As part of our blog series on the European Sustainability Reporting Standards (ESRS), today we would like to take a closer look at the ESRS S2 standard, which deals with the social impact on workers in the value chain. This standard contributes to transparency about how companies influence employees in upstream and downstream value chains and ensure that human rights are respected.

What is ESRS S2?

ESRS S2 focuses on workers who are employed in a company's upstream and downstream value chain but who are not directly employed by the company. For example, the impacts associated with the company's own operations and value chain, including the company's products, services and business relationships. These include, for example

• Employees of suppliers
• Employees of service providers at the company's location
• Workers who extract raw materials for the company
• Employees of customers who regularly carry out activities in the company's environment.

The standard requires reporting on the material impacts an entity has on these workers, the measures taken to mitigate these impacts and the risks and opportunities.

Disclosure requirements in accordance with ESRS S2

According to ESRS S2, companies are obliged to report on their strategies and measures with regard to the workforce in their value chain. An overview of the main disclosure requirements can be found here:

Objective of ESRS S2

ESRS S2 aims to ensure that companies fulfill their responsibilities towards workers throughout the value chain. This includes both upstream and downstream activities that can have a significant impact on working conditions. Companies must take measures to mitigate risks, seize opportunities and promote respect for human rights.

Synergies with other ESRS standards

ESRS S2 is closely related to other social standards such as ESRS S1, which relates to the company's own workforce. There are also overlaps with standards from the areas of governance (e.g. ESRS G1) and environmental standards (e.g. ESRS E5, which covers the use of resources and the circular economy).

Challenges during implementation

Reporting on labor in the value chain can be complex, especially when it comes to data collection from different countries and industries. Companies must ensure that they obtain information from suppliers and other actors in the value chain in order to meet the requirements of ESRS S2. Collaboration with stakeholders and the implementation of procedures to monitor working conditions is crucial.

Conclusion: The importance of ESRS S2

ESRS S2 provides companies with a framework to make their responsibility towards workers in the value chain transparent. By meeting these requirements, companies help to improve global labor standards, minimize risks and take advantage of long-term opportunities.

Outlook

In the next posts, we will look at practical examples of how to implement ESRS S2 and how companies can improve their reporting. Stay tuned for deeper insights into the social impacts along the value chain and how to make them sustainable.