PSG3: Setting up an effective grievance procedure and public reporting for larger companies

Modified on Wed, 12 Aug at 9:56 AM

A well-functioning grievance procedure is a cornerstone of meaningful stakeholder engagement. It signals that a company takes accountability seriously, and gives stakeholders a credible, accessible channel to raise concerns. This article provides practical guidance on how to set up an effective grievance procedure and how to report on grievances publicly. The guidance is introduced in the context of the grievance-related requirements under PSG 3.3 and PSG 3.4 of the B Lab Standards that apply to Large, Extra Large and Extra Extra Large companies.

What is a grievance

A grievance is a concern or complaint about a company's actual or potential social, environmental, or governance issues that a stakeholder raises to the company. Companies can broaden this definition to include all other “perceived injustices evoking an individual’s or a group’s sense of entitlement, which may be based on law, contract, explicit or implicit promises, customary practice, or general notions of fairness of aggrieved communities” (Source GRI 3: Material topics 2020). It is distinct from general feedback and extends beyond customer service issues (like order refunds or shipping delays) to address broader concerns regarding ethical, environmental, and social impacts: a grievance signals that a stakeholder believes something may be wrong and expects the company to respond.

Grievances are typically submitted through the company's grievance procedure, though they may also arrive through other channels as explained below.

The scope of the grievance procedure

All stakeholders — not just those identified under PSG 2.2 — must be able to file a grievance. This is an important distinction: while a company may have identified six primary stakeholder groups for engagement purposes, the grievance procedure must be accessible to any stakeholder who has a concern about the company's conduct.

Setting up the grievance procedure

When designing the grievance procedure, the following needs to be considered:

Accessibility: The procedure must be available on the company's webpage in relevant languages or forms to ensure stakeholders can access it.

As well as having a public grievance procedure on its webpage, the company may need to create alternative procedures to ensure all stakeholders can raise grievances. For instance:

Some stakeholders, such as workers, may be better served by an internal or alternative channel (e.g. ethics hotline).
For specific community members the company may establish a dedicated channel to raise complaints about a specific issue. For instance, if a community needs to be relocated because a new factory is being built on their land, the company might set up a dedicated channel for affected residents to raise concerns about compensation, timelines, or replacement housing, staffed by people familiar with the resettlement process.

In addition, the company may also consider literacy, digital access, and power dynamics — particularly for vulnerable stakeholder groups such as community members or workers in lower-wage roles.

Steps and follow-up: The public procedure should describe what kinds of concerns can be raised, set expectations for how the company will respond, and explain how it will facilitate a resolution. The company must define clear timeframes for accepted grievance acknowledgement, investigation, and resolution, and communicate these to grievance raisers.

Confidentiality and non-retaliation: Stakeholders must be able to raise concerns without fear of negative consequences. This is especially critical for workers. Protecting stakeholders from retaliation means implementing active measures, not simply stating a non-retaliation commitment. This may include, for instance, to allow the grievance raiser to request that their identity remains confidential, or collaborating with independent third parties to assess risks for vulnerable stakeholders.

Notifying stakeholders of the grievance procedures

Having a procedure in place is not enough – stakeholders need to know it exists. Companies are required to notify each of their main stakeholder groups of the relevant grievance procedure available to them. Methods may include:

Onboarding materials for new workers, suppliers, or partners
Updates on webpages or company blogs
Company documents such as annual reports or sustainability disclosures
Direct stakeholder engagement sessions
Posters or notices in workplaces
Workshops or training sessions
On-pack information for consumers
Inclusion in Codes of Conduct or supplier contracts

The notification method should be tailored to reach the intended stakeholder group effectively.

Public reporting on grievances

PSG 3.4 requires companies to publicly report on their grievance procedures and outcomes.

Before turning to public reporting, the company must meet internal governance requirements. Annually, a designated management role must analyse grievances — covering trends, effectiveness, and recommended improvements — and present findings to the highest governing body, alongside evidence that the procedure is working effectively.

The public report serves two purposes: accountability to stakeholders, and continuous improvement of the mechanism itself. Reporting should cover, at minimum:

The number, types, and nature of grievances received
The number of requests rejected and on what grounds
The number of resolved cases, the outcomes, any follow-up activities, and the average duration of the process
Stakeholder satisfaction levels
Any other data that will help the public understand the procedure’s performance

Reporting should be aggregated – individual cases should not be identified in ways that breach confidentiality. Where the number of grievances is low, the company should ensure they are aggregated in a way that does not risk identifying individuals.

Measuring stakeholder satisfaction

The primary focus of PSG 3.4.4(d) (measuring stakeholder satisfaction) is to gather feedback from actual grievance raisers on both the grievance process and its outcome. We recognise that confidentiality constraints may prevent companies from contacting all grievance raisers after a case is closed — and that company contexts vary significantly. For this reason, the requirement does not set a specific threshold for the percentage of raisers from whom feedback must be collected.

There is also no prescribed method for how satisfaction is determined. It does not need to be numerical. Companies may use sentiments, qualitative descriptors, or a combination of approaches. Examples for aggregate reporting include:

Percentage of respondents who rated the process as satisfactory
Percentage of positive vs. negative sentiment across feedback received
A qualitative summary of themes, for example: "The majority of respondents felt the process was fair and timely; the most common concern raised was the length of the resolution period."

Supplementary proxies for stakeholder satisfaction

To ensure the information gathered is meaningful — particularly when response rates from grievance raisers are low — companies may supplement direct feedback with proxies. See some examples below:

1. Employee or stakeholder perception surveys - These can gather information from potential grievance raisers to evaluate satisfaction with the mechanism more broadly, covering dimensions such as awareness of the mechanism, trust in the fairness of the process, and whether stakeholders feel safe raising a concern without fear of retaliation.

2. Accessibility question at the point of submission - A short question added at the start of the grievance form can capture whether raisers find it accessible and easy to use before they proceed — providing real-time usability feedback.

3. Re-filing and appeal rates - A high rate of appeals or reopened cases is a strong indicator of dissatisfaction with the initial process or outcome. This should be tracked and reported as part of the public reporting requirement.

4. Site-level grievance statistics shared with representatives - Aggregated grievance data can be shared with worker representatives, with structured feedback gathered in response. Where applicable, a similar approach can be implemented with community representatives.