Barbara Strozzilaan 336
1083 HN Amsterdam
The Netherlands
sector@globalreporting.org

GRI Sector Program
Program Description
Approved by the Global Sustainability Standards Board (GSSB) on 7 February 2019

© GRI 2019

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Program Purpose2
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As reported by the Sustainable Development Goals Report 2018, urgent and accelerated actions are needed toaddress global challenges facing the economy, the environment and society. 1 More clarity is needed on whichissues constitute a sector’s most significant impacts from a sustainable development perspective. 2

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A firm foundation providing authoritative information on sectoral impacts can help to focus sustainability reportingon the issues that matter most from a sustainable development perspective, leading to a stronger foundation forsustainable decision-making.

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Furthermore, the Sector Program can help surface emerging issues for future development in the Standards, which
will help the GSSB deliver on its commitment to continuously improve the GRI Standards. The Sector Program
will help to complete the reporting framework provided by the GRI Standards.

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High-Level Requirements

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The GSSB will approve high-level requirements for the Sector Program. The Standards Division has identified thefollowing high-level requirements:•

Process: The Sector Program is to follow the Due Process Protocol, including a multi-stakeholder
process for content development as well as exposure to public comment.

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Deliverables: The Sector Program intends to produce regular releases of Sector Standards, beginningwith the commencement of two pilot projects in Q1 2019 (see Items 04 – Project Proposal for an Oiland Gas Sector Standard and 05 – Project Proposal for an Agriculture Sector Standard). The Standards
Division will propose the number and sequencing of sectors to be covered in the Sector Program for theapproval of the GSSB.

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Quality: Publications are to be well evidenced, and to have excellent technical quality and clear
definitions. Sector Standards are intended to be clear and user friendly to promote uptake amongcorporate reporters, as well as other stakeholders that use sustainability reporting to empower
sustainable decision-making.

•Authority and Credibility: Sector Standards will demonstrate the necessary characteristics to bereceived as authoritative and credible.

Enhancement of the technical features of the GRI Standards: The Sector Program is to support theenhancement and expansion of the GRI Standards by explaining a sector’s impacts and stakeholder expectations,
including surfacing issues not previously covered in the GRI Standards.
The Standards Division will make proposals to the GSSB for the development of new or the revision of existingStandards. The GSSB will consider and prioritize these proposals during the regular reviews of the GSSB work
program as per the Due Process Protocol. Diagram 1 on the following page illustrates how the identification ofissues within the sector program are intended to drive the development of Topic-Specific Standards.

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United Nations, The Sustainable Development Goals Report 2018, accessed on 23 October 2018.
For example, the World Business Council for Sustainable Development’s (WBCSD’s), Materiality in Corporate Reporting – A White Paper
focusing on the food and agriculture sector 2017, accessed on 23 October 2018, has highlighted inconsistencies in identified material issues insustainability reporting in the food sector.
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Diagram 1: Issues identified within the Sector Program drive development of Topic-Specific Standards

Sector Program Process
The process for developing Sector Standards is expected to involve:

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conducting preliminary desktop research on issues of relevance to a given sector, leveraging the sector
work of other organizations as well as G4 sector supplements, and providing inputs to draft development;

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forming a multi-stakeholder, expert Project Working Group or Technical Committee;

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surveying the Group for identification of significant impacts and stakeholder expectations and analyzing
survey results;

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vetting identified issues and their descriptions through a multi-stakeholder process (draft development),
using a combination of virtual and in-person group meetings as well as one-on-one meetings, as warranted;

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exposure of draft Sector Standards to public comment and incorporation of public feedback;55•

finalization and release of the Sector Standard.

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It is currently anticipated that an average sector project lifecycle is approximately 15 months. The process andtimelines will be field tested during the pilot project. Learnings from the pilot project may cause changes in scopeor process that may impact the project lifecycle.

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The project cycle is expected to repeat, incorporating lessons learned, for subsequent sectors. After the desired
sector coverage is achieved, the Sector Program will transition to a recurring maintenance cycle. Sector Standards
will continue to evolve to align with the GRI Standards and to reflect developments and emerging issues within
sectors. In turn, evolution in the GRI Standards will in part be driven by information delivered within the GRISector Program.

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Program scope

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The Standards Division has conducted preliminary analysis on sector coverage and will propose the number andsequencing of sectors to be covered in the Sector Program for the GSSB’s approval. The GSSB will decide thesectors to be covered by the program and the order of these sectors within the GSSB Work Program,incorporating public feedback on the Work Program.

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The Standards Division will include the following criteria to prioritize sectors:

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the economic, environmental and social impacts of the sector (the predominant criterion);75•

the strength of the literature on a sector’s impacts and role in sustainable development;76•

the number of existing GRI reports from the sector.

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In addition, the Standards Division has reviewed several sector classification systems in its analysis of sector
coverage, to determine whether adopting an existing external sector classification system would be beneficial for
the Sector Program. The Standards Division has also reviewed documentation and stakeholder feedback gathered
by GRI in previous years on this issue. (More detail on external sector classification systems and stakeholder
feedback related to these in provided in Annex I: Sector Classifications.)

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The Standards Division recommends against adopting an external sector classification system for the Sector
Program. The Standards Division recommends and has developed a preliminary naming system that uses ‘common
denominator’ names (e.g. mining, oil and gas, agriculture) that are intended to be recognizable to all stakeholders,regardless of the classification systems they use, to avoid privileging some stakeholders while creating barriers orchallenges for others.

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The Standards Division will recommend a sector name and key to predominant external sector classification
systems at the project proposal stage for each proposed sector (e.g. Item 04 – Project Proposal for an Oil and
Gas Sector Standard). The GSSB can approve the draft name and key when approving a draft standard for publiccomment, taking into account feedback from the Project Working Group or Technical Committee, and canconsider public feedback on the name and key when approving a Sector Standard for final release.

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An example of a key for the agriculture sector is provided in Table 3 below.

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Table 3: Key linking agriculture sector within the Sector Program to GICS, ICB and ISIC equivalents

Classification Standard

Classification No.

Classification Name

GICS

302020Food Products

ICB

45102010

Farming, Fishing, Ranching & Plantations

45102035
A1

Sugar
Crop and animal production, hunting and related service
activities (excludes tobacco)

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Fishing and aquaculture

ISIC
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Next Steps – Pilot Project

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The Sector Program will begin with two pilot projects to field test the sector strategy, streamline processes andbuild team capacity (e.g. Item 04 – Project Proposal for an Oil and Gas Sector Standard and Item 05 –Project
Proposal for an Agriculture Sector Standard).

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After the pilot is completed and lessons learned, the intention is to scale up to running multiple projects
concurrently to allow completion of desired sector coverage. Scale-up depends on securing additional resources.

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The GSSB will approve sector projects before commencement, will approve the membership of Project Working
Groups and/or Technical Committees, will provide feedback on content development, will approve draft Sector
Standards for public exposure, and will approve all final Sector Standards.

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Table 4: Sector Project Milestones

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Summary Milestones

Due Date

Significant events in the program
e.g., the completion of key deliverables or
beginning/completion of a project.
GSSB approval of Program Description

7 February 2019

GSSB approval of Oil and Gas and Agriculture
Sector Project Proposals and Terms ofReference

7 March 2019

Commencement of Pilot Projects: Appointmentof Project Working Groups

Call for nominations for Project Working Group on 25 March2019

GSSB approves Project Working
memberships via electronic vote

26 May 2019Group

GSSB approves draft Sector Standards for public
exposure (Pilot Projects)

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Public comment period

9 December 2019 – 8 March 2020

GSSB approves final draft of Sector Standards(Pilot Projects)

June 2020

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Annex 1 Sector classifications

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The GSSB discussed the workplan for the GRI Sector Program in November 2015 and April 2016 meetings,
including the potential selection of an external sector classification system for GRI’s Sector Program.

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In 2015, the Standards Division conducted a limited initial stakeholder consultation with 25 stakeholders todetermine the suitability of using an external sector classification system within GRI’s Sector Program.
Stakeholders were not asked to gauge cost or feasibility.

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The consultation focused on three options deemed likely to be most suitable for the Sector Program:

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the Global Industry Classification Standard (GICS), a proprietary classification developed by Standard &Poor’s and MSCI;

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the Industry Classification Benchmark (ICB), a proprietary classification developed by Dow Jones and
FTSE Russell;

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the International Standard Industrial Classification of All Economic Activities (ISIC), a public classification
developed by the United Nations.

Stakeholder feedback received in 2015 revealed three predominant viewpoints. Stakeholders either:
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exhibited a strong preference for classification systems commonly used by investors such as GICS or ICB,
which were designed for investment purposes;

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exhibited a preference for the United Nations sector classification ISIC, which is non-proprietary anddesigned to enable international statistical analysis; or,

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had no knowledge of the classification systems in question, recommended alternative classification
systems, or questioned the benefit of selecting an external sector classification system for use in the
Sector Program.

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Characteristics of sector classification systems

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Sector classification systems organize and classify companies hierarchically, with larger groups of companies
containing aggregations of smaller groups. For example:
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GICS includes sectors>industry groups>industries>sub-industries;
ICB includes industries>supersectors>sectors>subsectors; andISIC includes sections>divisions>groups>classes.

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Individual corporate entities are assigned to GICS and ICB by those who maintain the classifications. ISIC, on theother hand, does not assign individual corporate entities, though entities may be assigned by nations or
governments to classes or groups within ISIC for the purposes of statistical analysis.

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Investment-based classification systems

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Investment-based sector classification systems such as GICS and ICB group companies together based on market
or production-related characteristics. An investment-based sector classification system groups together
companies that are expected to more tightly correlate in terms of financial performance rather than the overallmarket. 3 These groupings are used in investment strategies. For example, an asset manager might decide toSee, for example, Investopedia, GICS Vs. ICB: Systems For Classifying Stocks 2018, accessed 23 October 2018 and ETF.com, Test-Driving
Industry Classifications 2009, accessed 23 October 2018.
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underweight or overweight a particular sector as part of an investment strategy. Where a company is grouped
may impact how its shares are bought, sold or traded. For example, planned movement of telecom companies
within the GICS classification system to Communications Services in 2019 is anticipated affect the weight of thesecompanies within certain indices. 4

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Investment-based classification systems are:
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proprietary and cannot be used without licensing fees;
complex and difficult to develop and maintain, as they assign individual entities to groupings;
hardwired into databases and IT infrastructure;
ingrained within investment organizations, habituating frequent users to certain terminologies.

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These factors drive stakeholder affiliation with a classification system. Stakeholders within research and investment
institutions are strongly attached to the classification system used in their daily work.

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The investment-based sector classification landscape is evolving and changing. Updates to classification systems as
business evolves also mean that it is more difficult to anticipate which sector nomenclature will remain valid in 35 years. For example, both GICS and ICB are undergoing revisions within the next 1-2 years. 5 Predetermining asector classification for a Sector Program intended to run for multiple years would have unforeseen implications
as these shifts occur.

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United Nations-based classification system (ISIC)

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The United Nations International Standard Industrial Classification of All Economic Activities (ISIC) is nonproprietary. It is designed and maintained by the United Nations Statistics Division for the public good. The
development and maintenance is governed by the Committee for the Coordination of Statistical Activities,
including 45 international and supranational organizations, by the Principles governing international statistics
activities. ISIC is available free of charge on the ISIC webpages of the UN Statistics Division.

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ISIC is designed for economic analysis and policy-making and is used by governments as a framework for statisticalanalysis. The fourth revision of ISIC occurred in 2008, adding more granularity to allow stakeholders to be more
specific in statistical analysis. For example, ISIC’s Manufacturing section has 28 separate divisions, which are further
broken down into groups and classes: Division 33 (Repair and installation of machinery and equipment) is further
subdivided into two groups (Repair of fabricated metal products, machinery and equipment; and Installation ofindustrial machinery and equipment), and the Repair group is further divided into six classes. ISIC’s granularity insome sense treats business entities as ‘pure plays’ engaged in a single business activity, which is becoming a rarity
in the corporate landscape.

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Most nations worldwide have adapted ISIC to their national statistics systems, though some nations may also use
their own classifications systems for statistical analysis (e.g., SIC codes in the UK, SIC/NAICS Code in the USA,and GB/T 4754-2011 in China).
In terms of updates, ISIC is considerably more stable (i.e., has fewer updates) than investment-based classifications.
However, this means that ISIC may diverge significantly from investment-based classification systems over time,increasing a sense of unfamiliarity among reporters or report users that are accustomed to investment-basedclassifications.

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See Business Insider Netherland, GICS Sector Reclassification 2018, accessed 23 October 2018 and Fidelity, Know your sectors andindustries. Available at: https://tinyurl.com/ybfcbhl4. [Accessed See Business Insider Netherland, GICS Sector Reclassification 2018,
accessed 23 October 2018 and Fidelity, Know your sectors and industries 2018, accessed 23 October 2018.
5 GICS – MSCI, GCIS Structure Change 2018, accessed 09/11/18 and FTSE Russell, Industry Classification Benchmark 2017, accessed 23 October

2018]

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Generally speaking, corporate reporters as well as investors who commonly use information from sustainability
reporting in decision-making are less accustomed to working with ISIC. Governments and international agencies,
on the other hand, are less accustomed to working with GICS and ICB. Selecting one external classification system
may therefore add confusion for stakeholders accustomed to other classification systems.

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Stakeholder feedback summary

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Sector classification systems were discussed informally in individual meetings with 25 stakeholders in 2015. The
stakeholders included labor, investors, ratings agencies, companies, civil society, as well as two internal
stakeholders within GRI who actively engage with governments and international organizations.

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The feedback reflects three different stances: pro-investment-oriented classifications; pro-internationally orientedclassification; and unfamiliarity or uncertainty that the Sector Program requires an external classification to fulfil
its purpose and to serve the public interest.

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Feedback in favor of investment-based classification systems

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Below are representative quotations from stakeholder feedback in favor of investment-based classification systems.
The feedback notes the importance of investors as sustainability report users, and notes that reportingorganizations may be more comfortable with an investment-based classification. The feedback also sees frequent
updating on investment-based classifications as a benefit.

200“The language used by GICS and ICB might be closer to how companies speak about themselves.”

201“Strong preference for GICS because it is focused on investors and adopts a market-oriented approach.”

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“GICS is updated more frequently, for the last time in 2014. The business world is changing often andnew sectors are being created as we speak. ICB was last updated in 2007 and ISIC in 2008, which is avery long time ago.”

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“The system should have a relation to investors and analysts, as they are the main driver of sustainability
reporting.”

207“GRI should consider the system that is currently most widely used for investors.”

208“GICS or ICB is preferable as it is easy for companies to relate to.”209

“The link to integrated reporting may be easier if a system is chosen that is used for financial reporting.”

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Feedback in favor of UN-based classification system (ISIC)

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Below is a sample of feedback in favor of the United Nations-based classification system ISIC. The feedback
responds favorably to ISIC as non-commercial and promoting the public interest, and notes that the choice of aninvestment-based classification system might be seen as problematic by non-investor stakeholders.

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“The UN ISIC system seems the most neutral for GRI to base its sector standards on. It is expected thatstakeholders in the Labor constituency find this classification acceptable for GRI to use.”

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“It seems important to recognize that ISIC was developed for the public interest and not so much for acommercial purpose. A system that is designed for stock exchanges and investors might have a negative
connotation for some target groups.”

219“The preference is for ISIC. It is designed in the interest of the public (rather than) revenue generation.”

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Feedback expressing unfamiliarity/uncertainty with the proposed classification
systems

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Below is a sample of feedback suggesting lack of familiarity or uncertainty regarding the usefulness of selecting aclassification system. The feedback suggests that for some stakeholders, classification systems are not within theirframe of reference, and that adopting a single classification system may not be helpful or necessary for the Sector
Program.

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226“(We were) not familiar with ICB, GICS, or ISIC before.”

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“The ideal approach would be to ask each company who their competitors are and to compare themwith those.”

229“Often sectors are difficult to assign and there is much overlap and differences between one sector.”

230“Perhaps it is possible to use GICS and ISIC at the same time?”

231“The choice of classification depends on what you are going to use it for.”

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“It is doubtful whether any of these systems is suitable for GRI purposes, as these are designed for otherpurposes.”234“It is important that GRI clarifies the problem that we are trying to solve.”

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Proposal: A more flexible approach

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Proprietary classification systems are important for investment purposes, and a non-proprietary internationalframework is important for statistical and economic analysis. However, the purposes served by both types ofclassification system are different from and the purpose of GRI’s Sector Program.

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GRI’s sector program needs to name and define particular groups of businesses that are similar in terms of businessactivities and sustainability impacts, in order to develop contents for these businesses. GRI’s sector program also
needs to identify and define sectors in a way that resonates with corporate reporters and those who use
sustainability reporters for decision-making. Finally, GRI’s sector program may need to name and define entities
that are not usually covered in sector classification systems, such as universities, public agencies or nongovernmental organizations.

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It is pragmatic to be able to make decisions on naming and definition of sectors when needed (at project proposal
stage), rather than years in advance of a particular project. A flexible approach will ensure that Sector Standards
are named and structured in a way that is appropriate when the project occurs.

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Annex 2 Collated Comments from the Stakeholder Council
Overall Comment

The Stakeholder Council has long called for investment in sector standards and welcomes the DRAFT Sector Work Programme and overall
believes it to be a strong document.
A number of members queried why the ‘sector supplements’ weren’t referenced in this document. We recommend that you articulate:
1. how sector standard process will build on the sector supplements (given that the latter are still considered by GRI reporters and otherstakeholders);
2. how learnings from the sector supplement process have informed the process set out in this document.

Program purpose

We recommend that the overall rationale (as opposed to benefits) of the sector standards is more clearly articulated. For example, is it tocontribute to the SDGs or to provide information to investors, etc?
There is an opportunity to simplify the text in this section. The text in the bullet points (lines 6-13) and subsequent paragraph (lines 16-23) all
refer to benefits of the Sector Programme. We recommend that these benefits are streamlined, repetition avoided and expressed in no morethan six dot points. The statements in lines 15 and 23 could be used as opening and closing statements respectively.

High-level requirements

With respect to lines 44 and 45 we recommend that a mechanism is put in place to ensure new “surfacing issues" covered in the Sector Standards
are co-ordinated with revisions to the Global Standards.
We recommend that consideration is given to the connection between the existing material topics and the new sector supplements and that thisbe articulated in this document along with any work already done on a sectoral benchmark analysis of the most material topics from a sector
perspective. Will the sector standards (and companies that use them) differentiate between “global issues”, such as those addressed by the SDGs
and “sector specific issues” such as noise or aircraft movements for the aviation sector?

Sector Program Process

We recommend that the Project Working Group:• Consults outside its membership in developing draft sector standards, reports on that process and analyses the output of that consultation.
• Includes academics researching sustainability issues and reporting in particular sectors as academics have critical thinking and research analysis
skills. (The academics on the Stakeholder Council could provide names of academics with expertise in particular sectors.)

Page 10 of 11• Includes industry stakeholders other than companies and sustainability/ESG data users.
Re lines 64-5, the opposite is also possible. That is, GRI Standards could evolve to reflect emerging issues identified via Sector Program.
Programme Scope andSector Classifications

The criteria are expressed as if equally weighted. The Stakeholder Council is strongly of the view that the overriding criteria should be thesignificance of a sector’s environmental, social and economic impacts.
The current number of GRI reporters in the sector should not be a key criterion. It is possible that certain sectors (such as non-industrial
sectors) are not publishing GRI reports because they perceive that GRI standards are not specifically designed for them. If the criteria toprioritize sectors is based on the number of reports, we may continue to discourage high impact sectors from making sustainability disclosuresor publishing GRI reports.
Reviewing the literature is part of the process of assessing a sector’s impact and should be stated as such rather than as a separate criterion in
its own right.
While there were some dissenting views, overall, we support the proposal not to adopt an external sector classification system. Concerns
raised with the proposal related to whether a new classification system would not be followed and simply avoided making a choice amongst
existing schemes.
We recommend reducing the discussion on sector classifications and focusing on the positive reasons for the chosen classification (rather thanperceived problems with other classifications).
In addition to mapping to GICS, ICB and ISIC, we recommend mapping to the Sustainable Industry Classification System (SICS), developed by
SASB and described on this website: https://www.sasb.org/find-your-industry/
We recommend that Annexe 1 is a separate document not circulated as an annexe to the Sector Work Programme. It is a useful document in
its own right but is distinct from the Sector Work Programme. On a minor point we recommend reconsidering the appropriateness of
including ‘consumable fuels’ and ‘alternative fuels’ in ‘mining’.

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