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GRI 201: Economic Performance 2016

EFFECTIVE DATE: 1 JULY 2018

Introduction​

GRI 201: Economic Performance 2016 contains disclosures for organizations to report information about their economic performance-related impacts, and how they manage these impacts.

Background on the topic​

This Standard addresses the topic of economic performance. This includes the economic value generated and distributed (EVG&D) by an organization, its defined benefit plan obligations, the financial assistance it receives from any government, and the financial implications of climate change.

These concepts are covered in key instruments of the Organisation for Economic Co-operation and Development: see the Bibliography.

1. Topic management disclosures​

An organization reporting in accordance with the GRI Standards is required to report how it manages each of its material topics.

An organization that has determined economic performance to be a material topic is required to report how it manages the topic using Disclosure 3-3 in GRI 3: Material Topics 2021 (see clause 1.1 in this section).

This section is therefore designed to supplement – and not replace – Disclosure 3-3 in GRI 3.

REQUIREMENTS​

  • 1.1 The reporting organization shall report how it manages economic performance using Disclosure 3-3 in GRI 3: Material Topics 2021.

2. Topic disclosures​

Disclosure 201-1 Direct economic value generated and distributed​

REQUIREMENTS​

The reporting organization shall report the following information:

  • a. Direct economic value generated and distributed (EVG&D) on an accruals basis, including the basic components for the organization’s global operations as listed below. If data are presented on a cash basis, report the justification for this decision in addition to reporting the following basic components:
    • i. Direct economic value generated: revenues;
    • ii. Economic value distributed: operating costs, employee wages and benefits, payments to providers of capital, payments to government by country, and community investments;
    • iii. Economic value retained: ‘direct economic value generated’ less ‘economic value distributed’.
  • b. Where significant, report EVG&D separately at country, regional, or market levels, and the criteria used for defining significance.

Compilation requirements

  • 2.1 When compiling the information specified in Disclosure 201-1, the reporting organization shall, if applicable, compile the EVG&D from data in the organization’s audited financial or profit and loss (P&L) statement, or its internally audited management accounts.

GUIDANCE​

Background
Information on the creation and distribution of economic value provides a basic indication of how an organization has created wealth for stakeholders. Several components of the economic value generated and distributed (EVG&D) also provide an economic profile of an organization, which can be useful for normalizing other performance figures.

If presented in country-level detail, EVG&D can provide a useful picture of the direct monetary value added to local economies.

Guidance for Disclosure 201-1​

Revenues
An organization can calculate revenues as net sales plus revenues from financial investments and sales of assets.

Net sales can be calculated as gross sales from products and services minus returns, discounts, and allowances.

Revenues from financial investments can include cash received as:

  • interest on financial loans;
  • dividends from shareholdings;
  • royalties;
  • direct income generated from assets, such as property rental.

Revenues from sale of assets can include:

  • physical assets, such as property, infrastructure, and equipment;
  • intangibles, such as intellectual property rights, designs, and brand names.

Operating costs
An organization can calculate operating costs as cash payments made outside the organization for materials, product components, facilities, and services purchased.

Services purchased can include payments to self-employed persons, temporary placement agencies, and other organizations providing services. Costs related to workers who are not employees working in an operational role are included as part of services purchased, rather than under employee wages and benefits.

Operating costs can include:

  • property rental;
  • license fees;
  • facilitation payments (since these have a clear commercial objective);
  • royalties;
  • payments for contract workers;
  • training costs, if outside trainers are used;
  • personal protective clothing.

The use of facilitation payments is also addressed in GRI 205: Anti-corruption 2016.

Employee wages and benefits
An organization can calculate employee wages and benefits as total payroll (including employee salaries and amounts paid to government institutions on behalf of employees) plus total benefits (excluding training, costs of protective equipment or other cost items directly related to the employee’s job function).

Amounts paid to government institutions on behalf of employees can include employee taxes, levies, and unemployment funds.

Total benefits can include:

  • regular contributions, such as to pensions, insurance, company vehicles, and private health;
  • other employee support, such as housing, interest-free loans, public transport assistance, educational grants, and redundancy payments.

Payments to providers of capital
An organization can calculate payments to providers of capital as dividends to all shareholders, plus interest payments made to providers of loans.

Interest payments made to providers of loans can include:

  • interest on all forms of debt and borrowings (not only long-term debt);
  • arrears of dividends due to preferred shareholders.

Payments to government
An organization can calculate payments to governments as all of the organization’s taxes plus related penalties paid at the international, national, and local levels. Organization taxes can include corporate, income, and property.

Payments to government exclude deferred taxes, because they may not be paid.

If operating in more than one country, the organization can report taxes paid by country, including the definition of segmentation used.

Community investments
Total community investments refer to actual expenditures in the reporting period, not commitments. An organization can calculate community investments as voluntary donations plus investment of funds in the broader community where the target beneficiaries are external to the organization. Voluntary donations and investment of funds in the broader community where the target beneficiaries are external to the organization can include:

  • contributions to charities, NGOs, and research institutes (unrelated to the organization’s commercial research and development);
  • funds to support community infrastructure, such as recreational facilities;
  • direct costs of social programs, including arts and educational events.

If reporting infrastructure investments, an organization can include costs of goods and labor, in addition to capital costs, as well as operating costs for support of ongoing facilities or programs. An example of support for ongoing facilities or programs can include the organization funding the daily operations of a public facility.

Community investments exclude legal and commercial activities or where the purpose of the investment is exclusively commercial (donations to political parties can be included, but are also addressed separately in more detail in GRI 415: Public Policy 2016).

Community investments also exclude any infrastructure investment that is driven primarily by core business needs, or to facilitate the business operations of an organization. Infrastructure investments driven primarily by core business needs can include, for example, building a road to a mine or a factory. The calculation of investment can include infrastructure built outside the main business activities of the organization, such as a school or hospital for workers and their families.

See references [5], [6], [7] and [9] in the Bibliography.

Disclosure 201-2 Financial implications and other risks and opportunities due to climate change​

REQUIREMENTS​

The reporting organization shall report the following information:

  • a. Risks and opportunities posed by climate change that have the potential to generate substantive changes in operations, revenue, or expenditure, including:
    • i. a description of the risk or opportunity and its classification as either physical, regulatory, or other;
    • ii. a description of the impact associated with the risk or opportunity;
    • iii. the financial implications of the risk or opportunity before action is taken;
    • iv. the methods used to manage the risk or opportunity;
    • v. the costs of actions taken to manage the risk or opportunity.

Compilation requirements

  • b. When compiling the information specified in Disclosure 201-2, if the reporting organization does not have a system in place to calculate the financial implications or costs, or to make revenue projections, it shall report its plans and timeline to develop the necessary systems.

RECOMMENDATIONS​

  • 2.3 When compiling the information specified in Disclosure 201-2, the reporting organization should report the following additional characteristics for the identified risks and opportunities:
    • 2.3.1 A description of the risk or opportunity driver, such as a particular piece of legislation, or a physical driver, such as water scarcity;
    • 2.3.2 The projected time frame in which the risk or opportunity is expected to have substantive financial implications;
    • 2.3.3 Direct and indirect impacts (whether the impact directly affects the organization, or indirectly affects the organization via its supply chain or entities downstream from it);
    • 2.3.4 The potential impacts generally, including increased or decreased:
      • 2.3.4.1 capital and operational costs;
      • 2.3.4.2 demand for products and services;
      • 2.3.4.3 capital availability and investment opportunities;
    • 2.3.5 Likelihood (the probability of the impact on the organization);
    • 2.3.6 Magnitude of impact (if occurring, the extent to which the impact affects the organization financially).

GUIDANCE​

Guidance for Disclosure 201-2
Risk and opportunities due to climate change can be classified as:

  • physical
  • regulatory
  • other

Physical risks and opportunities can include:

  • the impact of more frequent and intense storms;
  • changes in sea level, ambient temperature, and water availability;
  • impacts on workers – such as health effects, including heat-related illness or disease, and the need to relocate operations.

Other risks and opportunities can include the availability of new technologies, products, or services to address challenges related to climate change, as well as changes in customer behavior.

Methods used to manage the risk or opportunity can include:

  • carbon capture and storage;
  • fuel switching;
  • use of renewable and lower carbon footprint energy;
  • improving energy efficiency;
  • flaring, venting, and fugitive emission reduction;
  • renewable energy certificates;
  • use of carbon offsets.

Background
Climate change presents risks and opportunities to organizations, their investors, and their other stakeholders.

As governments move to regulate activities that contribute to climate change, organizations that are directly or indirectly responsible for emissions face regulatory risks and opportunities. Risks can include increased costs or other factors impacting competitiveness. However, limits on greenhouse gas (GHG) emissions can also create opportunities for organizations as new technologies and markets are created. This is especially the case for organizations that can use or produce energy and energy-efficient products more effectively.

See references [2], [3] and [4] in the Bibliography.

Disclosure 201-3 Defined benefit plan obligations and other retirement plans​

REQUIREMENTS​

The reporting organization shall report the following information:

  • a. If the plan’s liabilities are met by the organization’s general resources, the estimated value of those liabilities.
  • b. If a separate fund exists to pay the plan’s pension liabilities:
    • i. the extent to which the scheme’s liabilities are estimated to be covered by the assets that have been set aside to meet them;
    • ii. the basis on which that estimate has been arrived at;
    • iii. when that estimate was made.
  • c. If a fund set up to pay the plan’s pension liabilities is not fully covered, explain the strategy, if any, adopted by the employer to work towards full coverage, and the timescale, if any, by which the employer hopes to achieve full coverage.
  • d. Percentage of salary contributed by employee or employer.
  • e. Level of participation in retirement plans, such as participation in mandatory or voluntary schemes, regional, or country-based schemes, or those with financial impact.

RECOMMENDATIONS​

  • 2.4 When compiling the information specified in Disclosure 201-3, the reporting organization should:
    • 2.4.1 Calculate the information in accordance with the regulations and methods for relevant jurisdictions, and report aggregated totals;
    • 2.4.2 Use the same consolidation techniques as those applied in preparing the financial accounts of the organization.

GUIDANCE​

Guidance for Disclosure 201-3
The structure of retirement plans offered to employees can be based on:

  • defined benefit plans;
  • defined contribution plans;
  • other types of retirement benefits.

Different jurisdictions, such as countries, have varying interpretations and guidance regarding calculations used to determine plan coverage.

Note that benefit pension plans are part of the International Accounting Standards Board (IASB) IAS 19 Employee Benefits, however IAS 19 covers additional topics.

Background
When an organization provides a retirement plan for its employees, these benefits can become a commitment that members of the schemes plan on for their long-term economic well-being.

Defined benefit plans have potential implications for employers in terms of the obligations that need to be met. Other types of plans, such as defined contribution plans, do not guarantee access to a retirement plan or the quality of the benefits. Thus, the type of plan chosen has implications for both employees and employers. Conversely, a properly funded pension plan can help to attract and maintain employees and support long-term financial and strategic planning on the part of the employer.

Disclosure 201-4 Financial assistance received from government​

REQUIREMENTS​

The reporting organization shall report the following information:

  • a. Total monetary value of financial assistance received by the organization from any government during the reporting period, including:
    • i. tax relief and tax credits;
    • ii. subsidies;
    • iii. investment grants, research and development grants, and other relevant types of grant;
    • iv. awards;
    • v. royalty holidays;
    • vi. financial assistance from Export Credit Agencies (ECAs);
    • vii. financial incentives;
    • viii. other financial benefits received or receivable from any government for any operation.
  • b. The information in 201-4-a by country.
  • c. Whether, and the extent to which, any government is present in the shareholding structure.

Compilation requirements

  • 2.5 When compiling the information specified in Disclosure 201-4, the reporting organization shall identify the monetary value of financial assistance received from government through consistent application of generally accepted accounting principles.

GUIDANCE​

Background
This disclosure provides a measure of governments’ contributions to an organization.

The significant financial assistance received from a government, in comparison with taxes paid, can be useful for developing a balanced picture of the transactions between the organization and government.

See reference [8] in the Bibliography.

Bibliography​

This section lists authoritative intergovernmental instruments and additional references used in developing this Standard.

Authoritative instruments:​

  1. Organisation for Economic Co-operation and Development (OECD), OECD Guidelines for Multinational Enterprises, 2011.

Additional references:​

  1. Carbon Disclosure Project (CDP), Guidance for companies responding to the Investor CDP Information Request, updated annually.
  2. Climate Disclosure Standards Board (CDSB), Climate Change Reporting Framework – Edition 1.1, October 2012.
  3. Climate Disclosure Standards Board (CDSB), Climate Change Reporting Framework Boundary Update, June 2012.
  4. International Accounting Standards Board (IASB), IAS 12 Income Taxes, 2001.
  5. International Accounting Standards Board (IASB), IAS 18 Revenues, 2001.
  6. International Accounting Standards Board (IASB), IAS 19 Employee Benefits, 2001.
  7. International Accounting Standards Board (IASB), IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, 2001.
  8. International Accounting Standards Board (IASB), IFRS 8 Operating Segments, 2006.