Pluses & Minuses of the New GRI G4 Guidelines
Tuesday, 11th June 2013 at 5:40 pm
The delivery of new G4 guidelines provides a timely and valuable opportunity for companies to re-think why they report, what they report and how they report, says Paul Davies – a member of the GRI G4 Practitioner's Network and principal at sustainability performance company, Banarra.
Amid much anticipation, some trepidation, plus a little bit of fanfare at its conference last week, the Global Reporting Initiative released the next iteration of its widely embraced sustainability reporting guidelines.
G4 is pretty much make or break for GRI, at a time when the steam is running out of reporting for some organisations who are questioning its relevance and value to their business. That’s not to say that sustainability reporting is a waste of time and energy – far from it for many organisations.
But a lot of reporters have lost sight of what its purpose actually is, or have just become a little too comfortable with churning reports out over so many years. The edginess and enthusiasm that drove sustainability reporting 10 to 15 years ago has been diluted by mainstreaming.
The G3/3.1 too was also losing its bite. Its fundamentals were right but its unintended emphasis on accumulating performance indicators, whether material or not, to get an A+ was sending the wrong signal to reporters and the market. It struggled to communicate the importance of materiality, or at least didn’t do it well enough to get overweight, stakeholder-irrelevant reports down to thin, sharp, punchy accounts of what matters.
The delivery of G4 therefore provides a timely and valuable opportunity for companies to re-think why they report, what they report and how they report. In many aspects, G4 is an impressive step up over G3. The ‘Big M’ now is Materiality.
Materiality is the only way sustainability reporting will survive in terms of delivering value for readers. It sits at the heart of G4 and rightly so. G4 asks reporters not just what they did to focus their report, but what topics their materiality efforts came up with.
Then GRI added something that I think is important – G4 asks reporters to look at these issues in terms of their impacts inside and outside their business and broaden their accounting for these impacts beyond the narrow confines of their corporate walls.
In other words, talk about material impacts in the broadest context of your value chain. This broader and more comprehensive accounting for impacts, externalities, risks and opportunities is a positive step for reporting.
G4 also tackles the perennial weakness of most reports in discussing how the organisation managed its sustainability performance. G3’s management approach disclosures were an attempt to reduce the emphasis on purely shovelling performance data into the report (most of which was impenetrable for many stakeholders anyway), and getting the business to frame its data in relation to its management of performance outcomes.
It never quite worked with G3, as many reporters paid little attention to management disclosures, sometimes confounded by what G3 was asking them to do. G4 has tackled this head-on and made management disclosures simpler, more materiality based, and their relationship to performance data more prominent.
The two biggest challenges reporters expected from G4 were the likely significant step-ups in relation to governance and supply chain. Up until now, these two areas have been poorly addressed in reports, mainly for reasons relating to fear of disclosure, paucity of initiatives, or just lack of solid data.
G4 has, as expected, cranked things up in both these areas, but it has ended up ‘sitting on the fence’ I believe. There are a range of new disclosures in G4 relating to both governance and supply chain. But with the governance disclosures there are several ‘outs’ for those not wanting to talk about them, or unable to talk about them.
Of the 22 General Standard Disclosures related to governance, you only have to report on one at the base level of GRI compliance (the ‘core’ report option). But even at the more intensive compliance level (the ‘comprehensive’ report option) you can still have 21 abstentions from talking about your governance practices and yet potentially claim compliance with G4. This seems to be a significant loophole which I think dilutes the original intent of this new approach.
It’s a similar scenario with G4’s supply chain disclosures. Apart from three fairly innocuous General Standard Disclosures about suppliers being mandatory for all reporters, there is still no compulsion for reporters to discuss supply chain impacts unless the reporter itself declares the subject to be material. Unfortunately, two other areas in G4 suffer a similar fate – the governance and supplier-related areas of ‘ethics and integrity’ and ‘anti-corruption’.
No new international framework can live up to everyone’s expectations. GRI has, I think, achieved some solid and commendable outcomes with G4. The guidelines themselves are well presented in terms of accessibility of content, and thoughtfulness in guidance.
GRI has sought to harmonise G4’s content where possible with other important global initiatives, frameworks and protocols. GRI has also smartly addressed the issue of application levels and the significant and damaging confusion they created in the marketplace.
GRI has fought for winnable outcomes in G4, yet eased off in some key areas that most challenge transparency these days. Push too hard and G4 risks being dropped in the bin by reporters who are still struggling with G3. But I also give many reporters huge credit for demonstrating what they are capable of – to really use sustainability reports to drive change within their business processes, culture and performance. They do rise to the challenge if they feel it is important to do so. G4 could have pushed a little harder, I believe, to really set the stage for better reporting over the next five or so years.
As a small business, Banarra has reported annually on our sustainability outcomes – good and bad – for the past six years. We still struggle to get it right. We also advise on, write and assure (but never for the same clients!) over a dozen GRI compliant reports each year.
We intimately know the practical challenges of both sustainability reporting and G3. G4 will be a step up, no doubt. But only time will tell how big that step is and whether GRI and its multitude of stakeholders will get what they were after – better, sharper, leaner reports that tell readers what they need to know and what they need to base decisions on.
About the author: Paul Davies is a Principal at Banarra and has worked on numerous reporting, materiality, stakeholder engagement, strategy, community standards and assurance assignments in the property, telecommunications, financial, mining, energy, legal and service sectors.
Davies is a certified GRI trainer, a member of the GRI G4 working group on management approach disclosures and a member of the GRI G4 Practitioner's Network.