"Corporate citizenship must adapt to the precision and seriousness of core business reporting"

Corporate citizenship has changed significantly over the last few years. This is the conclusion of a recent study by WIDER SENSE, which took a close look at the social commitment of DAX 40 companies. While there used to be a clear separation between a company's core business and its social commitment, the core business is now coming under increasing pressure to become more socially responsible. Social commitment, on the other hand, is becoming more strategic and data-based, according to one result of the study.

Our colleague, Senior Consultant Sustainable Finance Hendrik Leue, was asked by the makers of the study about his view on the role of corporate citizenship:

Wider Sense: Are there requirements for corporate citizenship within the current regulatory framework, ratings or rankings?

Hendrik Leue: There is nothing specific on this in the CSRD. In the end, corporate citizenship is not prominent enough in the materiality analysis. But in the ISS, for example, one of the two leading ESG ratings, there is a section on "community involvement". It evaluates the following sub-items: strategic focus, long-term nature of the programs, monitoring of progress and transparency about the resources used.

WS: How is the ESG reporting landscape changing right now?

HL: In the early days of sustainability reporting, CSR often took on a disproportionate importance. Since the really "material" issues have to be identified in a materiality analysis, it has become clear that the big drivers for positive and negative impacts on the world are in the core business. And it is precisely these that must now be disclosed very transparently in accordance with precise and uniform standards.  

WS: What does this mean in terms of corporate citizenship?

HL: It also requires corporate citizenship to adapt to the precision and seriousness of the reporting of the core business in order not to be seen as a green or whitewashing company. For example, we can now clearly measure how the gender pay gap in the company has developed in comparison to others. This sets high standards and readers are becoming smarter in their assessment of the reports.

WS: Why is corporate citizenship important to companies at all?

HL: Today, it is primarily about retaining or attracting good employees. Companies that make a credible and effective contribution to society are particularly attractive. For corporate volunteering, however, this also means that bankers should not plant trees, for example, but rather help to stabilize volatile food prices for farmers in the Global South. Of course, this only works if the bank does not do the exact opposite elsewhere and makes profits from fluctuating prices.

The study by WIDER SENSE reveals which of the DAX 40 companies are positioning themselves as pioneers in terms of social commitment, who still has room for improvement and what different approaches there are to creating win-win situations for companies and society.