Over 10,000 organisations globally report according to GRI’s requirements. With such widespread adoption, updates to the GRI Standards have the potential to change the non-financial reporting landscape as a whole. That’s why all organisations should take note, whether or not they are currently reporting with GRI.
According to GRI, the updates are the “most significant change” since the most recent version of the GRI Standards launched in 2016. Here’s what you need to know about the changes.
Why has GRI updated the Standards?
The Standards have been updated in order to:
- require all organisations to report on human rights-related topics;
- integrate reporting on due diligence;
- clarify key concepts, reporting principles and disclosures;
- align with recent developments in responsible business conduct;
- drive consistent application;
- encourage more relevant and comprehensive reporting; and
- improve the overall usability of the GRI Standards.
The Standards incorporate intergovernmental expectations for responsible business
GRI developed the new Standards with reference to various intergovernmental documents on responsible business conduct, including the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance for Responsible Business Conduct.
The Standards now include mandatory disclosure requirements based on these documents. For example, all organisations must now report on:
- their policy commitments for responsible business conduct, including their policies to respect human rights, and how those commitments are embedded throughout their activities and business relationships;
- grievance mechanisms and other remediation processes they have put in place;
- their engagement with affected and potentially affected stakeholders;
- their due diligence processes for identifying actual and potential negative impacts on the economy, the environment, and people, including impacts on their human rights;
- their prioritization of impacts, based on their significance or severity, to determine material topics for reporting; and
- their management of material topics, including information on specific policies, goals and targets, actions to prevent, mitigate, and remediate negative impacts, and the effectiveness of actions taken.
Organisations adhering to the guidelines GRI has referred to should already have these policies and processes in place. They can now focus on preparing fulsome responses to these new disclosure requirements.
But those without policies and processes aligned with these instruments should consider adopting them now. GRI’s new focus on these areas as disclosure topics reflects broader trends toward mandatory due diligence and human rights requirements. Stakeholders will increasingly expect organisations to respond.
The Standards reflect a revised modular system, including entirely new Sector Standards
The Standards are now organised into three series:
- Revised Universal Standards—the revised Universal Standards address GRI’s reporting principles, general disclosures, and the process for choosing material topics. The updates principally affect these Standards, which apply to all reporting organisations.
- New Sector Standards—GRI has introduced a new concept of Sector Standards. Sector Standards will clearly identify topics that are likely to be material for reporting organisations in various sectors. Organisations are required to refer to the Sector Standard(s) for their sector(s) when determining their material topics. Sector Standards are not, however, a substitute for an organisation’s own materiality assessment, which it must continue to conduct independently.
- Adapted Topic Standards—three Topic Standards (307, 412, and 419) have been incorporated into the Universal Standards. These Topic Standards related socioeconomic and environmental compliance and human rights, and the disclosures they included are now mandatory for all reporting organisations. There are now 31 Topic Standards. These Standards have been adapted to reflect changes to the Universal Standards, but the disclosure requirements in them have not changed.
There is only one way to report in accordance with the GRI Standards
Previously, organisations could report according to the GRI Standards in a Core or Comprehensive manner. The new Standards do not include this distinction—organisations can only report according to the GRI Standards by fulfilling the following requirements:
- Apply the reporting principles.
- Report the disclosures in GRI 2: General Disclosures 2021.
- Determine material topics.
- Report the disclosures in GRI 3: Material Topics 2021.
- Report disclosures from the GRI Topic Standards for each material topic
- Provide reasons for omission for disclosures and requirements that the organisation cannot comply with.
- Publish a GRI content index.
- Provide a statement of use.
- Notify GRI.
More than ever, materiality is focused on impacts
The updates reflect a renewed focus on each organisation’s impacts on the economy, the environment, and society. For example, before these updates, material topics were those topics that reflected at least one of the following dimensions:
- the organisation’s significant economic, environmental, and social impacts; or
- their substantive influence on the assessments and decisions of stakeholders
In the revised Standards, “material topics” are only those topics that represent an organisation’s most significant impacts on the economy, environment, and people, including impacts on their human rights. “Influence on the assessments and decisions of stakeholders” is no longer a standalone factor to determine whether a topic is material.
Practically, if an organisation has determined any of its material topics based on their influence on the assessments and decisions of stakeholders alone, a new materiality assessment exercise may be required. GRI has provided new guidance for conducting materiality assessments in a straightforward, four-step process in the new Standards.
In any event, all organisations should consider how the new definition of materiality affects their assessment and communication of their material topics. A materiality matrix that refers to both elements of the prior definition of materiality will no longer be relevant for GRI purposes.
The new Standards apply next year
The Universal Standards 2021 apply to information published on or after 1 January 2023. GRI does, however, encourage early adoption.
Sedgwick Richardson’s sustainability team has been advising organisations on compliance with the GRI Standards since 2002. Please reach out to a member of our team for more information about the updated GRI Standards and get help meeting the new requirements.