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The GRI Report In G4, organizations must conduct a robust materiality assessment. Reporters will need to look at policies and management, essentially conducting a thorough performance review as its first step in the reporting process. Following that assessment, organizations will determine if they will report either to the core or comprehensive standards. G4 signals that reporting in accordance with GRI will require organizations to report or explain all material topics. Materiality and impact are also major factors in determining the boundary of the report. G4 shifts the idea that boundary is determined by influence and control. In G4, the organization determines boundary based on impacts, regardless of whether it exercises control or influence over the entity in its value chain. Previously, the organization's level of control and influence over the other entity determined boundary. G3 and G3.1 focused on data and contractual relationships, which could result in an exclusion of an entity from a report boundary. G4 focuses on risks and opportunities, and exclusions can be based solely on impact. Lack of control or influence is no longer an acceptable reason for exclusion. To summarize, all official GRI reports conforming to the G4 guidelines must disclose the following regarding how report content was determined: • The process used for determining report content and aspect boundaries; • A list of material aspects; • A list of entities included in the organization's financial statements (i.e. entities within the organization); and • Whether each material aspect applies within or outside of the organization. The new emphasis on materiality is a significant and positive development in the progression of GRI guidelines. G4 underscores the critical nature of each organization understanding how it impacts other entities. Expect to see more complete and inclusive reporting with G4. New Governance Of all the revised sections in G4, the updated governance section represents the highest number of substantial changes. Reporters might be relieved to know that the finalized guidelines are not as intense as those originally listed in the G4 exposure draft. Notably absent from G4 is the proposed requirement that every GRI report have a signed statement from the highest governance body or CEO declaring a balanced and reasonable presentation of the organization's impacts. In G4, this requirement was softened to instead ask that GRI reports contain a CEO letter that discusses the company's strategy, particularly with regard to managing the company's significant impacts. For more advanced reporters, new governance additions are required for comprehensive reports: • Process for delegating authority from board to executives; • Whether an executive is assigned responsibility for sustainability; • The board's role in mission, values, policies, and goals; • Measures taken to educate the board about sustainability; • The board's role in assessing management effectiveness and in reviewing the report to ensure material aspects are covered; • Sustainability concerns communicated to the board; • Process for determining remuneration; • Ratio of salary for highest to median paid in each country; and • Ratio of salary increases for highest to median paid in each country. The last points pertaining to salary and raises is of particular significance because remuneration is one of the key topics in the newly expanded requirements. In comprehensive reports, organizations will need to disclose the policies and processes regarding remuneration, including detailed reporting for remuneration of the highest bodies and executives. Fixed and variable pay factors, such as performance- or equity-based pay, bonuses, and deferred or vested shares, all receive special attention. Processes for determining remuneration and inclusion of stakeholders' views regarding remuneration are also singled out for review. Disclosing and Formatting G4 organizations must adhere to stricter guidelines regarding supply chain. Reporters must describe the supply chain, as well as disclose any significant changes to the supply chain. Additionally, the disclosure for conflict of interest now includes cross-shareholding with suppliers. Cross-shareholding is when a company owns stock in its supplier, and its supplier owns stock in the company, which can create a potential conflict of interest with regard to supply chain assessment. G4 adds new supply chain assessments to the environmental, labor practices, and society categories of reporting aspects. Grievance mechanisms have been added to each of those aspects as well. Procurement practices have been added to the economic category, though the meaty supply chain elements on this topic are in the DMA guidance and not in the indicator that falls under it. G4 represents major upgrades to the usability and format of the report. The new G4 guidebooks clearly delineate between requirements and guidance for each disclosure. This will make it easier for organizations to understand what is required, as well as how guidance elements can add value in managing each performance topic. The books also include a glossary of key terms and quick links for overarching concepts. Alongside the GRI G4 guidelines, GRI also released a series of useful publications on integrated reporting, sector-specific research, assurance, and mandatory reporting regulations. Overall, the G4 guidelines represent significant improvements to GRI's reporting principles. New emphasis on materiality and governance, as well as clarity regarding adherence to G4 guidelines, will lead to better reporting and increased transparency. Feeling overwhelmed by all the changes? GRI reporters will not be required to use G4 until 2015, but GRI is hoping all reporting organizations will start implementing the new standards as quickly as possible. Certified training based on G3/G3.1 will continue until December 2014, and GRI will continue to issue certificates of completion to participants. By the end of June 2013, a bridging training module will be available (English only) from G3/G3.1 to G4 and will be offered only to participants who already have a G3/G3.1 certificate of completion. Participants of this module will receive a second certificate saying that "the participant has successfully completed the GRI certified training course based on G4 reporting guidelines." The new G4 standard training course for participants totally new to GRI will be available (English only) beginning as early as September 2013. Cora Lee Mooney is senior consultant and lead trainer for Brown Flynn. She can be reached at coraleem@brownflynn.com. MAY/JUNE 2013 | www.thecro.com [29]