A Deeper Dive into GRI

The Global Reporting Initiative (GRI) is an organization that provides a set of standards to help other firms and businesses report their impacts on the environment and economy in a credible manner. This is incredibly useful because it serves as a tool for investors to evaluate if the firm aligns with their personal values, and decide whether or not to invest.

The GRI standards are made up of Universal, Sector, and Topic. Each aspect has its unique role in the facilitation of ESG data. The Universal Standards first establishes the fundamentals of GRI that all businesses must comply with, and states the GRI principles of accuracy, balance, and verifiability. General disclosures are then explained, including the overall organizational structure, reporting, policies, strategy, governance, and practices. Lastly, it explains a firm’s process of determining its material topics which are most relevant to measuring impact, and discloses information on how a firm should report its material topics and how Sector Standards can be applied. The Sector Standards are intended to ensure the quality and consistency of industry reports. Respective standards are being developed for 40 different sectors, and will include the sector overview and material topics. The overview covers major activities and business relationships, while material topics are analyzed of their most significant impacts associated with the sector, then connected to Topic Standards. Information from sector specific evidence and advice from sector experts is allowed to be incorporated.

The last set of standards is the Topic Standards. Similar to the Sector Standards, each Topic Standard consists of the topic overview and topic specific disclosures, as well as the management of organizational impacts. Firms mostly focus on incorporating the topic standards associated with their material topics into their reporting.

But what are the guidelines to using GRI Standards? Although adherence to the standards is strongly recommended, they are not required in all aspects. If an organization is unable to meet the requirements or only wants to disclose certain information, they can choose to comply with only certain select parts of the GRI Standards. Instead of reporting in accordance, firms can instead choose to report with reference to the GRI Standards.

GRI is an organization that plays a crucial role in the reporting of ESG data, but it is not a perfect solution to the problems of incomplete information. As an investor, it is important to understand the services and limits of the GRI Standards in order to properly utilize its information when building a portfolio.