An improved reporting process is helping companies identify gaps in their sustainability practices, which, when closed, can lead to big savings
The latest guidelines from the Global Reporting Initiative (GRI), issued less than a year ago, are turning sustainability reporting into more of a management tool and less of a marketing exercise.
The new version, called G4, introduces a whole set of guidelines on governance and places the emphasis on prioritizing which actions of the organization have a truly significant impact on the environment and society.
The focus is more on ‘how’ the report is produced, rather than on ‘what’ it finally says. In other words, it is designed to engage the organization from the C-suite on down in managing the impact rather than putting out a checklist of indicators.
This was the message in a training session with high-level government officials (including several procurement officers) conducted in Washington on April 23 and 24 by BrownFlynn, a sustainability consulting firm and the first US-certified GRI training partner. This training was conducted in partnership with the World Business Council for Sustainable Development at WBCSD’s US offices.
‘You can no longer just have a green team draw up the report,’ BrownFlynn director of learning Cora Lee Mooney told the two dozen participants from the Government Services Administration, the Environmental Protection Agency, the US Army and the White House Council on Environmental Quality, among others.
The new guidelines mark a major advance in the approach to sustainability reporting, says BrownFlynn principal and co-founder Barb Brown.
‘We are thrilled with G4,’ she says. ‘The guidelines turn reporting into a real management process instead of just an exercise to fill the cells on a spreadsheet.’
Mike Wallace, who recently joined Cleveland-based BrownFlynn after several years as the director of GRI’s US offices, urged the government participants to adopt the international guidelines as they develop their own criteria for sustainability reporting from their suppliers.
‘There’s no need to re-invent the wheel,’ he said, in kicking off the two-day session. The GRI guidelines have already gone through several iterations and there is a value to having common standards, he added.
The growing sophistication of the reporting process, the BrownFlynn team said, has resulted in companies finding gaps in their sustainability practices. Closing these gaps has often led to significant savings – so much so that some companies are now breaking out the net financial benefit from sustainability investments.
This in turn has led to a new trend of integrating the sustainability report into the financial report. These integrated reports appeal to analysts and investors, who are paying more attention to how a company manages its impact on everything from water resources to child labor – not only directly but through its supply chain as well.
‘It is being seen as a best practice,’ says Brown. ‘It is a sign of a well-managed company.’
Previous versions of the GRI guidelines emphasized the checklist of indicators certifying compliance. The so-called Application Level A incentivized this practice by awarding what is intuitively the top grade to checking off boxes in a way that provided little helpful information.
By asking organizations to determine which of their actions truly have a material impact, the BrownFlynn team said, the reporting process generates an agenda for management as well as information for business partners, analysts and investors.
Application Level A no longer exists. The new gold standard under G4 is the ‘comprehensive report,’ which requires disclosure on a battery of governance questions that show whether the organization really has the infrastructure to produce a reliable sustainability report.
Companies are increasingly seeing the benefit for their own management, and sometimes requiring GRI reports from their supply chain, creating a ripple effect.
As US federal agencies, with their huge procurement footprint, show greater interest, sustainability reporting and the use of GRI guidelines could become even more widespread.
The European Parliament this month approved a directive requiring large companies to make certain non-financial disclosures on sustainability and diversity, said Eric Israel, who has taken over responsibility for GRI activity in the US.
‘These are voluntary guidelines now, but the direction is clear,’ he said. He also noted that stock exchanges are considering making sustainability reporting a requirement for listing.
‘It’s not going to go away,’ says Brown.
