How to Strengthen ESG Reporting with the Updated GRI Standards

Key take-aways from the GRI Standards 2021 update
How to Strengthen ESG Reporting with the Updated GRI Standards
Publ. date 6 Oct 2021
In the corporate world, sustainability reporting requirements are continuously increasing through national and international directives. In the EU, the upcoming Corporate Sustainability Reporting Directive (CSRD) will impact the reporting guidelines of a large number of European companies. Beyond legal requirements, the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) have been identified as the most comprehensive and internationally recognized sustainability standards setters for corporate reporting. At the end of 2020, GRI counted more than 38,000 GRI reports from organizations, including 73% of the world's 250 largest companies.

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On October 5th, GRI announced the biggest update of its standards since 2016. For companies which have selected the GRI Standards as their framework, understanding these changes is key to prepare for future reporting.

Integration of Sector Standards and additional requirements in the Universal Standards

During its launch event, GRI announced the introduction of sector standards, aimed at helping companies to identify topics that are most likely to be material for each organization. At this stage, GRI has only unveiled requirements for the Oil and Gas sector, which was identified as one of the most high-impact sectors (based on the significance of the sector’s impact, its size and distribution around the world). This standard will be effective for reports published in 2023.

The sector standards provide an additional grid to identify the relevant material issues while referring to the Topic Standards. For the Oil and Gas Sector, 22 issues have been identified as likely material topics. Oil and Gas companies do not have to report on all material issues identified in their Sector Standard, but it is adviced to consider them all when identifying the company’s impact.

The Sector Standards also provide correspondence tables with the UN’s Sustainable Development Goals (SDGs). The non-profit organization is expected to publish sector standards for 40 industries in the upcoming months: the next ones will be for the coal, mining and agriculture industries.

The other major update was made on the ‘Universal Standards’, previously GRI 101 (Using the GRI Standards), GRI 102 (About the Organization) and GRI 103 (Material Topics). Those were renamed as followed:

  • GRI 1 Foundation: Introduction of the purpose and system of the GRI Standards and how to use them.
  • GRI 2 General Disclosures: Disclosure requirements regarding reporting practices and other organizational details split in five chapters: Organization and reporting practices; Activities and workers; Governance; Strategy, policies and practices; and Stakeholder engagement.
  • GRI 3 Material Topics: Process to identify actual and potential impacts on the economy, environment and people, regrouped into material topics. The Standard proposes a detailed approach on how to conduct a material assessment based on the preliminary disclosures from the CSRD around double materiality. Companies have access to a step-by-step guide to conduct their assessment and identify the recommended disclosures.

Implications of the updated GRI Standards for organizations

With this major update of the GRI Standards, the non-profit organization aims at aligning with the highest reporting requirements and aligning with future regulations such as the CSRD in the EU. Patrick Cambourg, head of the Taskforce on preparatory work for the elaboration of EU non-financial reporting standards (via the CSRD) confirmed the statement of collaboration and co-construction between its taskforce and the GRI Standards. The updated Universal Standards integrate additional requirements that companies should report on, aiming at increasing transparency on topics such as governance, stakeholder engagement and due diligence, including in the topic of human rights.

Through these standards, companies will have the choice of reporting in accordance with the GRI Standards (1) or with reference to the GRI Standards (2). The former refers to full compliance with all requirements, and the latter allows organizations to select their level of reporting through the GRI Standards guidelines. Organizations wishing to continue reporting according to the GRI Standards will need to move from the ‘Core’/‘Comprehensive’ approaches to these new guidelines by 2023.

How to prepare for the updated GRI Standards guidelines?

 

1. Assessing current alignment with updated GRI Standards

As a first step, companies are recommended to assess their readiness in ESG reporting according to the updated requirements. By conducting an ESG stocktaking exercise, analysing the information at hand and what is not available will result in a clear roadmap.

2. Defining the relevant Sector Standard to update or conduct your Materiality assessment

Reviewing your materiality assessment every two to three years is a strong recommendation to make sure that your company maintains a forward-looking focus. Smaller updates every year will allow for dynamic adjustments according the organization’s evolving environment and activities.

Companies are recommended to conduct their next materiality assessment using the GRI Sector Standards and new guidelines to materiality based on the double materiality concept that focuses on the companies’ impacts on society. Organizations are advised to update their materiality assessment before disclosing their reporting according to the updated GRI Standards.

3. Ensuring lean reporting and alignment with other ESG standards

To optimize resources dedicated to sustainability reporting, companies are recommended to identify where standards converge. For a complete voluntary sustainability reporting framework, both GRI Standards and SASB standards can be used concurrently by reporters to ensure high-quality and transparent reporting. As SASB is also expected to publish an updated version of their SASB Codified Standards in Q4 2021, organizations are recommended to seek alignment between the two frameworks.

To support companies in their reporting exercise, Finch & Beak has prepared a freely downloadable checklist to comply with the updated GRI Standards requirements, available at the top of the page.

Looking to align your sustainability reporting and materiality assessment with the new GRI Standards?

If you are looking to get prepared for the updated standards or are preparing a new materiality assessment, get in touch with Josée van der Hoek, Director at josee@finchandbeak.com or call +34 682 048 301 to hear about how Finch & Beak can support you in meeting your ambitions.

Photo by Igor Starkov from Pexels

About Noémie Harari

Committed young professional looking forward to helping companies build a more sustainable future. | noemie@finchandbeak.com

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