The Global Reporting Initiative (GRI)
Information
  • Date submitted: 31 Oct 2011
  • Stakeholder type: Major Group
  • Name: The Global Reporting Initiative (GRI)
  • Submission Document: Download
Keywords: Accountability (3 hits),

General Content

a) What are the expectations for the outcome of Rio+20, and what are the concrete proposals in this regard, including views on a possible structure of the Outcome document?

How can the world manage the transition to a ?Green Economy in the context of sustainable development and poverty eradication?? GRI suggests that a Green Economy will only be achieved if organizational information on the three pillars of sustainable development - economic, social and environmental performance - is widely available to decision makers, together with information on organizational governance. This can be achieved by the UN Conference on Sustainable Development (Rio+20) adopting a policy framework on sustainability reporting based on the report or explain approach: this practical measure would make a positive impact.

Thousands of organizations now report on their economic, social and environmental performance, showing that sustainability reporting adds value. Research shows that in 2011, 95 percent of the largest 250 companies worldwide issued sustainability reports, up from around 80 percent in 2008 and 50 percent in 2005.

While the number of reporters is growing, including in emerging economies such as Brazil, China and India, and the quality of reporting is improving, sustainability reporting is yet to achieve its full potential: the adoption of the practice is too slow.

Mainstream financial analysts have already started to include sustainability information in their analyses. But a critical mass of sustainability information is needed to inform markets. In this respect, it can be argued that companies that do not report sustainability data withhold from the markets vital information needed for the assessment of medium to long term risk and value, thereby imposing a cost on the markets and undermining their effective functioning.

Regulators are understanding the importance of the issue. Governments, international organizations, stock exchanges and a number of private initiatives have developed a wide range of policy, regulation, requirements, and guidelines to promote sustainability reporting and environmental, social and governance (ESG) disclosure, while some others are currently considering doing the same.

Among others, Australia, China, Denmark, the European Union, France, India, Germany, Norway, Spain, Sweden and the United States have developed policy initiatives to promote sustainability reporting and/or environmental, social and governance (ESG) disclosure, while stock exchanges in Brazil, China, Malaysia, Singapore, Pakistan and South Africa are playing a pivotal role in requiring or recommending listed companies to disclose sustainability/ESG information.

At the same time NGOs and investors are calling for more transparency in the corporate sector on sustainability impacts and performance.

There is a widespread movement which is building momentum and a global approach to the issue would be beneficial for the global economy. If sustainable development is to be reached, the world needs to move now from the innovative and pioneering approach of the estimated 4,500 companies that report their sustainability performance to a true global mainstream practice for all organizations.

The UN Conference on Sustainable Development (Rio+20) can achieve this by adopting a policy framework on sustainability reporting based on the report or explain approach.

During the early development of sustainability reporting, the question was ?why do you report??. As sustainability challenges grow, increasing the need for urgent action, the question is now becoming ?why don?t you report??. Regulators, managers, employees, investors and consumers all have a direct interest in knowing how companies and other organizations are contributing to sustainable development. Where this information is missing, they have a right to be concerned.

There are many compelling reasons now for governments to adopt a report or explain approach to sustainability reporting by all companies. It would establish a level playing field, promote transparency, foster innovation, set the basis for good governance, leave space for flexibility of approach, and represent a smart regulation approach, being relatively simple to enact and implement. It would ultimately make more and better quality sustainability information available, enabling better measurement of progress towards sustainability.

The international principles and objectives for sustainable development agreed at the United Nations Conference on Environment and Development and World Summit on Sustainable Development remain more important than ever. It is now urgent to make them reality. If the transition to a Green Economy on the path to sustainable development is to be made, all large businesses and other organizations must become engaged and contribute. Sustainability reporting is a practical way to achieve this goal.

For these reasons, the Global Reporting Initiative calls on the governments, international bodies and major groups, who will be involved in the United Nations Conference on Sustainable Development (Rio+20) to:
a. Acknowledge the growing practice of sustainability reporting and recognize that, improving corporate management and performance, facilitating stakeholder engagement, driving innovation and competitiveness represents an essential contribution to the transition towards a Green Economy;
b. Note that the increased quantity and quality of data available through sustainability reporting can be a powerful tool to help organizations and markets work more efficiently;
c. Commit to develop a global policy framework requiring all listed and large private companies to consider sustainability issues and to integrate material sustainability information within the reporting cycle, in their Annual Report and Accounts ? or explain why if they do not. The global policy framework (which can take the form of a Convention) should adhere to three key principles:
? Report or Explain ? establish a report or explain approach to sustainability reporting policy;
? Transparency ? enhance transparency by requiring national measures which would mandate the integration of material sustainability issues within the company reporting cycle, in their Annual Report and Accounts;
? Accountability ? provide effective mechanisms for investors and all stakeholders to hold companies to account on the quality of their disclosures, including for instance an advisory vote at the Annual General Meeting (AGM); and
d. Recognize the need for a process that builds on data available through sustainability reporting, leading to the development and adoption of macro-level metrics such as the Sustainable Development Indicators that, beyond GDP, would allow a more comprehensive measurement of well-being, environmental health and the progress made towards a Green Economy taking into consideration the use of already developed methodologies.
b) What are the comments, if any, on existing proposals: e.g., a green economy roadmap, framework for action, sustainable development goals, a revitalized global partnership for sustainable development, or others?

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c) What are the views on implementation and on how to close the implementation gap, which relevant actors are envisaged as being involved (Governments, specific Major Groups, UN system, IFIs, etc.);

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d) What specific cooperation mechanisms, partnership arrangements or other implementation tools are envisaged and what is the relevant time frame for the proposed decisions to be reached and actions to be implemented?

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Specific Elements
a) Objective of the Conference: To secure renewed political commitment for sustainable development, assessing the progress to date and remaining gaps in the implementation of the outcomes of the major summits on sustainable development and addressing new and emerging challenges.

Contributions could include possible sectoral priorities (e.g., (e.g., energy, food security and sustainable agriculture, technology transfer, water, oceans, sustainable urbanization, sustainable consumption and production, natural disaster preparedness and climate change adaptation, biodiversity, etc.) and sectoral initiatives that contribute to integrate the three pillars of sustainable development could be launched and endorsed at Rio+20.

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b) Green economy in the context of sustainable development and poverty eradication: views regarding how green economy can be a means to achieve sustainable development in its three dimensions, and poverty eradication; what is its potential added value; experience to date, including what has worked and how to build upon success, what are the challenges and opportunities and how to address the challenges and seize opportunities, and possible elements of an agreement in outcome document on a green economy in the context of sustainable development and poverty eradication

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c) Institutional framework for sustainable development: Priorities and proposals for strengthening individual pillars of sustainable development, as well as those for strengthening integration of the three pillars, at multiple levels; local, national, regional and international.

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d) Any proposals for refinement of the two themes. Recall that Resolution 64/236 describes the focus of the Conference: "The focus of the Conference will include the following themes to be discussed and refined during the preparatory process: a green economy in the context of sustainable development and poverty eradication and the institutional framework for sustainable development".

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Full Submission

Report or Explain

A policy proposal for sustainability reporting to be adopted as a common practice for the advancement of a Green Economy

for the UN Conference on Sustainable Development (Rio+20)

Thousands of organisations now report on their economic, social and environmental performance, showing that sustainability reporting adds value. If sustainable development is to be reached, the time has now come for sustainability reporting to become standard practice. This can be achieved by the UN Conference on Sustainable Development (Rio+20) adopting a policy framework on sustainability reporting based on the report or explain approach. This proposal outlines the case for such policy approach and invites discussion.

International principles and objectives for sustainable development were agreed at the United Nations Conference on Environment and Development in Rio de Janeiro in 1992. Their implementation was elaborated on at the World Summit on Sustainable Development in Johannesburg in 2002. In 2012, the United Nations Conference on Sustainable Development (Rio+20) will provide an opportunity to realize these principles and objectives at a time when global sustainability challenges are ever more critical.

In practical terms, how can the world manage the transition to a ?Green Economy in the context of sustainable development and poverty eradication? (hereafter Green Economy)? This proposal suggests that a Green Economy can only be achieved if organizational information on economic, social and environmental performance - the three pillars of sustainable development - as well as disclosure on organizations? governance is widely available to decision makers, including governments and private sector organizations. If businesses and all other organizations monitor and report data on their sustainability performance, they will have the vital information needed by executives to manage risk and identify sustainability opportunities. This would help them engage with stakeholders, and help financial markets work efficiently, in a shared effort to pave the way to sustainable development worldwide. Importantly, this information is also needed to monitor the effectiveness of sustainability policies, and to help in the development of new macro-level metrics such as national Sustainable Development Indicators. By looking beyond traditional GDP, this would enable a more comprehensive measurement of wellbeing, environmental health and the progress made towards a Green Economy.

Background on sustainability reporting

Governments first referred to environmental reporting at the United Nations Conference on Environment and Development in 1992. In Agenda 21 of the Conference, governments agreed that business and industry should be ?encouraged to adopt and report on their environmental records, as well as on the use of energy and natural resources?. 1 Building on this, the World Summit on Sustainable Development also underlined the importance of reporting by noting the need to enhance corporate environmental and social responsibility and Accountability, including through actions such as ?public reporting on environmental and social issues?.

Since that time, many leading Organizations worldwide have begun to integrate sustainability into their overall strategy to ensure they operate responsibly and sustainably. A 2011 report by KPMG shows that 62 percent of the companies surveyed have sustainability strategies in place, compared to just over half in 2008.3

According to a recent McKinsey survey, more than 50 percent of executives consider sustainability ?very? or ?extremely? important in a wide range of areas, including overall corporate strategy.

Increasingly, sustainability reporting is seen as an important gauge of both the quality of an organizations? governance processes and on and of its long term business strategy. Transparency to a wide stakeholder group creates an impetus for improving performance and sustainability reporting practice, enabling companies to measure, monitor and manage their impact on society, the economy, and help contribute to a sustainable future.5 Businesses generally seek to make a profit by pricing competitively and driving down costs. Costs are not just set against financial accounts, but also economic, social and environmental ones. The market for more sustainable products and services is also expanding. A growing number of organizations recognize these factors and are beginning to act on them.

The practice of sustainability reporting was advanced further in 1997 when the idea of creating a global framework for sustainability disclosure was conceived and the Global Reporting Initiative (GRI) was founded. Publicly inaugurated at the UN Headquarters in 2002, GRI produces what has become the leading global framework for sustainability reporting. Key features of GRI?s Sustainability Reporting Framework include its:

? Comprehensive scope, covering the main sustainability issues

? Continuous development, reflecting user experience

? Multi-stakeholder developed framework and governance model

? Universal relevance, including for private sector, public agency and civil society organizations.

Using a common reporting framework can promote international comparability between reports7. Various regulations, standards and initiatives now recommend or require reporting. This is why GRI collaborates closely with other organizations that provide normative frameworks and principles complementary to GRI?s Reporting Framework. Collaborations include:

? the United Nations Global Compact (UNGC): the Communications on Progress ? COP ? represent the mechanism through which UNGC participating companies demonstrate progress towards attainment of the ten UNGC Principles; GRI and UNGC joined forces to build a universal framework for corporate sustainability performance and disclosure, aiming to transform business practices on a global scale;

? the Organisation for Economic Cooperation Development (OECD): The OECD Guidelines for Multinational Enterprises recommend disclosure on social and environmental performance;

? the United Nations-backed Principles for Responsible Investment initiative (PRI), which specifically encourages use of the GRI Framework;

? the International Organization for Standardization (ISO), whose Standard on Social Responsibility encourages reporting.

By working together to harmonize with these organizations, current and potential reporters have clarity and consistency to make their respective contributions to a sustainable global economy.

The business case for sustainability reporting

Thousands of organizations worldwide now produce sustainability reports. Research shows that in 2011, 95 percent of the largest 250 companies worldwide issued sustainability reports, up from around 80 percent in 2008 and 50 percent in 2005.8 In producing such reports, these companies assess the sustainability dimensions of their activities and report their policies and performance. Among these reporters are innovators, leaders and early adopters of sustainability reporting. These companies represent an enormous pool of experience and expertise that continues to contribute to better disclosure and transparency.

The internal and external value that companies have found in sustainability management and reporting is widely documented. Sustainability reporting increases innovation and competition, drives continuous performance improvement and at the same time makes organizations more accountable for their impacts.9 The evidence for the business case is building as uptake of reporting increases.

?The business case for Sustainability Reporting has been proven by many leading companies around the world: hardly any that started reporting have discontinued. This means that these companies find value in sustainability reporting, otherwise they would not continue. Sustainability reporting is good business practice.?

Ernst Ligteringen, GRI Chief Executive

Some organizations are now producing integrated reports, a new and still emerging form of corporate report that seeks to bring together financial performance data with material information about an organization?s strategy, governance, performance and prospects in a way that reflects the economic, political, social and environmental context within which it operates. An integrated report is intended to provide a clear picture of how an organization creates value, both now and in the future. In August 2010, the International Integrated Reporting Committee (IIRC) was established to create a globally accepted framework for integrated reporting. The objective is that through integrated reporting many more companies and their stakeholders will become aware of sustainability performance measurement and disclosure and start acting on this information.

The market case for sustainability reporting

Recent years have seen an increasing interest from markets in sustainability performance data disclosed in reports. Investors look for positive returns, either by holding stock or by trading it, and study markets to see how they will develop. Markets are hindered by incomplete data, making it difficult for to assess risks or opportunities arising from sustainability issues. This is why information brokers such as Bloomberg now offer environmental, social and governance (ESG) performance data on thousands of companies on more than 350,000 terminals worldwide. Bloomberg?s competitor, Thomson Reuters, also offers ESG information to clients, while rating agencies such as Standard & Poors have created ESG indices for India, Egypt and the MENA region.

Sustainability reporting is increasing and mainstream financial analysts have already started to include sustainability information in their analyses. While the number of reporters is growing, including in emerging economies such as Brazil, China and India, and the quality of reporting improves, sustainability reporting is yet to achieve its full potential: the adoption of the practice is too slow. As an illustration, it took 12 years for the G250 to grow from 35% to 95% in the sustainability reporting practice. At the current rate it would take decades before sustainability reporting becomes common practice across global markets. An estimated 4,500 organizations are included in sustainability reporting databases, a fraction of the more than 45,000 publicly traded companies that are required to disclose their annual accounts and the estimated 82,000 corporations that do business across national borders in the world today. This means that regulators, investors and stakeholders know little or nothing of the sustainability practices and impacts of the vast majority of the world?s large companies.

Markets, however, will not treat sustainability information seriously as long as only a minority of companies report. A critical mass of sustainability information is needed to inform markets and enable performance benchmarking and analysis. In this respect, it can be argued that companies that do not report sustainability data withhold from the markets vital information needed for the assessment of medium to long term risk and value. By leaving information gaps and creating asymmetries of information, non-reporting companies impose a cost on the markets and undermine their effective functioning.

At the same time a positive trend needs to be discerned: governments, international organizations, stock exchanges and a number of private initiatives have developed policy, regulation, requirements, and guidelines to promote sustainability reporting and disclosure, while some others are currently considering doing the same. Among others, Australia, China, Denmark, the European Union, France, India, Germany, Norway, Spain, Sweden and the United States have developed policy initiatives to promote sustainability reporting and/or ESG disclosure, while stock exchanges in Brazil, China, Malaysia, Singapore, Pakistan and South Africa are playing a pivotal role in requiring or recommending listed companies to disclose sustainability/ESG information.

At the same time NGOs and investors are calling for more transparency in the corporate sector on sustainability impacts and performance12. Therefore, it is possible to recognize a widespread movement which is building momentum and a global approach to the issue would be beneficial for the global economy.

If there is to be a change, the world needs to move now from the innovative and pioneering approach of 4,500 companies to a true global mainstream practice for all companies.

?Companies do not operate in a vacuum. They operate in the triple context of commerce, the environment and society. Stakeholders cannot make an informed assessment about sustained value creation by a company from its financial report. Information is required on the governance of the company and how its operations impact on the environment and society. ESG disclosures are required and if not furnished the company should explain why not."

Prof. Mervyn King, GRI Honorary Chairman

The case for a report or explain approach

During the early development of sustainability reporting, the question was ?why do you report??. Reporting on aspects of performance other than financial was not required by managers, regulators or investors. Pioneers of sustainability reporting started the process because they recognized its value to their operations. They recognized that better information was needed to improve the management of their companies, and its relationships with all stakeholders. Continued and growing sustainability reporting by companies demonstrates their assessment that the practice adds value.

As sustainability challenges grow, increasing the need for urgent action, the question is now becoming ?why don?t you report??. Regulators, managers, employees, investors and consumers all have a direct interest in knowing how companies and other organizations are contributing to sustainable development. Where this information is missing, they have a right to be concerned.

Landmark developments demonstrate the benefits of a report of explain approach to regulation.

In Denmark, large businesses (including state‐owned companies) have been required by law to include information about their corporate social responsibility (CSR) policies and practices in their annual reports since 2009.13 Companies must account for their CSR policies (or disclose if none are in place), how these policies are translated into actions, what the companies have achieved as a result, and what they expect in the future. An impact assessment study published by the government in 2010 concluded that the requirement to report was helping motivate more businesses to develop and report on sustainability.

In South Africa, the over 450 companies listed on the Johannesburg Stock Exchange (JSE) are required to apply or explain the King Code of Governance (King III). The King Code recommends that organizations produce an integrated report in place of their annual financial and sustainability reports. As King III now falls within the listing requirements of the JSE, listed companies have to produce an integrated report, or explain why they have not. Underlying this requirement was the recognition that sustainability information was nowadays as important to company directors as it was to investors.

There are many reasons for governments to adopt a report or explain approach to sustainability reporting by all companies.

? Level playing field: By establishing the basic principle of report or explain, a common floor of practice would be established. While sustainability reporting would remain voluntary, companies would still be free to choose what information to disclose. A consistent reporting approach, applied across national boundaries, would make it easier for companies to operate more effectively in global markets and along transnational supply chains.

? Transparency: Markets can only be effective when relevant information is available. Information contained in sustainability reporting is essential for a Green Economy. A report or explain requirement would help ensure that the information needed by markets and society to assess a company?s management and performance, is provided. This would be based either on reported data, or the explanation for not reporting. Investors and customers would then be able to make informed decisions regarding penalties, premiums or voting decisions they would attach to disclosures, or lack of disclosure.

? Innovation: By monitoring and reporting their sustainability performance, all organizations would be better placed to consider innovative ways to improve their performance and increase their contribution to sustainable development. Evidence from the last decade suggests that sustainability reporting is a powerful source of innovation and performance improvement. Reporting encourages businesses to engage with stakeholders, integrate sustainability into their business strategy and bring to market new products and services.

? Governance: As sustainability challenges mount, it is increasingly inconceivable that corporate governance can be considered responsible if it fails to take into account sustainable development issues. Whether from a perspective of risk prevention, the desire to develop products and services that help solve the world?s problems, the intention to contribute to the development of a green economy, or the broader desire to ensure that the role of business in society is understood and trusted is a prerequisite of good governance.

? Flexibility: A report or explain approach would neither prescribe which measures should be taken at national level ? leaving each Government to choose the policy approach depending on the peculiarities of the economic environment ? nor how companies should report - leaving space for them to choose their preferred framework, sustainability indicators and standards. This would enable new reporters, including small and medium sized enterprises, to start at a basic level and improve quality and expertise over time.

? Smart regulation: A report or explain policy would be relatively simple to enact and implement. It does not require complex or excessively prescriptive regulation and is fully consistent with current financial reporting requirements. It could be required by governments and public authorities, and also by market actors, such as stock exchanges requiring listed companies to report or explain, or institutional investors requiring their investment targets to report or explain. Stakeholders would become engaged as part of the reporting process. The resulting democratization of sustainability information would see markets and society as whole would play a monitoring, assuring, promoting, and enforcing role.

? Progress towards sustainability: A common report or explain approach would ultimately make more and better quality sustainability information available. This would enable markets and policy makers to better monitor progress, provide support, and refine policies, thereby contributing the transition to a Green Economy and sustainable development.

GRI Proposal

The international principles and objectives for sustainable development agreed at the United Nations Conference on Environment and Development and World Summit on Sustainable Development remain more important than ever. It is now urgent to make them reality. If the transition to a Green Economy on the path to sustainable development is to be made, all large businesses and other organizations must become engaged and contribute. Sustainability reporting is a practical way to achieve this goal.

For these reasons, the Global Reporting Initiative calls on the governments, international bodies and major groups, who will be involved in the United Nations Conference on Sustainable Development (Rio+20) to:

a. Acknowledge the growing practice of sustainability reporting and recognize that, improving corporate management and performance, facilitating stakeholder engagement, driving innovation and competitiveness represents an essential contribution to the transition towards a Green Economy;

b. Note that the increased quantity and quality of data available through sustainability reporting can be a powerful tool to help organizations and markets work more efficiently;

c. Commit to develop a global policy framework requiring all listed and large private companies to consider sustainability issues and to integrate material sustainability information within the reporting cycle, in their Annual Report and Accounts ? or explain why if they do not. The global policy framework (which can take the form of a Convention) should adhere to three key principles:

? Report or Explain ? establish a report or explain approach to sustainability reporting policy;

? Transparency ? enhance transparency by requiring national measures which would mandate the integration of material sustainability issues within the company reporting cycle, in their Annual Report and Accounts;

? Accountability ? provide effective mechanisms for investors and all stakeholders to hold companies to account on the quality of their disclosures, including for instance an advisory vote at the Annual General Meeting (AGM); and

d. Recognize the need for a process that builds on data available through sustainability reporting, leading to the development and adoption of macro-level metrics such as the Sustainable Development Indicators that, beyond GDP, would allow a more comprehensive measurement of well-being, environmental health and the progress made towards a Green Economy taking into consideration the use of already developed methodologies.

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