The Global Reporting Initiative – Leap forward or last gasp?

Date: 9 Mar 2006

It was about four years ago that I first wrote an article focusing on the substance behind the Global Reporting Initiative. Whilst welcoming the mission of the GRI, and acknowledging the wide–ranging approval that had been granted to its multistakeholder approach, I felt that the quality of the actual indicator framework was poor. A great process that produces a duff product is not a great process at all.

That was then. This is now. And now, we have a consultation draft of the next generation indicators and the question is – has the process now realised the potential that lies behind sustainability reporting and really delivered?

Certainly a lot has happened in the mean time. A countless swarm of committees and subcommittees has deliberated. More importantly, large numbers of companies have reviewed the framework and, mostly, taken from it what they thought helpful and fed back on what is not. There is a lot more practical experience around in the world in this area than there was four years ago.

In that original article, I suggested that any framework of indicators like the GRI needed to do three things:

1. Describe factors which are genuinely about the health of the business and its relationship with various stakeholders.
2. Cover all the different aspects of how the business has significant impacts on society.
3. Contain measures of performance, not just management process.

The good news is that the new revised indicators better meet these criteria than their predecessors. A whole raft of pretty useless economic indicators has been dropped as being both onerous and pointless. A lot of other measures, for instance on human rights, that were simply seeking the existence of a policy now seek information on performance. Unfortunately, this better approach has not yet extended to other important areas, namely product responsibility.

This is the draft that should have been produced four years ago. The question is whether the world has moved on, and we now actually need GRI 4.

The new generation of reporters need to confront a rising challenge, which is one of disconnect between the producers of reports and the intended audiences. The multistakeholder approach by definition produces a framework which is intended to appeal to all those audiences. This is an impossible proposition when some of those audiences have such diametrically opposed starting points. Indeed, as the GRI becomes more mature and specific, we may well see that GRI's multistakeholder consensus begins to break down, and it needs to make hard choices.

The recent debacle in the UK over an Operating and Financial Review (OFR) managed to establish pretty well the effective terms of reference for a report to the financial community. What companies struggle with is how to properly engage with their most important and direct stakeholders – the employees and customers, and well in some cases as the local communities. These people do not read reports – even GRI ones.

The problem can be defined as this: who provides the context? Financial reports are mostly numbers. They are reported by expert commentators who interpret the figures in the light of current market conditions, the track record of the management, the state of the competition and other expected factors likely to affect the industry. And from that, they produce narrative, and some judgement over likely future performance.

Sustainability reports are even more heavily dependent on the context. And yet all the current models of reporting expect the companies to provide their own narrative – to tell the story complete. And yet that doesn't work, because the end user actually doesn't read the reports, and doesn't trust the company to provide its own context. There are no expert interpreters of this information. All the focus on assurance is about checking data – but that isn't the real issue. People by and large don't think the companies will lie about the data – but they fully expect them to paint the best gloss on what the data actually means.

Add to that the fact that some of the leading companies are wearying of the annual treadmill of reporting that some believe distracts them from driving performance, and you have a process that still needs to grow up and prove its value to the business. That is the big challenge to the GRI. Its indicators have made considerable progress, but it now needs to turn its focus back onto the basic premise of how reporting can add real value to the good business, and to the broader base of stakeholders.

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