Ed Note: Check out a 3p sponsored GRI Certified Training course in Sustainability Reporting to get trained by the author of this post
By: Nancy Mancilla, ISOS Group
To build on last week’s posting, “Using GRI to Compare Apples to Apples in Sustainability Reporting”, we’d like to help you distinguish quality GRI reports from those that would probably be best served as marketing pieces.
As the number of companies taking the sustainability plunge rises, so do the myriad organizations conducting ratings and rankings. Unfortunately, the rigor of these ratings tends to confuse reporters who wonder what exactly they should be reporting on. One thing is clear- it is generally the Sustainability/CSR report that provides the bulk of data used as a basis for analysts’ decisions.
We believe that heavy analysis should first be focused on the sustainability reporting process taken to produce the report, and only later on the activities of the company. With firm policies and procedures in place, actions will be much more robust. Without proper application of a proven reporting framework, the strategic direction of an entity’s sustainability activities may suffer. Proper application of the Global Reporting Initiative’s methodology for reporting is intended to clear the path and provide the much needed focus. Therefore, our approach for assessing the quality of reports is based on the principles laid out by the GRI- now G3.1 Guidelines.
If a reporting organization applies the combined set of tests to self-diagnose their state of affairs, it will be obvious in the level of reported disclosures. Each issue chosen to report upon should be the result of a materiality and stakeholder engagement process. It should also be representative of the entity’s true sustainability context linked to areas designated for improvement and drafted in a manner that conveys the extent to which the organization has sufficient control and influence to direct change.
The proper presentation of disclosures should allow stakeholders to make informed decisions and take appropriate action as related to the company at hand. This can be done by demonstrating balanced reporting (positive and negative results), providing a basis for comparison, employing accurate and reliable modes for preparing data, crystallizing the timeliness of data tracking periods and clearly expressing performance results that could be easily understood by diverse audiences.
You don’t need to be a Sustainability Analyst to convert GRI’s Principles for defining Content and ensuring Quality into a scoresheet used to rate an entity’s reporting efforts. Each Principle is broken down into more detailed criteria- or “tests” that can be weighted with simple Excel spreadsheet. The methodology adopted in our courses quantitatively describes these qualitative factors on a scale from 0 to 100, where higher cumulated points signify a deeper application of each Principle.
When instructing our course participants on how to complete the assessment, we generally recommend that they document strengths, areas that could have been improved, and/or clear weaknesses. Well…what happens when criteria has not been met? If the assessor finds it difficult to determine applicability of the Principle, then it can be assumed that it was overlooked, misunderstood or completely ignored-regardless, points should not be awarded in such instances. After assessing the report across each “test,” all scores are tallied and plotted along a matrix distinguishing quality performers from poor communicators or “green washers.”
It’s true that one may find the score sheet difficult to use without studying the Principles to some degree and that results could be subjective. Reports in general are read by people with different interests and interpretations of the data. Although the new technologies like XBRL may make it easier to tag and analyze data points across companies, it is your opinion as an analyst that reporters value. The ultimate goal of performing such assessments should be to challenge corporate behavior. Unfortunately, current approaches are fragmented and inconsistent. Each leaves reporters testing different modes of measurement, engagement and formatting on a year to year basis. If we continue to educate ourselves on how to better apply GRI’s Principles, we can become more rooted into a common method for harnessing the true value of reporting.
(image credit Flickr User ogimogi)