The Corporate Social Responsibility Directive (CSRD) has increased demand for enhanced transparency in all areas of sustainability reporting. Its requirements for workforce reporting are the most significant of the three primary Sustainability disclosure frameworks (which also include the IFRS Sustainability Disclosure Standards and SEC standards).
Both large EU groups and non-EU headquartered groups with significant EU operations in scope of CSRD, need to be prepared for its impact in this area. Under the CSRD, companies must disclose people metrics and workforce-related information to an auditable standard across up to 17 specific disclosure requirements (defined in 51 pages of new workforce reporting regulation).
In this article, we explore three areas where human resources (HR) leaders and their teams will be key to making workforce reporting part of a successful CSRD implementation.
A vital part of the CSRD reporting team
PwC’s Global CSRD Survey 2024 highlights a gap between companies’ confidence in meeting the reporting requirements of the CSRD and the level of preparation they still need to undertake ahead of implementation.
When looking at workforce reporting, companies indicate they have a lot of confidence in their ability to meet the requirements in comparison to other sustainability issues.
Even though 96% of respondents are confident that they’ll be able to meet workforce reporting requirements, the involvement of HR leaders and teams in cross-functional approaches to CSRD implementation is at best inconsistent and, at worst, completely absent.
These findings coincide with our experience, which shows that there is frequently a disconnect between Reporting and HR. Closing this gap should be a high priority. Otherwise, the success of companies’ CSRD implementations could be undermined in two ways:
- HR teams may be unaware of the detailed requirements of CSRD and/or how it impacts workforce strategy, governance and risk.
- Reporting teams may mistakenly view employee data availability and reporting as lower risk compared to other requirements.
While it’s good to see companies moving forward confidently with their CSRD implementations, having HR leaders and teams at the reporting table from the outset is essential. Doing so will minimise workforce reporting risk and create opportunities for better stakeholder engagement.
A key stakeholder in the double materiality assessment
A double materiality assessment (DMA) of impacts, risks and opportunities (IROs) is the essential step towards CSRD compliance. It enables organisations to focus their reporting efforts on sustainability matters that are most relevant to them and their stakeholders.
Our Global CSRD Survey 2024 highlights DMAs’ effectiveness: the percentage of companies evaluating more than 100 IROs halved after applying materiality, while the percentage of companies evaluating fewer than 20 doubled.
Our survey shows that the number of topics on which companies report varies enormously. It also underlines the subjectivity of IRO assessments. That said, it is difficult to see how a company will complete this important process and not identify material workforce IROs.
It’s therefore all the more important to engage HR as a participating stakeholder in the double materiality assessment process. Otherwise, there’s a real risk of determining meaningless workforce IROs that could lead to reputational damage when disclosures are analysed and interpreted by the market.
A key custodian of workforce data governance and quality
Regardless of scope and materiality, our survey shows that data availability and quality is the biggest obstacle to CSRD reporting implementation.
Certainly, CSRD presents a massive data challenge. CSRD reporting requires companies to collect, verify and consolidate many types of data. And workforce data is no exception, not least because of the breadth of definitions of ‘workforce’ under the CSRD.
In our experience, companies find that defining who forms part of the workforce is more complex than they originally anticipated. This is because of the need to consult local law and regulations and potentially incorporate workers who may not be permanent employees.
This can require the collation of data across multiple systems and numerous jurisdictions – from core HR, legal and grievance to procurement systems and spreadsheets – before attempting to consolidate it in a meaningful form. Added to all this, workforce data comes with a host of privacy-related constraints.
Companies therefore risk becoming a hostage to fortune as regards reporting if they do not engage early with HR during the planning phases of their CSRD implementation. Doing so is key to understanding any data gaps and allowing time for them to be closed.
Crucial stakeholders in your CSRD implementation
Under the CSRD, there are significant requirements to produce assurable reports on workforce sustainability. This is why we believe HR leaders and their teams need to be at the reporting table – recognised as valuable and participating stakeholders working closely with the CFO and Chief Sustainability Officer from the outset of the CSRD implementation process.
Authors
PwC’s Global CSRD Survey 2024
The promise and reality of CSRD reporting
Workforce
Empower and enable your workforce to be transformative
