Pensions should also be included in your sustainability report

2 July 2024


Starting this year, all large companies will have to report on their sustainability efforts. Are their pension schemes also included in this? ‘That is something you should really want’, says Oscar van Zadelhoff (BeFrank).

Not only is sustainability receiving ever more attention, it also brings with it more and more obligations. As of this year, for example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) obliges more and more companies to report on their impact on people and the climate. This so-called CSRD covers three areas: Environment, Social, and Governance, often also known as ESG. Exactly what you need to report on these areas is detailed in the European Sustainability Reporting Standards (ESRS). That way, every company does it the same way, and you can compare data. This includes, for example, your CO2 emissions, your personnel policy, the gender distribution at the top, information about the relationships with your suppliers and the impact on your supply chain.

Material or not

Are pension schemes actually included in this? To be honest, this is still somewhat unclear, says Oscar van Zadelhoff, product manager and lawyer at pension administrator BeFrank. ‘It just so happens that I had a customer on the line recently. He was in the process of introducing the CSRD, and wanted to know whether the pension scheme is included in it, and what data he could put in his report in this regard.’

The answer is a bit of a grey area, according to the product manager. Roughly speaking, the question is whether you, as an organisation itself, consider your pension scheme to be part of your primary business operations. ‘Pension money is cash out to a lot of companies’,according to Van Zadelhoff. ‘It means they don’t view it as company money all that much, and what happens with it is often less important to them. But you can also look at it the other way around: not cash out, but deferred pay that employers and employees pool together and set aside. And that is certainly your own money, and therefore makes it important what you do with it is done sustainably or not.’

This year, not only large companies, but also over 100,000 SMEs will be confronted with the CSRD. The key concept here is ‘double materiality’. ‘In short, this involves the question: what do you think are the most important things in a company? If you say that pension funds are part of this, then it very quickly becomes material’, says Van Zadelhoff.

Sustainable pensions

Sustainable pensions have been in the spotlight lately. At the beginning of June, a motion was passed in the Lower House, which opposed the ‘activist investment policy’ of pension funds. The motion calls for a greater focus of pensions on return, calling on the government to prevent pension funds from pursuing ‘politically driven goals’ and ‘idealistic principles’ with their investments.

These efficiency requirements seem somewhat at odds with the European CSRD, which encourages transparency in these kinds of social objectives. Van Zadelhoff says that this latter vision is more in keeping with what he currently encounters in practice. ‘We are noticing that sustainability is increasingly important to companies. And they are happy to be able to contribute to this through their pension scheme.’

Earlier this year, BeFrank was one of the nearly 300 B Corp companies certified in the Netherlands. This means that it is now part of a worldwide and growing network of companies that are demonstrably committed to people, the environment and society. It is no surprise that the pension administrator itself has more and more of these B Corp organisations as customers, and sustainability is therefore the starting point for investment policy.

Water use and waste

BeFrank furthermore wants to set a good example through its own business operations. It is naturally not the only company to do so. This is precisely why the pension scheme is a great way to make a difference, says Van Zadelhoff. ‘Putting it bluntly, if you’ve already replaced all the bulbs with LEDs, if you’re already driving electric cars, and already drinking from paper cups, this could definitely be another point to make sustainability gains. You can have a lot of impact with your pension scheme, as it can involve quite a bit of money. In that respect, however, it is still very much the virgin territory of sustainability policy for many companies.’

But the question remains: what about that report? And how difficult is it if you do want to report on your pension scheme? Not difficult at all, emphasises Van Zadelhoff. ‘For example, we have been offering our customers a dashboard for 5 to 6 years now. This gives them insight into the savings in water use, waste and the CO2 emissions of our investments, compared to the benchmark. The funds in which we invest provide us with that data, and that data is also getting increasingly better. As a customer, you can include this in your sustainability report. I think there’s an increasing interest in that. The data is there, that’s not the issue. And the impact is enormous. I think you should actually want to report on your pension funds as well. It allows you to demonstrate that you are doing good things.’

This article appeared on on 1 July.