The Global Reporting Initiative Sustainability Reporting Standards replaced the GRI’s G4 reporting framework on 1 July 2018. Vicky Lee and Carissa Pobre, Sustainability Advisers, The Purpose Business, give some tips on how to raise your game when it comes to ESG management and reporting by using the GRI Standards.

It has been two years since Hong Kong Exchanges and Clearing Ltd (HKEX) increased the requirements for reporting on the environmental and social impacts of listed companies. While listed companies are no strangers to fulfilling these requirements, publishing information about ESG issues is still fairly new in Hong Kong and there have been concerns in the market about the latest upgrading of some ESG elements to ‘comply or explain’. Will companies, for example, address these new disclosure responsibilities as a box-ticking exercise?

Report readers want more than that. In the ‘Analysis of ESG Practice Disclosure in 2016/2017’ (the HKEX Analysis), published in May 2018, HKEX encourages issuers to provide a comprehensive description of their policies on ESG performance and disclosure and to improve their overall ESG reporting practices.

One way of ensuring that you meet the local requirements in Hong Kong is to adopt the Global Reporting Initiative Sustainability Reporting Standards (GRI Standards). GRI offers a forward-looking and forward-thinking tool for businesses in their approach to ESG. The interconnections between local and GRI reporting standards can be easily seen through GRI’s guide Linking the GRI Standards and HKEX ESG Reporting Guide ( The GRI Standards will be a particularly useful framework for company secretaries, both in terms of regulatory compliance and their board advisory roles.

Introducing the GRI Standards

The GRI Standards were launched in 2016 and replaced the former G4 reporting framework on 1 July 2018. They come at a time when non-financial disclosure is in increasingly high demand. As investors, stock markets and stakeholders in general expect greater transparency on critical ESG issues, reporting frameworks like the GRI Standards encourage more ownership among companies of their environmental and social risks.

Research jointly undertaken by GRI and RobecoSAM, the sustainable investing company that also handles benchmarking of the Dow Jones Sustainability Indices, reinforces how the GRI Standards provide information that investors want to know and are well placed to form the basis of ESG-related disclosure.

In Hong Kong, just as elsewhere globally and across Asia, the GRI reporting framework has increasingly become the standard framework used by listed companies. Navigating the HKEX ESG requirements alongside the GRI Standards – its global benchmark and counterpart in several ways – provides companies with a way to disclose their ESG performance and bring value in the long term. Below, we focus on three key areas where the GRI Standards can help companies on their ESG journey:

  1. stakeholder engagement
  2. materiality, and
  3. management approach.

1. Stakeholder engagement

Both the HKEX and GRI Standards emphasise that stakeholder engagement should be a key part of your ESG programme. HKEX states that issuers should engage stakeholders on an ongoing basis in order to understand their views and meet their expectations. The GRI Standards have long emphasised stakeholder inclusiveness as one of the GRI’s four reporting principles, and they recommend that the stakeholder engagement exercise should be conducted using a locally recognised institutional framework and that its outcomes should correspond to the material issues covered in the report.

Stakeholder engagement is a crucial step prior to your materiality assessment to gain insight on where your pressing environmental and social impacts and risks lie. Report readers expect you to demonstrate concrete details regarding who, when, how often and how you engage your stakeholders, as well as what you learn from them. However, the HKEX Analysis found that only a small percentage of their 400 sample issuers gave sufficient context on this engagement.

Cathay Pacific’s Sustainable Development Report 2016 demonstrates an in-depth stakeholder engagement exercise with key stakeholder groups to help define a sustainable development strategy that addresses stakeholder concerns. The approach of its stakeholder engagement is clearly presented with information on who was engaged and how they were engaged, as well as the common issues that were important to stakeholder groups. Cathay Pacific took into consideration the views of its stakeholders in its materiality assessment and continues to examine if the views of its stakeholders are changing over time.

The GRI Standards are composed of a modular series of documents. First are the three universal standards of the 100 series, which are applicable to all reporters.

  1. GRI 101 Foundation
  2. GRI 102 General Disclosures, and
  3. GRI 103 Management Approach.

According to the description of ‘Stakeholder Inclusiveness’ in GRI 101 Foundation, ‘systematic stakeholder engagement increases accountability to a range of stakeholders. Accountability strengthens trust between the organisation and its stakeholders. Trust, in turn, strengthens the credibility of the report.’

GRI 102 General Disclosures provides a framework for companies to deliver their stakeholder engagement approach and process structurally. Companies should bear in mind that the ultimate goal of adopting the GRI Standards is not just to improve information disclosure, but also to use stakeholder feedback in creating more responsible and relevant business development.

2. Materiality

The principle of materiality underpins all quality ESG reporting: it means understanding the ESG issues that are important to your business, thus informing the topics and key performance indicators (KPIs) to cover in your report. As reporting frameworks become more sophisticated, materiality – defined as reflecting an organisation’s significant economic, environmental and social impacts, or substantively influencing the assessments and decisions of stakeholders – is one of the principles that the GRI Standards have further emphasised.

Conducting a proper materiality assessment can serve as a starting point to developing an ESG strategy, though many companies still struggle with applying and disclosing this principle. According to the HKEX Analysis, the quality of materiality disclosures varies among Hong Kong–listed issuers. While many of them claim to have conducted materiality assessments, over half of them (52%) provided inadequate details in their ESG reports on their stakeholder engagement and materiality assessment process – some providing hardly any detail at all. The HKEX found that some ESG reports contained lengthy narratives on their materiality assessments that were ‘vague and difficult to read’.

The GRI Standards encourage companies to view the materiality process as an opportunity to further understand what their businesses should focus on. For one thing, determining your material issues should be stakeholder-driven – one example being the 2017 Sustainable Development Report by Swire Properties. Their methodology is systematically presented, step-by-step, presenting the assessment journey from qualitative issues identification to quantitative survey, leading the reader to the company’s materiality matrix that plots the internal and external stakeholders to each issue. Most importantly, the outcome of the materiality assessment gives direction to the company’s action plans under its Sustainable Development 2030 Strategy.

Materiality should be the ‘number one’ ESG reporting principle, as it encourages issuers to truly understand their risks and opportunities. If risks are properly managed and opportunities are realised for further development, this will encourage the development of a more favourable and vibrant business environment in Hong Kong.

Beyond keeping track of the right data, disclosing sufficient information on your materiality process also shows transparency for report readers and stakeholders. This is particularly important because going through a process to understand what truly matters to the business, whether financial or non-financial in nature, is one that should entail involvement and responsibility at board level.

3. Management approach

Consideration also needs to be given to your internal controls relating to ESG performance and disclosure. What your report readers actively look for is not just the figures relating to your emissions or your employee turnover rate, but the policies and management approach you have established to address material ESG issues. In particular, you need to show that the board provides leadership and sets the strategic direction on ESG issues.

Management approach disclosures are therefore a unique highlight of the GRI Standards. Hong Kong Electric Investment (HKEI) explains clearly the board’s involvement in its CSR policy in the ‘Challenges and Strategies’ section of its 2017 Sustainability Report. A CSR Committee supervised by the CEO and senior management was formed for formulating strategies and embedding CSR initiatives into operations. HKEI also makes use of its GRI Content Index to direct its readers to where they can obtain more information.

An effective policy and management approach will not be something you can come up with overnight. It is nonetheless important to tell your readers about your current policies and your plans for developing them in the future. The GRI Standards advise that, if you do not have a management approach for a particular material topic yet, don’t be afraid to disclose this, although you should also disclose your determination to remedy this.

Board involvement in ESG is more than just a recommendation. The board can no longer simply delegate the task of compliance with ESG requirements and should be taking an active part in the reporting process. The board needs to thoroughly understand their company’s environmental and social impacts and embed ESG factors into the business. The HKEX ESG Reporting Guide notes that ‘the board has overall responsibility’ in reporting, and this message is also emphasised in the HKEX Analysis.

Raising your game

The GRI Standards focus on the ultimate purpose of ESG reporting – that is, to demonstrate a commitment to responsible growth. The GRI Standards are designed so that companies can consider and better understand their significant impacts on the broader economy, environment and society. When companies truly own these issues, through reporting, they are able to tell their story to enable responsible growth. The GRI reporting principle of ‘sustainability context’ is particularly useful to contextualise the company’s ESG-related impacts and contributions.

So how do you put this in practice and increase the business value of your ESG reporting? We recommend that you do not only focus on the number of KPIs you can get into your report, but also on your overall approach to ESG issues. You can start the process by going back to your last two reports. Take a holistic and collaborative approach to work out your ESG strategy through stakeholder engagement and materiality using the GRI Standards. Most important of all, make sure your board of directors is involved in the reporting process.

The KPI requirements will be hard to comply with if you don’t have a viable sustainability strategy. What makes a good report? Essentially, good ESG reporting should reflect the collective efforts of the company to strategically tackle its sustainability impacts.

Vicky Lee and Carissa Pobre
Sustainability Advisers, The Purpose Business
More information is available on The Purpose Business website: