Our key takeaway: What matters in sustainability reporting is how an organisation impacts the economy, environment, and people – rather than how these areas impact the organisation. The GRI Standards’ update will support companies in considering their impacts on people and meeting the expectations contained in the UN Guiding Principles.
The Global Reporting Initiative (GRI) has released its new 2021 Standards, as a revision to its 2016 Standards:
- GRI as a “modular system of interconnected standards”: GRI is comprised of three series of standards: (1) the GRI Universal Standards, (2) the GRI Sector Standards, and (3) the GRI Topic Standards. The GRI Universal Standards apply to all organizations and consist of: GRI 1: Foundation 2021 (GRI 1) which explains how to use the Standards, and clarifies the principles that are fundamental to quality reporting (e.g. accuracy, balance, verifiability); GRI 2: General Disclosures 2021 (GRI 2) which focuses on the disclosures that will give context for understanding an organization’s impact (e.g. structure and reporting practices, activities and workers, governance, strategy, policies, practices and stakeholder engagement); and GRI 3: Material Topics 2021 (GRI 3) which explains how organisations can determine their ‘material topics’ and what organisations should disclose about their material topics (i.e., the process followed, the list of material topics, and how each topic is managed). Organisations are obliged to use the Sector Standard that applies to their sector – if it is available at the time of reporting (the oil and gas Sector Standard is available, others will follow). Organisations can select GRI Topic Standards to help them report on the material topics determined (e.g. related to waste, occupational health and safety, and tax).
- The definition of ‘material topic’ has been revised to focus on impact: In the revised Standards, ‘material topics’ are defined as topics that represent an organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights. This differs from the 2016 version, in which stakeholder views were viewed as a primary input. Specifically, the Global Sustainability Standards Board (GSSB) notes in its FAQs that the previous approach “led organizations to prioritize impacts only if the consulted stakeholders highlighted them. Impacts would often be assessed based on their significance to the organization and influence on stakeholders. As a result, organizations would consider the impacts on themselves instead of how they impact the economy, the environment, and society.” The new definition of material topic now focuses on impact – in alignment with the UN Guiding Principles – and the ‘influence on the assessments and decisions of stakeholders’ is no longer a standalone factor that determines whether a topic is material. Of particular note, human rights impacts are material based on their severity, and the concept of ‘Topic Boundary’ has been replaced with a focus on the organisation’s value chain. Organisations are asked to report on whether the organization is involved with negative impacts through its own activities, or as a result of its business relationships – with an accompanying description of these activities and business relationships.
- Stakeholder engagement – focused on impact on people: The importance of stakeholder engagement in the process of determining material topics has been clarified (in GRI 1) and a new step has been included for organizations to identify relevant stakeholders to inform their choice of material topics (in GRI 3). The definition of stakeholders has been revised: “Stakeholders are individuals or groups that have interests that are affected or could be affected by an organization’s activities.” This definition aligns with the OECD Due Diligence Guidance for Responsible Business Conduct. GRI states that “[c]ommon categories of stakeholders for organizations are business partners, civil society organizations, consumers, customers, employees and other workers, governments, local communities, non-governmental organizations, shareholders and other investors, suppliers, trade unions, and vulnerable groups.” The revised definition no longer includes as stakeholders an “entity or individual whose actions can reasonably be expected to affect the ability of the organization to successfully implement its strategies and achieve its objectives”. This change enables the GRI Standards to focus on an organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights.
For more, see:
GRI Resource Centre
GRI Standards, A Short Introduction to the GRI Standards (GRI, 2021)
GSSB, GRI Universal Standards Project – GSSB basis for conclusions (GSSB, October 2021)
