Sustainability reporting in the business world is rapidly gaining importance, especially with the introduction of the CSRD (Corporate Sustainability Reporting Directive), which requires companies in the European Union to disclose extensive information about the social and environmental impacts of their business activities. By 2026, all companies in the EU with more than 10 employees will be required to report according to these standards.
Within the CSRD framework, employees and how they are treated are a top priority for European companies. Among the key elements of these disclosures is the ESRS S1 standard, which focuses on how companies treat their own workforce and covers more than 30 topics related to employee management.
This standard introduces a new level of transparency and requires companies to disclose information on working conditions, wage structures, social dialogue, worker participation and unionization, equal treatment, equal pay for equal work, employment and inclusion of people with disabilities, measures to prevent workplace violence and harassment, diversity, occupational safety, and the impact of business decisions on employees. The ESRS S1 standard is designed to align business practices with European social objectives (Parent, 2024).
Compliance with ESRS S1 is not just a regulatory necessity but also a key element of global efforts to promote fair and sustainable labor practices.
Standard S1: Own Workforce is one of four social standards, focusing on the impact of business activities on the company’s own workforce. This includes permanent and temporary employees, as well as contractors, with an emphasis on their working conditions, social dialogue, fair pay, training, inclusion, health and safety, and work-life balance. ESRS S1 requires organizations to disclose their impacts on their own workforce, including both positive and negative effects, as well as financial risks and opportunities. This includes everything from employment practices to employee well-being and demands transparency regarding past, present, and future efforts to improve workforce conditions. With this standard, the EU ensures a consistent approach for organizations to report on their impact on employees and to ensure transparency and accountability in this area.
By aligning with ESRS S1, which emphasizes fair working conditions, health and safety, and employee well-being, companies can foster a positive work environment. This results in higher employee engagement and loyalty and reduced turnover. Employees who feel valued and supported are more likely to stay with the company, reducing hiring and training costs. A company that promotes diversity, inclusion, fair pay, and opportunities for personal development can position itself as an employer of choice and attract top talent in competitive industries.
When companies invest in their workforce through skills development, training, and work-life balance initiatives, they create a more motivated and innovative environment. This leads to greater efficiency and creativity, which can fuel business growth and innovation. On the other hand, a strong ESRS S1 strategy sends a clear message to customers, stakeholders, and the public that the company is committed to social responsibility. This strengthens the company's reputation and builds customer loyalty.
By complying with ESRS S1, companies proactively address potential risks such as labor disputes, discrimination, or violations of health and safety standards. Operational resilience is also increased, as a workforce empowered in terms of health, safety, and career development is more adaptable. By investing in employee well-being and creating a supportive work environment, companies are better equipped to manage crises because their workforce is more flexible and prepared to handle challenges.
In conclusion, the ESRS S1 standard is not merely a regulatory requirement but a significant opportunity for companies to enhance their reputation, improve relationships with current and future employees, and increase their appeal to investors.
It provides a framework for companies to ensure transparency about their impact on their own workforce and take responsibility for managing related risks and opportunities.
In today’s business world, success is increasingly linked to how companies treat their employees—and ESRS S1 lays the foundation for this new reality.
