The Top 10 Areas for Technology Disclosure in the 2023 SASB Standards: A review of 77 industries

As many already know, the Sustainability Accounting Standards Board (SASB) recently released its updated standards which help companies identify their sustainability risks and opportunities along with metrics to use in their disclosures. Coupled with the ever-increasing role that technology is playing in the business landscape, I was curious to know how technology is embedded in the SASB standards across the 77 SICS.

We already know that adopting certain technological advances could have many benefits including increased efficiency, better financial performance, and improved company prospects. This suggests that the use of technology could, in some cases, be material due to its implications on investor decisions and shareholder value.

Presented in descending order, a review of 77 industries outlined the following top 10 areas that could benefit from technology-related disclosure:

1) Legal proceedings

Due to significant monetary losses resulting from legal proceedings, investments in technology could be warranted. These investments will be different across industries depending on the causes of legal proceedings and how technology could be leveraged to prevent or manage them effectively and efficiently. For example, if a pharmaceutical company identifies that legal proceedings are mostly associated with safety risks in clinical trials, it would be worth exploring how technology can be used to prevent issues related to human rights and community relations. Technology can also be leveraged by legal teams to improve efficiency. The relevance of this area is the most recurring with it being mentioned in 29 of the 77 industries.

2) Water management

Water insecurity and water scarcity threaten economic development, especially in water-stressed areas. It is estimated that the global economic cost of water insecurity is nearly $500 billion per year. This could be a business risk for water-intensive industries such as agriculture products, beverages, proceeded foods, electric utilities and power generators, and chemicals. For companies that use water as a key input, it is recommended they disclose how technology is being used to analyze water use, risks, and opportunities as well as increase water use efficiency.

3) Air quality

The latest estimate from the World Bank found that air pollution cost the globe $8.1 trillion (equivalent to 6.1% of global GDP). This issue affects low- and middle-income countries disproportionally and led to increasing regulatory and public concerns. To manage this risk, companies – mostly those operating in construction materials, metals and mining, and oil and gas industries – are recommended to actively manage the issue “through technological and process improvements”. Technologies that monitor air quality are examples of such innovations.

4) Data security

The use of technology can be both a risk and opportunity for companies. While technology could have many benefits, most risks are related to data breaches which could be costly. Companies operating in industries such as e-commerce, commercial banks, consumer finance, and software & IT services are recommended to disclose their approach to addressing data security as well as corrective actions taken in response to data breaches.

5) Energy management

With energy consumption accounting for more than three-quarters of greenhouse gas emissions, there is an increasing focus on financing the energy transition. Managing energy use and decreasing its consumption can not only bring cost savings to a company’s bottom line, but it can also reduce reliance on a volatile supply chain. In certain circumstances and for some industries, the long-term benefits of investing in energy efficient technologies could outweigh the short-term capital costs. Companies operating in industries such as oil & gas, fuel cells & industrial batteries, semi-conductors, and auto parts are recommended to consider and disclose such investments. Energy management is also relevant for companies in the insurance industry as they can incentivize responsible behaviour through policy clauses that could mitigate overall underwriting portfolio risks.

6) Greenhouse gas emissions

Technological improvements in certain industries have reduced greenhouse gas emissions; for example, iron and steel producers have been able to reduce their emissions of carbon dioxide and methane per ton of steel produced. The industry, however, remains carbon-intensive which suggests that continuous technological advances are needed. The meat, poultry and dairy industry is another focus due to its significant generation of scope 1 GHG emissions, mostly methane. While methane capture technologies are relatively recent, they are maturing rapidly and becoming more cost-effective.

7) Recycling

Innovative technologies that manage and mitigate products’ end-of-life impacts are particularly relevant for companies that generate most of their revenues from selling products. This issue is material for industries such as appliance and manufacturing, building products & furnishings, medical equipment & suppliers, solar technology & project developers, electrical & electronic equipment, and auto parts. Changes in consumer demand for sustainable products and the impacts of waste on the globe are some of the leading factors for the increased investments in advanced recycling technologies and the circular economy.

8) Safety management and emergency preparedness

It is recommended to disclose how technology is being used to manage accident and safety risks in coal operations and most industries in transportation. Underground mines, for example, are known to have several hazards that lead to serious consequences. Technologies that acquire, evaluate, and use real-time data to guide on the shortest route to a mine’s exit could prevent negative impacts of hazardous events.

9) Supply chain

Tracking the supply chain, especially for industries that rely heavily on global partners, can be enabled by technology. For example, most industries in the healthcare sector such as biotechnology & pharmaceuticals and medical equipment & supplies, would benefit from tracking their supply chain to prevent counterfeit drugs and substandard medical equipment. The World Health Organization estimates that 10% of medications worldwide are either subpar or fake. While this mostly impacts developing countries, counterfeit drugs are also a pervasive issue in other parts of the world including the United States, Canada, and Europe. One way to prevent this costly issue is to implement a pharmaceutical track-and-trace system that spots counterfeit drugs.

10) Worker exposure and harassment

Finally, disclosing how technology is used to manage worker exposure and harassment is relevant for industries that pose certain risks to worker health, and these include fuel cells & industrial batteries, chemicals, and semi-conductors. As for worker harassment, there has been an emergence of enterprise-wide technology platforms that allow employees to raise concerns anonymously.

Other areas that benefit from disclosing how technology is used include pipeline inspections, waste management, and IP protection and media piracy. The recurrent mention of technology-related disclosures highlights technology’s role in addressing business risks and opportunities. Some areas are recurring across sectors and industries whereas others are limited to certain sectors due to unique inputs and operations.