The G.4 – Part 2 of 3 – Major Transparency Shift on Extended Responsibility in Supply Chains

October 22, 2012 EcoVadis

The amendments proposed to the GRI reporting guidelines introduce dramatic conceptual changes associated with the redefinition of contextual elements, reporting boundaries, materiality, in which supply chain is pervasive. This second part of the Ecovadis blog series dedicated to the GRI G4 project focuses on increased supplier-centered content into the following elements in particular: the revised glossary, profile disclosure, and disclosure on Management Approach.

Terminology

For the first time, the G4 guidelines are to define the term “supplier” extensively, in addition to “supply chain” and “value chain”. The definition of supplier encompasses brokers, consultants, contractors, distributors, home workers, independent contractors, primary producers, wholesalers and sub-contractors.  A supplier is defined as “an organization or person that provides materials, products or services directly or indirectly to another organization”.  The definition of value chain, more imprecise than in the ISO 26000 guidance, includes “parties that are linked by the organization’s activities, products, services, and relationships, and may therefore impact and be impacted by the organization.” In this context, supply chain is defined as “the part of the value chain which consists of the sequence of suppliers and activities that provides materials, products or services to an organization”.

New Profile disclosure

There is a total of 73 disclosure items in the G4 (compared to only 42 in the G3). Among them, a range of new disclosures are part of the revamped “Organizational Profile” section and ask to report on three main supply chain-related elements: 1) types of materials, products and services used for the final product or service; 2) recent changes in organization’s structure including the supply chain; 3) number of suppliers and their locations by country and region along with a disclosure on the volume or monetary value of purchases (by type, locations, etc.).

Boundary & Materiality

A major transformation in the G4 is the enlargement of the boundary definition. From now on, the boundary definition is based on impacts in the entire value chain and not exclusively legal ownership or control.  To achieve this, the guidelines have introduced a new step to define boundary: “Map Value Chain”. In addition, more than ever, the G4 stresses on materiality to shortlist the topics of importance in the report with a special reflection on the value chain context 

Disclosure on Management Approach (DMA)
In the G4, the DMA gets separated into ‘Disclosure’ and ‘Guidance’ sections and more importantly consists of a Generic DMA and Aspect-specific DMA (based on the relevance of management practices, i.e. which level a topic is managed at). On one hand, the generic DMA ask for a narrative on new concepts such as the inclusion of CSR criteria into supplier selection, management, auditing and contract termination, CSR contractual obligations, product and service design.   The project proposes a specific DMA for the new ‘Procurement Practices’ Aspect. Another new specific DMA cover the ‘Employment’ Aspect, which includes disclosures on suppliers’ employees (working conditions, social and labor protection, remuneration, employment relationship etc.).
With such major revisions included in the G4, reporting companies will be compelled to provide a comprehensive data set on supply chain topics. The guidelines will ask for standard mandatory disclosure items defining the perimeter of the value chain along with key impacts (and CSR issues) of concern.  GRI reporters therefore must be largely prepared in advance to be able to communicate the related information.

This article was written by Simon Gargonne, CSR analyst at Ecovadis

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Top photo: Flickr Creative Commons Ajnagraphy

 

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