ESRS S1-S4: The Topical Social Standards

The four Social Standards involve the topics of the own workforce, workers in the value chain, affected communities and consumers and end-users. ESRS S1 to S4 provide the disclosures for companies to report on human-centric topics linked to a company’s internal and external operations.

The four social standards make it clear that, in addition to environmental protection (disclosure through ESRS E1-E5), companies should also ensure compliance with human rights.

The official Information on the Social ESRS can be found on pages 161-245 of Annex I from the European Commission's updated set of standards publication. Similar to the disclosure requirements for the Environmental Standards, all four Social Standard disclosure requirements can be broken down and described by the four reporting areas from ESRS 2: (1) governance (GOV), (2) strategy (SBM), (3) impact, risk, and opportunity management (IRO), and metrics and targets (MT). Your initial double materiality analysis provides the basis for the range of topics from ESRS S1 to S4 to be reported on.

Further details on each ESRS S1-S4 can be found in the next part. It describes each Sub-topic and Sub-sub-topics, as well as the Objectives.

ESRS S1: Own Workforce

ESRS S1 is the first social standard to focus on the company's labor force. Based on the 13 disclosure requirements, companies must report on working conditions, diversity and equality, remuneration, human rights, health, and safety as well as training and development of their employees.

Some requirements are based on established indicators, but are supplemented by additional requirements that often necessitate new data collection. Data protection and implementation issues can pose additional challenges here.

Sub-topics incl. sub-sub-topics of ESRS S1

Objectives of ESRS S1

The objectives of ESRS S1 are to understand:

• How your company is affecting your own workforce, considering material positive and negative impacts as well as potential impacts
• Which actions can be taken to prevent or mitigate negative impacts
• Your company’s material risks and opportunities related to its impacts and dependencies on its own workforce, and how your company manages risks and opportunities
• The risks and opportunities arising from the impact and financial materiality related to your company’s own workforce over the short-, medium-, and long-term

ESRS S2: Workers in the Value Chain

ESRS S2 focuses on the social aspects of a company's entire value chain, including labor conditions and human rights. Companies must disclose the impacts, risks, and opportunities related to their business relationships.

Collaboration along the value chain is crucial for the quality of reporting, as information can typically only be obtained from indirect sources or estimates if suppliers do not provide data.

Sub-topics incl. Sub-sub-topics of ESRS S2

Objectives of ESRS S2

The objectives of ESRS S2 are to understand:

• Your company’s material impacts (positive and negative, actual or potential) on workers in your value chain
• How your company’s actions can prevent, mitigate, or remediate negative impacts
• How your company manages the type and extent of risks and opportunities related to the impacts and dependencies on workers in the value chain
• The risks and opportunities from impact and financial materiality related to your company’s value chain workers over the short-, medium-, and long-term

ESRS S2 aims at developing an understanding of the material impacts, risks, and opportunities with regard to workers that are connected with a company’s operations and value chain, for example, through products or services or business relationships.

ESRS S3: Affected Communities

ESRS S3 requires companies to identify the relevant interest groups and integrate their impact into business decisions. This means that companies must enter into dialogue with a large number of people — especially with specific groups such as indigenous peoples.

Companies must report on how they manage positive and negative impacts on communities, both in the present and potentially in the future.

Sub-topics incl. Sub-sub-topics of ESRS S3

Objectives of ESRS S3

The objectives of ESRS S3 are to understand:

• How your company is affecting communities where the impacts are most likely and severe, considering material positive and negative impacts as well as potential impacts
• The actions and their results to prevent or mitigate negative impacts 
• How your company manages the risks and opportunities arising from the impacts on affected communities
• The impact and financial materiality related to affected communities with respect to the short-, medium-, and long-term view

ESRS S3 refers to affected communities that are associated with a company’s own operations or its value chain, also through products or services and business relationships.

ESRS S4: Consumers and End-Users

ESRS S4 focuses on a specific stakeholder group of companies — consumers and end users. In particular, ESRS S4 requires a company's view of the impacts, risks, and opportunities for consumers and end users — but not the impacts on customers.

This includes responsibility for the quality, safety and transparent labelling of products and the way in which companies minimize potential risks.

Sub-topics incl. Sub-sub-topics of ESRS S4

Objectives of ESRS S4

The objectives of ESRS S4 are to understand:

• The material impacts (positive and negative, actual or potential) of your company’s products and/or services on consumers and end-users
• Your company’s actions to prevent and mitigate negative impacts
• How your company manages the type and extent of risks and opportunities related to the impacts and dependencies on consumers and end-users
• The impact and financial materiality related to consumers and end-users of your company’s services and end-users 

The perspective of ESRS S4 includes consumers and end-users connected with a company’s own operations as well as its value chain, including through products or services or business relationships.

Check out the following articles for more details on the other ESRS:

• ESRS 1 and ESRS 2: The Cross-Cutting Standards
• ESRS E1-E5: The Topical Environmental Standards
• ESRS G1: The Topical Governance Standard
• Guide on ESRS Datapoints