Demystifying Social KPIs under CSRD: Six Recommendations for Business

Photo by monticelllo on iStock

March 6, 2024
  • Ellinor Haggebrink

    Former Manager, Transformation, BSR

  • Renata Greenberg portrait

    Renata Greenberg

    Director, Transformation, BSR

Key Points

  • Amid upcoming regulations, companies are finding it challenging to identify and measure Social KPIs
  • BSR’s Sustainability Management team provides concrete recommendations for business on how to identify meaningful social measurements that can be integrated into existing set-ups across the entire value chain.

With the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the expected Corporate Sustainability Due Diligence Directive (CSDDD), companies in the European Union and beyond are required to report on their social and environmental impacts within a broad range of sustainability topics, creating a growing focus on what can be quantified and verified. The directives will make it mandatory for companies to mitigate and report on impacts throughout their entire global value chain, which many find challenging as there is less visibility and control over sustainability issues upstream and downstream.

In the case of environmental issues, this is fairly straightforward both in terms of what the regulators are asking companies to disclose, and already well-established metrics and tools to measure GHG emissions reductions. When it comes to the social part of a company’s ESG agenda, however, setting targets and measuring impact is not as simple. 

Challenges of working with the social impact agenda have been expressed by several BSR members, who are less certain about the right way of setting social targets and KPIs, precisely: what to measure and how to measure it. Through several projects with members, we have been able to develop a roadmap on how to identify meaningful social KPIs and targets covering the entire value chain.

Key recommendations include: 

  • Benchmark against regulation and best practice: Start with researching existing and upcoming regulations, industry frameworks, and guidelines on social sustainability; this will give an overview of what is already in the market and help prioritize. Benchmark yourself against best-in-class peers, to identify priority topics and leadership practices from companies that have already gone down this road.

  • Prioritize: While the CSRD requirements help set the right direction, it is a daunting task to try to cover everything in one go. Start focusing on the areas where you are mature, and pilot identified social KPIs here.

  • Build on what already works: A crucial step is a mapping exercise to capture what metrics are already in use within the organization, to avoid coming up with ‘on-top-of measuring.’ This gap analysis will not only help to build on what you already have, but also make it easier to see how new social KPIs can be embedded into existing set-ups. 

  • Engage internal stakeholders from the start: Make sure to involve the right internal stakeholders; soliciting expert input serves to reality-check the value of the proposition, but also to make sure there is buy-in, letting people contribute to the agenda. As one of our members put it—“to make the project successful, people need to be able to relate to it internally.” 

  • Dig where you stand and align with materiality: Social initiatives tend to be more successful when aligned with existing corporate strategies, as they can take advantage of operating capabilities and capitalize on existing knowledge. At an early stage, test and make sure that your social KPIs and targets support and reflect the strategic and operational focus of your organization, and are anchored in your materiality assessment.

  • Involve the digital team: They play a crucial role in collecting relevant data and making sure it is valid; involve them in the pilot phase and work closely together to ensure the data collection is rigorous and realistic. To operationalize your social KPIs, you need to ensure accuracy and security in how the data is gathered.

Identification and measurement of social impacts provides a great opportunity for businesses to explore what truly matters to their affected stakeholders and the organization. We recommend embracing this process as a discovery, with CSRD as a reference for what to comply with, best practice examples from peers, and a thorough consultation process within the organization. The outcome ought to be tailored to your overall impact and role in society, bringing people together, and creating a shared understanding of the journey to come once the social KPIs are set.

For more information on setting Social KPIs under the CSRD, contact BSR’s Sustainability Management team.

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