Press release: Sector economist ABN AMRO: Businesses cannot sit back due to delay sustainability reporting requirement
Those who recognise hidden costs now have a competetive advatage
AMSTERDAM, 7 May 2025 – Although the introduction of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) has been delayed, Dutch companies cannot afford to sit back. Indeed, new research by ABN AMRO and the Impact Institute shows that Dutch companies are responsible for as much as EUR 41 billion in social costs. These social costs stem from human rights violations within the entire production chain of the Dutch business sector.
This amount shows that companies face significant legal, reputational and financial risks, especially once the reporting obligation comes into force,’ warns Gerarda Westerhuis, sector economist at ABN AMRO. “Those who work on social responsibility now will soon reap the benefits. It offers a competitive advantage and limits future risks. There are opportunities right now.”
Hidden costs: why quantifying works
These costs are based on the so-called True Pricing method, which reveals the social impact of human rights violations such as underpayment, unsafe working conditions, child labour and unequal pay by quantifying them and converting them into financial values. The financial values are calculated based on prevention, compensation, reparation and retaliation costs. By calculating the actual price of products or services, companies become aware of social costs that were previously invisible. Westerhuis: ‘The biggest cost concerns the equal pay gap: accounting for €16.9 billion’. Of the €16.9 billion in social costs due to the equal pay gap, the vast majority – about €11.9 billion – is caused abroad. The remaining €5 billion is caused directly in the Netherlands. This is not exceptional: 76 per cent of the total hidden costs, over €31 billion, originate with foreign partners.
Although making breaches transparent is often complex and often occur outside the Netherlands, that does not absolve Dutch companies of their responsibility for the entire value chain, the report says.
Risks: invisible costs, tangible consequences
The sectors with the largest hidden costs are business services (with €7.7 billion in social costs), industry (€6.2 billion), trade (€3.8 billion) and transport & logistics (€3.3 billion). These costs show that these sectors are most at risk of legal, reputational and financial damage, especially at the time of transparent reporting. Although it is difficult to get a good overview of the entire production chain, this insight is crucial for these sectors in particular to identify problems and target improvements.
Companies that lag behind in this respect, for instance, run the risk of chain liability, with organisations being held responsible for abuses at their suppliers. In addition, in the long run, products associated with forced labour risk exclusion from the European market. The financial impact can also be significant, including fines, reparations, but also the loss of investments or subsidies. Moreover, when a company is publicly held accountable, this potentially results in reputational damage, customer loss and a decline in employee engagement. For example, Boohoo’s share price plummeted 40 per cent in 2020 after it was revealed that employees were working in appalling conditions below minimum wage. Major investors exited, and reputational damage led to hefty revenue losses and higher costs for due diligence and chain supervision.
Opportunity: ESG not as an obligation, but as a strategic advantage
Although the introduction of the Corporate Sustainability Reporting Directive (CSRD) has been delayed until 2027 and the Corporate Sustainability Due Diligence Directive (CSDDD) until 2028, this does not mean a postponement. The social impact transparency obligation is coming. Only now there is extra time to take this responsibility seriously to avoid financial and reputational damage, Westerhuis said. “By taking action now, companies kill two birds with one stone. More and more consumers, employees and investors prefer organisations that operate ethically and sustainably. At the same time, factoring in social costs promotes innovation. Think recycling
of scarce raw materials as an alternative to mining, reducing child labour and forced labour.”
‘ESG is strategically essential’
Chantal Korteweg, director of Social Impact & Inclusive Banking at ABN AMRO, also underlines the importance for companies to take responsibility right now. “Set policies, identify risks, take concrete action and monitor progress. Ensure fair wages and transparent reporting. Address inequality by creating equal opportunities, improving working conditions and addressing the equal pay gap. Embed respect for human rights in the supply chain by implementing UNGPs and OECD guidelines as a basis for sustainable, long-term value.”
