GRI 3: Material Topics - determining what to report and how to manage it
The three disclosures
GRI 3: Material Topics (2021) replaced GRI 101, 103 and the previous materiality guidance. It has three disclosures: 3-1 the process used to determine material topics; 3-2 the list of material topics; 3-3 management of each material topic.
The four-step process in 3-1
- Understand the organization's context - activities, business relationships, and the sustainability context in which it operates.
- Identify actual and potential impacts - on the economy, environment and people, including impacts on human rights.
- Assess the significance of impacts - using severity (scale, scope, irremediability) and, for potential impacts, likelihood.
- Prioritize the most significant impacts; those topics become the material topics reported.
Impact materiality
The GRI definition of a material topic is one that reflects the organization's most significant impacts on the economy, environment and people, including human rights. It is not limited to impacts that are financially material to the business, and it is not a simple stakeholder-vote exercise. Positive impacts are assessed on scale and scope; negative actual impacts on severity alone; negative potential impacts on severity and likelihood.
3-3 requires a description of the actual and potential, positive and negative impacts, how the topic is managed (policies, targets, responsibilities, actions), how the approach is evaluated, and how stakeholders have been engaged.
Trap: questions often present "double materiality" wording borrowed from other frameworks. GRI requires impact materiality; financial materiality may be added but is not the GRI test.
Worked example: an ongoing discharge is an actual negative impact - judge it on severity alone. A hypothetical tailings dam failure is a potential impact - judge it on severity multiplied by likelihood, which is why a low-probability, catastrophic impact can still be material.