Five reasons every organization should embrace GRI Standards
Five reasons every organization should embrace GRI Standards
Recently, the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) announced a partnership to better demonstrate how companies can use the two standards together. This new collaboration responds to demand for more clarity in the sustainability reporting sector that includes multiple standards.
There is some understandable confusion regarding which reporting standard to use to attract investors and customers. But it’s generally agreed that completing both a GRI and SASB report will tremendously improve your company’s ESG performance. Each of the standards offers unique opportunities to create value for your company.
In this post, we’ve focused on GRI, which takes a deep dive into a corporation’s economic, environmental, and social practices and measures the corporation’s sustainability contributions, whether positive or negative. To increase ESG value, your company should use GRI Standards for the following reasons:
Globally used & trusted
Chances are you’ve bought a product or service from a company that utilized GRI for sustainability disclosure. 190 of the 250 largest corporations use GRI Standards to report their sustainability performance. The GRI Standard achieved this extensive influence by creating the first set of sustainability reporting standards in the world and forming strategic partnerships with international organizations such as the OECD, the UN Global Compact, UNEP, and ISO.
One GRI strategic partnership involved the Principles for Responsible Investment (PRI) and the UN Global Compact (UNGC) in the development of the 2017 Stockholm Declaration. The Stockholm Declaration states that the private sector can achieve a sustainable future by 2030 if it annually invests $5-7 trillion in the 17 UNGC Sustainable Development Goals (SDGs). The declaration currently has 29 signatories representing more than $1 trillion in AUM. The GRI’s involvement in these international and national commitments progressively builds trust and recognition with governmental entities, companies, investors, and the public.
Materiality & investor alignment
Investors tend to focus on specific ESG actions and practices that create value. GRI’s Materiality Principle provides a framework for identifying the key environmental, social, and economic impacts your organization has based on the nature of your business. It also takes into consideration the impact organizational activities and decisions have on key stakeholders.
The Materiality Principle helps companies select relevant, impactful “material topics” to report. Often, GRI Aspects chosen by companies align with the interests of investors. GRI and RobecoSAM, for example, conducted a study of ESG issues prioritized by both companies and investors in the mining, metals, and electric utilities sectors. The companies tracked in each of the three sectors disclosed on four issues of climate, environment, occupational health and safety, and communities. Meanwhile, all investors in the study prioritized the same four issues in their material assessments.
The newest GRI Standards consist of two overarching categories: universal standards and topic-specific standards. Each standard is broken down further into specific disclosures. The universal standards (101, 102, 103) and their associated disclosures are applicable to every organization adhering to the GRI framework. Topic-specific standards are split into Economic (200), Environmental (300) and Social (400) categories. An organization’s material topics will determine which topic-specific standards and associated disclosures are reported on.
For example, companies in the mining, metals, and electric utility sectors will likely best engage and meet the interests of investors by choosing the GRI topic-specific standards of “GRI 305: Emissions”, “GRI 307: Environmental Compliance”, “GRI 403: Occupational Health and Safety”, and “GRI 413: Local Communities”.
High quality data
Investors with portfolio management strategies guided by their own material assessments and values typically seek clear and reliable ESG data from individual companies. Compiling this ESG data in the present day is a challenge. Companies use different reporting standards. They pick and choose the information and metrics they wish to share in reports. Also, the metrics they use in reports may change from year to year.
Research shows the GRI can help your company avoid these pitfalls and share the most relevant ESG data with investors. One GRI study in partnership with Baruch College/CUNY scored 572 companies based on the information quality and degree of verification of their ESG disclosure. The 481 companies that used the GRI framework to disclose on 11 contextual ESG elements scored higher on average for each element compared to the 91 companies that didn’t use the GRI Standards. Most notably, GRI reporters scored an average of 45 out of 100 for Human Rights disclosure data compared to an average of 15 for non-GRI reporters.
Each year we learn more about which ESG metrics create the most long-term value and how they do it. GRI developed the 34 topic-specific standards so it can update individual standards as opposed to the entire reporting system. This structure allows GRI to incorporate emerging ESG topics and metrics, such as tax transparency or the circular economy, without a complete reconfiguration.
The Global Sustainability Standards Board (GSSB), consisting of 15 experts from different sectors of the global economy, oversees and reviews all new standards or updates to GRI. This board develops consensus for additions or updates to GRI to ensure any organization can use the standards. The GSSB’s diversity and GRI’s strong relationships with economic thought-leaders ensure any updates meet the priorities of your investors and other stakeholders.
Every GRI report revolves around the stakeholder inclusiveness principle that states reporting organizations need to identify their stakeholders and discuss the actions they executed to address the stakeholder expectations and interests. ESG materiality assessments can adequately meet the interests of your stakeholders, but only if those assessments involve all your stakeholders of investors, vendors, employees, customers, and the communities interacting with your supply chain. GRI outlines five steps for comprehensive stakeholder inclusiveness and engagement:
1. Benchmarking & gap analysis
From the start, your company should monitor the stakeholder engagement practices of your peers and identify the practices that work best. Your company should determine whether your stakeholder engagement utilizes these best practices. If not, close gaps by developing strategies or policies that implement these best practices.
2. Identification & prioritization of various stakeholders
To adhere to the inclusiveness principle, your GRI report should list all internal and external stakeholders. You can prioritize these stakeholders by creating evidence-based criteria that adequately measure the influence each stakeholder group holds in your business.
3. Design a stakeholder engagement plan
Stakeholder engagement plans should clearly detail what information you want to learn from your stakeholders and the methods or communication channels you will use to get that information.
4. Engage your stakeholders
Implementation of GRI stakeholder engagement can build from existing engagement frameworks used by your company or new engagement activities specific to completing the report. GRI advises documenting the stakeholder engagement processes you choose to implement in the report.
5. Collect & analyze information
Spending sufficient time documenting your stakeholder engagement will significantly facilitate the collection and identification of key topics and concerns raised by your stakeholders. GRI’s structure helps prioritize the results you should share with leadership, the public, and all the groups involved in the stakeholder engagement process.
Use the GRI Standards as a stepping-stone for other reporting standards
The GRI Standards may seem complicated due to their thoroughness and wide range of topic-specific standards. But we recommend that you don’t let this perceived complexity discourage your company from completing a GRI report.
We’ve found that completing GRI reports assists with submissions to GRESB, SASB, and other ESG reporting standards, because GRI Standards paved the way for ESG reporting as the first corporate sustainability reporting standard in the world. Other ESG reporting standards follow similar methodologies to GRI in areas like stakeholder engagement, materiality assessments, data collection, and more.
GRI also provides a way to benchmark your company’s ESG performance against industry peers. There is a high likelihood that companies in the same industry will prioritize the same material topics, and this benchmarking will provide you with insights into the competitive landscape.
If you feel overwhelmed by GRI, Goby’s team of ESG experts can help you navigate the reporting framework and identify GRI topic-specific standards to prioritize that will improve your ESG performance and eligibility for other certifications. Feel free to reach out today!