ESRS S1 Own Workforce and ESRS S2 Workers in the Value Chain establish clear requirements for reporting on impacts related to workers. A significant, long-term supplier relationship falls squarely within the ‘value chain’ definition. The company must perform a materiality assessment to determine if the poor labor practices at the supplier constitute a material impact. If material, they are obligated to disclose policies, actions, and targets related to managing this impact, regardless of ownership.

The ESRS emphasizes the principle of proportionality and the concept of reporting on a ‘comply or explain’ basis for certain data points. A lack of perfect data does not excuse omission of a material topic. The correct approach is to disclose the material impact, use the best information available (including estimates), provide transparency about the limitations (per ESRS 2 BP-2), and outline forward-looking plans for improvement. This balances transparency with practicality.

While resource use (E5) may be related, the core topic of influencing consumer behavior towards sustainability is directly addressed in ESRS S4 Consumers and End-Users. This standard requires disclosures on material impacts related to information transparency, health and safety, data privacy, and the promotion of sustainable consumption. Therefore, policies on product labeling, consumer education, take-back schemes, and related targets would be disclosed under S4.

The scenario describes a classic failure in scoping the materiality assessment. ESRS E4 requires companies to consider impacts and dependencies on biodiversity across their entire value chain, not just their direct operations. For an agricultural trader, the most significant biodiversity impacts (e.g., deforestation, soil degradation, water use) are overwhelmingly located upstream in the supply chain. Limiting the assessment to owned urban offices indicates a flawed process that ignores the value chain, leading to a grossly incomplete and non-compliant disclosure.

Double materiality is the cornerstone of the ESRS reporting framework. It requires a company to assess sustainability matters through two lenses: 1) Impact materiality (how the company’s activities affect people and the environment), and 2) Financial materiality (how sustainability-related risks and opportunities affect the company’s financial performance and position. A topic is material for reporting if it is significant from either or both perspectives. This ensures reports serve both impact-focused stakeholders and investors.

ESRS E1 is explicit. If a company’s Scope 3 emissions are material (which they are for most companies), it is required to disclose whether it has set climate transition targets for them. If it has, those targets must be quantitative and time-bound (e.g., a percentage reduction by 2030). A qualitative goal like ‘engage with suppliers’ does not fulfill the requirement for a climate transition target. The standard allows for a phased approach to data improvement but expects a quantitative target once materiality is established.

ESRS G1 requires disclosures on the policies, due diligence processes, risk assessments, and measures taken to prevent and detect corruption and bribery. Merely stating a policy exists is insufficient. The ‘how’ is critical: companies must describe the implementation mechanisms. This includes how employees are trained on the policy, how the company conducts risk assessments (e.g., for agents or in specific jurisdictions), and the availability and use of secure, anonymous reporting channels (whistleblowing mechanisms) and how they are protected.

The principle of sustainability context is vital for meaningful reporting. It requires that performance be presented and understood within the larger context of environmental limits (like planetary boundaries) or social foundations (like community needs). Reporting only on relative efficiency gains (reduction per unit) without acknowledging the absolute impact on a severely stressed watershed paints a misleadingly positive picture. True performance should be assessed against the goal of operating within the carrying capacity of the local environment, which this disclosure fails to do.

ESRS S3 defines ‘affected communities’ broadly and by the potential for impact. The definition is not limited to geography. It includes groups in a geographic area influenced by the company’s operations (e.g., a local town), but also groups connected by cultural, social, or economic ties that could be affected (e.g., a diaspora community, a specific occupational group in the supply chain). The key is the common characteristic(s) that create vulnerability to the company’s impacts, making this a dynamic and context-specific assessment.

ESRS S1 Own Workforce and ESRS S2 Workers in the Value Chain establish clear requirements for reporting on impacts related to workers. A significant, long-term supplier relationship falls squarely within the ‘value chain’ definition. The company must perform a materiality assessment to determine if the poor labor practices at the supplier constitute a material impact. If material, they are obligated to disclose policies, actions, and targets related to managing this impact, regardless of ownership.0