Corporate Sustainability Reporting: What You Need to Know About Social Sustainability in the Workplace

Anyone who deals with social sustainability in the workplace knows that it’s not a “nice to have”, but essential if a company is to be successful in the long term and contribute to democratic society in the spirit of corporate responsibility. The European Union's Corporate Sustainability Reporting Directive (CSRD), which replaces and expands on the 2014 Non-Financial Reporting Directive (NFRD), reflects this.

From now on, capital market-oriented companies not only have to file an annual report on their finances, but also on ESG factors - i.e. their environmental and social impact as well as their corporate governance. But while the financial report is a matter of course for many companies and impact on the environment can at least be measured in numbers in many cases, the social aspects are often more difficult. What does that mean and, above all, what should you report on?

Who reports on what?

Reporting in accordance with the CSRD is based on the European Sustainability Reporting Standards (ESRS) - a comprehensive set of standards that specifies how and what must be reported on. Well, not exactly, because companies still have to determine what exactly is included in the report themselves for the most part, as part of a materiality analysis. This means that a decision has to be made for each topic as to whether it is relevant for the company in question. For example, protection when handling hazardous substances must obviously be taken into account in many production facilities, whereas it’s less likely to play a role in an advertising agency. However, it is crucial that it’s not just one person determining what will be included in the report, but that stakeholders are involved as comprehensively as possible. After all, this kind of transparency is one of the key objectives of the CSRD.

Social sustainability in the workplace: What does the directive say?

With regard to social sustainability, the ESRS specify four major topics, each of which contains various sub-topics and sub-sub-topics:

• Own workforce (working conditions, equal rights and opportunities, other rights)

• Workers in the value chain (the same sub-themes apply here)

• Affected communities (economic, cultural and social rights; civil and political rights; rights of indigenous groups)

• Consumers and end users (information-related issues, personal safety, social inclusion)

What may not look like much at first glance is actually quite a lot. This is because it not only deals with how the company treats its own employees, but also who it works with, what influence it has on other people, e.g. where the company is located, and what it does to protect customers. Accordingly, we cannot go into all possible aspects of the policy here, but we would like to give you a few suggestions on what you may want to look out for from a diversity and inclusion perspective.

Social sustainability among your own employees 

In most cases, it is relatively easy to determine your company’s social sustainability when it comes to your own employees, as existing data is often sufficient for an initial overview. In terms of working conditions in particular, you will likely already have or know how to compile numbers for factors such as working hours, fair pay, the existence of employee representatives, and compliance with health and safety regulations.

Topics such as equal treatment and equal opportunities may be more challenging, however, as this involves not just easily quantifiable factors such as the number of female managers or employees with disabilities, but also other aspects of diversity and protection against discrimination. An employee survey can help you to make the composition of your company and any discrimination employees may have experienced visible and derive measures to improve social sustainability. And once these measures are firmly in place, make sure to include them in your report: for example, if you have a code of conduct that explicitly addresses diversity, ERGs or networks for diverse employees, or if you train your managers on inclusion, your stakeholders will want to know. Young talent and sustainability-conscious investors in particular are increasingly interested in companies’ awareness about their responsibility towards their employees.

Social sustainability in the value chain

It can be more challenging to report on social sustainability in the value chain, because you are in many respects dependent on the self-disclosure of others. However, you can also exert influence yourself, e.g. by drafting a code of conduct for companies you work with or including social sustainability criteria in your contractual terms and conditions. This, too, can be a part of social sustainability and social responsibility, and you can make an impact by being selective - as much as possible - about who you work with.

Social sustainability in affected communities

When it comes to your social impact in your community, the scope for action may also be limited, especially for smaller companies - but then so is the extent to which they impact communities in the sense of the ESRS, because the standards here are mainly concerned with topics such as water supply, housing, freedom of information and assembly, or the rights of indigenous people. But perhaps your company does not have a direct influence on these factors through its own activities, but is committed to improving them via initiatives or sponsorships, for example? If so, this may have a place in the report. Conversely, also consider the extent to which social circumstances represent risk factors for your company's activities, as this should also be included in the report.

Social sustainability for your customers

In many industries, companies in Germany are already obliged under the General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) not to discriminate against customers and other external stakeholders. In your sustainability report, you may want to disclose how you ensure fair treatment and inclusivity, for customers or consumers. Of course, the principle of materiality also applies here: the impact should be clear, so “We comply with the AGG” is not enough. But if, for example, you pay particular attention to the making your products accessible to people with disabilities, have created guidelines for non-discriminatory marketing campaigns, or regularly train customer service on diversity, then this can become part of the report.

That's quite a lot!

As you can see, the topic of social sustainability can encompass a lot. Therefore, keep the principle of materiality in mind: Do you implement special measures in any of these areas or is something particularly relevant for your stakeholders, e.g. the composition of your management team? Then you may want to include it in the report. If diversity and inclusion are not much of a priority in your company, or if measures are still being planned, then it may not be material for your report. Remember, the point is to give an honest picture of how your company has fared in terms of social justice and sustainability over the past year - not how it might fare in the future. 

If you have not yet achieved your ESG goals in terms of social sustainability and need support in finding suitable measures, we will be happy to help you. Take a look at our range of workshops, for example!