Explain the process for defining the report content and the Aspect Boundaries.
Explain how the organization has implemented the Reporting Principles for Defining Report Content.
This section describes the steps that the organization may go through in order to define the specific content of the report. The steps described here have been designed to offer Guidance on how to implement the Principles for Defining Report Content. Although following the steps is not a requirement to be ‘in accordance’ with the Guidelines, the implementation of the Reporting Principles is a requirement. The Reporting Principles are fundamental to achieving transparency in sustainability reporting and therefore should be applied by all organizations when preparing a sustainability report. The Principles for Defining Report Content are to be applied to identify the information to be disclosed, by considering the organization’s activities, impacts, and the substantive expectations and interests of its stakeholders. There are four Principles for Defining Report Content: Materiality, Stakeholder Inclusiveness, Sustainability Context and Completeness. Each Reporting Principle has two components: a definition, and a description of how and why to apply the Principle. Both components should be considered by the organization. The figure below indicates which of these Reporting Principles is applicable in the different process steps. Stakeholder Inclusiveness applies to the whole process, in varying degrees.The methodology applied in the steps varies according to the individual organization. Specific circumstances such as business model, sector, geographic, cultural and legal operating context, ownership structure, and the size and nature of impacts affect how the organization identifies the material Aspects and other material topics to be reported. Considering the organization’s specificities, the steps to define report content are expected to be systematic, documented and replicable, and used consistently in each reporting period. Changes to the assessment approach, and their implications, are expected to be documented.Step 1: Identification - OverviewThe process begins with Identification of the Aspects and any other relevant topic, and their boundaries, which might be considered to be reported on. This identification is based on the Principles of Sustainability Context and Stakeholder Inclusiveness. When assessing the range of potentially relevant topics, the organization should use the tests that underlie these two Principles. The organization should identify Aspects and any other relevant topics based on the impacts related to all of its activities, products, services, and relationships, regardless of whether these impacts occur within or outside of the organizationI. While the organization new to sustainability reporting is likely to focus on impacts that occur within the organization, a broader consideration of the impacts outside of the organization should become feasible as reporting practice matures.Step 2: Prioritization – Overview The next step in defining report content is Prioritization of the Aspects and any other relevant topics from Step 1, to identify those that are material and therefore to be reported on. Prioritization should be based on the Principles of Materiality and Stakeholder Inclusiveness. When assessing the level of priority, the organization should use the tests that underlie these two Principles.Step 3: Validation - OverviewThis step is followed by Validation where the Principles of Completeness and Stakeholder Inclusiveness are applied to finalize the identification of the report content. When validating the identified material Aspects (or other material topics), the organization should use the tests that underlie these two Principles. The outcome of these first three steps is a list of material Aspects (and other material topics) and their Boundaries. The final list of material Aspects (and other material topics) will lead the organization to defining a list of Specific Standard Disclosures related to them, which should be disclosed in its report.Step 4: Review - OverviewFinally, after the sustainability report has been published, it is important that the organization undertakes a review of its sustainability report - Step 4. This review takes place as the organization is preparing for the next reporting cycle. A review may focus not only on the Aspects that were material in the previous reporting period but also consider again the Principles of Stakeholder Inclusiveness and Sustainability Context. The findings inform and contribute to the Identification step for the next reporting cycle.
I United Nations (UN), 'Guiding Principles on Business and Human Rights, Implementing the United Nations "Protect, Respect and Remedy" Framework', 2011.United Nations (UN), Protect, Respect and Remedy: a Framework for Business and Human Rights, 2008.United Nations (UN), Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie, 2011.
1.1 IDENTIFYING RELEVANT TOPICSBefore defining the list of material Aspects or other material topics, organizations are advised to consider an initial broad list of topics that merit inclusion in the report. These are ‘relevant topics’.‘Relevant topics’ are those that may reasonably be considered important for reflecting the organization’s relevant economic, environmental and social impacts; or influencing the assessments and decisions of stakeholders. All such topics potentially merit to be considered for inclusion in a sustainability report.All GRI Aspects and related Standard Disclosures under each Category in the Guidelines and the GRI Sector Disclosures can be considered at this stage as the initial list of topics for this step. The GRI Sector Disclosures can be found at www.globalreporting.org/reporting/sector-guidanceThe identification of relevant topics involves considering the relevant impacts related to all of the organization’s activities, products, services, and relationships, regardless of whether these impacts occur within or outside of the organization.For each identified relevant topic, the organization has to assess the impacts related to it and identify the Boundary. The Boundary of a topic specifies where the impacts occur: within or outside of the organization. Boundaries should be described in sufficient detail to identify:
The organization’s identification of relevant topics is expected to be systematic and may consider the precautionary principleII. In addition, where practicable the organization is advised to apply a scientific and internationally validated approach to measurement, and rely on proven expertise and authoritative research.In assessing the range of potentially relevant topics, the organization should use the tests that underlie the Principles of Sustainability Context and Stakeholder Inclusiveness.1.2 DETERMINING BOUNDARIES FOR RELEVANT TOPICS This section explains concepts that will help to determine Boundaries of relevant topics and material Aspects.The impacts that make a topic relevant can occur within or outside of the organization, or both.‘Boundary’ refers to the description of where impacts occur for each relevant topic (potentially material Aspect). In setting the Boundaries, an organization should consider impacts within and outside of the organization. Topic Boundaries vary.a. Within the organizationImpacts that make a topic relevant can occur within the organization. In the Guidelines, ‘within the organization’ means the group of entities that are reported in G4-17.These impacts do not always occur throughout the entire organization. During this step, the organization needs to evaluate in which entities within the organization the impact occurs. Refer to General Standard Disclosure G4-20.b. Outside of the organizationImpacts that make a topic relevant can occur outside of the organization. There is no exhaustive list of outside parties to be considered in this process. Instead, the organization should attempt to capture the instances where a relevant impact occurs. These relevant impacts can be described as direct or indirect for some topics or as caused by, contributed to, or linked to the organization for othersIII.For assessment purposes, the impacts that make the topic relevant outside of the organization can be grouped by their geographical location or the nature of the organization’s relationship to them (such as suppliers in country X). Refer to General Standard Disclosure G4-21.c. Within and outside of the organizationImpacts that make a topic relevant can occur within and outside of the organization. When describing the Boundaries for such topics, organizations should combine the considerations for determining Boundaries within the organization and outside of the organization, as explained earlier.At the end of the Step 1, the organization will have identified a list of relevant topics, along with their Boundaries. In the next step, this list is assessed for materiality, reporting priority, and level of coverage in the report.II United Nations (UN) Declaration, 'The Rio Declaration on Environment and Development', 1992.III United Nations (UN), ‘Guiding Principles on Business and Human Rights, Implementing the United Nations “Protect, Respect and Remedy” Framework’, 2011.United Nations (UN), Protect, Respect and Remedy: a Framework for Business and Human Rights, 2008.United Nations (UN), Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie, 2011.
2.1 WHAT TO ANALYZEAfter considering a list of relevant topics which might be covered in the report – which is likely to be a list containing a selection of GRI Aspects and GRI Sector Disclosures that are complemented, if needed, by other topics – the organization has to prioritize them. This involves considering the significance of their economic, environmental and social impacts or their substantive influence on the assessments and decisions of stakeholders.For simplicity, the ‘relevant topics’ identified in Step 1 are referred to as ‘Aspects’ from now on.The definition of the Materiality Principle states:“The report should cover Aspects that:
Consequently, to determine if an Aspect is material, qualitative analysis, quantitative assessment and discussion are needed. The organization’s strategy and the context of its activities are important parts of this analysis and discussion.The fact that a topic is difficult to quantify does not mean that the topic is not material. The decision of what is possible to be reported on for an identified material Aspect is to be considered later. The focus now is the analysis considering the points above.The prioritization should be based on the Principles of Materiality and Stakeholder Inclusiveness. When assessing the level of priority, the organization should use the tests that underlie these two Principles.2.2 ANALYSIS OF ‘INFLUENCE ON STAKEHOLDER ASSESSMENTS AND DECISIONS’ AND ‘SIGNIFICANCE OF THE ORGANIZATION’S ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS’To implement the Materiality Principle, each Aspect should be assessed on ‘Influence on stakeholder assessments and decisions’ and ‘Significance of organization’s economic, environmental and social impacts’.These viewpoints might overlap to some extent with respect to internal stakeholders. The interests and expectations of stakeholders that are invested specifically in the success of the organization (such as of workers, shareholders, and suppliers) inform the analysis of both viewpoints.a. Influence on stakeholder assessments and decisions The analysis of this viewpoint includes the assessment of the views expressed by stakeholders before and during the reporting period.By applying the Principle of Stakeholder Inclusiveness, the organization should be able to identify and consider its key stakeholders and their respective views and interests, and how their views may affect decisions on the report content. The analysis requires the organization to translate the varied opinions of different stakeholders into a series of decisions on what to include and exclude from its report.The Guidelines require disclosure on stakeholder engagement under G4-24 to G4-27. The organization is required to describe how stakeholders are identified and prioritized, how their input has been used or not used, and how different expectations and interests are assessed, as well as the organization’s rationale behind the chosen approach.Stakeholder views may be drawn from existing, ongoing engagement mechanisms, as well as from stakeholder engagement that is initiated specifically for defining sustainability report content. Throughout the engagement process the Principle of Stakeholder Inclusiveness is applied in detail.The stakeholder engagement process described here aims to identify Aspects that are important to key stakeholders and to recognize gaps between the perceptions of the organization and stakeholders. Aspects of high significance to key stakeholders should be considered material, especially those Aspects that concern the stakeholders’ own interests.The nature of the organization’s impact and the Aspect Boundary are considered when defining the geographical focus of engagement. The stakeholder engagement process has to be appropriate to the stakeholder group. Stakeholder engagement also identifies the interests of stakeholders who are unable to articulate their views (such as future generations, fauna, ecosystems). The organization should identify a process for taking such views into account in determining materiality, including the interests of stakeholders with whom it may not be in constant or obvious dialogue.The proper stakeholder engagement process is two-way in nature, systematic and objective. Some engagement processes with specific stakeholder groups, such as workers and communities, are expected to be independent of management and include mechanisms for stakeholders to express collective views relevant to their location.The analysis of the Aspects identified by stakeholders may include:
In addition, prioritizing stakeholders requires an analysis of how stakeholders relate to the organization and to the Aspect being considered. This process may include the degree to which stakeholders:
An organization’s activities, products, services, and relationships lead to economic, environmental and social impacts. Some of these sustainability impacts are visible to stakeholders, who express an interest in them directly. But not all sustainability impacts are recognized by stakeholders. Some impacts may be slow and cumulative. Others occur at a distance from stakeholders, so that causal links may not be clear.b. Significance of the organization’s economic, environmental and social impactsThe aim of this analysis is to prioritize those Aspects that may positively or negatively influence the organization’s ability to deliver on its vision and strategy.To prioritize Aspects for reporting, the organization’s assessment includes, among others, the following elements:
Elements of this information may be available through established internal policies, practices and procedures (such as strategy, KPIs, risk assessments, and financial reports), as well as regulatory disclosure.Among other possible elements, the analysis may include:
2.3 DETERMINING MATERIAL ASPECTSa. ThresholdsAfter completing the analysis of ‘Influence on stakeholder assessments and decisions’ and ‘Significance of the organization’s economic, environmental and social impacts’, the organization should be able to identify Aspects with respect to both these viewpoints.The organization now defines thresholds (criteria) that render an Aspect material. The analysis of the two viewpoints should be reflected in these thresholds.The definition of thresholds by the organization has a significant effect on the report. It is important that the thresholds and underlying criteria are clearly defined, documented and communicated by the organization.This determination involves discussion, qualitative analysis and quantitative assessment to understand how significant an Aspect is.The fact that a topic is difficult to quantify does not mean that the topic is not material. The decision of what is possible to be reported on for identified material Aspects is to be considered later.In defining thresholds, the organization needs to make a decision on how to address Aspects that are more significant in one viewpoint than the other. An Aspect does not have to be highly significant in both viewpoints to be deemed a priority for reporting.Emerging issues – Aspects that may become relevant over time – are an example of this. Significance within one viewpoint is more important than convergence between the different viewpoints, and establishing a lowest common denominator is to be avoided. In addition, as noted earlier, Aspects of high significance to key stakeholders concerning their own interests are expected to be considered material for reporting.For a visual representation of this identification, in the figure below, the area between the two axes includes the Aspects identified during the Identification Step. Here, the Aspects are placed with respect to the ‘Influence on stakeholder assessments and decisions’ and ‘Significance of the organization’s economic, environmental and social impacts’. All the Aspects within the chart should be considered in the Prioritization Step.b. Level of coverageLevel of coverage refers to the prominence, amount of data and narrative explanation disclosed by the organization about a material Aspect. DMA, Indicators, or a combination of the two represent different levels of coverage.The organization may consider the following as examples of how it may address level of coverage according to relative reporting priority:
DMA allow for the discussion of challenges and dilemmas where the organization does not have a management approach for the material Aspect.In addition, Indicators should be reported in combination with the DMA for material Aspects for which impacts occur within the organization.For material Aspects for which impacts occur outside of the organization, Indicators are expected to be reported where data quality and availability allows.At the end of the Prioritization Step the organization has established a list of all the material Aspects to be included in the report, along with their Boundaries and their level of coverage.The organization should report if information presented for a DMA or Indicator does not cover the Boundary identified for the material Aspect in General Standard Disclosures G4-20 and G4-21.
The Validation Step assesses all identified material Aspects against the Principle of ‘Completeness’ prior to gathering the information to be reported.The Validation Step involves assessing the material Aspects against:
Validation is undertaken with the aim of ensuring a report provides a reasonable and balanced representation of the organization’s sustainability performance, including both its positive and negative impacts.The Principles of Completeness and Stakeholder Inclusiveness are applied here to finalize the identification of report content. When validating the identified material Aspects (or other material topics), the organization should use the tests that underlie these two Principles.It is critical for the list of material Aspects identified for inclusion in the report to be approved by the relevant internal senior decision-makers at the organization. Some organizations may choose to involve external stakeholders in this authorization. The Validation process should be documented.Once the identified material Aspects list has been approved, the identified material Aspects require translation into Standard Disclosures – DMA and Indicators – to report against. After the Validation Step, the organization gathers the information to be reported for each material Aspect, and assembles the final report. In gathering the information, the Principles for Defining Report Quality apply. The organization determines the Aspects for which there are already management and performance information available, and those for which it still needs to establish management approaches and performance measurement systems.IVThe organization may identify material topics that are not covered by the Aspects list and Indicators in the Guidelines neither by the GRI Sector Disclosures. To address these topics, the organization may apply the Generic DMA. The organization may also use – complementary to the Generic DMA – alternative indicators, also sector specific ones, or develop their own indicators. Organization-specific indicators included in the report should be subject to the same Reporting Principles and have the same technical rigor as GRI’s Standard Disclosures.The organization may also take the approach of assessing the Indicators for materiality during the Validation Step. If an Indicator is deemed material yet the Aspect it belongs to was not identified as material, the Aspect should be considered material.IV If an Aspect has been identified as material and the organization lacks sufficient infomration to report on it, the sustainability report should state what action will be taken to resolve the gap, and the timeframe for doing so.
A review takes place after the report has been published, and the organization is preparing for the next reporting cycle. The Review focuses on the Aspects that were material in the previous reporting period and also considers stakeholder feedback. The findings inform and contribute to the Identification Step for the next reporting cycle.The Principles of Stakeholder Inclusiveness and Sustainability Context, and their associated tests in the Guidelines, inform the review of a report. They serve as checks regarding the presentation and evaluation of report content, as well as checks for the reporting process as a whole.The organization may choose to engage internal and external stakeholders to check whether the report content provides a reasonable and balanced picture of the organization’s impacts and its sustainability performance, and if the process by which the report content was derived reflects the intent of the Reporting Principles.
Step 1: Identification
Step 2: Prioritization
Step 3: Validation
Step 4: Review