GRI Standards: Same same but different

When the fourth generation of sustainability reporting guidelines published by the Global Reporting Initiative (GRI) expires in June 2018, there will be no mourning. Their introduction in 2013 was already accompanied by considerable resentment. Whereas in previous years sustainability reporting had only been aligned with the requirements of G3 with great effort, G4 presented reporting processes with considerable new challenges in terms of depth of detail and stakeholder orientation.

Eliminating the application levels also removed an important incentive that allowed companies to distinguish themselves with their reporting performance. “The increased complexity of GRI G4 reporting will deter rather than encourage new companies to publish sustainability information,” econsense warned in a statement at the time. The reluctance of companies was to confirm this assessment. It was not until 2015 that the number of G4 reports surpassed those still oriented toward G3 until then. And one thing is striking. The vast majority of companies limited themselves to reporting in accordance with the new “Core” compliance option. They did not yet venture into the more elaborate “Comprehensive” level.

The new standards after negotiation

So now the “GRI Sustainability Standards“. It’s fair to say that the Global Sustainability Standards Board (GSSB) did its homework. The body at GRI spent a year negotiating the new standard among its many stakeholders. The GSSB has done a pretty good job. They translated the Guidelines into a new form and application practice without getting rid of the essential substantive requirements of G4. As a member of the international GRI Standards Pioneers Group, we also actively supported the introduction of the new standards.

With the standards, the GRI sustainability guidelines reach a level of sovereign maturity in corporate reporting. No more checklists, no more “painting by numbers”. Whith that a routine compulsory exercise is worked through for the auditors in an annual rhythm.

What has changed now?

The G4 guidelines have by no means become G5. Those “standards” are based on the same principles as G4. The material requirements have not changed either. What has changed, however, is the structure and the way the Guidelines are handled. Companies that already report according to G4 will have no difficulty meeting the new requirements. However, there is one small new hurdle to overcome, but more on that later.

The familiar contents of the reporting guideline have been transformed into a series of modular standards. As a result, the framework now consists of three general standards and 33 topic-specific standards. The new format of the standards allows GRI to update individual topics based on changing assessments and perspectives without having to immediately revise the entire set of standards.

The three universal standards – 101 Fundamentals, 102 General Disclosures and 103 Management Approach – are to be applied by any company preparing a sustainability report. In addition, the company then selects the relevant topic-specific standards based on the preceding materiality analysis (a 200 series on economic aspects, a 300 series on environmental aspects, and a 400 series on social aspects) to report on topics material to the company.

With the new GRI standards, a company can continue to report at the “Core” or “Comprehensive” scope.

However, it could also simply draw on individual topic-specific standards for its reporting purposes. Thereby it provides a sound and recognized basis for specific aspects of its reporting. This can be greenhouse gas emissions, water and energy consumption, or labor practices. These modules could be classified as “GRI Referenced”. Even though it’s unlikely to happen in real life: But in fact, a report could now be “Core” that fulfills only one topic-specific module in addition to the three universal modules. In principle, however, the following applies: A fully-fledged sustainability report according to the GRI standards is, however, a report that complies with the requirements of the three universal standards as well as containing the information on those topics that are essential (i.e. “material”) for understanding the sustainability performance.

In detail, reporting teams can expect a number of improvements that simplify reporting in purely practical terms. The clear streamlining of content avoids existing redundancies and fraying of content during editorial production. The same applies to a number of new content precisions. (e.g., report boundaries, handling of “off-GRI topic” issues, or definitions of terms). And finally, the expected handling of mandatory content components but also gaps is formulated more clearly. The new differentiation of the information to be provided is generally welcomed. They are mandatory requirements (“shall”), recommendations (“should”) or “guidance” (the use of which is also only optional). In each standard, a prefixed overview facilitates navigation between the options. The previous ten “sector disclosures” for selected industries are no longer a mandatory part of the standards, but are to be taken into account as “guidance”.

GRI’s efforts to achieve better integration with existing financial and non-financial reporting standards (Integrated Reporting Framework (IIRC), SASB standards, etc.) through this approach are unmistakable.

An important and possibly sporting innovation awaits the reporters in the materiality analysis. Since G3, a materiality matrix is supposed to show the main substantive fields of action of organizations’ sustainability practices. In a Cartesian coordinate system, the fields of action that are material from a stakeholder perspective are plotted against the fields of action that are material from a company perspective. This representation has already led to numerous discussions in many companies. With questions such as “Why is occupational health and safety at the bottom left?” and, unfortunately, an inability to sufficiently plausibilize the message of this matrix, many a report probably found itself facing an early demise.

And what do the GRI standards do? They have modified the desired presentation in such a way that the company must now look at its potential impacts on relevant aspects of its business. It remains to be seen how this will be handled in practice. In view of the corporate policy sensitivities, one would have liked to see a completely different approach formulated for the materiality consideration. Here, it is still true that there will be a good debate about what is or is not material.

It will now have to be seen whether the standards will improve acceptance of the GRI guidelines among German companies or even give sustainability reporting a new boost. The defining reporting trend remains integrated reporting – in the future with the support of the standards.

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