Sustainability Reporting Guideline Released

May 26, 2013

The fourth version of the Global Reporting Initiative standard comes in two volumes.

The Global Reporting Initiative (GRI) released the fourth version of standards to guide companies in disclosing the environmental, social, and economic aspects of their operations. The launch of G4 came at a highly orchestrated — some said flamboyant — three-day international conference attended by more than 1,650 people who arrived in Amsterdam, The Netherlands, from 80 countries. The geographic spread is the widest ever at a GRI launch.

A number of corporations were on hand to endorse G4. Among them were Alcoa, China Power and Light, Dell, ENEL, General Electric Co., Puma, and Siemens.

Two and a half years in preparation, the new guideline comes in two separate parts. Book One, “Reporting Principles and Standard Disclosures” tells organizations what criteria they should apply to prepare a sustainability report that can be said to be “in accordance” with the standard.

Part Two, an implementation manual, explains how to apply the reporting principles, and how to interpret the concepts in the first book. The second book also contains the key performance indicators and their definitions, plus a glossary of terms.

The major change in G4 is the requirement for companies to explain precisely how they went about deciding what to report. GRI reports are now supposed to focus on materiality — the organization’s significant economic, environmental, and social impacts, or those that influence the assessments and decisions of stakeholders. Companies must identify the environmental, social, and governance (ESG) aspects of their businesses and then tell how and why they selected those that are “material.” Companies are expected to be very transparent and quite specific about the process they use to engage stakeholders.

The success of the disclosure of management approach, or DMA, hinges on whether it can change behavior. By starting out at a relatively higher level in the enterprise, G4 is an attempt to have both the organization and its stakeholders understand why something is material, what is going to be done about it, and if the management strategy is working.

DMA provides context for investors to be assured the company has systems in place for evaluating risks and opportunities, Carlota Garcia Manas, head of research at Eiris, the global network of ESG analysts and ethical investment advisers, explains.  She says G4 will help to prevent companies from reporting on only on their pet projects. Investors want to know the business case for ESG and how it integrates with the overall corporate strategy.

Bruno Sarda, who is responsible for the operational strategy of Dell’s global sustainability efforts, says G4 will help report readers understand how companies are identifying and dealing with problems in their supply chains. Sarda says those who support G4 should “embrace the process for itself” because it can unlock the business case to do more.

Rather than thinking of themselves as carrying the gospel to others about G4, advocates should “consider ourselves as midwives giving birth to a different kinds of reporting,” says Glenn Frommer, chief sustainable development manager for MTR Corp., the mass transit and railway operator in Hong Kong.

Anatomy of the guidance
The contents of Book Two are not exactly mandatory. With either option, once an organization has chosen a certain aspect as material, it is encouraged to look at the guidance.

GRI is allowing two ways to declare a report “in accordance” with the guidelines: the core option and the comprehensive option, which requires additional standard disclosures about strategy, governance, ethics, and integrity. The comprehensive option also requires the reporter to communicate its performance more extensively by disclosing all the GRI indicators related to the material aspects it has identified.

The standard requires new information, including disclosures relating the supply chain and greenhouse gases.

G4’s guidance on disclosures about a company’s management approach is robust. For example, reporters are advised to describe how the organization ensures that charitable donations and sponsorships (financial and in-kind) are not disguised forms of bribery.

A content index should accompany the “in accordance” statement. If the requirements of either option are not fulfilled, the report should state: “This report contains standard disclosures from the GRI Sustainability Reporting Guidelines” along with a list of where they are located in the report.

GRI will continue to recognize the previous third versions for up to two reporting cycles. However, reports published after 31 December 2015 should be prepared using G4. First-time reporters will face GRI’s recommendation to use G4.

Visit Crosslands Bulletin regularly for more information gathered on site at the GRI conference. 

For more information contact Nelmara Arbex, Deputy Chief Executive, PO Box 10039, 1001 EA Amsterdam, The Netherlands. Tel: +31 20 531 0000; Fax: +31 20 531 0031; arbex@globalreporting.com.