New CSRD Reporting Rules Bring Heightened Transparency for C-Suite
Workforce reporting requirements in CSRD will increase transparency amongst C-level executives, internal employees, and external stakeholders.
Leading a business at higher levels of seniority has always meant being attentive to the attitudes and opinions of a wide group of internal and external stakeholders. CEOs and their boardroom colleagues know fielding questions and controversies about how the organization is conducting itself, particularly in relation to its people, is part of the role.
Today, scrutiny increasingly comes from within—and outside of—organizations, with employees objecting and opining on everything from a company’s involvement in government defense contracts, for example, to layoffs, a perceived lack of training opportunities, all the way to full-on pay disputes. Workers have access to far more information, industry comparisons, and workplace indices, sharpening their awareness of their employer’s performance in people matters.
Incoming Corporate Sustainability Reporting (CSRD) rules in the European Union are about to make waves for leaders by requiring all businesses over a certain size to report on a wide range of corporate sustainability measures. This includes 30+ people measures, alongside the usual financial disclosures. Such information, often treated as sensitive and confidential by business leaders, is to be made definitively public information, changing the dynamic for Boards.
CSRD presents two clear themes that business leaders must pay attention to, which I previously discussed in a conversation with Yves Van Durme from Deloitte, and Vandemoortele’s Marc Croonen. Here's a recap:
1. A new level of transparency for workforce data
Organizational policies for, and responses to, workforce measures will be made publicly available with CSRD reporting. This means companies will need to disclose specific people measures. These numbers will be out there for all to see. Catching up may need to be done at pace, both in terms of implementing a system to measure the right workforce elements and developing policies to make improvements in the areas most crucial—and potentially reputationally damaging—to the business.
How a company communicates its values and people strategy may also need to be reviewed. The requirements of mandatory people reporting may help businesses here, as the CSRD reporting process demands narrative commentary as well as numbers. Companies will need to explain what they are doing to improve performance in certain areas and close gaps.
CSRD reporting requirements may also bring energy for positive change. Companies that offer little to no training for entry-level employees, for example, could see applications in the hiring pool cut down. This could, perhaps, ignite change to offer more training to compete for talent—a scenario that exemplifies the purpose of the regulations.
For those campaigning to proactively improve the employee offering, the changes represent an opportunity to make internal changes to support the business in attracting and retaining the best talent, and potentially even to enhance an organization’s position within the investor community.
2. Going beyond workforce reporting
Higher levels of transparency on people measures will also change leadership dynamics. A CFO–CEO conversation about whether to outsource jobs to a lower-cost location, for instance, is likely to be somewhat different after CSRD. What was previously a discussion about cost-savings will surely be influenced by the fact that the decision’s impact on people will be far more visible and quantified. Cost and reputation trade-offs will become more central.
The heightened prominence of people reporting data also strengthens the hand and position of HR and the people analytics function. Leaders may seek to mitigate the impact of business decisions on the workforce by introducing benefits elsewhere, such as reskilling individuals and teams. In some organizations, this represents a golden opportunity to deliver value through people and to support change management programs characterized by fairness and equal opportunity for all. But this is only true if the players involved have the right attitude and the tools to make data-driven workforce decisions a central part of the business.
Marc Croonen, Chief of Human Resources at Vandemoortele, a Belgium-headquartered food manufacturing company with around 5000 employees, said in our recent conversation that having the numbers to back up observations makes conversations about people, productivity, and performance faster and more effective.
“The Board likes evidence in data form and has come to expect it,” said Croonen. “Workforce conversations are expedited by the data in almost every way. We spend less time discussing what we think might be going on, and more time focussing on what the numbers are saying, and how to best make improvements for the good of our people and the wider business.”