Interview with Marieke Huysentruyt: CSRD and the Fight to Reduce Inequalities
As part of our partnership with De Gaulle Fleurance for the 5th edition of the 2024 Observatory of Societal Transitions, Marieke Huysentruyt, Academic Director of the Sustainability & Organizations Institute at HEC Paris, discusses the historical dynamics of inequalities, the impact of new European regulations (CSRD and CS3D), and the key drivers for building a more equitable and inclusive society.
"Despite global economic progress, global inequalities remain as pronounced as they were at the beginning of the 20th century, with a Gini coefficient unchanged since 1880."
What is the current state of global inequalities and how have these inequalities changed over the last century? How do you explain this trend?
We have to remain modest: indeed, global inequalities are as great today as they were at the beginning of the 20th century. The Gini coefficient, which reflects the distribution of income in the world, is now at 0.67, the same level as in 1880, but 0.05 points lower than at the last two peaks in inequalities, in 1910 and between 1980 and 2000. Inequalities have nevertheless fallen for some twenty years now. To measure inequalities, we take into account inequalities both between countries and within a country. Since 1980, we have seen inequalities between countries are decreasing, thanks in particular to the economic growth of India and China.
In contrast, inequalities within countries are increasing. While emerging countries have experienced strong growth, not everyone has benefited from this wealth creation under the same conditions. The same phenomenon can be observed within developed countries. This is causing tensions, like those
witnessed in France with the Gilets Jaunes movement. In France, the inequalities are far greater than
income inequalities and continue to grow.
When we look ahead to 2030 and look at the sustainable development goals that countries have 19 committed to achieve by that date, we have to recognise that we are a long way from the trajectory that would enable us to honour our commitments. This is the case for all countries, and especially the most vulnerable countries. If we continue as we are, we will not make it: there is an urgent need to take action against inequalities.
The causes of inequality are multi-dimensional: depending on the place of birth, on the social background, opportunities are not the same; a man and a woman will also have very different fates in certain countries... Inequalities can be seen both in terms of income and wealth. Finally, well-being is a broader concept than the concept of income. It encompasses opportunities for education, healthcare, etc.
"The CSRD directive helps to identify the many levers that exist to advance the cause of equality"
Can the new European regulations on extra-financial reporting (CSRD) or duty of care (CS3D) change the situation in Europe and around the world?
With the CSRD directive and the new sustainability reporting, we are changing scale to adopt a detailed view of companies and the inequalities that may exist between employees. There are 'superstar' companies such as Google and Amazon, which pay high salaries and offer a wide range of benefits to their employees in order to attract and retain talent. These companies are far from being the standard in their business sector, which creates major wage inequalities between companies in the same sector or in the same industry.
CSRD reporting will undoubtedly reveal even more "superstars". One of the indicators to be monitored will be the gap between the employer's salary and the average salary of his employees. But we should soon find out that the main inequalities are between companies, not within them. This is the opposite of what happens when we look at inequalities within and between countries. Thanks to this new sustainability reporting, we will be able to compare companies on a wide range of social criteria: income disparities between men and women, depending on the age of employees, access to training and to social protection, etc. These are all indicators that contribute to individuals’ well-being.
The CSRD directive thus makes it possible to identify the many levers that exist to advance the cause of quality and employees’ well-being. This harmonised and generalised reporting will strengthen the information available to companies, give them the keys to take action and promote inspiring good practice.
The indicators available will enable us to know, beyond the wage gap, whether a company is inclusive: the proportion of disabled people in its workforce, the place of stakeholders in its governance, etc.
The CSRD and CS3D directives should profoundly change the business world, as the requirements on the company's value chain (its partners and suppliers) are equally high.
What effective levers can be activated to reduce inequalities?
The subject of sharing value is increasingly present in public debate. Companies that do not share value with their stakeholders (employees, but also suppliers, consumers, local communities, etc.) are now exposed to activist shareholders’ challenges and could tarnish their reputation.
The debate is therefore on the table: how should value be shared? With whom and to what extent? In France, companies with 11 or more employees are required by law to set up a system for sharing value with their employees. Despite what some people fear, these schemes do not have the effect of reducing salary levels in companies. However, since they benefit from favourable tax conditions, these schemes drain the State’s resources. This is a perverse effect that needs to be assessed.
Another promising lever is economic mobility. We need to ensure that we live in a society where everyone has economic opportunities, whatever their social background. Studies show that the key factor in this mobility is the social link that can exist between people who do not look alike. This social capital helps to build bridges between people and creates opportunities.
Companies have a role to play and can help to create links between generations, between hierarchical levels, between social backgrounds, etc. Mentoring schemes, for example, can be a real lever for reducing inequalities. Beyond that, these links reinforce empathy, understanding of the other person's perspective, the ability to listen and to trust. These are all social skills that are essential in the workplace.
The final lever is the ambitious vision of a "systemic" company, aware of its links with all of society's stakeholders. To reduce inequalities, companies cannot act alone; they must work with associations, the public sector and academia. With better coordination of all these players, we can make a real difference.
We will not be able to complete the ecological transition without taking the issue of inequality seriously. The major environmental and climate challenges are concentrated in the South, in vulnerable countries. We need to tackle these challenges as a whole.
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