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The Global Reporting Initiative’s (GRI) Past, Present and Future:
Critical reflections and a research agenda on sustainability
reporting (standard-setting)
Charl de Villiers (corresponding author, charl.devilliersauckland.ac.nz)
The University of Auckland, and University of Pretoria
Matteo La Torre (matteo.latorre@unich.it)
Università "G. d'Annunzio" di Chieti-Pescara
Matteo Molinari
University of Kent
Please cite this paper as:
De Villiers, C., La Torre, M. & Molinari, M. 2022. The Global Reporting
Initiative’s (GRI) Past, Present and Future: Critical reflections and a
research agenda on sustainability reporting (standard-setting), Pacific
Accounting Review, forthcoming. DOI: 10.1108/PAR-02-2022-0034
Abstract
Purpose – The paper reflects on the future of sustainability reporting standards by examining
the current practical initiatives and the Global Reporting Initiative’s (GRI) position in the
arena of non-financial and sustainability reporting, and identifies avenues for future research.
Design/methodology/approach – A critical reflection and analysis of research on the GRI’s
achievements and the influence of the IFRS Foundation’s initiative to develop global
sustainability reporting standards.
Findings – The GRI has a dominant position in sustainability reporting standard-setting
related to the provision of information about the influence of reporting organisations on
society and the natural environment. The IFRS Foundation’s initiative to enter the
sustainability reporting standard-setting arena, although from the perspective of providing
information to investors regarding the influence of society and the environment on the
reporting organisation, is an attempt to solidify its own position as the reporting standard
setter of choice, not only for financial reporting, but for all reporting standards. However,
despite its aim to differentiate its role from the GRI by leveraging the financial-oriented
ideological side of double materiality, we argue that the IFRS is unlikely to harm the GRI's
global position in producing multi-stakeholder standards for sustainability reporting and
accountability. This differentiated position is facilitated by the different sources of legitimacy
the GRI and IFRS rely on.
Originality – Due to the recent initiatives for creating new sustainability reporting standard-
setters, this paper offers one of the first critical reflections on the past and the likely future of
the GRI and its sustainability reporting standards. The paper also identifies several new
avenues for future research.
Keywords: GRI; Sustainability Reporting Standards; ISSB; Standard-setting
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1. Introduction
The GRI is one of the most acclaimed sustainability reporting standard-setting bodies, which
has developed stakeholders-oriented reporting standards aimed at ensuring the disclosure of
information that facilitate an understanding of how reporting organisations influence social
and environmental matters. Recently, new sustainability reporting standard-setting bodies
emerged to develop investor-oriented reporting standards, focusing on how social and
environmental risks and opportunities influence the reporting organisation. Specifically, the
International Financial Reporting Standards (IFRS) Foundation has become involved and has
taken over several of these investor-oriented sustainability standard-setting bodies under the
banner of the IFRS Foundation’s International Sustainability Standards Board (ISSB). While
the GRI did not initially engage with the IFRS Foundation, it recently signed a collaboration
agreement with the ISSB to coordinate their work programmes and standard-setting activities
to connect capital market and multi-stakeholder standards (IFRS, 2022a).
These developments prompt a reflection on the GRI’s achievements and its likely future in
the sustainability reporting standards arena. In turn, the current changes in sustainability
standard-setting, and the entry of the IFRS/ISSB, are likely to provide novel research
opportunities and practical implications. Therefore, this paper draws upon the recent call for
global standards for sustainability reporting and the ongoing changes in sustainability
reporting standard-setting, including the regulatory initiatives and the de facto reporting
standards aimed at harmonising sustainability reporting (La Torre, Sabelfeld et al., 2020; De
Villiers et al., 2022a).
The GRI standards have played a leading role in the development of voluntary sustainability
reporting before mandatory requirements for non-financial disclosure (Carungu et al., 2022).
While the EU Directive 95/2014 was an attempt to pursue the comparability of non-financial
and sustainability information, it revealed some limits in establishing mandatory standards for
non-financial and sustainability reporting (La Torre et al., 2018). For instance, there is still a
lack of common consensus among standard-setters, regulators, and preparers on global
standards and reporting guidelines, and the discretion companies have to adopt reporting
guidelines, renders this reporting initiative ineffective in affecting change or improving
comparability (La Torre et al., 2018). Reporting frameworks need to complement each other
to build a comprehensible infrastructure for corporate reporting on non-financial aspects (La
Torre et al., 2018). Yet, the current regulatory drive toward mandatory adoption of
sustainability reporting suggests the need for a commonly accepted framework or standards.
Although there are initiatives to mandate sustainability disclosures in many jurisdictions,
including the US and New Zealand, the European context provides an example of these
regulatory initiatives. In 2020, the European Commission mandated the European Financial
Reporting Advisory Group (EFRAG) to start working toward European Union (EU) non-
financial or sustainability reporting standards, revising the EU Directive (n. 95/2014) on non-
financial reporting (EFRAG, 2020). In March 2021, an EFRAG report outlined how EU
sustainability reporting standards will be developed through an inclusive, consultative and
rigorous process. In April 2021, the European Commission proposed a Corporate
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Sustainability Reporting Directive, which would oblige organisations to comply with the
standards. EFRAG’s public consultation processes are ongoing, and its initiatives will
establish unified sustainability reporting standards for the EU block, and for many companies
from outside the block that trade with the EU.
Motivated by these regulatory pressures and the changes to the standard-setting landscape,
and the entrance of the IFRS/ISSB, this paper provides a novel reflection on the future of the
GRI and its sustainability reporting standards. The paper examines the GRI’s current
initiatives and its position in the field of sustainability reporting standard-setting. We identify
and discuss the challenges and practical shortcomings of the GRI from the recent accounting
research literature. We also analyse and discuss the IFRS/ISSB’s involvement in
sustainability standard-setting and the likely effect thereof on the GRI’s position and the
future of sustainability accounting standards. In addition, we identify new opportunities for
future research on sustainability reporting and its standard-setting environment.
The remainder of this paper is structured as follows. Section 2 summarises the GRI’s story
and its function in sustainability reporting practice. Section 3 reviews and discusses the most
relevant research on GRI. Section 4 analyses the IFRS Foundation’s initiative and its likely
impact on GRI and corporate sustainability reporting and accountability. We identify some
avenues for future research in section 5, while concluding the paper in section 6.
2. The GRI’s position in sustainability and non-financial reporting
GRI is an independent international organisation, established in 1997 as a joint initiative of
the Coalition for Environmentally Responsible Economies, an American non-government
organisation, and the United Nations Environmental Programme. The GRI’s primary purpose
was to set the first accountability mechanism to guarantee organisations adhere to responsible
environmental principles, which were then broadened to include social, economic and
governance issues (GRI, 2022d). Over time, GRI has further developed its reporting
guidelines/standards throughout the timeline shown in Figure 1.
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Figure 1: History of the GRI
Source: GRI (2022b).
In 2000, the GRI published the first version of its guidelines, which was the first international
framework for comprehensive corporate sustainability reporting with a particular focus on
environmental matters (GRI, 2022a). Thereafter, GRI G1 Guidelines (2000), GRI G2
Guidelines (2002), GRI G3 Guidelines (2006), GRI G3.1 (2011), and GRI G4 (2013) were
developed to embrace economic, social, and ethical issues. In 2016, the GRI’s Global
Sustainability Standards Board issued the first global standards, including all the main
concepts of the previous guidelines, improved with a more flexible structure, clearer
requirements and a more straightforward language. These standards configure a set of
modular reporting guidelines to support organisations in communicating the impacts of their
activities on economic growth, society, and the environment (GRI, 2022b). According to the
GRI (2022a), its standards aimed to:
“create a common language for organisations and stakeholders, with
which the economic, environmental, and social impacts of organisations
can be communicated and understood. The Standards are designed to
enhance the global comparability and quality of information on these
impacts, thereby enabling greater transparency and accountability of
organisations”.
These standards continue to be updated and added to, including new Topic Standards on Tax
(2019) and Waste (2020).
The GRI provides a list of corporate reporting features to be included in non-financial
statements and sustainability reports. The new structure consists of 36 Standards into
Universal Standards and Topic-Specific Standards. The Universal Standards enclose “100
series”, containing three of 36 Standards, i.e. GRI 101 on Foundation, GRI 102 on General
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Disclosure, and GRI 103 on Management Approach. The Topic-Specific Standards embrace
“200 series” on economic issues, “300 series” on environmental issues, and “400 series” on
social issues. These series detail the disclosures related to the organisation’s impacts on
economic, environmental, and social issues, and the use of qualitative and quantitative
indicators to measure such impacts (Molinari and Carungu, 2019). Furthermore, the GRI
standards acknowledge the importance of the stakeholder engagement process to identify the
stakeholders and their needs, and the material social and environmental topics to be reported
in the non-financial reports.
Organisations can adopt GRI standards for non-financial reports by choosing between Core
or Comprehensive options (GRI, 2022c). The first option allows disclosing some topics of
GRI 102 on General Disclosure, the organisation’s compliance with GRI 103 on
Management Approach reporting requirements, and the reporting of at least one topic-
specific disclosure. The second option requires all disclosures from GRI 102, compliance
with all GRI reporting requirements, and all topic-specific disclosures related to material
issues. However, organisations can use a mixed-option, i.e. the ‘GRI-referenced’. This option
allows organisations to select specific standards or portions of their content. Accordingly, the
flexibility of this international framework provides practical benefits in sustainability and
non-financial reporting (Buhr et al., 2014).
According to Allen White, co-founder and former CEO of the GRI, the main challenges of
GRI rely on mobilising
“people with seemingly disparate interests around a public good. The key
challenge is to adhere to a policy of inclusiveness and to find a place for
each and every person who seeks to, or should, contribute. This is the path
to both legitimacy as well as innovation. It is the power of the collective
mind of diverse individuals that was, and remains, the soul of GRI”
(Waddock and White 2007, p. 41).
Accordingly, GRI’s structure, the community of practice it has developed, and the efforts for
integrating insights from its stakeholders are all aligned to boost inclusiveness and
cooperation among reporting preparers (Etzion and Ferraro, 2010).
Since its initial implementation, the GRI has gained extensive attention from organisations
worldwide and has become an international sustainability reporting framework (Federation of
European Accountants, 2016). The KPMG (2017) survey provides further evidence on the
high popularity of GRI standards among organisations. For instance, in 2016, 63% of the top
100 organisations worldwide (N100) and 75% of the world’s 250 largest organisations
(G250) by revenue based on the Fortune 500 ranking have adopted the GRI framework for
their sustainability reports (KPMG, 2017). The KPMG (2020) survey confirms the dominant
position of GRI as a global reporting standard, with an increasing number of organisations
using GRI in 2020 compared with 2017. This ongoing effort has facilitated GRI in
championing the institutional field of sustainability reporting. Consequently, many large
organisations worldwide are engaged in accountability and sustainability practices, and this
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motivated other organisations to undertake a mimetic approach and take up the same
direction (Carungu et al., 2019).
Accordingly, corporate reporting represents an essential vehicle for organisations to
communicate with stakeholders and pursue their accountability commitment (Busco et al.,
2013; Lombardi and Secundo, 2020). This process of communication and accountability
affects a broad range of constituents, such as standard-setters, regulators, policymakers,
investors, and society (Federation of European Accountants, 2016; La Torre et al., 2020). The
rise of the stakeholder audience leads to the compelling need to better understand
organisations’ longer-term value drivers, expectations and risks, including their impact on the
environment and society, and it requires a rethinking of corporate reporting (Adams and
McNicholas, 2007; Busco et al., 2013; Hopwood, 2009). Within this context, sustainability
and non-financial reporting have characterised significant steps in developing corporate
reporting practice from traditional financial reporting (Campra et al., 2020; Perrini, 2006; La
Torre et al., 2018; Uyar, 2016).
The need for shared knowledge regarding non-financial reporting practices has prompted
regulators to standardise corporate reporting practices (Biondi, 2020; La Torre et al., 2018;
2020). For example, within the European context, the Directive 2014/95/EU on reporting
non-financial and diversity information represents a crucial step to improve corporate
transparency and accountability on social and environmental issues across Europe. The EU
Directive is an example of a systematic process aimed at harmonising corporate reporting
practices, improving comparability of information, and meeting stakeholders’ needs (Aureli
et al., 2020; La Torre et al., 2018; Veltri, 2020). Specifically, paragraph no. 9 of the EU
Directive mentions some Union-based and international frameworks and guidelines that
organisations may consider for preparing their non-financial reports, such as Eco-
Management and Audit Scheme (EMAS), United Nations (UN) Global Compact Guiding
Principles on Business and Human Rights, Organisation for Economic Co-operation and
Development (OECD) Guidelines for Multinational Enterprises, International Organisation
for Standardisation's ISO 26000, and GRI Standards. However, despite acknowledging this
multitude of frameworks and guidelines for sustainability reporting, the still GRI enjoys wide
global acceptance and adoption among a broad range of stakeholders.
3. The GRI’s challenges and practical shortcomings: insights from
research
While prior research has been interested in understanding the GRI’s capability to foster and
enhance accountability, a piece of the literature has critiqued and highlighted its practical
challenges in this task. GRI stresses how to enhance accountability for an organisation’s
impact on sustainable development, which assumes particular relevance for investors,
national governments, customers, and other employees (Adams et al., 2022). Miles (2011)
stated that the GRI standards allow organisations to analyse how to integrate sustainability
issues into business operations, track progress, and address stakeholder information needs.
However, the GRI framework and guidelines are still perceived as demanding.
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Academic research reveals how the multi-stakeholder input to the GRI Standards, and
consequently reputation amongst stakeholders, is a key reason for wide corporate adoption of
the GRI Standards (Adams et al., 2022). However, a review of accounting literature focused
on the GRI shows some ongoing shortcomings and challenges with implementing GRI
Standards in practice (Habib, 2022; Massaro et al., 2016; Moses et al 2020; Moses and
Hopper, 2022). For instance, limited resources employed (Tauringana, 2020) and low
emphasis on sustainability reporting by governments (Halkos and Nomikos, 2021) discourage
the reliance on GRI for sustainability reporting. Thus, organisations operating in industries,
such as electricity, retail, food, and the cruise industry (Roca and Searcy, 2012; Font et al.,
2016), and small and medium-sized enterprises (SMEs), are struggling to implement GRI
Standards (Sampong et al., 2018).
Many organisations consider the GRI's reliance on accountability as a costly activity (Safari
and Areeb, 2020). Research also warns about sustainability reporting preparers’ issues.
Particularly, middle and staff management layers are still struggling with sustainability
reporting demands and are still developing the required skills (Adams et al., 2022). Thus,
there is a call for future research investigating the quality and levels of such accountability in
the aftermath of calls to simplify sustainability reporting and prioritise the information needs
of a broader audience (Adams and Abhaywansa, 2022). This unavoidably involves the recent
developments in sustainability standard-setting and their ability to enhance sustainability
learning processes, disclosures, accountability, and attention to performance.
GRI standards and guidelines support organisations to recognise material sustainability issues
leading to improved sustainability performance and sustainability reporting quality (Chen et
al., 2015). Font et al. (2016) suggest that GRI guidelines should be adopted to identify
material sustainability topics and assist organisations in understanding stakeholders’ needs.
Calabrese et al. (2016) find that GRI guidelines can help SMEs identify which sustainability
topics should be prioritised. However, recent research points out how the materiality concept
in GRI standards remains unclear for some organisations. Garcia-Torea et al. (2020) state that
guidance on how GRI principles may be applied would be beneficial. In this regard, GRI
provides practical examples of tools for identifying sustainability reporting content but does
not clarify how to employ those tools, so representing an obstacle in identifying material
issues properly (Garcia-Torea et al., 2020).
Of course, GRI standards helped organisations understand what material information should
report. Yet, companies also require more clarity on the indicators to measure sustainability
material issues. Some organisations still fail to identify and disclose all material issues due to
contradictory interpretations of GRI indicators and a lack of consistency in the materiality
assessment (Machado et al., 2021). Although GRI standards are commonly applied by
different organisations operating in different industries and developing country contexts
(Adams et al., 2021; Dissanayake, 2020; Fonseca et al., 2014), there is still an unsatisfactory
level of understanding of multiple standards and indicators among report preparers (Slacik
and Greiling, 2020). For instance, Toppinen and Korhonen-Kurki (2013) criticise the
ambiguity in defining the GRI indicators. As a result, organisations focus more on complying
with GRI indicators, rather than considering the practical meaning of GRI standards; in turn,
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the substance of disclosing sustainability and non-financial information to address
stakeholders’ expectations (Safari and Areeb, 2020). Consequently, GRI standards should
still incorporate additional indicators in line with the specific country and industry in which
organisations operate (Adams et al., 2022; De Villiers and Lubbe, 2001).
Unfortunately, GRI is not used appropriately, and many organisations do not yet benefit from
the disclosure’s full potential. Research has advised that GRI standards struggle to provide
insightful methods to support sustainability reporting preparers to disclose sustainability
issues (Adams et al., 2022). This practical shortfall also lies in the GRI discretionary
adoption. Notably, organisations tend to selectively disclose non-financial information, which
may manipulate stakeholders’ perceptions towards organisational risk and performance. This
approach decreases the GRI standards’ effectiveness with the consequent lack of sufficient
resources dedicated to sustainability reporting. Thus, while acknowledging the GRI's global
position in sustainability reporting standards, there is still concern about its adoption and
reliability due to the lack of mandatory power coming from the regulations.
The reliability issue of sustainability information also relates to the assurance practice
domain. Assurance-related issues raise concerns among practitioners. For instance, more
policy requirements regarding external assurance are needed to increase sustainability
reporting quality (Badia et al., 2020). Accordingly, GRI could contribute to identifying the
criteria to be prioritised by sustainability assurance providers and how these criteria should be
applied. Notably, more substantial assurance should be encouraged on concerns neglected by
sustainability assurance providers, such as the sustainability context, reporting balance, and
information comparability (Boiral et al., 2019). However, there is limited evidence on
organisations adopting GRI standards and providing more balanced, comparable and precise
information for assurance needs (Boiral et al., 2019). Michelon et al. (2015) examined GRI
reporting practice in line with disclosure quality, determined by the dimensions of content,
type and managerial orientation. They show that the assurance and reporting guidance does
not ensure higher quality information as these practices are perceived as symbolic activities
to increase the perceived accountability.
Despite these practical issues, the GRI standards evolved to meet the emerging global
challenges, such as climate change, the development of new technologies, economic
inequality and the world population, and the transition to a sustainable economy (GRI,
2022d). For instance, the GRI created the ‘Sustainability and Reporting 2025’ project to
discuss the type of information needed to deal with these global issues and discuss the role of
technology in enabling organisations and stakeholders to collect, check, analyse, and manage
non-financial data appropriately (Fiandrino, 2019). Moreover, GRI’s ongoing work to
improve the quality of reporting includes the 2021 revision to the Universal Standards and
issuing Standards Interpretations and sector supplements.
Crucial to this goal is the increased understanding of external assurance and internal
processes, such as the process of determining material issues. To support this effort, GRI has
recently established a Global Standards Fund to ensure the continuous independent and multi-
stakeholder development of the GRI standards, global advocacy to drive commitment of the
standards, further development of the sector program and the sector standards fine-tuned to
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identify sectors’ most substantial impacts and reflect stakeholder expectations for
sustainability reporting, and a ‘free public good’ status of the GRI Standards available to all
organisations (GRI, 2022c). However, there is ongoing debate on the need for convergence of
sustainability reporting and non-financial reporting frameworks (Accountancy Europe, 2020),
including the IFRS Foundation’s Consultation Paper on Sustainability Reporting that argue
that there is a need for the IFRS/ISSB to play a role in convergence. In March 2022, the
IFRS/ISSB published exposure drafts IFRS S1 “General Requirements for Disclosure of
Sustainability-related Financial Information” and IFRS S2 “Climate-related Disclosures”.
These developments could challenge the GRI’s role as a key player in sustainability standard-
setting. Given these developments, we critically reflect on the GRI’s position and
sustainability reporting development in the future.
4. How the IFRS Foundation’s involvement in sustainability reporting
standard-setting is likely to influence the GRI
While the GRI has a long-standing and established leadership in the landscape of
sustainability reporting standards and guidelines, over the last year, we witnessed an
increasing competition among standards setters and international organisations/authorities in
producing new frameworks and guidelines for non-financial and sustainability reporting. The
IIRC’s (International Integrated Reporting Council) initiative was an example (De Villiers et
al., 2020). Yet, despite the efforts to promote and legitimate the integrated reporting
framework (La Torre, Dumay, et al., 2020), its fate seems to have been foretold by Flower
(2015), with the recent merge into the Value Reporting Foundation and now the ISSB’s
initiatives.
La Torre et al. (2018) focus their discussion on the increasing numbers of competing
instruments for non-financial reporting produced in the last years. They argue that “as long as
the organisations touting different competing frameworks jockey against each other for a
leading global position”, they will hardly achieve or promote sustainable development (La
Torre et al. 2018, p. 610). Meanwhile, other standards and guidelines have been introduced or
promoted worldwide, such as those of the Task Force on Climate-related Financial
Disclosures, the Value Reporting Foundation and the UN Global Compact. These initiatives
contributed to changing the arena of sustainability reporting de-facto standards and occupy
particular niches of its space, such as that one about the climate information. Thus, albeit the
GRI’s standards and guidelines remain the most widespread sustainability reporting
frameworks worldwide, these further initiatives attempted to conquer a piece of the
jurisdiction in the growing field of sustainability accounting and reporting practices.
This is the case with the recent IFRS Foundation’s initiative to create new sustainability
reporting standards. Our interest in the IFRS Foundation’s initiative is motivated by its
potential influence on the sustainability reporting standard-setting arena and its novel interest
in entering this field. Over the last 20 years, the IFRS Foundation and its IASB (International
Accounting Standards Board) has had an established and significant role in creating generally
accepted standards for financial accounting and reporting worldwide and in Europe
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specifically. In September 2020, the IFRS Foundation’s Trustee published a “Consultation
Paper on Sustainability Reporting”, representing its first attempt to enter the sustainability
reporting practice field (IFRS Foundation, 2020).
As stated in the document, the consultation paper was created “to identify the demand from
stakeholders in the area of sustainability reporting and understand what the Foundation could
do in response to that demand” (IFRS Foundation, 2020, p. 4). The consultation paper was
constructed around three main questions:
“Is there a need for a global set of internationally recognised sustainability
reporting standards?
If yes, should the IFRS Foundation play a role in setting these standards
and expand its standard-setting activities into this area?
If not, what approach should be adopted?” (IFRS Foundation 2020, p.14)
While answering the first question was taken for granted and known, there was also an
implicit response to the second one. The IFRS idea was already to create a standard setting
body for sustainability reporting. This sustainability standards board should work to achieve
coherence and comparability by developing global sustainability standards (IFRS Foundation,
2020, p. 8). Accordingly, in November 2021, the IFRS Foundation Trustees created and
announced the new International Sustainability Standards Board (ISSB) in response to this
demandi.
The rationale of the consultation was to achieve legitimacy for operating as an international
standard-setter for sustainability reporting. As demonstrated in previous research, public
consultation usually operates as a strategy to get legitimacy and persuade the public about the
need for the new institution and standard setter (Durocher et al., 2007; Richardson and
Eberlein, 2011; La Torre, Dumay, et al., 2020). Due to the “growing calls for the urgent need
for further consistency in reporting and comparable information”, the IFRS Foundation
explains that the best option would be creating a new Sustainability Standards Board working
upon the existing initiatives instead of maintaining the status quo or facilitating the existing
initiatives (IFRS Foundation, 2020, p. 8). This option would better contribute to “reducing
complexity and achieving comparability in sustainability reporting” (IFRS Foundation, 2020,
p. 8). This was the main subject of consultation as this latter aimed to “understand whether
demand is sufficient to create such a standard-setting body (see the section, Requirements for
Success)” (IFRS Foundation, 2020, p. 8).
The IFRS Foundation argued that its action is needed to harmonise sustainability reporting as
it is done for financial accounting standards for the benefit of preparers and stakeholders. As
stated in the consultation paper:
“The IFRS Foundation action could lead to an approach that seeks to
harmonise and streamline sustainability reporting, which could benefit
stakeholders of the IFRS Foundation and benefit sustainability reporting.”
(IFRS Foundation, 2020, p. 8)
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Additionally, as ISSB could work alongside the IASB, “stakeholders could also benefit if a
single organisation developed requirements in financial reporting and sustainability
reporting”, reducing complexity (IFRS Foundation, 2020, p. 8). Yet, once again,
harmonisation is used again as a rhetorical argument for legitimate the IFRS’s initiative by
leveraging the synergy with the IASB’s authority (La Torre et al., 2018). Thus, despite
having no experience in the field of sustainability reporting, the IFRS Foundation is seeking
to extend its existing jurisdiction in the international financial accounting standards-setting
toward the field of sustainability reporting and accounting. Nevertheless, here we question:
why do we need another sustainability reporting standards setter since the GRI already has
the expertise and global leadership with its standards and guidelines for sustainability
reporting?
In the following subsections, we examine the rationale motivating the IFRS Foundation’s
action of extending its jurisdiction over the boundaries of financial accounting standard-
setting. At the same time, we discuss how this action can influence the GRI role.
4.1 The double materiality inscription and its ideological conflict
Behind the IFRS Foundation’s initiative, there is an interest in the rapid growth of
sustainability and climate disclosure and its related business opportunities. For example, in
Europe, such an interest is also boosted by the recent regulatory initiatives for making
sustainability reporting mandatory. The EU Directive (n. 2014/95) for reporting non-financial
information is proof. The EU Directive aims to harmonise non-financial and sustainability
reporting practices among large European companies by establishing minimal reporting
requirements (La Torre et al., 2018). It also unveiled the need for globally accepted
sustainability reporting standards as much as it allows companies to adopt one or more global
and local reporting standards/guidelines (La Torre et al., 2018). However, the IFRS
Foundation’s initiative for operating as a sustainability reporting standards setter is not only a
response to this need. Instead, it is reasonably motivated by the strategic action to leverage
the ideological regulatory attempt to make corporate sustainability information more linked
and related to corporate financial accounting and reporting.
The IFRS Foundation’s ISSB is both a diver and a result of financial accounting capture of
sustainability reporting. The ISSB seems more interested only in the sustainability disclosure
that has implications for financial performance and is material for investors. The ISSB’s
exposure draft of “General Requirements for Disclosure of Sustainability-related Financial
Information” confirms this interest by stating that
“The objective of [draft] IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information is to require an entity to
disclose information about its significant sustainability-related risks and
opportunities that is useful to the primary users of general-purpose
financial reporting when they assess enterprise value and decide whether
to provide resources to the entity” (IFRS Foundation, 2022b)
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Thus, the ISSB’s standard-setting seems to be more concerned with the financial information
and financial value coming from the sustainability risks than the sustainability information
itself. This will likely privilege the investors-oriented perspective in reporting sustainability
information.
We can also see such financial capture in the most recent initiatives for revising the non-
financial reporting regulation in Europe. While the European Commission issued the EU
Directive on non-financial reporting to make social and environmental reporting mandatory,
it launched the process to amend this regulation in 2019 with a Proposal for a Corporate
Sustainability Reporting Directive (CSRD) (European Commission, 2021). This Proposal
aims to extend sustainability/non-financial reporting adoption and its assurance practices,
while introducing more detailed reporting requirements.
Among its novelties, it also introduces the principle of double materiality (European
Commission, 2021). The Proposal argues the need to ground non-financial reporting practices
on the “double materiality perspective”, which should help companies establish the material
information to be reported. It clarifies that “double materiality” will be able to:
“removing any ambiguity about the fact that companies should report
information necessary to understand how sustainability matters affect
them, and information necessary to understand the impact they have on
people and the environment.” (European Commission, 2021, p. 13)
Based on the GRI’s standards, the materiality assessment for sustainability reporting requires
an extensive process of stakeholders' engagement and assessment of material topics based on
both their significance for the social and environmental impacts and their influence on the
stakeholders. This assessment process aims to prioritise these topics, which should be
reported in the sustainability report. However, double materiality requires a different
approach compared to the one used to apply the GRI concept of materiality (Adams et al.
2021).
The double materiality perspective establishes that social and environmental issues and
information should be assessed through both an “outside-in perspective”, about their effects
on companies’ financial performance, and an ‘inside-out’ perspective concerning the impacts
on the environment and society (European Commission, 2021, p. 1). Thereby, the double
materiality encloses an ideological conflict between the investors’ financial interests and
other stakeholders’ needs.
The double materiality encloses the inscription of stakeholders' interests that are hard to
balance, and its trade-off may advantage, once again, the financial interest at the cost of
sustainable development. Prior research demonstrates that companies tend to prioritise
financial performance and investors’ interests (Adams et al., 2021; La Torre, Sabelfeld, et al.,
2020). La Torre, Sabelfeld, et al. (2020, p. 718) argue that the double materiality “may result
in a risk management-oriented approach to stakeholder engagement that has nothing to do
with broad corporate accountability to stakeholders”. They explain that:
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“with the double materiality perspective, the risk remains that social and
environmental materiality may be used only to assess social and
environmental risks to preserve the company’s financial value as
companies continue to privilege financial sustainability over social and
environmental sustainability.” (La Torre, Sabelfeld et al., 2020, p. 715)
Thus, the double materiality may cause the financial capture of sustainability reporting, so
reducing its broad accountability potential.
Accordingly, IFRS Foundation catches on to this opportunity coming from the double
materiality perspective and may emphasise the risk of financial capture for sustainability
reporting practice. In the IFRS Foundation’s consultation paper, it reads (IFRS Foundation,
2020, p. 14):
“For the SSB to commence with a double-materiality approach would
substantially increase the complexity of the task and could potentially
impact or delay the adoption of the standards. Therefore, a gradualist
approach is recommended. If established, the SSB would initially focus its
efforts on the sustainability information most relevant to investors and
other market participants. Such information would more closely connect
with the current focus of the IASB.”
“if more jurisdictions embrace the double-materiality concept to minimise
the risks of global and jurisdictional fragmentation of standards.”
Thus, IFRS Foundation’s ISSB will work primarily to produce sustainability standards for
reporting information about the social and environmental effects on the reporting entity, their
financial performance and the enterprise value (IFRS Foundation, 2020, p. 13; IFRS
Foundation 2022b). This will privilege investors and other capital market participants, as the
primary audience of financial reporting (IFRS Foundation, 2020, p. 13). The ISSB was
finally constituted with the formal purpose of “developing a set of sustainability disclosure
standards” to produce “sustainability disclosure that is useful to investors and other
participants in the world’s capital markets in making economic decisions” (IFRS Foundation,
2021). Thereby, the ISSB sustainability standards aim to be only about reporting financial-
related sustainability information, as confirmed in the first exposure draft IFRS/S1 (IFRS
Foundation, 2022b).
Accordingly, as argued above, we can see the IFRS Foundation’s position matching with and
benefits from the first (“outside-in”) perspective of double materiality, which is only about
the financial effects of social and environmental issues. Meanwhile, it cannot replace the
leadership role of GRI and its sustainability reporting standards, which are grounded on a
multi-stakeholder approach and able to unfold the “inside-out” perspective of double
materiality and broader corporate accountability. Therefore, for the IFRS Foundation, the
double materiality was arguably a means, and justification, to enter the sustainability
reporting field, defend their jurisdiction in financial reporting standard-setting, and conquer a
new one without conflicting with the GRI position.
12
The GRI and the ISSB currently occupy two different positions in the sustainability reporting
standard-setting arena. As stated, the ISSB aims to provide standards for investors-oriented
sustainability disclosure that can have financial implications for the entities. The recent
collaboration agreement between the IFRS Foundation and the GRI aims to pursue the
following purpose i:
“ensuring compatibility and interconnectedness of investor-focused
baseline sustainability information that meets the needs of the capital
markets, with information intended to serve the needs of a broader range of
stakeholders. […] aligning where possible their respective work
programmes, terminology and guidance, helping to reduce the reporting
burden for companies and to further harmonise the sustainability reporting
landscape at an international level.”
It recognises that:
“the IFRS Foundation and GRI provide two ‘pillars’ of international
sustainability reporting—a first pillar representing investor-focused
capital market standards of IFRS Sustainability Disclosure Standards
developed by the ISSB, and a second pillar of GRI sustainability reporting
requirements set by the GSSB, compatible with the first, designed to meet
multi-stakeholder needs.”
Thus, we can expect that the GRI standards will keep maintaining a distinguished global
position as the primary standards for multi-stakeholder sustainability reporting. Yet, the open
question is about whether the influence of the IFRS Foundation’s sustainability-related
disclosure standards will prevail over the GRI multi-stakeholder approach in companies’
sustainability reporting practices.
4.2 Source of legitimacy: Structural power and legitimacy from the market
While ISSB adjusted its position to differentiate it from the GRI, the second factor than can
explain the ISSB’s and the GRI’s future success and their different jurisdictions in the
sustainability reporting standard-setting arena is about their different source of legitimacy. As
argued above, the IFRS Foundation’s consultation paper was to get legitimacy from its main
stakeholders to operate as a sustainability disclosure standard-setter. The IFRS Foundation’s
consultation paper highlights that a requirement for success is:
“achieving a sufficient level of global support from public authorities,
global regulators and market stakeholders, including investors and
preparers, in key markets”(IFRS Foundation, 2020, p. 9)
Thus, while the GRI has already a strong legitimacy coming from its widespread adoption
and the GRI adopters over the decades, the ISSB still have to get its legitimacy by
demonstrating that its action is desirable, proper and appropriate (Suchman, 1995).
13
Nevertheless, it is worth noting that, despite the global diffusion, the GRI was not able to
establish a mandatory adoption of its standards over its decades of work. This may likely be
explained by a different regulatory context characterizing the past two decades and the level
of institutionalisation of sustainability reporting practices. Instead, the IFRS Foundation’s
ISSB entered the scene in a favourable context by leveraging the regulatory push and global
need for an international standards setter for sustainability reporting. In its Proposal, the
European Commission (2021) highlights that:
“Many stakeholders stressed that if the EU develops sustainability
reporting standards, it should build on and be consistent with international
standard-setting initiatives.” (p. 17)
Thus, IFRS Foundation can benefit from this regulatory need and its global structure in
financial reporting standard-setting as much that, in its consultation paper, attempt to
convince the public of the need for ISSB by arguing:
“Stakeholders could also benefit if a single organisation developed
requirements in financial reporting and sustainability reporting.” (IFRS
Foundation, 2020, p. 9)
Yet, ceteris paribus, the GRI can also meet this demand for operating as a global
sustainability standard-setter, so receiving the regulatory endorsement. The difference from
the IFRS Foundation lies in the different legitimacy they can use.
In its attempt to enter the sustainability reporting field, the IFRS Foundation seems to get its
legitimacy by relying on its structural legitimacy. Structural legitimacy allows “audiences [to]
see the organisation as valuable and worthy of support because its structural characteristics
locate it within a morally favoured taxonomic category” (Suchman, 1995, p. 581). Structures
are indicators of the organisation’s socially constructed capacity to perform specific work and
convey the message that is acting on collectively valued purposes properly (Suchman, 1995).
Structures can be, for example, the procedures that become the valued proxy for judging the
organisation’s operation (Suchman, 1995).
Similarly, the IFRS Foundation seeks to persuade its audience that it is the right global
standard-setter for sustainability reporting:
“The IFRS Foundation’s three-tier governance structure could be
effectively used for the creation of an SSB. This structure consists of an
independent standard-setting board of experts governed and overseen by a
global set of Trustees who, in turn, are accountable to a monitoring board
of public authorities, the IFRS Foundation Monitoring Board. The
Monitoring Board provides a formal link between the Trustees and public
authorities to enhance the public accountability of the IFRS Foundation.”
Accordingly, by showing its structure, procedural setting and ties with regulators and
authorities, the IFRS Foundation seeks to demonstrate that it is the right organisation to
govern the global sustainability standard-setting procedures. As Suchman (1995, p. 581)
14
argues, a “structurally legitimate organisation becomes a repository of public confidence
because it is ‘the right organisation for the job’”. Thus, the IFRS Foundation leverage its
structural legitimacy by benefiting from its structural power and institutional endorsement in
global accounting standard-setting. However, this “sense of rightness” has more to do with
the organisation’s identity and less with demonstrating its competence (Suchman, 1995).
The GRI, instead, can benefit from a well-established consequential legitimacy, through
which an organisation “should be judged by what they accomplish” (Suchman, 1995, p. 580).
For example, through consequential legitimacy, an organisation is judged upon the value and
quality of the products (outputs) it produces, which determines its reward. These technical
characteristics are not objective and, instead, are socially constructed in the society’s texture
(Suchman, 1995). The GRI’s consequential legitimacy results from the widespread adoption
of its reporting standards and guidelines and their adopters’ judgement about what it was able
to accomplish over the two decades. This legitimacy from the markets can confer the GRI the
proper competence and reputation to act as a global sustainability standard-setter. Instead, the
ISSB will keep relying on its structural power until it can demonstrate the superiority of its
sustainability standards. In the meantime, however, the main challenge the GRI will face is to
occupy with its standards a proper space in the sustainability reporting mandatory adoption
jurisdiction. As a result, its recent agreement with the IFRS Foundation seems to pursue this
goal and mitigate the risk from ISSB’s action.
5. Avenues for future research
Prior research has revealed many of the practical challenges of GRI standard adoption and its
ability to ensure accountability. As previously discussed, accounting research on the GRI
shows how the GRI contributed to promoting multi-stakeholder accountability, helping
organisations identify material issues, spread common material issues among organisations,
and measuring their sustainability performance through indicators. In addition, prior studies
have identified several related research opportunities (Hsiao et al., 2022; De Villiers et al.,
2022a, 2022b; Molinari and De Villiers, 2021). These research areas are likely to continue to
inspire future research, however, given recent developments, different research questions and
perspective are likely to come to the fore.
Etzion and Ferraro (2010) demonstrated how GRI’s use of words and analogies contributed
to institutionalising sustainability reporting. Future research can investigate how GRI
guidelines and standards helped create a common language in sustainability reporting, as
represented in Figure 2. In this vein, empirically investigating how GRI standards (or other
standards) can enact stakeholder accountability, identify material issues, and measure their
social and environmental impacts can improve our understanding of their ability to create a
common language and contribute to reflecting on the need to create new global standards for
sustainability reporting.
15
Figure 2: Future research directions
As argued before, there is an ideological struggle in the new concept of double materiality.
These conflicting ideological interests are mirrored in recent initiatives for creating global
sustainability standards (e.g. the IFRS/ISSB’s initiative). Future research may be fruitfully
directed at investigating the ideological interests grounding the sustainability reporting
standards and their influence on accountability and the language characterising the dialogic
mechanism of sustainability reporting. Thus, future research may aim to answer the following
research questions:
How does the GRI react to maintain its position in the face of competing bodies, such
as the IFRS/ISSB?
How can the GRI standards foster broad multi-stakeholder accountability in
organisations?
Can the GRI continue to foster a common language and improve managers’ and
stakeholders’ sustainability literacy?
Can (or how can) different reporting standards jointly contribute to pursuing a
common language in sustainability reporting?
How can organisations/managers manage the trade-off and ideological conflicts
between GRI standards and investor-oriented sustainability standards?
The material issues and information disclosed in sustainability reports are based on the type
of accountability organisations embrace and the sustainability standard they adopt. Therefore,
there is considerable interest in understanding the influence of GRI and other standards on
materiality and content of sustainability reports. Some related research questions are:
How do different reporting standards change materiality assessment and stakeholder
engagement performed by organisations?
Is the concept of materiality evolving toward a financial meaning? If so, why?
How does the type of accountability organisations embrace influence reporting?
16
Stakeholders
accountability
Materiality
assessment
Sustainability
performance
indicators
Sustainability
standard setting
Common language
creation
The European Union regulation and recent sustainability standard-setting initiatives aim to
facilitate the comparability of sustainability information/reporting (La Torre et al., 2018).
Establishing standard metrics and indicators for measuring sustainability performance will
aid comparability. However, standard metrics may also work against broad accountability
and ensuring all material matters are disclosed. Related research questions are:
How can/do standard sustainability metrics and indicators foster or deter broad multi-
stakeholder accountability?
How are stakeholders needs met/frustrated by the disclosure of standard metrics and
indicators?
How do financial and investors interests play a role in establishing standard metrics,
and how does this process affect a broader set of stakeholders and society as a whole?
How is/could the trade-off between comparability and materiality managed in
developing and using standard sustainability reporting metrics?
To conclude, as we have argued before, the GRI will face the challenge of competing with
other reporting frameworks (e.g. the Value Reporting initiative, the UN Global Compact and
the Task Force on Climate-related Financial Disclosures) to maintain its position. Thus,
future research could examine the research questions encompassed in the following question:
How do/can the competition and collaboration among standard setters influence the
language, the materiality and the metrics in sustainability reporting practice?
6. Conclusion
This paper is motivated by the increasing need and regulatory pressures for developing global
standards for sustainability reporting. In reviewing the GRI research and its history in
developing and promoting sustainability reporting standards, we highlighted the GRI’s long-
standing and global position as an important sustainability reporting standard-setter. Over the
decades, the GRI has contributed towards the development and improvement of sustainability
reporting practices worldwide. The GRI thus fostered a common language in sustainability
reporting practices, both for organisations and stakeholders.
This common language has been developed though the widespread voluntary adoption of
GRI guidelines/standards over the years, making the GRI standards the de-facto standard for
sustainability reporting. Since corporate accountability is dialogic in nature (Cooper and
Owen, 2007; Dillard and Vinnari, 2019), standards are essential to establish the dialogue
surrounding accountability and sustainability reporting.
We identify that the IFRS/ISSB initiative to create new sustainability standards is an attempt
to establish dominance in all reporting standards. However, despite its aim to differentiate
itself from the GRI by serving financial stakeholders, the IFRS/ISSB is unlikely to harm the
GRI's global position in developing multi-stakeholder-oriented sustainability reporting
standards. We explain that this is due to their different roles and positions in the sustainability
17
standard-setting arena: investor-focused versus societal/stakeholder focused standards, and
the different sources of legitimacy they rely on.
The IFRS Foundation's initiative in sustainability standard-setting leverages its structural
legitimacy, based on its global financial standard-setting position. However, the IFRS cannot
stray from its founding principles, which relate to investor needs, therefore IFRS/ISSB is
unlikely to fully understand and address the information needs of non-investor stakeholders.
By contrast, the GRI can benefit from its consequential legitimacy, which is based on what it
has been able to accomplish in the sustainability reporting field and the global adoption of its
standards. Thus, we conclude that the GRI will likely continue to be revered as the custodian
of reporting standards focused on promoting sustainability reporting and multi-stakeholders
accountability that focus on information needed to assess the impact of the reporting
organisation on society and the environment, while the IFRS Foundation’s ISSB will be seen
as the protector of investors with their standards promoting the disclosure of financial and
‘sustainability’ information that focus on the impact of the environment and society on the
reporting organisation.
18
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