By Robert A. Axelrod and Diane Poelker
The race is on to master the new requirements of the Global Reporting Initiative’s G4 guidelines. This comprehensive overhaul of the world’s most popular sustainability reporting standards has big implications for the content of reports. But beyond that, it’s important to ask, what does this all mean for how we manage sustainability strategy, communications and corporate reputation?
Fresh from a round of GRI-certified G4 training, here’s our take on three changes in particular that will influence perceptions of who is actually doing sustainability well and not just reporting on it:
Materiality: If You Want Credit, Show Your Work – The previous iteration of GRI, G3.1, detailed a deliberate and transparent process for identifying material issues. But the emphasis in reporting remained on the output: a ubiquitous four-quadrant grid that depicts relative importance. G4 lifts the veil on the tough conversations that may have been taking place behind closed doors or, in some cases, never happening at all – discussions about impacts on and access to key resources, both up and downstream. G4’s structural changes mean it’s not only critical to list material issues, but also to detail how an organization arrived at its conclusions about materiality.
Why it matters: It’s a credibility thing. Revisions to the materiality guidelines require reporters to take a more holistic view of their role in the business value chain and in the world. G4 seeks to hold reporting organizations accountable not just for writing a report, but for engaging in an ongoing reporting cycle that includes hard questions, critical analysis and, ultimately, the prioritization of sustainability issues as part of a comprehensive business strategy.
Reporting Levels: No More Making the Grade – G4 dispenses with the A-B-C Application Level shorthand that was often misconstrued in the U.S. as grades on a report card. In its place, it introduces two “in accordance” levels: “Core” and “Comprehensive.”
Why it Matters: The days of just checking the boxes for appearances’ sake are over. But so, too, is the stigma of not making the grade just because certain GRI indicators weren’t pertinent to your company.
Having said this, there’s no question that G4 really raises the bar when it comes to disclosing information about an organization’s operations and governance. Former Level A reporters may find themselves challenged to comply with the new Comprehensive standards, which require full reporting against 58 General Standard Disclosures before weighing the materiality of some 90 more potential disclosures. Similarly, it remains to be seen if former Level C reporters will have the support and buy-in to meet the “Core” reporting threshold.
For us, though, one of the most significant impacts of G4 is the way it challenges reporters to share the stories of what really matters, rather than focus on a checklist of numbers, charts and data. Just as important – it also helps readers think critically about a company’s assessment and level of disclosure compared to its peers.
Reporting Boundaries: Shifting Lines – G3.1 defined “boundary” in terms of the entities over which the reporter had control or significant influence. G4 challenges an organization to think beyond this well-defined box, focus instead on its impact on each identified material issue, and draw variable reporting boundaries based on this analysis.
Why it Matters: It compels companies to put a microscope to their procurement strategies, encouraging organizations across the value chain to prioritize sustainability. Setting boundaries on an issue-by-issue basis is clearly a more complex and time-consuming process. But the fine-tuned perspective that results should help companies tailor their sustainability strategies much more closely to the specifics of their value chain. And that, in turn, should lead to better environmental, social and economic outcomes all around.
Overall, the new G4 framework provides strong new tools to help companies think more strategically and communicate more transparently about sustainability issues. As with any new standard, plenty of questions remain about how reporters will actually apply the G4 Guidelines and how they’ll be received in the marketplace. But one thing is clear: a new era in sustainability reporting has arrived and, if history tells us anything, those who embrace it early on will be viewed as leaders, blazing the trail for all those who choose to follow.
Bob Axelrod is a vice president and Diane Poelker is a managing supervisor at FleishmanHillard’s headquarters in St. Louis. They have a combined 25 years of CSR reporting experience and help lead the firm’s CSR practice.