Social ESRS: Own workforce, workers in the value chain, consumers & co.

 

The social standards aim to create transparency regarding companie’s social practices, policies and measures. According to the disclosures, companies should report on their material impacts, risks and opportunities in a social context. In terms of content, the ESRS social standards draw significantly on international and European human rights instruments and conventions. 

The four social standards require companies to report transparently on significant impacts, risks and opportunities arising from their business activities with regard to their “own workforce” (S1), “workers in the value chain” (S2), “affected communities” (S3) and “consumers and end users” (S4) (see graphic). 

For this, accurate information on working conditions, equal treatment and human rights should be disclosed. This includes topics such as gender equality, fair wages, secure employment, social dialogue, trade union freedom, and fundamental rights. 

The Social Standards reference internationally recognized conventions and declarations, including: 

These conventions and declarations serve as the basis and reference points for defining and disclosing material social and human rights aspects in the ESRS. 

Due to the structuring of the ESRS social standards according to stakeholder groups, they contain a large number of different disclosure requirements. Three out of the four social standards (“Workers in the value chain”, “Affected communities” and “Consumers and end users”) have an almost identical scope and structure. The standards all contain the same five disclosure requirements, with disclosures to be made under each standard for different stakeholder groups. 

These disclosures are: 

ESRS S1 (disclosures about “own workforce”) is the most comprehensive standard. In addition to the five disclosure requirements mentioned above, ESRS S1 includes twelve further disclosure requirements. The more detailed disclosure requirements in the area of the company's own workforce can be largely attributed to the fact that companies have both better data availability and a higher degree of influence here compared to other stakeholder groups. 

Some of the disclosures required under the ESRS social standards are complex to collect and certainly not available in practice at the push of a button. Companies must therefore ensure at an early stage that the relevant disclosures can be collected in the necessary level of detail. 

We recommend that companies address the upcoming disclosure requirements as early as possible. As the ESRS social standards require a range of disclosures on policies, targets, action plans and processes, it is important for companies to agree on an ambition level early on and formulate a corresponding company-wide strategy or roadmap. Particularly against the backdrop of increasing employee interest in sustainability and social issues, as well as the current lack of skilled workers, companies can set the appropriate course here to gain a strategic advantage. 

A transition period applies to all four ESRS social standards. Thus, companies with fewer than 750 employees can omit almost all information in the first year of reporting. Those companies can omit the following disclosures: Disclosures about their own workforce (ESRS S1) in the first reporting year, and disclosures about workers in the value chain (ESRS S2), affected communities (ESRS S3), and consumers and end users (ESRS S4) in the first two years of reporting.