GRI vs ISSB – purpose and materiality

We have been getting a lot of questions from organizations on how they can prepare to report under ISSB’s new sustainability standards (S1 and S2). So, starting this week, we will be sharing details on how different these standards are to GRI (which is the most widely used reporting framework in Mexico to date).

In this first installment, we will discuss the basics behind both frameworks. It is important to understand where they come from and what they intend, to then understand how this will impact your sustainability reporting.

First up, purpose…

• ISSB’s framework intends to guide organizations to “disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.”
• GRI’s framework states its purpose is “enable an organization to publicly disclose its most significant impacts on the economy, environment, and people, including impacts on their human rights and how the organization manages these impacts.”

So, if companies want to just align with one of these frameworks, the reason for choosing the topics they will report on seems to be quite different. ISSB is focused on the organization’s long term financial survival. GRI is focused on how the organization impacts the world.

And thus, the readers of an annual report must understand these perspectives may alter which topics the organizations include, and why something might not be included (and this, in turn, has an impact on the interpretation of such information).

Second, materiality…

Considering this context, the definition of materiality is evidently quite different too.

• For ISSB “information is material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports.”
• For GRI, “topics are material if they represent its most significant impacts on the economy, environment, and people, including impacts on their human rights.”

Clearly, this would suggest that ISSB focuses more on the immediate decisions stakeholders may make related to the company (i.e. an investment, a loan, an employment situation, a purchasing decision), while GRI tries to make organizations think about their impacts on stakeholders independent of what stakeholders themselves are doing (closer to the concept of externalities).

Now, before you conclude these frameworks are not at all compatible, there is a paragraph on GRI’s materials that might make you reconsider… “Even if not financially material at the time of reporting, most, if not all, of the impacts of an organization’s activities and business relationships on the economy, environment, and people will eventually become financially material issues.”

So, as you will explain in the next installments, if you agree that sustainability impacts will eventually become financially material, or if you’ve been thinking about your sustainability strategy from a double materiality perspective, you might find that the frameworks after all are indeed quite compatible. And that your reporting efforts if you’ve been reporting under GRI’s framework, will not change that much once you add ISSB to the mix (they will certainly require some additional things, but not a reinvention of the wheel).

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG