Since GRI launched its Sustainability Disclosure Standard in 2016, it announced a major revision on October 5, 2021. The new "General Standard 2021" specifically incorporates "Human Rights" and "Due Diligence" risk areas, effective January 1, 2023. GRI also released its first industry-specific disclosure standard, the "Oil and Gas Industry Standard," to provide organizations around the world with a more accurate and transparent understanding of their economic, environmental, and social impacts.
The 2021 GRI Standards include "GRI 1 Foundations," "GRI 2 General Disclosures," and "GRI 3 Material Topics." GRI 2 General Disclosures focuses on employees, governance strategies, and stakeholders, and incorporates "human rights assessments" and "due diligence" into the General Disclosures indicators. GRI 3 Material Topics provides guidance on procedures for identifying material topics, helping organizations effectively identify and disclose relevant material topic requirements.
The materiality analysis based on "impact" is the biggest difference of the new version in 2021. Compared with the GRI 2016 version, which uses "stakeholder concern" and "impact on the environment, economy and society" to identify major report themes, the new version of GRI 2021 focuses more on companies and stakeholders to assess the "actual and potential impact on the environment, economy and people (including human rights)".
The materiality analysis process consists of four steps: understanding the organizational context, identifying actual and potential impacts, assessing the magnitude of impacts, and finally ranking and disclosing these impacts in the report. The first three steps involve routine sustainability impact identification for the reporting organization, while the fourth step involves ranking material topics during report preparation. Companies must follow these four steps to regularly assess and manage operational impacts and disclose their management approach in the published sustainability report.
1. Architecture changes
The newly released GRI General Standards are a brand-new structure, including Universal Standards, Sector Standards, and Topic Standards.
While the General and Thematic Criteria are already part of the current GRI framework, the Industry Criteria represent a significant change in this revision. The current General Criteria are GRI 101, GRI 102, and GRI 103. This revision will restructure them to GRI 1, GRI 2, and GRI 3. GRI 3's name has been changed from "Management Approach" to "Material Topics."
GRI 1 (Basic): Explains the purpose and system of the GRI guidelines, explains the concept of sustainability reporting, and specifies the requirements and reporting principles that corporate organizations must comply with and disclose in accordance with the GRI guidelines.
GRI 2 (General Disclosure): The original GRI 102, with 56 disclosure items across six categories (Organization Overview, Strategy, Ethics and Integrity, Governance, Stakeholder Communication, and Reporting Practices), has been consolidated into five categories (Organization and Reporting Practices, Operations and Employees, Governance, Strategy, Policies and Practices, and Stakeholder Communication), with a total of 30 disclosure items.
GRI 3 (Major Topics): Provides guidance on how organizations can identify major topics, including the process of identifying major topics, listing major topics, and how to manage major issues.
2. No longer distinguishing between core and comprehensive options
Currently, there are two options for preparing a sustainability report (Core and Comprehensive), with the difference between the two depending on the level of disclosure in the report. Going forward, the new GRI Standards will no longer distinguish between Core and Comprehensive. All sustainability reports prepared using the GRI Standards will adhere to all items in GRI 2 (General Disclosure).
3. New Sector Standards
This revision of the General Reporting Standards introduces the concept of new industry standards. The goal of establishing industry standards is to ensure that each industry's sustainability reports truly reflect the significant impacts on stakeholders. By recommending disclosure standards within the industry, it is hoped that the quality and consistency of corporate sustainability reports will be improved. Through industry standards, clear procedures for identifying significant topics and disclosure requirements are provided. In the future, industry standards will develop disclosure guidelines for 40 specific industries, considering significant impacts on the environment, society, and the economy. Oil and gas, coal, agriculture, aquaculture, and fisheries are the priority sectors. The first industry standard to be launched is GRI 11 Oil and Gas Sector 2021.
The new version of the guidelines adds industry standards. Companies are required to match the major themes identified internally with these standards to confirm whether they meet the impact scope preset by the industry; they must also conduct a materiality analysis based on the relevant industry standards, assess actual and potential impacts, and finally rank the impact themes with reference to industry standards and internal ratings.
4. Strengthening human rights and due diligence
One of the main reasons for this revision is to mandate that all reporting organizations disclose information and management practices regarding human rights and labor rights. The new GRI 2 (General Disclosure) incorporates human rights and due diligence into the disclosure standards. In the past, companies did not necessarily disclose human rights as a major theme in their sustainability reports. Going forward, GRI will require companies to explain how they implement their policy commitments to respect human rights and how these commitments are integrated into their organizational activities and business relationships.
5. Principles of Consolidated Reporting
A sustainability report that combines both quality and substance must not only adhere to GRI disclosure guidelines but also consider the report's reporting principles. The current reporting principles are divided into two groups: "Principles defining report content" and "Principles defining report quality." The new version of the Common Criteria consolidates the previous content and quality principles into eight principles.
The new GRI General Standards feature significant revisions to their material topic identification process. Previously, this process was often based on internal decision-making processes. Companies will need to prioritize compliance with the new standards. The new GRI General Standards also place particular emphasis on human rights and due diligence. The GRI standards emphasize balanced reporting, ensuring that ESG reporting aligns with corporate goals through senior management participation. This facilitates cross-departmental collaboration and resource integration, ensuring that sustainability reporting truly advances sustainability.
Author: (Financial) Plastics Industry Technology Development Center, Quality, Environment and Safety Department, Corporate Sustainability Group, Zheng Shuyun, Consultant
