The Global Reporting Initiative (GRI) addresses one of the biggest problems facing businesses worldwide: standards.
Here are three main things you should know about it:
- The GRI is an organisation – founded in Boston, Massachusetts and currently headquartered in Amsterdam, Netherlands.
- It aims to help corporates in their environmental, social and corporate governance (ESG) efforts and their corporate social responsibility (CSR).
- It is the most highly respected agency of its kind across the world. Its presence in the minds of ESG professionals, and the global adoption of its standards, are widespread.
What issue is the GRI solving?
The GRI tries to solve a highly frustrating practical problem with reports on ESG and CSR because, despite their importance, they are extremely challenging to report on in ways that make sense.
To recap: CSR means a company adopts a business structure targeting positive impacts in areas like sustainability, social issues, and governance. ESG is the measure of how successful those efforts are. Both are important to stakeholders.
But every positive impact must be supported by evidence. Companies need to record data, take measurements and produce concise reports showcasing progress. ,
Historically, the problem has been that no universal standard for reporting on CSR/ESG existed. This the Global Reporting Initiative brought itself into being: to try and address this challenge.
Why are universal reporting standards necessary?
Governments want transparency; consumers want transparency, and investors want transparency.
True transparency is more than simply publishing one company-specific report and hoping readers will understand it. Every report is different, with alternating structures, displays of data, and subject matters. In practice, they risk only being understood internally.
Without a uniform reporting standard, companies wouldn’t be able to measure their progress correctly or compare it against national and international standards.
What advantages do the GRI reporting standards bring?
There are two main advantages that boards and management should pay close attention to:
- The standards provide clarity on processing complex data. This is crucial because efforts to understand a firm’s ESG and CRI impact are frequently complex. Having standards to guide reports in this area means readers can process information properly in ways they are familiar with.
- The standards have a reputation. GRI is a well-known and broadly embraced name across the globe. Its reporting standards do receive criticism, such as being too difficult to understand or too flexible to allow benchmarking. However, at large, the standards will likely retain popularity in the future.
What areas do the GRI reporting standards focus on?
- Environmental impact
- Employee welfare
- Waste management
- Diversity and opportunity
- Rights of indigenous peoples
- Child and forced labour
- Local communities
This list is just a sample, and the GRI has documents on reporting standards for each one in turn. All were adopted in 2016 as part of the organisation’s effort to develop a comprehensive reporting framework.
Why should boards embrace GRI standards?
In most companies, boards and management know that success in CSR/ESG is crucial to an organisation’s overall business strategy.
More and more, investors are seeing them as vital components because they lead to long-term success. Consumers and clients see them as critical because they identify with the same principles. Meanwhile, studies have shown that employees of firms with a solid commitment to CSR/ESG are more motivated, boosting productivity.
Communicating CSR/ESG results in these areas to stakeholders is done through proper reporting, so logically, it makes sense that boards and management support universal standards to make sure this is done correctly.
Boards should remember the following about GRI standards:
- They are widely accepted – with 190 of the world’s largest 250 companies using them. But apart from that, they are endorsed through strategic partnerships with some of the world’s most influential organisations, like the OECD, ISO, and UN Global Compact.
- The GRI has a dedicated Materiality Principle designed to track the potential of ESG measures to create value. Additionally, the GRI tailors this principle to each business type. Investors, in general, will embrace this information.
- Experts repeatedly say that GRI standards help avoid mistakes around reporting complex data. This reduces the chances of being “caught out” by potential investors.
- GRI standards incorporate stakeholder input at every stage. This is essential because stakeholders set vital benchmarks for the organisation. Their feedback shows what they do and don’t want to see from an organisation’s business activities.
Knowing the basics of GRI is extremely important if you are in a management or director position – or thinking of taking one.
Even if your company doesn’t use its standards, your competitors or the broader industry might, meaning you will automatically be at an advantage if you know how to grasp its concepts.
The most important thing to remember about GRI is that it has been, and will continue to be, enormously popular as a benchmark-setter. It is a language that stakeholders (particularly investors) will understand, meaning it offers a better chance of accurate, engaging and persuasive communication.