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GRI 204: Procurement Practices 2016

EFFECTIVE DATE: 1 JULY 2018

Introduction​

GRI 204: Procurement Practices 2016 contains disclosures for organizations to report information about their procurement practice-related impacts, and how they manage these impacts. The Standard is structured as follows:

  • Section 1 contains a requirement, which provides information about how the organization manages its procurement practice-related impacts.
  • Section 2 contains one disclosure, which provides information about the organization’s procurement practice-related impacts.

The rest of the Introduction section provides a background on the topic, an overview of the system of GRI Standards and further information on using this Standard.

Background on the topic​

This Standard addresses the topic of procurement practices. This covers an organization’s support for local suppliers or those owned by women or members of vulnerable groups. It also covers how the organization’s procurement practices (such as the lead times it gives to suppliers, or the purchasing prices it negotiates) cause or contribute to negative impacts in the supply chain.

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 procurement practices 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 procurement practices using Disclosure 3-3 in GRI 3: Material Topics 2021.

GUIDANCE​

The reporting organization can also:

  • Describe actions taken to identify and adjust the organization’s procurement practices that cause or contribute to negative impacts in the supply chain, including:
    • How dialogue with suppliers is used to identify procurement practices that cause or contribute to negative impacts in the supply chain;
    • Actions taken to adjust payment policies and procedures.
  • Describe policies and practices used to select locally-based suppliers, either organization-wide or for specific locations.
  • Explain the rationale and methodology for tracing the source, origin, or production conditions of raw materials and production inputs purchased, if applicable.
  • Describe policies and practices used to promote economic inclusion when selecting suppliers.

Procurement practices that cause or contribute to negative impacts in the supply chain can include:

  • Stability or length of relationships with suppliers;
  • Lead times;
  • Ordering and payment routines;
  • Purchasing prices;
  • Changing or cancelling orders.

Forms of economic inclusion can include:

  • Small and medium-sized suppliers;
  • Suppliers owned by women;
  • Suppliers which are owned by or recruit workers from members of vulnerable, marginalized, or under-represented social groups.

2. Topic Disclosures​

Disclosure 204-1 Proportion of spending on local suppliers​

REQUIREMENTS​

The reporting organization shall report the following information:

  • a. Percentage of the procurement budget used for significant locations of operation that is spent on suppliers local to that operation (such as percentage of products and services purchased locally).
  • b. The organization’s geographical definition of ‘local’.
  • c. The definition used for ‘significant locations of operation’.

RECOMMENDATIONS​

  • 2.1 When compiling the information specified in Disclosure 204-1, the reporting organization should calculate the percentages based on invoices or commitments made during the reporting period, e.g, using accruals accounting.

GUIDANCE​

GUIDANCE FOR DISCLOSURE 204-1
Local purchases can be made either from a budget managed at the location of operation or at an organization’s headquarters.

Background
By supporting local suppliers, an organization can indirectly attract additional investment to the local economy. Local sourcing can be a strategy to help ensure supply, support a stable local economy, and maintain community relations.