EU’s new Corporate Sustainability Reporting Directive requires 50,000+ companies to provide detailed workforce reporting

The European Union is introducing the Corporate Sustainability Reporting Directive (CSRD), requiring companies to report on their sustainability efforts and how their operations affect the environment and people. This new Directive will replace the Non-Financial Reporting Directive (NFRD) and will be phased in from the beginning of 2024. The CSRD goes beyond the NFRD and aims to make Europe a global leader in sustainability reporting. As the Directive will come into effect in less than a year, organizations should start to prepare. This article provides a high-level overview of the requirements for workforce reporting. 

What workforce data companies will need to report?  

CSRD has a broad scope and encompasses various aspects of sustainability, including Environmental, Social, and Governance (ESG) factors that companies must disclose. The standards for workforce reporting will include both qualitative and quantitative data related to performance measures, working conditions, diversity, and compensation. EFRAG has released ESRS S1 draft, detailing the reporting standards for workforce data.

The directive is still under review, but not much change is expected when it comes to workforce metrics. Here is a selection of metrics that organizations will be required to report on:

1. Absenteeism

2. Annual total compensation

3. Annual total compensation ratio

4. Base pay

5. Employment type (full-time, part-time, temporary, permanent etc.)

6. Equality in pay

7. Fair remuneration

8. Family related leaves

9. Health and safety

10. Male-female pay gap

11. Maternity Leave

12. Number of employees and FTEs

13. Number of employees by country per employment type

14. Number of employees by gender per employment type

15. Retirement

16. Sickness

17. Type of worker engagement and its frequency

18. Training and development

19. Working time, including overtime

How will companies be impacted by the reporting requirements? 

CSRD offers opportunities for businesses and the economy. It enables businesses to achieve greater social impact and it provides transparency, which reduces the risk of greenwashing while offering clarity to external stakeholders, including investors and consumers. As such, complying with CSRD can strengthen a company’s credibility, leading to greater prospects of external investment. It also improves comparability in the market. 

In addition to offering opportunities, the CSRD will also require a significant amount of work from organizations. Companies will need to gather, process, and disclose a large amount of data, covering various time periods and metrics such as those mentioned earlier. This means that compliance with CSRD will require companies to adopt new systems and procedures or to bring in external consultants to handle the process. The most efficient approach, in terms of both time and cost, is to adopt a specialized people reporting and analytics solution to take care of much of the heavy lifting: the solution pulls the data from existing systems into a universal data model, has the required metrics prebuilt and makes the metrics easily accessible. It ensures calculations are correct and consistent, and it saves much time of risk-prone manual work.

Which companies need to comply?   

CSRD will apply to 75% of businesses in the European Economic Area: 

•  EU-based large companies that meet two of the following three conditions: €40 million in net turnover, €20 million in assets and 250+ employees.

•  Non-EU companies that have a turnover of above €150 million in the EU.

•  Small companies with listed securities in a regulated market (yet with more flexibility and simplified reporting standards).

When will the CSRD take effect?  

The European Commission is currently reviewing the ESRS S1 draft standards. It is expected that the standards will be finalized in the fall of 2023. The implementation of the rules is scheduled to take place between 2024 and 2028 in three stages:  

•  Large public-interest companies with 500+ employees and already subjected to the NFRD will have to comply starting from January 1, 2024. The reports for this category are due in 2025. 

•  Large companies not currently subject to the NFRD, with 250+ employees and/or €40 million in turnover and/or €20 million in total assets will have to comply from January 1, 2025. The reports for this category are due in 2026. 

•  Listed SMEs and other undertakings will have to comply starting from January 1, 2026. Reports for this category are due in 2027. SMEs will have the option to opt-out until 2028. 

As the Corporate Sustainability Report Directive will take effect in January 2024, companies need to start preparing now. Collecting both qualitative and quantitative workforce data, converting that into information, and subsequently reporting it will require significant resources. 

Fortunately, Crunchr has a decade of expertise in workforce reporting. For its current clients, most of the data and metrics required by CSRD can be effortlessly managed. Crunchr is a people reporting and analytics solution that gathers and consolidates workforce data, allowing enterprise companies to have a single source of truth when it comes to workforce reporting. If you also need to streamline your companies’ workforce reporting processes and are looking to create a smooth transition to comply with CSRD reporting,  get in touch with our team to learn more about how we can help you.