Four Improvements for the Global Reporting Initiative’s ‘G4’ Guidelines

September 20, 2011
  • Dunstan Allison-Hope portrait

    Dunstan Allison-Hope

    Senior Advisor, BSR

  • Virginia Terry

    Former Director, Advisory Services, BSR

In its first major overhaul since 2006, the Global Reporting Initiative (GRI) plans to create a new “G4” version of its Sustainability Reporting Guidelines by 2013. In preparation for this, the GRI will be accepting comments from the public as well as multistakeholder working groups.

BSR played an active role in the creation of the G3 guidelines, and since that time, we have gained significant experience applying these guidelines through our work with member companies in Asia, Europe, and the United States—all of which has informed our perspective on improvements we think can be made.

Before we outline those improvements, however, it is important to remember how we got to where we are today.

Unlike financial reporting frameworks, which have been evolving over the past century, the first GRI guidelines were released in 2000, followed by a G2 update in 2002, mainly in response to demands for improved quality and comparability.

When it came time to create the G3 in 2005, we focused our input on two key areas where we felt the greatest improvements could be made:

  • Move away from the “checklist approach” to reporting by improving the GRI’s “Reporting Principles” (such as materiality, accuracy, timeliness, and stakeholder inclusiveness) and positioning them alongside the “standard disclosures” as an equally important part of the guidelines.
  • Make the guidelines easier to use by looking at them through the eyes of someone actually preparing a report.

Over the past five years, the G3 has been successful in these two areas. In particular, it is notable how well companies are using the GRI’s content principles, especially materiality, to shape reporting content. It is also fascinating to note how the concept of materiality, which was originally defined purely for use in reporting, is now so widely applied in the creation of company strategy. The discipline required to create a sustainability report has undoubtedly had a positive impact on the robustness of sustainability strategy.

Today, around 2,000 companies issue sustainability reports every year, and where once the GRI appeared to be in competition with other reporting frameworks, today it is the only game in town. However, expectations are now much greater than when the GRI was first launched. The financial crisis, combined with the growing awareness of our global sustainability challenges, has increased society’s expectations on corporate accountability and transparency.

With the G4, the GRI aims to make sustainability reporting as systematic, objective, and comparable as financial reporting. BSR intends to play an active role in the process to create the G4 guidelines, and, to that end, we surveyed our staff about what should change.

Crop of chart

We have four recommendations:

  1. Scrutinize the real-world use of the “standard disclosures.” Standard disclosures allow readers to compare companies on issues deemed to be of interest to most stakeholders and material to most companies. And a good many of them are both of those things. But all report preparers will recognize the sinking feeling that comes with working through the voluminous standard disclosures late in the reporting process and trying desperately to match them with potentially relevant report content. As written, some standard disclosures are widely used (such as EN16, “total direct and indirect greenhouse gas emissions by weight”) while others are not reported on because they are too complex or too removed from real-life management (such as EN1, “materials used by weight or volume”).

    Now is the time to undertake quantitative research into which disclosures are being used by companies and which are not, and try to understand why. Trawling through hundreds of sustainability reports will be grueling work for sure, but someone’s got to do it.

  2. Reinforce the importance of the “principles for ensuring report quality.” Companies have become skilled at using the four “principles for defining report content” (materiality, stakeholder inclusiveness, sustainability context, and completeness), while some of the six “principles for ensuring report quality” (accuracy, clarity, balance, timeliness, comparability, and reliability) remain on shaky ground. There’s a stark contrast between the planned, systematic, and orderly creation of annual reports and the all-too-often ad hoc, chaotic, and inefficient approach to sustainability reporting. We’ve worked with companies with improvised sign-off procedures, inconsistent reporting cycles, and cavalier attitudes about metrics disclosure. This has got to change, and enhanced “principles for ensuring report quality” will help.
  3. Un-dot the i’s and un-cross the t’s. Some of the standard disclosures require an astonishing level of detail. Phrases such as “by region,” “by employee category,” and “percentage of” require effort well beyond any conceivable benefit and are mostly ignored. Indeed, requests for that level of detail can serve to repel any disclosure at all, or result in a wide variety of ingenious work-arounds. Ironically, the quest for greater comparability might be well served through fewer requirements for specificity. Instead of nitty-gritty detail, the GRI should encourage the reporting of information that is relevant to business and sustainability.
  4. Move more of the “standard disclosures” from the main guidelines into the sector supplements. Often, the GRI sector supplements tend to be more relevant for companies than the main guidelines themselves. For this reason, it would be beneficial to move more standard disclosures from the main guidelines into their relevant sector supplements. This would require that the current process to create the GRI sector supplements become faster and more easily achieved, but this would be done in the service of greater comparability. Similarly, BSR staff working on country-level reporting (such as in China) would like to see country-specific guidance for key markets, along with greater coordination between the GRI and organizations (such as stock exchanges or regulators) influencing reporting requirements at the country level.

In addition to these recommendations, BSR staff made a number of other suggestions, such as overhauling the standard disclosures on ethics and integrity, providing more robust disclosure requirements on public policy, and increasing the emphasis on the disclosure of forward-looking information.

Reviewing these areas for improvement, one thing stands out: They are specific, detailed, and technical. And herein is a key point: The guidelines are in remarkably good shape given their young age, and the fundamentals are sound. Now the hard job is to refine, refine, refine.

BSR intends to play a constructive role in the process to create the G4 guidelines, and we welcome our members’ thoughts on the most important improvements to be made. Please contact Dunstan Allison Hope or Virginia Terry.

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