The Global Reporting Initiative (GRI), one of the leading organizations promoting standardized ESG reporting, announced its support for a proposed governance change by the European Financial Reporting Advisory Group (EFRAG), that would introduce a two-pillar structure for financial and non-financial reporting.
The GRI’s position was made as part of a published response to EFRAG’s consultation following a request by the European Commission to consider the changes needed to EFRAG’s governance, if it were to take on responsibility for creating non-financial reporting standards, as part of the Commission’s review of the Non-financial Reporting Directive (NFRD), including its exploration of how new European sustainability standards could be created and managed.
EFRAG’s current mission is to serve develop and promote European views in the field of financial reporting and ensuring that these views are properly considered in the IASB standard-setting process and in related international debates.
In its consultation, it was proposed that EFRAG establish two pillars, one for financial reporting activity, and another for nonfinancial reporting standard setting (NFR).
In its response, GRI stated:
“In principle we support the proposed creation of a two-pillar structure under the EFRAG umbrella to drive the necessary and appropriate reporting by organizations. We strongly believe that all companies need to prepare two comprehensive reports to provide all stakeholders a complete and relevant picture of their impacts; one addressing financial considerations and the other addressing all external impacts a company is having on society and the environment and hence their contributions towards the goal of sustainable development. The proposed structure safeguards against one of the two being underweighted. Furthermore, we are of the opinion that both financial reporting and non-financial reporting need to be mandated and pursued with the same level of rigor.”
The response also outlined how GRI and the Global Sustainability Standards Board (GSSB), an independent operating entity with responsibility for the development of GRI sustainability standards, can contribute to the European solution, including addressing the need for one global set of sustainability reporting standards. The response stated:
“As a mission-driven organization, we are keen to ensure that our GRI Standards are part of this future. The GRI Standards are truly global in nature and in adoption; which aligns well with the ambition of the Commission to develop a solution for use beyond Europe.”
The GRI has been one of the leading voices promoting the development of global sustainability reporting standards. In December, as part of its response to the International Financial Reporting Standards (IFRS) Foundation consultation on its potential role in sustainability reporting standards, the organization issued a call recommending mandatory sustainability reporting by companies.
Peter Paul van de Wijs, GRI Chief External Affairs Officer, said:
“The GRI Standards, the most widely used sustainability reporting standards in Europe and beyond, are well positioned to play a key role in achieving the Commission’s aims to improve and expand non-financial reporting in the EU. Furthermore, our globally applicable, independent standards can be a bridge to achieving an international solution.
“The EU has an opportunity to provide global leadership, as the first major jurisdiction to mandate sustainability reporting with the same rigor as financial reporting. GRI stands ready to work with EFRAG and the Commission to make this a reality.”