3 November 20215 minute read

Global Reporting Initiative updates its Universal Standards – revisions will affect ESG reporting by numerous businesses

The Global Reporting Initiative (GRI) has revised its Universal Standards (the GRI Standards), potentially affecting the Environmental, Social and Governance (ESG) reporting practices and procedures of many organizations.[1]

The GRI Standards are the most commonly accepted global standards for sustainability reporting they are fundamental to the functionality and standardized meaning of ESG. Accordingly, the GRI Standards are designed to enhance public reporting by organizations on a range of economic, environmental and social impacts, such as anti-corruption, biodiversity and emissions.

Organizations can use the GRI Standards to prepare a sustainability report or simply use selected GRI Standards as models or benchmarks for growth. Either way, the GRI Standards present organizations with best practices for them to evaluate their positive (or negative) contributions towards sustainable development. In other words, the reporting process informs an organization’s management on its progress, compared with that of competitors, and it also provides stakeholders a metric to use when evaluating an organization’s ability to achieve its goals.

What are the GRI Standards?

The updated GRI Standards consist of three series: Universal Standards, Sector Standards, and Topic Standards.

The Universal Standards apply to all organizations and are composed of Foundation, General Disclosures, and Material Topics. All organizations must comply with these Universal Standards in order for their ESG reports to be measured in accordance with GRI Standards.

The Sector Standards intend to increase the quality, completeness, and consistency of reporting by organizations by providing information for organizations on their most likely material topics. The Sector Standards may also list additional disclosures that are not in a Topic Standard, giving Sector Standards broader coverage.  There are Sector Standards for 40 sectors with oil and gas, coal, agriculture, aquaculture, and fishing as the foundation of the GRI Sector Standards.

The Topic Standards can be used to report specific information on an organization’s material topics, such as economic performance, market presence, waste, training and education, and labor-management relations.

Why were they revised?

The revised GRI Standards are the result of recommendations from the GRI Technical Committee on Human Rights Disclosure and the Global Sustainability Standards Board (GSSB). As the Chair of the GSSB stated, the revisions to the GRI Standards are “built around the concepts of impact, material topics, due diligence and stakeholder engagement, [and] these updates make it clear how companies can provide transparency and accountability in what they report. We are providing them with the tools to demonstrate understanding of their impacts and respond to the information demands of their stakeholders, including investors, governments, and civil society.”

Key motivations of the GSSB when revising the GRI Standards were to:

  • Embed mandatory human rights-related disclosures for all reporting organizations
  • Integrate reporting on due diligence into the GRI Standards
  • Provide greater clarity on keep concepts, reporting principles and disclosures in the GRI Standards
  • Drive consistent application
  • Encourage more relevant and comprehensive reporting and
  • Improve the overall usability of the GRI Standards.

Although many of the edits were minor, to accomplish these revisions, the GSSB also created new provisions. For example, GRI 307-1 in the 2016 standards is now GRI 2-27, under which an organization is now required, among other disclosure obligations, to report the total number and monetary value of fines for instances of non-compliance and regulations that were paid during the reporting period. Additionally, Disclosure 2-24 is new and requires the organization to describe how it embeds the policy commitments under Disclosure 2-23, which relate to the organization’s policy for responsible business conduct and human rights.

GRI 11

GRI 11: Oil and Gas 2021 is a set of Sector Standards that apply to organizations undertaking oil and gas exploration, production, storage, transportation, and refining.

Even though GRI 11 is a Sector Standard, an oil and gas organization reporting in accordance with the GRI Standards will use all three series in its reporting (GRI Universal Standards, GRI Sector Standards, and GRI Topic Standards).   Even so, GRI 11 outlines topics likely to be material for oil and gas organizations and lists disclosures relevant to these topics, such as air emissions, climate adaptation, and water and effluents.

Next steps

These Standards do not become effective until January 1, 2023, but organizations are encouraged to study what kind of information the Standards request so they can start collecting this data now.

Moreover, many organizations are noting that as the GRI Standards continue to develop and become more widely used, they may informally become an industry standard. That is, the very real potential exists that lenders and shareholders may come to expect sustainability reports that are in line with the GRI Standards.  Thus, even organizations that use a different model to report their progress towards sustainability are encouraged to gain an understanding of the GRI Standards.

DLA Piper’s Commodities group will continue to monitor developments relating to ESG reporting best practices. Please contact CommodiitesGroup@dlapiper.com with any questions.

[1] Until the effective date of January 1, 2023, organizations can continue using the previous set of GRI Standards.