Defining Report Content and Boundaries: Get Ready for G4: Second Bite

This is the second in our ‘Get Ready for G4’ series of posts in which we will help you to understand upcoming changes to the GRI Sustainability Reporting Framework.

For those of you who didn’t get indigestion from my first post ‘Get Ready for G4: One bite at a time’ let’s see what has been served up for second course.

My last blog related to the proposed abandonment of application levels in favour of ‘in accordance with’ criteria.  Reader comments suggested that both C- and A-level reporters were losing out.

Will organisations find the proposed changes to Boundary in the G4 Exposure Draft  difficult to swallow?

Proposed changes to boundary: What you need to know

The GRI currently defines report boundary as the range of entities over which the organisation exercises control (aligned with financial reporting definitions) or over which  it  has the ability to influence.  This includes both upstream and downstream entities. It acknowledged that the boundary may vary based on specific GRI defined aspects.

G4 will define boundary as ‘the range of value chain elements or areas covered in the report for each material topic. In setting the boundaries for material topics, an organization should consider impacts throughout its entire value chain, regardless of whether it exercises control or influence over the elements in its value chain.’

What’s that, you say?

OK, so a lot of new jargon and a possible change in the recipe of ingredients in your next GRI Report. Let’s break it down.

First, the introduction of the notion of value chain, defined as ‘those parties that are linked by the organization’s activities, products, services, and relationships, and may therefore impact and be impacted by the organization’ both from an upstream and downstream perspective.

This is an attempt to move away from looking at reporting through a legal structure or financial lens by providing a framework to help the organisation communicate the actions it takes to manage its significant impacts from a much wider perspective. But aren’t organisations still grappling to understand their supply chains (the topic of my next blog)? How can an organisation even begin to grasp their value chain from cradle to grave?

Don’t panic yet. Or give up on sustainability reporting. GRI has recognised that this is a new concept for many and has provided a number of easy-to-follow diagrams to help organisations come to grips with this.

The second big change is the move away from the G3’s  ‘aspects’ toward G4 ‘topics’. In the G4, a topic will be defined as ‘any possible sustainability issue’, as defined by the reporting entity. The G3’s ‘aspects’ were developed by the GRI, to help reporters to group specific performance indicators together (e.g child labour, energy, employment).

GRI does not want to restrict the organisation from only reporting against ‘aspects’ defined in the framework. Sustainability issues can develop rapidly and organisations are unable to ignore the expectations of stakeholders to include them. In other words, if a particular topic is material to your organisation, then include it in your report boundary. As with the current practice for aspects, you may have multiple boundaries for each new topic.

The third and perhaps most controversial suggestion is the change in the boundary definition which means that your reporting boundary is no longer limited to those aspects of your operation which you manage or influence.

For many organisations in many different sectors this change is complex. Shouldn’t organisations be focusing their efforts primarily on elements of their value chain that they currently manage and secondly on those which they have an ability to influence? If there is no ability to influence won’t attempting to report on issues outside of boundaries of influence amount to wasted effort? What role does the organisation play here? These questions remained to be answered.

Stronger links between boundary and content selection

Under the proposed changes to the Applying the Report Content Principles Technical Protocol the process of defining an organisation’s boundary now has clear links with the process of defining your report content. The current three-step process of identifying issues, prioritising issues and the final selection of aspects and their standard disclosures for reporting has been modified to include mapping your value chain as the first step.

Putting the first step into action – are organisations ready?

So now that we understand the definition and the link to defining report content is clear, how do we practically apply this across all sectors?

The World Business Council for Sustainable Development (WBCSD) has developed a guide to help organisations called “Collaboration, innovation, transformation. Ideas and inspiration to accelerate sustainable growth – a value chain approach’. It includes ten case studies of organisations who have adopted a sustainable value chain approach and a step-by-step framework to develop a sustainable value chain. The process of conducting a life cycle assessment (LCA), assessing the environmental impacts generated during every phase of the life of a given product or service, features as an important step in understanding the value chain. A good LCA helps organisations focus on their best opportunities to decrease impacts.

A number of other companies such as Nike, Ford and Unilever have embraced the value chain concept and disclosed this in their recent sustainability reports, demonstrating practical application is achievable.

Shaping the future of reporting

Getting an organisation to broaden its thinking about elements and impacts within their value chain as the first step in the process of defining report content is a positive step. We need the proposed changes to G4 to be bold.

GRI is trying to shape the future of reporting and to do that we cannot assume that what is common reporting practice today will continue to be acceptable. Value chains force us to think outside of our backyards, to work collaboratively with those that we impact or who impact us and to step outside our comfort zones. To avoid getting indigestion it’s best to take the value chain approach one bite at a time, first understanding and acknowledging our broad impacts and then considering how to target the organisational effort to address those impacts in the most productive way.

Amongst the four questions posed by the GRI during the G4 public feedback period is, do you think mapping the value chain is a helpful exercise for defining boundaries of material topics? The deadline for feedback is 25 September.

Rebecca Gunn is a Senior Consultant with ACCSR. She is a member of the GRI Stakeholder Council and Advisory Council to GRI Focal point.