By Megan DeYoung
Since the Global Reporting Initiative (GRI) was founded in Boston in 1997, it has grown both in size and complexity. According to GRI’s online database, just 12 pioneers filed reports using their simple G1 standard back in 1999.This year, more than 5,000 companies worldwide will use the standard for their non-financial reporting.
Over the years, GRI guidance has become synonymous with rigorous, good practice for reporting. The wholesale application of these guidelines, however, has resulted in a sea of mundane reports that are increasingly difficult to differentiate between or that lack unique perspectives. So, when does a guide become a hindrance to innovation?
Amid all the noise, what makes one’s strategy—and performance report—stand out from those of its competitors? Why would anyone want to read it? The problem with standards like GRI is that they provide guide rails towards sameness. The same comment could be made about any standard, whether it be SASB or IIRC or CDP. By their very nature, a standard must standardize. How else do you judge a company and benchmark it against others?
The Tick-Box Exercise
In an attempt to be relevant to all companies, standards often become long lists. Sector-specific guidance, like GRI, is designed to tailor the shopping list to industries. But this strategy often makes the problem worse. After thinking about all the issues that an industry might need to disclose—and asking a wide range of stakeholders for input—the list can get really long. The truth is that, for many companies, following GRI can sometimes turn into a giant tick-box exercise.
Standardization is the enemy of innovative reporting. No one wants to say the same thing and make the same commitments with the same key performance indicators as everyone else. It may well be that disclosing “the number and percentage of total sites identified as requiring biodiversity management plans” is crucial for all mining companies. But reporting on the Mining and Metals MM2 indicator isn’t going to make anyone walk away from a report and call that company’s strategy innovative.
So the real challenge of using GRI—as with any standard—is to make it work for your organization. Corporate Citizenship always advise businesses to view GRI as one input to the reporting process—to be aware of it and by all means follow it, but don’t let it dictate strategy and story.
What is Reporting Really All About?
Reporting is the story of a company’s impact on society—how the company has performed over time and what it aspires to do in the future. Reports need to be readable and digestible. They need to tell a story that’s honest and relevant. Every single company is unique, and of course, GRI and other standards try to address exactly this, but long lists of topics do nothing to spur innovation. They do little to inspire a passion to identify that purpose — the reason why a company exists—and to tell the unique story of what the business is achieving.
Above all, companies need to focus on the issues that matter to the business and its stakeholders. The good news is that last year, GRI provided an iteration of previous G4 versions. The changes focus on materiality in particular and identify the issues that really matter to organizations and its stakeholders. Without a rigorous materiality process, the GRI G4 simply isn’t usable. Of the 5,300 firms that filed reports with GRI in 2015, nearly half used the new G4 standard. The big change in 2016 is that all reports will need to meet that new benchmark.
Will this result in more innovative and tailored reporting? It depends. The issue at stake here is the purpose of materiality. Is materiality designed to inform a report or to guide the strategy? Good materiality should guide objectives, inform strategy, and focus on investment decisions. A report then follows and paints a picture of the global challenges that an organization sees ahead and what will be done about them.
Ultimately, success in reporting can come from answering three simple questions:
1. Does the report meet the needs of stakeholders?
2. Is the process a learning opportunity?
3. Is the report driving improvement within my company?
There’s no doubt that the G4 guidelines are a big improvement on G3, but there are further changes afoot. Watch out for more changes to the GRI Sustainability Reporting Standards that will be published as part of a consultation that opens at the end of April 2016.
None of this means that GRI should be avoided— far from it. For companies at the early stages of reporting, the GRI a great resource to identify pertinent topics. Over the years, GRI has raised standards across the board and spurred more companies to stop dodging tricky issues and start reporting on them transparently. At the end of the day, however, if a company wants to report in a way that is meaningful and stands out, GRI should be viewed as a starting point—one input—to a great report.
Megan DeYoung is Director of the North American practice of Corporate Citizenship, a global management consulting company specializing in sustainability and corporate responsibility, and she is a member of the CRA Ratings and Rankings Thought Leadership Council.