Over the last few decades, sustainability reporting has evolved from a voluntary exercise carried out by a handful of companies, to being a fundamental mechanism for companies to demonstrate transparency and accountability to stakeholders. Established in 1997, the Global Reporting Initiative (GRI) has pioneered for better sustainability reporting through its guidance and standards, having developed the first corporate sustainability reporting framework. Since then, a number of other standards have emerged, including the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Framework ( Framework), and the Task Force on Climate-related Financial Disclosures (TCFD), each with a slightly different purpose and approach. Today, GRI’s standards are used by the majority of companies reporting on sustainability to stakeholders ranging from civil societies and investors to the general public.

Having evolved through several iterations, the latest planned review is happening now. The Global
Sustainability Standards Board (GSSB), the independent standard-setting body of GRI, has published the
exposure draft of GRI’s Universal Standards – GRI 101; GRI 102; and GRI 103. The revised Universal Standards seek to improve the quality and consistency of reporting by providing greater clarity on some of GRI’s key concepts and improving the usability of GRI’s standards. They have been restructured into:

1. GRI 101: Using the GRI Standards;
2. GRI 102: About the Organisation; and
3. GRI 103: Material Topics. The Topic Standards are now also grouped together under one series instead of the separate economic (GRI 200), environmental (GRI 300), and social (GRI 400) series.

Aside from structural changes, fundamental revisions have also been made, which will have implications on:

1. how companies will use and apply the new standards;
2. what to disclose; and
3. how this is determined using the principle of materiality.

Having reviewed and considered all the proposed changes, we have summarised the most important updates and provided some insight into what the implications of GRI’s revised Universal Standards might be for businesses.

What are the most important changes to GRI’s proposed revisions to its Universal Standards?

1. The “core” and “comprehensive” options of using GRI are no longer used.

GRI has removed the in accordance to either “core” or “comprehensive” approach, which now simplifies the application of Standards for companies. In the new exposure draft, there are just two ways to using the GRI Standards for sustainability reporting:

1. In accordance with the GRI Standards – Where companies use the set of GRI Standards
2. With reference to the GRI Standards – Where companies use selected GRI Standards, or part of their content

The changes mean that companies either meet or do not meet the standards. Having these two distinctive options for applying the standards eliminates a level of complexity that does not necessarily:

1. Lead to better reporting: A company producing a report in accordance with the comprehensive option is required to meet all the disclosure listed for each of the company’s material topics. This in turn, may actually lead companies to report information that is not relevant to their business.
2. Distinguish the more enhanced reports: On the other hand, many companies that publish a report in accordance with the core option, actually go beyond the core requirements, without being able to claim this.

The other proposed change is that the statement of use must be signed off by the “highest governance body or most senior executive of the organisation”.

What would companies that want to be in accordance with the new standards need to do? - Get sign-off by the Board or CEO on how it has used the GRI Standard. At the moment, the exposure drafts suggest that the statement of use must be signed off by the “highest governance body or most senior executive of the organisation”. There is also a possibility of extending the statement to include the quality and accuracy of the reported information. While this may add another level of complexity to the reporting process for companies, having this level of sign off gives extra weight and credibility to claims made about GRI application.

2. All disclosures in GRI 102, including those related to governance, are mandatory and omission statements are not an option.

Companies wishing to remain “in accordance with the GRI Standards” must report on all of the disclosures within the GRI 102 standard. Although the GRI 102 standard has been streamlined with some disclosures revised, combined, relocated or removed, some have several components and require an elaborate explanation. Furthermore, omissions of any disclosure within GRI 102 are not permitted. Instead, if a company does not have in place one of the requirements stipulated by the disclosure, they must simply state so in order to meet the standard. The good news, at least for publicly listed companies, is that some of these disclosures will be met in the annual report, which can be referenced in the GRI Content Index.

What would companies that want to be in accordance with the new standards need to do? - Report on more disclosures than they may be used to under “core”. For example, all the GRI 102 disclosures are now required, including all 15 that relate to Governance. In addition, all appropriate disclosures from the GRI Topic Specific Standards for each material topic will need to be included. There is still some level of discretion in determining if a disclosure is relevant, but this means that if several disclosures are relevant for a particular material topic, companies must report on all of them and cannot select just one, as is currently the case with the “in accordance with core option”.

3. The definition of ‘materiality’ has been revised to re-emphasise the focus on an organisation’s most significant impact outward (on the economy, environment and people).

The first change is that the principle of Materiality, along with the principle of Stakeholder Inclusiveness, are no longer presented as standalone principles. Instead, they are now covered within GRI 103, along with the Management Approach Disclosures, which contains guidance for identifying and disclosing material topics.

Secondly, material topics are now defined as follows: “Topics that reflect the organisation’s most significant impacts on the economy, environment, and people, including impacts on human rights”. The first thing to note is that while other standards, such as SASB[1] and the Framework [2], have focused their definition of materiality on the financial implications to the business, GRI focuses entirely on an organisation’s outward impacts, which has always been its emphasis.

There is no one best way, but merit in both approaches. Companies should understand their impact on the economy, environment and people. Furthermore, companies should also understand how sustainability topics are impacting their bottom line and their ability to create value for stakeholders. Both aspects are important to develop and deliver a sustainable business strategy. How topics are prioritised for the purpose of reporting will depend on the audience(s) of the report and their interests.

What would companies that want to be in accordance with the new standards need to do? - Ensure that when conducting an assessment of material sustainability topics, at least one of the aspects they look at should be the company’s impact on the economy, environment and people, including human rights. We would also recommend that companies also go beyond this and also consider the impacts on the business, its resilience and its long-term performance.

4. Human Rights feature more prominently throughout the standards and is now part of the definition of materiality.

GRI has made human rights much more explicit throughout the standards as a way to drive greater awareness, action and disclosure in this area. This is following the recommendations from GRI’s Technical Committee on Human Rights Disclosure. As it stands, the exposure draft aims to better align the standards with the UN Guiding Principles for Business and Human Rights (UNGPs) and review the range of human rights topics and disclosures covered in the Topic Standards to ensure it reflects best practice.

Please note that GRI will now define stakeholders as “individuals or groups that have interests that are, or could be, affected by an organization’s activities and decisions”. This differs from the previous definition whereby stakeholders could both, affect and be affected by the organisation. This is in line with the fact that Human Rights is about impact on the people, not on the business.

What would companies that want to be in accordance with the new standards need to do? - Be ready to increase transparency on the topic of human rights. Many companies are already assessing and reporting on some aspects of human rights – labour practices for example – although not necessarily framed as human rights. Aside from GRI’s changes, there is also increasing legislation around the world driving business action on human rights – The UK Modern Slavery Act, The Australia Modern Slavery Act, The California Transparency in Supply Chain Act, the Child Labour Due Diligence Law – to name a few. So, it is important that businesses get to grips with what this topic means for them.

SASB defines materiality as “the issues that are reasonably likely to impact the financial condition or operating performance of a company and therefore are most important to investors”.

The Framework defines materiality as “a matter is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organization’s ability to create value over the short, medium and long term”.

5. GRI will be developing Sector Standards to better set the sustainability context and material topics for a sector

GRI’s Sector Standards are being reintroduced and will be mandatory for companies include in their GRI content Index to be “in accordance with the GRI Standards”. Previously, the GRI G4 Guidelines – the predecessor of the GRI Standards – were accompanied by 10 sector supplements. Currently, three Sector Standards are being piloted – Oil and Gas, Coal, and Agriculture and Fishing.

While the Sector Standards should be used to help businesses identify what is likely material for each sector, it should not replace a robust materiality assessment.

What would companies that want to be in accordance with the new standards need to do? - Follow the guidance and requirements set out by the upcoming Sector Standards, if available for their industry sector. Beyond the initial sectors – Oil and Gas, Coal, and Agriculture and Fishing – GRI has said that it will be developing Sector Standards according to the significance of impacts for each sector – the higher the impact a sector has on sustainable development, the higher its priority. Ultimately, the aim is for the GRI Sector Program to cover all sectors that it considers to be “high-impact”.

How final is the exposure draft?

The exposure draft of GRI’s Universal Standards – GRI 101; GRI 102; and GRI 103 are subject to final revision following the recently concluded public consultation. Once the updated versions are released early 2021, companies will have a few years to adjust before they come into force. Based on previous transition periods, this may be around 2 years.