Trump versus Clinton or SASB versus GRI

Topical as ever on the CSR Reporting Blog, although usually not party-political, I was struck by some of the similarities in the current U.S. Presidential Election and the sustainability standards reporting landscape. In fact, we might liken the Trump-Clinton adversarial position to the SASB-GRI position, where the stakes have just been raised with the official publication of the GRI Standards.  

GRI was created as the voice of the people in 1999 to support the inevitable need of wide groups of stakeholders for increasing transparency about business practices and corporate accountability. Over the years, GRI has remained steadfastly true to its multi-stakeholder process (sometimes, sadly, at the expense of speed and flexibility) and continues to deliver the only broad set of globally applicable standards for sustainability reporting available today. With the vast majority of reporting companies using GRI guidelines, and, I expect, an equally vast majority planning to transition to the GRI Standards in the next reporting cycle, GRI's voice has been a dominant one on the sustainability landscape for many years. Unfazed by the absence of a CEO in this current period, the mission goes beyond individual interests, and the Standards promise to elevate GRI's position in the global debate - especially in the political arena where governments make decisions and regulators earn their bread. The voice of GRI is the voice of how business affects us. Often, the actions of business affect our bank accounts, but for most of us, they affect the quality of our environment, the values we hold dear and the way we live happy, productive lives. (Cue: violins).

SASB was created in 2011 with a different purpose. Distilled into one sentence, that purpose (as I interpret it) is to help people who have more money make more money with sustainability in mind. SASB states its vision and mission as: "The Sustainability Accounting Standards Board sets industry-specific standards for corporate sustainability disclosure, with a view towards ensuring that disclosure is material, comparable, and decision-useful for investors." This is how it's portrayed in a video screenshot on the SASB website:

Helping investors make more money in itself is nothing to be ashamed of. SASB's approach has been to split the business of corporations into different sectors, and develop a comprehensive range of standards, focusing on the mostly sector-specific sustainability-related issues that affect the financial valuations of companies for investors. SASB has had an amazing crazy-busy time, consulting with corporations and investors and pulling together sustainability accounting standards across 79 industries in 10 sectors. The full set was published in March 2016. It's been a mammoth job and the outputs are very clear.

At the center of SASB's raison d'être has always been that existing sustainability reporting is rubbish for investors. Sure, I don't recall SASB ever using the word rubbish, but that's how I understand it. For example, in a letter from SASB to the United States Securities and Exchange Commission in July 2016, SASB refers to Sustainability Reports as "glossy, attractive publications, often developed in consultation with a company’s marketing department or a public relations firm that describe a company’s achievements with respect to environmental, social, governance, and related matters" and "sustainability reports generally include information that is immaterial for purposes of investment decision-making. These reports tended to make the reporting company look as good as possible to stakeholders other than investors" and "Standalone sustainability reports are often prepared by corporate communications departments or public relations firms. They tend to be positively biased and do not provide investors with a true and fair representation of performance on material risks....This practice of producing a glowing sustainability report is known as “greenwashing”." No doubt then, that investors don't think much of sustainability reporting, according to SASB.

SASB goes further in its public comments to GRI during the Exposure Draft Period of the GRI Standards, submitting a 4-page letter, which includes the paragraph:

"Perhaps GRI is better placed in providing a forum for stakeholders to voice their concerns and ideas"? Seriously? After 17 years of driving the sustainability conversation by creating reporting frameworks that have been adopted and recognized as best practice by thousands of organizations globally, the suggestion is that GRI backs off and runs a chat-club while SASB's largely untried and untested Standards become the SEC endorsed/mandated reporting tool for a small pool of U.S. public corporations? That’s a bit off in my book. It made me think of the adversarial positions we are currently witnessing in the U.S. Presidential Election. In politics, for you to win, someone has to lose.

Portraying GRI as a virtually useless initiative that's encouraging companies to greenwash, and the thousands of sustainability reporters around the world as creators of imbalanced marketing blurb to make them look good is a distortion. SASB wants to be the recognized standard that the U.S. SEC endorses.  The above-mentioned letter to the SEC concludes: "Because of SASB’s approach, with its emphasis on due process and adherence to U.S. securities law, we believe it would be appropriate for the SEC to acknowledge SASB standards, once they become final, as an acceptable framework for companies to use in their mandatory filings to comply with Regulation S-K in a cost-effective and decision-useful manner." Now that GRI is a formal Standard, and not just a framework, SASB has real competition. 

Even before the GRI Standards were published, the GRI reporting guidelines (specifically G4) were used widely in both non-financial AND financial reporting. For example, using Caspian^TM powered by Datamaran^TM , eRevalue's brilliant corporate disclosure research tool, covering more than 44,000 corporate reports, it took me just a split second to discover that GRI was referenced 733 times in 2016 in financial reports and SEC filings, whereas, in this same period SASB was referenced just 18 times. That's in addition to the >800 non-financial (sustainability) reports that reference GRI, versus 51 non-financial reports that reference SASB. (Interestingly, SASB may be becoming a tool that's used more in non-financial reporting than for financial reporting. Oops!)  Of the 18 financial reports published in 2016 that reference SASB, only one actually reports against the sector indicators according to the relevant SASB Standard. All the others mention SASB once - in reference to the frameworks and guidance used in the preparation of a materiality matrix. Of these 18 financial reports, 14 include a full GRI G4 report with a Content Index, or refer to a standalone G4 report in addition to the financial report. The remaining four companies mention GRI as a guidance framework for the materiality assessment.  

Now, let's be clear. SASB has a very legitimate and useful agenda. Make sustainability disclosure more relevant and useful for the U.S. financial markets. Address the very specific information needs of investors. Help the financial markets enhance value creation. Efficiency. Comparability. Clarity. Focus. Sector-specific. It's all good. But as good as SASB is, SASB is not better by telling GRI to go and sulk in a corner because GRI has a different definition of materiality or because proper use of the GRI framework is evolving rather than perfect.

Sure, GRI-based reporting is fraught with issues of quality, good news rather than balanced news, and omissions. I have been a constant voice of the reporting quality mantra. It's true that some Sustainability Reports are glossy brochures. That's not to say the framework doesn't add value. GRI has been used tens of thousands of times over tens of years in hundreds of countries. How many times have the SASB standards been used in practice? How is the quality of adherence to the SASB Standards assessed? How many investors used SASB based disclosures and found them to be relevant to their investment decisions? What's the prognosis about how investors will actually use the information reported according to SASB Standards, if they are ever used by more than a couple of corporations?


In my work of more than 10 years as a sustainability reporting consultant, I know first-hand the tough deliberations that go into sustainability reporting and the processes companies go through to make quality and meaningful disclosure. I witness a genuine intent to present good and relevant information for stakeholders. I believe the reports of today are much more balanced than those of some years ago. But there is obviously still some way to go.

Marjella Alma, CEO and co-Founder of eRevalue, developer of a groundbreaking analytics platform for emerging ESG, regulatory and reputational risk assessment, is very much at home in this space. Marjella says: "The collective push for disclosure on sustainability issues is impressive. Irrespective of the specific framework, there is growing evidence that companies are including non-financial issues into all kinds of reports, including 10-K’s and Annual Reports. If you look at the issues, rather than the frameworks, you can see companies embracing the thought leadership and this push to more meaningful disclosure. GRI's work of the past 20 years is incredible; the global uptake including emerging markets, not just large multinationals, has made a big difference. The sector-specificity of SASB is a helpful addition. Ultimately, it's about helping companies understand 1. what issues are out there 2. manage them properly and 3. use the right metrics that reflect their business model. At eRevalue, we are making it much easier and much more efficient for companies to know what’s on the radar and do something about it."


What alarms me about the sustainability reporting landscape is this lack of respect and collaborative spirit. It may be that investors have different needs than non-financial stakeholders. It may be that materiality in sustainability reporting is used differently than materiality in a U.S. regulatory framework. But that doesn't mean that respectful, collaborative, constructive coexistence of these two approaches for maximum benefit would not be advantageous for financial markets. Both GRI and SASB organizations together are spending around $15 million per year to advance this - our - agenda. Perhaps that money could be used more efficiently with a greater degree of synergy. Instead of telling GRI to back off, maybe there should be a serious discussion about how to jointly provide guidance that meets the needs of SEC regulatory filings, investors and other stakeholders. I am sure this is possible. SASB has done amazing work in articulating sustainability priorities by sector. This is GRI's Achilles Heel. GRI has done amazing work in creating a strong framework that has put disclosure on the map around the world. There is surely something SASB can learn from that. Do we, as stakeholders, need to live with either/or? Can't we have both, in good spirit?

Which brings me back to the election. Only one candidate will win. One wins, one loses. It doesn’t have to be that way in sustainability. But then, I never was a politician but will always be an optimist.

 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz 

GRI Standards - the fun starts now

A while back I published an overview of the GRI Sustainability Reporting Standards Exposure Draft. Well, now, the Standards are no longer in draft form. They are in real-live-downloadable-usable-bloggable format. Get your free copy here on the GRI website. Not an awful lot has changed since the Exposure Draft. The main thing is GRIs optimism that this makes GRI a more welcome player at the high-stakes tables where governments, regulators and policy-makers play. As a guideline-maker, GRIs legitimacy was apparently not grounded enough to have equal voice. As a standard-setter, GRI has come of age and has the vote. For corporations who  transition to GRI Standards, though, the changes probably represent:

• an administrative headache - all the basic templates and formats developed for G4 will now have to change
• a change of language yet again - we all just got used to Aspects with a capital A - now it's back to topics
• a fear of greater scrutiny at some point in the future, possibly certification, that means a more robust approach to reporting will be required, rather than the sloppy use of G4 that we see by many reporters who declare use of the G4 but do not actually make the grade
• a fear that a price-tag will soon be placed on use of the Standards - GRI has to fund the GSSB somehow, right? 
• an opportunity to influence the Standards development - changes may now be quicker and easier with the modular Standard format, as only one piece needs to change or be added instead of the entire framework. The change from G3 to G3.1, for example, was confusing - the whole framework changed because a couple of new indicators were added. 

Billed with just a smattering of hype as the First Global Sustainability Reporting Standards Set to Transform Business, the Standards offer some advantages over G4, but it will take more than this to transform business. The move to Standards is not, and was not designed to be, an overhaul of G4 to deliver a new wow version. No bells and whistles. The move to Standards does not incorporate significant elements which will improve the quality or robustness of reporting, the comparability of reporting, the way companies define and prioritize material issues Aspects topics and how they determine what and what not to report, the use and credibility of assurance practices etc. While there has been some tidying up of the silly bits in G4, and some clarification of the ill-worded bits, nothing substantive beyond the wordsmithing and number sequencing has changed.

Look beyond the numbers
However, you cannot simply change the numbers and that's it. You have to check in with each Standard. For example, one of the disclosures that few reporters actually report fully: GRI 403, formerly Aspect Occupational Health and Safety, including former G4-LA4, G4-LA6, G4-LA7 and G4-LA8:

Disclosure 403-2 is the former G4-LA6.  See the difference in the wording:

The former relates to (1) total workforce and (2) independent contractors. The latter, 403-2, relates to (1) employees and (2) everybody else. This is much clearer in the new Standard but may require a change in the way some companies report. 


Beyond these incremental improvemental differences, GRI Standards come with one critical change and one new demand:

One critical change
G4's 46 Material Aspects have now been converted into 33 topic-specific Standards. That's two fewer than in the Exposure Draft. The material topics table would now look like this (except the new Standards do not include such a table):

That's a total of three universal standards and 33 topic-specific standards - one for each topic.

All the Standards are in BMW-style series with no subsets: 200 series for Economic, 300 series for Environment and 400 series for Social. All former Aspects relating to grievance mechanisms are moved to the Management Approach Standard, and are not identified as material topics in their own right.

For reporters, this means that if you retain the same material topics, you still might need to revise the indicators you report. For example, if Marketing Communications were a material topic, Core reporters would have selected one of two disclosures - G4-PR6 or G4-PR7. Now, the new Marketing and Labeling topic includes both Product and Service Labeling, which was associated with three indicators - G4-PR3, G4-PR4 and G4-PR5. The new Marketing and Labeling disclosure has been trimmed down to exclude some disclosures that are now General Disclosures, leaving three possible options in GRI Standard 417, only one of which was formerly Marketing Communications (417-3).

 

Therefore,  as a Core reporter, you now have three options where you had one previously, but as a Comprehensive reporter, you have three mandatory disclosures where previously you had five. This might sound a little confusing, and it is. But for most of the disclosures, all you need to do is switch the numbers. In some cases, companies might have to realign their material topics to the GRI Standards and revise the selection of topic-specific disclosures. 

Another point to make here is that the GRI Standards now make it quite explicit that it's just fine to use a different indicator than the ones included in the 33 topic-specific Standards. Standard 101-2.5.3 includes the possibility to report "other appropriate disclosures" if there is no appropriate GRI Standard.

For example, you are a Food and Beverage Manufacturer and have selected Community Investment and Philanthropy as a material topic. Interestingly, philanthropy has never been identified as possibly ever "material" by GRI - this is rather odd, as strategic philanthropy can be a critical part of a corporation's impact on society - and most companies just LOVE to report on this. 

Funnily enough, this is exactly one of the material topics selected by PepsiCo in its very recently published 2015 Performance with Purpose Report, which I was just reading. PepsiCo deals with this in an interesting way. Instead of including an indicator in the GRI Content Index, PepsiCo explains: "At this time there are no relevant GRI indicators that directly correspond with PepsiCo’s material aspect of Global Citizenship. PepsiCo monitors and reports on this aspect through the KPIs discussed in the Global Citizenship section." 

Now, with GRI Standards, PepsiCo can define its own disclosure of measurement of progress against this material topic, provided these disclosures are subject to the "same technical rigor" as the GRI Standards. In fact, this was also an option under G4, but it was a sort of secret option that no-one knew about unless they asked. Now it's more explicit, and enables companies to select more meaningful performance indicators to reflect progress being made in different areas. 

One of the most perplexing aspects of G4 always was the limited flexibility to reflect the diversity of material topics. If your material topic was, for example, Alcohol Related Harm, as it is in the Diageo 2015 GRI Report,  you wouldn't find a related Aspect among the GRI pre-paid lists. What to do? One catch-all option in G4 was to use G4-EC8 - "examples of the significant identified positive and negative indirect economic impacts" for anything that was not covered by another indicator. I have pretty much used G4-EC8 to death over the years. Another option is to use a combo  of existing Aspects. This is what Diageo does:

 

However, this is not entirely satisfactory, as none of the Performance Indicators that Diageo reports under any of these aspects relate to alcohol in society - they all relate to safety of products manufactured, quality control and labeling requirements. None of these indicators actually address the material issue. Therefore, the only real option for Diageo under these circumstances is to do what we discussed above  - disclose the Management Approach and use a proprietary non-GRI topic and indicator. As it happens, Diageo does have a perfectly fabulous disclosure on this: 

It's a clear strategy statement and targets. This can be used with  G4 to disclose against this material issue. With GRI Standards, the fact that this is now explicit (Standard 101-2.5.3) might make the use of the Standards easier and more relevant for many reporters who suffered from Aspect perplexy.

One new demand

In the GRI Standards,the GSSB has snuck in something else:

Standard 101 - 3.4. If you refer to the GRI Standards in any way in your report (and there are a set of prescribed statements in the Standards that define how to say you did the GRI thing), then you are obliged to notify GRI - either by sending GRI a copy of the report or by registering the report with GRI on the Standards page. Except that at present, there is no link or form to use to notify on that page. I wonder what GRI will do will all these thousands of notifications ... let's assume 8,000 reports reference the GRI Standards in any given year, that's 30 notifications every working day. And who will know if reporters do not notify GRI? I can understand that GRI wants to keep tabs on use of the Standards, but this is likely to happen only when GRI charge money for certification or use of the Standards logo... forgive me for being skeptical that this is on the cards at some point. 


18 months to get ready and steady
In the meantime, GRI Standards will be free and effective for sustainability reports published on or after 1 July 2018. So you have plenty of time to get your disclosures in order. Early adopters gain the advantage of being early adopters. That is, you get first rations of paracetamol. Overall, the language is clearer, the repetition is less and the direction is more logical. You can download all the Standards in one consolidated set at the GRI Standards download center. Whew, that's a relief. And only 443 pages as well.



I am sure that we will see many GRI Standards-based reports published in 2017, ahead of the 2018 cut-off date. The fun is about to start.....




Ahem.. needless to say, I will be very happy to offer the expertise and incredible service of me and my company, Beyond Business,  to help YOUR company transition to GRI Standards and become an early adopter. Paracetamol included free with this service. Contact elaine NOW before stocks run out.

 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz 

The GRI STANDARDS Exposure Draft explained

It's official. G4 is now becoming a STANDARD. GRI is looking for input to the new Exposure Drafts for GRI Sustainability Reporting Standards (GRI Standards) in the Public Comment Period which is taking place NOW and will continue until 17th July. Of course, for all of you attending the 5th GRI Global Conference next week (come and say hi!) you will be hearing a LOT MORE about that, so you might want to hold off on your comments until after the event. In the meantime, I decided to translate the technobabble into a digestible version of the changes for those of you who want to know more about what it means, in addition to what it means, if you know what I mean.  

I also took the opportunity to have a chat with the two folks who are key to making this change happen - Chelsea Reinhardt, GRI's Deputy Director of the GRI Standards Division, and Bastian Buck, GRI's Director of the Standards Division - both of whom shared some fascinating insights. Chelsea has a strong background in standards, having led a full supply chain standards review for the Marine Stewardship Council in a previous role. She also has great taste in ice cream - cappuccino chocolate chip is her thing. Sounds good to me. Their insights are included through this post, which is LONG. So grab your Chunky Monkey and let's get started. 

A GRI Standard - how scary is that?

I suspect that for most of us, hearing the word STANDARD brings a sense of almost regulatory-like scary officialdom to sustainability reporting - after all, what we have had so far from GRI is a periodically-updated set of guidelines in the form of a framework - and that doesn't sound particularly threatening. It's a credit to GRI that the voluntary uptake of this framework has been so widespread by so many companies around the world - although the cynics (or realists) among us might suggest that because the application of the framework has been so pick'n'mix-ish, it's been easy for many reporters to claim adherence to the framework without actually investing the rigor that adherence requires and without actually adhering. Adherence without adherence has been a major blow to the credibility of Sustainability Reporting over the years. As the CSR Reporting Blog has often pointed out. 

Now, with G4 becoming a STANDARD, is all that going to change? Are we going to enter the era of ISO G4 that requires an administrative army, a battalion of auditors, a paper trail to Antarctica and a list of corrective actions as long as the Great Wall of China in order to report GRI? Is reporting going to become a headache, rather than the FUN we all have today? (What? Not fun? Then you are not doing it right!) Well, you know what, I am not going to say it's not a little scary as I think there is a little more to the transition to Standards than we might believe at first glance. It's positioned as G4 same but better... but when you read the small print.. it's actually G4 with many new twists. We'll still be in the same ball park but the ball will be a little different. Stay tuned.

Insight from Chelsea
"One of the main challenges in transitioning the standards has been the size of the task. Going through more than 300 pages of very dense content in the G4 guidelines, the Implementation Manual and the FAQ document. We have been sifting through line by line, under the oversight of the GSSB, tying to make decisions on which content rightfully belongs as a requirement in the new Standards and what should be rightfully positioned as guidance or recommendations. We are really trying to bring it all together in one place and this often involves considering the historical context in which the content was developed and going back to the output of the G4 working groups as well."

Insight from Bastian
"The discussion about adherence to the Standards and quality of reporting has come up frequently. One of the main struggles for GRI is that the Standards are voluntary and adherence in the current context is first and foremost a claim that a reporting organization makes. There are probably a range of mechanisms needed to introduce rigor. Certainly GRI should be more proactive about bringing the users of reported information into this discussion. But the priority right now is the Standards with a very clear signal from the Standards Board that credibility is something to look at and that is high on the agenda."

Materiality still center stage
The new Standards retain the principle of materiality as a core element to shape the entire disclosure, in the same way as in G4. We have seen in many G4 reports, however, that materiality can be whatever you want it to be - and the detail of how companies convert stakeholder input into a dot on the matrix is often non-existent. I had wondered if the transition to GRI Standards might not have taken the opportunity to add some requirements for more disclosure about how materiality is determined.

Insight from Chelsea
"The process for prioritization of material issues in the Standards has not changed fundamentally. The principle has not changed but we have strengthened the guidance to give more specificity about what we expect to see reported against the materiality principle. We are currently preparing a guidance document that will be released with the Standards about identifying and prioritizing material topics and applying the reporting principles. In some cases, we have seen that the materiality matrix has been misinterpreted and we are trying to improve the consistency of reporting materiality in the new Standards."

The skinny

Here is the short version of what's going to change. Instead of G4 being two documents - the Principles Manual and the Implementation Manual - there will now be to be a set of multiple modular Standards:

The first three - SRS 101, 201 and 301 - are what we today know as the Reporting Principles / In Accordance criteria, General Standard Disclosures and Disclosures on Management Approach (DMA). The remaining standards each cover an individual topic, based on the G4 Aspects, and include all the Performance Indicators we love so well. Sector Disclosures still exist, but in the new Standards they are referenced as guidance, not as a requirement.

The In Accordance options remain the same in this new setup - you need to report against SRS 101, 201 and 301 and one disclosure for each material topic for CORE and every disclosure for each material topic for COMPREHENSIVE, just as now in the G4 framework. 

Selection of standards from the 400, 500 and 600 series are determined by the selection of your material impacts - just as now. If you don't want to go the full monty, you can use one of the Standards - say SRS 505 for reporting emissions - and reference that in isolation - just as in the current setup, you can include "disclosures from G4" without claiming In Accordance with the entire sustainability reporting framework. Note that all the Standards now have their own numbering, so Disclosure 403-2 in the SRS 400 series is the new version of G4-EC8 in the Indirect Economic Impacts of the Economic category. There are several changes in the order of the different disclosures so in making the transition, some application will be required to work out what's moved and where it's moved to.

Insight from Chelsea

"There were many compelling arguments to take away the (Economic, Environmental, and Social) categories altogether, as so many issues are cross-cutting and have both social and environmental implications. But on the other hand, there’s a benefit in having categories to help users navigate and understand the new structure. Ultimately we took away the sub-categories – but this is subject to change with feedback we may receive."

Insight from Bastian

"With regard to the Sector Disclosures, what we have learned over time is that one of the big struggles is grouping – companies’ activities often cut across different industries and are not directly comparable. The other thing is we don’t want to establish several levels of the Standards going forward, the vision is to be global, comprehensive across the board of potential sustainability impacts of corporations. What we have on the horizon is guidance around issues that you might want to consider if you have a certain business activity… and that would work in the new structure going forward. Having been around in these discussions for so many years, I am still hopeful that we can build that out. It is a big stretch and requires more resources but our priority today is to get the Standards in place. Reporters can also of course make use of the sector guidance from other sources in conjunction with the GRI Standards - they have been written to allow this."

Insight from Chelsea
"The options of core and comprehensive are definitely a point of discussion and continued debate. The decision was made at this point in time to maintain both options as consistent as possible throughout the transition to Standards. There is already going to be some transition work for companies but it is one of the priorities for future review. We will be consulting on this, probably later this summer. There is no consensus here that these are perfect options but once we see how companies are using the Standards, we will be able to consider that what changes might be best for a review and redesign. These will be really exciting conversations for us to consider."

Insight from Bastian
"Looking at the GRI Standards, going forward, they will be more appropriate for use by policymakers. Take the EU Directive for instance. GRI Standards are aimed to attract a new audience not just retain the ones we have. There may be specific requirements in different jurisdictions for companies to report on ESG issues that can be fulfilled by individual GRI Standards or sections of GRI Standards not necessarily against the entire set of standard relating to specific core or comprehensive options."

What's in the box? 

The Exposure Drafts of these documents are here and the party pack includes: 

• The first part of each of the three universal standard proposals SRS 101, 201, 301
• One example topic-specific Standard in the Economic, Environmental, and Social categories
• A revised Glossary of Terms

There is also a 77-page background document which you can find here which provides a blow-by-blow account of all the changes. 

All in all, you have 207 pages of documentation and 77 pages of explanation. Time to order more Chunky Monkey.

Insight from Chelsea

"There were some definite debates among members of our Standards Board about the nature of the content and the outcome we are trying to get to with these specific disclosures. There is actually a public record of all these conversations and outcomes on our GSSB website. There were also some structural debates – members had different opinions about the structure of the content, for example, do we create a structure of one standalone standard or should that be five separate standards. In the end, we settled with one standard but that was not necessarily a unanimous vote. This might be revised further depending on stakeholder viewpoints."

Learn the new language

GRI is known for creating its own language and the lingo associated with G4's introduction was somewhat unwieldy to say the least. All of a sudden we had to get used to Specific Standard Disclosures, Aspects, Aspect Boundaries, In Accordance and a whole lot more. In the transition to the GRI Standards, we will have to adjust once again. First, each is standard is now an SRS. We can handle that. But just as we had got used to calling everything Aspects, the new proposal kicks that out and replaces that with the term, "topic", no longer making the distinction between a GRI prefab material impact (Aspect) and any old material impact (topic). In addition, the GRI Standards adopt the aceptable lingo for standard-setting practice - we now need to understand the nuance between what we shall report, what we should report and what we can report. If the disclosure says you shall disclose, then it's required in order to be In Accordance. If the disclosure says you should disclose, or you can disclose - then this is not required - it's a recommendation or guidance. The new Standards are full of shalls, shoulds and cans.. You too should, shall, can adapt to the new language of the GRI Standards when you prepare your reports in the future.  

When is an Aspect not an Aspect?

When it becomes a STANDARD of course. In the new era of SRSs, Aspects have no home. They have become topics. Just like any other topics. You all have this table of Aspects committed to memory.

 Now it looks like this: 

GRI has whittled down the total number of Aspects ..errr topics.... from 46 to 35 and, as you can see, things have moved around a little lot - anti-corruption and anti-competitive behavior are now in the category of economic topics rather than social topics, for example, and many Aspects which had been duplicated in G4 - such as three different supplier assessments for labor, human rights and society have been boxed into one Supplier Social Assessment topic. All the grievance mechanism Aspects that were introduced in G4 have not been continued as individual GRI Standards - they are now to be part of the DMA and only disclosed if material. Another big change here is that there are no sub-categories for social topics.  

In many ways, this change to the Aspect-topic table makes a lot of sense - it's almost as though GRI is correcting the mistakes of G4 by tidying up the set of predetermined topics we can choose from. Some of them were indeed rather awkward. On the other hand, this list of 35 is not extensive enough and we might have expected GRI to dig a little deeper at this stage and develop a more comprehensive list of topics that help align the language and performance reporting around similar issues. If this list were broader (and I understand it can never be exhaustive), companies would be more easily able to match issues that are material to their business to the list of available topics. This would encourage more consistent reporting around more issues. As it stands, social issues such as access to products and services, animal welfare, digital inclusion and many many more are left to the vagaries of SRS 403-2 (G4-EC8 in a former life) - significant indirect economic impacts -  a sort of catch-all disclosure where nothing quite fits exactly but it's used because it's the nearest thing when you want to align your materiality within the G4 framework and you have topics that do not fit anywhere else. SRS 403-2 has more guidance clauses than Liberace had sequins. Guidance, that means, can, not should or shall. 

In essence, this goes right to one of the core weaknesses of G4. The framework should be about reporting impacts, but in fact, many of the topics and performance indicators are about reporting actions. Almost every company that uses the framework has indirect impacts far far greater than all of its direct impacts added together. Yet, in G4, so little space is given to these type of impacts that it drags reporters back to "what we did" rather than "where we made a difference to people's lives". Significantly enhancing the table of topics and providing guidance for disclosing on these would make the GRI Standards more robust and relevant to more reporters and report-users than the current proposal. I understand that one of the great benefits of the new Standards structure is that new topics can be more easily added in the future, and that this will be a priority for GRI once the Standards are in place.

When is a Boundary not a Boundary?

When it becomes a STANDARD of course. In G4, one of the most difficult things we had to get our mind around was the requirement to state Aspect Boundaries. The Boundaries, we were told, were where impacts occur.

From G4 Framework Glossary

The G4 framework requires reporters to describe where an impact occurs, including the geographical location, whether this is either within your organization or outside your organization, and then define who it affects. For example, child labor may be a problem in certain geographies and the impact maybe outside your organization because the child labor occurs at your supplier locations and not in your own factories. So, the material issue is child labor, but the Aspect Boundary might be external in country X. You might be tempted to think that it's material for you, but that, because it's external, you are not accountable. 

In the new Standard it has been clarified that the Boundary relates to the entities which cause the impact, wherever the impact occurs. Child labor may be the issue, and even if the impact occurs at your supplier's factory, you are still the cause of that impact insofar as you hired the supplier to do the work. No question here about accountability. Your supplier, your problem. In the proposed GRI Standards you are required to disclose which of the entities inside or outside of your organization are causing the material impact - no geography required (SRS 301-1). However, the new Standards do give you a little room for maneuver with some guidance: "If the Boundary for the material topic is defined as outside the reporting organization, it can be difficult to report the topic-specific disclosures. This can happen if, for example, the Boundary for a topic includes part of the supply chain, and the organization does not have access to supplier information to report the topic disclosures. In these cases the organization is still required to report its management approach for the topic, in order to claim that the report is in accordance with the GRI Standards."

This is all rather tiresome, somewhat confusing and probably not even all that relevant. The entire concept of Boundaries is a little off-putting. In my view, the simpler version would be to require (shall) companies to disclose material impacts using their entire value chain from sourcing to market as a start-point and leave out Boundaries altogether.

Insight from Chelsea
"The Boundary change is one of the things we want to be communicating about during this consultation period. The clarification around the definition of Boundary is very consistent with the intent of the definition in G4 and with the outcomes of the original working group that developed that content. One of the main references are the UN Guiding Principles on Business and Human Rights and this together with the OECD Guidelines established this concept that companies should take responsibility for the impacts they link into not just their own direct impacts. We didn’t provide enough explanation in the G4 text to help companies interpret that consistently. We have had many reporters who asked for clarification. Fundamentally the STANDARD offers a clarification which is not in contradiction with G4, but we probably didn’t do a complete enough job in explaining it in the first place. The other misconception was the geographic interpretation of this, that’s not really a real issue for this particular disclosure."

And now to the fine print

The remaining changes in the transition to Standards are largely about terminology, improved consistency and clarity, and by and large, this works. More to follow on this as I scrutinize the fine print, but in general, the changes seem positive, for example a slightly clearer version of the "describe your supply chain" disclosure and more.

Insight from Chelsea

"There are a number of more subtle but important changes and our job is to call them out in a way which is clear and digestible. For example, the content index will be more outcome based and we no longer prescribe the use of a specific table format. The intent is that it will make it easier for reporting companies. I would say for companies that were previously working off the guidelines and not consulting the Implementation Manual, there is a lot of additional guidance and this is a good thing for them to dig into and understand. This may look new to some organizations who have not used the Implementation Manual thoroughly, but we think it will be very helpful."

More insight from Chelsea
"Comparability is of course harder across companies with the concept of materiality. I think you will see some improvement in the Standards that leads to greater comparability with improved clarity. In some parts of the Standards we have more specific information about what should be reported where in the past it was less clear. We believe that companies want to do the right thing and report fully and correctly. The Standards make a clear distinction between what is mandated to report and the guidance and coaching that can help you to get there."

GRI STANDARDS: Good, bad or indifferent?

The main challenge with the GRI Standards, targeted for implementation for reports published in 2018, is that it comes so close on the heels of the G4 introduction. Most reporters are just getting their minds wrapped around G4, and whoosh, in comes STANDARDS with SRSs, topics, shalls, shoulds and cans and a different look and feel. I doubt it will be a very easy transition. GRI says the Standards are more user-friendly - they weren't all that user-friendly in the first place - but there are some welcome changes and clarifications. The big advantage will be that GRI can play around with the individual standards without having to revamp the entire standards suite which will enable updates, revisions and the addition of new topics more quickly, efficiently and effectively. Of course, I still suspect that the main motivator for GRI was not to improve G4 but to convert it into the currency of the leaders. Self-respecting organizations in this space have to have a standard. But if that makes reporting clearer, easier and better, it's progress. Time will tell if GRI Standards will have such an effect - in the meantime, we can be cautiously optimistic. 

Insight from Chelsea
"Everybody in our Standards Division and our Board would agree that it is complicated. It is harder to transition content into a new structure than we perhaps originally anticipated. The positive is that it will be a better product – we have done a lot of clean-up work and editing along the way. For reporters, almost all of the fundamental concepts of G4 carry through – there are no major shifts in the reporting process or additional work needed to report in the standards. What will be required is some time invested to understand the nuances of the changes and which changes impact different companies. We will be developing some detailed mapping documents showing exactly what has changed as well as a new training module. A guidance document is in development and we are going to create an ecosystem of resources to help companies manage this change. But we believe the overall impact on the reporting process will be fairly minor."

And on that positive note.... see you in Amsterdam for lots of interesting standard-type debates!

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz  

Take time to code

Today, when you talk about coding, the younger among us immediately click to coding: "the process of designing, writing, testing, debugging, troubleshooting and maintaining the source code of computer programs". But in the context of CSR and sustainability, we have a type of coding that is just a little different.

If you work for a large company, the chances are you have a Code of Conduct, a Code of Ethics, a Code of Commitment, a Code of Behavior or some sort of Code that frames the way the company behaves and expects its employees to align with. In addition, your company probably subscribes to one or more external codes or standards or frameworks that provide structure and even external validation of your company's activities in the field of corporate responsibility and sustainability. 

Did you ever stop to think just how many codes, standards and frameworks are actually out there? (Don't get me started, that's another conversation.) But yes, there are LOADS. And even more that. This was the case more than ten years ago and it's still the case at present. That's why, when Deborah Leipziger came along in 2003 and provided a comprehensive guide to the most relevant and useful codes, standards and frameworks in The Corporate Responsibility Code Book, it was an iconic piece of work that would be invaluable as companies started the process of navigating where to hang their hat as they develop a responsible business strategy, or understand what it is that makes one code or another more or less helpful or relevant. Recently the Corporate Responsibility Code Book celebrated the publication of its third edition.

Why does a competitor align with SA8000, for example, where another competitor prefers to use the ETI Base Code? What might we learn from the Extractives Industry Transparency Initiative, even if we are operating in a different sector? What are framework agreements and what role do they play in changing the way business gets done? Do the Guiding Principles on Business and Human Rights actually have any relevance for our company and why? Today, the third edition of The Corporate Responsibility Code Book is updated to include new initiatives such as the Guiding Principles on Business and Human Rights and the Gender Equality Principles and updates to the Global Reporting Initiative guidelines, the OECD Guidelines for MNEs, Social Accountability 8000 and many others. Similarly, some initiatives which that have been overtaken by new frameworks and are therefore no longer relevant have been removed.

While it's probably only geeks like me who actually like to read a book like The Corporate Responsibility Code Book, it's usefulness for anyone working in this space cannot be underestimated. And because, as a geek, I find this so fascinating, I couldn't resist talking to Deborah Leipziger, the code guru, to hear a little more from behind the code scenes.

Deborah Leipziger advises companies, governments and UN agencies on corporate responsibility and sustainability. She has advised leading multinational companies on strategic and supply chain issues, as well as a wide range of CR initiatives, including the UN's Global Compact, the Global Reporting Initiative, the UN Environment Programme, the Human Rights Impact Assessment, and Social Accountability International. Ms Leipziger is a Senior Fellow in Social Innovation at the Lewis Institute at Babson, and has taught at the Bard MBA in Sustainability, at the Simmons School of Management, and at Hult International Business School. She is a co-author several books and has served as a member of several boards including the Advisory Committee on Socially Responsible Investment for Aviva (UK), the Center for Ethics at Manhattanville College (USA) and the International Board of Ethos (Brazil). check out her website: here    

The Code Book is somewhat of an icon in sustainability and the general body of knowledge available. Who actually uses the Code Book and what's its value to them?

Deborah: The Code Book is used in many classrooms to teach about sustainability and CSR. I use it to teach my MBA students at Bard. I have heard from many professors that it makes for a very good syllabus and complete course materials. Many college libraries also purchase The Code Book. In addition, companies and law firms also purchase The Code Book for their libraries.

What makes for a good Code of Conduct? 

Deborah: The best standards and codes build upon the knowledge and value of normative and foundation standards, such as those developed by multilateral organizations like the International Labor Organization. A good code of conduct should be dynamic and flexible, while at the same time having staying power. Over the past 25 years, I have worked with many codes and standards. The best codes and guidelines are clear and concise and written with implementation in mind. Strong support from stakeholders is also essential.

In your introduction, you refer to a new emerging vocabulary as an essential part of fostering corporate responsibility. What are the key changes in vocabulary and why is it essential for us to adapt?

Deborah: A wonderful question! One of the most lasting contributions of codes and standards is their ability to create clear definitions in a complex field. Guidelines and codes have shaped a lexicon of terms around CSR and sustainability. For example, SA8000 lays out definitions of child labor and trafficking which are helpful for stakeholders and companies. These definitions provide companies with concrete parameters. The UN Guiding Principles on Business and Human Rights uses the terms “irremediable” to define human rights abuses for which there is no remedy, such as a lost childhood spent in hard labor. There are abuses for which there is a remedy, such as providing back pay for wages which were withheld. A few years ago, I was asked to advise Aviva plc on a project they were working on with Forum for the Future to create scenarios for what a sustainable economy might look like in 2050. My reaction was that we do not yet have the vocabulary to imagine and create a sustainable economy in the coming decades. I tackle this in a book I co-wrote with a team at Babson: Creating Social Value: A Guide for Leaders and Change Makers, which came out in 2013. One of the paradigm shifts that I see is companies working to promote social value creation, which includes solving social problems while also creating financial value. Companies need to think beyond being compliant with laws and standards, and towards creating social value through social innovation.

Your last chapter talks about pathways to convergence with ISEAL as an example which brings NGOs together under a broad framework of shared principles. However, what's the evidence that any sort of convergence in the private sector is actually happening? It seems that the world of codes, frameworks, and standards is only becoming more complex.

Deborah: The ISEAL Alliance has brought coherence to a wide range of social and environmental certification systems, creating common frameworks. This has helped to bring credibility and efficiency to certification and labeling standards from organics to fair trade. At the same time, there are many new systems emerging many of which are complex. I think complexity and convergence can coexist.

Did you consider the standard of standards, the emerging GISR? Do you expect GISR to influence the way Codes are used? 

Deborah: I have been following the progress of the Global Initiative for Sustainability Ratings (GISR) for many years. Allen White and I worked together when we were both in the Netherlands and he has been a speaker in my classes for many years, which has allowed me to follow the progress of the GISR first hand. I think the GISR will indeed have an impact on how codes and standards evolve. Perhaps it will be included in a future version of The Code Book.

What's your position on the frameworks used for inclusion in major stock exchange sustainability rankings for example DJSI?

Deborah: Many companies use DJSI as a framework to drive strategy and disclosure. I think the Dow Jones Sustainability Index is an excellent tool for companies. It helps drive performance and serves as a driver for companies to excel. I consider stock exchanges to be pivotal in driving change in the corporate sector. I hope to see more rankings like the DJSI emerge.

What was your personal biggest insight as you were preparing the third edition?

Deborah: I was struck by how much membership has grown for the guidelines and codes covered in Code Book III. When I first began tracking codes and standards, many of the initiatives had a dozen or so members. Now initiatives encompass broad networks of companies. I am also struck by how the field has evolved from aspirational initiatives to complex and brilliant initiatives like the UN Guiding Principles on Business and Human Rights. The Guiding Principles constitute a significant contribution to the field of corporate responsibility, defining the role of the state and of companies in addressing human rights and the need to provide access to remedy when human rights have been abused. The Guiding Principles provide a useful tool for companies working to complete due diligence and to assess where their operations, products, or services might have a potential adverse impact.

Will there be a Code Book IV? 

Deborah: It’s not in the works right now, but it is a possibility. There is a great deal of interest from emerging economies and Code Book III was launched in New Delhi.  

*******

Thanks to Deborah for these insights. Happy coding!


elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz  

GRI joins the Standards Club

You may have noticed the announcement earlier this month by the GRI that governance changes are afoot. Well, they are more than afoot. They are now signed, sealed and in the bag. Maybe, like me, you didn't really understand what the fuss was all about. GRI wants to be a standard setter. OK. But GRI is a standard setter. But some might say: not really, really - other standard setters have more strictly defined governance structures with separation of responsibilities relating to standard setting. But GRI has a multi-stakeholder process, isn't that a valid governance structure? Not valid enough, apparently. 

It seems that, if you want to be in the standard-setting Club, you have to have four things: 

• Separation of authority: GRI's CEO will no longer have a role in standards development and a separate Board will oversee this activity.
• Due process: a stronger Due Process Protocol and a new Due Process Oversight Committee  are now being set up.
• A new acronym or two: GSSB, DPOC, IAC are now part of the GRI lexicon.
• More money: separate fundraising for standards development and the people who will do it. 

The benefits to being in the Club are significant. You can wear the badge. You can get included in things designed for standard setters only. You become part of the process as governments and stock exchanges consider new regulation on sustainability disclosure. Think of the rapid development of Sustainable Stock Exchanges around the world and the new EU Directive on non-financial reporting. When you are an official standard setter, these organizations include you and refer to your standards.

Why is this so important? Because it brings an additional level of credibility and influence which are beneficial to the development and recognition of GRI standards. It enables dedicated resource to focus on standards development, independent of other organizational priorities. It enables the pace of standards development to move more quickly, as issues are defined, rather than wait for items to reach the top of the GRI very-long to-do list. These are all benefits which should be noticeable in time to the GRI framework-using public and in the advancement of corporate sustainability disclosure.

To be clear, the changes at GRI involve the following six steps effective from January 31, 2015: 

• An organizational firewall between standard-setting activities and all other organizational activities will be created 
• A separate governance structure for standard-setting will be implemented, including the creation of a new Global Sustainability Standards Board (GSSB ), a Due Process Oversight Committee (DPOC) and an Independent Appointments Committee (IAC)
• The global multi-stakeholder principle will be safe guarded 
• The Due Process Protocol for the Sustainability Reporting Standards development will be strengthened 
• An independent public funding base for standards activities will be established, separate to that of other organizational activities 
• Transparency of all standards development processes (meeting agendas, papers and minutes related to the standards development processes will be made available on GRI’s website).

Just to reassure you, this new standard setting stuff does not mean that the GRI framework will become a certifiable standard such as an ISO GRI G40000000 or something like that. At present, the new GSSB has no mandate to go off and move the goalposts. The current plan is that G4 will continue to be a framework that is assurable in the same way that it always has been. No need to go rushing off thinking you've been backed into a standards corner.

I had a chat with Bastian Buck, the Director of the Reporting Standard Department. He was the guy that led the development process of the G4 guidelines and in my experience, the go-to guru with great knowledge of reporting standards and their development.

ME: Bastian, isn't all this just a big political game with little substance. GRI wants more recognition, more attention and more clout. Is that what it's all about?

BASTIAN: It's not just a name-change to be a standard setter. It's not just a cosmetic change. GRI is perceived as a de facto standard setter already by many. However, this change does enable GRI to have more audiences. International developments with governments, legislation and stock exchanges are increasingly relevant for GRI, and this kind of governance structure speaks to these groups more directly. It gives the GRI framework a different type of recognition, based on a transparent process where all those involved are following due process with relevant checks and balances. This has always been the way GRI worked, but the new structure formalizes this and ensures that all our audiences know that we are working in a way that is widely recognized as imperative for standard setters. Not only this, the separation of the standard setting and advocacy work of GRI will be helpful as it will enable us to spend money on improving the standard and applying updates on a timescale which is much closer to the identification of the need. So far, changes in the standard have always been vetted against another organizational priority, and there was not always enough funding to do everything. The new structure will allow for much greater focus and resources for standard setting and is therefore a good thing.   

ME: What does this mean for reporters? Will reporting companies have to change the way they report? 

BASTIAN: No, reporters won't notice any direct changes and the G4 guidelines will remain as they are. Going forward, what reporters might notice is that the guidelines may be updated more frequently, taking into account new realities and new considerations. There may be some formatting changes to align the way G4 is produced and updated to the standard setting approach (such as modular elements of the guidelines that can be changed without replacing the entire framework, to allow for easier application of updates) but this is unlikely to make a big difference to what companies are asked to report in G4. 

ME: Will GRI need to hire more people under this new structure?  

BASTIAN: Yes, indeed. The commitment to greater transparency, the more frequent updates of the standards, the maintenance and strengthening of the multi-stakeholder framework and consultations will all require more people. We currently have 8 people in the reporting standards team. I envisage this will expend quite a lot in coming years. The upside is that our G4 framework will be more robust, more up-to-date and our processes more transparent. 

ME: If the GSSB and other new bodies are now independent and reporting to the GRI Board of Directors, does this make the CEO role redundant? What will the CEO do? He will have LOADS of spare time, no?   

BASTIAN: I doubt the CEO will have too much spare time. GRI has an extensive and ambitious advocacy program and there is still much work to do to spread the word and represent stakeholders in a range of committees and regulatory bodies. GRI is reaching out to other organizations in the sustainability disclosure space to drive greater alignment between standards and greater clarity. The dual focus of GRI going forward which will be on standard-setting and enhancing the value of reporting. The latter will require innovation in the way we think about reporting and collaboration with groups  we haven’t previously connected with.  We have many initiatives in place and planned that will enhance the quality of service and support we provide for reporters around the world. The new structure will enable this part of the work to proceed with focus, just as it will help the standard setting part of the work proceed independently and in line with disclosure needs. 

ME: Who is going to pay for all of this?  

BASTIAN: Fundraising for the new GSSB is starting to happen now that the new structure has been announced. There are a number of ongoing conversations. This is a good opportunity for those who have an interest in supporting this specific work to channel their funding towards standards development. We expect that this will be attractive to organizations or individuals that may not have offered funding to GRI in the past.

**********

As GRI moves forward, it will be interesting to watch how this new structure falls into place and what it actually helps create. Will we see G5, G6 and G7 in quick succession? Or a number of standards positioned under the umbrella of Sustainability Reporting Standards? Or will we see a War of the Standards unfold with every sustainability disclosure organization trying to be not only a standard setter but THE standard setter? We have heard a lot about collaboration but we are yet to see any terribly obvious fruits of such collaboration. Several months back, the IIRC announced the launch of the Corporate Reporting Dialogue to "promote greater coherence, consistency and comparability between corporate reporting frameworks", with all the known standard setters taking part. We haven't heard much since then. Maybe having everyone now in the same Club might help move things along.

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Check out our G4 Report Expert Analysis Service - for published G4 reports or pre-publication - write to Elaine at info@b-yond.biz to help make your G4 reporting  even better.