Sustainability Accounting Standards BoardResponsible Electronics 2013

Electronics Industry Citizenship Coalition (EICC)

October 2, 2013

Deb Martin

Manager– Stakeholder Engagement

Welcome & Agenda

• What is SASB?

• How is SASB different from other frameworks?

• How does SASB determine materiality for industry standards?

• What is the SASB’s standard setting process?

• How can I engaging with SASB?

• Q&A

© 2013 SASB™

© 2013 SASB™

The Sustainability Accounting

Standards Board is an

independent, US-based

501(c)3 non-profit engaged in

the development of

sustainability accounting

standards for use by publicly-

listed corporations in

disclosing material

sustainability issues in

standard filings for the benefit

of investors and the public.

SASB is accredited by the

American National Standards

Institute (ANSI).

Standards

Development

Research Publications

and Licensing

Corporate

Pilot Program Awareness &

Outreach

The Sustainability Accounting Standards BoardAccounting for a sustainable future

Organizational Momentum Our Advisory Council, Standards Council and Industry Working Groups are comprised of prominent

representatives of the business and investor communities.

0%

20%

40%

60%

80%

100%

1975 1985 1995 2005 2010

Intangible Assets Tangible Assests

Why SASB- Changing Valuations

Source: Ocean Tomo

Components of S&P 500 Market Value

© 2013 SASB™

SASB completes the picture on corporate performance© 2013 SASB™

Value Proposition

Financial Accounting Standards

• Business• Financial• Governance

Sustainability Accounting Standards

• Environmental• Social• Governance

Investment Value

• Efficient due diligence

and screening

• Data for determining

portfolio risk exposure

• Peer-to-peer

comparability of ESG

risk & opportunity

Corporate Value

• ESG legal and risk

management tool

• Cost-effective reporting

• Peer benchmarks

• Market-based

sustainability

perspective

Client Service Value

• New service offerings

• Powerful industry

research

• Thought leadership

Sustainability Reporting Landscape

7 © 2013 SASB™ CONFIDENTIAL & PROPRIETARY

Organization

Type• 501(c)3 • NGO • NGO

Orientation • United States • International • International

Accreditation • ANSI • None • None

Primary

Deliverable

• Industry-specific standards

80+ standards documents

• General guidance

1 guidance document

• General framework

1 framework document

Disclosure

Platform• Form 10-K • Voluntary report • Voluntary report

Reporting

Entities

• Public corporations

traded on U.S. exchanges

• Public corporations

• Private companies

• Public corporations

• Private companies

Materiality

• Defined by US Securities Law

material to investors

• Defined through stakeholder

consensus

relevant to stakeholders

• Defined internally

relevant to investors

Working

Groups

• 850 members in four sectors

to date (out of ten total)

• Affiliation:

33% Investment

31% Corporate

36% Other

• 115 members

Affiliation (G4):

2% Investment

3% Corporate

95% Other

• 43 members

Affiliation:

23% Investment

14% Corporate

63% Other

SASB complements other established frameworks and initiatives

SASB

Industry Accounting Metrics

FASB

SEC

Financial Accounting

StandardsSustainability Accounting

Standards

IIRC GRI

GISRRatings System

SASB provides

minimum content

requirements for

integrated

reporting

SASB establishes

industry Accounting

Metrics for use by

ratings agencies and

analysts

SASB

develops

language for

standardized

disclosure of

material, non-

financial

impacts

Protecting Investors

Principles for Integrated

ReportingGlobal issues, voluntary

guidelines

SASB provides

guidance on the

materiality of

sustainability

issues for

mandatory

disclosure to

investors

SASB covers

sector specific

issues for all

industries

US Based

Global

2013 SASB™

Materiality & US Securities LawSASB is guided by the SEC definition of materiality

“Material information” is defined by the Supreme Court as

presenting a substantial likelihood that the disclosure of the

omitted fact would have been viewed by the reasonable

investor as having significantly altered the “total mix” of

information made available.

The Supreme Court’s Definition of Materiality

2013 SASB™

Materiality Assessment

Environmental capital | Social capital | Human capital

| Business model and innovation | Leadership and governance

Evidence of interest

Issue frequency in 5 data-

driven tests:

Financial risks

Legal drivers

Industry norms

Stakeholder concerns

Innovation opportunity

Evidence of

financial impact

Issue impact on 3 financial

value drivers:

Revenue & Cost

Assets and Liabilities

Risk profile (Cost of

Capital)

Forward-looking

adjustment

Issue relation to 3

sustainability principles:

Probability

Magnitude

Timing

Material sustainability issues

Universe of sustainability issues

2013 SASB™

The universe of sustainability issues is vasthowever…

2013 SASB™

SASB Industry-Specific Standards Reduce the Noise to Signal Ratio

2013 SASB™

Form 10K quotes from FY 2012 period

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Hardware

EMS/ODM

Semiconductors

Telecommunications

Quality of disclosure on:Product lifecycle management

No Disclosure Boilerplate statement Industry specific Metrics

Issue-specific analysis on current state of disclosure in 10KsThe analysis provides SASB with evidence of interest on material issues

80%

79%

86%

85%

IWG

Ma

teria

lity S

co

re

© 2012 SASB™ CONFIDENTIAL & PROPRIETARY

Developing Standards for 80+ Industries in 10 SectorsTo date, SASB has started work on 34% of the industries in SICS

Sector Industries Status

Healthcare 6 ISSUED

Financials 7 FINALIZATION PHASE

Technology &

Communication6 Public Comment

Non-Renewable

Resources8 WORKING GROUPS

Transportation 9 Q4 2013 Kickoff

Services 9 Q1 2014 Kickoff

Resource

Transformation5 Q2 2014 Kickoff

Consumption 17 Q3 2014 Kickoff

Renewable

Resources & Alt.

Energy

8 Q4 2014 Kickoff

Infrastructure 10 Q1 2015 Kickoff

Industries

Hardware

EMS & ODM

Semiconductors

Software & IT Services

Internet Media & Services

Telecommunications

SASB Standards Development Processand current status on our sector work

Sector

research

(Q1)

- Issue and KPI research

- Evidence gathering

- Industry Brief research and writing

Vetting

process

(Q2)

- Industry working groups survey

- Review of IWG feedback

- Delta Series + Research dialogue

Standards

development

(Q3)

- Public note of issues

- Standards Council review on content and process

- SEC Briefing

Issue / Metrics

Reviewed

Public

Comment

(Q4)

-

Public

Release

Health CareTechnology &

Communications

Non-Renewable

ResourcesFinancials

Set of material

Issue / Metrics

SASB Standards Development process is certified by:

- Public comment on standards’ draft form

- Standards Council draft form and PCP review

Standards Draft

Form

Standards Draft

Form reviewed

Transportation

© 2013 SASB™

The Vetting ProcessA robust multi-stakeholder vetting process

$12T Assets Under

Management (AUM)

$ $5.1T Market Cap

Industry Working Groups

Survey participants provide feedback on:

Material Issues

o Materiality of suggested issues

o Ranking of issues

o Additional issues for

consideration

Accounting Metrics Principles

o Decision-usefulness

o Relevancy

o Cost-effectiveness

o Comparability

o Auditability

* Figures for IWGs for Health Care, Financials, Technology & Communications, and Non-Renewables

Industry Working Group totals for 4 sectors *

850 Industry Working Group

Participants (balanced between

investors, corporations, and

intermediaries.

Sector Status

Healthcare ISSUED

FinancialsFINALIZATION

PHASE

Technology &

Communication

DEVELOPMEN

T PHASE

Non-Renewable

Resources

DEVELOPMEN

T PHASE

Transportation RECRUITING

Services Q1 2014 Kickoff

Resource

TransformationQ2 2014 Kickoff

Consumption Q3 2014 Kickoff

Renewable

Resources & Alt.

Energy

Q4 2014 Kickoff

Infrastructure Q1 2015 Kickoff

© 2013 SASB™ CONFIDENTIAL & PROPRIETARY

We are here

Brief(Draft)

Std.(Draft)

Briefv1.0

Std.v1.0

Standards Development Process- Tech and Com

SASB provides guidance for disclosure of

material sustainability issues in the Form 10-K by

establishing issues that are material at the

industry-level and likely to be material at the

company-specific level

Companies are responsible for determining

materiality; issues deemed material at the company-

level should be accounted for in Form 10-K

SASB provides accounting standards to account

for companies’ performance on material issues in

a comparable and auditable way

Sustainability Accounting StandardsSASB provides guidance on issues and standards to measure performance

© 2012 SASB™ CONFIDENTIAL & PROPRIETARY

The Call to Action– How can You Engage?

19 10/2/2013

View SASB’s free webinars on our website:

o http://www.store.sasb.org/

Visit the SASB Tech & Communication webpage for status

o http://www.sasb.org/sectors/technology-communication/

Participate in the public comment period launching on October 2, 2013

o http://www.sasb.org/engage/public-comment/

When available, download the standards applicable to your industry

and start to think about integration. (Launch is on Feb 20, 2013)

o See Healthcare Standards:

http://www.sasb.org/standards/standards/

Attend our Delta Series Event on Oct 11th in NYC

o http://www.sasb.org/engage/sasb-delta-series/

Consider participating in our Corporate Pilot Program (coming soon)

Deb Martin

Stakeholder Engagement Manager

deb.martin@sasb.org

415-830-9220, ext. 122

Thank you.

21 10/2/2013 © 2013 SASB™ CONFIDENTIAL & PROPRIETARY

Appendix

Hardware EMS & ODM SemiconductorsSoftware & IT

Services

Internet Media &

ServicesTelecom

Env.

Capital

Sustainable energy

management

Sustainable energy

management

Water and waste

management in

manufacturing

Sustainable energy

management

Water management

Managing waste and

air pollution from

manufacturing

operations

GHG emissions

• Sustainable energy

management

• Sustainable energy

management

• Sustainable energy

management

Socia

l

Capital

• Data privacy and

security

• Data privacy and

freedom of expression

• Cyber security

• Data privacy,

advertising standards

and freedom of

expression.

• Cyber security

• Data privacy and

security

• Digital inclusion

Hum

an C

apital • Talent recruitment,

development and

retention

• Labor relations

• Talent, recruitment,

development and

retention

• Employee health and

safety

• Talent, recruitment,

development and

retention

• Talent, recruitment,

development and

retention

• Labor relations

B.M

odel &

Innovatio

n • Product lifecycle

management: design,

use and disposal

• Product lifecycle

management: design,

use and disposal

• Product lifecycle

management: design,

use and disposal

• Products and services

enabling

environmental

efficiency and positive

social impacts

• Products and services

enabling

environmental

efficiency and positive

social impacts

• Products and services

enabling

environmental

efficiency and positive

social impacts

• Product lifecycle

management: disposal

• Products and services

enabling

environmental

efficiency and positive

social impacts

Leaders

hip

&

Govern

ance

• Supply chain

management and

materials sourcing

• Supply chain

management and

materials sourcing

• Supply chain

management and

materials sourcing

• Systemic risk

management of

technology disruptions

• Intellectual property

protection and anti-

competitive practices

• Management of

intellectual property

• Systemic risk

management of

technology disruptions

• Market manipulation

and anti-competitive

practices

Material issues in the Technology & Communications sector

22 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY 10/2/2013

10/2/201323

Issues for discussionInnovation, data privacy, energy management and supply chains

© 2013 SASB™ CONFIDENTIAL & PROPRIETARY

Hardware EMS / ODMSemi-

conductors

Software & IT

Services

Internet Media &

ServicesTelecom

Products

enabling

environmental /

social benefits✔ ✔ ✔ ✔

Data privacy ✔ ✔ ✔ ✔Sustainable

energy

management ✔ ✔ ✔ ✔ ✔ ✔Supply chain

management

and materials

sourcing✔ ✔ ✔

10/2/201324 Actual 10K quotes from FY 2012 period

Supply chain management and materials sourcing Evidence of financial impact + IWG feedback

MP: Market participants (e.g. investors, analysts)

CO: Companies and industry associations

IWG Feedback

Production stoppages due to labor unrest in some Asian

countries.

Reputational damage and public outcry.

A recent study by PWC found that 78 percent of sector

senior executives perceived mineral and metal scarcity

as a pressing issue for their company; 67 percent

thought that their company would experience an

unstable supply of these inputs within the next five

years; with 56 percent of respondents rating the severity

as ‘high’ or ‘very high’.

The SEC estimates that costs to comply with the

Conflict Minerals provision of the Dodd-Frank Act will

total $3 to $4 billion in the first year and at least $200

million each year afterward.

IWG

SupportMP CO

Hardware 100% 100% 100%

EMS / ODM 100% N/A N/A

Semiconductors 100% 100% 100%

10/2/201325

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Hardware

EMS/ODM

Semiconductors

Type of disclosure on:Supply chain management and materials sourcing

No Disclosure Boilerplate statement Industry specific Metrics

“We are subject to provisions of the Dodd-

Frank Wall Street Reform and Consumer

Protection Act intended to improve

transparency and accountability

concerning the supply of minerals

originating from the conflict zones”

Boilerplate language

Industry-specific disclosure

“In 2013, [the company] will continue to

work to establish a “conflict-free” supply

chain for our company and our industry. In

2012, [we] verified, after reasonable

inquiry, that the tantalum we use in our

microprocessors is “conflict-free,” and our

goal for the end of 2013 is to manufacture

the world’s first verified, “conflict-free”

microprocessor”

Actual 10K quotes from FY 2012 period

Supply chain management and materials sourcing Disclosure on the issue already exists in Form 10Ks, there is a need to standardize