated Reporting Council defines integrated reporting as “a process founded on integrated thinking that results in a periodic integrated report by an organization about value creation over time and related communications regarding aspects of value creation. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.”

Both of these organizations are focused on providing information beyond our existing financial reporting and SEC reporting models. And, interestingly, many companies are already responding to demand for such information. In a report from the SASB titled “The State of Disclosure – An Analysis of the Effectiveness of Sustainability Disclosures in SEC Filing – 2016,” the SASB reviewed the reports of up to the top 10 companies in 79 industries. Among their findings were:

Overwhelmingly, companies have recognized the existence of, or the potential for, material impacts related to the sustainability topics included in SASB standards. Indeed, 69 percent of companies in the analysis reported on at least three-quarters of the sustainability topics included in their industry standard, and 38 percent provided disclosure on every SASB topic.

With this background, our next few posts will help you build an understanding of the state of these disclosures in current reporting, the nature of investor demand for these disclosures, and the standards that the SASB is developing to help investors get the information that they believe they need.

As always, your thoughts and comments are welcome!