Understanding G4

The Concise Guide to Next Generation Sustainability Reporting

Elaine Cohen

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351275262
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Should you or your clients report using the new G4 sustainability reporting framework? What's the significance of the changes and how do they affect you? What is the right reporting level for your company? What should you do next...?Sustainability reporting is here to stay and expanding its influence. The Global Reporting Initiative (GRI) G4 Sustainability Reporting Framework was launched in May 2013, with the publication of two manuals, adding up to 300 pages of technical guidance. Since then thousands of reporters have been hoping for a short and definitive guide to this new reporting paradigm. This is it!In this expert guide to G4, Elaine Cohen presents an easy-to-follow review of everything any company needs to know in order to decide whether to use the G4 Framework and if so, how. If you want to know what G4 means for corporate reporters, whether they are first-timers, SMEs, experienced global companies or existing GRI reporters at any level, this book is for you. It will give you the answers you need to make decisions, in a user-friendly format, and help you deliver greater value to your own company or your client companies.This book will also help users of reports know what to expect from the new generation of G4 Sustainability Reports and reporting consultants, as they advise clients on reporting process, content and disclosure.

CHAPTER 1
Why GRI and Why G4?

WHEN STARTING OR CONTINUING on the reporting journey, with every new sustainability report, each company has a choice: GRI-based or not GRI-based. While this book is not really about whether or not to use the GRI framework, but rather, how to use the new G4 framework, it seems appropriate to consider, given the major change from G3 to G4, whether G4 is actually still relevant and if GRI should continue to be the obvious choice for reporters. These are my thoughts.

Why GRI? Why not just do your own thing? Or use another framework?

Why even consider a GRI-based report? Why not just report in your own way, or use another type of framework (although there is none as detailed and all-encompassing as the GRI Framework). The GRI even offers its own ready-made G4 get-out clause to enable you to have your cake and eat it – if you use the guidelines, but are not ready to be ‘in accordance’, then you can include the sentence: ‘This report contains Standard Disclosures from the GRI Sustainability Reporting Guidelines’ (G4IM, p. 50).

My view is that GRI is the leading and highly respected de facto global standard for sustainability reporting, and as such, reflects the leadership and relative engagement of the companies that use it. The GRI Framework sets a standard which is indicative of a collaborative, rather than an insular, mindset. It was developed with the expertise of a large range of highly qualified professionals from different fields and creates the promise of relevant and quality reporting, providing a thorough, reputationally positive platform for your sustainability report. GRI enables you not to reinvent the wheel, but to utilize the cumulative articulation of general stakeholder expectations around sustainability. To me, GRI-based reporting seems to be the only sensible choice for serious sustainability reporters. G4, then, is now the way to go.

However, the advantage of the GRI is only realized when the framework is applied with rigor. Not being a certifiable standard, the door is wide open for misuse, or abuse, of the guidelines. Current reports range from demonstrating the highest degree of adherence to sloppy, inaccurate and in some cases, entirely misleading or even deceitful use of the guidelines. If you are planning to use G4, and deliver an ‘in accordance’ report at whatever level, my plea is: do it right. Don’t wing it. Take it seriously. Report with integrity. Business sustainability and the reporting movement are not helped by sloppy reporting. If you are going to be sloppy, or untruthful, then don’t use the GRI framework.

Abbreviations used in references to GRI published documents and G4 content:

• RPSD: Reporting Principles and Standard Disclosures booklet (Book 1 of the GRI G4 Framework)
• G4IM: G4 Implementation Manual
• GSD: General Standard Disclosure
• SSD: Specific Standard Disclosure
• DMA: Disclosure on Management Approach

G4 disclosures are referred to as G4-X, where X is the number of the relevant disclosure, as listed in the GRI published materials.

Overall, G4 has good points and less good points, and offers some opportunities. See Figure 1.

FIGURE 1. The G4 SWOT.

Time will tell as to whether the threats will turn out to be real problems for uptake of the G4 Framework. The option to cherry-pick G4 and refer to the guidelines without declaring a CORE or COMPREHENSIVE level may be tempting to many, possibly because companies will judge that some of the very detailed GSDs are of little relevance and importance to stakeholders, despite GRI’s due process in developing G4. I believe that there will be great benefits – and opportunities – for all if G4 is widely accepted, as you probably have realized. Therefore GRI should have a vested interest in encouraging more and better sector guidance, improved reporting quality and enhanced stakeholder interest, as well as keeping a finger on the pulse of the viability of G4 COMPREHENSIVE, with the possibility of adding a little flex to the GSD disclosure requirements.

Bottom line

If I had to venture an opinion, it seems to me that first-time reporters, SMEs, privately owned companies and minimalist G3 B level reporters may find CORE the better option. Large MNEs, experienced A level reporters and globally publicly traded companies, especially ones which operate in jurisdictions where sustainability reporting is mandated, or those that have large and complex businesses with a high number of significant material issues, may find that COMPREHENSIVE is the only way to go, if they want to remain GRI reporters.

CHAPTER 2
What Does a G4 Report Look Like?

BEFORE WE GET INTO THE WHYS and wherefores of what G4 and how G4, and differences from G3, let’s get to know the animal. When you have a G4 report in your hands, or on your desktop screen, or even via an app on your iPad, how will you recognize it as G4? Read on to discover five things that should give the game away.

First, the reporting company should tell you it’s a G4 report. The report should clearly state: ‘This report has been prepared in accordance with the Global Reporting Initiative G4 guidelines’ (RPSD, p. 14) and the report must contain a GRI Content Index (G4IM, GSD, G4-32, p. 36).

Second, the reporting company should disclose how it has applied the G4 Framework using one of two options: CORE or COMPREHENSIVE (G4IM, GSD, G4-32, p. 36).

Third, the material issues should hit you in the face. If, when you pick up a G4 report, you cannot identify the material issues within five seconds, it’s not G4. Material issues should be prominently placed and quickly accessible to G4 report users.

So far, so good. This is enough to know if a report claims to be the genuine G4 item. G4 thus becomes shorthand for the content you can now reasonably expect to find in the G4 report, which is shown in Figure 2.

FIGURE 2. G4 required reporting elements.

As you can see, there are two main differences between the CORE and the COMPREHENSIVE options. The first is at the level of General Standard Disclosures (GSD). COMPREHENSIVE reporters must respond to all GSDs, whereas CORE reporters can pass in three areas:

• One strategy-related GSD (G4-2: description of key impacts, risks and opportunities);
• All but one of the 22 GSDs on Governance and Remuneration. At COMPREHENSIVE level, Governance and Remuneration disclosures are far more detailed than G3 ever was, and include a host of reporting detail on governance structure, performance, role in risk management and transparency (G4-35 to G4-50), and remuneration and incentives (G51–G-55).
• Two out of three GSDs relating to ethics and integrity (G4-57 and G4-58, mechanisms for reporting ethical breaches).

The second difference is at the level of Specific Standard Disclosures. CORE reporters can opt to report against only one performance indicator per selected material topic, whereas COMPREHENSIVE reporters must go the whole way and report on every listed indicator, as well as all the additional disclosures and indicators contained in any finalized GRI Sector Supplements.

Fourth, the G4 report will contain much detail about the process of developing the selected material content (G4-18) than was required by G3, as well as a list of most material issues (G4-19). Some pre-G4 reports have included the list of prioritized material issues (commonly referred to as a Materiality Matrix) but this has been far from common practice. The strong material focus should be recognizable in any G4 report you select.

Fifth, the G4 report will contain more information about the core issues selected to report on, not only how they were selected, but why they were selected, what is so important and what the company is doing to address them. This is the elevated relevance of the Disclosure on Management Approach (DMA), which was largely under-reported in G3 (G4-DMA).

These five characteristics will make your G4 report stand out from the previous generation. In the remaining pages of this book, we will explain how to tailor your report content in alignment with these five characteristics, and also respond to the Specific Standard Disclosures (SSDs).

What does this mean?

For those of you who knew the G3 Framework, you will remember the A,B,C classification that was intended to provide a graduated entry into sustainability reporting via low transparency (Application Level C), medium transparency (Application Level B) and high transparency (Application Level A), all of which could be supplemented with a ‘+’ to signify external assurance. This system was problematic, leading to an embarrassing and ultimately misleading culture of box-ticking and a race to include more indicators so that a company could claim higher transparency and publish self-congratulatory press releases about how great their reporting is. G4 now abolishes the A,B,C system, leaving two options only, for those reporters who wish to remain in accordance with the GRI guidelines. CORE, which may result in reports that are even less transparent than the former Application Level C, and COMPREHENSIVE which may result in reports which are even more stretching than the former Application Level A. This is potentially great news for first-time reporters and SME reporters, who now have an arguably easier way into GRI Reporting, provided they do the work. It’s possibly difficult for A reporters who will be challenged by the additional disclosures in G4, but for whom the stretch is manageable.

The big question is how B level reporters will react. Should they ‘demote’ themselves to the lower level and move to CORE? Or should they stretch themselves way beyond historical limits and try for COMPREHENSIVE? The answer will probably lie in the quality of B reports. At GSD level, both former A and B level reporters face the same challenge of more extensive GSDs. In G4, there are 58 GSDs, versus 42 in G3 which both A and B reporters had to address. Figure 3 shows a table of the GSDs and how they compare to the G3 requirements.

In the area of Specific Standard Disclosures (performance indicators) some B level reporters have tended to stay at the minimum 20 indicators required, while others have reported far more extensively. It’s possible that the high transparency Bs will make the leap to G4 COMPREHENSIVE. However, the G4 reporting decision is not about how many indicators B level reporters ticked in the past, but whether they have mature sustainability processes in their organization and have done the work (or are prepared to do the work) to address material focus in their value chain, and are ready to talk about this in the context of sustainability reporting. If yes, COMPREHENSIVE may be within reach.

At the DMA and SSD level, the degree of transparency and stretch in both CORE and COMPRHEHENSIVE versions is largely determined by the selection of material issues: more issues, more disclosure.

What should you do?

Change your mindset. You cannot report at the level of G4 with a G3 mindset. Companies should move away from the approach of deciding which indicators can be reported, and then deciding which Application Level to adopt. COMPREHENSIVE is not a prize – it’s intended to be a genuine reflection of the maturity of the company on its sustainability journey. With G4, companies should first think about their role in society and their material impacts. Companies should have some level of embedded stakeholder engagement which informs the selection of material issues, as well as a sustainability program which tracks key impacts and metrics. If companies can demonstrate this level of maturity, they are ready for G4.

A word about format. As online has become a dominant medium of communication these days, you should consider making your G4 fully accessible online and mobile-ready via an app for smartphones and tablets. Getting your report to people that want or need to use it has never been easier. App it!

A word about feedback. G4 provides a greater opportunity to engage with stakeholders. As the report is more focused on material issues, and therefore more meaningful (and possibly comprehensible) to stakeholders, companies should redouble efforts to ensure that feedback is proactively sought, rather than just ticking the box in the GRI Index that requires a contact point. If the report is online, an opportunity exists to provide easy ways for stakeholders to submit comments and suggestions. Also, make sure that the contact point for queries and feedback is an actual contact point. There is nothing more frustrating for a stakeholder, and more trust-eroding, than taking the time to submit feedback to a company on their report and receiving no response.

Table of contents

• Cover
• Title
• Copyright
• Abstract
• About the Author
• Disclaimer
• Contents
• Who This Book Is For
• Why I Wrote Understanding G4
• Foreword
• 1 Why GRI and Why G4?
• 2 What Does a G4 Report Look Like?
• 3 The Language of G4
• 4 What's Different About G4 Versus G3?
• 5 How Do You Start Writing a G4 Report?
• 6 What To Look For When Developing a G4 Report?
• 7 Will G4 Mean No More Reporting to Other Frameworks?
• 8 Does My G4 Report Need to be Audited?
• 9 Additional Insights for Reporters and Non-reporters
• 10 The Question on Everybody's Lips: Will G4 Reports be Shorter?