GRI vs ISSB – strategy

This week, we are publishing the third installment on the similarities and differences between GRI and ISSB. Last time we discussed what is covered by GRI’s universal (also known as general) disclosures (the ones everyone must report) vs what is covered by ISSB’s S1, and how both frameworks address disclosures on corporate governance. This week we will cover how both standards approach disclosures on the overall sustainability strategy.

Sustainability strategy disclosures

• ISSB asks companies how sustainability-related risks and opportunities affect the company’s financial performance, position, and prospects. It requires detailed information on how these factors influence the company’s strategy, decision-making, and how the company is preparing to make its business model resilient. This includes describing how these risks and opportunities may alter cash flows over short, medium, and long-term time horizons, considering the impact throughout the value chain.
• GRI focuses more on policies, strategies, and practices (including commitments) for responsible business conduct. It fosters an alignment with global expectations for corporate responsibility. It seeks commitments from organizations’ leadership teams on sustainability issues. It also requires disclosures on how impacts are identified (including grievance mechanisms), and measures on how the organization’s activities impact the world.

Similarities

• Both frameworks ask companies to assess which are their most relevant sustainability risks (GRI has a chapter on how companies should identify these impacts and assess their significance and asks if stakeholders are considered during this process).
• Both ask how sustainability factors are embedded into the corporate’s strategy.
• Both ask how the organization has responded to these factors.

Differences

• ISSB gives more room to sustainability opportunities than GRI (which seems to be more focused on negative impacts)
• ISSB wants companies to quantify the potential effects of relevant sustainability factors on the entity’s financial position, financial performance, and cash flows both for the reporting period and for the future (short, medium, and long term). This analysis must consider the entire value chain.
• ISSB specifically asks for factors that may materially impact financial performance in the future and what investment plans exist for responding to these factors.
• GRI asks for a statement from the leadership team on how relevant sustainability is to the organization.
• GRI specifically asks for the commitment to respect human rights (independent of what topics have been deemed as the most relevant for the organization).
• GRI also has disclosures focused on how the company organizes its team, policies, and procedures (including training) to make sure it can achieve its sustainability goals.
• GRI asks how companies remediate negative impacts they have on the world (which includes how companies have mechanisms to identify grievances), including the impact companies have on the economy, the environment, people, and human rights.
• The quantitative information in GRI is focused on instances of non-compliance with laws or regulations and the fines this has led to (instead on the impact to a company’s financials beyond fines).

Contrary to what we had seen in previous installments, the differences between both frameworks in terms of strategy are somewhat more material. Organizations that are already reporting under GRI’s disclosures, will have to provide new information to be aligned with ISSB. The main areas where additional disclosures would be required include:

1. Financial Impact: Detailed quantitative disclosures on how sustainability risks and opportunities impact the company’s financial performance, position, and cash flows. Plans for investments related to sustainability risks and opportunities.
2. Time Horizons: Specific definitions of the time periods that are being used, as well as disclosures on the impacts in the different horizons for sustainability planning.

In a nutshell, aligning with ISSB would require a more integrated approach, connecting sustainability risks and opportunities directly with financial outcomes.

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