Sustainability and Social Justice

The Global Reporting Initiative: Promise and limitations

Document Type

Book Chapter

Abstract

Introduction The Global Reporting Initiative (GRI) is widely seen as the leading standard for voluntary corporate reporting of environmental and social performance worldwide. Since its modest inception in 1997, GRI has been formally embraced by more than a thousand companies and organizations worldwide, including over half of the S&P 100, and has informed the non-financial reporting (NFR) of many more (Brown et al. 2009; Etzion and Ferraro 2010). It has garnered widespread legitimacy and attained official recognition by governmental agencies and multilateral organizations, such as the United Nations Global Compact (Bair 2007). The founders of GRI, acting as ‘institutional entrepreneurs’, promoted a vision of a multistakeholder process with broad and shared benefits. The founders expected that GRI would shift the balance of power in corporate governance toward non-governmental organizations (NGOs) as representatives of civil society. GRI’s premise was that standardized information could be used for benchmarking and ranking companies, providing a valuable supplement to financial reporting for investors and empowering civil society organizations (Fiorino 2006). GRI has, however, proven to be much more successful in securing corporate acceptance than in gaining traction with NGOs or investors. GRI has clearly contributed to the legitimacy and routinization of corporate social reporting as a practice, but though its adoption extends to companies in larger developing countries, the impact on development is very limited. GRI has not resulted in the generation of comparable data sets that enable analysis across companies and sectors; indeed, the reports have very few users. On these counts, GRI has fallen short of the intent of establishing social reporting with the same status as financial reporting. Indeed, there are signs that the diffusion of GRI is stagnating in Western countries. More fundamentally, GRI has disappointed expectations that the balance of power in corporate governance could be shifted toward civil society. The impact of GRI on developing countries is hard to assess. GRI derived at least some of its impetus from Western public attention to poor labour conditions in developing country facilities owned by, or in, subcontracting relationships with Western multinational corporations. Whether GRI is viewed primarily as a tool for managing corporate reputation or for improving corporate practices, it has primarily been designed to serve Western NGOs and companies, rather than economic development in the global South. As a result, the requirements and reporting on labour rights are particularly weak in relation to other dimensions. Moreover, GRI guidelines do not address practices with a direct bearing on economic development, such as technology transfer, local sourcing or upgrading labour skills and capabilities. GRI, however, is likely to have incidental impacts on development. For example, implementation costs serve as a barrier to entry for developing country firms, but also potentially raise their capabilities and sophistication, thus helping them compete for a share of global value chains. The GRI entrepreneurs sought to transform the field of corporate governance through discursive, organizational and economic strategies. The GRI’s founders saw a core tension in the social reporting field between the logic of ‘civil regulation’, which views social reporting as a mechanism to empower civil society groups to play a more assertive role in corporate governance and the logic of ‘corporate social performance’, which emphasizes the instrumental value of social reporting to corporate management and the investor community. The founders sought to create an alliance of NGOs and business by advocating a ‘win-win’ frame in which these logics are portrayed as complementary (Levy 1997). At the core of GRI’s strategy is the institutionalization of NFR as a routine practice. The win-win discourse of corporate social responsibility (CSR) has certainly helped move GRI toward this goal. The evidence, however, suggests that GRI is losing momentum primarily because of a failure to deliver value to various stakeholders. Investors remain unconvinced that NFR is valuable in pricing financial assets, companies are expressing doubts about the payoffs from NFR, and NGOs are not finding GRI data particularly useful in their campaigns. Institutional emergence is a dynamic process, whose trajectory reflects the outcome of strategic interactions between actors and does not always reflect the intentions of its founders. The GRI entrepreneurs correctly understood the centrality of support from the corporate sector to the success of the initiative, and they recognized the constraints imposed by resistance to radical shifts in governance. Considerable attention was thus paid to ensure collaboration from major multinational corporations. As a result, the corporate sector plays an increasingly prominent role, while activists find themselves somewhat marginalized, eclipsing the ‘civil regulation’ vision. Data for this project were collected from an extensive documentary analysis of the GRI archives and secondary sources, observations at annual GRI conferences, and semi-structured interviews with approximately 50 individuals who participated in the development and use of the GRI.

Publication Title

Business Regulation and Non-State Actors: Whose Standards? Whose Development?

Publication Date

2011

First Page

109

Last Page

121

ISBN

9780203126929

DOI

10.4324/9780203126929-17

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