What is a scenario-based approach in SASB Level II practice?

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Multiple Choice

What is a scenario-based approach in SASB Level II practice?

A scenario-based approach is about applying hypothetical futures to test whether the topics and metrics you’ve chosen for disclosure would remain material and what those disclosures would look like under those futures. It helps ensure the information you provide stays relevant and decision-useful across a range of plausible conditions, not just in the current environment. By running scenarios, you can see if certain topics become more or less material and tailor disclosures accordingly, including what specifics investors would want to see. For example, a company might examine a scenario with a tightened carbon policy and another with severe water scarcity to evaluate climate and water-related metrics and disclosures. This shows whether those topics stay material and how the disclosures might need to evolve to remain informative. This approach isn’t about benchmarking against peers, setting time-bound targets, or auditing data governance. Those are different activities focused on comparison, goals, or data quality, whereas scenario testing specifically probes materiality and disclosure content under varying futures.

A scenario-based approach is about applying hypothetical futures to test whether the topics and metrics you’ve chosen for disclosure would remain material and what those disclosures would look like under those futures. It helps ensure the information you provide stays relevant and decision-useful across a range of plausible conditions, not just in the current environment. By running scenarios, you can see if certain topics become more or less material and tailor disclosures accordingly, including what specifics investors would want to see.

For example, a company might examine a scenario with a tightened carbon policy and another with severe water scarcity to evaluate climate and water-related metrics and disclosures. This shows whether those topics stay material and how the disclosures might need to evolve to remain informative.

This approach isn’t about benchmarking against peers, setting time-bound targets, or auditing data governance. Those are different activities focused on comparison, goals, or data quality, whereas scenario testing specifically probes materiality and disclosure content under varying futures.

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