Towards sustainable business Carol Adams

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Web Name: Towards sustainable business Carol Adams

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Towards sustainable business

Carol Adams

About CarolContact MePublicationsIn the newsExplainer: The Global Reporting Initiative – what investors, board directors, accountants, auditors and regulators need to knowPosted on November 11, 2021 1 Comment

By Carol A Adams

Main points:

Highlights the benefits of the Global Reporting Initiative (GRI) Standards issued by the Global Sustainability Standards Board (GSSB) to board directors, investors, accountants and regulators.20+ year history and used by over 10,000 organisations world-wide.Introduces governance structure and reasons for their popularity.

The Global Reporting Initiative’s (GRI) sustainability reporting Standards are used by most of the world’s largest companies and over 10,000 organisations world-wide (see KPMG, 2020 p25). They allow companies to demonstrate accountability for their impacts on economies, the environment and people. Their popularity stems from recognition that the success of companies depends on stakeholder support, being trusted and getting a heads up of likely problems down the track. The globalisation of business that occurred in the latter half of last century and the pollution and exploitation of lesser developed countries, labour rights and human rights that followed made this accountability a must have. This need is reinforced by almost daily press reports of corporate wrong doing.

The GRI has a track record spanning over twenty years. It was founded in the late 1990s and issued its first set of guidelines in 2000. In 2016 the fourth set of guidelines (G4) were transitioned into Standards. A substantial revision was undertaken in 2021. The 2021 update brought enhanced governance disclosures, stronger guidance on materiality to enhance consistency and comparability and an increased focus on human rights. 2021 also saw the announcement that GRI is co-constructing sustainability reporting standards for the European Corporate Sustainability Reporting Directive (CSRD) with the European Financial Reporting Advisory Group (EFRAG). The CSRD will apply to approximately 50,000 companies.

GRI’s governance structure

The transition to Standards in 2016 saw a revised governance structure modelled on financial reporting standard setters, but with multi-stakeholder input reflecting broad stakeholder interest in sustainability reporting. The Global Sustainability Standards Board (GSSB) replaced a technical working group. A Due Process Oversight Committee and Independent Appointments Committee were formed.

The GSSB has sole responsibility for setting the Standards – there’s a ‘firewall’ between it, the GRI Board, the 50 strong GRI Stakeholder Council and funding sources. The governance bodies and working groups are multi-stakeholder and have global representation. Together with GRI’s presence across the world, this facilitates the global relevance of the Standards.

Standards issued by the GSSB

There are three ‘Universal Standards’ that apply to all organisations.

GRI 1 sets out the reporting principles that must be followed. The principles of accuracy, balance, clarity, comparability, completeness, timeliness and verifiability will be familiar to accountants. The principle of ‘sustainability context’ requires that the organization reports “information about its impacts in the wider context of sustainable development”. This involves: considering the ability of future generations to meet their needs; drawing on scientific consensus on the limitations of environmental resources; reporting in relation to the UN Sustainable Development Goals (SDGs); and, considering societal expectations.

GRI 2 sets out required disclosures about the entity, its activities, governance structure, strategy and policies with respect to sustainable development and approach to stakeholder engagement.

GRI 3 sets out the process for determining and managing material topics – those where it has the most significant impacts on the economy, environment and people.

The sector guidance that accompanied G4 are being replaced with 40 sector standards, the first one for the oil and gas sector. These sector standards help organisations identify their material topics and the 30+ topic standards tell organisations what to report on matters ranging from tax, economic performance, emissions, energy to diversity and equal opportunities.

There is flexibility in where information is disclosed – there is no requirement to develop a separate report for all the information. A content index records the location of each required disclosure for ease of reference.

Key points for stakeholders to note are set out below.

Board Directors

The requirement to disclose processes for engaging stakeholders and determining and managing material topics often enhances management’s due diligence. Engaging with stakeholders and identifying what matters to them builds trust. The requirement to provide a statement about the relevance of sustainable development to the organisation and its strategy facilitates the consideration of risks and opportunities in strategy development. External assurance (under the purview of audit and risk committees) can provide additional confidence and with appropriate governance oversight the organisation is well placed to thrive amidst the increasing complexity that sustainable development challenges bring.

Investors

The impacts of organisations on the economy, environment and people often have financial consequences, sometimes through reputational damage, operational risks, or strategic opportunities. In many cases it is almost impossible to know when, how or how much the financial consequences to a business will be. Consequently, investors are interested in the processes organisations use to identify stakeholder interests and material impacts, prevent, and mitigate them along with governance oversight thereof. GRI Standards provide credibility and context for additional financial disclosures for capital markets.

Accountants and auditors

Accountants have valuable knowledge and experience to guide their organisations in developing appropriate data protocols, internal controls, the scope for external assurance engagements and the selection of assurance providers (see GRI 1).

There is increasing demand for external assurance of sustainability reporting. As it is increasingly mandated in some jurisdictions for some organisations, demand will increase even where not mandated.

Regulators

Voluntary reporting of the impacts of organisations on the economy, environment and people has been fraught with greenwash and researchers have long called for mandatory reporting. The governance structure of the GRI was designed to facilitate adoption of the GRI Standards by legislators. The Standards are aligned with authoritative intergovernmental instruments on the conduct of business and on human rights. Their use aids national governments in tracking their contribution to sustainable development and fulfilling their commitments to the UN SDGs. (See CIPFA, 2021 re the importance of reporting on impacts to the public sector.)

You might be interested in the ICAS hosted discussion on sustainability reporting with Sir David Tweedie and Professor Mervyn King.

References

CIPFA (2021) Evolving climate accountability: A global review of public sector environmental reporting

KPMG (2020) The time has come: The KPMG survey of sustainability reporting 2020

Carol Adams served as member of the GRI Stakeholder Council during 2013-2019 and Chair for the final two years. The views expressed are her own.

Filed Under: Sustainability reporting A trial balance for sustainability reporting: reconciling the ISSB and the GSSBPosted on November 6, 2021 1 Comment

by Carol A AdamsThe IFRS Foundation’s COP 26 announcement of the establishment of an International Sustainability Standards Board (ISSB) would not be a surprise to those following the discussions. Nor would its soaking up of the frameworks and [Continue reading]

Filed Under: Sustainability reporting There are no investment returns on a dead planetPosted on October 11, 2021 5 Comments

by Carol A AdamsThe recent release by EFRAG of the ‘Climate standard prototype’ highlights the gulf between the approach to sustainability reporting taken by the EU (working with EFRAG, the GRI and now Shift) and that of the IFRS Foundation [Continue reading]

Filed Under: Sustainability reporting Lets put sustainability back into the sustainability reporting debatePosted on October 4, 2021 2 Comments

by Carol A AdamsMain points:presents three possible scenarios as to how "sustainability" reporting might developthe current direction will not facilitate harmonisation or sustainable developmenta modification will facilitate bothtaking a [Continue reading]

Filed Under: Sustainability reporting A round up of the key themes from recent events with links to recordingsPosted on September 30, 2021 Leave a Comment

by Carol A AdamsMain points:Across the world various bodies and organisations are considering what policy development in relation to climate change and sustainable development means to themSummarises some recent events I've spoken at with [Continue reading]

Filed Under: Events presentations, Sustainability reporting, Teaching materials My response to the IASBs Exposure Draft on the Management Commentary Practice StatementPosted on August 10, 2021 2 Comments

To: Andreas Barckow, Chair, International Accounting Standards BoardComment letter on the Exposure Draft on the Management Commentary Practice StatementI appreciate the opportunity to provide feedback on the Exposure Draft. I have been [Continue reading]

Filed Under: Corporate reporting, Sustainability reporting Towards a conceptual framework for non-financial reporting inclusive of pandemic and climate risk reportingPosted on July 17, 2021 1 Comment

by Subhash Abhayawansa and Carol A AdamsAbstract/summaryThis paper evaluates non-financial reporting (NFR) frameworks insofar as risk reporting is concerned. This is facilitated through analysis of the adequacy of climate- and [Continue reading]

Filed Under: Books journal articles, Corporate reporting, TCFD recommendations We studied the world’s top airlines and hospitality firms – many are still poor at reporting risks around climate and pandemicsPosted on July 15, 2021 1 Comment

The plane truth. BP Miller/Unsplash, CC BY-SACarol A Adams, Durham University and Subhash Abhayawansa, Swinburne University of TechnologyMany UK companies will have to make statements about the risks of climate change to their businesses [Continue reading]

Filed Under: Corporate reporting, TCFD recommendations Sustainability reporting and trust in banksPosted on June 10, 2021 Leave a Comment

As a sector banks struggle to get and maintain customer trust.  The annual reports of the Royal Bank of Scotland over the last decade discussed their efforts to regain it.  A photograph depicts large text over stairs stating: “Our future is not about [Continue reading]

Filed Under: Sustainability reporting Comment letter on the Exposure Draft proposing amendments to the IFRS Foundation ConstitutionPosted on May 15, 2021 2 Comments

by Carol A AdamsResponse to the proposed amendments to the IFRS Foundation constitution to accommodate a new board to set "sustainability standards"Question 1Do you agree that the amendments proportionately reflect the Trustees’ strategic [Continue reading]

Filed Under: Sustainability reporting Next Page Search this siteCarol Adams

Carol Adams is an author, consultant and Non-Executive Director with expertise in financial and non-financial reporting and environmental, social and governance risks. Read More…

Recent PostsExplainer: The Global Reporting Initiative – what investors, board directors, accountants, auditors and regulators need to knowNovember 11, 2021A trial balance for sustainability reporting: reconciling the ISSB and the GSSBNovember 6, 2021There are no investment returns on a dead planetOctober 11, 2021Lets put sustainability back into the sustainability reporting debateOctober 4, 2021A round up of the key themes from recent events with links to recordingsSeptember 30, 2021My response to the IASBs Exposure Draft on the Management Commentary Practice StatementAugust 10, 2021Towards a conceptual framework for non-financial reporting inclusive of pandemic and climate risk reportingJuly 17, 2021We studied the world’s top airlines and hospitality firms – many are still poor at reporting risks around climate and pandemicsJuly 15, 2021Sustainability reporting and trust in banksJune 10, 2021Comment letter on the Exposure Draft proposing amendments to the IFRS Foundation ConstitutionMay 15, 2021A checklist for your full draft PhD thesisMay 15, 2021IFRS Foundation Trustees: key acknowledgements not addressed in strategyMay 4, 2021US Council of Institutional Investors taking an interest in SEC position on climate and diversity disclosuresMay 2, 2021Sustainable development as our north star in the harmonisation debateApril 16, 2021Connecting the COVID-19 pandemic, ESG investing and calls for ‘harmonisation’ of sustainability reportingApril 8, 2021ArchiveArchiveSelect Month November 2021 October 2021 September 2021 August 2021 July 2021 June 2021 May 2021 April 2021 March 2021 January 2021 December 2020 November 2020 October 2020 September 2020 July 2020 June 2020 May 2020 April 2020 February 2020 January 2020 November 2019 October 2019 August 2019 June 2019 May 2019 April 2019 March 2019 December 2018 October 2018 September 2018 August 2018 June 2018 May 2018 March 2018 February 2018 January 2018 November 2017 October 2017 September 2017 July 2017 June 2017 May 2017 March 2017 January 2017 December 2016 November 2016 October 2016 September 2016 July 2016 June 2016 May 2016 April 2016 March 2016 January 2016 December 2015 November 2015 October 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013 June 2013 May 2013 April 2013 March 2013 Subscribe to updatesCategoriesAccounting (27)Books journal articles (35)Corporate report reviews (13)Corporate reporting (78)Embedding sustainability (41)Events presentations (27)Financial reporting (6)Financial services sector (24)Governance integrated thinking (40)Human capital diversity (14)Integrated reporting (70)Interviews (21)Investment stewardship (3)Leadership (8)Materiality (9)Natural capital (13)SDGs (16)Social capital (9)Stakeholder engagement (9)Sustainability Accounting, Management Policy Jnl (15)Sustainability reporting (69)TCFD recommendations (5)Teaching materials (10)University sector (16) Copyright 2017 Carol Adams Views contained in these web pages not attributed specifically to others are my personal views. They do not represent the views of any organisation I am employed by, have been employed or am or have been associated with. Site developed by Daisywheel Interactive using Mocha premium theme for Wordpress

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