GRI Application Level skipped by 25% of reporters – Why?

Why do 25% of sustainability reporters NOT declare their GRI Application Level (A, B, C with or without ‘+’)? Curious about this statistic, I dug deeper to find which countries and brands are the main culprits. 

GRI recently announced that it is reorganizing to better pursue its two main objectives. First, that, by 2015, all large and medium-size companies in OECD countries and large emerging economies should be required to report on their Environmental, Social and Governance (ESG) performance and, if they do not do so, to explain why. And second, that by 2020, there should be a generally accepted and applied international standard which would effectively integrate financial and ESG reporting by all organizations.

Although perhaps desirable, I am not fully convinced about the feasibility of these goals. But that is beside the point…  I am concerned about existing structural challenges which may be contributing to the chasm between those who report and those who do not - or deviate from GRI’s reporting framework.

In my last week's blog entry, I took A Look at GRI Application Level Declaration Statistics. The high percentage of undeclared reports intrigued me – so I dug a bit deeper. The largest ‘culprits’ - in terms of countries - comprise China (37 of 51 reports in GRI’s 2009 database or 73%), Japan (60/86 or 70%), France (15/25 or 60%), South Africa (18/45 or 40%) and the USA (47/132 or 36%). 

Looking just at the US contingent, I note that this includes long-term reporter, arguably many reporting leaders, such as Abbott, Alco, Cisco, Coca-Cola, Johnson & Johnson, Nike and Proctor & Gamble.

What drives these major brands to make the conscious decision to skip their GRI Application Level declaration? Are they worried about the Six Commandments mentioned in  Elaine Cohen’s blog post GRI Reporting Levels 101? Or are there other reasons - perhaps most persuasively offered by corporate counsel - which may be driving this process? I would welcome your insights and comments.

Mehrdad Nazari is a Senior CSR, GRI & ESIA Advisor (Blog: http://www.prizmablog.com, Web: www.prizmasolutions.com)

18 Comments to GRI Application Level skipped by 25% of reporters – Why?

  1. […] This post was mentioned on Twitter by elaine cohen. elaine cohen said: Reading Why do companies not declare GRI reporting levels #CSR by Prizma blog Mehrdad Nazari http://bit.ly/aNAY7q […]

  2. Alex says:

    Hi Mehrdad
    Interesting article, thanks. I guess because the AL approach is noble but has limitations – and target audiences dont understand it. Comapnies such as E.On went from A to B. BP uses C. Nobody seems to care, and there’s little policing. The importtant thing is inclusivity, context and materiality – all working towards trust. DOn;t forget that for large mining companies who are members of ICMM, their membership conditions require them to be A+.

    Cheers
    Alex

  3. Comment left on LinkedIn by Iain McGhee, Director of Business Development at CRedit360, UK:

    ” A very interesting question. Though I don’t think it’s as bad as this – in 2009 around 25% of reports including a GRI G3 contents index didn’t declare an application level. Not ideal but still a minority. Comprehensive data for all published GRI (and non-GRI for that matter) reports are available on CorporateRegister.com.

    In my experience it’s probably occuring for a couple of reasons. Firstly, because the letter grading can be misinterpreted as a quality grading which it isn’t, but this perception naturally makes reporters nervous to apply the system. Secondly, because it can be a very confusing system, 3 letter codes, 3 types of checking, and then the ‘+’ equals means 18 different derivations. The ‘+’ symbol is a whole separate discussion, but certainly adds to the overall confusion – assurance isn’t simply a tick box yes/no, it has many forms (interesting to note that at least when I last checked, the GRI themselves won’t confirm the ‘+’ when doing an application level check).”

  4. Thanks for your note, Alex. Yes, I agree that most people don’t know about (care about?) the nuances of the GRI Application Level. But I remain intrigued how this approach varies so much around the world. What drives companies in Japan and China to be so different (avoidance = 70+%) in their approach compared to companies in other countries?

  5. Comment by Todd Yaney, AIAG Exec. Loan at Chrysler, on LinkIn Group:
    “I’ve wondered the same thing. I have written to several of them – never got much of an answer. Iain mentioned the stigma about grades, but that’s usually internal and is easily overcome. I know some, though, whose depth would warrant an A but they still keep that level under wraps. Great question. Maybe we’ll hear from one here.”

  6. Liza says:

    How about:
    1. the process is monumentally boring and anal
    2. it does not add value – to reporting or anything else

    Liza

  7. An ethical funds research analyst noted this:

    “As an investor I appreciate it when companies use GRI reporting as it makes my life easier, but I wouldn’t necessarily discount the value of any report that didn’t report according to GRI or mention its GRI application level, as long as I had the information I needed from the reporting itself. Also, reporting is only one (albeit very important) part of what a company does – my biggest priority would be for a company to develop a good strategy and report it well. Whether it uses GRI at all and what level it declares is really up to the company – I would rather judge for myself whether the report covers my needs.”

  8. Marianna Malaspina noted on GRI LikedIn:

    “What I found extremely hard to work with while analyzing GRI reports were two things: on some of the standards, several of the companies I observed do not give any answer. 2) On many others, they do not give a straight numerical answer but instead refer to sections of their report which in turn bury the sometimes non existant data in long dissertations.
    This makes any analysis much more complicated and time consuming (not to say frustratiing) then needs be. And, which is mich worse, useless or impossible.

    Since one of the reasons for the existance of the GRI is to make companies comparable and therefore creditable for improvements, I think it should be part of the companies’ job to make comparison possible. This may not be easy, but if companies do not accomplish this they run the risk of having to allocate the hubdred of thousands of dollars they spend on their reports to pure and empty PR.”

  9. And Henrik Weinestedt responded on GRI LinkedIn:

    “@Marianna: I had this explained to me by a frustrated manager at one of India’s top sustainability/GRI reporting consultancies – the obvious loop hole which means you can report on every single indicator without actually having the data, if you only claim that you are working on developing the data reporting processes etc. I sincerely hope for three things:

    G4 removes this loop hole;
    Companies stop doing using it;
    Assurance agencies have the guts to point it out to the companies (ab)using it.”

  10. A supply chain auditor and research provider in Hong Kong e-mailed me with the following comments:

    “According to Chinese news sources, the majority of reports (70%) are from state-owned enterprises who just use the GRI for reference. Often times, the SOEs are required to issue such reports, under a regulation issued by the State Council which provides basic guidelines and principles for SOEs to fulfill social responsibility. Therefore, the application level may not be that important in such a context, particularly for the SOEs. In other words, it seems their main audience is the government.”

  11. Daniel Roberts, Director at RAAS Consulting, left this comment on LinkedIn:

    “Mehrdad,
    A key reason that application levels are not used can be found in the purpose of a CSR report, and the flexibility that the GRI standard provides. If a CSR report is primarily an exercise in marketing (as it clearly is form some companies – not all) then the flexibility of the GRI standard allows companies to claim to have followed the GRI while actually saying only what they want to say.

    If the objective of the CSR report is to motivate employees, then the same issue applies – the GRI standard provides legitimacy while allowing the company to focus on the specific internal messaging that is desired.

    Finally, if regulators are the audience, then the GRI reporting standard is only tangentially applicable, and the application levels are meaningless.”

  12. Thanking Daniel for his comments, I responded with this note: How do you – and previous comments – help us understand why China, Japan, South Africa and US are leading the pack of undeclared sustainability reports? Is the context and target audience of reporting so different in those countries compared to the rest?

  13. […] practiced by reporters in countries like China, Japan, South Africa and the US (see also my recent blog entry)? More generally, do you feel that availability of Sector Supplements will help attract new […]

  14. […] GRI Application Level skipped by 25% of reporters – Why? […]

  15. This blog entry made it to my Top 10 for 2010. Full list posted here

  16. […] GRI Application Level skipped by 25% of reporters – Why? […]

  17. Adam says:

    Mehrdad,
    The answer is materiality and relevance. In the U.S. with financial reporting, FASB does not impose materiality standards. It allows companies self-determination when deciding what is material and relevant. Although GRI pretends to allow this self-determination, it imposes a list of Core and Sector Indicators that are ‘assumed’ to be material and relevant, and therefore reportable. If a company has no need to report on a specific metric because it is not relevant or material, why should the company bother with the expense of measuring it, reporting it and/or assuring it. In order to declare an A application level, a company needs to report on Profile disclosures
    1.1
    2.1 – 2.10
    3.1 – 3.8, 3.10 – 3.12
    4.1 – 4.4 , 4.14 – 4.15
    1.2
    3.9, 3.13
    4.5 – 4.13, 4.16 – 4.17
    And include:
    Management Approach disclosed for
    each Indicator Category

    And:
    Respond on each core and Sector
    Supplement* indicator with due
    regard to the materiality Principle
    by either: a) reporting on the
    indicator or b) explaining the reason
    for its omission.

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