Katie Yewdall
Associate Director, Southeast Asia, Sustainability Consulting, ELEVATE
Marcela Romero Merino
Director of BSD Consulting Colombia

Published: 21 September 2020

Published: 21 September 2020

Katie Yewdall - Associate Director, Southeast Asia, Sustainability Consulting, ELEVATE
Marcela Romero Merino - Director of BSD Consulting Colombia

Three ways that the proposed changes to the GRI Universal Standards will change sustainability disclosure… but not enough

After 4 years of use, the GRI Universal Standards (101, 102 and 103) have undergone a public consultation for revision. The revision includes the recommendations of the GRI Technical 290 Committee on Human Rights Disclosure and feedback from reporters and users on the use and interpretation of standards.

Sustainability reporting is rarely utilized to its full potential. Despite regular messaging on how sustainability reporting can create real value for the business, practitioners within companies can struggle to get management to use the process of reporting to meaningfully explore opportunities for change and innovation. The proposed changes, particularly around materiality and stakeholder engagement, leave less room for interpretation and will push management to more meaningfully examine what sustainability means and hopefully lead to transformative change.

1. More (but not enough) consideration of the value chain

One of the main objectives of the review process was to integrate due diligence into the standards. The proposed changes introduce a due diligence concept to align with international instruments on due diligence such as the UN Guiding Principles on Human Rights, OECD Guidelines for Multinational Enterprises, and the OECD Due Diligence Guidance for Responsible Business Conduct. The due diligence perspective brings new disclosures across all Universal Standards (101, 102 and 103).

With the adoption of the due diligence perspective, we would also expect a much higher level of transparency on how the organization identifies, assess and manages impacts at all levels and across all functions. This is where, in our experience, companies have a large performance gap.

The main areas affected are in materiality assessment and value chain assessment. The due diligence expectations push organizations to disclose impacts over the whole value chain, with a special focus on the supply chain. ELEVATE has been delivering due diligence, risk assessments and supplier segmentation on clients’ supply chains for decades. Collecting and using supply chain data to inform decision making processes, including materiality assessments and strategy design will be key for the transition to new standards.

The proposed changes just ask for descriptions of value chains, without a need to fully assess and explore the impacts and effects of a company’s procurement and products or, crucially, report on value chain performance. Reporters will not only miss out on progressive developments but will also be ultimately punished by the market if they simply describe and do not analyse the implications of their value chain and report performance against inherent risks in their supply chain. We think this is a big miss.


2. Using materiality to drive change

Currently, the GRI Standards identify material topics based on the significance of the organization’s economic, environmental, and social impacts and their substantive influence on the assessments and decisions of stakeholders. The materiality matrix often used by reporters interprets this to be an assessment of “influence on stakeholders” and “significance to business”, or something similar. This interpretation too often allows management to consider the impacts on themselves only and escape the realities of outward impacts of operational activities.

In the consultation draft, GRI 103 focuses on material topics and the materiality process. The draft states that material topics of an organization “reflect its most significant impacts on the economy, environment, and people, including impacts on human rights”. This stronger wording will encourage companies to consider how operations and relationships impact the environment and society.

We believe that an integrated materiality or double perspective materiality can be used for an ESG or sustainability report which is in accordance with GRI standards but that can also serve multiple data performance users and align with multiple standards such as SASB, TCFD, IR and industry specific standards.  ESG data must be targeted at the needs of the user rather than based on availability to the provider.

The new GRI 103 proposes criteria to determine the significance of negative impacts: severity (based on scale, scope, and irremediable character) and likelihood. This approach aligns with common impact assessment methodologies generally used for environmental impact assessment and some social impact assessments. In this context, the use of data and data analytics becomes more important when it comes to assess significance – and requires the use of internal information and open data sources, something that at ELEVATE we have been delivering via our analytics tools.

This new definition will also affect sustainability governance within organizations.  Requiring much more engagement and accountability from executives.


3. More targeted stakeholder involvement

Stakeholder engagement is currently required to feed into the materiality assessment process. Proposed changes ask reporters to describe “how the organization seeks to ensure meaningful engagement with stakeholders”, which pushes, but does not mandate, reporters to ensure meaningful stakeholder engagement. This new disclosure requirement pushes companies to be more strategic about how they engage with stakeholders.

These changes may force reporters to address sensitive topics that they have otherwise been able to push to one side. Addressing ignored topics, with the support of stakeholders, should lead to more balanced reports and could even lead to new, disruptive solutions and opportunities.

A second proposed change that increases stakeholder engagement, is the need to report “the stakeholders and experts whose views have informed the identification of material topics”. Many of our clients utilise expert panels or through seeking deeper insights through AI. This new disclosure requirement encourages activities that put business leaders more in touch with sustainability forces. Although this may seem more cumbersome, leaders can benefit as a result of this effort. Afterall, a better-informed leader can only make better informed decisions.


Other changes to the structure and intention of the standards:

GRI 101 is called now GRI 101: Using the GRI Standards. It introduces the GRI Standards System, that now includes the Sector Standards along with the Universal Standards, and the Topic Standards, which have been regrouped in one series instead of previous 3 series (economic, environmental and social). A plan for developing several Sectors Standards is in place and the first one, for Oil & Gas sector is also under public consultation.

GRI 101 also presents changes in the reporting principles eliminating the difference between content and quality principles. We have now 8 principles: accuracy, clarity, balance, comparability, completeness, timeless, sustainability context and verifiability. Materiality and stakeholder inclusiveness are now part of GRI 103 (see below).

GRI 101 draft includes a series of revised key concepts like impact (outward), material topic (focusing on the impact perspective), due diligence (brand new introduction in GRI standards responding to main international instruments on due diligence such as UN Guiding Principles on Human Rights and OECD Guidelines), and stakeholder (also aligned to OECD guidelines).

According to the consultation draft, Core and Comprehensive options do not exist anymore. Reporters will report in accordance to the Standards, which GRI 101 refers to as Approach A, or with reference to GRI Standards, now referred to as Approach B.

GRI 102 is called now About the Organization, retaining the requirements for the provision of information about the context and nature of the reporting organization.  The contents have been reorganized and regrouped in 5 sections with a new nomenclature: Organization details and reporting practices (REP), Organization Activities (ACT), Governance (GOV), Responsible Business Conduct (RBC), and Stakeholder Engagement (SE). The inclusion of the RBC section is the big news here, which includes human rights policies, implementation across the organization and relationships, and grievance mechanisms and remediation processes.

GRI 103: is about Material Topics, how to identify and prioritize them, what information the organizations need to disclose about the identification and management, and the related impacts.  It offers more detailed guidance on how to determine material topics to be disclosed in the report.

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These blogs are written by ELEVATE staff members or associates and the views and opinions expressed are not necessarily those of ELEVATE.

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