Social sustainability crucial for a solid workforce policy

With regard to sustainability, companies will face many challenges in the coming years. In conversations with clients, Nicolien Borggreve and Linda Thonen notice that there are still many uncertainties and questions regarding European legislation such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

‘For example, clients want to know under what conditions their company falls within sustainability legislation, how far the duty of care for employees in the supply chain reaches, or what participation rights the works council has in the implementation of the CSRD,’ says Borggreve.

These are questions for which the answers are not always known yet. The CSRD came into effect on January 1st and imposes, among other things, the obligation for a company to report on various social aspects. In addition, on March 15th, the Council of the European Union approved the CSDDD. If the European Parliament adopts the Directive  companies will have to take action against actual and potential negative impacts on the environment and human rights within their value chain. The committee of legal affairs (JURI) of the parliament has already endorsed the directive in preparation of the plenary vote, but waiting for definitive legislation is not advisable, according to the PwC experts.

New legislation calls for a major transformation

Borggreve: 'It involves a major transformation in business operations, which requires a lot of work. Take, for example, proper reporting of workplace accidents. This is mandatory under the CSRD and a challenge for many companies. But if European or national legislation regarding due diligence in the field of corporate sustainability is introduced, companies will also have to formulate measurable improvement actions in the context of health and safety.'

‘Such a law will also lead to an increasing need for upskilling among directors and supervisory board members, as we have noticed. They can be held liable for misleading sustainability reporting or for various data disclosures,' Thonen adds.

Investors demand robust sustainability policies

Most large companies now feel the need to anticipate upcoming sustainability legislation. Thonen: 'Especially when there is an external financing need. Investors also look at current developments and demand a robust sustainability policy for favorable interest rates.'

'The same applies to mergers and acquisitions,' says Borggreve. 'When we talk about the S in ESG (environmental, social, governance), acquiring parties want to understand how a company treats its employees; also further down the value chain. The insights and monitoring that will be required in the future through sustainability legislation are already relevant today for the company's value and offer an opportunity to reflect on the existing business model and strategy.'

A future-proof workforce policy

Regarding the workforce policy, Borggreve sees opportunities for optimization. ‘Companies need to focus on social sustainability to make their workforce policy future-proof. Labor law in the Netherlands is based on the Universal Declaration of Human Rights of the United Nations. This means that companies in the Netherlands, if they have their affairs in order, already have a lot of data points to report on under the CSRD. However, there is still much to be gained in terms of strategy.’

According to Borggreve and Thonen, companies would do well to consider the following topics:

• How mature is the policy on inclusion and diversity? How do you ensure that employees receive equal pay for equal work and have the same growth opportunities, regardless of gender or background?
• How mature is the policy on fair compensation? Does the company pay a living wage to employees in the Netherlands and abroad?
• How is management around health and safety organized? How do you design work processes to minimize physical accidents and burnouts?
• How are the rights and obligations arising from labor law regulated? How can you best facilitate flexible working as an employer?
• Is there a good whistleblowing policy? Does the policy provide the right opportunities for employees and does it comply with the latest legislation?
• Are there green employment conditions in place? Can you give employees an extra day off if they take the train instead of the plane for their international travel?

‘In other words, social sustainability is the foundation for the employer of the future, and experience shows that current developments offer strategic opportunities for every company,’ conclude Borggreve and Thonen.