The Global Reporting Initiative updated its
Standards in 2021 by integrating the UN Guiding Principles on Business and
Human
Rights.
This revision to its 2016 Standards was made with a clear goal to push
businesses for more transparent
reporting
on their social impact and human rights-related issues. GRI's primary motivation
in creating this revision was to make companies respond to global regulatory
developments in human rights, due diligence and responsible business conduct.
The revision
The revision came at an unprecedented time. The COVID-19 pandemic highlighted
many gaps in understanding the impact of our supply chains on social
structures and communities; revealing deep inequities in capacity and access to
health worldwide in both developed and developing economies. It also shed light
on how marginalized communities face injustices during crises.
The pandemic made it clear that all of these human rights issues add more risks
to the reputation and viability of businesses. Addressing human rights issues
helps reduce global threats; and businesses and communities alike thrive in
environments where human and civil rights are respected. Stakeholders,
especially investors, recognize that promoting workers’ rights and respecting
fundamental human
rights
increases productivity and profitability while improving relations with local
communities and civil society. Hence, in November 2022, the European
Parliament adopted new reporting rules for multinationals and other businesses
— including the Corporate Sustainability Reporting
Directive
— to make transparency on environmental, social and governance matters the norm
among large businesses. This law has been in the making since the pandemic,
pushing GRI to update itself due to growing regulatory pressure.
The GRI aims to eliminate this gap with its updated version, which went into
effect January 1, 2023. The organization has made it clear that instead of
businesses focusing on how the economy, environment and people affect their
organizations, GRI-compliant reports will need to show how each company impacts
those key stakeholders this year and beyond.
Will GRI’s latest revision make greater transparency on social and human rights
issues necessary? KPMG’s latest Survey of Sustainability Reporting
shows that 78 percent of the biggest 250 companies by revenue (G250) adopted the
GRI Standards for their sustainability reporting in 2022 and that 78 percent of
the G250 will do additional reporting on their actual and potential social
impacts.
Understanding the new Standards
The changes to the Standards include key revisions to GRI 1: Foundation,
GRI 2: General Disclosures and GRI 3: Material Topics.
GRI 1 focuses on impact, material topics, due
diligence
and stakeholder engagement — all concepts that have been expanded to include the
outward materiality of a company’s impact on the economy, environment and
people; with reporting principles focusing on quality and presentation of
information. Another critical revision is removing companies' options to report
using GRI; the new version ensures that there is only one way to report in
accordance with the GRI Standards.
Revisions to GRI 2 include the requirement of more in-depth information on
reporting practices, activities and workers, governance, strategy, policies and
practices, and stakeholder engagement; while new disclosures include reporting
on policy commitments for responsible business conduct — including respect for
human rights and due diligence — and how these commitments are embedded in the
organization. Another key addition is reporting on compliance with laws and
regulations.
Lastly, the revised GRI 3 includes a broader approach to materiality that
incorporates the concept of due diligence. In the 2021 version, GRI even shifted
the focus of materiality and now defines material topics as those that
“represent the organization’s most significant impacts on the economy,
environment and people, including impacts on their human
rights.”
In addition, the new version also offers guidance on determining materiality.
While the revised definition of “material topics” may seem simpler, the actual
value of the report will come in explaining the process used to determine these
topics. Hence, GRI requires businesses to share the method used to determine and
manage each material topic.
Impact on businesses
The latest revision will significantly challenge businesses to measure and
report on social impact and human rights-related issues beyond their boundaries.
However, due to substantial stakeholder awareness, companies are shifting their
perspective on human rights and measuring its impact. They also recognize this
opportunity to be transparent about their impacts to improve their brand image
and remove hurdles and disconnects within their global supply chain structures.
Since the update went into effect in January, several businesses of varying
sectors have released their report in accordance with the latest GRI version and
are adhering to the new requirements.
For example, Philips released its Annual Report of 2022
focusing on “creating value with sustainable impact.” The company complied with
the requirements of the latest edition by including a thorough explanation of
its materiality analysis and relevant changes to its materiality and more data
on its social impact than the previous reporting
year.
In addition, Philips appears to recognize the value of transparency in its
historical reporting: It has included data on social impact beyond reporting
requirements, as expected from a company with operations in more than 100
countries with several thousand employees.
Other examples include ERM — a global EHS and risk
consulting services company — which has also included a greater focus on
materiality, with a renewed focus on environmental and social impact, in its
latest Sustainability
Report. Additionally, Finnish multinational IT company
Tietoevry’s recent report adheres to the revised
GRI Standards. Recognized by
CDP three years in a row for its exceptional sustainability record and active
support of a clean-energy future, Tietoevry’s reports — even from previous years
— go beyond reporting requirements; but in its latest report, the company shared
its significant progress in human rights (specific to gender balance) and
ambitions for its environmental stewardship. The report meets all of GRI’s
revised requirements, details on its materiality process, and impact analysis.
The way forward
The companies mentioned above are just the first movers and leaders within their
relevant industries when implementing the newer regulatory requirements and
complying with GRI’s revisions. Within the year, we can expect several
businesses to follow suit. First, however, it is essential to recognize and
reaffirm GRI’s reasoning behind the revision.
Simply issuing sustainability reports and engaging in standard ESG practices
will not help companies win over their stakeholders — especially not the
present-day investor. Instead, businesses must integrate their ESG efforts
within their strategy and operations using a trickle-down effect starting from
their executive
leadership.
They need to establish the new norm — that ESG, including social impact, must be
prioritized as a key business issue and not just a requirement for a checklist.
With this, businesses must strike a precise balance between shareholder value
creation and ESG. GRI has aimed to strike that balance with its latest revision.
When used appropriately, the renewed requirements on materiality and impact
analysis help businesses realign their priorities to address both shareholder
value creation and ESG. Most of these issues are interlinked; and without
assessing risks and impact on both ends, businesses have and will continue to
fail.
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Corporate Sustainability Specialist & Consultant
As a corporate sustainability professional, Fatima Fasih is optimistic about a future where businesses are transparent about their impact and motivated to do more good for profit, people and our planet. A graduate of the esteemed MSs Sustainability Management program of the University of Toronto and a GRI-certified professional, Fatima has experience working with several businesses worldwide and guiding them on their sustainability journey. She started her sustainability career working in off-grid Pakistan and assessing the impact of solar technology on rural communities; recently, she founded her own sustainability consulting business, Enviro6. When she's not working, Fatima enjoys painting, traveling, and exploring the Philippines with her husband and 3-year-old.
Published Mar 30, 2023 2pm EDT / 11am PDT / 7pm BST / 8pm CEST