Tag Archives: GRI< Global Reporting Initiative

ESG Reporting Frameworks & Standards – Continue to Multiply

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Original:  October 14 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

The number of ESG disclosure and reporting guidelines, frameworks and standards continues to expand – here comes the GRI Universal Standards, the SASB XRBL Taxonomy, and much more.

The range of available transparency tools is making it more challenging for corporate management and investors to navigate.

The ESG / Sustainability / Sustainable Investing lexicon for both publicly-traded companies and their providers of capital is today chock-a-block with acronyms and initials. GRI, SASB, TCFD, OECD, IIRC, SDG, PRI, UNGC, GRESB, WEF, IFRS, EFRAG, EC’s NFRD – you get the picture!

And there are a host of industry-focused standards (such as RBA, once known as EICC), IEPC, LEED).

The venerable player is the Global Reporting Initiative (GRI), a comprehensive, ever-expanding, stakeholder-focused reporting framework created by global stakeholders over two decades ago with roots in Boston, in the Ceres Pledge of the early-1990s.

That pledge was created by SRI investors after the Exxon Valdez oil tanker disaster in Alaska and was intended to invite corporate managements to promise to do better in what is now ESG performance.

The first two signatories of significant size were General Motors and Sun Oil. G&A team members were involved in encouraging firms to sign on to the pledge in those early years.

By 1999-2000 the first corporate environmental, responsibility, et al reports were being published in the United States and Europe (a few dozen appeared in the first round with the first generation of the GRI framework, G1).

Over the ensuing years the GRI framework evolved and matured on through G3, G4 and finally in recent years to a more formal standards-based approach. And those modular standards for ESG reporting are continuing to evolve as GRI enters its third decade.

The news today about GRI is focused on the launch of what are called “Universal Standards”, which in modular form will be in place for corporate and institutional reports to use if they are going to report in accordance with the GRI Standards.

The now-familiar Core and Comprehensive will go away; it will still be OK to use “GRI-Referenced” (a less strict version which references parts of the GRI reporting standard) in reporting following the Universal Standards, which will go into effect in January 2023.

The new GRI Universal Standards align with the United Nations Guiding Principles on Human Rights, the OECD Governance Standards, and the International Corporate Governance Network (ICGN).

The elements of the Universal Standards to keep in mind are these: what is the impact of the corporation on society, and society on the corporation; materiality of disclosures; due diligence on the part of reporters.

Keep in mind the standards are broad and focused on stakeholder disclosure, of course including providers of capital as stakeholders. All companies can use the Universal Standards to communicate the firm’s impact on the broader society. (Think: how does your firm connect with people?)

Supply chain operations are an important part of GRI reporting going forward. Consider, as one expert recently explained, that of the large, multi-national enterprises of the developed world, more than 90 percent of production is beyond the company’s walls, out there in the world of non-company producers (many in less-developed nations as well as in China).

The European Union is considering adopting corporate sustainability reporting that would use the GRI Universal Standards for mandated disclosure by all companies operating in the 27 EU states (with certain qualifications as to size and other considerations).

GRI standards-focused disclosure is expected to include story-telling and metrics about corporate sustainability actions and activities, governance, strategies, planning, practices, engagements, and more. Materiality assessment activities are critical elements of GRI standards reporting, notes the GRI team.

In addition, GRI is launching a series of Sector Specific guidance, beginning with the new “Sector Standard for Oil and Gas.”

The sector standards will address “how decision and actions of companies address widespread stakeholder concerns about their climate change-related impacts, while ensuring a just transition for workers, communities and the environment”.

We are sharing details of the above developments at GRI with you in the Top Stories this issue.

The G&A Institute team has been focused intently on GRI reporting since 2000 and was designated as the GRI Data Partner for the U.S., and then the U.K. and Republic of Ireland more than a decade ago.

Over this decade, we’ve gathered and analyzed in depth thousands of GRI reports since then. G&A Institute is a Community Member of GRI, and we of course watch the work of GRI very closely.

Whether you are a corporate manager, executive or board member, or provider of capital to the corporate sector, you should also keep a close watch on GRI.  And, the G&A team is available to help answer any questions you have.

TOP STORIES

Corporate Sustainability Reporting: Changes in the Global Landscape – What Might 2021 Bring?

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by Hank Boerner – Chair & Chief Strategist, G&A Institute

Change is a-coming – quite quickly now – for corporate sustainability reporting frameworks and standards organizations.  And the universe of report users.

Before the disastrous October 1929 stock market crash, there was little in the way of disclosure and reporting requirements for companies with public stockholders. The State of New York had The Martin Act, passed in 1921, a “blue sky law” that regulates the sales and trades of public companies to address fraud issues.  That was about it for protecting those buying shares of public companies of the day.

Under the 100 year old Act, the elected New York State Attorney General is the “Sheriff of Wall Street — and this statute is still in effect. (See: AG Eliot Spitzer and his prosecution of the 10 large asset managers for analyst shenanigans.)

President Franklin Delano Roosevelt, elected two-term governor of NY before his election to the highest office in November 1932, brought along a “brains trust” to Washington and these colleagues shaped the historic 1933 Securities Act and 1934 Securities Exchange Act to regulate corporate disclosure and Wall Street activities.

Story goes there was so much to put in these sweeping regulations for stock exchanges, brokerage houses, investor protection measures and corporate reporting requirements that it took two different years of congressional action for passage into law in the days when Congress met only briefly and then hastened home to avoid the Washington DC summer humidity and heat.

The Martin Act was a powerful influence on the development of foundational federal statutes that are regularly updated to keep pace with new developments (Sarbanes-Oxley, 2002, updated many portions of the 1934 Act).

What was to be disclosed and how? Guidance was needed by the corporate boards and executives they hired to run the company in terms of information for the company’s investors. And so, in a relatively short time “Generally Applied Accounting Principles” began to evolve. These became “commonly accepted” rules of the road for corporate accounting and financial reporting.

There were a number of organizations contributing to GAAP including the AICPA. The guiding principles were and are all about materiality, consistency, prudence (or moderation) and objectivity like auditor independence verifying results.

Now – apply all of this (the existing requirements to the Wild West of the 1920s leading up to the 1929 financial crash that harmed many investors — and it reminds one of the situations today with corporate ESG, sustainability, CR, citizenship reporting.  No generally applied principles that all can agree to, a wide range of standards and frameworks and guidance and “demands” to choose from, and for U.S. companies much of what is disclosed is on a voluntary basis anyway.

A growing chorus of institutional investors and company leaders are calling for clear regulatory guidance and understanding of the rules of the road from the appointed Sheriffs for sustainability disclosures – especially in the USA, from the Securities & Exchange Commission…and the Financial Accounting Standards Board (FASB), now the two official keepers of GAAP.

FASB was created in the early 1970s – by action of the Congress — to be the official keeper of GAAP and the developer of accounting and reporting rules.  SOX legislation made it official; there would be two keepers of GAAP — SEC and FASB.  GAAP addressed material financial issues to be disclosed.

But today for sustainability disclosure – what is material?  How to disclose the material items?  What standards to follow?  What do investors want to know?

Today corporates and investors debate the questions:  What should be disclosed in a consistent and comparable way? The answers are important to information users. At the center of discussion: materiality – everyone using corporate reports in their analysis clamors for this in corporate sustainability disclosure.

Materiality is at the heart of the SASB Standards now developed for 77 industry categories in 11 sectors. Disclosure of the material is an important part of the purpose that GAAP has served for 8-plus decades.

Yes, there is some really excellence guidance out there, the trend beginning two decades ago with the GRI Framework in 1999-2000. Publicly-traded companies have the GRI Standards available to guide their reporting on ESG/sustainability issues to investors and stakeholders.

There is the SAM Corporate Sustainability Assessment (CSA), now managed entirely by S&P Global, and available to invited companies since 1999-2000. (SAM was RobecoSAM and with Dow Jones Indexes managed the DJ Sustainability Indexes – now S&P Global does that with SAM as a unit of the firm based in Switzerland.)

Since 2000, companies have had the UN Global Compact principles to include in their reporting. Since 2015 corporate managers have had the UN Sustainable Development Goals (SDGs) to report on (and before that, the predecessor UN Millennium Development Goals, 2000-2015). And the Task Force on Climate-Related Financial Disclosure (TCFD) recommendations were put in place in 2017.

The Securities & Exchange Commission (SEC) in February 2010 issied “guidance” to publicly-traded companies reminded corporate boards of their responsibility to oversee risk and identified climate change matters as an important risk in that context.

But all of these standards and frameworks and suggested things to voluntarily report on — this is today’s thicket to navigate, picking frameworks to be used for telling the story of the company’s sustainability journey.

Using the various frameworks to explain strategy, programs, actions taken, achievements, engagements, and more – the material items. Profiling the corporate carbon footprint in the process. But there is no GAAP to guide the company for this ESG reporting, as in the example of financial accounting and reporting.

Institutional investors have been requesting more guidance from the SEC on sustainability et al reporting.  But the commission has been reluctant to move much beyond the 2010 risk reminder guidance even as literally hundreds of publicly-traded companies expand their voluntary disclosure.  And so we rely on this voluntary disclosure on climate change, diversity & inclusion efforts, political spending, supply chain management, community support, and a host of other ESG issues. (Human Capital Management was addressed in the recent Reg S-K updating.)

We think 2021 will be an interesting year in this ongoing discussion – “what” and “how” should companies be disclosing on sustainability topics & issues.

The various providers of existing reporting frameworks and standards and those influencing the disclosures in other ways are moving ahead, with workarounds where in the USA government mandates for sustainability reporting do not yet exist.

We’ve selected a few items for you to keep up with the rapidly-changing world of corporate ESG disclosures in our Top Stories and other topic silos.

There are really important discussions!  We watch these developments intently as helping corporate clients manage their ESG / sustainability disclosures is at the heart of our team’s work and we will continue to keep sharing information with you in the Highlights newsletter.

More about this in The Wall Street Journal with comments from G&A’s Lou Coppola: Companies Could Face Pressure to Disclose More ESG Data (Source: The Wall Street Journal)
TOP STORIES

Company in the CSR Reporting Spotlight: Salesforce

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By Julia Nehring – Report Analyst-Researcher, G&A Institute

In recent months I have been analyzing many dozens of corporate sustainability, responsibility, stewardship, corporate citizenship, and similarly-titled public reports. Many of these are published by very prominent names with well-known brands attached to the corporate name.

For example, you probably know of Salesforce. As many technology companies have done, the enterprise began humbly in a small West Coast residence in 1999, when several entrepreneurs attempted to re-imagine how businesses could utilize computer software.

Today, the company offers a variety of sales, marketing, analytics, and other business services to its 150,000+ clients, which include startups, nonprofits, governments, large corporations, and anything in-between.

Measuring success, between 2017 and 2019 alone, Salesforce’s employee base increased 44 percent and its billions of dollars’ in revenue increased by 58%.

During this period of significant growth, Salesforce has impressively been lauded as a best workplace for diversity, a best workplace for women, and a best workplace overall, among numerous other types of accolades.

The Company’s Reporting Practices

Salesforce discusses these and a range of other accomplishments in its FY19 Stakeholder Impact Report. However, I am not commenting here to heap praise on Salesforce.

Using my lens as a CSR analyst-intern, I will attempt to highlight several reporting frameworks and concepts Salesforce has chosen to use in its most recent report that provide both transparency and promotional value for the company’s practices and accomplishments.

I also offer my own comments and ideas that come from learning about different reporting guidelines from different agencies, as well as reviewing many dozens of corporate CSR reports as a GRI report analyst.

Clicking on any of the links below will take you to G&A resources mentioned about the topic.

ESG Reporting Frameworks

By far the most commonly-used framework worldwide by companies in G&A’s research is the Global Reporting Initiative (GRI). Salesforce includes multiple references to this framework (formally, the GRI Standards) in its content index. (Best practice: including a content index in your company’s report to help users find information quickly.)

However, the report was not prepared “in accordance” with the GRI Standards. Instead, Salesforce opted to reference only certain disclosures and metrics of the GRI framework, as they apparently deemed applicable internally.

The apparent rationale? Since each framework identified in the report — including the GRI Standards, the Task Force on Financial-related Disclosures (TCFD), and the Sustainability Accounting Standards Board (SASB) — define materiality in different ways, Salesforce did “not attempt to formally reconcile the divergent uses of the term materiality”.

In other words, instead of providing a more complete set of disclosures for one of the frameworks, the company opted to in effect dabble in each.

Along with its GRI references, the report includes some SASB references in the content index, and (positively) mentions its support of and use of the TCFD in conducting a climate-related scenario analysis.

I think investors may find this confusing. While Salesforce is ahead of the majority of companies who do not currently acknowledge SASB or TCFD at all, it is difficult for the report reader to discern which disclosures from each framework have been excluded. This does not help to paint a full picture for the reader.

It appears the company does acknowledge this, as it states that, “Over time we will work to expand our disclosures and align more closely to the leading frameworks, even as the frameworks themselves rapidly evolve.” A good practice, I think.

United Nations Sustainable Development Goals (SDGs)

Salesforce is a supporter of the United Nations Sustainable Development Goals (the 17 SDGs). In its report, Salesforce lists 12 SDGs that the company closely aligns with.

However, the company does not explicitly state how each SDG aligns with a particular action or initiative. Providing this level of detail — common practice among companies that discuss SDGs in their reports — Salesforce could show the reader that these are not merely ideals for the company, but that in fact Salesforce is actually taking actions in regards to each stated goal.

Regarding External Review

Ernst & Young was retained to review and provide limited assurance for select sustainability metrics in Salesforce’s report.

The items reviewed cover Salesforce’s reported GHG emissions, energy procured from renewable resources, and carbon credits. A limited level of assurance and review of only GHG data or specified sections is very commonly seen in CSR reports.

The companies that tend to stand out among their peers in our wide and deep research of corporate disclosure are those that have decided (strategically) to obtain reasonable/high assurance, or opt to have the entire report reviewed by credible third party auditors.

Salesforce’s awards and growth speak for themselves — the company is undoubtedly providing great value to its clients and doing so in a way that people admire.

While its Stakeholder Impact report overall does an excellent job at showcasing the company’s progress, in my comments here I covered the above areas to encourage and provoke thoughts of striving for even greater completeness and reader comprehension.

Not just for Salesforce, but for public companies in general with Saleforce’s report as one example.

Epilogue: Why did I decide to review Salesforce?

During my time as an analyst-intern for G&A Institute, my intern colleagues and I analyzed dozens upon dozens of CSR reports in depth over the months, many of which are reports of The Business Roundtable (BRT) companies.

Many BRT CEO members signed on to the re-stated “corporate purpose” statement last summer and we researched the companies’ sustainability / responsibility track records and public disclosure practices.

In our research, we found that:

  • Twenty-nine (29) BRT companies had upward trends for all Yahoo! platform’s sharing of Sustainalytics scores (including those for environment, social, and governance) since 2017.
  • Of these 29, five had CEOs that were identified on the Harvard Business Review’s Top 100 CEOs list
  • Of these five, Salesforce was the only company whose Carbon Disclosure Project (CDP) score rose between 2017 – 2018 (from “B” to”A” score)

So, while I certainly do enjoy using Salesforce’s tools at my job, it had no bearing on my decision to analyze the company’s CSR report for this project. The company’s growth in spite of (or because of) its commitment to people and planet is very exciting to see.

I hope that my analysis is helpful to Salesforce and other companies that may be following this corporate responsibility leader’s sustainability journey.

* * * * * * * *

Since her internship as a report analyst, Julie Nehring joined G&A as a Sustainability Analyst. She continues her research role as a member of the G&A team. She pursued an MBA at the University of Illinois in Urbana-Champaign and interned at the Caterpillar Inc Data Innovation Lab. Julie previously worked for several years as a project manager for a national environmental consulting firm and for a year as an AmeriCorps volunteer. As the president of her university’s Net Impact chapter, she enjoyed helping colleagues and classmates get involved and volunteer in the community.

Note the views and opinions expressed here are those of the author and do not necessarily reflect the views or position of Governance & Accountability Institute regarding the company.

U.S. Industry & Trade Associations Encourage Corporate Sustainability — Today, the American Cleaning Institute is in Focus

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by Hank Boerner – Chairman, G&A Institute

As more and more U.S. companies begin or expand their disclosure and reporting on their sustainability journey, and their widening range of corporate responsibility activities, the choice of reporting frameworks both narrows and expands.

Narrows in the sense that the Global Reporting Initiative (GRI) framework — now in its fourth generation (“G4”) since the introduction of the GRI approach in 1999-2000 — is considered the de facto global standard by thousands of company managements. There are now 30,000 sustainability reports in the GRI database — 21,000-plus of those published GRI Reports.

And the number of reporting frameworks and generally accepted standard steadily expands — there are many more standards, frameworks, codes of conduct, guidelines, third party requests for information, that now take sustainability / responsibility / citizenship / environmental performance reporting far beyond where these activities were a decade or so ago. Many corporate managements recognize the importance of such reporting and devote the necessary [human and financial] resources to the task.

Examples of available standards include corporate responding to the annual CDP CSA request for information (the voluntary Corporate Sustainability Assessment). CDP began operations in 2000 as the Carbon Disclosure Project with focus on collecting, organizing and providing information on corporate Greenhouse Gas Emissions (GhGs) to investors; today the CDP focus include water issues, forestry issues, supply chain issues, and sector-by-sector research and analysis (the first sectors included chemicals and automotive). The client base is almost 500 institutional investors with more than US$55 trillion in AUM — they accept the CDP approach as an important standard in reporting on corporate environmental performance (or lack of).

There are also global and U.S. industry associations and trade groups that help their corporate members to understand key issues, map materiality; understand stakeholder expectations; align corporate strategies, activities and programs, third party engagement, and disclosure and reporting with the ever-expanding stakeholder and shareholder expectations. Among these are such well-known organizations as Automotive Industry Action Group (AIAG) and the Electronics Industry Citizenship Coalition (EICC).

Industry Effort:
The American Cleaning Institute and Sustainability

One large industry-focused effort we focus on today organized resources to develop a charter to provide a common, voluntary approach to promote and demonstrate continual improvement in the industry’s sustainability profile is that of the cleaning (products & services) industry — the American Cleaning Institute (ACI).

The Charter for Sustainable Cleaning is one of ACI’ major initiatives to fulfill the mission, and provide a framework for corporate members to go beyond basic legal and regulatory requirements.

You know many of the member company names and their brands, which are ubiquitous in American and global business-to-business and consumer marketing; a sampling includes Amway, BASF, Church & Dwight, Clorox, Colgate-Palmolive, Dow, DuPont, Huntsman, and International Flavors & Fragrances (IFF).

The American Cleaning Institute’s sustainability mission is to “benefit society and improve the quality of life through hygiene and cleanliness by driving sustainability improvements across the industry and throughout the supply chain.” The ACI Charter for Sustainable Cleaning was launched in January 2014 at the group’s annual meeting & industry convention. The charter was in part based on the A.I.S.E. Charter for Sustainable Cleaning, a voluntary initiative of the sister trade association in Europe (AISE). The bulk of ACI’s U.S. member companies are cleaning product manufacturers and chemical suppliers.

To date, 25 ACI member companies are signing on to the charter; they are required to have systems in place to continual assessment; review; and improvement of sustainability performance. This includes product life cycle; raw materials; resource use; product specs; manufacturing; end use and disposal of products and packaging; and occupational health and safety.


Discussion:
Brian Sansoni, VP, Sustainability Initiatives

We spoke with ACI’s Brian Sansoni, the VP, Sustainability Initiatives, based in Washington, D.C. Brian described the ACI’s sustainability efforts with the Charter as “an ongoing roll-out, beginning with speaker presentations and participant discussion at the 2014 annual conference. We are now two years into the effort.” The effort is to develop and demonstrate the sustainability efforts of a major industry sector in the United States, the cleaning products and services manufacturing and marketing industry and the industry’s supply chain.

Brian, who joined ACI in 2000, was named VP, Sustainability Initiatives in 2012 (he also has the title of VP, Communication & Membership). Brian works closely with the association’s communications team, the government affairs team, research & science team, and with a sustainability committee whose members come from member companies. He’s a radio news reporter and Congressional press secretary by background and past experience, and applies those skills to the communication about the industry association and member companies’ commitments to greater sustainability.

Brian’s teammate is Melissa Grande, Senior Manager, Sustainability Initiatives, who joined us in the conversation. Brian and Melissa oversee the production of the ACI Sustainability Report, which Brian describes as being thorough, distinct and relevant with metrics that clearly provide a hallmark of what the association and its member companies are doing in their collective sustainability journeys. The report summarizes data from 33 member companies participating in the 2014 Sustainability Metrics Program (the metrics relate to energy use, GhG emissions, water use and solid waste generation). The report features an updated summary of ACI’s social and environmental sustainability programs, and details for ACI’s scientific and research programs. They also conduct the “Sustainability Academy” for the education of ACI’s member companies.

The report is available at: www.cleaninginstitute.org/sustainability2015

Melissa Grande explained that as part of the association’s ongoing collaboration with other standard setters, ACI is a member organization of the Sustainability Consortium (Melissa was previously a member of the consortium staff).  ACI participated in the Sustainable Accounting Standards Board (SASB) development of suggested (voluntary) materiality disclosures for the Consumption Products Sector (including household and personal products).

Brian Sansoni stressed that the ACI effort is intended to create an industry-wide, discrete approach that member companies can benefit from, and contribute to as the initiatives move forward.

Important:  ACI’s Critical Issue Assessment

For the first time, the Institute staff and participating companies conducted a comprehensive materiality assessment to map risks and opportunities facing the U.S. cleaning product value chain, including key energy and environmental metrics. The mapping identified and characterized the key issues that affect ACI’s membership and the industry-at-large.

The top issues identified in the materiality process by internal and external stakeholders:

1 – Materials (safety of chemical ingredients; raw material sourcing, scarcity).
2 – Disclosure & Transparency (public disclosure related to sustainability, governance, products).
3 – Climate Change / GhGs (climate risk & opportunities; GhG emissions).
4 – Ecological Impacts (biodiversity, deforestation, environmental management, responsible agricultural practices).
5 – Water (use, waste water treatment, recycling).
6 – Workplace Health and Safety (health & safety management; health & wellness training programs).
7 – Waste (hazardous, non-hazardous waste; management of product end-of-life).
8 – Energy (energy use, renewable energy).
9 – Supply Chain Management (screening business partners on ethics & sustainability issues).
10 – Compliance (with EHS regulations).

The American Cleaning Institute’s Materiality Assessment, Brian notes, is an important way of guiding the association’s and member companies’ reporting on industry priorities. It’s also useful for the dialogue between companies and their stakeholders. ACI CEO Ernie Rosenberg notes that the association will be more strategic about tracking industry performance [on the issues] and the ACI sustainability reporting will evolve as a result.

In our view, the American Cleaning Institute’s sustainability program is an excellent example of the preferred method of the American business community in addressing ESG performance issues: adopting of voluntary, industry-wide standards, approaches, guidelines, codes of conduct, and other non-regulated approaches.

As we said up top, this approach is represented by what we see in the automotive, electronics, chemicals, apparel and other industries and sectors. This is important to keep in mind as the public dialogue on sustainability reporting includes expectations that the Federal government will at some point issue mandates for greater sustainability disclosure and structured reporting (similar, some advocates say, to mandated financial reporting).

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For Reference

 

Company participants in the 2014 American Cleaning Institute Metrics Program:

AkzoNobel Chemicals LLC; Amway; Arylessence, Inc; BASF Corporation; Brenntag North America; Celeste Industries Corporation; Chemia Corporations; Church & Dwight Company, Inc; The Clorox Company; Colgate-Palmolive Company; Corbion; Croda, Inc; The Dow Chemical Company; DuPont Industrial Biosciences; Ecolab, Inc; Evonik Corporation; Farabi Petrochemicals; Firmenich Incorporated; Givaudan Fragrances Corporation; GOJO Industries, Inc; Henkel Consumer Goods, Inc; Huntsman Corporation; International Flavors & Fragrances, Inc; Novozymes PQ Corporation; Procter & Gamble; SC Johnson; Sasol; Seventh Generation; Shell Chemical LP; Stepan Company; The Sun Products Corporation; Vantage Oleochemicals.

These companies are key members of the US$30 billion U.S. cleaning products marketplace. ACI members formulate soaps, detergents and general cleaning products used in household, commercial, industrial and institutional settings. They also supply ingredients and finished packaging for these products; and, ACI members include oleochemical producers.