gssbsecretariat@globalreporting.org

Item 02 – Relationship between GRIStandards and other reportingstandards
For GSSB discussionDate

9 June 2023

Meeting

15 June 2023

Description

This paper provides an update on the work to inform the position of the Global
Sustainability Standards Board (GSSB) regarding the relationship between theGRI Standards and other reporting standards, particularly the upcoming standards
by the International Sustainability Standards Board (ISSB) and the European
Sustainability Reporting Standards (ESRS) in the European Union.

This document has been prepared by the GRI Standards Division and is made available to observers
at meetings of the Global Sustainability Standards Board (GSSB). It does not represent an official
position of the GSSB. Board positions are set out in the GRI Sustainability Reporting Standards. TheGSSB is the independent standard setting body of GRI. For more information visit
www.globalreporting.org.

© GRI 2023

ContentsIntroduction.............................................................................................................................................. 3
Proposed text on the relationship between the GRI Standards and other reporting standards ............. 3
Background ........................................................................................................................................ 3
Proposed text ..................................................................................................................................... 5
Feedback and next steps ................................................................................................................... 7

Page 2 of 7

1Introduction

2This paper presents an update on the work informing the position of the Global Sustainability

3Standards Board (GSSB) regarding the relationship between the GRI Standards and other reporting

4standards. In particular, the upcoming standards by the International Sustainability Standards Board

5(ISSB) and the European Sustainability Reporting Standards (ESRS) in the European Union.

6

This update includes a proposed text based on Box 1 of GRI 1: Foundation 2021 that explains the7relationship between the GRI Standards and other standards.

8

Proposed text on the relationship9between the GRI Standards and10

other reporting standards

11Background12

Box 1 in GRI 1: Foundation 2021 explains the link between sustainability reporting and financial and13value creation reporting. Since the release of GRI 1 in 2021, the reporting landscape has significantly

14evolved. The IFRS Foundation has set up the International Sustainability Standards Board (ISSB)

15with the mandate to develop standards for reporting sustainability-related financial information to16

investors. In the European Union, the Corporate Sustainability Reporting Directive (CSRD) has been

17

adopted and will be underpinned by mandatory European Sustainability Reporting Standards (ESRS)

18

based on double materiality.

19

The changing reporting landscape calls for assessing and explaining how the GRI Standards relate to20

these developments and identifying contents that may require updating. This includes Box 1 in GRI 1

21and potentially section 5.1 Aligning sustainability reporting with other reporting in GRI 1, among

22others. The positioning of Box 1 within section 2 of GRI 1 may also necessitate revision.

23

To inform the GSSB’s position on this matter, the Standards Division proposed a text based on the24existing Box 1 in GRI 1 and the near-final versions of the IFRS Sustainability Disclosure Standards

25and ESRS. This work was presented at the GSSB meeting on 20 April 2023 for an initial discussion.

26

As noted during the 20 April meeting, the proposed text does not constitute the final version for

27

insertion in the GRI Standards. It is intended to inform the GSSB's position on the relationship28

between the different standards. Any proposed changes to the GRI Standards must follow the GSSB

29

Due Process Protocol.

Page 3 of 7

30

The proposed text has been shared with the ISSB and EFRAG for comment. The proposed text is

31

intended to inform the GSSB’s own position on the matter; it is not an official position of the ISSB or

32

EFRAG.

33

IFRS Sustainability Disclosure Standards

34

The IFRS Sustainability Disclosure Standards under development (expected to be published at the35

end of June 2023) require an entity to disclose material information about all sustainability-related

36

risks and opportunities that could reasonably be expected to affect the entity’s business model or37strategy and consequently its cash flows, access to finance, or cost of capital over the short, medium,38

or long term (i.e., affect its prospects). In the context of sustainability-related financial disclosures,

39

information is material if omitting, misstating or obscuring that information could reasonably be40

expected to influence decisions that primary users of general purpose financial reports make on the41basis of those reports, which provide information about a specific reporting entity. Sustainability-42

related risks and opportunities arise from the entity’s dependencies and impacts on resources and43

relationships.

44

European Sustainability Reporting Standards45The European Sustainability Reporting Standards under development (expected to be adopted as

46

Delegated Acts in the summer of 2023) adopt the concept of double materiality, which has two

47

dimensions:48•Impact materiality: ‘A sustainability matter is material from an impact perspective when it

49

pertains to the undertaking’s material actual or potential, positive or negative impacts on

50

people or the environment over the short-, medium- and long-term time horizons.’

51•Financial materiality: ‘information is considered material for primary users of general-purpose

52financial reporting if omitting, misstating or obscuring that information could reasonably be

53

expected to influence decisions that they make on the basis of the undertaking’s sustainability

54

statements.

55

A sustainability matter is material from a financial perspective if it triggers or may trigger

56

material financial effects on the undertaking. This is the case when it generates or may

57

generate risks or opportunities that have a material influence (or are likely to have a material

58

influence) on the undertaking’s cash flows, development, performance, position, cost of59

capital, or access to finance in the short-, medium- and long-term time horizons.’

60

The draft ESRS state that, ‘In general, the starting point is the assessment of impacts.’ ‘Irrespective of61

their being financially material, impacts are captured by the impact materiality perspective.’ The ESRS

62

also require considering how the undertaking ‘is affected by its dependence on the availability of63

natural and social resources at appropriate prices and quality, independently of its potential impacts

64

on those resources.’

Page 4 of 7

65

Proposed text66The proposed text presented to the GSSB on 20 April 2023 has been revised based on GSSB

67

feedback and to improve its clarity. The following key changes have been made:68•In the third paragraph, it has been clarified that:o69
70

impacts can give rise to sustainability-related risks and opportunities for anorganization in the short, medium, or long term;o71

identifying impacts is a necessary first step in identifying risks and opportunities that72

arise from impacts (rather than in identifying all risks and opportunities, as impacts73

are one source but not the only source of risks and opportunities).

74•

independent of the organization’s own impacts, in the fourth paragraph.

75
76

•77
78

81

The fifth and seventh paragraphs are new to provide more guidance on how the GRIStandards and IFRS Sustainability Disclosure Standards can be used together.

•79
80

An example has been added of risks and opportunities that arise from dependencies,

The term ‘prospects’ has been deleted and the term ‘primary users’ has been clarified basedon the terminology of IFRS, in the sixth paragraph.

•In the last paragraph, it has been clarified that:owhile most impacts will result in risks and opportunities, sustainability reporting with82

the GRI Standards is independent of considering sustainability-related risks and83

opportunities, based on the existing text of Box 1 in GRI 1: Foundation 2021 and GRI

84

3: Material Topics 2021;

85
86

othe material topics determined with the GRI Standards cannot be deprioritized byapplying materiality definitions of other reporting standards.

87

Feedback was also received on developing a visual about the relationship between the different88perspectives and reporting standards. This visual has not yet been developed.

89

Proposed text based on Box 1 on page 9 of GRI 1: Foundation 2021

90

Box 1. Impact materiality, financial materiality and double materiality in sustainability reporting91

The GRI Standards enable organizations to report information about the most significant impacts of

92

their activities and business relationships on the economy, environment, and people, including

93

impacts on their human rights. Such impacts are of importance to sustainable development and to an

94

organization’s stakeholders, such as investors, workers, customers, or local communities. This95

perspective is also referred to as ‘impact materiality’. It has been adopted in the European

96

Sustainability Reporting Standards as one of the two dimensions an undertaking needs to report on97

and is expected to see more widespread adoption in regulatory approaches around the world.

Page 5 of 7

98

The impacts of an organization can also affect the availability, quality, and affordability of the99

resources and relationships it depends on. Thus an organization’s impacts can result in its own risks

100

and opportunities. These risks and opportunities can affect the organization’s business model or

101strategy and, consequently, its cash flows, access to finance, or cost of capital over the short,102

medium, or long term. For example, an organization’s high use of non-renewable energy contributes

103

to climate change and could, at the same time, result in increased operating costs for the organization

104

due to legislation that seeks to shift energy use toward renewable sources. Or, an organization’s track105

record of respecting human rights and promoting gender equality at work helps attract skilled workers,

106

increasing the organization’s reputation and thus helping increase customers’ demand for its products

107and services.

108

An organization’s impacts can thus give rise to sustainability-related risks and opportunities in the109

short, medium, or long term. Most, if not all, of the impacts of an organization, will eventually translate

110

into risks and opportunities. Therefore, understanding these impacts is a necessary first step in

111

identifying risks and opportunities that result from an organization’s impacts.

112

An organization’s dependencies on resources and relationships are also a source of risks and113

opportunities, independent of the organization’s impacts on those resources and relationships. For

114

example, when an organization’s business model depends on water and the quality of the water it

115depends on is affected by the polluting activities of other organizations upstream in the river basin.

116

Information about the risks and opportunities that arise from an organization’s impacts and from the117

organization’s dependencies on resources and relationships are reported under IFRS Sustainability

118

Disclosure Standards. The material topics and related impacts determined with the GRI Standards

119

provide crucial input for identifying the risks and opportunities that arise from an organization’s

120

impacts.

121

The IFRS Sustainability Disclosure Standards require disclosing material information about all

122

sustainability-related risks and opportunities that could reasonably be expected to affect an123

organization’s business model or strategy and consequently its cash flows, access to finance, or cost124of capital over the short, medium, or long term. This includes the sustainability-related risks and125

opportunities arising from the impacts of the organization on the economy, environment and people.

126

Information is material if omitting, misstating, or obscuring that information could reasonably be

127

expected to influence decisions of primary users of general purpose financial reports (that is, existing128

and potential investors, lenders, and other creditors).

129

The use of the GRI Standards and the IFRS Sustainability Disclosure Standards provide a

130comprehensive overview of an organization’s sustainability-related impacts, risks and opportunities.

131

The perspectives that each of these standards bring are relevant in their own right and complement

132

each other.

Page 6 of 7

133

The European Sustainability Reporting Standards have adopted ‘financial materiality’ as the second

134

dimension an undertaking needs to report on. The combination of impact and financial materiality is

135

referred to as ‘double materiality’ under the European Sustainability Reporting Standards.

136

While most, if not all, of the impacts of an organization will eventually translate into risks and137

opportunities, sustainability reporting with the GRI Standards is independent of considering

138

sustainability-related risks and opportunities. It is therefore important for the organization to report on139

all the material topics that it has determined using the GRI Standards. These material topics cannot

140

be deprioritized on the basis that they do not result in risks and opportunities for the organization or by

141

applying materiality definitions of other reporting standards.

142

Feedback and next steps

143

This revised text is a draft and is presented for further comments and discussion by the GSSB at the144

15 June 2023 meeting.

145

The final standards of the International Sustainability Standards Board (ISSB) and the European

146

Sustainability Reporting Standards (ESRS) are not yet available, and thus further updates to the text147

may be required in the future. The ISSB and EFRAG will be invited to provide input on the revised

148

text.

149

In addition, GRI is developing a set of technical Questions & Answers with the ISSB to explore key

150

questions on the interoperability between the GRI and IFRS standards. Questions include, who are151

the information users of GRI and IFRS standards, what is the role of investors as stakeholders and152

information users in GRI reporting, and when are disclosures about impacts material to investors. A

153

further question could be, how does the process for determining material topics outlined in the GRI

154

Standards connect to the process by which the reporting organization identifies sustainability-related

155

risks and opportunities under IFRS reporting. These Q&A will further inform the proposed text.

Page 7 of 7