GRI Reporting and How It Can Be Implemented

As an accountant, I’m intrigued by the standards that exist by the Global Reporting Initiative on sustainability reporting and how it’s maintained, assessed, policed, etc. Typically the “meat” in a firm’s external audit lie in the audit opinion and financial statements… I’ll be honest, that’s the first thing I flip to, because that’s where the facts are. The numbers don’t lie – a quick glance at the margins, ratios and bottom line will tell you a lot about the company. Very rarely do I read it cover to cover, but I will now start doing that, because it’s in the Management Discussion and Analysis (MD&A) section of audit reports that managers talk about GRI, and other things you don’t necessarily think of when you value a firm, like intellectual capital. I always thought of it as a place where management paint their numbers in the most positive light possible and briefly talk about external opportunities and threats. 

The GRI Initiative provides standardized rules in which management follows to develop their framework to suit their company in advance such as:

  • Principles to define report content: Materiality, Stakeholder Inclusiveness, Sustainability Context, and Completeness
  • Principles to define report quality: Balance, Comparability, Accuracy, Timeliness, Reliability, and Clarity
  • Guidance on how to set the Report Boundary

Requirement management disclosures are defined as follows:

  • Strategy and Profile
  • Management Approach
  • Performance Indicators
The GRI standards includes expanded, comprehensive guidance for reporting on human rightslocal community impacts, and gender
Performance Indicators are organized into categories: EconomicEnvironment and Social. The Social category is broken down further by LaborHuman RightsSociety and Product Responsibility sub-categories.

In preparing responses to the Economic Indicators, data should be compiled from figures in the organization’s audited financial accounts or its internally audited management accounts, wherever possible. 

To enhance the credibility of sustainability reporting, the GRI recommends, in addition to the establishment of suitable management systems and reporting processes, having the reports certified by auditors.

Both for the stakeholders as well as for the management, the external audit provides the assurance that reports are accurate, complete and appropriate. The auditor’s examination of systems and processes, along with the associated findings and recommendations, which are recorded in the assurance statement are often starting points for the optimization of internal sustainability management.

For smaller firms that want to use GRI as guiding principles in linking sustainability to their overall strategy, it is possible to use the firm’s balanced scorecard as a tool to measure success and progress in implementing the triple bottom line.  The balanced scorecard is used to strategically align an organization’s values with specific market forces.  The market forces are linked with the different perspectives of the scorecard, and those market forces are then used to link to a specific GRI measure, how success or failure is measured using the triple bottom line. Based on that measure, the benchmark in the scorecard is made. I like this approach to reporting the triple bottom line because it’s transparent and provides a basis for responsible and sustainable decision making, which is essentially the difference between sustainability and corporate social responsibility. It also makes managers accountable for performance by setting benchmarks in advance, and can be implemented by firms who do not have to publish annual reports.
All in all, the GRI standards are much more detailed, thorough and measureable than I thought they would be, I was expecting something much more generalized.  As with accounting standards, there is room for misinterpretation / misrepresentation, but that is the role of the auditor to properly define the scope of the audit to include all parts of sustainability reporting.  Personally, I would like to see this be taken a step further and actually have a sustainability statement as part of the financials that in some way incorporates the ratios discussed in class.
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2 comments on “GRI Reporting and How It Can Be Implemented
  1. jeremy says:

    Excellent suggestion about the incorporation of EEE ratios in the financials. You should write to GRI and recommend this to them! 🙂

  2. Donna Scott says:

    Thanks, I might do that. It would add a level of comparability to financial statements, similar to the ratios that income statements and balance sheets provide, that would be more standardized than only using performance indicators that may differ between firms. I’d have to look into it further. IFRS standards have only recently been adopted by the majority of countries to maintain consistency in accounting standards across the world, so it may still be a while for this kind of extension.

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