Human rights in ESG

A new global benchmark for corporate transparency on human rights is changing sustainability reporting, writes Bastian Buck, chief of standards, Global Reporting Initiative.

With 25 years as the global leader in sustainability reporting, the Global Reporting Initiative has been the catalyst for change in sustainable development. Used by over 10,000 organisations, covering more than 100 countries – and 73% of the world’s 250 largest companies – the GRI Standards are the most widely adopted sustainability reporting standards in the world.

The Universal Standards were launched in 2021 and come into effect from January next year. They have been revised to require more transparency in reporting on human rights impacts and due diligence obligations. All GRI reporting companies will need to be able to disclose how they identify severe risks to the economy, environment and people. This now clearly includes impacts on human rights connected with their business, and what they are doing to address these risks.

Other changes to the Universal Standards include a definition of human rights in line with leading international standards. Impacts on human rights are now expressly included as a general disclosure topic in the Universal Standards, there are fewer general disclosures in the new standards and human rights are specifically highlighted in the definition of material topics.

Previously, human rights-related disclosures were addressed largely in the GRI Topic Standards, on which an organisation is required to report only if it determines those topics to be material. This is a significant update because all entities reporting in accordance with the GRI Standards will be required to report on the Universal Standards.

This development is part of a multi-phase project to update our human rights-related disclosures. The emphasis on ‘double materiality’ brings the GRI Standards in line with the United Nations’ Guiding Principles on Business and Human Rights and emerging mandatory human rights and environmental due diligence legislation. Double materiality realises that users (investors, society) will need transparent disclosures both for the impact on people, economy, environment and human rights as well as the impact of sustainability issues on the financial health of a company (enterprise value).

For companies that already adhere to the UNGPs, these revisions may not present a significant new challenge in practice. However, for companies that have not to date sought to explicitly adhere to the UNGPs, this will present a new challenge in terms of meeting the revised GRI standards.

That is why GRI and the International Financial Reporting Standards Foundation recently announced a collaboration of their respective standard setting boards, the International Sustainability Standards Board and the Global Sustainability Standards Board. By working together, GRI and the IFRS will provide two pillars of international sustainability reporting. The first pillar represents investor-focused capital market sustainability disclosure standards currently being developed by the ISSB. The second reflects GRI sustainability reporting requirements, compatible with the first pillar, designed to meet multi-stakeholder needs.

Alongside this is the development of the European Sustainability Reporting Standards, in which GRI and the European Financial Reporting Advisory Group have been working together to construct.

The GRI Standards are based on expectations for reasonable business conduct set out in intergovernmental instruments such as the Organisation for Economic Co-operation and Development’s Guidelines for Multinational Enterprises, the OECD’s Due Diligence Guidance for Responsible Business Conduct, the International Labor Organization’s International Labor standards and the UNGPs.

The revised Universal Standards set a new global benchmark for corporate transparency. Fully addressing gaps between the available disclosure frameworks and intergovernmental expectations for responsible business and human rights reporting, we are confident that they will enable more effective and comprehensive sustainability reporting than ever before.