Sustainability reporting is a fast-moving subject, and significant changes took effect particularly with the implementation of the Corporate Sustainability Reporting Directive (CSRD) and the adoption of the European Sustainability Reporting Standards (ESRS).
Many organizations who voluntarily report under the Global Reporting Initiative (GRI) Standards wonder what to do. While GRI Standards were popular due to their global recognition, the CSRD mandates that companies within its scope must adhere to the ESRS.
Despite this shift, the transition might not be as daunting as it appears. Both GRI Standards and ESRS share a common architecture and use similar terminology and concepts easing the potential burden on companies making the switch.
Recognizing the need to simplify this process, GRI and the European Financial Reporting Advisory Group (EFRAG) have introduced the ESRS-GRI Standards Interoperability Index and the GRI-ESRS Data Point Mapping Tool. Both of these tools are essentially a bridge, mapping the overlap between two sustainability reporting standards. They are also helpful to understand the differences between the standards. Comparing the standards with help of these tools, a company that has already reported under GRI Standards can see where the disclosures in GRI Standards correspond in ESRS (and vice versa). This enables companies to identify gaps as well as areas where they are well positioned.
However, the move to ESRS does prompt questions, especially for those well-acquainted with GRI reporting. The nuances in disclosures, the metrics, and the different wording used for the degree of obligation, including the concept of double materiality assessment, present new challenges. The double materiality assessment, in particular, is a key distinction — ESRS considers financial materiality along with impact materiality as it was used to be the case for the pre-2021 GRI Standards, but not anymore.
To navigate these changes effectively, companies are advised to conduct thorough gap analysis, comparing their current GRI-based reports with ESRS requirements to identify any disparities. Companies might also prioritize data collection to meet the new double materiality assessment and the detailed disclosure requirements of ESRS. This proactive approach, along with creating dummy reports, can ensure a smooth transition.
In conclusion, while the ESRS introduces new reporting dynamics, the foundations laid by GRI Standards offer a valuable starting point. Even though the scope, flexibility, and global recognition of GRI Standards ensure their continued relevance in the broader sustainability reporting landscape, it can be expected that the ESRS will overtake the importance of GRI Standards in the EU in upcoming years.
Therefore, in our upcoming newsletters we would like to take a closer look at the issues raised in this newsletter. Our next newsletter will focus on interoperability between the standards, explaining to what extent companies that have previously prepared sustainability reports using the GRI Standards can easily apply their established processes and collected data to ESRS reporting.