A recent study published in European Management Journal sheds light on a surprising paradox in sustainability reporting: while the Global Reporting Initiative (GRI) standards have become increasingly comprehensive, their growing complexity may be undermining the very transparency they aim to promote. The research, titled "Standardization Cycles in Sustainability Reporting within the Global Reporting Initiative," analyzed sustainability reports from 15 large Norwegian organizations over an 11-year period (2010–2020).
These organizations represented seven different industries: financial services (3), insurance (3), manufacturing (2), energy (1), retail trade (2), aquaculture (2), and transportation (2). The findings reveal that while the volume of reporting content grew by 90%, transparency improved by only 18%. Meanwhile, the content of GRI standards increased by over 500% during the same period.
Vicious standardization cycle
The study examined why this happened by combining a qualitative longitudinal content analysis with a quantitative multi-level system dynamics model. This model explores the interactions between three key stakeholders: standardization organizations (like GRI), reporting organizations, and their audiences.
Transparency of sustainability reports is measured by the ratio of neutral statements in such reports and the total number of statements. A neutral statement about sustainability performance (whether positive or negative) is free from ambiguity and bias. We identified a vicious standardization cycle, where the introduction of more detailed and complex standards makes it harder for organizations to produce clear and transparent reports. A lack of clarity hampered stakeholders' ability to assess organizations' sustainability performance, prompting standardization bodies to develop even more standards. The study suggests that "less is more" when it comes to sustainability reporting standards, advocating for fewer but clearer guidelines to enhance transparency and combat greenwashing.
Insights derived from the labyrinth of standardization reporting guidelines
The study highlights several critical insights. First, it demonstrates that the relationship between standardization and transparency is more nuanced than previously thought. While standards can directly improve transparency, their growing complexity can have the opposite effect, creating a barrier for organizations trying to comply with reporting requirements. This dual effect limits the overall improvement in transparency, even as reporting content expands significantly.
Second, the research underscores the challenges organizations face in adhering to complex reporting frameworks. Non-neutral statements (such as: “no significant environmental damage has been caused in the past”)—whether intentional or unintentional—were frequently observed in the analyzed reports, raising concerns about impression management and greenwashing. These practices can obscure true sustainability performance and mislead stakeholders, undermining the credibility of sustainability reporting.
As a result, stakeholders need to critically evaluate sustainability reports, recognizing that non-neutral statements may influence judgments about an organization's sustainability performance.
Finally, the study calls for a reassessment of current reporting frameworks. The researchers suggest that GRI and similar organizations should prioritize simplicity and clarity, reducing the information density of standards to make them more accessible and actionable. This approach could help break the vicious standardization cycle and improve the overall quality of sustainability reports.
Conclusion
This research provides a compelling case for rethinking sustainability reporting standards. By embracing the principle that "less is more," the global community can move closer to achieving the transparency and accountability needed to address pressing environmental and social challenges.
Reference: Kim E. van Oorschot, Vilde Aas Johansen, Nanna Lynes Thorup, Dina Margrethe Aspen, Standardization cycles in sustainability reporting within the Global Reporting Initiative, European Management Journal, Volume 42, Issue 4, 2024, Pages 492-502, ISSN 0263-2373, https://doi.org/10.1016/j.emj.2024.04.001
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