The Step Up to G4 – Part III

While there is still uncertainty around what exactly the Global Reporting Initiative's G4 will look like when it lands in May this year, there are high-level trends that both report preparers and users have to start thinking about says Sustainability Assurance consultant, Christiane Meyer.

The Global Reporting Initiative (GRI) published a first draft of G4 in late 2012 to seek public comment on the suggested changes, and while there is still uncertainty around what exactly G4 will look like when it lands in May this year, there are high-level trends that both report preparers and users have to start thinking about.

This article looks at the anticipated changes to governance and anti-corruption disclosures in G4, and is the third in a series of instalments that provide commentary on some of the key changes expected in G4 around boundary and value chain, management approach, supply chain, governance, anti-corruption and the central role of materiality.

Disclosures on Governance
The disclosures on governance within the GRI Guidelines form part of the upfront Strategy and Profile Disclosures that set the overall context for understanding organisational performance. It is fair to say that the proposed changes to G4 see the governance section completely overhauled. It pushes reporters far, some may say too far, in terms of transparency and with that, accountability. The proposal significantly strengthens the link between governance and sustainability performance.

The most notable changes are the inclusion of detailed disclosures around executive remuneration, as well as accountabilities, performance, qualifications and competencies of the organisation’s highest governance body in relation to sustainability risks and opportunities.

Currently only those organisations wanting to claim a comprehensive application of GRI’s Guidelines in their reports (Application Level B and A) have to report on all governance disclosures. The G4 exposure draft proposed to make this a requirement for all reporters that want to produce a report ‘in accordance’ with G4.

If this is the case in the final version of G4, this will pose a challenge to most reporters, both from a confidentiality and an information gathering point of view. Will reporters, particularly small to medium sized businesses, be able to meet these requirements – provided, of course, they even want to?

However, any effort to enhance governance disclosure will pay off in the longer term by putting sustainability considerations, and how they relate to governance, on the top of board’s agendas; by providing sustainability managers with more internal traction as a result; and by making this critical information accessible to relevant stakeholders such as investors.

Disclosures on Anti-Corruption
The topic of anti-corruption is one of only two (the other one being Greenhouse Gas Emissions) that GRI proposes thematic revisions to in G4. The issue of corruption and bribery has been prominent in recent times, with both national and international incidents covering our front pages. It remains one of the key barriers to sustainable development.

Taking a closer look at G4 and the proposed revisions relating to anti-corruption, one will soon realise that G4 will make it a whole lot harder for reporters to completely escape the unpleasant issue of corruption and how it is managed within the organisation – and beyond!

At the highest level, the G4 approach demonstrates a recognition that managing the issue of corruption is a cross-functional exercise that strongly relates to the values and culture of an organisation and importantly, its people.

The probably most notable proposed change is the insertion of a completely new section called ‘Ethics’ that sits alongside ‘Governance’ in the upfront Profile Disclosures. This new section focuses on systems and performance that encourage ethical behaviour within the organisation, as well as on lead and lag ethics indicators.

Other proposed changes are the inclusion of facilitation payments in GRI’s definition of corruption, which follows international/legislative trends; the significant tightening up of performance indicators for anti-corruption; and additional disclosure requirements for the management approach on anti-corruption.

G4 sends a simple but strong message to reporters: either you disclose your management approach and performance in relation to corruption or, if you don’t, you thereby tell the world that you consider corruption “not material” to your organisation or your stakeholders – a claim that is increasingly difficult to justify for the vast majority of reporters.

About the author: Christiane is a Consultant at Banarra and specialises in reporting, ethics and anti-corruption, and grievance management. She is a certified GRI trainer, a member of the GRI G4 Working Group on Anti-Corruption and a member of the Curriculum Review Committee of Not for Profit Primary Ethics.