Credible Reporting of Sustainability Impacts Benefits all Stakeholders
By Ásthildur Hjaltadóttir, GRI Chief Regional Officer
In recent months, Global Reporting Initiative – provider of the world’s most widely used sustainability reporting standards – has taken a more proactive stance in how we communicate about the changes and challenges in the ESG landscape. Why now, you may ask? Well, we are at a crucial juncture in the corporate transparency journey. One direction may lead to narrower disclosure and less scrutiny, the other, opportunities for robust reporting that drives accountability.
Sharing the GRI perspective on these key developments is part of our efforts to improve understanding by all stakeholders and tackle some of the confusion out there, while making the case for the transition to a more effective corporate reporting system. This regular series briefings series dives under the surface of topical themes in the world of sustainability reporting – with topics so far ranging from materiality to tax.
It seems a controversial statement, given the column inches written on the topic, but there is no alphabet soup of sustainability standards. Yes, there is a myriad of guidelines, frameworks, surveys, and certifications that deal with ESG. Yet only the GRI Standards provide impact-focused standards that are globally applicable and meet the needs of a multi-stakeholder audience.
Investors, you are important. However, to put it simply, informing all stakeholders is good for business. By providing comparable, verifiable information on sustainability efforts, companies show the world that they practice what they preach. Investors want that assurance, as do governments, civil society, rating agencies, academics, among others.
Indeed, stakeholder capitalism is something of a buzz phrase these days, with the annual letter earlier this year from the CEO of BlackRock, Larry Fink, calling for companies to “create value for and be valued by its full range of stakeholders”. However, stakeholder capitalism without sustainability reporting that reflects the needs of society and the environment makes little sense.
A stakeholder-centric corporate strategy can have multiple benefits – from enhancing reputation and brand to improved ability to hire new staff, mitigating environmental risks and increasing access to capital markets. So, explaining how corporate actions seek not only to be profitable, but also to safeguard stakeholder interests, is a powerful tool when trying to communicate how the business is accountable to people and planet.
There are currently two separate yet inter-linked developments underway in the global disclosure landscape, which GRI is closely engaging with:
- The European Sustainability Reporting Standards (ESRS) being created by the EU, based on double materiality for a multi stakeholder audience (which includes investors). GRI has provided technical input to their development, which is led by the European Financial Reporting Advisory Group (EFRAG).
- Standards for the disclosure of sustainability related financial information being drafted by the IFRS Foundation – with which the newly established International Sustainability Standards Board (ISSB) is charged – and will be based on financial materiality for an investor audience. GRI and IFRS Foundation recently entered into a MoU under which our respective standard setting efforts will be aligned.
In our view, the approaches of the IFRS and the EU are not competing but complementary forces. Different standards have different purposes for different audiences, as determined by materiality. Standards with a sole purpose to inform investors are built on a different concept from impact standards that inform a broader group of stakeholders.
What is important is that the application of these standards have clarity of purpose. From biodiversity loss to climate change, health crises to inequality, sustainability challenges won’t be addressed without the end goal in mind. That is why all stakeholder groups benefit from credible reporting standards, which are essential to mitigate lingering concerns about greenwashing. Frameworks without a definite reporting obligation cannot tackle this, nor can ESG ratings and rankings.
We need transparency on impacts because this is the enabler of sustainable behaviour. I believe markets and stakeholders around the world are increasingly understanding this perspective. Therefore, as the ESG landscape continues to evolve, I am confident that the place and relevance of GRI, and the multi-stakeholder accountability that our standards represent, will continue to grow.
ABOUT THE AUTHOR
As Chief Regional Officer, Ásthildur Hjaltadóttir oversees the work of GRI’s seven Regional Hubs. She has been with GRI for more than 15 years in a wide variety of roles, including previously managing GRI’s report services, training and coaching departments. Prior to GRI, Ásthildur worked in international development in Belgium and the Netherlands. She holds degrees in Political Science & Government, and English Language & Literature, from the University of Iceland.