G4 in action

​The main features of G4 were presented this morning, as companies joined together to discuss the future of sustainability reporting.

GRI Deputy CEO Nelmara Arbex kicked off proceedings with an address that clarified the importance of G4. “We didn’t start this initiative 10 or more years ago because we enjoy reporting. Reporting is not fun. But reporting is vital for change, and we don’t have much time. We need Guidelines that focus on the sustainability impacts that really matter - and where they matter.”  

Arbex outlined how G4’s content and structure meet this fundamental need, offering the right balance between required disclosures and common-sense decision making.  

A set of General Standard Disclosures are to be reported by all organizations, providing essential information about the organization itself and its approach to reporting. This includes clear explanation of how the report’s material Aspects and Boundaries are identified, particularly in discussion with stakeholders.  

The two options for reporting ‘in accordance’ with G4 – Core and Comprehensive – are also founded on decisions about materiality. The common elements of the two options are designed to address these fundamental questions: does the organization know what matters, and where?  

The Guidelines’ new split into two ‘books’ was demonstrated. One sets out, simply, the GRI Reporting Principles and Disclosures. ‘Book 2’, the Implementation Manual, gives further advice on how best to report. The Manual also provides quicklinks for fast navigation, updated definitions and references, information on the link between sustainability and integrated reporting, and clear indication of GRI’s linkages with the OECD Guidelines and UNGC Principles. The increased use of summaries, visual aids and step-based processes was also revealed.  

Specific Standard Disclosures, including Disclosures on Management Approach, are only to be reported for material Aspects. They include new Indicators for reporting on Supply Chain impacts, Anti-corruption, and GHG Emissions. Yet Arbex stressed that despite G4’s increased focus on materiality, organizations are of course likely to monitor and manage a broad range of sustainability issues. The report itself should demonstrate the organization’s understanding of the key links between sustainability and its everyday business.  

Representatives from companies that have already assessed G4 then gave their views. Kim Hessler of General Electric expressed satisfaction at the conciseness and clarity of G4’s tiered, materiality-focused approach.  

“It’s almost like a funnel - it enables companies to identify global challenges, then look at their relationship to them. Finally, you end up with qualitative and quantitative information. This avoids the previous issue of companies reporting a plethora of information.

“It also benefits stakeholders. Conciseness and clarity for companies means conciseness and clarity for stakeholders; it helps them to dialogue better.”  

Rupert Thomas of Shell also emphasized the tighter discipline that will result from G4 – and the fact that it will apply to external stakeholders. While organizations may still publish expansive reports if they choose, the erstwhile ‘tick box’ approach of unfocused reporting may be a thing of the past.  

Thomas also praised G4’s suitability for standalone sustainability reporting and for integrated reporting. “Integrated reporting shouldn’t result in less reporting. And G4 is the global standard for sustainability reports – standalone sustainability reporting is good for society and good for humanity.”  

Marina Migliorato of Enel stressed that G4 has the features to enable deep managerial and cultural change. “In using G4, companies – including SMEs – will establish data collection systems based on materiality. This will lead to updated KPIs and updated strategy – a new business model, due to the increased awareness of boards of directors.”  

Migliorato was also positive about G4’s use by SMEs. “It’s easier than you might imagine. Of course, reporting means involving and training colleagues, aligning internal processes, engaging boards. But many SMEs are in the supply chains of larger companies, where they can be sponsored to provide CSR information. And flexibility is crucial – they can use the Core ‘in accordance’ option.”  

In the follow-on session on Defining Report Content, Bastian Buck (GRI Senior Manager - Reporting Framework) explained that G4 is an effective mix of new and familiar content. For example, the process guidance that was previously in two separate Protocols has been combined, but the Materiality Principle itself is unchanged from the G3.1 Guidelines.  

Buck stressed that GRI’s Reporting Principles must be used when defining report content. While financial reporting has provided G4 with an ownership/control basis for boundary-setting, what’s new is that boundaries can vary for different subject matters. This is the Aspect Boundary; a new G4 term that signifies the location of impacts, often best identified by using the Principles of Sustainability Context and Stakeholder Inclusiveness.  

The ensuing discussion, moderated by GRI Vice-Chairman and Executive Director of St James Ethics Centre, Dr. Simon Longstaff, saw other developers and early readers of G4 give their views.  

Yuki Yasui of UNEP FI claimed that G4 will respond well to investors’ need for meaningful information. “Investors don’t want just volume or efficiency measures – they want insight into the operational environments of plants, for instance, and good awareness of risks that may present in time.  

“Comparability can be a problem with materiality. But this could be prevented through industry associations coming up with key standards and KPIs, which all organizations in a sector should consider material.”  

Yasui also affirmed that while financial and sustainability reporting are becoming better aligned, the linkage between the two must make sense. “Narrative is important here. Why are the numbers connected to ESG? How does ESG contribute to success, or cause risk? Interaction between financial departments and sustainability departments must increase; and remuneration for good ESG performance is an increasingly effective measure.”  

Leandro Machado of Natura gave insight into how traditional boundary measures of ownership or control are ceasing to apply. Ultimately, “There are no boundaries any more. If, like Natura, companies see themselves as part of society, then companies’ material Aspects are also society’s material Aspects.”  

Anneke Sipkens of Deloitte also addressed the issue of companies ‘using’ materiality to avoid certain disclosures. “Today, there’s no way people will get away with only talking about impacts within their organization. Especially if they are legally accountable for bad or uninformed decisions in their supply chains. Other people will be talking about them, for example via social media. So the worst response by a company would be to say nothing. They should report disagreements, say that there is an issue and that they are trying to resolve it.  

“Sustainability is still a silo’d activity at many companies, but hopefully G4 will push integration and increase the share of responsibility for sustainability around companies.”  

In giving the perspective of IFAC, A.N. Ramen explained that G4 will play well with accountants. For them, materiality is a natural concept. In-house accountants can provide strategic cost analyses throughout organizations’ value chains, a useful skill for sustainability reporting.  

Following yesterday's show stopping Plenary speech by Sharan Burrow of ITUC, Kirsty Drew of TUAC added further labor constituency perspective on G4. Drew praised the decision to shift organizations’ reporting responsibilities to their impacts, not their ownership. The outsourcing of production has increasingly meant the outsourcing of responsibility – a conceptual loophole that the correct use of G4 should address.  

Drew admitted that in G4’s development, labor input on materiality had been challenging. Materiality decisions can mean that labor is ignored as an issue – despite the fact that workers are always key stakeholders, and reports should always be focused on workers’ interests.  

Yet Drew assured delegates that the labor movement will keep a close watch on the fairness of companies’ materiality choices – ensuring that investors can use reports to “do their jobs and hold companies to account,” and benefiting civil society. ​​


Nelmara Arbex, GRI's Deputy Chief Executive at The Launch of G4 Guidelines