Reimagining managerial practices

Corporate social performance: status-quo and learnings from innovative formats

2024 is the year in which sustainability reporting standards on environmental, social, and governance (ESG) topics become mandatory in the European Union (EU) and spread to major jurisdictions around the world. The EU issued the Corporate Sustainability Reporting Directive (CSRD) and the accompanying European Sustainability Reporting Standards (ESRS) to be applied by its member countries while the IFRS Foundation, historically responsible for developing financial reporting standards, also issued sustainability standards that represent the global baseline for mandatory adoption in many jurisdictions outside of the EU. The sustainability reporting standards acknowledge that firms’ activities have significant implications for the sustainable development of individuals and societies, as well as for conducting business within planetary boundaries and contributing to the achievement of the United Nations Sustainable Development Goals (SDGs). However, the world-wide corporate reporting quantification and standardization effort focuses predominantly on the environmental dimensions of sustainability impacts at the expense of the social one. 

Corporate social performance (CSP) is often treated as a hard-to-quantify and hard-to-standardize dimension of ESG. Despite efforts by standard setters, impact investors, and regulators, there is no universally accepted method for measuring the social dimensions of the ESG universe, with very little exceptions. This is surprising given the polycrises heavily affecting social dimensions. Recently, the Covid-19 pandemic has radically changed many aspects of our lives, shedding light and casting shadows on assumptions and beliefs of what is important to individuals and societies. The World Health Organization (WHO, 2022) stresses that mental health conditions are very common in all countries of the world, yet most health and social systems neglect mental health, failing to provide the care and support people need and deserve. This oversight has implications for human capital management, a top priority for firms (Ellerbeck, 2022). As a matter of fact, recent studies demonstrate that the Great Resignation—a term coined in May 2021 to describe the unprecedent number of people leaving their jobs since pandemic’s onset—is not expected to abate soon (Fuller & Kerr, 2022). Furthermore, human rights persist as a foremost concern to be addressed within many global initiatives. The list of social issues continues. 

In this context of mandatory sustainability reporting coupled with the escalating significance of social issues globally, standardizing CSP indicators becomes crucial. Doing so can help channel investments into sustainable companies focusing on the “S” in ESG, as well as help corporate managers set the right priorities and incentivize socially desirable behaviors. Therefore, our research project tackles the pressing and timely question: How can we develop a new accounting framework that effectively captures CSP in a credible and impactful way?  Our main goal is to contribute to this ongoing debate among practitioners and academics by conducting a comprehensive and rigorous literature review of existing CSP frameworks and by gleaning insights from actively engaging with a diverse group of stakeholders. In doing so, we aim to foster the development of innovative approaches to devise robust CSP indicators and to effectively lead to their practical application.