As sustainability continues to evolve, companies will soon encounter new regulations that will also affect HR departments. The first CSRD deadlines are due in 2025. Is your HR department ready to provide the mandatory reporting on the 'social pillar'?
CSRD framework: what and when?
We are evolving from a non-standardized framework toward mandatory reporting on Environmental, Social and Governance (ESG) initiatives. This transition is manifested in legislation in the Corporate Sustainability Reporting Directive (CSRD) framework.
The CSRD will be implemented in several phases based on company size and other criteria. The first companies will already report in 2025 on their financial year 2024. For more information, visit EFRAG.org.
The CSRD framework consists of two main parts:
- cross-cutting standards that are mandatory for each company;
- sector-agnostic standards, categorized into Environmental (E), Social (S) and Governance (G). Companies are required to report only on the standards relevant to them.
How is HR involved?
In this webinar, we focused on the ‘social’ (S) pillar, which addresses how organizations manage their relationships with other parties. This entails how you treat your employees, customers, suppliers, and communities and includes, a.o. details about working conditions, diversity and inclusion, employee well-being fair wages and how the company supports local communities.
A large majority of the data to report on revolves around:
- own workforce: both employees and non-employees (e.g. consultants, freelancers, etc.)
- workers in the value chain: employees of companies in the up- or downstream value chain (e.g. customers, suppliers) that could be materially impacted by your company.
For both, you have to report on Initiatives, Results and Objectives (IROs), policies, processes, actions and targets. In total, this adds up to 393 individual data points in the social pillar.
Integrating ESG into your HR strategy
Approaching ESG merely from a compliance perspective without integrating it into your HR strategy is a short-term solution. If you are gathering all this data, use them wisely.
Our recommendation is to integrate ESG into your overall HR strategy. This makes your ESG initiatives impact-driven rather than just compliance-driven. It's a more sustainable approach for your organization in the long run, allowing you to use ESG as a driver of positive change and an enabler of a sustainable workforce.
The HR department as key contributor to the ESG agenda
In many organizations, HR often handles responsibilities within the Environmental (E) pillar, such as fleet budgets and workplace design, and within the Governance (G) pillar, including the code of conduct and whistleblowing mechanisms.
HR naturally leads the Social (S) aspect of ESG, focusing on fair access to work, employee well-being, and diversity, equity, inclusion, and belonging.
To integrate ESG into HR, make it a shared responsibility across all functions, including Talent Acquisition and Compensation and Benefits, etc. By embedding ESG practices into their strategy and daily operations ESG will also support their objectives of creating a sustainable company and workforce.
Where to start?
If HR is responsible for all these domains, where do you start? What should be the priority?
The CSRD doesn’t rank criteria, one is not more important than another. Depending on your company context, consider impact and credibility. You can’t promote a good work-life balance when you are struggling with basic labor rights issues like safe working conditions.
We advise you to approach the exercises considering the specificity of your context.
- Ask the right questions: Instead of asking "How can I comply," ask "Where and how can I leverage this new regulation and all the data it provides?"
- Collaborate with your executive leadership: claim your seat! Don’t wait for them to come to you - take charge.
- Inventory available data and initiatives before considering any next steps. A lot of it will already be part of your HR strategy
- Consider employee involvement from the start and create awareness on the topic & include their voice and perspective
Getting a grasp of what needs to be reported on can be daunting. We’ve cataloged all 1134 data points, qualitative and quantitative, to provide a starting point to benchmark your as-is analysis.
TriFinance and TriHD can support you in your compliance journey
If you are struggling with...
- ... a lack of understanding of legislation and processes;
- ... resource constraints, both in terms of people and budget;
- ... data availability, data quality and governance;
- ... finding the right skills to build an integrated ESG strategy.
TriHD and TriFinance are here to assist your HR department in developing an impact-driven and compliant ESG strategy.
Our HD experts can help you design a Strategic Competence plan that aligns with your business objectives, while encompassing the social parameters. Additionally, our finance experts can support you with a 6-step process to guide you toward a CSRD-compliant report.
