Strengthening Social Impact Assessment in Corporate ESG Reporting

In 2022, the European Parliament and the Council introduced a new regulatory framework, the Corporate Sustainability Reporting Directive (CSRD), to enhance the transparency and integrity of Environmental, Social, and Governance (ESG) reports. While previous legislation mainly focused on environmental impact, the new directive and the European Sustainability Reporting Standards associated with it elevate social impact to the same level of importance. Of the 12 Standards, two are General, five are Environmental, four are Social, and one is devoted to governance. This shift represents a significant change in how companies report their social contributions and responsibilities. A key requirement of this new framework is that ESG reports must undergo independent assessment by an external agency, ensuring the objectivity and credibility of the reports.

The effort of the European Securities and Market Authority (ESMA) to regulate third-party providers of ESG ratings and scores presents both an opportunity and a challenge. In response to demand, many consulting firms are rushing to offer ESG reporting services without proper training in social impact measurement. This study emphasises sociology's crucial role in providing the necessary tools for assessing social impact, focusing on co-creation and genuine societal improvement, distinguishing this from dissemination or transference. Companies not only influence society through their operations but also have the potential to transform it by embedding social impact within their strategies.

Our findings aim to contribute to developing a more robust and informed approach to ESG reporting, particularly in understanding social impact as improvement aligned with societal goals like the SDG and better aligned with the European Union's vision for corporate transparency and responsibility. By fostering co-creation with all stakeholders, companies can amplify the social benefits of their actions, creating a multiplier effect that reinforces the positive transformation of society through responsible corporate practices.