Ethical Performance
inside intelligence for responsible business
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EC directive a turning point for reporting frameworks?

July 2014

The ‘last word’ by Elaine Cohen in the March edition of Ethical Performance was a timely summary of what has been becoming apparent for some time. There is indeed a degree of confusion ‘on the ground’ about the GRI, IIRC and SASB frameworks, which in our experience on working with clients on non-financial reporting, can simply lead to companies retreating from them all.

That said, direct comparisons between IIRC, SASB and GRI are perhaps a little unfair as they are intended to provide guidelines for different purposes. IIRC and SASB are both aimed squarely at how companies communicate with their investors, providing guidance on how non-financial information should be incorporated in annual reports and US mandatory filings, respectively.
The prospect of integrated reporting, as now formalised by IIRC <IR> guidelines, has been held up as the ‘holy grail’ by many commentators. However, it is not yet clear if integrated reports serve the same function as, or will therefore replace, the dedicated CSR or sustainability reports that have become commonplace for many large companies.

Taking into account the interests of all stakeholders (i.e. anyone with a stake in a company), GRI provides guidelines for how companies can report non-financial information in a standard and, hence, comparable way. With G4, the requirement to establish material issues means that the GRI guidelines no longer simply cover the contents of a report itself, but also the way in which those contents are defined. This adds a new preliminary step to the reporting process, which requires organisations to engage with their stakeholders in order to understand which issues matter most.

Everybody seems to agree that this focus on materiality provides a robust approach, leading to more relevant reporting but again there is confusion around the different definitions of materiality by GRI, IIRC and SASB. Again, this stems from these frameworks’ different target audiences. IIRC and SASB use the more “traditional” meaning of materiality (evolved as it is from the financial accounting world), referring to the threshold above which an issue is determined to be sufficiently significant to be included in financial reporting. On the other hand, GRI encourages companies to identify and focus their reporting on those (non-financial) issues that matter most both to the company and to its stakeholders.

However, having different audiences does not mean that better harmonisation between the frameworks is not needed. Each of them have aspects that might benefit the others.

With the European Commission recently adopting a new directive on the disclosure of non-financial information, impacting an estimated 6,000 ‘large’ companies across Europe, this would seem to be the ideal time for the three organisations to come together and agree areas of common ground and better explain reasons for differences. That way, the many companies who are having to approach non-financial reporting for the first time will have a much clearer idea of where to start.

Richard Westaway & Coralie Ponsinet, IMS, the sustainability consultancy 

Europe | Reporting


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