Five reasons you won’t be using GRI’s new G4 guidelines any time soon
- Process Changes: A reporting company will need to revamp its processes in order to conduct a rigorous analysis of materiality, assess supply-chain impacts, and revise its approach to gathering data (including history).
- Cost: Developing a G4 report will require more time and effort than a G3.1 report and, as a result, will cost more to prepare.
- Key Content Issues: Requirements for reporting Materiality, Supply-Chain Impacts, and Stakeholder Engagement represent new, formidable challenges for many companies, and raise some rather thorny issues such as:
Transparency: Many companies are not comfortable in being transparent about problems – they don’t like to report on warts or skeletons in their closets.
Materiality: More-detailed analysis and reporting on material issues could alarm investors and stakeholders, causing negative impacts on a business; Supply-Chain Impacts: Assessing impacts across a company’s supply chain is difficult and, in some cases, may not be disclosed for competitive or proprietary reasons.
Stakeholder Engagement: Meaningful reporting on stakeholder engagement requires that a company has invested in a multi-year effort to build trust and add value. Lacking prior investment, many reporters will be unable to put any meat on these bones.
Competitive Issues: The need to protect trade secrets, confidential information (e.g., prices and costs), or business strategies and tactics may prevent full disclosure on materiality and supply-chain impacts.
- Quality: Compliance with G4 does not speak to the quality reporting any more than did the G3 and G3.1 Application Levels. Producing a quality report using the new guidelines will require a substantive effort.
- Lack of a Mandate: Use of the GRI protocol is voluntary and there are no formal requirements or pressure to use GRI. (CDP, by contrast, has 700+ signatory institutional investors who apply formal pressure for disclosure.)
As a result, many companies will wait and see, letting others be the pioneers. Since there is no apparent value-add for being compliant with G4, and given the various impediments, many reporters will wait one or two report cycles in order to see how early adopters handle the new requirements before making a go/no-go decision.
While some reporters may then adopt G4, others may continue to use G3 or G3.1. Others, perhaps many others, may decide to get off the GRI horse entirely, and use a different template for their sustainability reporting.
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