GRI should reshape its thinking to anticipate integrated reporting

April 19, 2010

Ten years ago sustainability reporting was a rare phenomenon. Today, more and more companies report on sustainability or environmental, social and governance (ESG) performance, in addition to their financial results. Frontrunners are increasingly integrating sustainability in their annual reports. The reporting guidelines of the Global Reporting Initiative (GRI) are highly valued by companies that report on sustainability and their stakeholders. These companies try to comply with the GRI guidelines by reporting on the defined indicators. One would think that the aforementioned frontrunners on sustainability will easily be able to score high on compliance with the GRI guidelines.

These ambitious companies recognize the importance of sustainability, see it as part of their core business and thus integrate it in their annual report. This means that choices have to be made. What are the most material sustainability topics for our business? What are our main impacts? Where lie the biggest opportunities? Where can we add most value? But after these choices are made, the company is confronted with the more than 100 indicators of the GRI. The company will still have to do some lengthy reporting to score on all these indicators and that does not fit with an integrated report.

While GRI talks about materiality, it also gives companies the option to do a self assessment to check their compliance with the GRI indicators (application level). The more indicators a company reports on, the higher the level of compliance. For companies that move from a separate sustainability report to an integrated report, this will often mean that they go to a lower level. This results in strange perceptions: a frontrunner that has integrated sustainability in its business will be perceived as a less-sustainable company. This forces companies to report about everything again, even if it is not material.

The GRI guidelines are a good basis for sustainability reporting and the indicators provide good background information for companies that want to define their own key performance indicators. However, GRI should avoid an adverse effect of its guidelines. It should focus more on materiality than it already does. Doing business in a sustainable way has nothing to do with reporting on as many indicators as possible. It is about knowing what your main economic, environmental and social impacts and opportunities are and acting on it. For GRI this means less focus on the quantity of indicators, and more on the quality. It should better facilitate frontrunners of integrated reporting. Otherwise GRI will run the risk of becoming relevant only for laggards.

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