GRI G4--Materiality Aligning Sustainability Reporting and Strategy
Danny Wong, Dr.PH, Senior Program Director, Los Angeles, CA
The G4 Sustainability Reporting Guidelines released in May 2013 are the Global Reporting Initiative's (GRI) fourth generation of Sustainability Reporting Guidelines. The GRI's mission is to make sustainability reporting a standard practice for all organizations, and the GRI G4 Sustainability Reporting Guidelines establish comprehensive and rigorous expectations for public sustainability reporting. These guidelines are clearly the de facto standard for sustainability and corporate responsibility reporting--more than 5,000 organizations globally have used the GRI framework to post over 12,000 reports to the GRI Sustainability Disclosure Database. This newest revision to GRI offers not only a better guide to sustainability reporting, but a roadmap for effective sustainability strategy.
The GRI G4 Sustainability Reporting Guidelines are divided into two parts: The Reporting Principles and Standard Disclosures (Part 1) and the Implementation Manual (Part 2). Part 1 provides the framework: Reporting Principles, Standard Disclosures, and criteria an organization should apply to prepare its sustainability report in accordance with the Guidelines. Part 2 explains how to apply the Reporting Principles, how to prepare the information to be disclosed, and how to interpret the various concepts in the guidelines. The bulk of Part 2 details the 46 Aspects and 95 Subjects of sustainability reporting, with each Subject having one or more quantitative and qualitative Indicators. The documents are long (94 and 266 pages, respectively), the print is small, and the narrative can be stiff and encyclopedic.
Compared to the prior GRI 3.1 Guidance, the G4 updates revise the definitions of "organizational boundary" and "comprehensiveness grading (i.e., A, B, C)" of reporting and further develop governance and supply chain disclosure guidelines. The biggest difference-and the one this article focuses on--is the principle of Materiality that the GRI emphasizes throughout the Guidelines. A key goal of the G4 update is to make sustainability reports more meaningful, more relevant, and more focused on materiality.
Materiality refers to the most significant (i.e., material) issues (i.e., aspects) that affect the organization's economic, environmental, and social impacts. Material Aspects also substantively influence the assessments and decisions of stakeholders regarding the organization and advance the concept of sustainability beyond the organization. Aspects may also be identified as "significant" by expert communities or through scientific impact or life cycle assessments, but the GRI is otherwise silent about these methods.
The materiality assessment determines the selection of Aspects to report and which performance indicators or metrics to use. The GRI Implementation Guidance specifies a 4-step process (see Figure 1) for defining Material Aspects and the appropriate boundaries, internal or external, to the organization. (The Boundary of a topic specifies where the impacts occur: within or outside of the organization.) Although this process is described as well in the G3 Guidelines, the G4 update requires GRI reports to disclose the entire prioritized list of material topics.
Figure 1* Defining Material Aspects and Boundaries - Process Overview
Step 1 is the Identification of candidates for reporting. These candidates are selected from all potential Aspects and Subjects based on organizational impacts and opportunities, as assessed through the lens of a broader sustainability context and a consideration of stakeholders expectations (i.e., stakeholder inclusiveness).
Step 2 involves the Prioritization of candidate Aspects and Subjects for reporting identified in Step 1. This assessment of Materiality considers the organization'ssignificant economic, environmental, and social impacts and, again, the expectations of stakeholders. Figure 2 is a visual representation of the resulting prioritization process-each green dot is a Material Aspect and the most Material Aspects for reporting are found in the upper right quadrant of the grid.
Figure 2* Visual Representation of Prioritization of Aspects
In Step 3, Validation ensures that the report is complete--the report provides a reasonable and balanced representation of the organization's sustainability performance, including both its positive and negative impacts.
Finally, Step 4 requires a Review not only of the Aspects selected as Material, but also of the non-static attribute of Stakeholder values and the broader global context of Sustainability.
The GRI G4 emphasis on improving Materiality and the required disclosure of the Management Approach for material Aspects will result in improved strategies for sustainability. For this reason, organizations should embrace G4. As the G4 Guidelines are implemented, sustainability reports will become more focused, more relevant, and more aligned with the most important impacts of the company. Greater attention to Materiality should result in shorter and more meaningful reports, with the tracking of fewer goals and metrics. Materiality will also provide an appropriate focus for transparency, bringing credibility to performance metrics and avoiding reports of achievements that are frivolous in comparison to a company's footprint and potential contributions to society.
This maturing of the sustainability reporting process will drive greater consistency, collaboration, and depth in global sustainability efforts. As organizations evolve their sustainability programs to align with the growing expectations of the GRI, these principles can become the shared roadmap of global strategies to achieve a truly more sustainable world.
The GRI proposes a two-year transition to G4--reports issued in 2016 are expected to follow the new standards.
Danny Wong, Dr. PH, CIH, is a Senior Program Director in STC's Southern California office. He has over 30 years experience in sustainability and EHS as a global corporate leader and as a consultant to Fortune 500 companies. Prior to joining STC, Danny was the Senior Director for Corporate Sustainability at Avery Dennison and set the vision and strategies for that company's sustainability program, embedding sustainability into all sectors of the business. For the company's manufacturing operations, he helped to develop business scorecards resulting in energy use savings in excess of $5M per year and zero-waste-to-landfill actions diverting 50,000 tons from landfills. Danny also collaborated with the human resources, product marketing, and global procurement departments to implement new policies on employee and supply chain standards for human rights, green product claims, and responsible paper procurement. In addition, Danny led the development of Avery Dennison's Corporate Sustainability Report. As the company's health & safety director, Danny drove the global recordable injury rate from 3 to less than 1, provided oversight for worldwide H&S audits, built the product compliance program, created a risk analysis for product development process and implemented a banned and restricted substances list for manufacturing.
Prior to Avery Dennison, Danny worked for the Atlantic Richfield company serving as the corporate advisor for global oil & gas exploration and refining operations as well as for the corporate remediation group. Danny implemented OSHA HAZWOPER requirements, defined risk-based cleanup criteria for site remediation and restoration, and collaborated with IT and cross-divisional stakeholders to develop the company's first chemical hygiene and exposure assessment database.
For more information about GRI's G4 Sustainability Reporting Guidelines and STC's Corporate Responsibility and Sustainability (CR/S) practice, contact Danny at (424) 273-0503 or via email at DWong@stcenv.com.
