Explanatory Memorandum to the
exposure draft Standards for Labor
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This explanatory memorandum sets out the objectives for the first set of exposure drafts of the Labor
project, the significant proposals contained in the exposure drafts, and a summary of the GSSB’s
involvement and views on the development of the following drafts.
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GRI Topic Standard Project for Labor - Employment
GRI Topic Standard Project for Labor - Remuneration and Working TimeGRI Topic Standard Project for Labor - Significant Changes for Workers
GRI Topic Standard Project for Labor - Control of Work Standard Interpretation to GRI 2

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This first set of draft labor-related standards includes new proposed disclosures next to extensive
revision of the GRI 202 Market Presence 2016 (Disclosure 202-1); GRI 401 Employment 2016
(Disclosures 401-1 to 401-02); GRI 402 Labor/management Relations 2016 (Disclosure 402-1); GRI
405 Diversity and Equal Opportunity 2016 (Disclosure 405-2).

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Objectives for the project

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The objective of the Labor project is to review and revise all GRI labor-related Standards and toincorporate new issues to reflect the stakeholder expectations for reporting labor-related impacts. Inline with the GSSB’s Due Process Protocol, a multi-stakeholder technical committee was establishedin September 2022 to contribute to the review and content development.

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Due to the focus on labor topics, a technical committee was formed with representation from workers,
employers, and the ILO. Next to this tripartite technical committee, an advisory group was establishedwith a broad stakeholder representation to advise and assist the technical committee during theprocess.

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The aim is to align with internationally agreed best practices, the latest developments, and relevant
authoritative intergovernmental instruments related to human rights and labor conditions such as
International Labor Organization (ILO) Conventions and Recommendations; the United Nations (UN)Guiding Principles on Business and Human Rights (Guiding Principles, UNGPs) and the Organization
for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.

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The revised labor disclosures will facilitate the organization to disclose its impacts regarding:

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The project reviews the current contents of existing GRI labor-related disclosures, and it also includes
new labor issues to reflect the stakeholders’ expectations related to reporting labor-related impacts toprovide decent work that contributes to sustainable development, poverty alleviation, and dignity toworkers.

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How the organization manages the labor impacts with employees, with workers who are not
employees and whose work is controlled by the organization, and with workers in thebusiness relationships, enhancing accountability and trust with workers and otherstakeholders.

© GRI 2024

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The implementation of international labor standards, including fundamental labor rights, byoffering decent work and dignified working conditions, as well as the involvement of workers’
representatives in developing and implementing policies.

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Its approach to human rights is to provide work that cares about its workers in terms ofdecent remuneration and working time, employment conditions, skills, career development,
and work-life balance, improving workers' satisfaction and retention of talent.

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The labor project is divided into three thematic set standards to allow targeted messaging andstakeholder engagement during the Public Comment Periods and to ensure the workload is
manageable for the stakeholders and GRI reporters all over the world reviewing the draft Standards
during public inquiry, the GSSB, the technical committee, the advisory group, the GRI Standards
Division, and other GRI divisions.

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Set 1 - Employment Practices and Conditions

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This set of standards asks how the organization manages its employment conditions andrelationships. This includes working time, remuneration, employment practices such as recruitment,
performance management and termination, data, and worker privacy, as well as how the organization
responds to changes that substantially affect workers.

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Set 1 includes three Topic Standards and one standard interpretation.
o Employmento Remuneration and Working Timeo Significant Changes for Workers
o Control of Work Standard Interpretation to GRI 2

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This first set of labor exposure drafts was sent for discussion and approval at the May 2024 meetingof the GSSB.

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Set 2 - Working life and career development

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This set of standards focuses on the equal treatment and the development of an organization's
workers. It asks how the organization responds to the training and education programs and theireffectiveness, family-related policies at the workplace, and measures to provide work-life balance andan inclusive and diverse environment.

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Set 2 includes the following Topic Standards:
o Training and Educationo Working Parents and Caregivers
o Diversity, Inclusion and Equal Opportunity

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The second set of labor exposure drafts is planned to be sent for discussion and approval by the
GSSB in Q4 2024.

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Set 3 - Workers Rights and Protections

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This set of standards focuses on four of the ILO’s Fundamental Principles and Rights at work. In
addition, it has a specific standard to target labor rights and working conditions for workers inbusiness relationships with a due diligence approach.

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Set 3 includes the following Topic Standards:o Child Laboro Forced or Compulsory Laboro Non-discriminationo Freedom of Association and Collective Bargainingo Workers of Business Relationships

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The third set of labor exposure drafts is planned to be sent to the GSSB in the first half of 2025.

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Summary of the proposals
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For more information on the project, consult the project proposal and the technical committee andadvisory group biographies.

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The scope of the workers set 1 of the standards are the organizations' employees and workers who
are not employees and whose work is controlled by the organization (hereafter workers who are not
employees). Workers of the organization’s business relationships are in the scope of set 3 of labor
standards and, therefore, are not included in this set of labor standards.

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The key revisions and new proposed disclosures and guidance for the first set of exposure draft
standards are summarized as follows:

911) General proposed change

9293This first set of draft labor-related standards includes new proposed disclosures next to an extensive
revision of:

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GRI 202: Market Presence 2016 (Disclosure 202-1);
GRI 401: Employment 2016 (Disclosures 401-1 to 401-02);
GRI 402: Labor/management Relations 2016 (Disclosure 402-1);
GRI 405: Diversity and Equal Opportunity 2016 (Disclosure 405-2).

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The revised draft Employment includes the revision of GRI 401: Employment 2016
(Disclosures 401-1).

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The new proposed draft Remuneration and Working Time includes the revision of GRI 202:
Market Presence 2016 (Disclosure 202-1), GRI 401: Employment 2016 (Disclosure 401-2),
and GRI 405: Diversity and Equal Opportunity 2016 (Disclosure 405-2).

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The revised Standard Significant Changes for Workers is a revision of GRI 402: Labor andManagement Relations 2016 (Disclosure 402-1).

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A new draft, Standard Interpretation to GRI 2: Control of work, is proposed to clarify andprovide information on how to apply and interpret the ‘control of work’ concept when
implementing the GRI labor standards.

1082) Summary of proposals Employment

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An exposure draft for GRI EMPL: Employment has been developed in line with the project objectives
set out above. Notable changes and inclusions in this exposure draft are summarized below:

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Non-standard Employment. The increase in non-standardized forms of employment implies that theorganization may have positive and negative impacts depending on how it implements international
labor standards and practices for the different types of employees and workers who are not
employees. The disclosure asks the organization to report on how it prevents employees and workers
who are not employees from disguised employment. The organization describes actions taken totransition employees from temporary employment to permanent and how the organization reports how
it monitors third parties with respect to international labor standards. (See GRI: Employment EMPL 1)

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Apprenticeships and internships. Apprenticeships and internships help workers acquire valuable
work experience, skills, and opportunities to access further work opportunities. However, they canalso expose workers, especially young workers, to exploitative conditions. This disclosure requests
the organization to report on its policy on apprenticeships and internships, providing details on
remuneration, duration of paid leave, and entitlements to paid annual, sick, and family-related leaves
such as maternity leave. (See GRI: Employment EMPL 2)

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Fair Recruitment. Fair recruitment ensures that workers’ rights are respected and prevents abusive
practices such as excessive fees, deceptive contracts, and unfair treatment during the recruitment
process. This disclosure asks the organization to report how it monitors the direct and indirect
recruitment of job seekers, employees, and workers who are not employees, which is fair andadheres to international labor standards. This includes no recruitment or related fees, obtaining
informed consent, and providing access to effective grievance mechanisms and remediation
processes. The organization reports any incidents concerning recruitment, including the number andPage 3 of 6

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type of incidents and the actions taken to remediate and prevent such incidents. (See GRI:
Employment EMPL 3 and EMPL 8)

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Performance management systems and performance reviews. When an effective performance
management system exists, workers can improve their skills and employability and receive training
and development opportunities to advance their careers. The organization reports how it ensures its
performance management system is objective and impartial, respects fundamental principles andrights at work, and any appeals process. The organization must also disclose the impacts resulting
from performance reviews, such as the percentage of employees and workers who are not employees
who received a performance review, reasons why some workers did not receive a review, and thenumber of appeals submitted. (See GRI: Employment EMPL 4 and EMPL 9)

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Personal data protection and privacy of workers. The aim of the disclosure is for theorganization to report on the personal data protection and privacy policies of its employees andworkers who are not employees. This includes collecting, processing, and monitoring personal data,obtaining consent from workers, and involving worker representatives in policy development andimplementation. (See GRI: Employment EMPL 5)

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Employment termination. This new management disclosure aims to increase accountability on thetermination of employment or work. The termination policy is related to job security. The organization
discloses its termination policy, including crucial aspects such as valid reasons for termination, theprocedure for termination, any safeguards against wrongful and unfair termination, and the procedure
for appeal for workers. (See GRI: Employment EMPL 6)

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Hiring and turnover metrics. The objective of this disclosure is for the organization to report on theimplementation of the recruitment process, including internal and external recruitment, employee
turnover, and tenure. It also gives insights into the organization’s workplace culture, stability, worker
satisfaction, and the processes to capture and retain talent. Therefore, the organization reports amore detailed breakdown of information. Under this disclosure, the organization reports the ratio of
new employees recruited and the total number and percentage of employee turnover in terms of
employee type, age group, gender, and region. Furthermore, the organization shall describe the mostcommon reasons for voluntary turnover and termination of employment. New information includes
internal recruitment rate and number of employees by the length of tenure, employee type and region,and total number and turnover rate for the most common types of workers who are not employees.
(See GRI: Employment EMPL 7)1623) Summary of proposals and changes related to Remuneration and Working Time

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An exposure draft for GRI REWO: Remuneration and working time has been developed in line withthe project objectives set out above. Notable changes and inclusions in this exposure draft aresummarized below:

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Policies to determine Remuneration and Working Time. These two disclosures focus on how theorganization manages two key parts of the relationship with workers: the amount earned by theworkers and the conditions regarding the number of hours of work and how those hours are arranged
when workers are at the organization's disposal.

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The organization reports its policies to determine remuneration and working time and how to ensure
the involvement of worker's representatives. Remuneration policies cover the principle of equal
remuneration for work of equal value and the differences in each policy between different types of
employees and different types of workers who are not employees. Furthermore, the organization
reports its policies regarding the remuneration’s components, such as basic pay considering the costof-living estimates and other payments in cash and in-kind, overtime, and deductions. Concerning
working time, the organization shall report on its working time policies, taking into account regular
working hours, rest hours, overtime, annual leave, working time arrangements, and the needs ofvulnerable workers. (See GRI: Remuneration and Working Time REWO 1 and 2)

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Transparency of remuneration and working time to workers. Effective communication between
the organization and its workers may result in favorable impacts such as trust and work satisfaction.
The new management disclosure focuses on ensuring workers understand their remuneration andworking hours. (See GRI: Remuneration and Working Time REWO 3)

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Inclusion of cost-of-living estimates in the new disclosure Remuneration of Workers. This topic
disclosure aims to understand how the organization remunerates its workers. Due to the importanceof the organization providing decent remuneration, the disclosure includes comparing the basic pay
against cost-of-living estimates. When reporting under this disclosure, the organization reports
different remuneration-related information. For example, median gross hourly basic pay by employee
category and the number of employees, and by the number of workers who are not employees whoare paid at the minimum wage. To be accountable for paying decent remuneration, the organization
reports the number and percentage of employees whose basic pay is at or above the cost-of-living
estimates and commitments to address the gaps between these basic pay and cost-of-living
estimates. (See GRI: Remuneration and Working Time REWO 4)

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Basic pay gap. This disclosure aims to identify differences in basic pay between men andwomen. However, it also allows the organization to report how it is inclusive of transgender and nonbinary employees in its reporting of the gender pay gap or reporting other pay gaps associated withvulnerable workers. The outcome of the disclosure is that the organization reports the discrepancies
in gross pay and hourly pay for each employee category. (See GRI: Remuneration and Working Time
REWO 5)

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More extensive approach to social protection coverage. Social security is fundamental for
improving job quality, increasing human dignity, and reducing poverty, inequalities, and vulnerability ofworkers and their families. When reporting under this topic disclosure, the organization reports its
contributions to different types of social protection, as well as the number, percentage, and types of
employees who are not covered by public programs or benefits. The reporting information iscomplemented by the requirement to report on actions to increase social protection coverage andcontributions made to relevant authorities for workers who are not employees. (See GRI:
Remuneration and Working Time REWO 6)

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Working time metrics. Under this disclosure, the organization reports information that shows how itmonitors working time to make decisions on the potential negative impacts of excessive working time.
As part of responding to new challenges due to globalization and technological advances and thegrowing number of women seeking paid labor, this disclosure also requests information related towork-life balance, such as working time arrangements and annual leave. (See GRI: Remunerationand Working Time REWO 7)

2134) Summary of proposals and changes related to Significant Changes for workers

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An exposure draft for GRI SICH: Significant Changes for Workers has been developed in line with the
project objectives set out above. Notable changes and inclusions in this exposure draft aresummarized below:

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Management of significant changes for workers. Significant changes in the organization may
result in negative or positive impacts on workers. The organization aims to report how it handles
significant changes that may result in positive impacts, such as career opportunities, new skills, andjob satisfaction, or negative impacts, such as mass termination. The disclosure requires a descriptionof processes and mitigation efforts on how the organization manages significant changes affecting
employees and workers who are not employees, including consultations with workers'
representatives. In cases where significant changes result in mass termination, theorganization shall report how it manages the termination of employees and workers. In addition, any
measures taken to lessen the adverse impacts of significant changes, including staff redeployment,
upskilling, and workforce planning, shall be reported. (See GRI: Significant Changes for Workers
SICH 1)

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Minimum consultation and notice periods to workers’ representatives. Reporting on notice
periods and consultation with workers before the implementation of mass termination offers
transparency on how the organization communicates on time and offers meaningful dialogue withworkers’ representatives. The organization shall provide the number of weeks’ notice and weeks
taken in consultation with workers before implementing mass termination. If notice periods andconsultation provisions are specified within any collective bargaining agreements, those shall also bereported. (See GRI: Significant Changes for Workers SICH 2)

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Redeployment and Training. The objective is to increase transparency regarding the actions takenby the organization to ensure employees can obtain quality jobs after implementing significant
changes. The organization shall report on the number and percentage of employees who received
training for up-skilling and reskilling, as well as the total number and percentage of redeployed andterminated employees. (See GRI: Significant Changes for Workers SICH 3)

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5) Summary of the proposal for a new Standard Interpretation to GRI 2 related to Control of
work

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The GRI Standards require organizations to report the number of workers who are not employees andwhose work is controlled by the organization. However, there is some ambiguity on whetherorganizations should classify workers in their business relationships as workers who are not
employees as this subset of workers. The Interpretation Statement clarifies that an organization's
instructions or terms to its business relationships regarding specific materials or work methods for
product manufacturing or service delivery do not necessarily constitute direct control of work. It also
gives additional information regarding the principle of control of work.

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New terms and relevant definitions
The revised and new disclosures require updating some of the terms according to the most recent
developments in labor rights and protections. The proposal is to include new and revised terms in the
GRI Glossary, such as:

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Workers who are not employees
Significant Changes
Employee Category

More extensive guidance through the standards
Each disclosure comes with more detailed guidance, examples, templates, and references to facilitate
the reporting to the organization.

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GSSB involvement and views on the development of
this draft

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The GSSB appointed one of its members as GSSB sponsor and technical committee member for thisproject. The GSSB sponsor is strongly involved in the technical committee process and has attended
all of their meetings and many subgroup meetings.

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The GSSB confirmed its support for the revisions to the GRI Labor Standards when it voted toapprove the drafts for public exposure at its meeting on 16 May 2024.

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The recording of the meeting can be accessed on the GSSB GRI YouTube channel.

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