Grey Area in the GRI

Grey Area in the GRI

In the dust of COP26, and with the end of the calendar year a month back, streams of corporate ESG reports are making their way into mainstream headlines. For example, Qatar Steel got an ‘A’ on their GRI report, AmerisourceBergen released a detailed GRI report after their inclusion in S&P’s Global Sustainability Yearbook, Warner even released their inaugural ESG report. Looking closely, you’ll find GRI appears in almost every article. But how can a standardized report receive an accuracy rating? What does the Warner ESG report mean to the public when their report has little alignment with any standard reporting metric? Why are so many companies aligning their reports with the GRI system?

So let’s dive into one of the most widely known standardized reporting systems to help understand what is happening behind the scenes – the Global Reporting Initiative has quickly become a leader in standardizing sustainability reporting and is currently the most commonly used disclosure metric with over 10,000 companies using it annually. Recently, GRI and SASB have partnered up and are encouraging companies to pair the reports.

GRI was founded in 1997 after the Exxon Valdez oil spill and the public frustrations that proceeded, their goal was to “create the first accountability mechanism to ensure companies adhere to responsible environmental conduct principles”, the reporting was eventually expanded to include social,  economic, and governance issues as well. To date, GRI has gone through several iterations to keep up with evolving global policy.

Why do companies choose GRI? GRI is a trusted framework, with many of the top companies reporting this way. In fact, they created the “first set of sustainability reporting standards in the world” and have often partnered with other reputable organizations such as OECD and UN Global Compact. GRI is also very flexible, companies can choose reporting metrics based on their primary focus and investor values allowing for key insights to be added to certain fields without re-jigging the whole system.

But as with most things, GRI is not perfect. With the increased flexibility, companies have the opportunity to pick and choose the metrics which look best on paper, and leave out others. With a simple change of wording, these company reports can state that GRI informed or inspired their report and not that it is 100% compliant with. This can leave large gaps in supply chain metrics while the focus stays on ‘headquarters’. These reports are also very dense, and filled with technical language that means little to the public eye – while frameworks like BCorps are standard and user-friendly, GRI is aimed at investors and key stakeholders with interest in specific assets.

For example, a recent sustainability report released by Atkore states that their report is aligned with the GRI and SASB, but “not fully in accordance with either metric”. That being said, Atkore has been recognized for their commitment to ESG and their corporate responsibility. In this way, we are comforted in knowing that this company aligns with reputable sustainability reporting foci, but we would have to delve deeper into the report to understand their chosen key metrics.

The systemCHANGR take: The GRI, as the first set of sustainability reporting standards in the world, was a massive leap forward in holding companies accountable for their actions, across fields, in a standardized way. With over 10,000 companies utilizing similar metrics, there is opportunity for the general public and those interested in responsible consumption to better understand and compare corporations. For example, AmerisourceBergen announcing their commitment to the COVID-19 pandemic alongside notable metrics and social impact stats allows us to notice how promises may or may not have been followed through by healthcare companies. The Global Reporting Initiative continues to evolve and iterate with increased global pressure for responsible governance, and industry-specific guidelines to remain relevant. However, the flexibility offered to companies is certainly an oversight as they can find ways to omit unfavorable aspects of the business, and employ the attractive aspects as a marketing campaign. For the GRI to be truly effective as a global standard, tighter guidelines must be enforced such that companies cannot simply ‘align’ with the metric… they either utilize it all, or not. 

For more on the regulation forecast check out this article.

Reporting by Lauren Carson

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