Navigating the Interplay of GRI Standards and ESRS

In the dynamic world of sustainability reporting, the Global Reporting Initiative (GRI) Standards represent a widely recognized set of sustainability standards, providing a reliable framework and guidance for companies worldwide.

As the reporting landscape is evolving with the introduction of the European Sustainability Reporting Standards (ESRS), mandated by the Corporate Sustainability Reporting Directive (CSRD), companies operating in the EU may find themselves at the intersection of GRI and ESRS.

In an important step towards harmonizing sustainability reporting standards, GRI and EFRAG (European Financial Reporting Advisory Group) signed a cooperation agreement in November 2023. This agreement gives companies that already report in accordance with GRI the certainty that they can use their current reporting processes for the ESRS. One year later, in November 2024, this joint collaboration resulted in the GRI-ESRS Interoperability Index and the GRI-ESRS Standards Data Point Mapping. These compare the various standards. GRI and EFRAG are currently working on a standardized XBRL taxonomy to improve the accuracy and accessibility of sustainability data. Details can be found in the section Standardized XBRL taxonomy

It is essential to understand the interaction between GRI and ESRS to ensure a seamless transition. In this blog article, we explain how you can build on your existing GRI reporting processes to prepare for compliance with the upcoming ESRS requirements.

GRI Standards: A Solid Foundation

GRI provides guidelines and standards for companies worldwide to report their sustainability-related information in a standardized and transparent manner.

The GRI standards consists of reporting guidelines and indicators for environmental, social, and governance (ESG) performance and impacts.

It helps organizations identify

• (1) material issues relevant to their operations and stakeholder concerns,
• (2) set targets and objectives, and
• (3) measure progress over time.

Companies worldwide have embraced GRI as the gold standard, incorporating its approach into their reporting practices, as GRI Standards consider the multifaceted aspects of sustainability, offering not just a framework but a narrative that resonates globally.

Concern of Double Reporting: Navigating Global (GRI) and European Demands (CSRD)

One pressing question for you as a sustainability professional is whether the ESRS will impose 'double reporting' requirements. According to GRI, companies already reporting with GRI Standards can integrate ESRS requirements into their existing processes.

Acknowledging concerns about increased reporting burdens due to new requirements, GRI actively engages with the European Commission to minimize additional demands. The European Commission's strategy aligns with the idea of building on existing standards rather than reinventing the wheel. GRI practices are considered valuable assets that can be integrated into the ESRS framework reporting processes.

As a result, GRI Standards can serve as a useful preparatory tool for ESRS reporting. Companies applying the reporting standards of GRI can find assurance that their current processes align well for the requirements of ESRS. 

The latest publication on GRI's collaboration with EFRAG emphases this once again: ‘The interoperability between GRI and ESRS avoids the need for duplicate reporting. Companies can use their existing GRI reporting procedures and practices to fulfil and complement the requirements of the CSRD.’

The ESRS will gradually expand their requirements, and utilizing GRI reporting ensures companies are prepared for forthcoming obligations.

The collaboration between the GRI and EFRAG and the IFRS Foundation aims to develop a core set of common disclosures and terminology. The focus is on assessing external impacts and understanding the impact of sustainability issues on an organization, or both.

The collaborative approach seeks to reduce reporting burdens significantly while enhancing the transparency and availability of credible and comparable sustainability data. This partnership acknowledges the advantages for all stakeholders and information users, encompassing investors and reporting organizations.

A Closer Look at ESRS: Novelties and Differences compared to GRI

The ESRS have been legally binding for the first group of companies since 2024, which represents an important milestone for data availability and comparability. Although the GRI Standards are globally applied standards, this is voluntary reporting; companies are not legally obliged to report in accordance with the GRI Standards. In the EU, the ESRS will become a fundamental part of systematic reporting routines for companies.

While EFRAG ensures alignment with the GRI Standards wherever possible, differences between the two standards are evident. These differences may relate to the granularity and type of data, the scope of application or the definition of the standards. The explicit differences (and the similarities) can be seen in the published GRI-ESRS Interoperability Index and in the GRI-ESRS Standards Data Point Mapping.

‍

For example, the ESRS introduce novelties compared to the impact-focused GRI Standards, such as a more extensive list of ESG data points following the double materiality analysis.

In the following, we listed some examples of differences:

ESRS 1 General Requirements vs. GRI 1 Foundation

• ESRS sustainability reporting is more prescriptive than GRI regarding the requirements for the reporting format
• ESRS require you to conduct a double materiality assessment, including the impact and financial perspective, while GRI is focused on impact materiality
• ESRS require you to use materiality on all levels, such as topics, sub-topics, sub-sub-topics, impacts and opportunities, while GRI refers to materiality at a topic-level

ESRS E1 Climate Change vs. GRI 302 Energy

The differences between ESRS E1-5 and GRI 302-1, both dealing with data on energy consumption, lie in the way in which the energy consumption data is aggregated and disaggregated

‍ESRS E1 Climate Change vs. GRI 305 Emissions

While ESRS E1-6 requires you to report the intensity ratio for total Greenhouse Gas Emissions (GHG) involving Scopes 1, 2 and 3, GRI 305-4 requires you to report the intensity ratio from Scope 1 and Scope 2 GHG Emissions separately from Scope 3

ESRS S1 Own Workforce  vs. GRI 403 Occupational Health and Safety

GRI 403-1a demands you to report on the legal requirements and management system standards which your system relies on, while such information is not demanded by the ESRS as this is aspect is regulated by the European Union

ESRS S3 Affected Communities vs. GRI 411 Rights of Indigenous Peoples

GRI 411-1 requires quantitative data on the number of incidents. ESRS S3 requires narrative disclosures

ESRS G1 Business Conduct vs. GRI 414 Supplier Social Assessment

While GRI 414-1 demands quantitative data on new supplier screening based on social criteria,  ESRS G1-2 demands a disclosure in narrative format

Navigating Materiality Across Standards

Material topics, as defined by GRI, transcend the conventional financial materiality applied to businesses.

GRI focuses on impact materiality. This means GRI's interpretation identifies material topics as those representing the organization's most significant impacts on the environment and people, including their human rights. This impact perspective views materiality as the organization’s outward effects on the socioeconomic constructs it engages with.

GRI Sector Standards, when available, serve as a valuable reference for material topics pertinent to specific sectors. Each organization, guided by its unique context, refines its material topics through iterative collaboration with relevant stakeholders.

Impact materiality according to ESRS distinguishes between negative and positive impacts. Aligning with GRI guidance, it describes actual and potential negative impacts, emphasizing the severity determined by scale, scope, and irremediable character.In November 2024, it was announced that EFRAG had adopted the GRI definition of impact materiality.

In addition, the ESRS involve the financial perspective of materiality, applying the IFRS Sustainability Disclosure Standards tailored to the needs of investors and capital markets. This encompasses the assessment of how the financial effects of sustainability topics shape your organization.

Both perspectives combined, impact and financial materiality, are referred to as double materiality in the context of CSRD.

The ESRS introduced a due diligence process informing the materiality assessment of impacts, risks, and opportunities. It references two international instruments: the UN Guiding Principles on Business and Human Rights and the OECD (Organisation for Economic Co-operation and Development) Guidelines for Multinational Enterprises.

This due diligence process adds a layer of robustness to the materiality assessment within the ESRS framework, aligning with globally recognized principles and guidelines.

Mapping GRI and ESRS Reporting Requirements

Addressing the practical concerns of sustainability professionals, GRI and EFRAG aim to provide detailed technical guidance on mapping GRI Standards to ESRS requirements.

On November 22, 2024, one year after the initial announcement, the GRI-ESRS Interoperability Index was published. This is a mapping tool that maps the ESRS Standards to the appropriate GRI Standards to provide clarity for reporting organisations. Furthermore, GRI and EFRAG have published a GRI-ESRS Standards Data Point Mapping, which maps the GRI Standards to the respective ESRS Standards.

‍

Both tools set out to:

• illustrate the interrelation between disclosure requirements and data points in each set of standards
• empower you to incorporate GRI standards as a reference in your ESRS reporting
• assist you in utilizing your ongoing reporting endeavors to craft your ESRS sustainability report
• establish robust groundwork for a mutual digital taxonomy

The mapping highlights the substantial commonality that has been already established between the two standards. Their interoperability eliminates the necessity for dual reporting, creating a user-friendly reporting system without unnecessary complexity. 

Entities reporting under ESRS can be considered as reporting 'with reference' to the GRI standards, allowing you to use ongoing GRI reporting efforts for crafting your ESRS sustainability report.

Important: The GRI-ESRS Standards Data Point Mapping is currently only a ‘Prefinal Draft’ version and has yet to be approved by the EFRAG Sustainability Reporting Board (EFRAG SRB). Changes may therefore still be made.

In June 2024, the GRI-ESRS Linkage Service was launched to support companies in aligning their GRI reporting with the ESRS. The service provides an analysis of the links between GRI and ESRS data points as well as feedback on optimising and restructuring existing sustainability reports in line with ESRS requirements. Enquiries can be submitted via an online form.

Harmonisation of the XBRL Taxonomy for ESRS and GRI

The XBRL taxonomy is a standardised digital format that was developed to record, transmit and analyse reporting data in a structured manner. It helps companies to make sustainability and financial reports more transparent and efficient, significantly increasing the comparability and usability of the data for stakeholders.

To further advance digital sustainability reporting, GRI and EFRAG are currently working on a standardised XBRL taxonomy. This harmonisation will facilitate the transition from traditional reporting formats to digital platforms while improving the accuracy and accessibility of data. The aim is to prepare sustainability information that is clear, comprehensive and easy to understand for all stakeholders.

‍

Sunhat’s software solution supports you in crafting your reporting according to GRI and/or ESRS. Our dedicated modules break down all reporting and application requirements for you and reveal synergies between the two frameworks at a glance.

If you’re interested in getting to know more about Sunhat’s smooth and intuitive solution, request a demo.