GRI exposure draft on sustainability reporting guidelines (G4)

Comments from ACCA to the Global Reporting Initiative, 24 September 2012.

Comments from ACCA to the Global Reporting Initiative, second public comment period for the development of G4 Sustainability Reporting Guidelines
24 September 2012

ACCA welcomes the opportunity to provide feedback on the Exposure Draft on the G4 Sustainability Reporting Guidelines. The attached response only addresses the particular areas of the consultation that are most relevant to ACCA.

In summary ACCA believes:

  • The greater focus on materiality introduced in the G4 Exposure Draft is a positive step, allowing companies to better focus their reports on material issues.
  • The value chain approach to materiality will allow reporters to highlight material impacts outside of their operations, but such an approach will require significant investment in data systems which could be beyond many companies.
  • The guidelines presented lack a certain degree of clarity and could be more focussed. This will act as a barrier to first time users.
  • More detailed guidance and definitions regarding materiality and report/KPI boundary setting would allow for greater comparability of reports.

Detailed answers are provided in an appendix.

General comments

Do you believe that the greater focus on materiality introduced in the G4 Exposure Draft will assist organizations in better defining report content, boundaries and issues so as to contribute to better and more relevant reports (as opposed to longer reports)?

Yes. A greater focus on materiality should allow companies to better focus their reports on the topics of greatest impact/relevance to their organisations and stakeholders. The process that has been described in the new guidelines will require reporting companies to perform a detailed review of their operations, considering their impacts both up and downstream in their value chains.

Such an approach could result in reports that are better focussed, but will involve a large commitment from reporters to map out supply chains etc. so that material impacts can be identified. This may be beyond some companies, who might lack the capacity to perform such a detailed review. Sector supplements could serve as a tool to assist companies in identifying their material impacts, so GRI should aim to further develop these.

ACCA is pleased to see that the definition of materiality is not purely based on financial and economic considerations, but also takes into account a wider range of impacts and stakeholders. More detailed guidance on materiality would assist companies in applying the guidelines, and allow for greater comparability between reports.

By reporting on material issues and impacts only, the focus of the report will be sharpened thus helping to communicate more effectively. It is also hoped that this will reduce the length of sustainability reports in the future, many of which are currently considered as too long.

Is the G4 Exposure Draft (including the new structure) clear and understandable in terms of what is expected of organizations for the sustainability report to be ‘in accordance with’ the guidelines?

Yes. The section on page 14 detailing the ‘In accordance’ criteria does explain what a company needs to do. It is also well referenced to other areas of the guidelines that provide further details on the specific requirements.

However, if any organisation finds that it may not be able to meet a number of indicators, it is likely to be intimidated by the guidelines. ‘In accordance with’ has tendency to imply that one has complied with them all. This could lead to challenges when sustainability reports are being subjected to external assurance. There is a need for progressional reporting.

Due to the increased number of KPIs that are presented in the G4 guidelines, it would benefit reporters if the technical protocol on report contents and boundaries was brought forward in the document. This would help to ensure that reporters consider report content and boundaries prior to delving into the detailed KPIs.

Does the G4 Exposure Draft clearly explain the interaction between the guidelines, the technical protocols and the sector supplements?

Yes. This is explained early in the guidelines (pages 5-9), so report preparers will see how the three fit together. References to the technical protocols and sector supplements are made throughout the guidelines where necessary.

Do you think that the G4 Guidelines can apply to organizations of various sizes in your region?

Yes.  For some, the scale of the guidance will be seen as a burden, and so organisations may choose to opt out of using G4, although the new focus on materiality should allow companies of varying sizes to apply it. A company can also use the technical protocol for defining report scope and boundaries, which will drive what is included in the report. This will likely yield a far more complex reporting scope for a large company than for a small company (although this will not necessarily be the case).

However, GRI should not underestimate the impact of providing the depth of information required on smaller companies – cost and time involved is likely to be significant. The approach would require sophisticated reporting systems, which would create a barrier for smaller organisations.

Accordingly, we welcome the SME guidance that is due after the launch of G4 and stress that this point be considered carefully within it.

Do you believe that the G4 Guidelines will drive the cost effective preparation of a sustainability report for all organizations?

No. The G4 Guidelines is unlikely to result in more cost effective sustainability reporting. The fact that companies are reporting on impacts throughout their value chain rather than just in entities that are owned or controlled by the organisation will involve a detailed value chain mapping exercise, which would likely be expensive.  Also, in order to address issues that are out of a company’s direct control (e.g. within a company’s supply chain including the impact on local communities and the environment), stakeholder management processes will need to be applied, which would likely be expensive, especially for smaller companies and companies in developing countries.

The G4 draft will go a long way to improve the materiality and completeness of sustainability reports, as well as encouraging reporting companies to acknowledge their respective spheres of influence. However, G3 and 3.1 were already deemed unattainable by many companies, demanding data which less mature companies were uncomfortable disclosing, or did not see the need to disclose. The GRI ‘Let’s Report’ template serves as a useful and more accessible framework for companies which feel a full G3/3.1 report is too onerous. It is important that in its development of the G4 guidelines, with the aim of improving the quality of reporting, GRI does not raise the bar too high for companies on the verge of reporting. A revised ‘Let’s Report’ template should be included in the G4 review process.

Other general feedback:

Stakeholder engagement is given lower prominence than G3. This is a retrograde step.

The GRI Index appears to allow reference to matters outside the report. This will undermine the value of a report – the advantage of a GRI sustainability report is to pull everything together.

Use of the term ‘persons charged with ultimate authority’ will need reconsidering to align with other standards such as IFAC’s use of ‘those charged with governance’. The latter is more encompassing to include those who lead in the execution of strategies than explicit decision makers.

GRI should make clear what their expectations are around assurance, and should commit to publishing guidance or an opinion, to help reporters.

specific comments


Do you think that the new version of the Technical Protocol helps organizations to express better the relationship between material topics and value chain?

Yes. The link between material topics and value chain is clear within the technical protocol. The fact that an organisation’s value chain needs to be mapped prior to material impacts being identified is important, as it allows the preparer to have the full scope of an organisations impacts prior to making any decisions.

The flow chart demonstrating process is helpful in visualising the process.  And the bubble chart on significant impact is a very useful tool.

Do you think mapping the value chain is a helpful exercise for defining boundaries of material topics?

Yes.  To determine which topics are material to an organisation, it is necessary to have a full picture of its impacts.

Care needs to be taken to ensure that a consistent approach is applied to value chain mapping. This applies to both the approach taken by different organisations, and to the approach that individual organisations take to the KPIs they report on. If an inconsistent approach is taken in either case, this will lead to comparability issues.

Consideration should be given to providing some more detailed examples of value chain mapping and how that relates to the boundaries of material topics.

Is the difference between the term ‘Aspect’ and ‘Topic’ clear when each term is used in the Technical Protocol?

Yes.  The hierarchy between topics and aspects is demonstrated well in the diagram on p.294. This flows well in to the specific aspect indicators, drawing a link between the indicators selected and the materiality assessment / value chain mapping exercise. Such a link is important in demonstrating why certain indicators have been selected.

Do you have other general comments related to the approach for setting boundaries proposed in the Technical Protocol?

Yes. Clearer guidance on what constitutes a value chain is necessary. For example, a retailer with thousands of products on their shelves will have an incredibly complex value chain. There will need to be guidance on how companies approach mapping and breaking down their value chain (e.g. at what level). At what point does responsibility end? How far along the chain is an organisation expected to go?

Assessing priorities in a value chain setting is very complicated; therefore detailed guidelines on how to do this would be necessary. Many companies currently assess materiality as a vector of business impact and stakeholder interest. In the value chain setting GRI might also consider lifecycle impacts, consumer interest and ability to influence.

Management of impacts is different in a value chain setting – this would require much greater emphasis on working in partnerships and in setting supply chain standards. Again, this would be a change in emphasis for many reporters. There is a need for additional guidance to reporters on how to report on value chain management and performance.

Application Levels

Do you agree with the proposal to discontinue with the Application Levels and to replace them with criteria that define when a report has been prepared ‘in accordance with’ the G4 Guidelines?

Yes. By removing the application levels, it removes the perceived quality differences between GRI A – C rated reporters. For example, an organisation could receive a C rating whilst reporting on all of its material impacts.

A potential issue with this proposal though, is that the loss of gradation could act as a barrier to new reporters. To achieve accordance with the G4 guidelines take significant investment in data management systems, which may be beyond some companies – even in the two year transitional period.

ACCA believes that a tiered system of reporting needs to be kept in order to ensure maximum use of the guidelines.

Do you support the introduction of transitional provisions to allow new reporters two reporting periods in order for their reports to gradually be in accordance with the G4 Guidelines?

No. It is important that companies have an opportunity to incrementally apply the GRI principles, but to put in place the data management systems required to prepare their reports in accordance with G4 guidelines in two years would be challenging.

It is not clear why the limited has been set at two years, and what the penalties would be of not meeting the accordance criteria within the set two year period.

It is not clear if there is a set of minimum requirements that companies have to comply with. Further guidance on the minimum requirement would be necessary.

The disclosures within the CEO’s statement could go further, to include details of any plans underway to bring the sustainability report in line with G4 Guidance in the two year period.