Intended changes to GRI’s governance

Comments from ACCA to the Global Reporting Initiative
9 July 2014.

General comments

ACCA welcomes the opportunity to respond to the Global Reporting Initiative (GRI) on its intended governance changes to achieve its role as a standard setter in sustainability reporting, and its suitability for official reference in public policy.

In summary, ACCA believes that:

  • The proposed governance structure appears to provide the necessary controls to equip GRI to be recognized as a public reporting standard setter, although greater clarity over the decisions made by GRI in determining the proposed structure would be necessary to assess this fully.
  • Further information on the nature and extent of the firewall between the standard setting and secretariat sides of the GRI is necessary to assess the suitability of the proposed structure.
  • Further information on how standard development at the GRI will be funded is necessary.

ACCA recommends that:

  • GRI should provide its stakeholders with a more complete view of the various choices available when looking to change its governance structure, which will allow them to assess whether the proposed option is optimal.
  • GRI should produce some supporting documentation on the firewall between the two sides of its operation, setting out what can and cannot pass through.
  • GRI should produce a paper on how the two sides of its organization will be funded, explaining how it will ensure that the development of future standards remains an independent and impartial process.

Detailed comments

Question 6.

Does the proposed governance structure equip GRI to be recognized as a public reporting standard setter?

Agree / Neutral

The proposed governance structure appears to provide the necessary controls and firewalls to equip GRI to be recognized as a public reporting standard setter. It would, however, be useful to be provided with information as to how the proposed governance structure compares to those of other standard setting organisations.  For example, a number of new boards and committees have been created under the new structure, each with specific rules around the number and kind of members who will be appointed. It would be good to clarify why certain rules have been set e.g. why does the SRSB have 15 members, include a Chair and Vice-Chair, whilst the DPOC have 6 members and 1 Chair, and the IAC has 5 members with a Chair elected from this group?

This would provide GRI’s stakeholders with a more complete view of the various choices available to GRI and a better understanding of why the particular structure presented in the consultation document is the optimum choice.

This proposal would benefit from having supporting evidence in three main areas:

  • Evidence of the demand from governments for a formal standard and an indication of the take up of it if GRI were to change.
  • Evidence that those governments already referencing the de facto standard will continue to be supportive and use the formal standard.
  • Evidence that governments will want a single global standard rather than a national version tailored for their needs and jurisdiction.

Question 7

Does the proposed governance structure meet the criteria your organisation / government would expect a public reporting standard setter to apply?

Agree / Neutral

As per question 6, the proposed structure appears to be suitable, although more information, specifically around the firewall, would be required to fully assess this. It would be helpful if some documentation was produced solely around the thickness of the firewall and what does and doesn’t pass through this. For example, why is the Board on the secretariat side when it has a connection with the DPOC and SRSB – should it sit above the firewall instead? It would also be important to highlight the possible movement of representation from one side of the firewall to the other.

Further information is required around the physical separation of the two sides of GRI, as well as amending routes of communication channels between staff members. The legalities around building ‘Chinese walls’ are vast and complex – what has GRI done to investigate the legal side of implementation and impacts on its current office and staff?

Question 8

Are any significant components mission in the design of the standard governance arrangements, and if so what are they?

It is vital for GRI explain how the two sides will be funded, and what control mechanisms will be put in place to ensure that the standard division will remain independent whilst being funded by the secretariat.

It would be useful for the GRI to produce a paper focusing solely on funding, which would elaborate on all financial matters including:

  • Who has overall responsibility for fundraising, and where will funds be sought from?
  • What are the revenue streams of the secretariat and how can independence be guaranteed if they transfer over the firewall?
  • Who controls which budgets?
  • Where will the funds to SRSB be sourced from, and how will funds be transferred to them?
  • What oversight mechanisms are in place to ensure the SRSB allocates those funds appropriately?
  • How will the GRI transfer from the current funding model to the new funding model?

Representing this diagrammatically as per 6.7 in the consultation document would be helpful. Some of this information is included within the ToR of the SRSB, but elaboration will clarify this matter.

It may be necessary to set up a funding oversight committee to ensure that funds are raised and spent in an appropriate manner consistent with other public reporting standard setters.

The GRI should also clarify how the proposed governance changes will affect roles and numbers in current governance groups such as the Stakeholder Council. 

It would be important to determine whether the new governance structure provides sufficient independence, as nominations come from the GRI committees (although ii looks as if the appointment committee can look elsewhere). The GRI board appoints the Appointments Committee based on recommendations from the GRI Global Nominations Committee. The DPOC is accountable to the GRI Board.  How does this compare to other public interest bodies?

Question 9

Does the Due Process Protocol, which is part of the standard governance arrangements, require any necessary amendments that you would consider essential? Please indicate the specific line number(s) within the Due Process Protocol that your comment(s) relate(s).

The following clarifications on the Due Process Protocol are necessary:

  • 72 / 73: It would be worth explaining the role of the Board / Stakeholder Council when advising the standards department. Does this ‘Standards Department’ relate to the ‘Standard Division’ as per diagram 6.7 or all of the groups on the right hand side of the diagram? If it is the former, it would be worth reflecting this on the diagram with a black arrow crossing the firewall. It would also be worth clarifying whether the Board / Stakeholder Council have the power to amend / reject project proposals or if their role is purely to provide comments and advice that can be adopted or not.
  • 84 / 85: When setting up Project Working Groups, it would be useful to clarify whether or not working group members need to be independent of Board / SC / OS. If not, then this highlights how individuals on the left hand side of the firewall can influence the development of the GRI standards.
  • General: It would be necessary to explain how the projects will be funded and how this funding will be managed (see answer to Q8).
  • General: It would be necessary to understand how the overall work stream of the Standard Division will be managed. Will there be a systematic review of the GRI standards on a planned and predictable timeline or will projects be proposed on an ad-hoc basis. This will clearly have funding implications i.e. the former has predictable cash flows, whilst the former does not.

Question 10

Does the Terms of Reference of the SRSB, which is part of the standard governance arrangements, require any necessary amendments that you would consider essential?

The following clarifications on the ToR of the SRSB are necessary:

  • 129 – 133: This point is related to the final bullet in answer to Q9 above. The budgetary allocation for the standards work covers a period of three years. This suggests that the work is fairly predictable in nature. How transparent will the SRSB be with this three year work plan? Will there be provisions made for ad hoc work that may materialise during the 3 year period?
  • General: The SRSB will have responsibility to identify new activities and projects. It would be useful for the GRI to provide an example of a new activity or project.
  • General: Greater clarity on what constitutes a new project or technical activity under SRSB and what might be considered the technical elements of capacity building and strategy pursued by the left side of the firewall would be valuable. That is, how should updating training materials associated with the standard be considered? Is SRSB to sign off on those changes? In the absence of examples, perhaps some criteria might be offered?
  • General: When setting work plans, will the SRSB seek input from other non-financial reporting standard setters such as the IIRC or SASB? Will individuals from these organisations be eligible for recruitment onto the SRSB / PWGs?
  • General: 60 days are allowed for consultation exercises. If the GRI are looking to create a framework which enjoys wide stakeholder credibility, a 90 day consultation period would be more appropriate.

Question 11

Does the ToR of the DPOC, which is part of the standard governance arrangements, require any necessary amendments that you would consider essential?

The following clarification on the ToR of the DPOC is necessary:

  • 16 – 19: The ToR refers to members of the DPOC being ‘senior individuals of integrity and high reputation with an interest and knowledge of international issues related to sustainability reporting, including a sound understanding of standard setting processes’. We believe it is more appropriate for members of this group to have more experience and knowledge of due process and standard setting processes than of sustainability reporting: the onus on knowledge of sustainability reporting should be removed.  It is worth considering having one lay person member in this group to assist with impartiality and reflect good practice done by other bodies. Is it necessary to specify that members of the DPOC be “senior” individuals? Such a specification would limit those who could be included on the committee, especially considering that there would be many capable individuals who would not be considered senior.
  • General: The new terms of reference call for the bodies to carry out an annual self-evaluation. It would be useful for the DPOC, at least, to submit to an independent evaluation at least once every three years.

Question 12

Does the ToR of the IAC, which is part of the standard governance arrangements, require any necessary amendments that you would consider essential?

The following clarification on the ToR of the IAC is necessary:

  • 18 – 21 / 23 – 23: As per the answer to Q11, is it necessary for all of the members of the IAC to have an ‘interest in and knowledge of international issues related to sustainability reporting’ or would a knowledge of the recruitment of high level individuals in a transparent manner be more important? It is worth considering having one lay person member in this group to assist with impartiality and reflect good practice done by other bodies.
  • 26: The IAC terms of reference includes the statement “the Chair of the DPOC shall have the authority to remove a DPOC member before the end of the term for poor performance, conflicts of interest, or otherwise not acting in the public interest”. This does not appear in the other terms of reference. Why is it in this document, but not in the others?
  • Line 50-53 and line 72-74. “Either make appointments from amongst those nominated to it by the bodies specified in s.14 (d) or if, in the opinion of the IAC, an insufficient number of nominees meet the criteria for appointment specified in Annex 1 to these Terms of Reference, seek further nominees”. Please can you clarify whether this means they can seek nominees externally or whether they have to go back to the specified bodies?