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CR May-June 2013

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The GRI Report A Material World Among other things, the latest round of corporate reporting guidelines offer greater ease and deeper impact. The key? Materiality. By Cora Lee Mooney After much anticipation and speculation, the Global Reporting Initiative (GRI) released the new G4 Guidelines in late May. As the first certified training partner of GRI in the United States, BrownFlynn attended the release in Amsterdam and received a sneak preview of the content. Corporate reporters will see many changes in the new guidelines, and understanding the overarching themes will be critical to implementation. Perhaps the most noticeable change in G4 is the removal of so-called application levels. Organizations will no longer seek levels A, B, and C. Instead, G4 identifies official GRI reports as either "core" or "comprehensive." This is good news for reporters. In general, the application levels were misunderstood by organizations because of the "grade" implication of upward progression. The actual difference rested in the importance of disclosing management approach, versus simply disclosing additional performance indicators. For example, moving from a C to a B was a positive step, because it required more disclosure on management strategy. Simply put, moving to a B required an increased attention to, and assessment of, impact. In contrast, moving from B to A simply required the organization to report on several more performance indicators. Having more data and having better management can be two very different things. Meaning and Understanding The new classifications of core and comprehensive are both more meaningful and conceptually easier to understand. So how do these two categories compare? Comprehensive reports include all general standard disclosures (formerly known as profile disclosures), disclosures on management approach (DMA) on all material aspects, and disclosures on all indicators associated with each material aspect. Core reports are not required to include discussion of impacts, risks and opportunities, or management intensive governance and ethics disclosures, but are required to include DMAs on all material aspects. In terms of indicators, core reporters must disclose at least one indicator associated with each material aspect. In G4, reports may denote assurance for any of the performance indicators on an individual basis. Organizations may disclose assurance for the report in the "GRI Content Index," signaling that the indicator has been assured. Additionally, GRI requires the assurance provider to publish a [28] CR MAGAZINE | MAY/JUNE 2013 letter explaining what has been assured. GRI provides guidance (not requirements) for the key qualifications for assurance providers. Alongside the G4 guidelines, GRI released a publication on assurance titled, The External Assurance of Sustainability Reporting as a part of their research and development series. Companies that do not meet the core or comprehensive requirements, but that want to reference GRI, must state, "This report contains standard disclosures from the GRI Sustainability Reporting Guidelines." With this change, GRI is attempting to rein in the number of companies using report language that denotes GRI as the "base" or as a "reference" or any other term for incorporating GRI guidance without actually declaring whether it is core or comprehensive. By standardizing the language, GRI is drawing a clear line between those organizations that truly follow the guidelines and those that simply incorporate a definition from a GRI indicator. Following the guidelines represents an organization's broad commitment to GRI through specific activities, such as conducting a materiality assessment, considering views of stakeholders, revealing governance structure, risks and opportunities, etc. These activities demonstrate an understanding of GRI principles—an understanding that cannot be achieved through limited and selective use of GRI indicators. The difference between a "GRI-referenced" report and a report that "contains" GRI standard disclosures clarifies the use of GRI for the reader. In turn, this change may encourage more organizations to declare their reports core or comprehensive. Materiality, Materiality, Materiality If G4 could be summarized in one word, that word would be materiality. At its core, G4 shifts the perception of reporting options from number of indicators to what is material and the impact of the organization on its stakeholders. In G3 and G3.1, many organizations initially decided which application level to declare. Based on that decision, the organization then determined which indicators they could report or desired to report. The organization could then proceed to report at the selected application level, giving high-level answers to questions about policy, governance, materiality, and stakeholder engagement. As a result, reports that were technically in accordance with GRI did not always disclose the reporting organization's risks or opportunities.

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