Last week the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP) released a linkage document that demonstrates the growing collaboration between the two organizations. The 16-page document outlines how corporate social responsibility (CSR) reporters can use or adapt the same data for both reporting processes. As more companies become transparent in disclosing their environmental, social, and governance (ESG) impacts to their shareholders, greater standardizing is needed. Collaboration between GRI and CDP, therefore, is an important first step. After all, GRI provides the standards for organizations by which they can perform their ESG performance; CDP scores responding companies based on their questionnaires’ responses.
Both organizations will use the document as a framework for improving their respective guidelines and questionnaires. CDP amends its annual questionnaire annually and can incorporate GRI standards into its framework. Likewise, GRI is working on a new iteration of its framework, and is exploring a new set of guidelines as it pushes for greater ESG and integrated reporting by the end of this decade.
Some critics may yawn at this arrangement, especially those who claim that reporting cannot make any material difference if companies can still engage in questionable labor practices, leave a negative impact on the environment, and avoid the level of transparency that many stakeholders they demand. After all, CDP scores its participating companies not by their ESG performance, but quality of disclosure. Using CDP’s metrics, the pharmaceutical giant Bayer is earns the highest scores, followed by the chemical behemoth BASF, with HSBC, Wal-Mart, and Chevron rounding out the top 5. Perhaps in an ideal world, it would be great if large corporations would turn on a dime and change the ways in which they run their operations—but these firms have large bureaucracies that make huge shifts slow, and in the long term, an ironing out of best practices for CSR disclosure will not only encourage companies to mitigate the effect they have on people and the planet—but also push their competitors to do the same. In the long run, that can only be good for the sustainability movement.
Both organizations will be able to learn from each other. For example, CDP requires more detailed information on greenhouse gas and carbon emissions than GRI. GRI is more rigorous in parsing out a company’s energy consumption throughout its supply chain; CPD does not request any data about a firm’s indirect energy consumption.
Finally, CDP asks its participating firms pointed questions about how climate change could affect their operations, quite similar to the Securities & Exchange Commissions’ recent advisory to public companies regarding the materiality of the risks involved with global warming—GRI, which is advocating integrated reporting, surprisingly does not suggest such disclosure in its guidelines.
Currently about 3400 out of the world’s 80,000 large- and medium-sized companies issue CSR reports. If more companies will participate in the process, standardization is key, as creating disclosure documents is a costly- and time-consuming process. Greater cooperation between organizations like GRI and CDP is a key to future success in the CSR (or in Europe, ESG), so this joint effort is a solid start.