CSRD Spotlight: ESRS S1-S4

As part of the Corporate Sustainability Reporting Directive (CSRD), reporting requirements are broken down into 3 main categories: Environmental, Social, and Governance (for an overview of the CSRD and who is affected, see corresponding blog post:  CSRD NetSuite Reporting Best Practices). Here we will specifically look at the Social Reporting Standards. This section is designed to provide specific information on a company’s social impact. The Social Standards are broken down into 4 subcategories, focusing on workforce well-being, human rights, diversity, and community engagement. These categories are defined as ESRS S1-S4. Here we will explore each of the 4 subcategories in detail.

ESRS S1: Own Workforce

This section relates to a company’s own workforce, including areas related directly to employee safety and overall well-being within a company.

• Employee Governance and Management
  • Details on policies on human rights, working conditions, and labor standards
• Diversity, Equity, and Inclusion (DEI)
  • Policies and practices to promote diversity, equity, and inclusion (DEI), including gender, age, disability, ethnicity, and other diversity dimensions
  • Report on workforce diversity at different levels of the company (i.e. senior management, board of directors)
• Labor Practices
  • Information about working hours, fair wages, job security, and non-discriminatory labor practices
  • Disclosure of collective bargaining agreements and the company’s relationship with trade unions
  • Data on employee turnover and retention rates
• Health and Safety
  • Report on occupational health and safety practices, including the number of work-related injuries, fatalities, and illnesses
  • Measures to promote worker well-being and mental health, including employee support programs
• Training and Development
  • Information about training and development opportunities provided to employees, including the number of hours spent on training, upskilling, and reskilling initiatives
• Employee Rights and Grievances:
  • Disclosure of processes for handling employee grievances and ensuring that employees’ rights are respected, including in regions with weak labor protections

ESRS S2: Workers in The Value Chain

This section highlights the need for companies to ensure decent working conditions not just within their own operations but throughout their entire value chain.

• Supply Chain Management
  • How fair and safe working conditions are ensured in a company’s supply chains. This is particularly important in high-risk areas or industries with labor issues such as textiles and agriculture
• Due Diligence
  • Steps taken to assess and manage risks related to labor rights violations, including forced labor, child labor, and unsafe working conditions
  • Disclosure of any audits, inspections, or third-party evaluations conducted on suppliers to ensure compliance with labor standards
• Engagement with Suppliers
  • How a company engages with suppliers to promote better labor practices. This can include training programs, capacity-building, or incentivizing suppliers to improve working conditions
• Human Rights Impact
  • Provide any human rights violations or labor issues that have occurred within a company’s supply chain and what actions have been taken to address them
  • Disclosure of any partnerships with NGOs or third-party organizations aimed at improving labor conditions within the value chain

ESRS S3: Affected Stakeholders

This section focuses on how companies interact with and impact affected stakeholders, such as local communities, consumers, and other external parties impacted by the company’s operations.

• Stakeholder Identification
  • Identify key stakeholders and assess how they are affected by the company’s operations. This includes local communities, consumers, governments, NGOs, and others
• Community Impact
  • Provide a company’s positive and negative social impact on local communities.
    • Positive impacts such as job creation, contributions to local economies
    • Negative social impacts such as displacement, environmental degradation and efforts to mitigate them
  • Details on community engagement efforts, including consultation with local populations before major projects like infrastructure or resource extraction
• Consumer Protection and Product Responsibility:
  • Details on how a company ensures consumer safety and product quality,( particularly in sectors such as food, pharmaceuticals, and technology)
  • A company’s efforts to address issues like product recalls, data privacy, or misleading advertising
• Human Rights and Stakeholder Engagement
  • Disclosure of how the company ensures human rights are respected for affected stakeholders, including initiatives to address issues such as forced or child labor, discrimination, or safety violations
  • Information about dialogue with affected stakeholders, including any grievances or conflicts that have been raised and how they were addressed

ESRS S4: Consumer and End-user Issues

This section covers the company’s responsibility toward consumers and end-users, focusing on product safety, quality, and marketing practices that affect consumers directly.

• Product Safety
  • A company’s efforts to ensure product safety and meet relevant regulations (especially in sectors with high safety risks like automotive, pharmaceuticals, and food) 
  • Reporting on any incidents or accidents related to product safety, including product recalls and corrective actions taken
• Fair Marketing Practices
  • Information on the company’s advertising and marketing practices, including efforts to avoid misleading claims or false advertising
  • Disclosure of policies related to advertising to vulnerable populations, such as children or low-income groups
• Consumer Privacy
  • How a company protects consumer privacy and ensures data security, including adherence to data protection laws (i.e. GDPR)
  • Any breaches of consumer data, their impact, and how the company responded
• Access to Goods and Services
  • Efforts to improve access to essential goods and services, such as healthcare, education, and affordable housing
• Consumer Complaints and Grievances
  • Processes a company has in place to handle consumer complaints and how they address issues related to product quality, safety, or service
  • Total number of complaints or disputes and the company’s efforts to resolve them fairly

For information on Environmental and Governance Standards, see corresponding blog posts: ESRS E1-E5, and ESRS G1.