What's new in the field of Corporate Social Responsibility?

ISO 53 001, a new International Standard outlining the requirements for a United Nations Sustainable Development Goals (SDGs) Management System, is being drafted.

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This upcoming International Standard will be a valuable complement to ISO 26 000 guidelines on Social Responsibility. 

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ISO 53 001 guidelines will be designed for organizations aiming to demonstrate and improve their efforts towards the UN SDGs and to systematically manage their responsibilities in a way that contributes to sustainability.

 

The intended outcomes of implementing an SDG management system include :

• Enhanced organizational performance;

• Compliance with sustainability-related obligations;

• Building trust and confidence among current and future stakeholders.

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The final document is expected to be published by the end of 2024.

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You can track the life cycle of these guidelines on the International Organization for Standardization website. 

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Numerous academic studies have been carried out to examine the link between companies' social performance and companies' financial performance.

 

In 2018, Timo Busch and Gunnar Friede reviewed academic research on this topic by applying a second-order meta-analysis. Their data sample combines 25 previous meta-analyses, yielding a sample size of one million observations.

 

Their results demonstrate a highly significant, positive, robust, and bilateral relation between corporate social and financial performance.

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Based on the extant literature, they conclude that the business case for developing Corporate Social Responsibility policies is undeniable.

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The studies examining the link between Corporate Social Responsibility and financial performance have identified several mechanisms that may explain this. These mechanisms include:

 

• Improved reputation with consumers, investors, and other stakeholders. Companies adopting a Corporate Social Responsibility policy tend to enjoy a better reputation, leading to increased sales, reduced financing costs, and improved customer loyalty.             

• Greater resilience to environmental and social risks. Companies that adopt a Corporate Social Responsibility policy are better prepared to deal with environmental and social risks, such as natural disasters, supply chain disruptions, and regulatory change.

• Greater capacity for innovation. Companies adopting a Corporate Social Responsibility policy tend to be more innovative, as they can understand stakeholders' needs and develop products and services that meet them.

The Corporate Sustainability Reporting Directive (CSRD) entered into force on 5 January 2023. It is part of the broader new EU growth strategy, the Green Deal. It aimed to revise and expand the previous Non-Financial Reporting Directive (NFRD). 

 

Key points regarding the CSRD include:

 

• Clarification of the double materiality principle: This is a significant contribution of the CSRD. The Directive requires that the organizations report information necessary to understand: i. the organization's impact on sustainability matters (an “inside-out” perspective); ii. how sustainability matters affect the organization's development and performance (an “outside-in” perspective).

• Scope and Purpose: The CSRD makes sustainability reporting mandatory for a broader range of organizations (which exceed two of the three criteria : average number of 250 employees; € 40 million turnover; and/or € 20 million balance sheet)

• Reporting Standards: It introduces mandatory European Sustainability Reporting Standards (ESRS), enabling interoperability with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI). These reporting standards encompass a wide range of sustainability matters, including environmental, social, and governance factors. 

• Assurance and verification: The CSRD includes provisions for external assurance on the reported sustainability information to enhance the credibility and reliability of the disclosed data.

In 2009, researchers from the University of Stockholm modeled nine planetary boundaries, defining a safe operating space within which life and human populations can develop. Crossing these boundaries alters and threatens our living conditions on Earth. 

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In September 2023, researchers assessed that six of the nine planetary boundaries had already been crossed. 

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The planetary boundaries are the following: 

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Climate Change: It relates to the concentration of greenhouse gases in the atmosphere. We have crossed it.

Biosphere integrity: This boundary is associated with the rate of species extinction. We have crossed it. 

Land System Change: This boundary is related to changes in land use, including deforestation and urbanization. We have crossed it.

Novel entities: These refer to human-introduced substances or materials that did not exist in the Earth's natural systems before significant human activities. We have crossed it.

Biogeochemical flows: This concerns the alteration of the global nitrogen and phosphorus cycles, primarily due to human activities. We have crossed it.

Freshwater Use: The boundary for freshwater consumption is set to prevent the depletion of freshwater resources beyond sustainable levels. We have crossed it. 

Ocean Acidification: This boundary addresses the increase in acidity in the world's oceans due to the absorption of excess atmospheric CO2. The process could harm marine life. This boundary is under pressure.

Stratospheric Ozone Depletion: This boundary relates to releasing substances that deplete the ozone layer in the Earth's stratosphere, such as chlorofluorocarbons (CFCs).

Aerosol Loading: This boundary addresses the concentration of particulate matter (aerosols) in the atmosphere, which can affect air quality and have climate implications.

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Crossing these boundaries will not bring about the immediate end of the world. However, the danger and uncertainty associated with this situation should encourage us to make profound and rapid changes to our lifestyles and growth model.

France became the first country to transpose the Corporate Sustainability Reporting Directive  (CSRD) in its national legislation. The ​Ordonnance n°2023-1142 relative à la publication et à la certification d'informations en matière de durabilité has been published on December 6, 2023. 

The main provisions are the following:

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• Applicability: We estimate the number of companies in France subject to the CSRD to be 6,000.

• Sanctions: The absence of the audit associated with CSRD report makes it liable to a €30,000 fine and two years imprisonment. Obstructing the audit makes it liable to a €75,000 fine and five years imprisonment.

• Subsidiaries: A subsidiary meeting the CSRD reporting criteria but controlled by a consolidating parent company headquartered in the EU is not required to produce a CSRD report. The parent company is the one accountable, with special provisions. A subsidiary meeting the CSRD reporting criteria but controlled by a consolidating parent company outside the EU is not required to file a CSRD report. Its parent company must file a CSRD report, subject to special conditions.

• Publication: CSRD information must be included in the rapport de gestion.

• Audit: Sustainability information must be certified by a Commissaire aux comptes or an Organisme tiers indépendant accredidated by the Comité français d'accréditation.