Getting the Most Out of G4 for Your Next Sustainability Report

Vague or ill-defined narratives that become bogged down in detail are among the traps for companies to avoid as they prepare their next sustainability report under the new GRI G4 guidelines, according to Paul Davies, Chief Operating Officer at sustainability consultancy Banarra.

The end of G3.1 is nigh! By the end of this calendar year, reporters will need to be moving on to G4 if they are looking to claim alignment with the Global Reporting Initiative (GRI) reporting framework.

To be honest, there is so much that is better about G4 than G3.1. Why would you wait to make the transition? We are now getting to see the real benefits of helping clients to deliver a G4-based report, so it’s hard to imagine ever wanting to go back.  

However, G4 requires some thought to realise its full benefits because there are five important connections to be made between different parts of G4 that didn’t exist in G3.1 (or weren’t that obvious).

The five connections include:

1. Identifying the boundaries of your material aspects relative to your organisation, its value chain and/or its areas of control and influence;
2. Considering the impacts of those material aspects relative to your stakeholders;
3. Using that process to shape the breadth of your discussion around those material aspects in your report;
4. Clearly defining and containing the number of material aspects to enhance the relevance of your report to readers; and
5. Ensuring that you cover off the key elements for each material issue you address.  

Let’s consider each of these in turn.

1. Identify the boundaries of your material aspects

The boundary-setting process helps organisations decide (and readers identify) what’s in and what’s out of the report.  

G4’s approach is to move away from traditional legal and structural report boundaries dictated by corporate ownership, and instead encourage report disclosures to focus on any part of the organisation, or its value chain, that is affected by material impacts.

This represents a broadening of thinking around the breadth of material impacts and how an organisation is accountable for them. The approach encourages a lot more rigour in how reporters describe their report boundary and materiality process, and how their identified material impacts are accounted for relative to their spheres of control and influence.

We have found this aspect to be one of the more challenging areas of G4 for reporters to implement from a practical perspective in preparing their reports. To respond to this, rather than delivering one particular method of doing this for our clients, we have first explored how they define their organisational boundaries and their relationships with internal and external entities.  

As a result, some clients prefer us to help them map their material aspects in relation to their organisation’s areas of influence and control, whilst other prefers to try and do it against a simple value chain model.

There is no one right way to do this, the outcome being more critical than the process. Whatever you do, don’t overcomplicate it. Boundary mapping can easily get bogged down because you are trying to add too much detail or complexity and maybe losing sight of what you are attempting to achieve.

2.    Consider the impacts of those material aspects relative to your stakeholders

This sounds like a no-brainer but it still seems to challenge reporters. We have seen a number of organisations go through the boundary mapping process, but then fail to use those outcomes to assess the impact of on their stakeholders. Don’t treat the boundary mapping as simply a means of meeting G4 requirements because its real value is to help shape the response in your report around your organisations’ impacts on stakeholders.

When mapping the boundaries of your material aspects, relate those boundaries to the stakeholders both within your organisation and throughout the value chain who are affected by, or influence, that material aspect. This is key to making the content of your report relevant, focused, and meaningful to the report’s readers.

3.  Use that process to shape the breadth of your discussion around material aspects

When developing your report content, keep going back to your boundary mapping and stakeholder impact processes as a checklist to ensure that your narrative and performance data speaks directly to those boundaries and affected stakeholders.

If you don’t, you run the risk of writing a partial response that ignores certain key impacts, entities or stakeholders. Readers may well notice that and possibly assume that you are doing it deliberately – and not always for the right reasons.

4.  Contain the number of material aspects to a handful of tightly focused topics

Two things kill many sustainability reports even before they are written – too many ‘material’ aspects and a lack of definition as to what those aspects mean to the reporter or stakeholder. The result is an unfocused report that does little to enlighten stakeholders or influence their decisions.

In G4 you will be looking to talk about a handful of material aspects in relation to your organisation, your stakeholders and your value chain. While there is no magic number of material aspects to be included in reports, if you are trying to respond to more than ten or so aspects you are setting yourself a real challenge to deliver a concise, succinct report while at the same time doing justice to each of those issues or impacts in terms of your response.

As tempting as it is to include all that well-documented, detailed and highly impressive performance data that you’ve collected on everything that doesn’t directly relate to your top half dozen material aspects – park it on your website or use it in internal management reviews.  This is a big ask of reporters by G4, but it will be much easier if you just stick to the material aspects you identified. After that, you will only need to disclose your management approach and key performance data relevant to those material aspects in a way that really adds context and meaning to the response you are presenting (more on this below).

Poorly defined material aspects also weaken your overall report, producing vague and ill-defined narratives that discuss a range of generic material areas such as “diversity”, “safety” and “emissions”, rather than tightly-defined material aspects that can be clearly accounted for and responded to in the report.

For example, diversity is not a material aspect, but the impact of a diverse workforce on your customer service is. Supply chain is not a material aspect, but addressing inappropriate labour practices in your supply chain is. The more tightly you define the material aspects, the better you will be able to respond, monitor and report on them.

5.  Ensure that you cover off the key elements for each material aspect you address

Disclosures on Management Approach (DMAs) are intended to provide you with an opportunity to explain (and the reader to understand) how your organisation is managing its material impacts for your business and for your stakeholders, whether economic, environmental, or social.

In past reporting under G3 and G3.1, DMAs have often been ignored by reporters, or if included, been vague and irrelevant to the material impacts being addressed. However, to readers, they are just as valuable as performance data, as they enhance readers’ knowledge and appreciation of how material aspects and associated impacts are understood and managed by your business, and redress the imbalance that has existed in reports that focus more on performance data and less on management capability. It also encourages transparency on the reporter’s challenges and barriers to managing difficult issues.

The intent of G4 is that DMAs are provided by the reporter only for material impacts, and that these disclosures are provided at the aspect level (which is typically the level at which most organisational performance areas are managed). But G4 allows you to also report management approaches at a higher organisational level, or at a more performance indicator-specific level, depending on which is more appropriate. In other words, there is flexibility to reflect different organisational approaches to different performance areas. You don’t need DMAs around non-material aspects of your performance.

The final piece of the puzzle is to ensure that the performance indicators you select, and the data you present, illustrate how effective (or otherwise) your management approach (as outlined in your DMA) has been in dealing with the impact. By including performance information that specifically speaks to your management approach, you create cohesion in your narrative that tells a story that the reader can understand and appreciate.

Taking account of the above five considerations will move you a long way forward in your ability to get the most out of G4, delivering a report that is less about claiming GRI ‘alignment’ and more about delivering a solid, stakeholder-relevant disclosure of your performance as an accountable, responsive, and responsible organisation.

About the Author: Paul Davies is a Principal at Banarra and has worked on numerous reporting, materiality, stakeholder engagement, strategy, community standards and assurance assignments in the property, telecommunications, financial, mining, energy, legal and service sectors. Davies is a certified GRI trainer, a member of the GRI G4 working group on management approach disclosures and a member of the GRI G4 Practitioner's Network.