The latest generation of sustainability reporting guidelines from the Global Reporting Initiative were launched in May this year. Erin Lyon, Executive Director, CSR Asia, takes a look at the major changes from the G3.1 guidelines they replace, and highlights what G4 will mean for both reporters and readers.

In the late 1990s, the Coalition for Environmentally Responsible Economies (CERES) and the Tellus Institute developed a framework for environmental reporting. To develop the framework CERES established a ‘Global Reporting Initiative’ project department. In 1998 a multi- stakeholder Steering Committee was established to develop GRI’s guidance with a mandate to ‘do more than the environment’. In 2000 the first version of the guidelines were launched and in 2001 GRI became an independent institution.

In 2002 the second generation of the guidelines, known as G2, was unveiled at the World Summit on Sustainable Development and later that same year GRI was recognised as a United Nations Environment Programme (UNEP) collaborating organisation and relocated to Amsterdam as an independent non-profit organisation. The G3 guidelines were launched in 2006 after collaboration with over 3,000 global experts. G3.1, launched in 2011, built on G3 with additional indicators and guidance. G4 is the latest in that development process and was designed to consolidate different sustainability norms and codes as well as to be easier to use and navigate.

The guidelines have the unenviable task of having to be fit for purpose for a wide variety of stakeholders, resulting in users that may be critical of, and yet dependent upon, GRI as the most widely accepted sustainability reporting framework.

What’s new in G4 and why does it matter?

G4 is the next installment in the development of reporting guidelines. Towards the end of its tenure, G3.1 was criticised for not being aligned with developments like the Greenhouse Gas Protocol (the most widely-used international accounting tool to understand, quantify and manage greenhouse gas emissions) and the UN Guiding Principles on Business and Human Rights. As guidance for business on specific issues developed over time, the reporting framework needed to evolve accordingly. Expectations were high at the start of the G4 process,

in particular there were hopes for a strong shift towards an integrated reporting approach. G4 now states that ‘sustainability reporting is an intrinsic element of integrated reporting’ and as such is advocating that the process of creating a sustainability report is essential in order to allow the development of an integrated report.

The main changes at a glance

Materiality is key

G4’s core concept is reporting what matters. That’s not new to GRI, it simply got lost in G3 with the over-emphasis on indicator disclosure. Companies need to have the confidence to report what matters, not just everything measured.

Application levels have gone

These have been replaced with three options. Companies must now disclose whether or not the report is ‘in accordance with’ GRI. ‘In accordance with’ can be at two levels – core and comprehensive. The third option, leaving the door open for those who simply report sustainability data, is that reporters can state: ‘This report contains Standard Disclosures from the GRI Sustainability Reporting Guidelines’. Why does this matter? The GRI G3 application levels were the most misunderstood and misreported element of G3 and arguably undermined the principles of the guidelines. An A+ report was commonly mistaken for a reference to sustainability performance rather than disclosure level.

Assurance needs to be clearer

Reporters need to be clear exactly what information has been assured. The GRI Index has a new column requiring a clear statement on what data has been assured. Different parties can assure different parts of a report.

The Disclosure on Management Approach (DMA) has changed

General DMA requires companies to disclose three basic items for the material topics. For certain topics more detailed guidance on what should be considered for inclusion in the DMA is provided.

When should you use G4?

GRI will recognise reports using G3.1 for two further reporting cycles. Reports published after December 2015 should be in accordance with G4. New reporters are encouraged to start with G4.

What’s the response?

The fanfare at the recent GRI conference compelled attendees to ‘leave as ambassadors for G4’. Does G4 need diplomatic intervention or is it strong enough to speak for itself?

My initial reaction is that users will need time to embrace the new guidelines, but once they get close to them and realise the benefits that the guidelines can offer, a new found appreciation of GRI may occur if, and only if, the user is willing and able to invest the time in understanding the guidelines and their intent. However, that will require commitment and there is some recognised frustration with G4 – that ‘in accordance with’ will be read as ‘good’ or ‘bad’ reporting rather than ‘comprehensive’ or ‘core’ and that clear guidance on how companies should report sustainability context has not been included.

At a total of 360 pages, the new guidelines will inevitably be daunting for those unfamiliar with sustainability reporting, but it is comforting to know that so much detail is available. Comprehensive guidance is required, especially given that so many companies are new to sustainability. Despite all those it may deter, the result could ultimately be better quality reports – for far too long companies have been able to produce meaningless sustainability data unrelated to strategy and without context. Reporters now have to ensure data is directly linked to key strategic issues.

A company needs to really understand material issues before reporting begins which may lead to a short-term decrease in new reports, but hopefully, an overall rise in the standard of reporting.

What does it mean for reporters?

Users (by that I mean those responsible for putting together a report) must now be operating from positions of influence within their organisation. G4 requires a report that is focused on material issues, which means that a report is aligned with company strategy. Reporters who have simply been collecting and reporting data, no matter how comprehensive, but with no reference to how sustainability performance relates to strategy will struggle to report in accordance with G4. Use of G4 should mean that the report is no longer the focus of sustainability activity, but a tool to articulate strategy and measure progress.

What does it mean for readers?

It should mean that reports actually outline what the relevant, material issues are and how the company manages those issues. It remains to be seen which companies have the confidence to do that and not revert to default practices of simply providing as much data as they can access. Reports should be comprehensive on material issues and provide comfort that assurance has been undertaken for the most significant and complex of concerns.

Realities to expect

Not everyone will embrace G4. Some companies will feel pressure to report, but won’t have senior management buy-in to report against G4 and will continue to provide a broad set of indicator data only.

It is somewhat inevitable that country- specific trends or approaches will emerge – China and Japan being the obvious immediate two examples in the region. Historically Japanese companies have selected what works for them in GRI and reported that way. China will surely adapt GRI with Chinese characteristics. Indian companies will also have to manage how the guidelines interact with their new legislation on CSR.

Hopefully companies will explore what it means to report – really understand who they are reporting for and deliver accordingly. For example, where companies are providing data for investors, a report could take an entirely different structure from a company listed in Asia with limited tradeable shares.

Ultimately companies need the confidence to report on material issues, on what matters for the future of the business, and G4 may well give them the confidence to do that.

Erin Lyon

Executive Director, CSR Asia

This article is reprinted from the CSR Asia website (www.csr- Reprinted with kind permission of CSR Asia. The author can be contacted at:

The new G4 guidelines can be downloaded from the GRI website:

CSR Asia provides workshops on the new GRI G4 guidelines designed to help practitioners at various stages of their reporting journey gain practical skills for its implementation.

Copyright: CSR Asia.

SIDEBAR: ESG reporting in Hong Kong

Environmental, social and governance (ESG) reportingwill become mandatory for public companies and larger private companies next year when the requirement for a more analytical and forward-looking ‘business review’ is implemented as part of the new Companies Ordinance. Such companies will be required to include a business review as part of their directors’ report. The review will need to include a discussion of the company’s environmental policies and performance as well as an account of the company’s key relationships with its employees, customers and suppliers and others that have a significant impact on the company and on which the company’s success depends.

Companies looking for guidance on ESG reporting have some home-made guidelines to refer to. In December 2012, Hong Kong Exchanges and Clearing (HKEx) added its Environmental, Social and Governance Reporting Guide to the listing rules. The guide is currently a recommended best practice, but may be elevated to ‘comply-or-explain’ status by 2015.

The Exchange hopes its ESG reporting guide will help issuers voluntarily adopt international practices for ESG reporting. The guide highlights the need for the use of key performance indicators to give investors comparable, comprehensive and quantitative data to assess the performance of companies on ESG issues.

More information is available on the HKEx website (