Transparency benchmark especially important in early days in putting sustainability on the agenda
In its early days, the Transparency Benchmark made an important contribution in putting sustainability on the agenda. In recent years, its effectiveness is declining. The future of the benchmark largely depends on how the new international Corporate Sustainability Reporting Directive (CSRD) is developed and how compliance is ensured. This is evident from our evaluation of the Transparency Benchmark and the Crystal Award over the period 2016-2020, commissioned by the Ministry of Economic Affairs.
The government is pursuing policies to make business sustainable, aimed at the successful conduct of business activities and the prevention of violations of human rights and negative environmental impacts by organizations at home and abroad. In doing so, the Cabinet expects organizations in the Netherlands and in their international activities to engage in international Corporate Social Responsibility (iMVO). To ensure transparency on iMVO policy, the Ministry of Economic Affairs deploys two instruments: the Transparency Benchmark and associated Crystal Award. The purpose of the evaluation of these two instruments is to (1) provide insight into the extent to which the instruments contribute to the objectives of the government’s iMVO policy and (2) make clear whether the instruments can continue to play a role, given the expected new international guideline CSRD.
Effectiveness Transparency Benchmark
The study shows that the Transparency Benchmark made an important contribution in putting sustainability on the agenda, especially in the early days. Thinking about sustainability was still new in the early years and the Transparency Benchmark has put it higher on the agenda. However, the relevance of the tool has declined over the years. The advent of more (international) sustainability benchmarks has caused the Transparency Benchmark to lose relevance and effectiveness. For example, it is hardly ever in demand from stakeholders or consumers. Directors value scoring well on the benchmark mainly for image reasons; if scores are lower, business operations are not adjusted. The administrative burden of the benchmark is perceived as high.
Future of the Transparency Benchmark
The future of the Transparency Benchmark and the Crystal Award depends largely on how the CSRD is concretely developed into criteria and how compliance is ensured. In this regard, we see three approach routes for the future of both instruments and the role of the Ministry of Economic Affairs.
- Route of approach 1: in this route, compliance with the CSRD becomes legally binding. Thereby, the CSRD, together with the availability of several other standards for reporting and benchmarking sustainability performance, ensures an increase and maintenance of transparency in reporting. As a result, the Transparency Benchmark can be terminated, allowing the Ministry of Economic Affairs and the RFO to deploy resources in a different way.
- Approach Route 2: In this route, the CSRD is designed on a voluntary basis. Here, the Transparency Benchmark can function as a preparation for the CSRD, provided the criteria are aligned with the CSRD. Here, among other things, the high administrative burden of the benchmark is a major concern.
- Route of approach 3: This route concerns an intermediate form of the aforementioned options, whereby the Transparency Benchmark is continued until a few years after the introduction of the CSRD. Habituation and compliance with new regulations often require several years. Therefore, it is valuable to continue with the Transparency Benchmark for the time being, until people get used to the CSRD.