‘Turmoil’ over GRI chair appointment highlights ‘political sensitivities’ of standard setting, says CEO

GRI's head Eelco van der Enden tells RI about the reaction to Carol Adams' appointment and reflects on the impact-focused standard setter's role in the push for interoperability.

The appointment of respected academic Carol Adams as chair of the Global Reporting Initiative’s (GRI) technical standards board raised more than a few eyebrows when it was announced in March by the impact-focused global standards body.  

A strong advocate for the importance of double materiality in corporate sustainability reporting, her appointment seemed to some to conflict with the GRI’s efforts to forge closer ties with the International Sustainability Standards Board (ISSB) and its project to create a global baseline reporting regime for companies based solely on financial materiality.  

“Tremendous turmoil” is how the GRI’s CEO, Eelco van der Enden, describes the response to the announcement.

“The questions I got immediately was whether the appointment of Carol would mean that GRI would step out of any construct with the ISSB, since Carol has been rather critical,” he tells Responsible Investor.    

A headline in RI a few days later, which flagged Adams’ attempt to push Australia to favour the EU’s double materiality-orientated standards over ISSB financial materiality ones, did not help matters. 

Given the GRI’s focus on impact, it is more closely identified with the European Sustainability Reporting Standards (ESRS), which will underpin the bloc’s new corporate disclosure regime. Despite this, early last year, the Amsterdam-based body signed an agreement with the ISSB to coordinate standard-setting activities. 

The political sensitivity surrounding the appointment of Adams took the GRI by surprise, Van der Enden admits – and offers lessons for the future. “Massaging expectations of stakeholders is a part of now being embedded in this global standards establishment, and that’s something the organisation will just have to do better,” he says.

He notes, however, that the deluge of queries from stakeholders from across the industry about what Adams’ appointment means for the GRI’s relationship with the ISSB did not include representatives of the latter.    

Instead, it was Van der Enden who reached out to the global standards body to reassure them that the choice of Adams as chair of the Global Sustainability Standards Board (GSSB) would not jeopardise their relationship.  

The selection of Adams was made not by Van der Enden or the GRI’s Supervisory Board, but by the body’s Independent Appointments Committee (IAC).  

From his discussions with the chair of the IAC, technical capabilities had been “a very strong focus” in the selection process, Van der Enden says. “No one can question Carol’s technical capabilities,” he adds.  

But given the GRI’s role as part of the expanding global reporting landscape – alongside ISSB and EFRAG, the EU’s standard setting body – the “political component” of what GRI does “is different from what it was 10 years ago”, he says. 

Interest in sustainability reporting standards has gone beyond traditional players and is becoming a key topic for regulators, investors and businesses, Van der Enden says. 

As he notes, that brings with it a “different responsibility”. “It’s not only saying ‘thou shalt report’ but also how can we co-operate and in what way to achieve this global comprehensive baseline – and that requires, beside technical skills, a flexibility.” 

Looking at governance 

To foster this flexibility, the GRI will also look at changes to its governance, including around “selection procedures”.

Van der Enden says the initiative is considering options such as the introduction of “safeguards” when it comes to hires undertaken by independent bodies within GRI. He stresses, however, that any changes introduced will not impact the “absolute independence of its standards”. 

Asked how such safeguards might have impacted Adams’ appointment, he says the “political sensitivities would have been taken more into account” – but adds that there is no way to tell if that would have influenced the outcome. 

The review Van der Enden has in mind would also look at the complex structure of the GRI, which he jokes has as many supervisory bodies as members of staff.  

Such a review is necessarily, he says, “if we are to make sure that not only the technical side of our business gets sufficient attention, but also political and politically sensitive topics”. 

A spokesperson for GRI confirmed that its governance and strategy committee has been mandated to come up with a proposal to put to the body’s supervisory board in June.

Details are still being worked out, but the central aim will be to put the responsibility for appointments in the hands of the GRI’s CEO and supervisory board, she said.

Committed to collaboration 

One thing that will not change is the GRI’s commitment to working with ISSB.

“If it is up to us, we will extend the memorandum of understanding,” Van der Enden says. “We will work more closely together in the future, so there is no inch of movement from our strategic direction towards supporting the ISSB and the whole concept of a global comprehensive baseline.” 

He argues that the ISSB financial materiality-focused standards and the GRI’s impact-focused ones can complement each to provide different jurisdictions with the reporting regimes they need.  

As he notes, however, key to this is interoperability, which has started to emerge across the different standard setters, particularly over the past 16 months or so. 

“If I look at the European sustainability standards, the impact part is for more than 90 percent covering GRI, so there is interoperability between GRI and ESRS. Then on the other side, ISSB is in the middle of discussions with EFRAG on definitions about financial materiality.” 

The fact that these bodies are involved in such lengthy discussions increases the likelihood that they will come to a “mutually acceptable conclusion”, Van der Enden says. “An interoperable structure between ISSB, GRI and the ESRS would a best-case scenario for all of us.”