The Global Reporting Initiative needs no introduction to reporters, it’s the framework against which many are expected to report. Companies first reported using a GRI framework a decade ago, and now just over 40% of all reports profiled on CorporateRegister.com follow the GRI to some degree. At current growth rates by 2015 around half of all reports will be using the framework.
Regional uptake of the framework is very variable, and we’ve seen almost exactly the same regional pattern for several years. South America, especially Brazil, is enthusiastic about the GRI, as are Spain and Portugal, the two European countries where use of the GRI is highest.
A pattern we have also previously identified is that many of the world’s leading reporting countries (the UK, Japan and Germany are three of the four leading CR reporting countries) are precisely those where reporters are most reluctant to adopt the framework. This is such a striking phenomenon that it appears worthy of research.
Just under half of 2011 GRI reports came from Europe (once again, Europe accounts for half of most aspects of reporting). Asia has a strong showing, with most Asian countries outside Japan keen to adopt the framework.
Over the years the reported GRI application levels are moving steadily upwards. The ‘Application level undeclared’ segment is slowly shrinking, although it does seem strange that a reporter going to the trouble of compiling a GRI contents index should then decide not to declare an application level at all.
The OpinionConceived in the late 1990’s when it became clear that reporters and their stakeholders needed some form of guidance to ensure consistency and comparability, the GRI gave birth to the first widely-used framework, the ‘G2’, in 2002. This was followed by G3 in 2006 and now, in 2011, we await the arrival of G4.
The strength of the GRI lies in the fact that it is the only global cross-sectoral reporting framework, so companies wishing to align themselves with perceived best practice have no choice but to adopt it. It is beyond dispute that a reporting free for all, without guidelines, principles or accepted parameters would benefit nobody.
Many GRI reports are excellent, with a clear GRI index identifying where relevant information may be found, and with this information communicated using accepted methodologies such as the Greenhouse Gas Protocol (GHG) for carbon. The sector supplements are also very useful, and if used properly would enable companies to report using common indicators specific to their sector, in a way that makes them easily comparable.
That is GRI reporting seen from a favourable perspective. From a less favourable viewpoint, there are several shortcomings which in some cases go to the heart of meaningful reporting:
- The ‘A, B C’ application level gives the impression that ‘A’ reporting is better than ‘C’ as in a school grading, and top management often sees reporting to the highest level as a competitive issue. This often gives rise to pages of box-checking GRI contents listings, as reporters try to include the maximum number of indicators. We have many examples of GRI contents exceeding 40 pages, and even one of nearly 60 pages. What we need is meaningful information based on ‘materiality’ - the issues which impact on the company’s business. Often the material issues become buried amidst the welter of immaterial ones. This leads to a situation where ‘C’ level reports are in fact often more useful to stakeholders than some ‘A’ level reports.
Recommendation: Consider developing a more neutral system of application levels where companies can choose the most appropriate level without the inherent judgement of ‘first, second, third class’.
- There is inadequate quality control. Companies may self-declare to whatever level they wish, but the GRI will not blow the whistle even where the declared level is hopelessly wrong. Even where the application level is appropriate, the GRI contents often do not constitute a real index – links or page numbers are often not included.
Recommendations: GRI should stipulate that an index must include html links or page references. GRI should introduce spot-checks of application levels to encourage more rigorous declarations.
- Together with the application level, a ‘+’ indicates that a report has been assured. Here again there is no quality control, and an assurance statement might cover the entire report or a couple of paragraphs or even just a couple of KPIs.
Recommendation: GRI should define a minimum scope for any assurance statement, but ideally it should encompass the entire publication.
- The KPIs used by companies within the same sector, even if they use a sector-specific supplement, are often not comparable. This was the finding of a study we conducted with WestLB looking at sectors such as food processing and automotive. It was discovered that sector supplements (those examined) have been drafted in such a way as to allow companies to choose different KPI definitions, thereby making any direct company comparison meaningless.
Recommendation: GRI might review current sector supplements and consider updating them to ensure consistency of KPIs. GRI should not publish new sector supplements containing inconsistent KPI definitions.
We are in a situation where many leading companies prefer not to follow GRI guidelines, and where the highest proportion of non-followers is to be found in the most productive reporting countries such as the UK, Japan and Germany. Something needs to change.
This year the GRI will be introducing the next iteration of its framework, ‘G4’. We hope all the issues above will be addressed, as it is clearly in the interests of CR reporting for organisations to use a consistent, generally accepted and meaningful reporting framework. We’ll report back this time next year.