When companies choose their reporting standards: Evidence on SASB adoption and associated outcomes

Abstract

We examine companies’ voluntary adoption of sustainability disclosure standards developed by the Sustainability Accounting Standards Board (SASB). Specifically, we study which company characteristics help explain the use of SASB standards and examine whether voluntary use is associated with sustainability-related activities and market outcomes. We find that peer behavior, sustainability-focused institutional ownership, company size, and existing sustainability reporting practices are key determinants associated with SASB adoption. Moreover, SASB adoption appears to be a highly persistent disclosure choice. It is significantly associated with stronger sustainability performance, such as lower sustainability violations, greenhouse gas emissions, and pollution levels, particularly when the SASB standards identify those issues as financially material. Finally, SASB adoption is associated with more extensive sustainability disclosure and greater price informativeness, consistent with investors getting additional firm-specific information from SASB-based reporting.

Keywords: sustainability reporting standards; Sustainability Accounting Standards Board (SASB); environmental, social, and corporate governance (ESG) issues; voluntary disclosure