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New, improved sustainability reporting guidelines were launched at a landmark Global Reporting Initiative conference in Amsterdam in May

This article was first published in the July 2013 International edition of Accounting and Business magazine.

‘We use our Earth as if we have a planet and a half; we have a deficit relation with our natural resources. The biggest challenge facing not just business, society and government, but humanity, is the question of our sustainability. And business as usual will do nothing to solve it.’ 

These are the words of the Global Reporting Initiative’s (GRI) chief executive Ernst Ligteringen at its global conference in Amsterdam in May, underlining the raison d’être of the sustainability reporting standard-setting body’s work as he unveiled the latest generation of reporting guidelines, known as G4, to a 1,600-strong audience of business leaders and financial professionals. 

The new guidelines replace the G3 guidelines, which were issued in 2006 and are now used by more than 4,000 companies and organisations in over 60 countries around world. Big-name companies using the guidelines include Royal Dutch Shell, SAP, EDF and Liberty Global, while smaller organisations include Christchurch International Airport in New Zealand. 

The launch of the G4 guidelines marks the culmination of two years of consultation involving 120 specialists and two consultation periods that attracted more than 2,500 responses. The new guidelines demand greater transparency from the organisations that use them, said GRI chairman Herman Mulder. ‘G4 is another step in the journey that we are taking,’ he said. ‘It is about creating better companies, a better market, a better world with more social justice and business managed in a responsible way.’ 

Key features 

The G4 guidelines aim to help companies produce clear, concise sustainability reports that are of high relevance to an organisation’s stakeholders. They aim to be more user friendly than previous versions, helping reporters to focus on and manage what really matters. ‘The new guidelines are easier to understand and check, and provide a lot of practical tools, overview tables and summaries,’ said Nelmara Arbex, deputy chief executive of the GRI. 

Some key features of the new guidelines are as follows: 

Materiality This is certainly not a new concept to the GRI, but the G4 places greater emphasis on the subject. The new guidelines aim to help organisations to produce reports that are concise and include information and key performance indicators (KPIs) on material impacts only. Reporters must define materiality and provide full disclosure on the topics that are material to them. 

Value chain A major difference is the focus on an organisation’s value chain. Reporters must assess their complete value chain and disclose where their impacts are most material. This will present significant challenges to many companies, as such supply-chain transparency is complicated and expensive to attain, and will often involve the impacts of suppliers over which they have little control. 

Application levels The G4 no longer has a system of application levels (A, B, C), which many believed drove companies to take a checklist approach to reporting. Instead, an ‘in accordance’ system with two tracks – core and comprehensive – has been introduced. 

Disclosure on management approach The new guidelines will require organisations to report on how they identify and manage their actual or potentially material impacts. This kind of narrative disclosure will provide report users with a better idea of how companies are managing their impacts, which will provide greater context to the KPIs included within a report. 

Assurance In previous iterations of the guidelines, reporters would indicate whether they had some form of external assurance over their reports by adding a ‘+’ after their application level (eg A+). This did not provide any information about how much of the report was assured. This has been removed from the G4 guidelines, which instead has an additional column in the organisation’s GRI index table where reporters can indicate which elements of the report have been assured, thus providing greater transparency on the extent of external assurance. 

GRI and integrated reporting 

A recurrent question that emerged from the GRI conference was how the G4 guidelines will fit in with integrated reporting (IR). The International Integrated Reporting Council (IIRC) recently published a consultation draft of the International <IR> Framework, which is due to launch later this year. The IIRC draft framework aims to allow companies to report on material information about an organisation’s strategy, governance and performance that reflects the commercial, social and environmental context within which it operates. 

According to the IIRC, IR is not simply about combining existing financial and non-financial disclosure, but will draw on elements of financial and sustainability reports to the extent that the information is material to how an organisation’s strategy creates and preserves value. The GRI will therefore be looking to offer guidance on how to link the sustainability reporting process to the preparation of an integrated report. 

While there is still an element of uncertainty of the future of corporate reporting, the G4 guidelines are certainly a step in the right direction. ‘Without transparent corporate disclosure, we risk remaining in the past century, where many of our resources have not been correctly priced and accounted for,’ said Christian Mouillon, Ernst & Young’s assurance global vice chair. ‘Without the correct sources of information, the market economy cannot function effectively.’

Focusing on what matters

Neil Stevenson, executive director – brand, ACCA

The G4 guidelines make it clear how organisations report on their economic, social, environmental and governance performance. The guidelines focus on what matters and what is material. This will be a great benefit to multiple stakeholders including investors.

For ACCA, the credibility of sustainability reports can be enhanced by engaging with stakeholders and responding to their requirements and concerns, as well as seeking third-party independent assurance on the content of such reports. Organisations that want to enhance and improve accountability for stakeholders and investors will benefit by using the G4 guidelines and embracing the principles of integrated reporting.

In the current economic climate, organisational accountability is an imperative. Being transparent and reporting on issues and impacts can help achieve this. We believe that all major entities in the public and private sectors should report publicly on the effect of their activities on the environment and societies in which they operate, along with reporting on their policies and how these have been translated into practice.

ACCA has been a member of the GRI steering committee since its inception in 1998 and also sits on the GRI stakeholder council. 

Sweden at the forefront

Sweden adopted the Global Reporting Initiative (GRI) guidelines for its state-owned companies in 2007, becoming the first country in the world to do so. The main reason was to promote long-term sustainability for the companies’ owners – the people of Sweden – the country’s minister for financial markets, Peter Norman, told delegates at the GRI conference. 

Sustainability features prominently on the Swedish government’s agenda, and government-owned companies are not expected to simply hand over a GRI report. Norman said: ‘We demand that our companies actually integrate sustainability in their policy.’ 

Sweden has taken reporting to the next step by making sustainability a responsibility of all boards of directors. ‘It is on their agenda, too, and they are monitored by the government to see if they are on track,’ added Norman, who hopes government policy will serve as an inspiration for Sweden’s private sector.

Gordon Hewitt, sustainability adviser, ACCA, and Suzanne Koelega, journalist


Last updated: 4 Sep 2016