New Metrics
GRI Responds to "Enforce or Explain"

GRI has now formally responded to the Enforce or Explain campaign we (the Center for Sustainable Organizations) launched last month in which we suggested that it either enforce the ‘sustainability context’ principle in its Guidelines, or explain why it doesn’t. Motivated, in part, by GRI’s own Report or Explain Campaign, in which GRI exhorts businesses around the world to issue sustainability reports or explain why they don’t, our campaign was aimed at GRI itself.

The first thing I'd like to say about the response GRI provided (September 21, 2011) is Thank You! There are many demands on GRI’s time and attention, I’m sure, and to receive the kind of response we did was very gratifying. While we may still not agree on all points, the fact that we are talking about this issue is a good thing. What I’d like to do now is offer some specific reactions to what GRI had to say.

Just to remind everyone, sustainability context, as GRI points out, is critically important to non-financial measurement and reporting. When measuring water use, for example, it is not enough to simply report the volume of water consumed this year versus last. Rather, as GRI puts it (Technical Protocol, p. 6), organizational performance should be reported...

...in relation to information about economic, environmental, and social conditions in relevant locations, e.g., discussing water consumption in relation to available supply in a particular location[.]

That said, such context is almost universally missing from contemporary GRI reports. This is a serious problem, since it is literally the case that sustainability measurement and reporting cannot be done without including the kind of context GRI’s Guidelines call for.

Nevertheless, GRI fails to enforce its requirement in three ways: 1) by not providing sufficient guidance for how to comply with it, 2) by enforcing an evaluative system that routinely hands out superior ratings to reports that are completely context-free, and (3) by excluding context itself in its own reports, thereby setting the wrong example.

Below are some specific statements made by GRI in its response to our campaign, followed by some further reactions of our own:

GRI believes that sustainability context is vital in all reporting.

On this point we certainly agree. But why, then, does GRI fail to enforce the inclusion of context in the ways we have described? Why does it not at least provide sufficient guidance, that is, for how to include context in reporting? Reports without context are not sustainability reports at all, and yet GRI allows the situation to persist.

Perhaps the most astonishing aspect of GRI’s response to our plea, therefore, is its failure to acknowledge the problem. If there can be no sustainability measurement and reporting without including the kind of context GRI’s own Guidelines call for, why continue to tolerate its absence? To do so makes a mockery of reporting, and of sustainability management itself.

Since GRI provides the Guidelines for organizations to follow, it should not judge the quality of resulting reports. The purpose of the GRI Guidelines is to ensure transparency...

If GRI should not judge the quality of reports, then why did it develop and actively promulgate (to this day) a rating system that does exactly that – a system it uses in service offerings of its own (see below)? Specifically, GRI’s Application Level rating system exists for no other reason than to "motivate reporters to enhance the quality of their reporting over time" (GRI). In other words, the various Application Levels defined by GRI are, in fact, levels of quality in reporting. Why else express them in terms of A, B and C, or A+, B+ and C+?

Indeed, GRI is already very much in the business of reviewing the quality of reporting, and that’s a good thing not a bad one. Not to be confused with vouching for accuracy, determining whether or not a report has been prepared in accordance with a set of guidelines commits no violations of independence or impartiality we can think of, and merely helps to ensure the completeness and usefulness of a report. If all reports should include context, then let’s have them be rated accordingly – a report either has it or it doesn’t. And if it doesn’t, it should never receive an A+ rating, or even a passing grade for that matter!

GRI also offers a service by which it applies the Application Level rating system itself in a service known as an Application Level Check. The purpose of that service, among others, is to help “indicate the extent to which the Guidelines have been applied” (GRI) – which is, frankly, no different than what we’re calling for. Still, neither the Application Level rating system nor the Application Level Check focus on the issue of whether or not sustainability context has been properly included in a report, despite the fact that sustainability reporting, per se, cannot be done without it and GRI requires it.

This is a grave omission. Who cares how many disclosures a report contains (a key measure in the Application Level system) if none of the metrics involved are context-based and thereby fail to express sustainability performance at all? As GRI clearly states, one of the main purposes of the Application Level Check is to examine the “completeness, correctness and usability” of a report. That’s fine, but without context a report fails on all three fronts – like Income Statements that exclude costs.

As for transparency being a core “purpose of the GRI Guidelines,” there can only be transparency in sustainability reporting when the metrics involved are context-based. Short of that, opacity reigns. But GRI, of course, knows this and has been advocating for the inclusion of context in sustainability reports for years, even as it has failed to enforce it.

The discordance here might be excusable if it were not so consequential. After all, how can we expect to achieve sustainability in the conduct of human affairs when the tools we use to measure and report organizational performance are so deeply flawed? Indeed we can’t. To remain credible, then, GRI must do the intellectually honest thing and enforce context now!

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