In October 2016 the Global Reporting Initiative (GRI) releaseda new sustainability reporting standard that will have wide reaching effects on sustainability reporting the world over.
Sustainability Reporting and the GRI
The GRI is an organization which has provided guidance on sustainability reporting since 1997. The guidance of the GRI has become a key benchmark for good practices in sustainability reporting and is widely u ed across many industries.
Sustainability reporting has become a widely adopted practice across all industries, but particularly the mining industry over the last decade. The GRI reports that 92% of the world’s 250 largest companies report on sustainability performance. Of these, 74% use the GRI, illustrating its reach as a global guideline for reporting.
Adoption of sustainability reporting is driven by market demands – of investors and stakeholders – rather than strictly regulatory requirements. According to a report of the MIT Sloan Management Review, 75% of senior executives in investment firms believe that a company’s sustainability performance is important to consider when making investment decisions. This creates the market impetus for sustainability reporting, beyond obligatory disclosures under securities law.
Reporting in the Shadow of Regulatory Requirements
Regulators are not absent however and securities regulators in Canada, the US and Europe have increasingly discussed the importance of sustainability issues in the context of material disclosures to the market. Specific obligations regarding disclosure on sustainability issues can be seen in regulatory developments from transparency reporting such as the Extractive Sector Transparency Measures Act, the UK Modern Slavery Act, California Supply Chain Transparency Act, and sustainability related disclosure obligations set by regulators in Europe, South Africa and elsewhere. In Canada, the 2015 Corporate Social Responsibility Strategy for the Extractive Sector encourages a voluntary approach, specifically endorsing the GRI as a CSR standard for the Canadian mining sector. This highlights the specific importance of the GRI in the Canadian mining context.
New GRI Standards
The new GRI standard is designed to simplify the sustainability reporting process and make it more accessible for reporting entities. The new standard adopts a modular approach, which will allow future updates of the standard without the need for a full scale revision.
The new standard has three core areas:
- GRI 101 – Foundation – This sets the basic framework and language for reporting on economic, environmental and social impacts;
- GRI 102 – General Disclosure – Which sets out reporting requirements on contextual information about an organization and its sustainability reporting practices.
- GRI 103 – Management Approach – Establishing reporting requirements about the approach of an organization in managing a material topic.
Beyond these core reporting frameworks, more detailed reporting tandards are set for a variety of sustainability topics:
- GRI 200 – Establishes standards on economic issue reporting such as economic impacts, procurement performance and anti-corruption;
- GRI 300 – Setting reporting standards on a variety of environmental topics including environmental management, energy, water, waste, biodiversity and environmental compliance;
- GRI 400 – Covering social sustainability issues such as employment practices, labour management, health and safety, privacy, freedom of association, diversity, indigenous rights, child labour, forced labour, human rights assessments and supply chains.
The intention is for these 36 modules of the GRI to be used as appropriate for the organization, as determined through stakeholderengagement and analysis of what topics are material to the organization’s operations. The question of materiality, in the context of the GRI, is much different than that found in most securities regulation, focusing more on societal materiality than financial materiality.
Implications for the Mining Industry
Sustainability reporting is here to stay and can serve as an excellent tool for mining companies to communicate with their stakeholders and stockholders on sustainability risks and opportunities affecting the organization. The GRI has, for some time, been a high water mark for good sustainability reporting practice. The introduction of a new global standard will allow adherents to increase consistency and develop industry norms, further facilitating this dialogue. This development will evolve alongside other trends in the world of sustainability reporting, including the emergence of integrated reporting including standards development of the Sustainability Accounting Standards Board (SASB). While the new GRI standards are not an endpoint, they are worth exploring and a useful guide to current best practice in sustainability reporting globally.
Michael Torrance is a lawyer with Norton Rose Fulbright, Toronto.