Should organizations be accountable for the performance of their supply chains? What information should they disclose? The Global Reporting Initiative (GRI) Working Group on Supply Chain Disclosures met last week in Santiago, Chile, to answer these questions in order to help improve supply chain reporting—which was identified by stakeholders and the GRI board as a weak point in overall sustainability reporting.
Trade union and worker representatives, sustainability executives from multinational companies, and civil society leaders assembled to revise the GRI Reporting Guidelines with the goal of strengthening supply chain disclosures. As part of the conference, I presented to 300 Chilean business leaders on the state of supply chain sustainability practices. Attendees also heard from the Chilean wine and fresh fruit industries about their recent transparency efforts, and were pleased to learn that Chile’s wine industry is the first in the wine world to establish sustainability management standards and to require sustainability reports from its member growers.
Even though our working group focused on supply chain sustainability disclosures, our input will inform the broader and more fundamental changes that will be made to the GRI’s reporting framework and guidelines.
Based on our discussion, we developed the following recommendations for companies:
- Demonstrate what is internal and external to your reporting efforts by drawing boundaries around entities under your control. The current boundary protocol is flawed because it conflates several concepts such as “control and influence” with “impacts,” and “organizational boundaries” with “reporting boundaries.”
- Report on direct and indirect impacts that result from investments, partnerships, and your supply chain. Companies should report on how their activities affect everything from the point of sale all the way back to the origins of raw materials. To make this task less daunting, companies should use the principle of materiality to focus on the most significant impacts in their supply chains.
- Disclose the steps that you take to prevent, mitigate, and remediate your impacts on the environment, society, and the economy. The “Disclosure on Management Approaches” should be reorganized with this in mind, and the guidelines should be aligned with the concept of due diligence—a defining characteristic of the UN “Protect, Respect, and Remedy” Framework for business and human rights.
A couple key questions will also remain under our consideration throughout the next year:
- Will disclosure of supplier lists be a part of the guidance?
- How will reporting on sub-tiers of supply chains be handled?
- How can positive actions in supply chains that contribute to sustainable development be reported on with credibility?
Once the draft guidance is in decent shape, the GRI will invite the public to comment. Look for more information on BSR’s blog.
Note: These are the views of the author and don’t necessarily reflect the views of the other working group members or the final consensus view to be determined by the GRI.