Engaging SASB Project
Leveraging Finance - ESG
Standard Setters and Regulators
Expert Group Comments on SASB’s Proposed Raw Materials Sourcing in Apparel Project
At its February 2021 Board meeting, SASB made the decision to add a project related to raw materials sourcing in the Apparel, Accessories & Footwear industry to its standard-setting agenda. SASB’s internal review of the topic and feedback from industry companies suggested that the existing metrics associated with their Raw Materials Sourcing disclosure topic “provide insufficient guidance that may result in inconsistent calculations and noncomparable disclosures.” SASB launched the new project to clarify and revise these metrics, namely:
- CG-AA-440a.1: Description of environmental and social risks associated with sourcing priority raw materials;
- CG-AA-440a.2: Percentage of raw materials third-party certified to an environmental and/or social sustainability standard, by standard.
Following further research and industry stakeholder consultations, SASB developed an “Exposure Draft” of their proposed changes to the standard, and invited public comment.
Rights CoLab and the project Expert Group submitted a comment letter in response, expressing support for the decision to consider the revision of metrics to address a perceived weakness in the standard. However, the Expert Group expressed concern about the inclusion of the social aspect in this project, when the human capital risks of raw materials sourcing will soon be addressed by SASB’s Human Capital Project. Since raw materials sourcing is a topic relevant to all sectors’ industries, not only apparel, the Expert Group strongly recommended that SASB removes the social dimension from this project and considers it instead as part of Human Capital Project.
Below is an excerpt from the letter, which was endorsed by the Expert Group members’ institutions.
These issues are not unique to the apparel sector. With the high risk of forced labor in the mining and construction sectors, raw materials sourcing risks in relation to labor cascade across a wide array of industries…The social risks associated with raw materials sourcing should be an integral part of a company’s supply chain management and risk disclosures, regardless of industry.
When the Board approved the Raw Materials Sourcing in Apparel project, SASB had not yet determined that “Labor Conditions in the Supply Chain” would be part of the SASB’s Human Capital Management Project, which was underway at the time. Following extensive research and a public consultation on the Human Capital Management Preliminary Framework in early 2021, SASB determined that there is sufficient evidence of the materiality of the supply chain topic to make it a high priority topic for human capital management standards revision. The human capital risks of raw materials sourcing — a significant component of the social dimension of raw materials sourcing — will soon be addressed by the Human Capital project. By including social risks within the scope of the Raw Materials Sourcing in Apparel project, the Value Reporting Foundation runs the risk of creating conflicting standards for social risk in global supply chains.
In sum, we see three problems with the inclusion of the social dimension in the Raw Materials Sourcing project. First, the distinction between this project and the Human Capital Management project as “outside-in” versus “inside-out” is inconsistent with international norms and legislation, as companies today are expected to use the knowledge and available resources to manage these risks. Second, the social issues facing the apparel industry are shared by many other industries. Third, while this project is at a more advanced stage than the Human Capital Management project, it is illogical to proceed with a project scope that includes social risks when they will soon be addressed holistically across all industries by the Human Capital Management Project. The Raw Materials project would benefit from having a narrower scope, focusing on a distinct set of issues that are unique to the apparel sector.