Wednesday, April 20, 2011

The new GRI 3.1 guidelines explained

One of the big advantages of being an Organizational Stakeholder of the GRI is the opportunity to attend no-charge webinars on diverse and interesting aspects of reporting. Sometimes the webinars are corporate Sustainability Officers presenting their experience of the challenges, successes, best practices etc of reporting, and sometimes it's the GRI expert staff providing news and updates. I try to attend every one and blog about as many as I can, time permitting. It's almost worth being a GRI Organizational Stakeholder just for these webinars :)

This week, I was online with Letshani Ndlovu and Bastian Buck of the GRI as they walked us through our paces on the new GRI Technical Protocol and the updated 3.1 Reporting Guidelines.

The Technical Protocol (TP) was created to provide process guidance on how to define the content of a sustainability report. This includes deciding on the scope of a report, the range of topics covered, each topic’s relative reporting priority and level of coverage, and what to disclose in the report about the process for defining its content. In defining content, we all know by now that "materiality" should be a prime consideration. The TP gives a detailed explanation of materiality, starting with: Material topics for a reporting organization should include those topics that have a direct or indirect impact on an organization’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large. Why is this important? Because: Sustainability impacts create both opportunities and risks for an organization. The ability of an organization to recognize opportunities and risks, and act effectively in relation to them, will determine whether the organization creates, preserves or erodes value. Each organization defines its own material issues, using feedback from stakeholders as well as internal and external scans of sustainability impacts.

Defining the reporting content is an "iterative" process which can be shown in the following diagram:

For details of how to apply all these stages, download the Technical Protocol from the GRI website. Note that the TP is an advisory document and supports reporters in providing responses to Profile Disclosure 3.5: "process for defining report content". This assumes, of course, that a reporting company uses a process to defining reporting content... and strange as it may seem, most do not. The TP should help companies move away from "shopping-list" mentality to a "what's material" mindset and guide reporting content accordingly. A defined approach should be used for prioritizing material issues and this should be "systematic, documented and replicable, and used consistently from year to year. Changes to the assessment approach, and their implications, should be documented." This should also help those providing assurance for Sustainability Reports. Note that the TP is a supporting document and does not directly influence the assessment of the report's Application Level.

The new 3.1 Guidelines
The 3.1 guidelines are a stepping stone to the big promise of G4 in 2013 and address just three specific aspects of the current G3 framework relating to: community impacts, human rights and gender equality.

Community impacts:

This replaces the former SO1 performance indicator with three new ones which refer to (1) the percentage of operations with implemented local community engagement, impact assessments and development programs, (2) those with significant actual and potential negative impacts on communities and (3) prevention and mitigation measures to address these negative impacts. The assumption is that everyone is always delighted to report about positive impacts (yes, we know!), so requiring reporting on negative impacts balances up the picture.

Note that the GRI does not define performance indicators for community investment in the form of strategic philanthropy, donations, pro-bono support or employee volunteering programs. Actually, this is one of the most commonly found elements in Sustainability Reports but the GRI does not consider this to be related to the core business model. Bastian Buck explained that these aspects are an "add-on" and therefore not an essential part of a sustainability program. I recently performed a benchmark study for a client on community investment reporting by 12 large companies in the hi-tech sector (more about that in a future blop), and it is notable that this is (a) always reported and (b) vastly inconsistent in the way it is reported.  I disagree that this is not core to a company's business model. Community investment is I believe quite a strategic element of sustainability programs, serving to help companies get closer to stakeholders, enhance reputation and most significantly, attract, retain, develop and engage employees. Even if the GRI does not consider this as material as the negative impacts, the fact is that every reporting company wants to report about this. Why not make the GRI framework a little more accommodating and provide guidelines and indicators for reporting on these issues as well? 

Human Rights impacts: 

The updates in the Human Rights section of the GRI Guidelines are based on the work of John Ruggie, the UN Special Representative on Business and Human Rights and his "Protect, Respect, Remedy" guidance. Several of the framework Management Disclosures have been updated to reflect this new thinking on Human Rights and two new indicators (HR10 and HR 11) have been added relating to (1) the percentage and total number of operations that have been subject to human rights reviews and/or impact assessments and (2) the number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms. The methodology for conducting human rights assessments is not prescribed, leaving companies to decide for themselves what a human rights assessment actually is and to what extent due diligence should be applied. Is a human rights assessment sitting round a table at HQ discussing potential issues or is it a third party verified audit of all human rights risks in all parts of the supply chain? Reporters will have to work this out for themselves, but I feel that new 3.1 indicators could have been a little sharper in their requirement of minimal accepted good practice in defining and assessing human rights impacts for reporting purposes. 

Gender Equality:

The focus here is on non-discrimination against women and the advancement of women's rights. There has been much work done in recent years relating to women's rights which are enshrined in internationally accepted basic human rights documents and are internationally recognized as being fundamental to sustainable development. Yup. We agree, don't we gals? The 3.1 framework includes several changes to Management Disclosures to include more specific reference to gender equality, an update of LA14 Performance Indicator (this has been updated to refer to salary AND remuneration ratios between men and women, rather than just salary alone, recognizing that there can be major differences between the two), and a new Performance Indicator LA15 which covers return to work and retention rates after parental leave by gender. What constitutes "return to work" and "retention rate" is left to companies to decide. However, much of the complexity here is precisely in the nature of these definitions: Does return to work mean return to the same of similar job with the same prospects for advancement? Does retention rate mean one month, three months, one year or more after returning to work? In response to LA15 we will need to be aware of the small-print nuances in gender equality accounting and whether meaningful measures are used as a basis for reporting.

The 3.1 guidelines are available now (download here) but they will not become mandatory for the declaration of report Application Levels until they are incorporated into the new G4 which will replace G3. In declaring a reporting level, companies will be able to choose to continue to report against G3 or step up their game and report against 3.1, but in either case, A, B or C Application Levels are available.
Confused? No Problem. All you need is a good consultant :).

elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices Contact me via  on Twitter or via my business website  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

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