Have you ever heard of the Global Reporting Initiative (GRI)? Many people haven’t. Nevertheless, it is one of the fastest-growing sustainability reporting programs in the world.
Much like the U.S. Green Building Council (USGBC) set the standard for green building frameworks through the LEED (Leadership in Energy and Environmental Design) rating system, GRI is setting the standard for organizational sustainability reporting frameworks.
This year, both USGBC and GRI released the fourth iterations of their frameworks. LEED v4 has been in beta testing since November 2012 and was approved by USGBC membership in June. Paladino served as technical editor and author on the LEED v4 Reference Guides. The GRI G4 Guidelines were released in May 2013.
Companies Under Pressure
While compliance with LEED and GRI are, for the most part, voluntary, the stakes are high for companies responding to increased pressure to demonstrate sustainability from stakeholders such as investors, customers, and government bodies.
The trends point to both green building and sustainability reporting becoming a must-do in the near future. A number of municipalities and counties already require LEED ratings to receive entitlements and the Security and Exchange Commission (SEC) has issued guidelines on disclosures related to the impact of climate change on business.
Within this context, what’s especially interesting is that the new versions of LEED and GRI are beginning to converge and point down the same path: towards putting a greater emphasis on materiality.
What is GRI?
GRI is a multi-stakeholder, consensus-based, nonprofit organization that promotes economic, environmental, and social sustainability. GRI pioneered and developed a comprehensive sustainability reporting framework that enables organizations to measure and report their economic, environmental, social, and governance performance with greater transparency and accountability.
Currently, GRI reporting remains voluntary. Nevertheless, thousands of organizations of all sizes and types, from all sectors, and from across all continents use GRI’s framework to communicate their sustainability performance. These include many well-known organizations such as Coca-Cola, Exxon Mobil, Goldman Sachs, Harvard University, McDonald’s Corporation, NASA, and the U.S. Army.
Commonalities Between LEED and GRI
LEED and GRI share multiple commonalities. Like LEED, the process to develop GRI guidelines is consensus based and uses the expertise of the people in its network through its international working groups, systematic stakeholder engagement and dialog, and due process such as public comment periods.
Both USGBC and GRI coordinate the activities of many network partners. USGBC is comprised of almost 13,000 member organizations and, to date, some 185,000 professionals have earned the LEED AP credential. GRI has a global network of 600 organizational stakeholders and 30,000 professional stakeholders representing different sectors and constituencies.
Similar to LEED prerequisites, the GRI reporting framework contains a set of standard and core indicators that measure the performance of the organization.
Both organizations are on a similar growth path as more professionals and organizations adopt their reporting standards.
(1) Directory (2013). U.S. Green Building Council. Retrieved on June 23, 2013 from http://www.usgbc.org/projects
(2) Sustainability Disclosure Database (2013). Global Reporting Initiative. Retrieved on June 23, 2013 from http://database.globalreporting.org/
This growth doesn’t come without challenges for organizations that choose to embark on the journey to constructing a LEED-certified building or creating a GRI report. Both USGBC and GRI are evolving to address these issues for their users.
- Analyzing the business case for embarking on the journey
- Choosing and engaging with key stakeholders
- Managing resistance to change and ensuring commitment from staff at all levels
- Setting practical and achievable goals
- Preparing to achieve published goals and managing risks and expectations around final results
- Managing issues not covered by local regulations and associated risks
- Collecting and organizing necessary information and producing clear documents that meet stakeholder needs
- Obtaining external verification
- Maximizing value from the tool rather than using the results for marketing purposes
- Telling an honest performance story about the organization, communicating negative results, and managing associated risk
- Selecting the material issues on which to focus
Major Changes for LEED v4 and GRI G4
Changes to LEED include additional systems to address new market segments such as data centers, warehouses, hospitality, and existing retail. The technical rigor required to meet many credits has been increased as well.
For instance, the water efficiency scope now includes total building water use, and the materials and resources credit category has been significantly revised to include a lifecycle approach to product and material specification. Performance metrics are attached to each credit.
Finally, the impact categories have been completely revised so that they align more closely with the USGBC vision and emphasize the positive contribution LEED buildings make to their communities and the planet, rather than limiting damage. Companies will also have to consider materiality when creating their certification strategy—which impact categories are most important and relevant to their business and stakeholders?
Major changes in the new version of GRI include a move from a three-tiered application system to a two-tiered system. Reporting organizations can now choose between the “core’” and “comprehensive” tiers. There is an increased emphasis on disclosing executive compensation following the financial crisis, and requirements for additional supply chain disclosures.
Most importantly, materiality has moved from a reporting principle to part of the technical process of determining what content businesses will actually report on. In the previous version, 55 core aspects were considered material to all businesses, but now companies only need to report on aspects they deem material.
The key takeaway is that the newest versions of both LEED and GRI contain similar approaches, as both organizations require companies to identify the sustainability issues that are most important and relevant to their businesses. To me, this indicates a maturation of both frameworks.
Materiality for Sustainability
In the business context, information is defined as material if it has significant bearing on how a shareholder might vote.
What is driving this shift to emphasize materiality?
For starters, institutional investors are now partnering with sustainability reporting frameworks such as GRI and the Carbon Disclosure Project to drive more transparent environmental reporting. They want to know the risks—and opportunities—in their investment portfolios arising from climate change, water scarcity, flooding, pollution, and deforestation.
For LEED, materiality puts a more rigorous emphasis on relevant building performance that influences key impact areas. Critics of LEED say that it encourages inappropriate strategies and doesn’t deliver on its environmental promises. LEED v4 has gone a long way towards addressing these issues by establishing stronger ties between credit intent and performance outcomes.
The positive outcome of the emphasis on materiality is that companies now must focus on what is relevant to their business and their stakeholders, rather than seeking out easy wins. For LEED, this means de-emphasizing the chase for a certain level (i.e., Platinum, Gold, etc.) and instead putting the focus on figuring out what outcomes you want LEED to help you achieve.
If you’re in Los Angeles for instance, you may choose to focus on transportation and water issues because those are key environmental markers of your region.
For GRI, this means de-emphasizing those indicators that are irrelevant for your business and instead putting the focus on those outcomes that have the most impact. If you’re a beverage manufacturer for instance, you may choose to focus on water issues because they represent a key risk for your industry.
With LEED v4 providing performance metrics for each credit, it will be easier than ever to align validated building performance metrics with GRI requirements.
My next post will explore how sustainability executives can use outputs from LEED v4 as content for sustainability reporting.
Wanda Lowrey is a Green Building Consultant, LEED® AP BD+C; O+M and a Certified GRI Sustainability Reporter in Paladino’s Seattle office.