| The fall of Enron, the collapse of
several more high-flying corporate giants, and the wrestling match
between the White House and the General Accounting Office are the
latest convulsions in a broad revolution that has caused a crisis
in both confidence and legitimacy. Institutions of all kinds are being
asked to disclose information about their economic, social or environmental
performanceand not just any information, but extensive, credible
The revolution follows from the most basic requirements about democratic
politics and free markets. Human beings whether acting as citizens,
investors or consumersneed good information to make good decisions.
During the 20th century, governments around the world took steps to
increase the freedom and reliability of information on everything
from hot dogs to political campaigns. When failures to disclose good
investment information triggered an economic meltdown in the 1930s,
the U.S. responded by creating Generally Accepted Accounting Principles
(GAAP) and the Securities and Exchange Commission (SEC).
The most recent disclosure revolution has its roots in the quiet,
but steady, demand from social investment funds over the last three
decades for corporate information on environmental and social performance.
For those who see the current process of globalization as a march
toward human and environmental destruction, the call for more openness
in both the making of decisions and the disclosure of impacts has
become a vital remedy. Small wonder, then, that one of the core topics
at every international meetingsuch as the World Trade Organization,
the World Economic Forum, the World Social Forum, the OECD, the World
Bank and the planning meetings for next falls World Summit on
Sustainable Developmenthas been how to create accountability
and confidence in the process of globalization.
Fortunately, there is one very bright spot on the horizon. On April
4, 2002, representatives from at least 200 organizations will gather
at United Nations headquarters in New York, NY, to celebrate the establishment
of the Global Reporting Initiative (GRI) as a new and permanent international
body. Conceived nearly five years ago as a partnership between the
U.S.-based Coalition for Environmentally Responsible Economies (CERES)
and the UN Environment Programme (UNEP), the GRI has created a successful
international multi-stakeholder processwith activists, business
leaders, accountancy societies, labor and government all at the tableto
develop disclosure guidelines for the social and environmental performance
of large organizations.
The GRI has already released two sets of Sustainability Reporting
Guidelinesa beta test in March 1999 and a Version
1.0 in June 2000. The June 2000 guidelines have been used by
more than 100 companies to shape and inform their reports.
Over the past 18 months, the GRI Secretariat has been gathering thousands
of comments from business leaders, accountancy experts, human rights
activists, environmentalists, financial analysts, civil society leaders
and government officials, and has coordinated the work of 10 international
working groups to recommend improvements in the guidelines. The result
of this intense and unparalleled intellectual investment will be captured
in the release of new guidelines in July 2002. This version will be
widely distributed and discussed at the World Summit in Johannesburg.
Analogous to software development and financial standard setting,
the steady, logical improvement of the metrics and the guidelines
Up until this point, the GRI has existed primarily as a vast virtual
network, guided by a diverse steering committee and an interim secretariat.
On April 4, a new, deeply experienced board of directors, balanced
among representatives of labor, civil society and business, will take
over. By the end of the year, the GRI will have selected a chief executive
and will have moved its headquarters to Europe. In the next 12 months,
a plethora of experimental GRI supplements adapted to different industry
sectors will appearsuch as mining, financial services, tourism
and automotive. And, of course, the core process of identifying what
information is most useful to evaluating corporate performance and
how that information can be measured and released will continue.
Looking ahead, pressure for GRI-based information will rise on all
frontsfrom government, from external stakeholders and particularly
from investors, who are looking for more and better ways to have confidence
in the real value and success of a firm. For example, in the United
States, the Enron scandal has put the spotlight on the need for better
accounting and increased corporate disclosure and transparency. In
the United Kingdom, pension funds are now required to report on their
consideration of social and environmental criteria in their investment
decisions. In France, publicly-traded companies now have to disclose
in their annual reports the way in which they take into account
the social and environmental consequences of their activity.
In some cases, the calls for disclosure have focused on a particularly
pressing issue, such as climate change. A group of British pension
funds is now asking firms to evaluate the financial and business risk
they face from a changing climate. Earlier this year, U.S.-based Domini
Social Investments pressed the SEC to require companies to disclose
their plans to avert climate change in the same manner that they discussed
their Y2K precautions. Shareholder resolutions have been filed against
major U.S. utilities, automakers and other industrial manufacturers
requiring the measurement and disclosure of greenhouse gas emissions.
Through all this activity we are witnessing the emerging tendrils
of what will soon be a large, interconnected system of information
measurement and distribution. This system will allow everyonemanagers,
investors, activists, consumers and government officialsto make
better decisions. The system will have many players performing many
functionsinformation gathering, ranking and assurance. The GRI,
as an institution, will occupy only a small, though vital, piece of
For example, the GRI is not a code of conduct; it is a set of disclosure
protocols that can be used by the proponents of various codes of conduct
to evaluate corporate compliance. The GRI is not a database; the collection
of GRI data will be gathered by investment companies, governments,
rating agencies, activist groups and other interested parties. The
GRI will not itself verify reports, though it will offer intellectual
guidance to those parties that may wish to provide assurance and credibility
services. The GRI, like the Financial Accounting Standards Board in
the U.S. and standard-setting bodies elsewhere in the financial world,
has one single but vital mission: to create general acceptance
among many parties on what should be measured and how.
As the United States was trying to define a new set of relationships
with the Soviet Union in the 1980s, President Ronald Reagan often
quoted a Russian proverbDoveryai, no proveryaitrust,
but verify. The core intuition of the proverb is that a relaxation
of tensions and the building of collaboration between parties depend
on establishing trust; but trust, in turn, depends on openness.
Events around the worldfrom the street battles over globalization
to the U.S. congressional hearings over Enronall point to a
damaging lack of trust and confidence. Too many people feel that the
interests of commerce are overwhelming all other human concerns and
that globalization will not lead to a more prosperous, more just and
more sustainable world. Their trust cannot be earned through artifice:
it will be built only by creating a system of international disclosure
in which people have intellectual, political and moral confidence.
With a little luck and a lot more hard work, the launching of the
Global Reporting Initiative on April 4th will be remembered as one
of most important steps along that path.
Robert Kinloch Massie is the executive director
of CERES and a member of the board of directors of the Global Reporting
Initiative. He can be contacted at massie@globalre porting.org. All
relevant information about the GRI, including records of meetings,
comments on the guidelines and descriptions of future events, can
be found at www.globalreporting.org.
For information or materials, contact Mark Brownlie at brownlie@global