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22 Apr Sustainability Reporting: GRI and SASB Complement Each Other
In the field of sustainability information, there are an increasing number of players with different roles, such as investors, corporates, regulators, NGOs, and other civil societies, forming a dynamic ecosystem of sustainability information. Sustainability standard is the foundation of this ecosystem, where the Global Initiative (GRI) and the Sustainability Accounting Standard Board (SASB) are two comprehensive and internationally recognized standard setters for corporate reporting. Recently, the two sides conducted a joint research to explore the experiences of companies that use both sets of standards. Afterward, they published a practical guide to sustainability reporting on April 8, 2021, which was also the result of a joint GRI-SASB project announced in July last year.
The key finding of the joint research located on the concept that the two reporting standards could complement rather than substitute each other. While SASB’s industry-specific standards identify the subset of sustainability-related risks and opportunities material to a company’s financial condition, operating performance, and risk profile, the GRI standards focus more on the economic, environmental, and social impacts of a company, which contribute towards the sustainable development. The indicators emphasized by SASB could affect a company’s current and future market valuation, while the reporting requirements of GRI have underlying assumptions that even if they are not already financially material at the time of reporting, they could become financially material over time.
In addition, KPMG’s 2020 Survey of Sustainability Reporting also found that more organizations used GRI and SASB standards together than separately. Within the 132 respondents, 39% used both standards, 33% were GRI-only reporters, and 10% followed SASB only. Both sets of standards were mostly used in infrastructure (50%), food & beverage (60%), and healthcare (83%) sectors.
(Source: GRI & SASB)
Why report against both GRI and SASB standards?
Pioneering transparency. Transparency is the main reason that companies adopt multiple frameworks. To provide a more complete overview, companies preferred to use both. In most cases, companies started using the GRI standards much earlier, and then added SASB according to growing investor interests in ESG issues. For instance, City Developments Limited (CDL), a global real estate company based in Singapore, adopted the GRI Standards in 2008 and added SASB in 2020.
Meeting investors’ needs. Investors are a priority audience. From the perspective of ESG investors, non-financial performance could not be separated from financial performance. According to CDL, investors are increasingly interested in having a more comprehensive overview of its ESG practices. To content the need, companies tend to provide useful non-financial information, using SASB as the cross-reference of specific areas with a broader GRI disclosure.
Creating more business value. Sustainability reporting provides more insights into an organization’s long-term value. By setting goals, tracking progress, and reporting, a company could identify its business opportunities and risks as well as its gaps from competitors. Thus, a company can improve its operational efficiency and seize growth opportunities. Adopting the two sets of standards could smooth the goal setting and progress tracking in a holistic picture.
What could we expect for the future after the GRI-SASB collaboration?
In light of the GRI-SASB collaboration, the world of other partnership possibilities come into realization. After the collaboration of the two, in September 2020, three other leading framework and standard-setting organizations, CDP, Climate Disclosure Standards Board (CDSB), and International Integrated Reporting Council (IIRC), along with the GRI and SASB, published a joint statement of intent to work together towards comprehensive corporate reporting, which committed to contribute to the achievement of a globally accepted comprehensive corporate reporting system. The system includes both financial accounting and sustainability disclosures, which could be connected via integrated reporting. In November 2020, the IIRC and SASB announced their intention to merge into a unified organization, namely the Value Reporting Foundation, which will be formed by mid-2021. In December 2020, the group of the five organizations published a prototype of climate-related financial disclosure standards, introducing the elements set out by the Task Force on Climate-related Financial Disclosures (TCFD).
It may be confusing for newly entered corporates that plan to do sustainability reporting, as they face various options, requests, and suggestions from multiple standards and frameworks. The GRI-SASB collaboration shows the possibility of integrating a range of frameworks, guidelines, and standards together. Also, an idea is gradually accepted that sustainability information disclosure should be reflected in the mainstream annual reports on a consistent basis across industry sectors and countries. Harmonization and simplification of corporate sustainability reporting could be expected while may still be ways off.
How to use GRI and SASB standards together effectively?
For corporates that will present themselves at home and abroad, they should aware the differences between the two standards and try to harmonize the gaps to save efforts. The GRI and SASB standards have different reporting processes, as well as very different approaches to materiality. Each of them provides guidance, while there is no single recommended way to use the two sets of standards together. Two examples of GM [GM:US] and Suncor [SU:US] in a research report echoed this. GM provided a GRI and SASB index, and reported data in separated tables. By contrast, Suncor included a combined SASB/GRI table, which had a mix of reported and cross-referenced data.
During the process of sustainability reporting, materiality assessment should be a high priority. If a company cannot report against the indicators when looking at the SASB framework in its industry, the company might need to think whether it has done a robust enough materiality assessment. In addition, an opinion is shared to release companies’ reporting effort. If a firm’s materiality analysis is in order, the firm could have GRI data collection processes in place; once completing the GRI data collection, it could add SASB to the mix, which will not be daunting but can be highly effective in terms of integrating financial and ESG impacts together.
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