AGM report 2016: Next Steps in Embedding Corporate Responsibility

Management Summary

Conclusion

Sustainability is gaining momentum. The policies and transparency of Dutch listed companies regarding sustainability themes such as natural capital, social inclusion, living wage and tax have improved over the past years. Dutch listed companies are increasingly focusing on new opportunities created by the transition to a sustainable economy, e.g. the development of new products and services. However, a lot remains to be done. The social inclusion and living wage themes are relatively new in the Netherlands and need further attention. Moreover, only a few companies report on their total tax contribution and the taxes they pay on a country-by-country basis.

The good news is that all Dutch listed companies have implemented general human rights policies, and the vast majority of companies have committed to contributing to the UN Sustainable Development Goals. Companies have started focusing on environmental and social aspects that are most material to them. Furthermore, tax is increasingly considered to be an integral part of corporate social responsibility (CSR). For a long time, CSR was mainly associated with environmental topics such as energy and CO2. Companies are now realizing that good tax governance is important for society as well.

Recommendations

Natural Capital:

• Conduct a risk and impact assessment to investigate natural capital-related risks for your own operations and the supply chain.
• Set measurable KPIs and targets to improve performance on natural capital conservation.
• Start to assess the externalities of your operations by creating an environmental profit and loss account (product or project-related).

Social Themes:

Inclusion:

• Formulate a policy on inclusion with a focus on people at a distance from the labour market.
• Take steps and set targets to achieve a more inclusive workforce by, for example, providing training and job opportunities.

Living Wage:

• Define ‘living wage’ together with stakeholders, e.g. suppliers and NGOs.
• Assess if a living wage is paid in your own operations and in the supply chain.
• Formulate a policy and supplier code of conduct on living wage.
• Include and examine criteria on living wage in supplier due diligence.

Social Value Chain Management:

• Conduct a risk assessment to assess the key social risks in the supply chain.
• Work together with suppliers, NGOs, etc., to improve social conditions in the supply chain.
• Improve transparency and reporting on the process, status, and progress of supplier audits.
• Develop a buyer code of conduct.

Responsible Tax:

• Formulate a clear tax strategy, including tax principles, as part of your CSR strategy.
• Describe your tax risks and mitigating actions in detail.
• Report your corporate income taxes, revenues, profits, assets, and employees on a country-by-country basis (or as granular as possible without disclosing competitive information).
• Report on the total tax contribution, including taxes such as VAT, wage taxes, insurance, and social premiums taxes.

Results of Selected Priority Themes

1. Natural Capital: The definition of natural capital is broad and includes climate change, biodiversity, and water scarcity. Dutch listed companies score relatively high on this theme, with an average score of 57%. Many companies have policies in place that cover natural capital issues, such as water usage. However, a comprehensive and focused approach to natural capital is often missing. Companies are advised to conduct a risk and impact assessment to better understand their main natural capital risks and impacts.
2. Social Themes (Inclusion, Living Wage, Social Value Chain Management): The average score on the social themes is relatively low at 27%. This is partly due to the introduction of more demanding criteria in these themes, such as living wage payment in the supply chain, mapping second-tier suppliers, and social inclusion policies. Dutch companies are increasingly aware of the importance of a responsible supply chain. However, managing complex supply chains and enhancing social value chain management are still major challenges.
3. Responsible Tax: This theme has shown the most progress over the years, with the majority of Dutch listed companies (78%) now having a responsible tax policy that goes beyond national and international regulations. The percentage of companies with a responsible tax strategy has grown significantly, indicating that tax is increasingly seen as a key component of CSR.

Results by Sector

1. Financial Sector: The financial sector performs well on all themes, particularly on natural capital and responsible tax. The homogeneous nature of financial activities and the sector’s engagement in promoting human rights and mitigating climate change contribute to these high scores.
2. Food, Beverage, and Retail Sector: Companies in this sector show high scores on natural capital and tax transparency, reflecting the sector’s materiality to environmental issues. This sector is actively involved in improving sustainability performance, driven by consumer awareness and regulatory pressures.
3. Technology and Electronics Sector: The sector scores relatively well on natural capital but faces challenges on social themes. Social inclusion and living wage, in particular, require more attention and targeted actions.
4. Industry Sector: The performance of companies in the industry sector is mixed. While they score reasonably well on natural capital, there is considerable room for improvement on social themes. The sector faces challenges in managing complex supply chains and implementing effective social value chain management.
5. Services Sector: The services sector lags behind other sectors in sustainability performance. This is largely due to the nature of service-based operations, which may perceive less direct impact on natural capital and social inclusion, and thus have lower engagement on these themes.