After the ‘Lost Decade’ — GRI to embark on new materiality guidance for GRI 3: Material Topics

9 min readOct 12, 2023

In her most recent Letter, Global Sustainability Standards Board (GSSB) Chair Carol Adams announced that “GSSB approved a proposal to develop (initially non-authoritative) guidance to help reporters use the process set out in GRI 3: Material Topics of determining and prioritising their organization’s significant impacts as a starting point for identifying risks and opportunities that arise from those impacts.”

This tees up a perfect opportunity for r3.0 to post excerpts from our Common Good Resource Paper, The Lost Decade: Sustainability Standards Sabotage Sustainability, which document the evidence of the Global Reporting Initiative (GRI) initiating its sabotage of sustainability by its quiet “bait-and-switch” of the horizontal axis of its Materiality Matrix.

In a nutshell, GRI introduced a Materiality Matrix in its 3rd Generation of Sustainability Reporting Guidelines (G3) in 2006 with a horizontal axis measuring Significance of Economic, Environmental, and Social Impacts, only to surreptitiously replace it in G3.1 in 2011 with Significance to the Organization.

In other words, GRI shifted from an altruistic approach assessing the organization’s impact on the world to a narcissistic approach assessing the world’s impact on the organization. This background seems necessary to understand GRI’s and GSSB’s efforts to reassess its current approach to materiality, in light of this baggage of sabotage.

You can read the excerpts in the interactive living document version here and more specifically here (or just continue to read below):

Begin of excerpt:

GRI 2006: Enter Context-Based Materiality

In 2006, four years after the establishment of the Sustainability Context Principle, GRI released its Third Generation of Sustainability Reporting Guidelines. G3, as these Guidelines were dubbed, introduced a new organizational structure for its Principles, with a first layer of Principles for Defining Report Content comprising 4 foundational Principles: Materiality, Stakeholder Inclusiveness, Sustainability Context, and Completeness.

GRI G3 Principles for Defining Report Content: Retaining Sustainability Context, Adding Materiality

This new configuration of the Principles both retained existing Principles from G2 (including Sustainability Context) and added new Principles — including Materiality, which had recently been redefined by AccountAbility CEO Simon Zadek and colleagues, expanding the term from its traditional bounded application in financial reporting, to now also apply to sustainability reporting and assessment. G3 picked up on this development, articulating its own definition of Materiality:

“In financial reporting, materiality is commonly thought of as a threshold for influencing the economic decisions of those using an organization’s financial statements, investors in particular. The concept of a threshold is also important in sustainability reporting, but it is concerned with a wider range of impacts and stakeholders. Materiality for sustainability reporting is not limited only to those sustainability topics that have a significant financial impact on the organization. Determining materiality for a sustainability report also includes considering economic, environmental, and social impacts that cross a threshold in affecting the ability to meet the needs of the present without compromising the needs of future generations. These material issues will often have a significant financial impact in the near-term or long-term on an organization. They will therefore also be relevant for stakeholders who focus strictly on the financial condition of an organization.” [emphasis added]

What’s particularly interesting is that G3 frames Materiality in terms of two types of thresholds: materiality thresholds, as commonly understood in financial materiality, and sustainability thresholds. In other words, G3’s definition of Materiality encompasses Sustainability Context, and so establishes the foundations for a Context-based approach to Materiality.

Accompanying this introduction of the Materiality Principle was a figure representing a matrix to graphically illustrate the dimensions encompassing Materiality, including Influence on Stakeholder Assessment and Decisions on the vertical axis and Significance of Economic, Environmental, and Social Impacts on the horizontal axis.

GRI G3 Materiality Matrix (2006)

Later, in the Profile section, G3 makes even clearer its commitment to the necessary disclosure of inside-out impacts and risks (ie an organization’s impact on its stakeholders and its broader operating environment) and also outside-in impacts and risks (ie the world’s impacts on the organization):

“The reporting organization should provide two concise narrative sections on key impacts, risks, and opportunities.

Section One should focus on the organization’s key impacts on sustainability and effects on stakeholders, including rights as defined by national laws and relevant internationally agreed standards. This should take into account the range of reasonable expectations and interests of the organization’s stakeholders…

Section Two should focus on the impact of sustainability trends, risks, and opportunities on the long-term prospects and financial performance of the organization. This should concentrate specifically on information relevant to financial stakeholders or that could become so in the future.” [emphasis added]

In other words, Section One encompasses inside-out impacts, and Section Two encompasses outside-in impacts, and together, Sections One and Two encompass a holistic approach to Materiality that also integrates the ecological and social thresholds enshrined in the Sustainability Context Principle.

This combination of bi-directional Materiality with the Sustainability Context Principle represented an apex in sustainability standards development. The expectation at the time, of course, was that the development process of strengthening sustainability standards would continue…

GRI 2011: Enter the Sabotage

In 2011, GRI introduced a seemingly modest revision of G3, appropriately labeled G3.1. The key Sustainability Context and Materiality Principles remained essentially intact. However, a seemingly minor yet ultimately monumental element was added, deep in the Technical Protocol for Applying the Report Content Principles.

On page 194 of the 200 page document, in the section covering Step 2: Prioritization encompassing the Materiality assessment, the detailed guidance completely abandons the approach to Materiality laid out in the Report Content Principles section of the upfront Reporting Guidelines (on page 8). Specifically, the original Materiality Matrix with the vertical axis of Influence on Stakeholder Assessment and Decisions and the horizontal axis Significance of Economic, Environmental, and Social Impacts is retained in the upfront section, but by the time we get to the detailed guidance of the Technical Protocol, the horizontal axis has completely disappeared, replaced (without noting this replacement or further explanation) by a horizontal axis of Significance to the Organization.

Let me repeat that to let its significance sink in: without comment or explanation, GRI removed Significance of Economic, Environmental, and Social Impacts from the horizontal axis of the Materiality Matrix, and replaced it with Significance to the Organization. An organization assessing the significance of [its] economic, environmental, and social impacts is a humane, empathic endeavor. An organization assessing the significance of the “Aspect” to the organization itself is a self-centered or even narcissistic endeavor.

GRI Materiality Matrix (G3.1–2011): Enter Sustainability Sabotaging Narcissism

While one might assume that the Significance of Economic, Environmental, and Social Impacts is subsumed under the Significance to Stakeholders — ie, merging the horizontal axis from the original Materiality Matrix into the vertical axis to represent both dimensions, this would amount to just that — an assumption. GRI would have had to actually articulate this merging in order for G3.1 users to safely make this assumption. The evidence reveals that GRI did not articulate this.

The Prioritization section of the G3.1 Technical Protocol is utterly silent on the question Significance of Economic, Environmental, and Social Impacts — it appears nowhere in this section. GRI could have clarified that the Significance of Economic, Environmental, and Social Impacts must be integrated into the Significance to Stakeholders assessment, but, quite significantly, it neglects to do so.

Given the significance of this omission, one cannot interpret it as an inadvertent oversight.

No, the only accurate way to interpret this development is as a purposeful dilution of the Guidelines, which amounts to the first step in the sabotage of sustainability.

This development did not go unnoticed. In December 2011, Sustainable Brands published an article by Center for Sustainable Organizations Founding Director Mark McElroy identifying this “myopic change” that

“amounts to a perversion of the idea of materiality in sustainability reporting, because it essentially cuts out consideration of what are arguably the most material issues: the broad social, economic and environmental impacts of an organization, regardless of how they relate to a particular business plan or strategy.” [emphasis added]

This fatal flaw remains on the radar screen to this day. As recently as February 2023, the Embedding Project posted a blog spotlighting this same problem (and underlining it with visual representation).

Embedding Project visualization of GRI’s “sleight of hand” on “renaming the axes” on its Materiality Matrix in the G3.1 Technical Protocol.

Here’s how Embedding Project Founding Executive Director Stephanie Bertels and Knowledge Director Rachel Dekker describe the 2011 development:

“…determining the significance of economic, environmental, and social impacts was (and is) hard… But fear not, a quick sleight of hand and renaming of the axes solves the problem: impacts on the underlying systems around you gets swapped for impact on the business and influence on decisions becomes importance to stakeholders (now it’s just an opinion or a demand). Not to point fingers, but one of the first reports that we found to take this approach was Ford’s 2004–2005 sustainability report.”

Wait, Ford introduced this narcissistic approach to materiality in 2005, the year before GRI even introduced the concept of materiality in G3, and six years before GRI inexplicably shifted to the narcissistic approach to materiality?? It is a material fact that Ford was a major funder of GRI throughout this period, suggesting the possibility (probability? near certainty?) that Ford funding played some role in GRI’s “sleight of hand”…

As a brief tangent: To its credit, Ford did make the connection between Materiality and Sustainability Context here, a year before GRI codified this connection (as noted in our previous section). Here’s how Ford framed Sustainability Context in its Materiality analysis at the time:

“We also considered, in a less systematic way, “sustainability context” issues identified through major initiatives like the United Nations Millennium Development Goals and the Millennium Ecosystem Assessment. “Sustainability context” issues represent important global challenges. While not tied directly to the auto industry, they sometimes shape the nature of and response to the environmental, social and economic issues we identified.” [emphasis added]

Wait, not tied directly to the auto industry?? Climate change is a core issue under the Sustainability Context umbrella, and the auto industry clearly has a material impact on climate change (given that internal combustion engines emit copious amounts of carbon dioxide that trigger the greenhouse effect that causes climate change)!

Now, back to Bertels and Dekker, who continue:

“Next thing we know, we have almost two decades of materiality assessments that take a decidedly different approach — us versus them. Go ahead, open almost any sustainability report and we bet you will find a materiality matrix full of issues plotted as dots based on their importance to stakeholders and their potential to impact the business.”

I encourage you to see for yourself: just do a Google image search for “materiality matrix”

Google image search for “materiality matrix” yields almost exclusively “Significance to the Organization” on the horizontal axis

So, in the historical development thus far, we see that GRI initiated its commitment to authentic sustainability with its introduction of the Sustainability Context Principle in 2002 (in G2), and strengthened this commitment by integrating contextual sustainability thresholds into its new Materiality Principle in 2006 (in G3).

The period when G3 was in force — from 2006–2011 — represents a high water mark, if you will, for sustainability standards.

With the publishing of G3.1 in March 2011, GRI started the process of sabotaging sustainability, by shifting Materiality from covering the Significance of Economic, Environmental, and Social Impacts, to covering the Significance to the Organization.

This solipsistic shift set a dangerous precedent, as we will see, but the strength of the Sustainability Context Principle remained essentially intact at this point.

End of excerpt

If you like to read the full documentation, please see our r3.0 Common Good Resource Paper, The Lost Decade: Sustainability Standards Sabotage Sustainability, for a complete coverage of the Standard Setters Sabotage of Sustainability.




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