Today, unlike any other time in the past, people are more conscious about sustainability and insist on only working with the businesses that are responsible. Although the concept of sustainability has been around for about 30 years since 1992 when it was coined during the first UN Conference on Environment and Development (UNICED), its application is only gaining pace now.
The main outcome of this meeting, which was emphasized in the latter summits, was sustainability reporting, which is a system of disclosure of a company's environmental, social, and governance(ESG) impacts. This is what stakeholders, such as investors, check to determine if they will invest, buy or work with a specific company.
To implement ESG sustainability reporting correctly, every business needs to identify and use an appropriate framework. One of the leading frameworks is GRI (global reporting initiative). So, how does it work? Keep reading to learn more about the sustainability reporting guidelines according to GRI.
The GRI framework was created in 1997 by the Coalition for Environmentally Responsible Economies (CERES) and UNEP, making it the first global reporting standard on sustainability. When drawn at first, GRI was aimed at addressing the issues emerging from the Exxon Valdez Oil Spill.
Since then, GRI has become one of the most preferred ESG sustainability reporting frameworks for organizations. Today, there are more than 13,000 organizations in 90 countries that use GRI.
GRI’s headquarters are based in Amsterdam, Netherlands, and it also has a network of seven regional hubs, all prepared to help organizations and stakeholders across the globe. Starting from2016, GRI included Sustainable Development Goals (SDGs).
GRI uses a set of standards that create the same language for stakeholders and organizations, which help make comparability easy. The ultimate goal is promoting greater transparency and accountability of organizations.
Therefore, ESG sustainability reporting based on GRI standards provides a reasonable and balanced representation of an organization's contribution (both negative and positive) towards a sustainable global economy.
The Global Reporting Initiatives (GRI)framework standards are structured to be used together to assist organizations to prepare their sustainability reports, which are further anchored on the core reporting principles (we will look at these shortly) and material topics. The standards are broadly categorized into four:
● The universal standards.
● The economic standards.
● The environmental standards.
● The social standards.
In addition to the GRI Standards, GRI also comes with recommendations, requirements, and guidance that organizations should use for correct reporting. Note that all of these are aimed at ensuring organizations do not just hastily craft reports but internalize the concept of sustainability into their operations for enhanced benefits.
The requirements are mandatory instructions on GRI for organizations that opt to use this framework and are factored in alongside the recommendations and guidance for implementation.
Guidance, on the other hand, are parts of the GRI framework that capture the background information, examples, and explanations that can help your organization understand more about the standards. Finally, the recommendations are cases where specific actions are recommended.
When preparing a report with the GRI framework, it is important to appreciate two core components, and the second is entirely built on the first.
First is the target of promoting sustainability, which means helping to make the planet (environment ,social, and governance) a better place. The second one is the target of the ESG sustainability reporting. The focus you demonstrate towards sustainability is what stakeholders, from investors to customers, will be interested in to make the big decision of selecting your enterprise.
Therefore, the implementation of ESG sustainability reporting should be deeply ingrained into your organization's systems and specifically targeted to stakeholders.
When preparing a sustainability report for your organization using the GRI framework, it is paramount to understand the underlying principles because they ultimately define acceptability and reliability. The principles are divided into two groups:
● The reporting principles that define the content of the report: These are stakeholder inclusiveness, materiality, completeness, and sustainability context.
● The reporting principles for defining the report quality: Falling in this category are reliability, timeliness, accuracy, balance, clarity, and comparability.
Here is a closer look at a sample of the principles to demonstrate how they work. We highlight three, which are selected at random.
Any organization in operation is always faced with multiple topics that it can report on. However, the topics that should be included in the report are those that touch on an organization's social, environmental, and economic impacts or that greatly influence stakeholders' decisions. Materiality is used to mean a threshold for influencing the decisions, especially in the financial realm.
In ESG sustainability reporting, materiality also focuses on the threshold but targets two areas, stakeholders and a wider range of impacts.
Therefore, as a principle, materiality is used to determine which relevant topic is sufficiently important to include in your report. For an organization, such as a manufacturing plant, reporting on the emission rates, which includes the current rates, efforts to reduce them, and the success achieved over time, can be an excellent topic. Other topics that are also important include water use, energy use, and pollution.
Completeness in ESG reporting refers to practices in information collection and whether its presentation is appropriate and reasonable. It includes a number of dimensions, including the material topics on the report, main boundaries, and timelines. It is also related to the quality of the information and works closely in line with the other two principles of balance and accuracy.
On the list of material topics to be included in the report, make sure that they reflect the organization’s environmental, social, and governance impacts in a way that your targeted stakeholders can comfortably assess the enterprise.
Then, the boundaries indicate where the impacts happen on the selected material topic. For example, your impacts might be causing impacts directly or as a result of relationships with others. These impacts should be quantified and associated data captured.
Lastly, on the principle of completeness, is time. According to the GRI framework, time is the need for the selected information to get completed over the time specified on the report. Therefore, it is prudent to carefully select the practical topics and breakdown the expected results.
For example, if you target to cut emissions from your organization by 30% in the next three years, "How do you report the same on an annual basis?" Here, you might want to break down the timelines into smaller achievable units, such as bi-annual or annual targets and link them to demonstrate progress towards the final target of 30% emission reduction.
Suppose you are applying the GRI framework to meet the regulatory requirements where timeline must be extended into the future, such as the Hong Kong Stock Exchange (HKEX). In that case, it is important to carefully imagine the expected future challenges and opportunities. In such a case, investors will be interested in knowing how effectively you will address these challenges for a better, stronger, and more sustainable organization.
This is another very important principle because it makes it possible for stakeholders to evaluate the performance of your organization. As you prepare the report, comparability must factor consistency so that what you did the previous year is built upon in the coming years. Stakeholders want the assurance that you will not slip back but keep scaling higher in the sustainability ladder.
Therefore, it is paramount to ensure you capture context to assist users in understanding the factors that resulted in varying impacts or performance. For example, how did you do it if you targeted to minimize water use and achieved the target? Did you change the raw materials, production machinery or adopted a new product design?
We have highlighted only three principles used for the GRI framework, but as you can see, implementation can get pretty complex. For most organizations, especially the new ones, how to adhere to all GRI guidelines is a major challenge.
Well, you need to make the report comparable, accurate, and deeply factor the concept of materiality, but how? This is where the idea of automation using sustainability reporting software comes into play.
Instead of manually capturing the environmental, social and governance impacts while factoring the different principles of GRI, a good program can help simplify the process. Indeed, you can select programs that are designed in line with the GRI and other frameworks. With the right program, you can automate the process so that data is gathered correctly.
For example, you can set the program to capture selected material reporting topic’s related data after a specific timeline. You can also allow team leaders to add data, monitor progress, and follow various signals for better performance. Other benefits of using advanced reporting programs include:
● It makes it easy to maintain consistency.
● It is cost-effective.
● Higher levels of accuracy.
● It is easy to generate regular reports.
● The programs can easily integrate with your company’s management system.
GRI framework is a comprehensive ESG sustainability reporting framework and can help you achieve your sustainability goals. Always remember that although your organization’s target is creating a report in line with the GRI framework, you should try to make sustainability part of the organization.
Hong Kong Stock Exchange (HKEX) has introduced new requirements for all listed companies and new stock issuers.
After years and decades of searching, researching, and testing, a solution for most planetary problems has been found: ESG sustainability reporting.