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GRI’s G4 Exposure Draft Undermines Sustainable Global Economy

We’re scratching our heads over the Global Reporting Initiative’s recent release of the Exposure Draft of its fourth generation of Sustainability Reporting Guidelines (dubbed “G4”).

With the G4 Development Process entering the Second Public Comment Period, we are deeply concerned with the integrity of the process, and even more distressed that its current trajectory undermines GRI’s ability to achieve its goal of a “sustainable global economy.” To understand these concerns, we first need to lay out the objective facts.

The Problem: Contradictions Galore!

We see two glaring inconsistencies in the G4 Exposure Draft:

First, GRI explicitly stated in the February 21 Organizational Stakeholder Webinar, which presented the results of the First Public Comment Period, that the “GRI Principles are not under revision” (see Figure 1).

From G3.1 to G4: GRI Organizational Stakeholder Webinar
  • GRI Principles are not under revision.
  • General technical improvements (language, separating standard from guidance in the texts, etc.)
  • Sections under revision: DMAs, Boundary definitions, Application levels, Governance.
  • New Content: Reporting on the supply chain impacts (other topics to be defined).
  • General lay-out and web based version (linked to XBRL taxonomy).

Yet the G4 Exposure Draft makes significant changes to the Completeness Principle in the Reporting Guidelines section, and to the Materiality and Completeness Principles in the Technical Protocol, while leaving the Sustainability Context and Stakeholder Inclusiveness Principles essentially untouched (see Figures 2 and 3).


Figure 2: G4 Exposure Draft: Completeness Principle

Sustainability Context

Figure 3: G4 Exposure Draft: Sustainability Context Principle

GRI’s Full Survey Report from the First G4 Public Comment Period asked stakeholders (in Question 26) which “standard disclosures you think could be improved,” resulting in highest priority given to Materiality (33%) followed closely by Sustainability Context (32%), with Completeness garnering the least support (24%) of the first-order Content Principles (see Figure 4).

Question 26

Figure 4: GRI G4 1st Public Comment Period – Full Report: Question 26

The above facts clearly show that the G4 Exposure Draft contravenes both GRI policy (by significantly revising some of the Principles) and stakeholder sentiment (by revising Completeness, the Content Principle stakeholders feel is least in need of improvement), while not revising Sustainability Context (the Content Principle stakeholders feel is most in need of improvement, alongside Materiality.)

Unfortunately, we believe these contradictions carry dire implications. GRI’s goal is to work towards “a sustainable global economy by providing organizational reporting guidance.” We commend GRI for establishing one of the best definitions of how organizations can measure their contribution to “a sustainable global economy” — namely, by adhering to the Principle of Sustainability Context.

However, GRI falls short of “providing organizational reporting guidance” on how to implement Sustainability Context. In other words, GRI has at its disposal the very tools needed to create a sustainable global economy, but confoundingly, it staunchly refuses to provide sufficient procedures for how to use its most powerful tool! So if the existing Exposure Draft were to go forward as is, it would effectively condemn the corporate sustainability world to another 7 years of context-free measurement and reporting, as the standard will likely not come back up for revision until around 2020. Far from moving us toward a sustainable global economy, then, G4 would erect roadblocks, slowing progress precisely when we need express-lane speed.

To draw an analogy, imagine what would happen if we were in the early stages of the development of financial reporting standards, and someone said: “You know, I really think we should include expenses in our profit and loss statements, because that’s the only way to know if we’ve made a profit or not.” And in response, the leading promulgator of financial reporting standards says: “That’s not a priority for us right now.” Or worse yet, they agree to call for the inclusion of expenses, fail to provide guidance for how, and then knowingly tolerate the distortional reporting that follows for at least twenty years!

The Solution: 4 Steps to Sustainability Context

To correct this course, we offer a sample of what high-level guidance on enacting Sustainability Context might look like — a four-step procedure that has emerged from our own work and writings:

  1. Identify Stakeholders: Start by identifying an organization’s relevant stakeholders (by group), with whom to engage for input in steps 2 through 4 below;
  2. Identify Actual and Normative Impacts on Vital Capital Resources: Identify impacts an organization is either already having and/or managing on vital capital resources of importance to stakeholder well-being, or ones that it should be having and/or managing given the relationships involved;
  3. Determine Proportionate Allocations: Determine what the organization’s proportionate allocation should be for either using natural capital, or producing and/or maintaining the supply of what we call “anthro” (for anthropogenic) capitals: human, social, and/or constructed capitals;
  4. Implement Sustainability Context: Based on steps 1 through 3 above, define context-based norms, standards or thresholds for what an organization’s own proportionate impacts on vital capital resources must be in order to be sustainable (i.e., to help ensure stakeholder well-being by not putting vital resources at risk or failing to maintain them), and then measure, manage, and report sustainability performance accordingly.

In about a hundred and fifty words, the procedure above offers more guidance for how to implement Sustainability Context than we’ve seen from GRI in three generations of its standard over a period of fifteen years. While certainly not foolproof, our formula provides at least a starting point for how to operationalize context-based sustainability. Without such guidance, there can be no real or meaningful measurement, management and reporting of sustainability performance, because performance of that kind fundamentally involves an understanding of impacts relative to contextually relevant circumstances, such as ecological limits, social needs, etc.

The good news is that the G4 Exposure Draft has opened the door to revising the GRI Principles once again – including Sustainability Context – in the Second Public Comment Period now underway (ending September 25). Not surprisingly, we want to urge all of you who care about sustainability and who understand the importance of having authentic measurement and reporting in business to chime in and implore GRI to wake up and give Sustainability Context the attention it deserves.


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