New EU regulations force action on workforce and sustainability strategies

Evaluating a company’s sustainability requires insight into its approach to employee management. Isabelle Timmerman and Danny Merckx of KPMG Belgium explain how the ESRS is shaping transparency in Europe.

A wave of new regulations is heading towards European businesses in the months ahead. Governments are seeking a more transparent and objective view of corporate sustainability. The EU's Corporate Sustainability Reporting Directive (CSRD) goes beyond just climate concerns, also addressing issues like workforce management through the European Sustainability Reporting Standards (ESRS).

‘This directive focuses on areas like employee wages, inclusion policies, equal opportunities, the coverage of collective labor agreements, and workplace accident rates,’ says Isabelle Timmerman, Senior Counsel at KPMG Law. Notably, policies for employees, temporary workers, and freelancers must all be documented.

Where can the information be found?

Since the ESRS impacts various departments within a company, collaboration in reporting information is crucial. Large businesses must now share data under ESRS in addition to their financial annual report. Timmerman explains: 'Companies must first assess what they need to report on and identify the stakeholders who can assist. My colleagues and I support businesses when there’s uncertainty about terms, such as whether burnout should be reported. We can also provide guidance on differences between national and EU regulations.’ 

Knowing what to report is only half the battle—companies must also collect that information strategically. Timmerman explains: 'Take labor policies, for example: child labor and human rights data are often available at a supranational level, while workplace discrimination or bullying data is managed nationally. Sometimes, companies even need to calculate metrics, like the coverage rate of staff under a collective agreement. Our consultants and legal experts support businesses from day one in setting up their reporting framework.'

Timmerman notes that the necessary information for ESRS reporting often already exists within companies but is typically spread across various systems and departments. This is further complicated by the need to include data on employees, freelancers, and potentially temporary staff. Danny Merckx, HR Director at KPMG Belgium, relies on SAP SuccessFactors Employee Central to gather this information for KPMG’s own ESRS reports. 'Because we already collect much of this data, the new directive only requires minor adjustments for us. Inclusion, diversity, and equal pay have been priorities for years, so this regulation feels like a natural next step for a sound HR strategy. For businesses just starting now, however, the gap will be difficult to close,' says Merckx. Timmerman reassures companies that most have a year’s grace period to comply with reporting on "S"-related topics, making it crucial to define policies and processes now to stay ahead.

Policy before technology

The question isn’t whether the technical systems are ready to produce these reports, but whether the policies are fully in place. Merckx explains: 'Most major IT systems have the components needed to create accurate and transparent reports, but the ESRS goes beyond just assembling data. It’s about providing information that adds value for employees. For instance, in the context of a transparent pay policy, employees should know where they stand compared to colleagues and the market. These are metrics you can visualize perfectly—provided your pay policy is fair and well-structured. A transparent policy is always the first step. Only then should you consider systems, as technology and tools are the final piece of the puzzle.’
 

This article was created in collaboration with De Tijd and L'Echo.