How Nossa Data’s ESG Reporting Software Helped PensionBee create their 1st ESG Materiality Assessment
Nossa Data has deep knowledge across all kinds of ESG ratings like Refinitiv, and frameworks like SASB.
Nossa Data has recently become a certified software partner of the Global Reporting Initiative (GRI). This means that we now fully support the most recent 2021 version of the GRI Standards for companies to report either in accordance with, or in reference to, the world’s most widely used sustainability reporting standards.
The GRI offers a comprehensive set of standards for organisations to disclose their impacts on the economy, the environment, and people. GRI is known for its impact materiality approach to corporate disclosure and has been working closely with the European Financial Reporting Advisory Group (EFRAG) regarding the recently finalised European Sustainability Reporting Standards.
In light of Nossa Data’s partnership, we interviewed Bastian Buck, Chief of Standards, to learn about what makes GRI unique in the space of standard-setters and its hopes for the future of sustainability reporting.
I have two roles at GRI. Firstly, I am the Chief of Standards and have been in this capacity for more than 10 years. In this role, I lead the team that is responsible for all standard setting activities such as reviewing existing standards and creating new ones.
I also look after the extension of our core product (the GRI Standards), in terms of our licensing business and our services and education business. I ensure that standard extensions are in line with the core product, but also leverage the Standards in the right way. A good example of this is our institutional relationship; we believe that certified software and tools providers are an essential part of growing the ecosystem and enabling reporters to apply the standards effectively.
GRI was founded to advance the discourse on business transparency regarding the impacts of their activities. We first devised guidelines and then out of that we’ve built standards which are now the global reference point for corporate reporting on the impacts of business activities.
“At the heart, we're trying to establish a second perspective on corporate reporting, one that is separate from mere financial consideration and materiality. We believe that reporting on impacts, in its own right, is a relevant practice that needs to become commonplace.”
GRI has come a long way and we continue to drive this perspective into regulation as well as encourage voluntary practice.
We updated the core of our set of standards, the Universal Standards, and there were three main reasons for this.
The core of the set of standards will likely remain unchanged for many years to come now. At this point, they are very solid which is an important milestone for us. But what you can expect from GRI now is the updating of the Topic Standards and release of more Sector Standards. What we do not intend to do is change the core principles or basis of GRI reporting.
The Sector Standards are an extension to the set of standards that we've provided over the years. Many years ago, we had sector supplements but this has evolved as we saw a need for building out the core of the set of standards around the material topics.
GRI believes that the disclosure on topics, in almost all cases, is generic and industry-agnostic. This is an important difference from other standards’ approaches, such as SASB, that have a sector-specific element on the disclosure level. The GRI Sector Standards tie back into the existing Universal and Topic Standards and they reference generic contents that exist for disclosure.
“The main contribution of the Sector Standard is helping organisations to identify their most significant impacts. The Sector Standards explain what the likely material topics are for a certain sector, which then informs your materiality determination. This is not to say that every topic covered in the GRI Sector Standards will apply for a company operating in the given sector, but it will more likely than not be material.”
This helps with one of the most underestimated and challenging parts of sustainability reporting which is applying materiality that is fundamentally different from financial materiality - to which most corporations are familiar. Generally speaking, we are seeing more emphasis on materiality determination, and we are assisting companies in doing so.
We also see the Sector Standards as a sort of conveyor belt for more standard setting of GRI. We identify areas that are currently not covered in the Topic Standards, through identifying likely material topics at a sector level. When we see a topic emerging in several sectors, we will cover it eventually as a Topic Standard. Therefore, we expect there to be continuous improvements and input into the standards through our Sector Programme.
In terms of ambition, we are growing the portfolio of sector standards to 40 sectors over the next few years. For those that will face European Union regulation, it is important to note that our sector categorisation is aligned with those of EFRAG. So it is likely that most, if not all, sectors that are to be released by GRI will also be reflected in European regulation.
On a global scale, more than 10,000 companies use GRI and, generally speaking, responders will continue to use the new version of GRI Standards. The Universal Standards came into effect as of 1 January 2023, thus we expect a big push to adopt the revised standards to begin in the 2023 reporting cycle. Having said that, we’ve seen that around 10% of responders have already made this move. This is consistent with earlier revisions of the standards where you have leaders that anticipate these changes and make the move earlier.
Although we are monitoring this space, we will have to see figures from 2023 to be clearer on how many and how quickly companies have adopted the revised standards.
GRI was founded to advance disclosure on impacts in corporate reporting and to complement traditional corporate reporting exercises that focused on solely financial materiality.
GRI is pleased to see that the EU, as a regulator of one the main economic regions of the globe, has recognised double materiality as the future of reporting. This is where we’d hoped the market would move towards, having both financial materiality and impact materiality viewed as important.
“At this stage, we can also say that the impact materiality perspective in the European standards is based on GRI. If you have already reported based on GRI for your global purposes, then you will have a much easier time reporting under the upcoming EU requirements.”
In other markets, impact materiality is not as established and certainly not included in regulatory endeavours. So, we are still working in many other countries and regions towards achieving this goal. But we believe that there will be an interplay between financial reporting and impact reporting, where a holistic picture of the performance of an organisation will have to capture both. We are working on a global level (with our colleagues at the IFRS Foundation) and on a regional level, to ensure that there is an ecosystem in which this type of reporting can happen.
The revision of the Biodiversity Topic Standard is a good example of the work GRI does to advance disclosure practice. The biodiversity standard has existed since 2016 and the biodiversity debate has moved on quite dramatically. Biodiversity is now described as one of the next frontiers in the environmental space. Therefore, it is important for GRI to update its contents with the best practices, but also to anticipate the development that we're seeing in the UN system today. This leads back to how GRI will always reflect the international instruments. This was an opportunity for GRI to offer its ideas on leading practices on biodiversity reporting.
It is important to look at biodiversity as an environmental subject that is site-, or operation-, or business model- specific. Looking at how an organisation impacts biodiversity in different locations in which it operates is a main thread throughout the revised standard. Companies can understand how the decisions they make regarding their business model can end up impacting biodiversity through their business activities. We see this as one of the next frontiers in disclosure whereby reporting needs to evolve and become more granular as it reaches into all aspects of businesses.
The basic rationale behind GRI is that more transparency on the impacts of business activity will eventually drive behaviour and accountability to reduce these impacts and act to address impacts before they occur.
We hope - and expect - that impact reporting will become mainstream practice. There's ample evidence reinforcing the idea that without understanding the impacts of your business activities, business will not even be able to conduct narrow financial reporting anymore. For example, when you look at what the International Sustainability Standards Board (An initiative from the IFRS Foundation) is developing, it all depends on a holistic understanding of your impacts.
We expect everything around us to accelerate. It took around 15 years to develop comprehensive climate reporting, but for biodiversity, we anticipate that this will go much quicker. Hence, we are building our own capacity as we look to double the size of the Standards Team and increase our capacity to deal with projects. We anticipate that this will happen across many of the 30 topics we're currently covering under the Topic Standards.
“We expect to see an exponential growth in both the number of companies applying these contents and in building the methodologies behind it. We will likely see professions emerging for the different issue areas like we've seen for climate. Our role is to service this from a disclosure practice perspective and make sure that the GRI Standards always reflect the best practice.”
If you want to embrace the notion of sustainability, the leading global practice is GRI reporting. There is no other impact reporting framework available that is as comprehensive, both in terms of its reach and in terms of its contents reflecting topics across economic, environmental and social issues - and meeting multi-stakeholder expectations for disclosure in the process.
For multinationals and internationally operating companies, responsible business conduct will only become increasingly more important. By applying the GRI Standards, you will have applied the ILO conventions, looked at the OECD guidelines, and met all these transparency expectations.
Lastly, regardless of whether or not you buy into sustainability as a notion, from a risk management perspective, there is no other framework that actually enables you to understand where your company has impacts through its business activities. This is important, as recent history has taught us, because all these impacts on people, the environment and the economy, eventually translate into financial risk.
One next frontier that is related to the provision of reporting software is the move more towards digitalisation. In this sense, the exchange of information and the availability of information will become crucial. GRI will work to establish transaction mechanisms like an XBRL taxonomy for the GRI Standards. We will also work with partners to make sure that the information is truly accessible for all stakeholders.
Nossa Data has deep knowledge across all kinds of ESG ratings like Refinitiv, and frameworks like SASB.