Sustainability report selection tool
- Business & Industry ,
- Management ,
- Supply chain ,
- Procurement ,
- Employee engagement
Kye Gbangbola looks at the latest guidance from the GRI on sustainability reporting and its focus on materiality
The Global Reporting Initiative (GRI) launched the fourth version of its sustainability reporting guidelines – “G4” – at its annual conference in Amsterdam in May. While G3 (and G3.1) was often criticised for pressuring organisations to measure and report metrics that were irrelevant to them, G4 places greater emphasis on materiality, with the aim that users will measure only what matters where it matters.
Announcing the launch of G4, GRI deputy chief executive Nelmara Arbex said: “The increasing demand for sustainability information is inevitable. But this demand is also a demand for sustainability-related information that matters. This is what G4 is about.”
According to GRI, the focus on materiality will make reports more relevant, more credible and more user-friendly. This greater focus will enable organisations to better inform markets and society on sustainability issues, claims the body behind the world’s most widely used sustainability reporting framework.
Whereas G3 was an “extent of reporting standard”, labelling an organisation A, B or C based on the number of disclosures made, G4 is described as an “in accordance with” standard. It contains two options – “core” and “comprehensive” – that focus on the quality of reporting and reinforce the freedom to report only on what is “material”.
Together the two options encourage reports to be more concise and offer greater clarity on issues, such as how value is created and long-term resiliencies.
G4 also requires greater integration between organisational functions and their supply chains. G3 touched on the supply chain, but offered little guidance in this area because overall it focused only on legally-owned entities – parent organisations and their subsidiaries. G4, however, is immersed in supply-chain procurement practices and includes both inside and outside reporting boundaries, which brings a major new dimension to the guidelines. Such an approach means it becomes clearer where an organisation’s responsibilities begin, end and are improved over time.
The performance of supply chains can have a significant impact on an organisation through all three dimensions of sustainability – economic, social and environmental – so G4 places greater importance on selecting suppliers and collaboration. Supply chains can increase the energy use and emissions attributed to supermarkets, for example, by a factor of 10.
Supply chains also hold significant reputational risk. Recent examples include: Primark selling products made at the Rana Plaza building in Bangladesh where 1,129 people were killed when it collapsed earlier this year; the London 2012 organising committee’s decision to allow Dow Chemicals to sponsor the “wrap” on the Olympic stadium, which was condemned by campaigners because of Dow’s links to the company responsible for the 1984 Bhopal disaster; and allegations that representatives of pharmaceutical company GSK bribed doctors in China.
Assurance remains recommended in G4, but there is a big difference in focus between the fourth iteration of the guidelines and previous versions. Assurance in G3 can best be described as being “below the radar”, whereas it is fully visible in G4. The new guidance requires assurers to be competent in GRI frameworks and the reporting organisation’s industry sector. The approach provides greater trust that the assurance is thorough, consistent, has integrity and is much more integral to the reporting process.
The G4 guidelines are also more intuitive and accessible to small organisations. GRI has achieved this by producing user-friendly documentation. In addition to the more logical approach taken in G4, the new guidelines turn the G3 “standard disclosures on profile and indicator protocols” into general standard disclosures (GSDs) and specific standard disclosures (SSDs) respectively. There are no longer two types of indicator: both are considered the same, so the “core” and “additional” distinctions have been dropped. Many users will also welcome the greater detail in G4 on GSDs, which cover:
- strategy and analysis;
- organisational profile;
- identified material aspects and boundaries;
- stakeholder engagement;
- report profile;
- governance; and
- ethics and integrity.
SSDs cover an organisation’s disclosures on management approach and indicators. The new reporting guidelines increase the degree of disclosure required on executive remuneration, board diversity and governance, for example, reflecting growing stakeholder interest in such matters.
G4 reinforces the guidance’s links to other environmental and sustainability reporting frameworks. This is achieved by setting out how GRI reporting can best be used in combination with other reporting initiatives and standards, such as: the framework from the International Integrated Reporting Council; the Carbon Disclosure Project; ISO standards, including ISO 14001; the UN Global Compact; the mandatory greenhouse-gas reporting requirements for UK quoted companies; and the OECD guidelines for multinational enterprises.
The aim of the new guidance is to help organisations produce more concise, complete and relevant reports. With more than two-thirds of the world’s largest companies adhering to GRI guidelines, global business leaders are now likely to race for the top and set about upgrading to G4. Most will be pleased to work with a framework where they are free to choose elements that are material enough to report on.
Good sustainability reporting can lead to improved profits, reduced risks and new business opportunities. For more large companies, reporting has become a mandate to operate and has enhanced their corporate reputations. Investors are more frequently refusing to lend to businesses in some sectors that fail to report non-financial information, while lowering the cost of capital to those who do.
As the essential business case becomes stronger, reporting on environmental impacts is easier than ever. Managing a firm’s sustainability is a way of making it as profitable as it can be and communicating about those efforts plays a big role. Some may say that G4 is just a vehicle to make companies look good with minimal expenditure and significant return. In reality, sustainability reporting that follows the best available standard has become necessary to understand the real value of a business. G4 provides the leadership organisations need to report and transform in a way that will enable them to meet 21st century challenges.
The Environment Agency has successfully prosecuted Southern Water for thousands of illegal raw sewage discharges that polluted rivers and coastal waters in Kent, resulting in a record £90m fine.
In Elliott-Smith v Secretary of State for Business, Energy and Industrial Strategy, the claimant applied for judicial review of the legality of the defendants’ joint decision to create the UK Emissions Trading Scheme (UK ETS) as a substitute for UK participation in the EU Emissions Trading Scheme (EU ETS).
None of England’s water and sewerage companies achieved all environmental expectations for the period 2015 to 2020, the Environment Agency has revealed. These targets included the reduction of total pollution incidents by at least one-third compared with 2012, and for incident self-reporting to be at least 75%.
Global greenhouse gas emissions from agriculture are projected to increase by 4% over the next 10 years, despite the carbon intensity of production declining. That is according to a new report from the UN food agency and the Organisation for Economic Co-operation and Development (OECD), which forecasts that 80% of the increase will come from livestock.
Half of consumers worldwide now consider the sustainability of food and drink itself, not just its packaging, when buying, a survey of 14,000 shoppers across 18 countries has discovered. This suggests that their understanding of sustainability is evolving to include wellbeing and nutrition, with sustainable packaging now considered standard.
Billions of people worldwide have been unable to access safe drinking water and sanitation in their homes during the COVID-19 pandemic, according to a progress report from the World Health Organisation focusing on the UN’s sixth Sustainable Development Goal (SDG 6) – to “ensure availability and sustainable management of water and sanitation for all by 2030”.
New jobs that help drive the UK towards net-zero emissions are set to offer salaries that are almost one-third higher than those in carbon-intensive industries, research suggests.