Cima F2 Exam Question No 45

Question No 45:

The Global Reporting Initiative ("GRI") is an organisation set up in 1997, to develop a sustainability reporting framework for businesses. To this end a number of versions of Sustainability Reporting Guidelines have been issued. The GRI Sustainability Reporting Guidelines gives guidance to entities on how to measure and report on managements' approach to the economic, environmental and social aspects that impact on their businesses.
Required: 

(A) Discuss the benefits to investors of entities preparing disclosures that follow the GRI guidelines on reporting. 

(B) Explain the nature of the information that could be disclosed by entities in their external reports in respect of the economic, environmental and social aspects that impact on their businesses, in order to comply with the GRI guidelines

• (A) Benefits to investors - The GRI is a recognised framework and where entities have adopted its guidelines it will provide investors with greater confidence that they are receiving relevant and useful information.

 Comparability and transparency improves where accepted guidelines exist as many entities are then following a similar approach to disclosures. Consistent compliance with the GRI guidelines will give investors confidence that they are receiving complete information rather than just the positive aspects designed to improve reputation. Goals, targets and benchmarks being included will provide a performance measurement which will help investors decide whether they are happy to invest going forward. 

• (B) GRI sustainability guidelines - The economic aspects are likely to contain information about how the entity impacts on the economic conditions of its shareholders and on the economic systems of both the area in which it operates and globally.

An entity may also include its policies regarding local and global economies and disclose targets and its strategy for meeting those economic targets and its performance to date.The environmental aspect of sustainability provides information about how an entity impacts on the environment.
Disclosures are likely to include managements' policies on waste, emissions and pollution. Targets on wastage and pollution, etc are likely to be set and strategies for achieving these and performance to date could also be included. The social aspect of sustainability relates to the impact the entity has on the social systems in which it operates.
The GRI focuses on performance in the areas of human rights, labour practices, including employer/employee relations, occupational health and safety and equal opportunity