ESG and Corporate Sustainability Reporting Directive (CSRD)

Our topic today is ESG and the Corporate Sustainability Reporting Directive (CSRD). It has been a recurring theme in publications and news specially during 2023. This time we focus on its impact on the working environment, as part of the ‘S’ element of the acronym. But first, what is ESG?

ESG is an acronym for Environmental, Social and Governance. Environmental, Social, and Governance (ESG) Programs are designed to help companies increase their societal value by looking beyond financial goals to include opportunities and manage risks around environmental sustainability and social responsibility issues.

• ESG Frameworks vs ESG Standards

ESG frameworks provide organizations with guidelines to identify, assess, and report on sustainability issues. The overall goal of the reporting frameworks is to give internal and external stakeholders — investors, employees, customers, government officials and more, a comprehensive view of the state of ESG initiatives,

ESG Standards serve as detailed guidelines that expand upon the principles outlined by frameworks. They provide specific requirements, metrics, and indicators for reporting on sustainability topics. By establishing a common language and set of metrics, standards promote comparability across sectors and organizations. In short, standards are designed to ensure that the ESG disclosures made in a particular framework are consistent and can be compared to one another.

ESG reporting is currently a legal requirement (CSRD) for many European entities. On 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive modernizes and strengthens the rules concerning the social and environmental information that companies must report. A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability.

• ESG and labour relations

The social component of ESG focuses on promoting equality and fairness, both within the workplace and in society more widely. It means being a responsible and inclusive employer: ensuring there is a healthy workplace culture, promoting equality with diversity and inclusion initiatives, and taking active steps to facilitate flexible working practices as much as possible. We are seeing more employers focus on social mobility as part of their inclusion strategy and start to offer apprenticeships, work experience and mentoring opportunities. There is also a trend towards developing employee networks for those experiencing menopause or perimenopause, or for neurodiverse employees, to complement longer established networks for women, those from ethnic minorities and those identifying as LGBT+.

The social component also involves being a socially responsible employer.  Some points that should be described in the ESG programs are:

• Equality, diversity, and inclusion: how do organizations foster a diverse and inclusive working environment?
• Recruitment, retention, and training: what can companies do to attract and retain talent? What investment are they putting into their people?
• Good working practices: what culture is being promoted by an organization? Are negative working practices being tackled?
• Health and wellbeing: how do companies protect the health of their employees (including mental as well as physical health)? What support is on offer?
• Pay: how do companies approach payment of the national minimum wage, executive remuneration and gender and ethnicity pay gaps?
• Policies and practices: what approach is taken to family friendly or agile working practices? What systems are in place to tackle inappropriate behavior?
• Whistleblowing: what effective systems and protections have been put in place to take care of both the whistleblower and the wrongdoer?
• Employee engagement: what workplace methods have been designed to improve an employee’s feelings and emotional attachment to the company, their job duties, position within the company, their fellow employees, and the company culture.
• Worker activism: what actions have been taken to permit workers to speak out for or against their employers on controversial issues that impact society.

Environmental and sustainability initiatives are also part of that equation and are an integral part of an organization’s broader ESG goals. Beyond adjusting products and services to reduce their environmental impact, some employers have enacted policies to encourage environmentally friendly behaviors by employees. These policies can include providing incentives for clean commuting, such as carpooling or using public transit, leveraging technology to reduce the use of paper for employee-facing and other internal processes, and practicing recycling in the workplaces.

It is important to emphasize that implementing ESG policies not only serves to comply with regulations, but also, for example in labour matters, brings benefits such as:

1. More committed employees
2. Increased profitability
3. Reputation enhancement
4. Attracting new clients
5. Talent acquisition
6. Talent retention

Our experience in compliance means we understand the importance of ESG due diligence.  Visit our website to find out more about our services. We look forward to answering your questions.