🇪🇺 EU CSRD
ESRS S1–S4: The Four Social Standards#
The European Sustainability Reporting Standards (ESRS) are part of the broader Corporate Sustainability Reporting Directive (CSRD) framework established by the European Union. ESRS provides clear, standardized guidelines for companies on how to report their sustainability impacts, risks, and opportunities. The CSRD mandates that companies disclose sustainability information across environmental, social, and governance dimensions, with the ESRS outlining the detailed reporting requirements.
Here is on overview of the social pillars in CSRD reporting:#
| Standard | Name | Focus |
|---|---|---|
| ESRS S1 | Own Workforce | Employees and non-employee workers under direct organizational control (e.g., contractors, temporary staff) |
| ESRS S2 | Workers in the Value Chain | Workers indirectly employed but affected by company operations (e.g., suppliers, factory workers, outsourced labor) |
| ESRS S3 | Affected Communities | Local communities impacted by business operations (e.g., environmental impacts, land use, displacement) |
| ESRS S4 | Consumers and End-users | Individuals who purchase, use, or are impacted by company products/services (e.g., product safety, privacy) |
Double Materiality Requirement
Under ESRS S1-S4, companies must explicitly disclose any significant risks or impacts identified in their supply chains, as well as actions taken or planned to mitigate these. Double materiality means reporting is mandatory if issues pose either:
- Financial risk/opportunity
- Significant social impact
ESRS S1: Own Workforce#
ESRS S1 addresses the conditions, treatment, and wellbeing of the organization’s own workforce, including both permanent and temporary workers under direct control.
Key Focus Areas#
| Topic | Required Disclosures |
|---|---|
| Workforce Composition | Detailed breakdown by gender, age, employment type (permanent, temporary, contractors) |
| Equal Pay & Gender Pay Equity | Policies, gender pay gap metrics, pay equity initiatives, including equal pay for equal work of equal value |
| Working Conditions & Wellbeing | Health and safety standards, wellbeing programs, mental health initiatives |
| Training & Career Development | Access to training, skills development programs, career growth opportunities |
| Collective Bargaining & Labor Rights | Coverage by collective agreements, freedom of association, union representation |
| Work-Life Balance | Flexible work arrangements, parental leave policies, support mechanisms |
Important
Reporting under ESRS S1 must include clear, verifiable data. Companies should explicitly disclose how they manage significant risks related to their workforce and any strategic initiatives addressing workforce concerns.
ESRS S2: Workers in the Value Chain#
ESRS S2 extends accountability to workers who, while not directly employed by the reporting entity, are significantly impacted through its value chain (suppliers, subcontractors, partners).
Key Focus Areas#
| Topic | Required Disclosures |
|---|---|
| Due Diligence & Risk Assessment | Processes for identifying, assessing, and prioritizing labor and human rights risks |
| Forced Labor & Child Labor | Clear identification of risk areas, explicit measures taken to mitigate or eliminate risks |
| Fair Working Conditions | Policies ensuring safe and fair labor practices across supply chains, minimum wage adherence, working hours |
| Monitoring & Audits | Regular audits, inspections, compliance checks, transparency measures |
| Grievance & Remediation | Effective grievance mechanisms, accessible reporting channels, evidence of issue resolution |
ESRS S3: Affected Communities#
ESRS S3 captures impacts on communities directly or indirectly affected by business operations. It includes:
- Community engagement processes and outcomes
- Environmental and social impact assessments
- Strategies for mitigating adverse impacts
- Protection of Indigenous and local community rights
ESRS S4: Consumers and End-Users#
ESRS S4 concerns consumer protection, ethical practices, and transparency in product and service delivery:
- Product safety and harm prevention
- Privacy and responsible data management
- Accessibility and inclusive product design
- Ethical marketing and transparent communications
- Complaint handling and customer feedback mechanisms
Reporting Guidance
Double materiality means that a company must report on issues that either:
- Impact the world (social or environmental impacts caused by the company), or
- Impact the company itself (risks or opportunities that affect its finances or operations).