Better GRI reporting standards would help companies avert costly disasters.

By Sanford Lewis

As many readers know, the Global Reporting Initiative (GRI) is the leading standard for corporate sustainability reports, developed through collaboration of NGOs, investors, companies and other stakeholders. About 2,000 companies currently issue reports referencing the GRI’s guidelines. Through June 30 of this year, GRI is inviting suggestions of new topics to be addressed in the next round of revision of its guidelines.

To this author, the key question is how GRI can remain relevant in light of recent environmental disasters in the Gulf of Mexico and Fukushima. What role, if any, can sustainability reports play in anticipating and preventing the worst forms of corporate destruction of our planet? Is sustainability reporting regarding catastrophic risk only reactive, or is it anticipatory?

After the Fukushima disaster, Tokyo Electric Power (Tepco) was dropped from the Dow Jones Sustainability Indexes (DJSI) family, following “a significant reduction in Tepco’s sustainability score.” Can GRI establish sustainability metrics that will actually anticipate and assist in preventing catastrophic risk, not just reacting in the aftermath of disaster?

Similarly, if GRI reports are not mere marketing tools, companies will need to disclose their most difficult truths and resist their understandable tendency to leave out bad news. Read in retrospect, BP’s GRI reports issued prior to the Gulf Coast disaster seem like a promotional brochure rather than a balanced account of the company’s safety practices.

Maybe GRI can follow the model of the US Securities Laws, which require that companies disclose facts “necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” Something like this ought to be a baseline test for sustainability disclosures. As this author has written previously, the BP GRI reports issued prior to Deepwater Horizon left out key safety and risk issues. Perhaps if the “material omissions” test were applied, additional disclosures might have been required in BP’s sustainability reports.

As our planet continues to be inundated with toxic chemicals – a slow-motion catastrophe, as opposed to accidents like Fukushima and the Gulf – another area for improvement in the GRI standards is adding guidance on companies’ adoption of safer chemicals. Although the current guideline suggests companies report on “product responsibility,” it does not require they disclose whether they are, for instance, targeting particular materials such as persistent or bioaccumulative toxic chemicals for elimination.

The GRI Web form allows 20 words for each new topic, accompanied by a 250-word justification. Based on the above, here are a few examples of topics:

• Require companies to report on catastrophic risks and prevention measures.

• Require companies to disclose any significant information needed to prevent their other disclosures from being materially misleading.

• Disclose any chemicals targeted due to risks to human health or environment, and progress on eliminating those chemicals.

Whether you agree with these topics, or have others to suggest, you can write to the GRI with up to eight topics per submitter. GRI will not only be looking at the topics suggested, but also at how many organizations and stakeholders recommend them. The invitation to submit new topics is the initial step in a revision process scheduled to culminate in a revised standard in 2013. Follow this link to comment.

About Sanford Lewis, Attorney

Sanford Lewis is counsel to the Investor Environmental Health Network, and also represents other shareholders and NGOs on issues of corporate disclosure and shareholder rights. You can also write him with your thoughts or questions at sanfordlewis [at] gmail dot com.

Talkback Readers: What topics would you recommend to the GRI to improve reporting? Share your ideas on Talkback!