GRI 204 Procurement Practices

What GRI 204-1 requires

GRI 204-1 requires disclosure of the proportion of spending on local suppliers at significant locations of operation — expressed as a percentage of total procurement spending at those locations.

The definition of 'local' is the most critical and contested element of GRI 204. GRI allows organisations to define local themselves — but the definition must be disclosed and applied consistently. Common definitions:

National: suppliers registered and operating in the same country as the company's operations. Most commonly used by multinational companies — simple to apply, uses existing supplier location data.

Regional: suppliers within a defined geographic radius of the operation — for example, within 200 km of a mining site. More restrictive but more meaningful for community economic development impact.

Provincial/state: suppliers registered in the same administrative region as the operation. A middle ground between national and local — relevant in countries with large geographic variation in economic development.

The choice of definition significantly affects the reported percentage — a company defining 'local' as national will report much higher local procurement than one defining it as regional. Comparing GRI 204-1 across companies requires understanding their local definitions.

Local procurement as economic development strategy

For extractive and large industrial companies in developing economies, local procurement is a core economic development strategy — building supplier capability, creating jobs, and retaining value in host communities rather than repatriating procurement expenditure to headquarters country suppliers.

Local content requirements: Many mining and oil licensing agreements include mandatory local content provisions — minimum percentages of goods and services that must be sourced locally. GRI 204-1 provides the annual performance disclosure against these regulatory and contractual requirements.

Supplier development programmes: Leading practices go beyond passive local procurement to active supplier development — providing technical training, quality certification support, financing access, and mentoring to help local businesses meet procurement standards. GRI 204-1 contextualised with supplier development programme description provides a more complete picture of economic development commitment.

Local content by category: Aggregate local procurement percentages can obscure important variations — some goods and services (construction, catering, security) can readily be sourced locally; others (specialised equipment, technical services) may have no qualified local suppliers regardless of commitment. Category-level local procurement data provides more actionable insight than a single aggregate percentage.

For CSDDD compliance: CSDDD requires companies to support SME suppliers rather than simply imposing requirements. Local supplier development programmes that build SME capacity directly satisfy this CSDDD requirement — and the GRI 204-1 metric tracks the commercial outcome of these programmes.

Calculating and collecting GRI 204-1 data

GRI 204-1 is a data collection challenge for multinational companies — requiring procurement data segmented by supplier location and operation location simultaneously.

Data source: Accounts payable or procurement system — supplier master data includes supplier registration address (for national definition) or coordinates (for geographic radius definition). Payment data provides the spend amounts. Combining these produces local vs non-local spend by location.

For companies with decentralised procurement: some spend occurs through corporate procurement (global contracts with multinational suppliers) and some through local procurement (site-level purchasing from local suppliers). The corporate procurement spend is typically non-local regardless of where goods are delivered; local procurement is site-managed. Capturing both streams and allocating correctly to locations requires procurement system architecture that not all companies have.

For companies using ERP systems: most ERP platforms (SAP, Oracle) can produce local procurement analysis from supplier master data and purchase order location. The challenge is often data quality — supplier location data in the master may be incomplete or inaccurate. Data cleansing before extraction is frequently required.

For first-time GRI 204-1 reporters: a manual calculation from accounts payable is a practical starting point — extract supplier list with payment amounts, manually classify suppliers as local or non-local using the chosen definition, calculate the ratio. This is labour-intensive but feasible for initial disclosure. Automate in subsequent years through ERP reporting.

Frequently asked questions