Pages

Wednesday, July 3, 2024

GRI revises employment standards. Shoot me now.

Yes, we’re back at the CSR Reporting Blog. Apologies for too long an absence due to so much time working on reporting rather than writing about reporting. But this new GRI brainchild was too good to pass up.

GRI has published exposure drafts for the first phase of its employment and labor standards revision, introducing new and completely unique disclosures. Just when you thought ESRS was enough to mindblow even the most energetic of reporters, GRI has generated 13 original multipart disclosures and revised (expanded) 8 disclosures, all from 5 existing ones. It’s the GRI multi-stakeholder Mary Poppins at work again pulling more metrics out of the bottomless carpet bag.

We are truly in the age of mega mushrooming of metrics, where every new standard adds to the reporting burden in a way that I fail to believe is what's needed to advance sustainable development and protect people, society and the environment. There’s a point at which disclosure becomes dysfunctional rather than constructive. It makes you wonder when we will have a metric for how many times people use the bathroom – broken down by gender, region, employee category (including workers who are not employees) and time spent per visit. Let’s just hope that this disclosure requirement doesn’t include details of bathroom activities.

Despite reverberating declarations of cooperation, collaboration and undying love between the prominent standard setters (notably GRI, IFRS and EFRAG), here we go again: GRI proposes more unique disclosure requirements that do not appear in any other standards (as far as I can ascertain). But don’t worry, I am sure, once the new standards are finalized, GRI will publish an interoperability guide. That will make everything so easy. Not.

(The GRI-ESRS Interoperability Index will need quite some updating.)

What does this first phase revision cover?
This first phase covers topics relating to 
  • Employment practices and conditions 
  • Working life and career development 
  • Worker’s rights and protection 
that are part of GRI’s existing standards: 
  • GRI 202: Market Presence 2016 (Disclosure 202-1) 
  • GRI 401: Employment 2016 (Disclosures 401-1 and 401-02) 
  • GRI 402: Labor/management Relations 2016 (Disclosure 402-1) 
  • GRI 405: Diversity and Equal Opportunity 2016 (Disclosure 405-2) 
There is also a new draft, Standard Interpretation to GRI 2: Control of work, which aims to clarify the ‘control of work’ concept which is used to identify reporting requirements in some of the standards. 
All drafts and surveys are available here for public comment by October 4th. Sorry if that ruins your summer. 

General takeaways 
More policy please: In line with more recent GRI revisions, these new standards integrate topic-specific management disclosures in addition to the management disclosures required by GRI 3: Material Topics 2021. This means you can’t get away with a high level policy overview – each topic includes disclosures that are mandatory within that standard and, in some cases, require quite explicit responses. 
Gender expansion: Gender has expanded in the reporting world these days. Most of the proposed disclosure requirements ask for data breakdown by gender. In addition to female and male genders, there are now two more categories: Other (Gender as specified by the employees themselves) and Not Disclosed (Gender is not disclosed by the employees themselves.) 
Enter the age of the non-employee worker: GRI’s new disclosures relating to employee practices now expand to include information and metrics relating to both employees AND “workers who are not employees’. EFRAG (ESRS) calls these “non-employees” which rolls off the tongue a little more easily. Apparently, the interoperability spirit did not sync far enough to align on terminology. (I will continue here using the EFRAG term to reduce keystroke fatigue and lower my typing-time carbon footprint.) 
GRI’s new guidance on who is a non-employee aims to unblur the rather confusing guidance already published. “Workers who perform work for the organization and whose work is controlled by the organization but are not in an employment relationship with the organization. Control of work implies that the organization directs the work performed or controls the means or methods for performing the work. ….. [for example]….agency workers, apprentices, contractors, home workers, interns, self-employed persons, sub-contractors, and volunteers”. 
It’s still a bit blurry, I think (EFRAG actually does it better, see ESRS S1 AR61-65).           

The draft standard goes further than any previous standards regarding the reporting of many aspects of policies and practices relating to non-employees. For example, required reporting for BOTH employees AND non-employees incudes aspects of external and internal recruitment, performance management, performance reviews, data protection, termination, hours of work and rest, remuneration rates, social protection contributions and management of the effects of operational changes including redeployment or upskilling. These disclosures can be understood when accounting for impacts on own workforce, but the need to report so extensively on non-employees seems excessively burdensome to me. By comparison, ESRS S1 Disclosure Requirement S1-7 requires: The undertaking shall describe key characteristics of non-employees in its own workforce. This includes “disclosure of the total number of non-employees in the undertaking’s own workforce, i.e., either people with contracts with the undertaking to supply labour (“self-employed people”) or people provided by undertakings primarily engaged in “employment activities” (NACE Code N78).” All other details about non-employees in ESRS are optional disclosures (except in the case of health and safety, Disclosure Requirement S1-14, which makes sense). 

I believe that organizations should indeed be held accountable for work arrangements for non-employees (such as safety, privacy, working hours and conditions etc.) and in all cases should take measures to ensure non-employee rights are upheld though proactive monitoring/auditing of contracts with employment agencies or contractors or self-employed parties. I think there’s a case for separating these disclosures: one standard should apply to direct employees, and most companies would identify own workforce or subtopics thereof as material; a separate standard should cover the way organizations manage practices related to non-employees, which could be selected by companies that identify non-employee issues as material, perhaps those companies employing a very high rate of such workers. Jumbling up everything all together to me places an unnecessary burden on reporting companies and dilutes focus. 
NB: Let’s not confuse non-employee management with misclassification of workers as per the Uber ruling, where drivers were deemed to be workers and not self-employed. This form of “disguised employment” is addressed separately in the draft disclosures from a policy standpoint. 

In Accordance – too much? There was a time when declaring compliance to the full GRI Standards by being In Accordance was seen as a mark of leading practice among reporters. Many companies claim to report In Accordance to signal leading transparency (although there is quite some corner-cutting in most cases). Now, I am wondering if the burden of such extensive reporting will lead companies to pick’n’mix, preferring to “reference” GRI Disclosures rather than aim for In Accordance. I have always advocated for relevant transparency, not all-out transparency. I think these new draft standards proposals step over the line of reasonable and constructive disclosure. Read the drafts. Decide for yourself.

Key takeaways: Employment Draft Standard GRI 404-1 
Got a grievance? GRI’s got you covered: The strong influence of human rights thinking is clear in this revision, with almost all disclosures referencing grievance mechanisms, appeals processes, adherence to fundamental principles and rights at work or worker representative engagement on different issues. If your reporting has conveniently glossed over human rights issues, this revision means no more. 
Do you pay your interns? You probably should, because now you will be asked to give a full account of remuneration for interns and explain why they are not paid, if they are not. No need to disclose what they have for lunch. 
Surprise surprise, privacy matters: You will need to disclose policies regarding employee and non-employee personal data collected, processed and monitored as well as how you obtain informed consent. It will be interesting to see how many employers collect information about employee shoe sizes or ice cream flavor preferences. Regarding the latter, I’ll happily give my informed consent. Additionally, a quantitative disclosure requires reporting of the number and types of incidents related to personal data protection and privacy of employees and non-employees. Incident means legal action or complaint or internal discovery of noncompliance. Companies are just going to LOVE this one. All that dirty washing hanging out there. Can’t see that happening any time soon. 
Saying goodbye? Now say how: A new full disclosure devoted solely to termination practices, including a description of the valid reasons for termination. I doubt any company will publish a policy relating to involuntary termination for reasons other than poor performance, misconduct or layoffs or variations on those themes. GRI explains that “This new management disclosure aims to increase accountability on the termination of employment or work. The termination policy is related to job security.” I am not sure how explaining your policy on firing people is related to job security. I would have thought the opposite is true. 
More and more and more data: Currently, the data requirement for the GRI 401-1 new employee hires and turnover indicator includes “total number and rate of new hires during the reporting period, by age group, gender and region,” and the same for turnover. The proposed draft expands this to include reasons for voluntary turnover and termination AND internal recruitment rate for employees and non-employees AND length of tenure by region for four different employee categories AND the number and turnover rate for non-employees by region. Ugh. Might as well just include a link to your HRIS database and be done with it. Another example: Currently, GRI 404-3 requires reporting of the percentage of employees by gender and employee category that received a performance review. In the new draft standard, it is also required to report how many non-employees received a performance review, and for those employees and non-employees who did not receive a review, why not! Hmm. Good luck with that one too. 

Key takeaways: Labor and Management Relations Standard 
This set of three multipart disclosures expands the single disclosure in GRI 402 that requires reporting the minimum number of weeks’ notice provided to employees regarding significant operational changes that affect them. The exposure draft goes way further to encompass details of how such changes are managed for both employees and non-employees. 
Don’t forget to consult: A key feature of disclosures here are how a company consults with workers’ representatives. Everything from termination and appeals procedures, notice periods and severance payments, the number of weeks spent in consultation with workers’ representative ahead of implementing changes and more are part of the draft disclosure requirements. 
Don’t forget to mitigate: For employees and non-employees, reporting requirements include actions taken to mitigate the effects of significant changes including redeployment, training and reskilling or layoffs. 

Key takeaways: Remuneration and Working Time 
This set of disclosures has gone into overdrive with more information and data requirements than ever before with three management (policy) disclosures and four multipart remuneration disclosures. Prepare to get granular on rem. This section includes elements from existing GRI 202-1, 405-2 and 401-2 and more. 
From minimum wage to cost-of-living: In GRI 202-1, reporters were asked to describe employee remuneration policies relative to the local minimum wage rules, if available. In the draft disclosures on remuneration, companies are asked to define remuneration policy including how this accounts for cost-of-living estimates and provide, for significant locations of operation: median gross hourly basic pay by employee category AND the number of employees who are paid at the local minimum wage AND number of non-employees who are paid at the local minimum wage AND the cost-of-living estimate AND the number and percentage of employees whose basic pay is at or above cost-of-living estimate, including a breakdown of employee category and gender AND steps taken to address gaps between cost-of-living estimates and basic pay for employees and non-employees. GRI conveniently provides a suggested template (one of several template proposals in this revision) for presentation of the cost-of-living metrics. For companies with more than three “Significant locations of operation” and more than three “Employee categories”, this is going to stretch the spreadsheet limits. 


By comparison, the ESRS requirement on remuneration references “adequate wages” where adequate wage is defined as the legal minimum wage or, if not available, in line with other relevant benchmarks. The organization is required to report (ESRS S1 Disclosure Requirement S1-10) “whether or not its employees are paid an adequate wage, and if they are not all paid an adequate wage, the countries and percentage of employees concerned.” C’est tout. 
There is also the question of what data or benchmarks to use to define cost-of-living estimates in each country of operation. GRI recognizes that there is no universal formula for calculating cost-of-living, and this can vary extensively depending on what you include. GRI guidance explains: “Cost-of-living estimates are approximate calculations determining the necessary amount to cover an individual and their family's basic expenses like food, housing, and healthcare in a specific location. Different methodologies can be used to derive the cost-of-living estimates as there is no international agreement.”
I also wonder if the often-referenced living wage concept is different from the cost-of-living concept. Either way, any reporter counting this as material will need to set up a whole new database to meet the needs of this disclosure, and every reporting company is likely to interpret cost-of-living differently. I have to wonder how valuable this is going to be in the grand scheme of how we ensure that remuneration is fair and decent for everyone. 
Working time – all is revealed: New disclosures 2 and 7 are dedicated to working time and requires detail of policies defining working and rest hours by day, week and year and metrics demonstrating how these were applied, including a breakdown of employees by type as well as non-employees with details of the number of hours worked by each type across four working-hour bands, in addition to other disclosures relating to additional aspects of working hours. Specifying overtime hours worked is not a requirement but in case anyone wants to volunteer, GRI generously shares an example template for presenting information on the number of overtime hours worked by employees by gender at significant locations of operation, with a breakdown by three bands of overtime hours. Additionally, the proposed draft asks organizations to describe how the working time policy considers the specific needs of vulnerable groups, including young workers and pregnant and nursing workers. 
Gender pay gap - still on the table: This disclosure is similar to the current GRI 405-2 and asks for percentage difference in average gross basic hourly pay of men and women for each employee category. No momentous change here, except that very few companies actually report a gender pay gap except for in those countries where it is a legal requirement to report, such as in the UK and certain other countries.
Social protection coverage: This is another extensively expanded disclosure requirement building on existing GRI 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees. Rather than requiring companies to specific which benefits they provide (as current), organizations will now need to specify whether they provide any of a set of 8 benefits categories, alongside other disclosures relating to who gets what and where and if it’s required by law or otherwise. Specifically, there is a requirement to report how a company monitors that social protection contributions are made to relevant authorities according to local regulations for non-employees.

 ******* 

In conclusion, with this first phase of changes, GRI has created a wish list of disclosures in a topic that is material to most reporters in some way. Disclosure should never be just for the heck of it. It should provide useful and meaningful information that helps us understand the impacts of a company on society and the risks it faces. If the second phase of the labor standards revisions take the same mushroomy approach, it’s hard to predict an enthusiastic adoption rate by most reporting companies. 
These disclosures differ drastically from what was hailed as "disclosure standards on steroids" with the introduction of ESRS. ESRS went further than any other sustainability disclosure standard. Despite all the wonderful collaboration going on, these proposals are not aligned with ESRS in a way that enables reporters to comply with both ESRS and GRI interchangeably for a single disclosure on these labor topics: reporting fully against ESRS would not meet the disclosure requirements of these GRI draft standards. I have to wonder who has lost the plot here. Oops. Maybe it’s me! Obviously, I need more ice cream.🍦🍦🍦🍦




elaine cohen, GCB.D: ESG Competent Boards Certified (2021), Sustainability Strategy and Disclosure Specialist, former HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltd, an inspired Sustainability Strategy and Reporting firm having supported >160 client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Beyond Business