Environment, social, and governance (ESG) disclosures have become one of the hottest topics in investing, sustainability, and many other industries. Even so, there is still some uncertainty about how to define ESG and what standards should be used to measure its efficacy – especially given the reporting requirements of highly regulated industries like finance.

INTERVIEW: How Is Sustainability Shaped by Standards?

In the September/October issue of Standardization News, I spoke with Eileen Snyder, regional technical coordinator for Pace Analytical Services. Snyder was one of the key voices behind the creation of ASTM's first ESG standard, the guide for environmental, social, and governance (ESG) disclosure related to climate and community (E3377). Snyder and I talked about how to define ESG, what is driving surging interest in the topic, and how she approached E3377. She also talked about why she become invested in this topic and how standards are playing a role in defining ESG.

Can you start by explaining the concept of ESG?

ESG stands for “environmental, social, and governance.” The topic dates to around 2004, when the United Nations issued a report titled, “Who Cares Wins: Connecting Financial Markets to a Changing World.” It was a joint initiative of financial institutions looking to be more transparent with investors.

ESG has also been termed “socially responsible investing.” ESG offers a common language for organizations to disclose information to stakeholders, which may include potential investors; credit and lending entities; insurance carriers that may want to underwrite coverage; community constituents; those that live or work in proximity to these organizations; employees of these organizations; vendors and suppliers of these organizations; and those who do business with these organizations. ESG provides a framework and a common language for them to have a dialog and share information.

What was the original impetus behind ESG? What are some of the issues it addresses?

If we think back to South Africa and apartheid, we began to form a language around the concept of socially responsible investing. There was an outcry, mostly on university campuses, toward disinvestment of any business entities that did business with or in South Africa. Underlying that is a desire for socially responsible conduct, not just in investing, but in general.

That’s the “S” in ESG. Thinking about the environmental space, this area is more mature. It’s regulatory driven, it’s transparent, and it’s not going to come and go as a fad. In the U.S., the regulatory framework began in the late sixties and early seventies. There was the Clean Air Act [1963] and Clean Water Act [1972], followed by the Resource Conservation and Recovery Act [RCRA, 1976] and the Superfund Act [Comprehensive Environmental Response, Compensation, and Liability Act, 1980], and recent regulation around perfluorinated compounds.

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The “G” is governance. It’s the ability of a company to look inward at their own corporate governance. To see who is on their board, who they are doing business with, how they might improve their ethics and transparency; if they are being accountable to stakeholders. Once we pull these elements apart and define them better, once we offer organizations an opportunity to disclose information on those three elements, we’ve improved transparency and accountability. 

Given the growth of interest in ESG, what do you see as its impact?

We’ve allowed employees, consumers, vendors and suppliers, and those that live in proximity or work in proximity to these organizations to know what’s going on. Again, that’s the transparency piece. The accountability piece goes to an organization’s desire to allow the concerns of its stakeholders to resonate with its governance board and decision-making. It allows them to look at what their peers in that space are doing and maybe match that, if not exceed that. What is the ultimate impact? The impact is to improve knowledge of stakeholders and 
provide improved accountability and governance from organizations.

What made you think ASTM was the right venue to tackle this topic, and what was the process that led to creating a standard for ESG?

ASTM has a 125-plus year history in this space. It’s internationally recognized, and it has a very rigorous process for the development of standards. This is the perfect organization to undertake stepping into a space that is currently not standardized. Even the language of ESG is 
not standardized.

A few years ago, the committee on environmental assessment, risk management and corrective action (E50) formed a new subcommittee on climate and community (E50.07). I joined and was interested to learn about topics the group wanted to engage with. I volunteered to lead a new task group to develop a standard on ESG. My co-lead was Pam Lacey, who recently retired as chief regulatory counsel of the American Gas Association. I was the knowledgeable party in the ASTM process, and she was the more knowledgeable party in the ESG space.

The task group had approximately 50 people who participated during a three-year process. There was a lot of amazing expertise from folks who were very knowledgeable, including practicing individual attorneys, trade associations, academics, consultants, banking, and insurance professionals. We first wanted to provide an overview, almost like a travel guide.

This process led to E3377, the first ESG standard from the committee.

We wanted to look at different ways people are approaching these questions and provide a resource so users of the guide could increase awareness and have the language to ask more detailed questions going forward. We did our research, consulted with attorneys, and provided concrete, direct language. We also looked at companies that are doing ESG ratings. We tried to figure out who is doing the ratings, what kind of information they are collecting, what companies are being asked through questionnaires, who is using those ratings, and whether investors are really looking at that data.

We decided after many months that we were not going to provide a prescriptive procedure on what to disclose, how to disclose it, or who to disclose it to. We were going to provide a reference for those in this space because, number one, there was no reference that pulled all this together. Number two, we felt that it was important to begin to standardize the language associated with ESG disclosures.

What did you single out from the disclosures and frameworks currently in use?

First, we attempted to survey the different frameworks that exist domestically and internationally. Some of those are voluntary disclosure frameworks. Some of those are requirements in the regulatory space. We attempted to map those out, describe them, and provide users of the guide a reference for these frameworks and standards.

Second, we did research into how ESG elements are defined. We came up with common language. The guide doesn’t tell the user, “You must do these things.” It’s not a practice or a method. It suggests a group of elements that may be used, for example, to report or disclose on the E, S, and G elements.

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Third, we dove deeper into the concepts of disclosure. If you are an entity that is under the jurisdiction of the SEC [U.S. Securities and Exchange Commission], if you are a public company, you must supply an annual Form 10-K. That is a disclosure that traditionally covered environmental liabilities, so it’s another opportunity to expand and talk about governance and social elements. Companies often have a corporate sustainability disclosure, a report on the good deeds they are doing in the community. We dove deeper into the data that is collected and asked, “What is the quality of the data? What are the data sources? Are they primary sources a company can show a third-party auditor? Are these sources of data refreshed on a regular basis? Monthly? Annually?”

Now that this standard is published, what do you see as priorities for standardization and for your own ASTM involvement?

There will be updates to E3377. We most likely will begin the revision process later this year in 2024 and look to publish a 2025 or 2026 revision. Why is that? Some of the regulatory pieces that we’ve listed in the guide are proposed. Some are U.S. federal rules, some reside in the European Union.  We want to incorporate any changes, finalization, or updates of rules and frameworks. We want the guide to be a living document.

When working on E3377, we came across many items that we had to consider out of scope because the guide is rich, complex, and carries a lot of information. We tabled items we considered out of scope. We kept a running list of those items at the close of our process.

When we published the guide, we sent an interest survey out to the wider E50 main committee, which is hundreds of individuals. We also sent it to the chair of the committee on sustainability (E60). That survey highlighted a few suggested topics and a roster of individuals who stepped forward to participate. The process now is to help those efforts become registered as new work items and help new task groups find each other. We will continue to help new projects launch and bridge across subcommittees and main committees so that we share expertise and knowledge rather than exist in silos.

I enjoyed the opportunity to collaborate and become a part of E50.07. Now I’m seeking to go beyond E50 to other committees, find out what they are doing, and bridge the divide across main committees and subcommittees.

How did you become interested in sustainability and the other topics you’ve chosen to work on at ASTM?

I have worked in the environmental space for over 40 years, including 28 years as an environmental engineering consultant and 15 years in the environmental testing lab space. My work is regulatory driven, and I have a knack for regulatory requirements.

The topic of sustainability is becoming more prevalent. As a consumer, you try to reduce your waste. There’s more general awareness. As a person who is intellectually curious, I was interested in exploring this space and delighted to be paired up with people who are experienced professionals.

It has been a learning experience for me, working with different organizations – and ASTM in particular for its international component. The organization allows me latitude to explore different topics and meet different people. It is part of my exploratory journey in terms of what the future might bring. ■

Eileen Snyder is regional technical coordinator for Pace Analytical Services. An ASTM International member since 2016, she is a recipient of the Distinguished Service Award (2019), the Industry Participation Award (2022), a Certificate of Appreciation (2023), and the President’s Leadership Award (2023). She received her bachelor’s degree in biology from Wheaton College and her master’s degree in environmental policy from Tufts University.

JP Ervin is content editor of ASTM International's Standardization News.