Are GRI's next-gen guidelines too complex?

Are GRI's next-gen guidelines too complex?

Framework LLC has worked hand-in-hand with the Global Reporting Initiative (GRI) to foster and promote the GRI Sustainability Reporting Guidelines as a GRI organizational stakeholder since 2005 and as provider of reporting and advisory services to our clients for nearly a decade. We are staunch supporters of the principles of materiality, comparability, context, and completeness in public disclosure of environmental, social, and governance information. We have thus viewed the strict application of the GRI guidelines as a replicable pathway for all companies, large and small, to be accountable and transparent in their public communication of sustainability performance.

After working with the GRI G3 for many years—and interpreting these guidelines for our clients equally in their nuance as well as in their limitations—we were keenly interested in reviewing the proposed G4 guidelines (our full comments on the exposure draft can be found here). Would an increased focus on materiality lead to greater issue selectivity, focus, relevance, and depth? Would the guidelines point the way towards true integration with financial reporting? Or would complexity overwhelm the best intentions of the organization and create daunting new challenges for reporters, as some early signs had suggested?

Unfortunately, in our estimation, if the G4 Guidelines were implemented as currently drafted, undue complexity and reporting burden would be the order of the day. As consultants, our role is not only to serve as advocates for strategic, transparent, and meaningful disclosure linked to financial performance and sustainability context, and responsive to stakeholder concerns; but also to do so in a manner inclusive and embracing of all companies, large and small, wherever they may be on their sustainability journey. We do not see the G4 Guidelines in their present state as advancing these objectives in a practicable manner. Instead, the focus is on voluminous disclosure (especially with regard to governance and supply chain), with narrowly defined “in accordance” requirements, and a tremendous added—yet fuzzily conscribed—“value chain” reporting burden.

To be sure, there are real strides to be found in the 300+ pages of the disclosure draft. Materiality receives greater emphasis, the misleading “graded” Application Levels have been put aside, and there is a more holistic view of company performance taken than ever before. Much thought has gone into the new structure, and there is an admirable effort at work to challenge reporters to rise to new levels of thoroughness and adherence. The problem is that much of this new structure, imposed as additional rather than substitute requirements, becomes so onerous as to face potential collapse under its own weight. Specifically, we are more than concerned at the possibility that many companies may simply choose not to navigate the G4 at all rather than dive into its considerably increased data demands.

As dominant and valuable a framework as the GRI provides, times have changed substantially since the millennial years when it came to prominence. In a world in which the bottom line faces constant pressures and disclosure requests come fast and furious, companies must now choose to whom and how deeply to respond—while allocating resources accordingly. Although we believe a majority of companies would continue to rely on a GRI-based approach regardless of the final shape of the G4, many might simply not be able to justify to senior management the increased costs (and, potentially, added liability) of strict adherence to this voluntary standard.

There are four areas of the current draft in particular that we strongly recommend be reconsidered or refined:

  • Value chain assessment: while helpful as a preparatory exercise in advance of the reporting process, its practical application is unclear when responding to specific indicators
  • Greater emphasis on materiality: a laudable strategy that needs to be carried through the instructions so that it allows reporters to narrow their focus to a manageable set of issues and frees them from the compulsion to stick with a “checkbox” approach
  • The replacement of application levels with a binary “in accordance” or “not in accordance” standard: the right idea, but a more graduated scale of adherence would be less discouraging to both smaller companies and those companies that do not aspire to the highest levels of reporting—yet still want to publicly declare their adherence to GRI principles and protocols
  • Additional supply chain indicators: A step in the right direction, but excessively detailed and burdensome—especially for companies that would find themselves needing to both collect this data from suppliers as well as provide it to their own customers
  • Increased governance disclosure requirements: more onerous than necessary in being split out into dozens of indicators; also politically unfeasible for some organizations

Our impression from the conversations we’ve had to date with clients, peers, and other corporate reporters is that we are far from alone in the above concerns. Fortunately, in the coming months, the GRI still has time in which to refine its course as it sifts through the commentary provided by its stakeholders. We sincerely hope that, should the response from stakeholders warrant it, the GRI will delay the final release of the Guidelines until the standard has been sufficiently reworked to ensure its continued practicable applicability and global adoption.