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Materiality in CSR reporting: the importance of GRI’s G4 guidelines

By Katie M. Scholz | 30 November 2012

The recent Rio+20 Summit made one thing clear: the trend in Corporate Social Responsibility reporting is only increasing. However, it is not only governments pushing for transparency in corporate activities; the trend is increasingly driven by business executives. The corporate support stems from the link between sustainability and healthy balance sheets. Accounting for true business costs, including long-term environmental risk, is increasingly important in long-term corporate strategies.

While many groups collect CSR reports, the Global Reporting Initiative (GRI) is recognized as the standard for sustainability reporting.  GRI started in 1997 as a joint initiative between CERES and UNEP to provide a framework for measuring more than just the financial performance of organizations, looking to the entirety of the organization’s impact. GRI guidelines ensure organizations report accurate and meaningful information to their stakeholders. GRI is currently updating their guidelines, having recently closed the first public comment period on the draft for G4.

In order to provide a professional CSR report, organizations must focus on topics material to their industry and stakeholders. The first step in assessing and reporting on CSR activities requires identification of both internal and external stakeholders through a materiality analysis. Stakeholders include groups who may affect, or be affected by, the organization’s actions. The current GRI guidelines, G3, define material issues as those relating to the economic, environmental and social impacts of corporate activities.

Many organizations currently reporting under the G3 guidelines follow a materiality matrix template that compares impacts against influence on stakeholder decisions by focusing on corporate activities and stakeholder communication. Using materiality matrices provides reporting organizations with a clear and visual means for improving transparency in communications with stakeholders.

One of the goals of the draft G4 guidelines is to provide improved guidance on identification of material issues. The G4 guidelines require external stakeholders to increase credibility of reports, making materiality assessments crucial to CSR reporting.  With the first comment period closed and analysis of feedback completed, it is clear that many topics are material regardless of industry, with 33% of respondents listing Energy, 27% listing Emissions and 24% listing Water in their top ten material topics. While sector-specific guidance is not a new offering for GRI, this is an area still open for improvement in the G4 guidelines. And, as the G4 guidelines are not final, there is still time to influence the topics deemed material by individual industries.

With an increased focus on defining materiality in CSR reporting, GRI is requesting input from organizations through December 14th on identifying sustainability topics material to specific industry groups.

Whether or not an organization has reported with GRI in the past, it is increasingly clear that CSR reporting is becoming the new norm. The call for input on the G4 material topics is an excellent opportunity to provide input and ensure that reporting organizations are transparent in their disclosures. For more information on how to suggest topics for inclusion, GRI provides an informational presentation.

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