Hopes are high that the next generation of the Global Reporting Initiative will go further towards actually tackling sustainability challenges

The Global Reporting Initiative guidelines, the world’s leading sustainability reporting framework, used by 3,900 companies and counting, are undergoing a revamp. The fourth generation (G4) of the guidelines will be published in May 2013, gradually replacing G3, which has been in place since 2006.

GRI says the update is needed because “the landscape of sustainability reporting is evolving”. Dr Nelmara Arbex, GRI’s deputy chief executive, says the update will address the structure of the guidelines, the topics covered, and the clarity of language and definitions.

In terms of structure, G4 will, for example, seek to improve the disclosure on management approach, the way companies provide information about how their organisational strategies are implemented. The structure review will also cover the sustainability reporting boundary – how far companies should go in disclosing their impact, and that of their products and suppliers – and will add detail on reporting on supply chain issues.

The content review, says Arbex, will cover “updates on governance-related topics, greenhouse gas emissions, biodiversity, occupational health and safety, and corruption”. She adds: “Other topics are planned but we can’t guarantee that they will be ready for May 2013.”

Overall, GRI hopes that G4 will enable companies to produce more focused reports, while also encouraging more companies, especially smaller firms, to report. “The GRI information requirements will be clearer” which should lead to “better use of the information and should decrease auditing costs,” says Arbex. GRI will also make a web-based version of G4 available, which will be “easier for beginners” than wading through the hefty G3 pdf file.

More strategy

Jette Steen Knudsen, an associate professor at the Copenhagen Business School, says the update will hopefully help to address the fact that “reports tend to be lengthy, glossy and somewhat generic, offering lots of detailed information [but not] pointing out key strategic, organisational, social and environmental challenges”.

She cites the example of BP, which “produced an excellent GRI report, but the report did not address the organisational and managerial challenges that appear to have contributed to the oil spill in the Mexican Gulf”.

The update could also help companies adjust to pressing business realities. For example, “in the wake of the financial crisis we see a strong emphasis on good corporate governance and transparency concerning remuneration”, Knudsen says.

G4 could be a step towards more use of integrated reporting, or combined assessment of a company’s financial and non-financial performance. In particular, G4 could help companies to make stronger the link between good intentions and actual behaviour.

Knudsen says that currently, “many companies offer detailed information about a wide range of GRI indicators but are less likely to offer information about how indicators may be related to broader management and strategic targets”. G4 could help overcome this “disconnect”.

But Arbex says there is still some way to go before comprehensive guidance on integrated reporting becomes available. “There is no internationally agreed definition on how such a report should be done or what it should look like”.

About 500 companies listed in the GRI Sustainability Disclosure Database declare they prepare integrated reports, but without a broader framework, Arbex says, “it is difficult for GRI to evaluate if they are going in the right direction”.