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What is the relationship between social return and the CSRD?

Some time ago, I received this question from InterPactum with a request to host a workshop on it at the National Knowledge Network on Social Return. Specifically, the question was: “What does the CSRD entail, and how does it influence social return?” An interesting question that allows me to draw on insights from previous research and my knowledge and experience in the area of CSRD.

Social Return

For everyone who is capable of working but cannot secure a place in the labor market without support, the government has a responsibility to provide assistance in accessing the labor market. The government aims to help as many people as possible with a distance to the labor market find paid employment and pursues this goal in various ways. One such approach is social return within the government’s procurement policy. People with a distance to the labor market can include early school leavers, individuals with disabilities, and people with a migration background. Social return is a strategy that uses contracts and collaborations with the market to address these issues. The supplier makes an investment—often a percentage of the contract value—to reduce the gap to the labor market for specific target groups.

CSRD

It is evident that there is a relationship between social return and the CSRD, as both developments stem from sustainability objectives at the European and national levels. The CSRD came into effect on January 5, 2023, and originates from the Green Deal—the EU’s growth strategy consisting of policy initiatives aimed at transforming Europe into a fair and prosperous society with a modern and competitive economy. Achieving this requires capital to flow into sustainable investments and activities. By mandating companies to report on their impact on people and the environment, transparency about their sustainability performance is created for financial parties and other stakeholders.

Relationship Between Social Return and CSRD

The CSRD emphasizes various sustainability aspects: Environmental (E), Social (S), and Governance (G), collectively referred to as ESG. The social themes are subdivided into labor conditions, equal treatment and opportunities for all, and other labor rights (such as child labor). Employment and inclusion of people with disabilities fall under the theme of equal treatment and opportunities for all, as does the topic of diversity. These two topics closely align with the goals of social return.

Companies are required to report, among other things, on:

  • the policies they have in place to promote equal opportunities and other measures to enhance diversity and inclusion;
  • the percentage of employees with disabilities within their workforce.

By applying social return in procurement, governments indirectly influence what companies report in their sustainability disclosures. Returning to InterPactum’s question, my answer is that social return primarily influences the CSRD, not the other way around.

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