Sustainable Entrepreneurship and the GRI Standards

The Global Reporting Initiative (“GRI”)[1] was founded in 1997 by the Coalition for Environmentally Responsible Economics (“CERES”) in Boston, Massachusetts to develop a standardized sustainability reporting framework that would effectively capture and describe the sustainability activities that transpire in the economic, environmental, and social aspects of organizational operations.[2]? The goal of the GRI has been to serve as a multi-stakeholder developed international independent organization that helps businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others.? In so doing, reporting enterprises can make better decisions regarding the actions that should be taken towards a more sustainable economy and world.?

The Global Sustainability Standards Board (“GSSB”) issues and maintains the GRI reporting standards for organizations to use in their “sustainability reporting”, which has been described by the GSSB as “the practice of companies disclosing the most significant economic, environmental and social impacts that arise from their corporate activities, and thereby being held accountable for these impacts and responsible for managing them”.[3]? When it was formed, the GRI was one of the pioneers of sustainability reporting.? Since then, the GRI has been a primary driver of transforming sustainability reporting from a niche practice to one now adopted by a growing majority of organizations.? The GRI’s standards are the world’s most widely used with respect to sustainability reporting and disclosure[4] and are available for use by public agencies, firms and other organizations wishing to understand and communicate aspects of their economic, environmental, and social performance.?

In 1999, soon after its formation, the GRI entered a partnership with the United Nations Environment Programme and released the first two generations of official sustainability reporting guidelines in 2000 and 2002, respectively. The GRI moved its headquarters to Amsterdam in 2002 and released a third generation of guidelines (“G3”) in 2006 following a substantial amount of industry and professional feedback that, among other things, led to the inclusion of a set of sector supplements.? The G3 guidelines laid down four fundamental principles for companies to follow when defining the content of their sustainability reports: materiality (i.e., the report should cover topics that reflect the company’s significant economic, environmental and social impacts), stakeholder inclusiveness (i.e., the report should identify the company’s stakeholders and explain how the company has responded to their reasonable expectations and interests), sustainability context (i.e., performance should be explained in the wider context of sustainability), and completeness (i.e., the report should cover material topics and their boundaries, sufficient to reflect significant economic, environmental, and social impacts, and to enable stakeholders to assess organizational performance).? The fourth generation of guidelines was issued by the GRI in 2013 and was intended, at least in part, to address concerns that had been raised in some quarters regarding the sheer weight of the metrics involved in the previous reporting framework and represented an effort to return to certain core principles of reporting such as materiality.?

The latest version of the GRI’s sustainability reporting framework, generally referred to as the “GRI Standards”, was published, following extensive consultation, in October 2016 and formally went into effect for reports and other materials published on or after July 1, 2018.? Since then, the GRI Standards have continued to be updated and added to, including new Standards on Tax and Waste, a major update to the Universal Standards described below, and the continuing roll-out of Sector Standards beginning in 2021.?

The GRI Standards are based on expectations for responsible business conduct set out in authoritative intergovernmental instruments, such as the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, and information reported using the GRI Standards can help users assess whether an organization meets the expectations set out in these instruments.[5]? Each of the GRI Standards includes requirements (i.e., mandatory instructions presented in bold font and indicated with the word “shall”); recommendations (i.e., a particular course of action which is encouraged, but not required, and indicated with the word “should”) and guidance (i.e., background information, explanations, and examples).? However, it is important to note that the GRI Standards do not set allocations, thresholds, goals, targets, or any other benchmarks for good or bad performance.? The GRI is not a rating agency, does not monitor whether an organization has correctly applied its guidelines, and does not provide certifications.

While the GRI Standards are primarily a disclosure and reporting framework, there was a strong upward trend over time of references to the GRI Standards in statements of sustainability commitments and policies issued by companies, with the most dominant standard in terms of references being GRI 2: General Disclosures, which covers the organizational profile of businesses, business strategy, ethics, integrity, governance, management approach, reporting practices and stakeholder engagement, followed by two environment-related standards: GRI 305: Emissions, which includes references to key issues regarding greenhouse gases and ozone depleting substances, and GRI 303: Water and Effluents, which includes issues regarding water supplies, water costs, and water discharge impacts.[6]

The GRI Standards are a modular system comprising three series of Standards, all of which are freely available through the GRI website: GRI Universal Standards, GRI Sector Standards, and GRI Topic Standards.[7] ?The Universal Standards are used by all organizations when reporting in accordance with the GRI Standards; the Sector Standards are used by organizations according to the sectors in which they operate; and the Topic Standards are used by organizations according to their list of material topics.[8]

Universal Standards: There are three Universal Standards[9]:

• GRI 1: Foundation 2021 (“GRI 1”) outlines the purpose of the GRI Standards, clarifies critical concepts, and explains how to use the Standards. It lists the nine requirements that an organization must comply with to report in accordance with the GRI Standards. It also specifies the principles (e.g., accuracy, balance, and verifiability) that are fundamental to good quality reporting.
• GRI 2: General Disclosures 2021 (“GRI 2”) contains disclosures relating to details about an organization’s structure and reporting practices; activities and workers; governance; strategy; policies; practices; and stakeholder engagement. These give insight into the organization’s profile and scale and help in providing a context for understanding an organization’s impacts.
• GRI 3: Material Topics 2021 (“GRI 3”) explains the steps by which an organization can determine the topics most relevant to its impacts, its material topics, and describes how the Sector Standards are used in this process. It also contains disclosures for reporting its list of material topics; the process by which the organization has determined its material topics; and how it manages each topic.

Sector Standards: ?The GRI Sector Standards were introduced in 2021 to increase the quality, completeness, and consistency of reporting by organizations, and the intention is to develop Standards for 40 sectors beginning with those with the highest impact (e.g., oil and gas, agriculture, aquaculture, fishing, and mining).? The Sector Standards list topics that are likely to be material for most organizations in each sector and indicate relevant disclosures to report on these topics, and if an applicable Sector Standard is available, an organization is obliged (‘required’) to use it when reporting with the GRI Standards.[10]

Topic-specific Standards:? The GRI Standards include three series of topic-specific Standards: the 200 series for economic topics (e.g., economic performance, indirect economic impacts, procurement practices etc.); the 300 series for environmental topics (e.g., materials, energy, water, transport, environmental grievance mechanisms etc.), and the 400 series for social topics, including labor practices and decent work (e.g., employment, occupational health and safety, training and education etc.), human rights (e.g., non-discrimination, forced or compulsory labor, indigenous rights etc.), society (e.g., local communities etc.) and product responsibility (e.g., customer health and safety, product and service labeling, customer privacy etc.).? These topic-specific Standards can be used by organizations to report information on their impacts relating to a wide range of economic, environmental, and social topics (e.g., indirect economic impacts, water, or employment).? Each Standard incorporates an overview of the topic and disclosures specific to the topic and how an organization manages its associated impacts. An organization selects those Topic Standards that correspond to the material topics it has determined and uses them for reporting.

According to the GRI, the foundation of sustainability reporting is for an organization to identify and prioritize its impacts on the economy, environment, and people—to be transparent about their impacts; and organizations are expected to develop and reported their required disclosures using the following reporting process[11]:

“…

Identifying and assessing impacts: Identifying its impacts and assessing their significance is part of an organization’s day-to-day activity, which varies according to its specific circumstances. ?GRI 3 explains step-by step how to identify and assess impacts together with their significance, and the topics and impacts listed in the Sector Standards provide a valuable means of identifying an organization’s impacts.

Determining material topics: ?Once an organization has assessed the significance of its impacts, it needs to decide on which to report. To do this, it needs to prioritize the impacts. Grouping the impacts into topics (such as ‘water and effluents’ or ‘child labor’) facilitates this, as it indicates what topics are most relevant to the organization’s activities - its material topics. GRI 3 also contains a step-by-step explanation of how to organize this grouping. ?To report in accordance with the GRI Standards, an organization needs to document the process by which it determined its material topics, and the disclosures contained in GRI 3 facilitate this. ?Again, the Sector Standards are part of the process of determining material topics. ?An organization should test its selection of material topics against the topics in the applicable Sector Standard.

Reporting disclosures: ?An organization that has determined its material topics needs to gather relevant data to report specific information on each topic. ?The topics in a Sector Standard list specific disclosures from the Topic Standards identified for reporting on the topic by an organization in the sector. ?Where relevant, additional disclosures specific to the sector are included. The disclosures in the Topic Standards specify the information that needs to be collected to report according to the GRI Standards.

Reporting in accordance with the GRI Standards: ?The GRI Standards allow an organization to report information in a way that covers all its most significant impacts on the economy, environment, and people, or to focus only on specific topics, such as climate change or child labor. GRI recommends reporting in accordance with the GRI Standards. ?Under this approach, the organization reports on all its material topics and related impacts and how it manages these topics, thus providing a comprehensive picture of an organization’s most significant impacts on the economy, environment, and people. ?However, if an organization cannot fulfill some of the requirements to report in accordance with the GRI Standards or only wants to report specific information for specific purposes, such as when complying with regulatory requirements; in that case, it can use selected GRI Standards or parts of their content, and report with reference to the GRI Standards.

Navigating a report: ?Reports using the GRI Standards may be published in various formats (e.g., electronic, paper-based) and made accessible across one or more locations (e.g., standalone sustainability report, webpages, annual report). ?Reports must contain a GRI content index which makes reported information traceable and increases the report’s credibility and transparency.”

Section 3 of GRI 1 sets out the nine requirements that must be satisfied by an organization for it to properly claim its sustainability report has been prepared in accordance with the GRI Standards[12]:

• Requirement 1: The organization must apply all the reporting principles specified in section 4 of GRI 1: Accuracy; Balance; Clarity; Comparability; Completeness; Sustainability Context; Timeliness; and Verifiability.
• Requirement 2: The organization must report all disclosures in GRI 2.
• Requirement 3: The organization must determine its material topics and review the GRI Sector Standard(s) that apply to its sector(s) and determine whether each topic in the applicable Sector Standard(s) is a material topic for the organization and list in the GRI content index any topics from the applicable Sector Standard(s) that the organization has determined as not material and explain why they are not material.
• Requirement 4: The organization must refer to GRI 3 to report its process of determining material topics using Disclosure 3-1; report a list of its material topics using Disclosure 3-2; and report how it manages each material topic using Disclosure 3-3.
• Requirement 5: The organization must (a) report disclosures from the GRI Topic Standards for each material topic; and (b) for each material topic covered in the applicable GRI Sector Standard(s), either (i) report the disclosures from the GRI Topic Standards listed for that topic in the Sector Standard(s), or (ii) provide the ‘not applicable’ reason for omission and the required explanation in the GRI content index.
• Requirement 6: If the organization cannot comply with a disclosure or with a requirement in a disclosure for which reasons for omission are permitted, the organization must in the GRI content index: specify the disclosure or the requirement it cannot comply with and provide one of four permitted reasons for omission (i.e., not applicable; legal prohibitions; confidentiality constraints; or information unavailable/incomplete) and the required explanation for that reason.
• Requirement 7: The organization must publish a GRI content index that includes: the title: GRI content index; the statement of use; the title of GRI 1 used; the title(s) of the GRI Sector Standard(s) that apply to the organization’s sector(s); a list of the organization’s material topics; a list of the topics in the applicable GRI Sector Standard(s) determined as not material and an explanation for why they are not material; a list of the reported disclosures, including the disclosure titles; the titles of the GRI Standards and other sources that the reported disclosures come from; when the organization does not report GRI Topic Standard disclosures for a material topic from the applicable GRI Sector Standard(s), a list of the disclosures and the required reason for omission; the GRI Sector Standard reference numbers for the disclosures from the applicable Sector Standard(s); the location where the information reported for each disclosure can be found; any reasons for omission used.? If the organization publishes a standalone sustainability report and the GRI content index is not included in the report itself, it must provide a link or reference to the GRI content index in the report.
• Requirement 8: The organization must include the following statement in its GRI content index: [Name of organization] has reported in accordance with the GRI Standards for the period [reporting period start and end dates].
• Requirement 9: The organization must notify GRI of the use of the GRI Standards and the statement of use by sending an email to [email protected].

Compliance with all the nine requirements above allow an organization to report “in accordance” with the GRI Standards and signals that the organization intends to report information in a way that covers all its most significant impacts on the economy, environment, and people.? While GRI recommends this approach, an organization that cannot fulfill some of the requirements to report in accordance with the GRI Standards or only wants to report information about specific topics for specific purposes, such as when complying with regulatory requirements for reporting on climate change, it can use selected GRI Standards or parts of their content and report “with reference” to the GRI Standards.? The GRI urges organizations that report with reference to the GRI Standards to take steps to eventually transition to reporting in accordance with the GRI Standards.[13]

The reporting principles set forth in Section 4 of GRI 1 are fundamental to achieving high quality sustainability reporting and are required to be applied by any organization seeking to claim that its sustainability report has been prepared in accordance with the GRI Standards.? The reporting principles, which are presented with guidance that includes tests that organizations can reference to gauge compliance with a particular principle, include the following[14]:

“…

Accuracy: The organization shall report information that is correct and sufficiently detailed to allow an assessment of the organization’s impacts.

Balance: The organization shall report information in an unbiased way and provide a fair representation of the organization’s negative and positive impacts.

Clarity: The organization shall present information in a way that is accessible and understandable.

Comparability: The organization shall select, compile, and report information consistently to enable an analysis of changes in the organization’s impacts over time and an analysis of these impacts relative to those of other organizations.

Completeness: The organization shall provide sufficient information to enable an assessment of the organization’s impacts during the reporting period.

Sustainability Context: The organization shall report information about its impacts in the wider context of sustainable development.

Timeliness: The organization shall report information on a regular schedule and make it available in time for information users to make decisions.

Verifiability: The organization shall gather, record, compile, and analyze information in such a way that the information can be examined to establish its quality.”

To learn more, download by book on Sustainability Reporting Frameworks, Standards, Instruments, and Regulations.

Notes

[1] Global Reporting Initiative.

[2] Adapted from a description of the evolution of the Global Reporting Initiative included in K. Mink, The Effects of Organizational Structure on Sustainability Report Compliance (Purdue University College of Technology Masters’ Thesis, 2012), 12-13.

[3] A Practical Guide to Sustainability Reporting Using GRI and SASB Standards (Global Reporting Initiative and Sustainability Accounting Standards Board, 2021), 4.

[4] See GRI - Four-in-five largest global companies report with GRI.

[5] GRI 1: Foundation 2021 (Amsterdam: Stichting Global Reporting Initiative, 2021), 4. ??For information on authoritative intergovernmental instruments relating to responsible business conduct, including those mentioned in the text, see A. Gutterman, Sustainability Initiatives of Governmental or Intergovernmental Bodies (Oakland CA: Sustainable Entrepreneurship Project, 2024).

[6] Carrots & Sticks: Beyond Disclosure in ESG and Sustainability Policy (Annual Report September 2023).? The results were based on an analysis of over 2,463 policies from 132 countries, 76 international and regional organizations, in 38 languages, from 1897 into 2023.? Using the protocol employed in the report to map the GRI Standards into ESG classification themes, the next four most referenced GRI Standards all fell within the “S” theme: GRI 412: Human Rights Assessment; GRI 404: Training and Education; GRI 402: Labor/Management Relations; and GRI 405: Diversity and Equal Opportunities.? Id. at 41 (Table 6) and 43.? Not surprisingly, there are noticeable variations in references across the top seven targeted business sectors: finance and insurance; management of companies; manufacturing; mining, quarrying and oil and gas extraction; professional, scientific, and technical services; public administration; and transportation and warehousing.? Id. at 45.

[7] A Short Introduction to the GRI Standards (Amsterdam: Global Reporting Initiative).

[8] GRI 1: Foundation 2021 (Amsterdam: Stichting Global Reporting Initiative, 2021), 5.?

[9] A Short Introduction to the GRI Standards (Amsterdam: Global Reporting Initiative), 2-3.

[10] Id. at 3 (also explaining the structure of each Sector Standard as follows: “Each Sector Standard consists of an initial section that gives an overview of the sector’s characteristics, including the activities and business relationships that can underpin its impacts. The main section of the Standard then lists the likely material topics for the sector. Topic by topic, the most significant impacts associated with the sector are described in this section. Each topic description points to the relevant disclosures in the Topic Standards for the organization to report. A Sector Standard may also list additional disclosures that are not in a Topic Standard, for example, where the disclosures from the Topic Standard do not provide sufficient information about the organization’s impacts concerning the topic.”)

[11] Id. at 5-6.

[12] GRI 1: Foundation 2021 (Amsterdam: Stichting Global Reporting Initiative, 2021), 11-17.

[13] Id. at 18.? To report “with reference” to the GRI Standards an organization must publish a GRI content index, provide a statement of use, notify GRI, apply the reporting principles specified in Section 4 of GRI 1 to ensure high quality reporting, and explains how it manages its impacts for the topics it reports on using Disclosure 3-3 in GRI 3.

[14] Id. at 20-24.