G4 Global Reporting Standards and AA1000

Best practice guidance is issued by the Global Reporting Initiative (GRI4) and AccountAbility’s AA1000 Reporting Principles Standard (2008). These will help you establish a methodology by which you may identify key stakeholders and material sustainability issues and develop your strategy. This involves looking at which issues are important from an internal and external perspective.

Identifying Your Stakeholders

Principle stakeholders typically include employees, customers, suppliers, neighbours, local communities, NGO’s, shareholders and investors. However, each business will have its own specific stakeholders and guidance recommends that the process for identifying stakeholders is made explicit for example:-

  • Internal consultation
  • Media search
  • External consultation
In the development of your stakeholders you will need to identify their overall influence as well as those who have an impact on your business and those that your business impacts

Important stakeholders are inherently known to organisations and most organisations are interacting with these stakeholders in some form or another as a matter of course. Such engagement happens in different formats and at various levels however, this process is often ad-hoc and without a formal structure and process in place and it is important that the process embedded in sound business practices.

Assessing your Material issues

Materiality is a core element in determining the relevance of information that the business needs to respond to. It is critical that materiality, as it applies to non-financial information, is interpreted such that it allows for consistent application.

The process of establishing materiality levels for non-financial information starts with the understanding of, and engaging with, the important stakeholders and encompasses the criteria to identify material items and how these are prioritised. As non-financial metrics are, by definition, not priced in markets, to undertake these evaluations the underlying values, ethics and decision-making processes of stakeholders need to be interpreted. The materiality of issues to stakeholders however cannot be assessed without taking into consideration the significance of these issues to business itself. This overlap between what is important to stakeholders as well as to the business, defines the real material issues that should be incorporated in the sustainability strategy and framework.

Prioritising material issues is a key part of both the AA1000 and GRI reporting principles. However this exercise can sometimes be sensitive as stakeholder will hold varying opinions on whether or not an issue is material or not. For this reason it is recommended that within the Sustainability Report, that the identified issues reported in tiers or are show on a materiality matrix as demonstrated on below and the contents of your reporting should broadly be ordered in accordance with which tier the issue falls into.

Responsiveness and developing your strategy

Your sustainability strategy should be a direct response to stakeholder issues that have arisen as a part of the stakeholder and materiality analysis. You will need to develop a coherent and joined up strategy to address each priority issue arising.

Key issues that should be covered within your strategy include

  • Overall vision and how it links to the overall business strategy
  • Objectives, targets and KPIs
  • Road map for implementation

Useful Links

Integrated Reporting

<IR> is a process founded on integrated thinking that results in a periodic integrated report by an organization about value creation over time and related communications regarding aspects of value creation.

An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.

<IR> is needed by business and investors. Businesses need a reporting environment that is conducive to understanding and articulating their strategy, which helps to drive performance internally and attract financial capital for investment. Investors need to understand how the strategy being pursued creates value over time

Examples of Impact Reporting may be found here – http://www.theiirc.org/