GRI G4 and materiality assessment six months on: Where now for your sustainability report?
December 03, 2013
Ian Buckland asks what has changed – and what still needs to – since the introduction of the latest GRI guidelines on sustainability reporting.
Launched in May 2013, the GRI G4 revision of the Global Reporting Guidelines has now been with us for six months. Rather than critique the first young buds of reports since then, it’s time to return to the Guidelines and some of the debate they’ve generated to identify the path to good practice. However it would be wrong to assume all readers have the same knowledge of the Guidelines, so first a recap in plain(er) English.
Like their predecessors, the G4 guidelines are a principles-based, permissive universal standard for sustainability reporting. In this version there has been a considerable shift in emphasis to using materiality assessment to explicitly shape sustainability reports. To be ‘In Accordance’ with G4, reporting entities must first report on at least 38 specific General Standard Disclosures covering basic profile and governance information. However, the remaining report content is essentially self-defined, within the standard’s guidance on materiality assessment.
This self-guided approach is leading to some user frustration, paradoxically from two opposite positions. On the one hand, supporters of rigid and policed guidelines point to the potential for self-guiding to become self-delusion, leading to potentially disingenuous reporting. From the opposite side, G4 is criticised for being too restrictive – for instance, when favourite programmes or preferred business performance metrics are disregarded. However, for most organisations accepting a mild ‘shaking of the tree’ and some initial outlay seems like a relatively small price for more effective, evidence-based sustainability decision making which will inform more than just reporting.
What role do materiality assessments play in G4?
An important difference between GRI G4 and the previous G3.1 is that Standard Specific Disclosures, or ‘indicators’ e.g. G4-EN13 ‘Habitats protected or restored’ are divided among 46 Aspects, such as ‘Biodiversity’. It is these Aspects, not their subsidiary indicators, that must be used to drive materiality assessment.
The specific requirements for a materiality assessment are defined within General Standard Disclosures G4 -18 to G4-21. In simple terms, these disclosures require reporters to:
List all material Aspects. The GRI table, which remains a G4 requirement, would be a simple place to record these.
Explain the process for defining report content and Aspect boundaries. As previously this would fit in an ‘About this report section’ common to many sustainability reports.
For each Aspect found to be material, report on whether it is material inside or outside the boundary of every entity covered by the report. This external requirement potentially extends the scope of material issues up and down the value chain. For simple, homogeneous entities with few aspects, this disclosure could be in the form of a simple sentence. With increasing complexity, a table or infographic may be more appropriate.
Beyond these requirements, the results of the materiality assessment also shape the report in terms of the indicators addressed and Disclosures of Management Approach. The diagram below shows materiality assessments drive reporting under the G4 framework.
How to build your Materiality Assessment
Effective materiality assessment is built on the careful integration of Purpose, Perspectives and Processes, or the 3 Ps. Most companies will have some experience of these in terms of simple sets of objectives such as sustainability visions or strategies, existing stakeholder engagement and even existing ‘prioritisation processes’. Such existing elements are an excellent starting point to creating a robust materiality assessment based on external stakeholder concerns and the entity’s sustainability impact.
Stakeholder charting, surveys and engagement in some form are essential elements to exposing external concerns. Internally, workshops involving key members of staff with sustainability and business responsibilities are a reliable approach to understanding business impacts, but precise techniques will need to match the culture of the business and complement existing sources. The precise mix between internal and external engagement will need to be carefully planned.
An important element of defining the approach is the definition of materiality thresholds or criteria that render an Aspect material. To give insight to this, Corporate Citizenship has devised ‘Signals of Stakeholder Interest’ and the corresponding ‘Signals of Business Impact’. These Signals are a collection of near-universal indicators of significance comparable across Aspects such as revenue generation and numbers of stakeholders. Transparent and based on empirical research, Signals offer an exciting approach to improving materiality assessment processes. They are especially applicable to the G4 process, but given the broadening significance of evidence-based sustainability decision-making of all sorts, Signals are an important path to good practice in materiality assessment.
The next six months will see the number of sustainability reports with materiality assessments at their heart begin to rise. By taking a structured approach informed by G4 we will see the emergence of more relevant and engaging sustainability reporting that is clearly integrated with core sustainability processes.
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